Our selective laser sintering printers convert our proprietary, engineered print materials and composites by melting and fusing (sintering) these print materials into solid cross‑sections, layer by layer, to produce finished parts. SLS printers can create parts from a variety of proprietary engineered plastic and nylon powders and are capable of processing multiple parts in a single build session.

Customer uses of our SLS printers include functional test models and end-use parts, which enable our customers to create customized parts economically without tooling. The combination of print materials flexibility, part functionality and high throughput of our SLS print engine makes it well suited for rapid manufacturing of durable parts for applications in various industries, including aerospace, automotive, packaging, machinery and motor-sports. 

Our family of SLS printers comes in a variety of print formats and degrees of automation. Our SLS production printers are designed to enable our customers to mass customize and produce high-quality, end-use parts, patterns, fixtures and tools consistently and economically from our proprietary engineered plastics, nylons and composites, on site and on demand.  

DMS Printers

Our direct metal sintering printers produce chemically pure, fully dense metal parts, by sintering very fine granularity powders in a variety of different metals materials and a ceramic material. We offer direct metal printers in several sizes, including the ProX 100, 200 and 300.

MJP Printers

Our professional MJP printers utilize jetting head technology to deliver high quality, accurate and tough parts in plastics, wax, engineered materials and the capability to print parts in multiple materials in a single part. Our MJP professional printers come with a five-year print head warranty and are designed to print high-definition, functional and durable models for form, fit and function analysis, including certain models that are capable of ultra-fine resolution for precision dental and jewelry applications.

CJP Printers

Our professional CJP printers produce parts in ceramic-like material and plastics using powder materials and binders.  These printers are full color printers, capable of printing in a million colors pixel by pixel and are ideal for MCAD, architecture, design communication, education, art and medical modeling applications.

FTI Printers

Our film transfer imaging printers use DLP light curing technology to print durable plastic parts with a smooth surface finish and true to design detailed features. Parts printed on these ProJet printers can be drilled, machined, painted and metal-plated after building and parts can be printed in six different colors.

PJP Printers

Our PJP consumer 3D printers utilize a proven, simple, clean, compact and quiet plastic extrusion print engine technology designed for office, home and classroom use. Our PJP printers are designed and engineered to be simple, accurate and robust and some are equipped with up to three compact precision print heads for print speed, accuracy, multi-color, multi-material printing with fast material changeovers and multiple print modes available.     

PJP printers offer an easy to use interface, affordable color printing in one to three colors in a  single build in PLA or ABS plastic.

3D Print Materials

As part of our integrated solutions approach, we blend, market, sell and distribute proprietary, consumable, engineered plastic, nylon and metal materials and composites under several leading brand names for use in all our printers. We market our SLA materials under the Accura® brand, our SLS materials under the DuraForm, CastForm™ and LaserForm™ brands and materials for our MJP, CJP and FTI printers under the VisiJet brand. We augment and complement our own portfolio of print materials with materials that we purchase from third parties under private label and distribution arrangements.

With the exception of the recently acquired metals printers, our currently offered printers have built-in intelligence that communicates vital processing and quality statistics in real time. For these printers, we furnish integrated print materials that are specifically designed for use in those printers and that are packaged in smart cartridges designed to enhance system functionality, up-time, materials shelf life and overall printer reliability, with the objective of providing our customers with a built-in quality management system and a fully integrated work flow solution.



We work closely with our customers to optimize the performance of our print materials in their applications. Our expertise in print materials science and formulation, combined with our process, software and equipment, design strengths, enables us to help our customers select the print material that best meets their needs and obtainwith optimal cost and performance results. We also work

As part of our solutions approach, our currently offered printers, with third partiesthe exception of direct metal printers, have built-in intelligence to develop different types ofmake them integrated, closed systems. For these printers, we furnish print materials specifically designed for use in those printers and that are packaged in smart cartridges and delivery systems. These integrated materials are designed to meet the needs ofenhance system functionality, productivity, materials shelf life and overall printer reliability, in addition to providing our customers.customers with a built-in quality management system and a fully integrated workflow solution.



SLA Print Materials and CompositesPrinters



Our familySLA 3D printers cure liquid resin materials with a laser beam to produce durable plastic parts with surface smoothness, high resolution, edge definition and tolerances that rival the accuracy of proprietary stereolithographymachined or molded plastic parts. We offer SLA printers with a wide range of materials, sizes and composites offersprice points that are well-suited for prototypes, end-use parts, casting patterns and molds, tooling, fixtures and medical models.

For SLA printers, we offer a variety of plastic-like performance characteristics and attributesliquid resin materials under the Accura® brand name. The resins are designed to mimic specific, engineered thermoplasticthermoplastics and provide a wide range of characteristics, including tough, durable, clear, castable, polypropylene-like, ABS-like, high-temperature resistant and Class IV bio-compatible materials. When used

We are also developing a 3D printing technology that utilizes a light-curing process we refer to as our Figure 4 platform. Figure 4 is an ultra-fast additive manufacturing technology in our SLA printers, our proprietary liquid resins turndiscrete modules, allowing it to be placed into a solid surface one layer at a time,automated assembly lines and through an additive building process, allintegrated with secondary processes, including material recovery, washing, curing and finishing steps. Unlike other photopolymer 3D printing, Figure 4 is capable of manufacturing parts in hybrid materials (multi-mode polymerization) that offer toughness, durability, biocompatibility, high temperature deflection and even elastomeric properties. This opens the layers bonddoor to new end-use applications in the fields of healthcare, durable goods, automotive, aerospace and fuse to make a solid part. SLA print materials are ideal for fit and form testing, wind tunnel testing, patterns and molds, show models and healthcare applications such as in-the-ear hearing aids, surgical kits and medical models.beyond.

SLS Printers



Our portfolio of Accura stereolithographySLS 3D printers use a laser beam to melt and fuse powder-based nylon and engineered plastic and composite print materials includes general purpose as well as specialized materials and composites that offer customers the opportunity to choose the material that is best suited for the parts and models that they intend to produce. 

To further complement and expand the range of materials we offer to our customers, we also distribute SLA materials under recognized third-party brand names.

SLS Print Materials and Composites

Our family of proprietary selective laser sintering materials and composites includes a range of rigid plastic, elastomeric and nylon materials as well as various composites of these ingredients. Our SLS printers have built-in versatility; therefore, the same printers can be used to process multiple materials.

Our DuraForm laser sintering materials include CastForm and LaserForm proprietary SLS materials. SLS materials are used to create durable, functional end-use parts, prototypesproduce very strong and durable patterns as well as assembly jigs and fixtures. They are also used to produce flexible, rubber-like parts, high-temperature resistant parts, patterns for investment casting, functional tooling such as injection molding tool inserts, and end-use parts for customized advanced manufacturing applications. 

Examplesparts. Customer uses of rapid manufacturing parts produced by our customers using our SLS printers include air ducts for military aircraft and engine cowling parts for unmanned aerial vehicles. Product designers and developers from major automotive, aerospace and consumer products companies use DuraForm parts extensively as functional test models including in harsh test environment conditions. Aerospaceand end-use parts, such as housings, machinery components, ducting, tooling, jigs and fixtures and medical companies use ourdevices and personalized surgery kits and guides. 

Our proprietary SLS printers to produce end-use parts directly, which enables them to create customized parts economically without tooling. Parts made frommaterials include a range of soft and rigid plastics, nylon and composite materials marketed under the DuraForm and®, LaserForm™® and CastForm™ brand names. These materials are cost effectiveavailable in a variety of lightweight, tough, versatile, high temperature, flexible and can compete favorably with traditional manufacturing methods, especially where part complexity is high.durable formulations.

Metal MaterialsDMP Printers



Our familyDMP solutions use a laser beam to sinter powders in a variety of DMS printmetals to produce fully dense parts with outstanding surface finish and resolution. We offer DMP printers that can process a wide range of materials includes metal and ceramicpowders, including materials with very fine powders with granularity of six to nine microns. Theseand proven manufacturing applications. We sell DMP systems in various sizes and certain models are optimized for specific metals, including titanium, stainless steel and nickel super alloys. Our DMP printers are well-suited for medical and dental implants, aerospace, automotive, and hi-tech and industrial applications, such as conformal cooling, simplifying assemblies, light weight parts, enhanced fluid flow, topology optimization and other complex parts.

We offer metal powder materials include ceramics,for our direct metal printers, including titanium, stainless steels, tool steels, super alloys, non-ferrous alloys, precious metals and alumina. Our DMS printers and materials are used for chemically pure, fully dense, fine feature detail printing of end use part and patterns in aerospace, automotive and healthcare applications. Super alloys are commonly used in parts of gas turbine engines that are subject to high temperatures and require high strength, high temperature creep resistance, phase stability and oxidation and corrosion resistance. Non-ferrous metals include aluminum and titanium. Precious metals such as gold, silver and platinum and exotic or rare metals such as cobalt, mercury or tungsten can also be processed. aluminum.



VisiJet Print MaterialsMJP Printers



Our family of MJP VisiJetprint materials includes3D printers utilize jetting head technology to deliver precise, tough parts with exceptional resolution in tough plastic, wax, elastomer and engineered part-buildingmaterials that we sell under the VisiJet® brand name. MJP printers offer the capability to print in rigid or flexible materials and compatible disposable supportmultiple materials that are used in the modeling processone build, making them ideal for mechanical functional testing, rapid tooling, jigs and facilitate an easily-melted support removal process. fixtures, casting patterns, over-molding and medical models.

CJP Printers

Our CJP 3D printers produce parts from our VisiJet materials includebranded, powder-based ceramic-like materials. CJP printers build high-definition, full-color parts that can be sanded, drilled, tapped, painted and plastic materials and binders. These print materials are sold to our customers packaged in proprietary smart cartridges designedelectroplated, which further expands the options available for our professional 3D printers. Our proprietary VisiJet plastic print materialsfinished part characteristics. CJP printers are ideal for studyproducing models used in mechanical design, healthcare, architecture, education, entertainment and form, fit and function engineering studies. VisiJetwax print materials and special dissolvable support materials are used for direct casting applications such as custom jewelry manufacturing, dental crowns and bridge work and other casting and micro-castingpackaging applications. Our VisiJet materials family also includes durable materials that provide injection-molded like properties for high-end prototyping and demanding applications and high performance powders for full-color printing in ceramic-like material and plastics for design communication, architecture, medical and education applications. 

PJP Print Materials

Our family of print materials for use in our PJP 3D printers includes polylatic acid (PLA), acrylonitrile butadiene styrene (ABS), polypropylene (PP), high density polyethylene (HDPE), low density polyethylene (LDPE), and unplasticised polyvinyl chloride (uPVC). These print materials are packaged in proprietary smart cartridges and offer a variety of properties, including tough polymer materials for car bumpers, tough and flexible polymers for face masks or containers, and chemical and solvent resistant materials for fuel tanks, snowboards and water pipes. PLA and ABS plastics are for use in our consumer 3D printers, providing multi-color, durable, real plastic parts.



Software Solutionsand Related Products



We also provide our customers withdigital design tools, including software, toolsscanners and haptic devices. We offer solutions for product design, mold and die design, 3D scan-to-print, reverse engineering, production machining and inspection and proprietary digitalinspection. These products are designed to enable a more seamless workflow software tools. We offer Geomagic software packages and design tools for reverse engineering, inspection and haptic design packages, enabling our customers to open scan data directly in the CAD parametric environment, design in Voxel CAD and sculpt. We also offer Cubify Invent and Cubify Design CAD software solutions.customers. We also offer proprietary software and drivers embedded within our printers.printers that provide part preparation, part placement, support placement, build platform management and print queue management.



3D ScannersOther Products



As part of our solutions for precision healthcare, we also offer 3D virtual reality simulators and simulator modules for medical applications. These 3D simulators offer clinicians a realistic hands-on experience to master critical skills, prepare for upcoming procedures and create patient specific simulations. We offer affordable 3Dalso provide digitizing scanners enabling seamless integration with our software solutionsfor medical and 3D printers for consumers and professionals. Geomagic Capture™ is designed for the professional user and is available in six configuration packages, each including a compact, ultra-precise, blue light LED scanner directly integrated with our Geomagic software. The Sense™ 3D scanner is the first 3D scanner designed for the consumer and optimized for 3D printing. It delivers precise, instant digital data for physical photography or 3D design. Our scanners are easy to use and intuitive for a fraction of the cost of others available in their classes today.mechanical applications.



Services



Warranty, Maintenance and Training Services



We provide a variety of customer services, and local application support and field support on a worldwide basis for all our SLA, SLS and DMS 3D printers. For our 3D printers and software, we provide these services and field support either directly or through a network of authorized resellers or other sources. We are continuing to expand our reseller channel for our line of consumer and professional 3D printers and software and to train our resellers to perform installation and maintenance services for our printers.  

The services and field support that we provide includesproducts, including installation of new printers at customers’ sites, printer warranties, several maintenance agreement options and a wide variety ofagreements, periodic hardware upgrades and software updates and performance enhancement packages.updates. We also provide services to assist our customers and resellerspartners in developing new applications for our technologies, to facilitate the use of our technology for the customers’specific applications, to train customers on the use of newly acquiredour printers and to maintain our printers at customers’ sites.

We provide these services and field support either directly or through a network of reseller partners. We employ customer-support sales engineers to support our worldwide customer base, and we are continuing to strengthen and enhance our partner network. We distribute spare parts on a worldwide basis to our customers.



All of our 3D printers are sold with maintenance support that generally covers a warranty period ranging from 90 days to one year. We generally offer service contracts that enable our customers to continue maintenance coverage beyond the initial warranty period. These service contracts are offered with various levels of support and options and are priced accordingly. We employ customer-support sales engineers in North America, in several countries in Europe and in parts of the Asia-Pacific region to support our worldwide customer base. As a key element of warranty and service contract maintenance, ourOur service engineers provide regularly scheduled preventive maintenance visits to customer sites. Wesites, and we also provide training to our distributors and resellerspartners to enable them to perform these services.

We distribute spare parts on a worldwide basis to our customers, primarily from locations in the U.S. and Europe.



We also offer upgrade kits for certain of our printers that enable our existing customers to take advantage of new or enhanced printer capabilities; however,capabilities. In some cases, we have discontinued upgrade support and maintenance agreements for certain of our older legacy printers.



Quickparts ServicesOn-Demand Solutions



We provide an extensive suite of on-demand parts servicesmanufacturing through our Quickparts branded global network of fulfillment facilities. Our Quickparts service offersfacilities worldwide in the Americas, EMEA and APAC. We provide a broad range of prototyping, production and finishing capabilities for precision plastic and metal parts service capabilities produced fromand tooling with a wide range of 3D printing and traditional materials using a variety of additive and traditional manufacturing processes.  Customers may procure

In addition to the sales of parts, we, and our sales partners, utilize our on-demand parts operation as a complete range of precision plasticsales and metal parts services using a variety of finishing, molding and casting capabilities. In addition,lead generation tool. Third party preferred service providers and leading service bureaus can also use our on-demand custom parts service as their comprehensive order-fulfillment center. We also provide on-demand professional 3D scanning, printing and parts production related to the entertainment industry through our Gentle Giant brand™.  

Consumer Services



Software Services



In addition to our software license products, we offer customers post sale software maintenance, which includes updates and software support for our software products. Our software is sold with maintenance service that generally covers a period of one year. We offer multi-year maintenance contracts that enable our customers to continue maintenance coverage beyond the initial one year period. These software service contracts typically include free software updates and various levels of technical support.

Healthcare Services

Through our precision healthcare services, we provide surgical planning, modeling, prototyping and manufacturing services, including printing and finishing of medical and dental devices, models and tools, as well as modeling and design reverse engineering and inspection software packages.services, including VSP™. We also provide service on our surgical simulators that are sold under our SimbionixTM brand.



Global Operations



We operate in North America,  Europethe Americas, EMEA and the Asia-PacificAPAC regions, and distributemarket our products and services in those areas as well as to other parts of the world. Revenue in countries outside the U.S. accounted for 44.5%, 44.5% and 48.9% of consolidated revenue in the years ended December 31, 2013, 2012 and 2011, respectively.



In maintaining foreign operations outside the U.S., we expose our business to risks inherent in such operations, including currency fluctuations. Information on foreign exchange risk appears in Part I, Item 1A, “Risk Factors”, Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” and Item 8, “Financial Statements and Supplementary Data,” of this Form 10‑K, which information is incorporated herein by reference.10-K. 



Financial information about geographic areas, including revenue, long-lived assets and cash balances, appears in Note 21 to the Consolidated Financial Statements and in Part I, Item 1A, “Risk Factors”, Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” and Part II, Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K which information is incorporated herein by reference.(“Consolidated Financial Statements”).



Marketing and Customers



Our sales and marketing strategy focuses on an integrated approach that is directed at providing 3D content-to-printcomprehensive solutions and servicesdesigned to meet customer needs. We use a widefull range of customer needs. This integrated approach includes the salesmarketing and marketing of our parts service, either as an adjunctlead generation tools to a customer’s in-house use of additive technologies or to the much broader audience of users who do not have 3D printers.

Our sales organization is responsible for the sale of all ofpromote our products and services on a worldwide basisbasis. Our marketing department supports our global sales organization and distribution channels by providing marketing materials, potential sales leads and co-marketing funds.

We sell our solutions globally through a direct sales force, partner channel and in certain geographies, appointed distributors. Our sales organization includes channel managers, direct sales people and application engineers throughout the Americas, EMEA and APAC, who are responsible for the sale of products and services and for the management and coordination of our growing network of authorized resellers. With the exception ofchannel partners.

Additionally, our online channels and direct Quickparts salespersons, we sell our products primarily through resellers who are supported by our own experienced channel sales managers consisting of salespersons who work throughout North America, Europe and Asia-Pacific.  Our application engineers provide professional services through pre-sales and post-sales support, and assist existing customers so that they can take advantage ofwith leveraging our latest print materialssolutions and production techniques to improve part quality and machine productivity. This group also leverages our customer contacts to help identify new application opportunities that utilizeapplications and sales opportunities. Our on-demand manufacturing service also expands our proprietary processescustomer relationships and access to our Quickparts printing service.  As of December 31, 2013, our worldwide sales, application and service staff consisted of 234 employees.

In certain areas of the world where we do not operate directly, we have appointed sales agents, resellers and distributors who are authorized to sell our production printers and the print materials used in them on our behalf. Certain of those agents, resellers and distributors also provide services to customers in those geographic areas.generates leads for future sales.  



Our consumer and professional printers and related print materials, services, 3D scanners and software solutions are sold worldwide directly and through a network of authorized distributors and resellers who are managed and directed by a dedicated team of channel sales managers.

As a complement to our printers and print materials sales, we maintain our on demand parts service, a global network of parts printing service locations branded as Quickparts. Quickparts is designed to provide our customers a single source for all their design-to-manufacturing needs, through which we offer access to a wide range of additive and traditional manufacturing technologies, print materials from plastics to metals and our project management and finishing capabilities through a powerful e-commerce platform with on-line quoting, plug-ins and secure ordering.

Our consumer oriented 3D printers, design productivity tools, downloadable content, and curation services are available through Cubify and through hundreds of retail stores and traditional retail distributors.  

Our commercial customers include major companies and small and midsize businesses in a broad range of industries, including manufacturers ofhealthcare, automotive, aerospace, computer, electronic,government, defense, technology, electronics, education, consumer energygoods and healthcare products. Purchasers of our printers include original equipment manufacturers (OEM’s), government agencies, universities and other educational institutions, independent service bureaus and individual consumers.energy.  No single customer accounted for more than 10 percent of our consolidated revenue for  the years ended December 31, 2013, 20122016, 2015 or 2011.2014.  



Production and Supplies



We assemble our Cube X consumer 3D printers and our ProJet 1000 through 7000 professional 3D printers and other equipment atAt our Rock Hill, South Carolina facilities. Our Vidar digitizerslocation, we assemble MJP, CJP and Cube consumercertain models of our SLA 3D printers, are assembled inas well as other equipment related to these printers. We assemble certain models of our Herndon, Virginia facility. Our ProJet x60 series of professionalDMP printers are assembled at our Andover, Massachusetts location. Our direct metals printers are produced in our Riom, France facility, as part of the acquisition of Phenix Systems.facility. We produce our Simbionix branded 3D simulators in Airport City, Israel.



We outsource certain productionSLA, SLS and DMP printer assembly and refurbishment activities to selected design, engineering and engineeringmanufacturing companies and suppliers in the United States.States and Belgium. These suppliers also carry out quality control procedures on our printers prior to their shipment to customers. As part of these activities, these suppliers have responsibility for procuring the components and sub-assemblies that are used in our printers.either from us or third party suppliers. We purchase finished printers from these suppliers pursuant to forecasts and customer orders that we supply to them. While the outsourced suppliers of our printers have responsibility for the supply chain and inventory of the components for the printers they assemble, the components, parts and sub-assemblies that are used in our printers are generally available from several potential suppliers.



We produce print materials at our facilities in Andover, Massachusetts, Norton, Ohio, Marly, Switzerland and Rock Hill, South Carolina.Carolina; Barberton, Ohio; Marly and Grüningen, Switzerland. We also have arrangements with third parties who blend certain print materials according to our specifications certain print materials that we sell under our own brand names. As discussed above,names, and we also purchase certain print materials from third parties for resale to our customers.



Our equipment assembly and print materials blending activities, on-demand parts services and certain research and development activities are subject to compliance with applicable federal, state and local provisions regulating the storage, use and discharge of materials into the environment. We believe that we are in compliance, in all material respects, with such regulations as currently in effect and that continued compliance with them will not have a material adverse effect on our capital expenditures, results of operations or consolidated financial position.



Research and Development



The 3D printing industry is experiencingcontinues to experience rapid technological change.change and developments in hardware, software and materials. Consequently, we have ongoing research and development programs to develop new printers and print materialsproducts and to enhance our product linesportfolio of products and services, as well as to improve and expand the capabilities of our printers, print materials and software. This includes all significant technology platform developments for all our print engines, print materials, software products and perceptual devices which includes our scanners and haptic tools.solutions. Our development efforts are often augmented by development arrangements with research institutions, customers, suppliers, of material and hardware and the assembly and design firms, that we have engaged to assemble our printers. From time to time, we also engage third party engineering companies and specialty print materials companiescompanies.

Research and development expenses were $88.4 million, $92.8 million and $75.4 million in specific development projects.2016, 2015 and 2014, respectively.



In addition to our internally developed technology platforms, we have acquired products orand technologies developed by others by acquiring business entities that held ownership rights to thesuch products and technologies. In other instances, we have licensed or purchased the intellectual property rights of technologies developed by third parties through licensing agreements that may obligate us to pay a license fee or royalty, typically based upon a dollar amount per unit or a percentage of the revenue generated by such products. As noted below, the amount of such royalties was not material to our results of operations or consolidated financial position for the three-year period ended December 31, 2013.

Research and development expenses were $43.5 million, $23.2 million and $14.3 million in 2013, 2012 and 2011, respectively.

We capitalized software development costs of $0.3 million from acquisitions in 2013. We did not capitalize any software development costs in 2012.  We capitalized software development costs of  $7.9 million from acquisitions in 2011.  See Note 6 to the Consolidated Financial Statements. 



Intellectual Property



We regard our technology platforms and materials as proprietary and seek to protect them through copyrights, patents, trademarks and trade secrets. At December 31, 20132016 and 2012,2015, we held 9731,171 and 8521,114 patents worldwide, respectively. At December 31, 2013,2016 and 2015, we also had 204249 and 264 pending patent applications worldwide, including applications covering inventions contained in our recently introduced printers.respectively. The principal issued patents covering aspects of our various technologies will expire at varying times through the year 2027.



WeIn addition, we are also a party to various licenses that have had the effect of broadening the range of the patents, patent applications and other intellectual property available to us.



We have also entered into licensing or cross-licensing arrangements with various companies in the United States and in other countries that enable those companies to utilize our technologies in their products or that enable us to use their technologies in our products. Under certain of these licenses, we are entitled to receive, or we are obligated to pay, royalties for the sale of licensed products in the U.S. or in other countries. The amount of such royalties was not material to our results of operations or consolidated financial position for the three-year period ended December 31, 2013.2016.



We believe that, while our patents and licenses provide us with a competitive advantage, our success also depends primarily on our marketing, business development, and applications know-how and on our ongoing research and development efforts. Accordingly, we believe the expiration of any of the patents, patent applications or licenses discussed above would not be material to our business or financial position.



Competition



We face competition from the development of new technologies or techniques not encompassed by the patents that we own or license from the conventional machining, plastic molding and metal casting techniques discussed above and from improvements to existing technologies, such as Computer Numerical Control (“CNC”) machining and rotational molding.

Competition for most of our 3D printers is based primarily on process know-how, product application know-how and the ability to provide a full range of products and services to meet customer needs. Competition is also based upon innovations in 3D printing, rapid prototyping and rapid manufacturing printers and print materials. Accordingly, our ongoing research and development programs are intended to enable us to maintain technological leadership. Certain of the companies producing competing products or providing competing services are well established and may have greater financial resources.

Our principal competitors are companies that manufacture machines that make, or use machines to make, models, prototypes, molds and small-volume to medium-volume manufacturing parts. These competitors include suppliers of CNC, suppliers of plastics molding equipment, including injection-molding equipment, suppliers of traditional machining, milling and grinding equipment, and businesses that use such equipment to produce models, prototypes, molds and small-volume to medium-volume manufacturing parts.  These conventional machining, plastic molding and metal casting techniques continue to be the most common methods by which plastic and metal parts, models, functional prototypes and metal tool inserts are manufactured.technologies.



Our competitors also include other suppliers of 3D printers printand materials, and software, including CAD design and scanningproduction software, tools and scanners, as well as suppliers of forming manufacturing solutions such as vacuum casting equipment. A number of companies currently sell print materials that compete with those we sell,equipment, and there are a wide number of suppliers of maintenance services for the equipment that we sell.healthcare simulators.  Numerous suppliers of these products operate both internationally and regionally, and many of them have well-recognized product lines that compete with us in a wide range of our product applications. Our competitors are also companies that manufacture or utilize machines that are used to make models, prototypes, molds and parts. These competitors include suppliers of CNC machines, plastics molding equipment, including injection-molding equipment, traditional machining, milling and grinding equipment, and businesses and service bureaus that use such equipment to produce models, prototypes, and molds and to manufacture parts on demand. Conventional machining, plastic molding and metal casting techniques continue to be the most common methods by which plastic and metal parts and tool inserts are manufactured today.



Competition in the on-demand parts printing service business is highly fragmented, withfor most of our 3D printers is based primarily on technology capabilities, process know-how, product application know-how and the ability to provide a full range of products and services suppliers operating on a local level.to meet customer needs. Accordingly, our ongoing research and development programs are intended to enable us to maintain technological leadership. Certain of the companies providing competing products or services, and those currently developing 3D printing products and services, are well established and may have greater financial resources than we have.



We believe that our future success depends on our ability to provide high quality solutions, enhance our existing products and services,portfolio, introduce new products and services on a timely and cost-effective basis, meet changing customer needs, extend our core technologies to new applications and anticipate and respond to emerging standards, business models, service delivery methods and other technological changes.



Employees



At December 31, 2013,2016 and 2015, we had 1,3882,445 and 2,492  full-time employees.employees, respectively.  Although some of our employees outside the U.S. are subject to local statutory employment and labor arrangements, none of our U.S. employees are covered by collective bargaining agreements. We have not experienced any material work stoppages and believe that our relations with our employees are satisfactory.



Available Information



Our website address is www.3DSystems.com.  The information contained on our website is neither a part of, nor incorporated by reference into, this Form 10-K. We make available free of charge through our website our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, amendments to those reports and other documents that we file with the Securities and Exchange Commission (“SEC”), as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. In addition, theThe public may read and copy materials we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the public reference room can be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, from which investors can electronically access our SEC filings.



SeveralMany of our corporate governance materials, including our Code of Conduct, Code of Ethics for Senior Financial Executives and Directors, Corporate Governance Guidelines, the current charters of each of the standing committees of the Board of Directors and our corporate charter documents and by-laws are available on our website. 



Executive and Other Officers



The information appearing in the table below sets forth the current position or positions held by each of our executive officers and his or her age as of February 1,  2014.28, 2017. All of our executive officers serve at the pleasure of the Board of Directors. There are no family relationships among any of our executive officers or directors.



We have employed eachMr. Joshi was appointed the Company’s President and Chief Executive Officer, effective April 1, 2016. Prior to joining the Company, Mr. Joshi worked at Hewlett-Packard Company (“HP”) from 1980 until his retirement on March 21, 2012.  From 2001 to 2012, he was Executive Vice President of HP’s Imaging and Printing Group, following two decades of research, engineering and management in HP’s imaging and printing systems. In addition to his service on our Board of Directors, Mr. Joshi currently serves on the Board of Directors of Harris Corporation and formerly served on the Board of Directors at Yahoo! Inc. and Wipro Ltd.

Mr. Hull is a founder of the individualsCompany and has served on our Board of Directors since 1993.  He has served as Chief Technology Officer since 1997 and as Executive Vice President since 2000. He has also previously served in various other executive capacities at the foregoing table other than Ms. Lewis for more than five years.Company since 1986, including Chief Executive Officer, Vice Chairman of the Board of Directors and President and Chief Operating Officer.



Ms. Lewis joined usMr. Johnson has served as Executive Vice President and Chief Legal Officer since November 2014.  He served as Interim President and Chief Executive Officer, Chief Legal Officer and Secretary from October 2015 to April 2016 and as Vice President, Global Marketing on October 15, 2009General Counsel and was elected an officer ofSecretary from April 2012 to November 2014.  Previously, he served as Assistant General Counsel and Assistant Secretary.

Dr. McAlea currently serves as Executive Vice President, General Manager, Metals & Healthcare. Dr. McAlea joined the companyCompany in May 2010.2003 and has served in various executive positions since that time. 

Mr. McMullen joined 3D Systems as Executive Vice President, Chief Financial Officer in July 2016. From 2006 until 2009, she2014 to 2016, he was Chief ExecutiveFinancial Officer of Desktop Factory, Inc.,Eastman Kodak Company, a venture financed technology start-upcompany focused on the developmentimaging. Before that, Mr. McMullen had a 32 year career at HP and delivery of a low cost 3D printer. For more than three years prior to 2006, Ms. Lewis servedits acquired companies, including positions as Senior Vice President Marketingof Finance and Corporate Treasurer of HP, Chief Financial Officer of HP’s Imaging and Printing Group and Vice President of Finance and Strategy for IKON Office Solutions, a global office copying/printing/imagingCompaq’s Worldwide Sales and related services company.Services Group.



Item 1A. Risk Factors

Forward-Looking Statements 

Certain statements made in this Form 10-K that are not statements of historical or current facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include the cautionary statements and risk factors set forth below as well as other statements made in this Form 10-K that may involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements.

In addition to the statements set forth below that explicitly describe risks and uncertainties to which our business and our financial condition and results of operations are subject, readers are urged to consider statements in future or conditional tenses or that include terms such as “believes,” “belief,” “expects,” “intends,” “anticipates” or “plans” that appear in this Form 10-K to be uncertain and forward-looking. Forward-looking statements may include comments as to our beliefs, expectations and projections as to future events and trends affecting our business. Forward-looking statements are based upon our beliefs, assumptions and current expectations concerning future events and trends, using information currently available to us, and are necessarily subject to uncertainties, many of which are outside our control. We assume no obligation, and do not intend, to update these forward-looking statements, except as required by applicable law. The factors stated under the heading “Cautionary Statements and Risk Factors” set forth below, as well as other factors, could cause actual results to differ materially from those reflected or predicted in forward-looking statements.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from those reflected in or suggested by forward-looking statements. Any forward-looking statement that you read in this Form 10-K reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, financial condition, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or to individuals acting on our behalf are expressly qualified in their entirety by this discussion. You should specifically consider the factors identified in this Form 10-K, which would cause actual results to differ from those referred to in forward-looking statements.

Cautionary Statements and Risk Factors



The risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not currently known to us or that we currently deem not to be material also may impair our business operations, results of operations and financial condition. If any of the risks described below or if any other risks and uncertainties not currently known to us or that we currently deem not to be material actually occurs, our business, results of operations and financial condition could be materially adversely affected. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment in our common stock.  



The risks discussed belowWe face significant competition in many aspects of our business, which could cause our revenue and gross profit margins to decline. Competition could also include forward‑looking statementscause us to reduce sales prices or to incur additional marketing or production costs, which could result in decreased revenue, increased costs and reduced margins.

We compete for customers with a wide variety of producers of equipment and software for models, prototypes, other three-dimensional objects and end-use parts as well as producers of print materials and services for this equipment. Some of our existing and potential competitors are researching, designing, developing and marketing other types of competitive equipment and software, print materials and services. Certain of these competitors may have financial, marketing, manufacturing, distribution and other resources substantially greater than ours.

We also expect that future competition may arise from the development of allied or related techniques for equipment and materials that are not encompassed by our patents, from the issuance of patents to other companies that may inhibit our ability to develop certain products and from improvements to existing print materials and equipment technologies.

Some of our patents have recently expired and others will expire in coming years. Upon expiration of those patents, our competitors may introduce products using the technology previously protected by the expired patents and those products may have lower prices than those of our products. To compete, we may need to reduce our prices for those products, which could adversely affect our revenues, margins and profitability. Additionally, the expiration of our patents could reduce barriers to entry into additive manufacturing, which could result in the reduction of our sales and earnings potential. If competitors using technology previously protected by our expired patents were to introduce products of inferior quality, our potential customers may view the technology negatively, which would have an adverse effect on our image and reputation and on our ability to compete with systems using other additive fabrication technologies.

We intend to follow a strategy of continuing product development to enhance our position to the extent practicable. We cannot assure you that we will be able to maintain our current position in the field or continue to compete successfully against current and future sources of competition. If we do not keep pace with technological change and introduce new products, we may lose revenue and demand for our products. We also incur significant costs associated with the investment in our product development in furtherance of our strategy that may not result in increased revenue or demand for our products and which could negatively affect our operating results.

We believe that our future success depends on our ability to deliver products that meet changing technology and customer needs.

Our business may be affected by rapid technological change, changes in user and customer requirements and preferences, frequent new product and service introductions embodying new technologies and the emergence of new standards and practices, any of which could render our existing products and proprietary technology obsolete. Accordingly, our ongoing research and development programs are intended to provideenable us to maintain technological leadership. We believe that to remain competitive we must continually enhance and improve the functionality and features of our current expectations with regard to those risks. There canproducts, services and technologies. However, there is a risk that we may not be no assurance that our current expectations will be met, and our actual results may differ substantially from the expectations expressed in these forward‑looking statements.

Global economic, political and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price.     

We are subject to global economic, political and social conditions that may cause customers to delay or reduce technology purchases due to economic downturns, volatility in fuel and other energy costs, difficulties in the financial services sector and credit markets, geopolitical uncertainties and other macroeconomic factors affecting spending behavior.  We face risks that may arise from financial difficulties experienced by our suppliers, resellers or customers, including:able to:









We may incur substantial costs enforcing or acquiring intellectual property rightsIf we are unable to meet changing technology and defending against third party claims as a resultcustomer needs, our competitive position, revenue, results of litigation or other proceedings.

In connection with the enforcement of our own intellectual property rights, the acquisition of third-party intellectual property rights or disputes related to the validity or alleged infringement of third party intellectual property rights, including patent rights, we have been, are currentlyoperations and may in the futurefinancial condition could be subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be costly and can be disruptive to our business operations by diverting attention and energies of management and key technical personnel, and by increasing our costs of doing business. Although we have successfully defended or resolved past litigation and disputes, we may not prevail in any ongoing or future litigation and disputes.

Third-party intellectual property claims asserted against us could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from assembling or licensing certain of our products, subject us to injunctions restricting our sale of products, cause severe disruptions to our operations or the marketplaces in which we compete, or require us to satisfy indemnification commitments with our customers including contractual provisions under various license arrangements. In addition we may incur significant costs in acquiring the necessary third-party intellectual property rights for use in our products. Any of these could seriously harm our business.

We may not be able to protect our intellectual property rights, including our digital content, from third-party infringers or unauthorized copying, use or disclosure.

Although we defend our intellectual property rights and endeavor to combat unlicensed copying and use of our digital content and intellectual property rights through a variety of techniques, preventing unauthorized use or infringement of our rights is inherently difficult. If our intellectual property becomes subject to piracy attacks, they may harm our business.

Additionally, we endeavor to protect the secrecy of our digital content, confidential information and trade secrets. If unauthorized disclosure of our trade secrets occurs, we could potentially lose trade secret protection. The loss of trade secret protection could make it easier for third parties to compete with our products by copying previously confidential features, which could adversely affect our revenue and operating margins. We also seek to protect our confidential information and trade secrets through the use of non-disclosure agreements. However there is a risk that our confidential information and trade secrets may be disclosed or published without our authorization, and in these situations it may be difficult and/or costly for us to enforce our rights.affected.



We have made, and expect to continue tomay make in the future, strategic acquisitions that may involve significant risks and uncertainties.  We may not realize the anticipated benefits of past or future acquisitions and integration of these acquisitions may disrupt our business and divert management.



We completed eleven acquisitions in 2013.  We also intendFrom time to continue totime, we evaluate acquisition opportunities in the future in an effort to expandcandidates that fit our business and enhance stockholder value.objectives. For example, in January 2017, we acquired Vertex-Global Holding B.V., a provider of dental materials. Acquisitions involve certain risks and uncertainties, including:including, among others, the following:































Historically, we have grown organically and from acquisitions, and we intend to continue to grow. Our infrastructure will require, among other things, continued development of our financial and management controls and management information systems, management of our sales channel, continued capital expenditures, the ability to attract and retain qualified management personnel and the training of new personnel. We cannot be sure that our infrastructure, systems, procedures, business processes and managerial controls will be adequate to support the growth in our operations. Any delays in, or problems associated with, implementing, or transitioning to, new or enhanced systems, procedures, or controls to accommodate and support the requirements of our business and operations and to effectively and efficiently integrate acquired operations may adversely affect our ability to meet customer requirements, manage our product inventory, and record and report financial and management information on a timely and accurate basis. These potential negative effects could prevent us from realizing the benefits of an acquisition transaction or other growth opportunity. In that event, our competitive position, revenues, results of operations and financial condition could be adversely affected. 

Our balance sheet contains several categories of intangible assets that we could be required to write off or write down in the future in the event of the impairment of certain of those assets arising from any deterioration in our future performance or other circumstances. Such write-offs or write-downs could adversely impact our earnings and our ability to obtain financing in the future. 

At December 31, 2016, we had $181.2 million in goodwill capitalized on our balance sheet and $121.5 million of other intangible assets, net capitalized on our balance sheet, which represented 35.7% of our total assets.

A majority of our acquisitions have resulted in our recording additional goodwill on our consolidated balance sheet. This goodwill typically arose because the purchase price for these businesses reflected a number of factors including the future earnings and cash flow potential of these businesses, the multiples to earnings, cash flow and other factors, such as prices at which similar businesses have been purchased by other acquirers, the competitive nature of the process by which we acquired the business, and the complementary strategic fit and resulting synergies these businesses bring to existing operations.

As a result of our annual impairment testing in 2015, we recorded goodwill impairment charges of $443.7 million and other intangible assets impairment charges of $93.5 million in the fourth quarter of 2015. The impairment charges were non-cash in nature and did not impact our cash position or cash flows, but such charges, and possible additional charges in the future could adversely affect our results of operations and stockholders’ equity and could adversely affect the trading price of our common stock. We will monitor our reporting units in an effort to determine whether events and circumstances warrant further interim impairment testing. We could be required to write off or write down additional amounts in the future in the event of deterioration in our future performance, sustained slower growth or other circumstances.

We may incur substantial costs enforcing or acquiring intellectual property rights and defending against third-party claims as a result of litigation or other proceedings.

In connection with the enforcement of our own intellectual property rights, the acquisition of third-party intellectual property rights or disputes related to the validity or alleged infringement of third party intellectual property rights, including patent rights, we have been, and may in the future be, subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be costly and can be disruptive to our business operations by diverting attention and energies of management and key technical personnel, and by increasing our costs of doing business. Although we have successfully defended or resolved past litigation and disputes, we may not prevail in any ongoing or future litigation and disputes, which could adversely affect our results of operations and financial condition.  

Third-party intellectual property claims asserted against us could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from assembling or licensing certain of our products, subject us to injunctions restricting our sale of products, cause severe disruptions to our operations or the marketplaces in which we compete or require us to satisfy indemnification commitments with our customers including contractual provisions under various license arrangements. In addition, we may incur significant costs in acquiring the necessary third-party intellectual property rights for use in our products. Any of these could seriously harm our business.

We may not be able to protect our intellectual property rights and confidential information, including our digital content, from third-party infringers or unauthorized copying, use or disclosure.

Although we defend our intellectual property rights and endeavor to combat unlicensed copying and use of our digital content and intellectual property rights through a variety of techniques, preventing unauthorized use or infringement of our rights (“piracy attacks”) is inherently difficult. If our intellectual property becomes subject to piracy attacks, they may harm our business.

Additionally, we endeavor to protect the secrecy of our digital content, confidential information and trade secrets. If unauthorized disclosure of our trade secrets occurs, we could potentially lose trade secret protection. The loss of trade secret protection could make it easier for third parties to compete with our products by copying previously confidential features, which could adversely affect our business, results of operations, revenue and operating margins. We also seek to protect our confidential information and trade secrets through the use of non-disclosure agreements. However, there is a risk that our confidential information and trade secrets may be disclosed or published without our authorization, and in these situations it may be difficult and/or costly for us to enforce our rights. 

Our business could be adversely impacted in the event of a failure of our information technology infrastructure or adversely impacted by a successful cyber-attack.

We have experienced cyber security threats, threats to our information technology infrastructure and unauthorized attempts to gain access to our sensitive information. Prior cyber-attacks directed at us have not had a material impact on our business or financial results; however, this may not continue to be the case in the future. Cyber security assessment analyses undertaken by us have identified and prioritized steps to enhance our cyber security safeguards. We are in the process of implementing these recommendations to enhance our threat detection and mitigation processes and procedures. Despite the implementation of these new safeguards, there can be no assurance that we will adequately protect our information or that we will not experience any future successful attacks. The threats we face vary from attacks common to most industries to more advanced and persistent, highly organized adversaries who target us because of the products and services we provide. If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our threat mitigation and detection processes and procedures. Due to the evolving nature of these security threats, however, the impact of any future incident cannot be predicted.

We may be required to expend significant additional resources to modify our cyber security protective measures, to investigate and remediate vulnerabilities or other exposures or to make required notifications, and we may be subject to litigation and financial losses. These costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Occurrence of any of these events could adversely affect our internal operations, the services we provide to our customers, our financial results or our reputation; or such events could result in the loss of competitive advantages derived from our research and development efforts or other intellectual property or early obsolescence of our products and services.



If we cease to generate net cash flow from operations and if we are unable to raise additional capital, our financial condition could be adversely affected and we may not be able to execute our growth strategy.



We cannot assure you that we will continue to generate cash from operations or other potential sources to fund future working capital needs and meet capital expenditure requirements.



If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring or incurring additional debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to obtain additional capital or refinance ourany indebtedness will depend on, among other things, the capital markets, our financial condition at such time and the terms and conditions of any such financing or indebtedness. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

During 2013 we carried out one capital markets transaction and received $272.1 million of net proceeds. From time-to-time we may seek access to additional external sources of capital to fund working capital needs, capital expenditures, acquisitions and for other general corporate purposes. However, we cannot assure you that capital would be available from external sources such as bank credit facilities, debt or equity financings or other potential sources to fund any of those future needs.

If our ability to generate cash flow from operations and our existing cash becomes inadequate to meet our needs, our options for addressing such capital constraints include, but are not limited to, (i) obtaining a revolving credit facility from bank lenders,  (ii) accessing the public capital markets, or (iii) delaying certain of our existing development projects. If it became necessary to obtain additional debt financing it is likely that such alternatives in the current market environment would be on less favorable terms than we have historically obtained, which could have a material adverse impact on our consolidated financial position, results of operations or cash flows.



The lack of additional capital resulting from any inability to generate cash flow from operations or to raise equity or debt financing could force us to substantially curtail or cease operations and would, therefore, have a materialan adverse effect on our business and financial condition. Furthermore, we cannot assure you that any necessary funds, if available, would be available on attractive terms or that they would not have a significantly dilutive effect on our existing stockholders. If our financial condition worsens and we become unable to attract additional equity or debt financing or enter into other strategic transactions, we could become insolvent or be forced to declare bankruptcy, and we would not be able to execute our growth strategy.



Global economic, political and social conditions and financial markets may harm our ability to do business, adversely affect our sales, costs, results of operations and cash flow. 

We are subject to global economic, political and social conditions that may cause customers to delay or reduce technology purchases due to economic downturns, volatility in fuel and other energy costs, difficulties in the financial services sector and credit markets, geopolitical uncertainties and other macroeconomic factors affecting spending behavior. We face risks that may arise from financial difficulties experienced by our suppliers, resellers or customers, including, among others, the following:

Our uneven sales cycle makes planning and inventory management difficult and future financial results less predictable.

Our quarterly sales often have reflected a pattern in which a disproportionate percentage of each quarter’s total sales occurs towards the end of the quarter. This uneven sales pattern makes predicting net revenue, earnings, cash flow from operations and working capital for each financial period difficult, increases the risk of unanticipated variations in our quarterly results and financial condition and places pressure on our inventory management and logistics systems. If predicted demand is substantially greater than orders, there may be excess inventory. Alternatively, if orders substantially exceed predicted demand, we may not be able to fulfill all of the orders received in each quarter and such orders may be cancelled. Depending on when they occur in a quarter, developments such as a systems failure, component pricing movements, component shortages or global logistics disruptions could adversely impact our inventory levels and results of operations in a manner that is disproportionate to the number of days in the quarter affected.

The variety of products that we sell could cause significant quarterly fluctuations in our gross profit margins, and those fluctuations in margins could cause fluctuations in operating income or loss and net income or loss.



We continuously work to expand and improve our product offerings, including our printers, printproducts, materials and services offerings, the number of geographic areas in which we operate and the distribution channels we use to reach various target product applications and customers. This variety of products, applications and channels involves a range of gross profit margins that can cause substantial quarterly fluctuations in gross profit and gross profit margins depending upon the mix of product shipments from quarter to quarter. Additionally, the introduction of new products or services may further heighten quarterly fluctuations in gross profit and gross profit margins due to manufacturing ramp-up and start-up costs. We may experience significant quarterly fluctuations in gross profit margins or operating income or loss due to the impact of the mix of products, channels or geographic areas in which we sell our products from period to period. In some quarters, it is possible that results could be below expectations of analysts and investors. If so, the price of our common stock may be volatile or decline and our cost of capital may increase.

We believe that our future success may depend on our ability to deliver products that meet changing technology and customer needs. 

Our business may be affected by rapid technological change, changes in user and customer requirements and preferences, frequent new product and service introductions embodying new technologies and the emergence of new standards and practices, any of which could render our existing products and proprietary technology and printers obsolete. Accordingly, our ongoing research and development programs are intended to enable us to maintain technological leadership.  We believe that to remain competitive we must continually enhance and improve the functionality and features of our products, services and technologies. However,  there is a risk that we may not be able to:



We derive a significant portion of our revenue from business conducted outside the U.S and are subject to the risks of doing business outside the U.S.



Approximately 44.5 percent of our consolidated revenue is derived from customers in countries outside the U.S. There areWe face many risks inherent in conducting business activities outside the U.S. that, unless managed properly, may adversely affect our profitability, including our ability to collect amounts due from customers. While most of our operations outside the U.S. are conducted in highly developed countries, theyour operations could be adversely affected by:by, among others, the following:





















These uncertainties may make it difficult for us and our customers to accurately plan future business activities and may lead our customers in certain countries to delay purchases of our products and services. More generally, these geopolitical, social and economic conditions could result in increased volatility in global financial markets and economies.



The consequences of terrorism or armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our market opportunities or our business. We are uninsured for losses and interruptions caused by terrorism, acts of war and similar events.



While the geographic areas outside the U.S. in which we operate are generally not considered to be highly inflationary, our foreign operations are sensitive to fluctuations in currency exchange rates arising from, among other things, certain intercompany transactions that are generally denominated, for example, in U.S. dollars rather than their respective functional currencies.



Moreover, our operations are exposed to market risk from changes in interest rates and foreign currency exchange rates and commodity prices, which may adversely affect our results of operations and financial condition. We seek to minimize these risks through regular operating and financing activities and, when we consider it to be appropriate, through the use of derivative financial instruments. We do not purchase, holdHowever, our efforts to minimize our exposure to market risks from changes in interest rates, foreign currency exchange rates and commodity prices may prove to be insufficient or sell derivative financial instruments for trading or speculative purposes.

We face significant competition in many aspects of our business, which could cause our revenue and gross profit margins to decline. Competition could also cause us to reduce sales prices or to incur additional marketing or production costs, which could result in decreased revenue, increased costs and reduced margins.

We compete for customers with a wide variety of producers of equipment for models, prototypes, other three-dimensional objects and end-use parts as well as producers of print materials and services for this equipment. Some of our existing and potential competitors are researching, designing, developing and marketing other types of competitive equipment, print materials and services. Many of these competitors have financial, marketing, manufacturing, distribution and other resources substantially greater than ours.

We also expect that future competition may arise from the development of allied or related techniques for equipment and print materials that are not encompassed by our patents, from the issuance of patents to other companies that may inhibit our ability to develop certain products, and from improvements to existing print materials and equipment technologies.

We intend to continue to follow a strategy of continuing product development to enhance our position to the extent practicable. We cannot assure you that we will be able to maintain our current position in the field or continue to compete successfully against current and future sources of competition. If we do not keep pace with technological change and introduce new products, we may lose revenue and demand for our products. We also incur significant costs associated with the investment in our product development in furtherance of our strategy that may not result in increased revenue or demand for our products and which could negatively affect our operating results.

New regulations related to conflict-free minerals may cause us to incur additional expenses and may create challenges with our customers.

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability regarding the use of “conflict” minerals mined from the Democratic Republic of Congo (the “DRC”) and adjoining countries. The SEC has established new annual disclosure and reporting requirements for those companies who use “conflict” minerals sourced from the DRC and adjoining countries in their products. We are currently conducting due diligence efforts in order to adhere to the initial disclosure requirements beginning in May 2014.These new requirements could adversely affect the sourcing, supply and pricing of materials used in our products. As there may be only a limited number of suppliers offering conflict-free minerals, we cannot ensure that we will be able to obtain these conflict-free minerals in sufficient quantities or at competitive prices. Compliance with these new requirements may also increase our costs, including costs that may be incurred in conducting due diligence procedures to determine the sources of certain minerals used in our products and other potential changes to products, processes or sources of supply as a consequence of such verification activities. In addition, we may face challenges with our customers if we are unable to sufficiently verify the origins of the minerals used in our products. unsuccessful.



We depend on our supply chain for components and sub-assemblies used in our 3D printers and other products and for raw materials used in our print materials. If these relationships were to terminate or be disrupted, our business could be disrupted while we locatedlocate alternative suppliers and our expenses may increase.



We  have outsourced the assembly of certain of our printers to third party suppliers, we purchase components and sub-assemblies for our printers from third partythird-party suppliers, and we purchase raw materials that are used in our print materials, as well as certain of those print materials, from third partythird-party suppliers.



While there are several potential suppliers of the components, parts and sub-assemblies for our products, we currently choose to use only one or a limited number of suppliers for several of these components, including our lasers, print materials and certain jetting components. Our reliance on a single or limited number of suppliers involves many risks, including:including, among others, the following:











While we believe that we can obtain all the components necessary for our products from other manufacturers, we require any new supplier to become “qualified” pursuant to our internal procedures, which could involve evaluation processes of varying durations. We generally have our printers and other products assembled based on our internal forecasts and the supply of raw materials, assemblies, components and finished goods from third parties, which are subject to various lead times.  In addition, at any time, certain suppliers may decide to discontinue production of an assembly, component or raw material that we use. Any unanticipated change in the sources of our supplies, or unanticipated supply limitations, could increase production or related costs and consequently reduce margins.



If our forecasts exceed actual orders, we may hold large inventories of slow-moving or unusable parts, which could have an adverse effect on our cash flow, profitability and results of operations. Inversely, we may lose orders if our forecast is low and we are unable to meet demand.



We have engaged selected design and manufacturing companies to assemble certain of our production printers. In carrying out these outsourcing activities, we face a number of risks, including:including, among others, the following:









The costs and effects of litigation, investigations or similar matters involving us or our subsidiaries, or adverse facts and developments related thereto, could materially affect our business, operating results and financial condition.

We may be subjectinvolved from time to time in a variety of litigation, investigations, inquiries or similar matters arising out of our business, including those described in Note 22 to the Consolidated Financial Statements. The Company cannot predict the outcome of these or any other legal matters.  In the future, we may need to record litigation reserves with respect to these matters because our insurance may not cover all claims that may be asserted against us. Should the ultimate judgments or settlements in any litigation or investigation significantly exceed our insurance coverage, they could have a material adverse effect on our business, financial condition and results of operations.

Our products and services may experience quality problems from time to time that can result in decreased sales and operating margin, product returns, product liability, warranty or other claims whichthat could result in material expense, diversion of management timesignificant expenses and attention and damageharm to our business reputation.



Products asWe sell complex as those we offer mayhardware and software products, materials and services that can contain undetected design and manufacturing defects or errors when first introduced or as enhancements are released that, despite testing, are not discovered until after the product has been installed and used by customers. ThisSophisticated software and applications, such as those sold by us, may contain “bugs” that can unexpectedly interfere with the software’s intended operation. Defects may also occur in components and products we purchase from third parties. There can be no assurance we will be able to detect and fix all defects in the hardware, software, materials and services we sell. Failure to do so could result in lost revenue, product returns, product liability, delayed marketplacemarket acceptance of the product,those products and services, claims from customersdistributors, end-users or others, increased end-user service and support costs, and significant warranty claims and other expenses to correct the defects, diversion of management time and attention and harm to our reputation.

Our operations could suffer if we are unable to attract and retain key management or other key employees.

Our success depends upon the continued service and performance of our senior management and other key personnel. Our senior executive team is critical to the management of our business and operations, as well as to the development and execution of our strategy. The loss of the services of one or more members of our senior executive team could delay or prevent the successful implementation of our growth strategy, or our commercialization of new applications for our systems or other products, or could otherwise adversely affect our ability to manage our company effectively and carry out our business plan. Members of our senior management team may resign at any time. High demand exists for senior management and other key personnel (including scientific, technical and sales personnel) in the 3D printing industry, and there can be no assurance that we will be able to retain such personnel. We experience intense competition for qualified personnel.

While we intend to continue to provide competitive compensation packages to attract and retain key personnel, some of our competitors for these employees have greater resources and more experience, making it difficult for us to compete successfully for key personnel. If we cannot attract and retain sufficiently qualified technical employees for our research and development and manufacturing operations, we may be unable to achieve the synergies expected from mergers and acquisitions that we may effect from time to time, or to develop and commercialize new products or new applications for existing products. Furthermore, possible shortages of key personnel, including engineers, in the regions surrounding our facilities could require us to pay more to hire and retain key personnel, thereby increasing our costs.

We may be subject to product liability claims, which could result in material expense, diversion of management time and attention and damage to our reputationbusiness reputation. 

The sale and businesssupport of our products entails the risk of product liability claims.From time to time,we may become subject to product liability claims that could lead to significant expenses.  The risk may be heightened when we provide products into certain markets, such as healthcare, aerospace and automotive industries.

This risk of product liability claims may also be greater due to the use of certain hazardous chemicals used in the production of certain of our products, including irritants, harmful chemicals and chemicals dangerous to the environment. We may also be subject to claims that our printers have been, or significant costsmay be used to, correctcreate parts that are not in compliance with legal requirements or that infringe on the defect or error.intellectual property rights of others.



We attempt to include provisions in our agreements with customers that are designed to limit our exposure to potential liability for damages arising from defects or errors in our products.products and other issues. However, the nature and extent of these limitations vary from customer to customer. Their effect is subject to a variety of legal limitations and it is possible that these limitations may not be effective as a result of unfavorable judicial decisions or laws enacted in the future.



The sale and support of our products entails the risk of product liability claims. Any product liability claim brought against us, regardless of its merit, could result in materialsignificant expense, diversion of management time and attention, damage to our business reputation and failure to retain existing customers or to fail to attract new customers. Although we maintain product liability insurance, such insurance is subject to deductibles and there is no guarantee that such insurance will be available or adequate to protect against all such claims. Costs or payments made in connection with product liability claims could adversely affect our financial condition and results of operations.



We face risksrely on our management information systems for inventory management, distribution and other key functions. If our information systems fail to adequately perform these functions, or if we experience an interruption in their operation, our business and operating results could be adversely affected.

The efficient operation of our business is dependent on our management information systems. We rely on our management information systems to, among other things, effectively manage our accounting and financial functions, including maintaining our internal controls; to manage our manufacturing and supply chain processes; and to maintain our research and development data. The failure of our management information systems to perform properly could disrupt our business and product development, which may result in decreased sales, increased overhead costs, excess or obsolete inventory, and product shortages, causing our business and operating results to suffer. Although we take steps to secure our management information systems, including our computer systems, intranet and Internet sites, email and other telecommunications and data networks, the security measures we have implemented may not be effective and our systems may be vulnerable to theft, loss, damage and interruption from a number of potential sources and events, including unauthorized access or security breaches, natural or man-made disasters, cyber-attacks, computer viruses, power loss or other disruptive events. Our reputation and financial condition could be adversely affected if, as a result of a significant cyber event or otherwise, our operations are disrupted or shut down; our confidential, proprietary information is stolen or disclosed; we incur costs or are required to pay fines in connection with changes in energy-related expenses.stolen customer, employee, or other confidential information; we must dedicate significant resources to system repairs or increase cyber security protection; or we otherwise incur significant litigation or other costs.



We are subject to U.S. and other anti-corruption laws, trade controls, economic sanctions and similar laws and regulations. Our failure to comply with these laws and regulations could subject us to civil, criminal and administrative penalties and harm our suppliers dependreputation.

Doing business on a worldwide basis requires us to comply with the laws and regulations of the U.S. government and various energy products in processes usedforeign jurisdictions. These laws and regulations place restrictions on our operations, trade practices, partners and investments.

In particular, our operations are subject to produce our products. Generally, we acquire products at market pricesU.S. and do not use financial instruments to hedge energy prices.foreign anti-corruption and trade control laws and regulations, such as the Foreign Corrupt Practices Act (“FCPA”) and United Kingdom Bribery Act (the “Bribery Act”), export controls and economic sanctions programs, including those administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), the State Department's Directorate of Defense Trade Controls (“DDTC”) and the Bureau of Industry and Security (“BIS”). As a result of doing business in foreign countries and with foreign customers, we are exposed to market risks relateda heightened risk of violating anti-corruption and trade control laws and sanctions regulations.

As part of our business, we may deal with state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA’s prohibition on providing anything of value to changes in energy prices.foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. In addition, manythe provisions of the customersBribery Act extend beyond bribery of foreign public officials and industriesalso apply to whomtransactions with individuals that a government does not employ. Some of the international locations in which we marketoperate lack a developed legal system and have higher than normal levels of corruption. Our continued expansion outside the U.S., including in Brazil, China, India and developing countries, and our printersdevelopment of new partnerships and print materials are directlyjoint venture relationships worldwide, could increase the risk of FCPA, OFAC or indirectly dependent uponBribery Act violations in the cost and availability of energy resources.future.

As an exporter, we must comply with various laws and profitability may be materially and adversely affectedregulations relating to the extentexport of products and technology from the U.S. and other countries having jurisdiction over our operations. In the U.S., these laws include the International Traffic in Arms Regulations (“ITAR”) administered by the DDTC, the Export Administration Regulations (“EAR”) administered by the BIS and trade sanctions against embargoed countries and destinations administered by OFAC. The EAR governs products, parts, technology and software which present military or weapons proliferation concerns, so-called “dual use” items, and ITAR governs military items listed on the United States Munitions List. Prior to shipping certain items, we must obtain an export license or verify that license exemptions are available. Any failures to comply with these laws and regulations could result in fines, adverse publicity and restrictions on our or our customers’ energy-related expenses increase, both as a result of higher costs of producing, and potentially lower profit margins in selling,ability to export our products, and print materials and because increased energy costs may cause our customers to delay or reduce purchases of our printers and print materials.repeat failures could carry more significant penalties. 



A cybersecurity incident could have negative impact.

A cyber-attack that bypasses our information technology (IT) security systems causing an IT security breach, may lead to a material disruptionViolations of our IT business systems and/anti-corruption and trade control laws and sanctions regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or the lossrestrictions of business information resulting in adverse business impact. Risks may include:

Historically, our common stock price has been volatile.

The market price of our common stock has experienced, and may continue to experience, considerable volatility. Between January 1, 2012 and December 31, 2013,  after giving effect to the three-for-two stock split in the nature of a 50% stock dividend that we distributed in February 2013, the trading price of our common stock has ranged from a low of $9.82 per share to a high of $92.93 per share.

Numerous factors could have a significant effect on the price of our common stock, including those described or referred to in this “Risk Factors” section of this Form 10-K,licenses, as well as amongcriminal fines and imprisonment. We have established policies and procedures designed to assist our compliance with applicable U.S. and international anti-corruption and trade control laws and regulations, including the FCPA, the Bribery Act and trade controls and sanctions programs administered by OFAC, the DDTC and BIS, and have trained our employees to comply with these laws and regulations. However, there can be no assurance that all of our employees, consultants, agents or other things:

The numberassociated persons will not take actions in violation of shares of common stock issuableour policies and these laws and regulations. Additionally, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage or provide a stock offering,defense to any alleged violation. In particular, we may be held liable for the issuance of restricted stock awardsactions that our joint venture partners take inside or the issuance of shares in connection with certain acquisitions or the conversionoutside of the notes could dilute the ownership interest of existing stockholders andUnited States, even though our partners may affect the market price fornot be subject to these laws. Such a violation, even if our common stock.

We have an effective registration statement on Form S-3 under which, among other things, we may issue up to $500.0 million of securities. We issued $272.1 million of Common Stock in 2013 and $112.1 million of Common in Stock in 2012 in reliance upon this registration statement and the remaining $115.8 million of securities covered bypolicies prohibit it, may be issued until June 12, 2015. We may file a new registration statement at any time to increase these available amounts as necessary to provide flexibility to execute our growth strategy.

In February 2013, the Company announced that its Board of Directors declared a three-for-two split of the Company’s common stock in the nature of a 50% stock dividend. On February 22, 2013, each stockholder of record at the close of business on February 15, 2013 received one additional share for every two shares held on the record date. In lieu of fractional shares, shareholders received a cash payment based on the closing market price of our stock on the record date. Trading began on a split-adjusted basis on February 25, 2013.

Our Certificate of Incorporation, as amended, authorizes our issuance of up to a total 220.0 million shares of common stock, of which 103.8 million shares have been issued or are otherwise currently reserved for issuance.  Future issuances could have the effect of diluting our earnings per share as well as our existing stockholders’ individual ownership percentages and could lead to volatility in our common stock price.

Additionally, subject to the limitations of our Certificate of Incorporation and applicable law, we are not restricted from issuing additional common stock, including securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The issuance of additional shares of our common stock in connection with future acquisitions or other issuances of our common stock or convertible securities, including outstanding options, may dilute the ownership interest of our common stockholders.

Sales of a substantial number of shares of our common stock or other equity-related securities in the public market could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities. We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock.

Our Board of Directors is authorized to issue up to 5 million shares of preferred stock.

The Board of Directors is authorized to issue up to 5 million shares of preferred stock, none of which is currently issued or outstanding. The Board of Directors is authorized to issue these shares of preferred stock in one or more classes or series without further action of the stockholders and in that regard to determine the issue price, rights, preferences and privileges of any such class or series of preferred stock generally without any further vote or action by the stockholders. The rights of the holders of any outstanding series of preferred stock may adversely affect the rights of holders of common stock.  

Our ability to issue preferred stock gives us flexibility concerning possible acquisitions and financings, but it could make it more difficult for a third party to acquire a majority of our outstanding common stock. In addition, any preferred stock that is issued may have other rights, including dividend rights, liquidation preferences and other economic rights, senior to the common stock, which could have a materialan adverse effect on the market valueour reputation, business, financial condition and results of our common stock.

Certain provisions of Delaware law contain anti-takeover provisions that may make it more difficult to effect a change in our control.

Certain provisions of the Delaware General Corporation Law could delay or prevent an acquisition or change in control and the replacement of our incumbent directors and management, even if doing so might be beneficial to our stockholders by providing them with the opportunity to sell their shares, possibly at a premium over the then market price of our common stock. One of these Delaware laws prohibits us from engaging in a business combination with any interested stockholder (as defined in the statute) for a period of three years from the date that the person became an interested stockholder, unless certain conditions are met.

Our balance sheet contains several categories of intangible assets totaling $511.8 million at December 31, 2013 that we could be required to write off or write down in the event of the impairment of certain of those assets arising from any deterioration in our future performance or other circumstances. Such write-offs or write-downs could adversely impact our future earnings and stock price, our ability to obtain financing and affect our customer relationships. 

At December 31, 2013, we had $370.1 million in goodwill capitalized on our balance sheet. Accounting Standards Codification (“ASC”) 350, “Intangibles – Goodwill and Other,” requires that goodwill and some long-lived intangibles be tested for impairment at least annually.operations. In addition, goodwillvarious state and intangible assets are tested for impairment at other times as circumstances warrant, and such testing could result in write-downs of some of our goodwill and long‑lived intangibles. Impairment is measured as the excess of the carrying value of the goodwill or intangible asset over the fair value of the underlying asset. A key factor in determining whether impairment has occurred is the relationship between our market capitalization and our book value. Accordingly, we may, from time to time, incur impairment charges, which are recorded as operating expenses when they are incurred and would reduce our net income and adversely affect our operating results in the period in which they are incurred.

As of December 31, 2013, we had $141.7 million of other intangible assets, net, consisting of licenses, patents,municipal governments, universities and other intangiblesinvestors maintain prohibitions or restrictions on investments in companies that we amortize over time. Any material impairment to any of these items would result in a non-cash chargedo business with sanctioned countries, persons and would not impact our cash position or cash flows, but such a chargeentities, which could adversely affect our reputation, business, financial condition and results of operations and equity and could affect the trading price of our common stock in the period in which they are incurred.

As discussed below, we completed several business acquisitions during 2013, 2012 and 2011. The majority of the acquisitions have resulted in our recording additional goodwill on our consolidated balance sheet. This goodwill typically arises because the purchase price for these businesses reflects a number of factors including the future earnings and cash flow potential of these businesses, the multiples to earnings, cash flow and other factors, such as prices at which similar businesses have been purchased by other acquirers, the competitive nature of the process by which we acquired the business, and the complementary strategic fit and resulting synergies these businesses bring to existing operations.

For additional information, see Notes 6 and 7to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Estimates—Goodwill and other intangible and long-lived assets.”



Changes in, or interpretation of, tax rules and regulations may impact our effective tax rate and future profitability. 



We are a U.S. based, multinational company subject to taxation in multiple U.S. and foreign tax jurisdictions. Our future effective tax rates could be adversely affected by changes in statutory tax rates or interpretation of tax rules and regulations in jurisdictions in which we do business, changes in the amount of revenue or earnings in the countries with varying statutory tax rates, or by changes in the valuation of deferred tax assets and liabilities.



In addition, we are subject to audits and examinations of previously filed income tax returns by the Internal Revenue Service (“IRS”) and other domestic and foreign tax authorities. We regularly assess the potential impact of such examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that we expect may result from the current examinations. We believe such estimates to be reasonable; however, there is no assurance that the final determination of any examination will not have an adverse effect on our operating results and financial position.

Our business involves the use of hazardous materials, and we must comply with environmental, health and safety laws and regulations, which can be expensive and restrict how we do business. 

Our business involves the blending, controlled storage, use and disposal of hazardous materials. We and our suppliers are subject to federal, state and local as well as foreign laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. Although we believe that the safety procedures utilized by us for handling and disposing of these materials comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident, local, state, federal or foreign authorities may curtail the use of these materials and interrupt our business operations. If we are subject to any liability as a result of activities involving hazardous materials, our business and financial condition may be adversely affected and our reputation may be harmed.

Our common stock price has been and may continue to be volatile.

The market price of our common stock has experienced, and may continue to experience, considerable volatility. Between January 1, 2015 and December 31, 2016, the trading price of our common stock has ranged from a low of $6.00 per share to a high of $33.97 per share. Numerous factors could have a significant effect on the price of our common stock, including those described or referred to in this “Risk Factors” section of this Form 10-K, as well as, among other things:

Some anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

We have provisions in our certificate of incorporation and by-laws each of which could have the effect of rendering more difficult or discouraging an acquisition of the Company deemed undesirable by our Board of Directors. These include provisions:

These provisions, alone or together, could deter or delay hostile takeovers, proxy contests and changes in control or our management. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents some stockholders from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.

Any provision of our certificate of incorporation or by-laws or Delaware law that has the effect of delaying or deterring a change in control of the Company could limit the opportunity for our stockholders to receive a premium for their shares of our stock and also could affect the price that some investors are willing to pay for our stock.

Item 1B. Unresolved Staff Comments



None.



Item 2. Properties



We occupy an 80,000Our headquarters is located in Rock Hill, South Carolina. As of December 31, 2016, we leased 1.1 million square footfeet and owned 0.1 million square feet, primarily located in the U.S., as summarized below.

Our corporate headquarters research and development and manufacturing facility in Rock Hill, South Carolina which we lease pursuant toalso serves as a lease agreement with Lex Rock Hill, LP. After its initial term ending August 31, 2021, the lease provides us with the option to renew the lease for two additional five-year terms as well as the right to cause Lex Rock Hill, LP, subject to certain termsresearch and conditions, to expand the leased premises during the term of the lease,development site. Other major research and development locations include Cary, North Carolina; San Diego, California; Seoul, Korea; Tel Aviv, Israel; Valencia, California and Wilsonville, Oregon, among others.  We believe our existing facilities and equipment are in which case the term of the lease would be extended. The lease is a triple net leasegood operating condition and providesare suitable for the paymentconduct of base rent of approximately $0.7 million annually from 2013 through 2020, including a  rent escalationour business. We will continue to make investments in 2016,capital equipment as needed to meet anticipated demand for our products. See “Item 1. Business – Production and $0.5 million in 2021. Under the terms of the lease, we are obligated to pay all taxes, insurance, utilitiesSupplies” and other operating costs with respectNotes 12 and 21 to the leased premises. Pursuant to the termsConsolidated Financial Statements for further discussion of the lease, we exercised the right to purchase the undeveloped land surrounding the leased premises in March 2011.  We purchased this 11-acre parcel contiguous to our Rock Hill facility for future expansion and additional facility capacity to continue to expand in-house manufacturing activities for printers and print materials.facilities.

In addition, we lease a second property in Rock Hill, SC for production and warehouse facilities and several other properties globally, which are summarized in the table below:

We also lease various other sales and service offices in Germany, the United Kingdom, the Netherlands, Australia, Japan, China, and India as well as various other facilities used in the U.S., Australia and the Netherlands.



Item 3. Legal Proceedings



For informationSecurities and Derivative Litigation

The Company and certain of its former executive officers have been named as defendants in a consolidated putative stockholder class action lawsuit pending in the United States District Court for the District of South Carolina. The consolidated action is styled KBC Asset Management NV v. 3D Systems Corporation, et al., Case No. 0:15-cv-02393-MGL. The Amended Consolidated Complaint (the “Complaint”), which was filed on December 9, 2015, alleges that defendants violated the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions and that the former officers are control persons under Section 20(a) of the Exchange Act. The Complaint was filed on behalf of stockholders who purchased shares of the Company’s common stock between October 29, 2013, and May 5, 2015 and seeks monetary damages on behalf of the purported class. Defendants filed a motion to dismiss the Complaint in its entirety on January 14, 2016, which was denied by Memorandum Opinion and Order dated July 25, 2016 (the “Order”). Defendants filed a motion for reconsideration of the Order on August 4, 2016, which was denied by Order dated February 24, 2017.

Nine related derivative complaints have been filed by purported Company stockholders against certain of the Company’s former executive officers and members of its Board of Directors.  The Company is named as a nominal defendant in all nine actions. The derivatives complaints are styled as follows: (1) Steyn v. Reichental, et al., Case No. 2015-CP-46-2225, filed on July 27, 2015 in the Court of Common Pleas for the 16th Judicial Circuit, County of York, South Carolina (“Steyn”); (2) Piguing v. Reichental, et al., Case No. 2015-CP-46-2396, filed on August 7, 2015 in the Court of Common Pleas for the 16th Judicial Circuit, County of York, South Carolina (“Piguing”); (3) Booth v. Reichental, et al., Case No. 15-692-RGA, filed on August 6, 2015 in the United States District Court for the District of Delaware; (4) Nally v. Reichental, et al., Case No. 15-cv-03756-MGL, filed on September 18, 2015 in the United States District Court for the District of South Carolina; (5) Gee v. Hull, et al., Case No. BC-610319, filed on February 17, 2016 in the Superior Court for the State of California, County of Los Angeles (“Gee”); (6) Foster v. Reichental, et al., Case No. 0:16-cv-01016-MGL, filed on April 1, 2016 in the United States District Court for the District of South Carolina; (7) Lu v. Hull, et al., Case No. BC629730, filed on August 5, 2016 in the Superior Court for the State of California, County of Los Angeles (“Lu”); (8) Howes v. Reichental, et al., Case No. 0:16-cv-2810-MGL, filed on August 11, 2016 in the United States District Court for the District of South Carolina; and (9) Ameduri v. Reichental, et al., Case No. 0:16-cv-02995-MGL, filed on September 1, 2016 in the United States District Court for the District of South Carolina. Steyn and Piguing were consolidated into one action styled as In re 3D Systems Corp. Shareholder Derivative Litig., Lead Case No. 2015-CP-46-2225 in the Court of Common Pleas for the 16th Judicial Circuit, County of York, South Carolina. Gee and Lu were consolidated into one action styled as Gee v. Hull, et al., Case No. BC610319 in the Superior Court for the State of California, County of Los Angeles.

The derivative complaints allege claims for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment and seek, among other things, monetary damages and certain corporate governance actions.

All of the derivative complaints listed above have been stayed until the earlier of the close of discovery or the deadline for appealing a dismissal in the KBC Asset Management NV securities class action.  

The Company believes the claims alleged in the putative securities class action and the derivative lawsuits are without merit and intends to defend the Company and its officers and directors vigorously.

Ronald Barranco and Print3D Corporation v. 3D Systems Corporation, et. al.

On August 23, 2013, Ronald Barranco, a former Company employee, filed two lawsuits against the Company and certain officers in the United States District Court for the District of Hawaii. The first lawsuit (“Barranco I”) is captioned Ronald Barranco and Print3D Corporation v. 3D Systems Corporation, 3D Systems, Inc., and Damon Gregoire, Case No. CV 13-411 LEK RLP, and alleges seven causes of action relating to legal proceedings, see Note 22the Company’s acquisition of Print3D Corporation (of which Mr. Barranco was a 50% shareholder) and the subsequent employment of Mr. Barranco by the Company. The second lawsuit (“Barranco II”) is captioned Ronald Barranco v. 3D Systems Corporation, 3D Systems, Inc., Abraham Reichental, and Damon Gregoire, Case No. CV 13-412 LEK RLP, and alleges the same seven causes of action relating to the Consolidated Financial Statements containedCompany’s acquisition of certain website domains from Mr. Barranco and the subsequent employment of Mr. Barranco by the Company.  Both Barranco I and Barranco II allege the Company breached certain purchase agreements in order to avoid paying Mr. Barranco additional monies pursuant to royalty and earn out provisions in the agreements. The Company and its officers timely filed responsive pleadings on October 22, 2013 seeking, inter alia, to dismiss Barranco I due to a mandatory arbitration agreement and for lack of personal jurisdiction and to dismiss Barranco II for lack of personal jurisdiction.

With regard to Barranco I, the Hawaii district court, on February 28, 2014, denied the Company’s motion to dismiss and its motion to transfer venue to South Carolina for the convenience of the parties. However, the Hawaii court recognized that the plaintiff’s claims are all subject to mandatory and binding arbitration in Charlotte, North Carolina. Because the Hawaii court was without authority to compel arbitration outside of Hawaii, the court ordered that the case be transferred to the district court encompassing Charlotte (the United States District Court for the Western District of North Carolina) so that court could compel arbitration in Charlotte. On April 17, 2014, Barranco I was transferred in to the Western District of North Carolina. Plaintiff filed a demand for arbitration on October 29, 2014. On December 9, 2014, the Company filed its answer to plaintiff’s demand for arbitration. On February 2, 2015, plaintiff filed an amended demand that removed Mr. Gregoire as a defendant from the matter, and on February 4, 2015 the Company filed its amended answer. The parties selected an arbitrator and arbitration took place in June 2015 in Charlotte, North Carolina.

On September 28, 2015, the arbitrator issued a final award in favor of Mr. Barranco with respect to two alleged breaches of contract and implied covenants arising out of the contract.  The arbitrator found that the Company did not commit fraud or make any negligent misrepresentations to Mr. Barranco. Pursuant to the award, the Company is to pay approximately $11.3 million, which includes alleged actual damages of approximately $7.3 million, fees and expenses of approximately $2.3 million and prejudgment interest of approximately $1.7 million. The Company disagrees with the single arbitrator’s findings and conclusions and believes the arbitrator’s decision exceeds his authority and disregards the applicable law. As an initial response, the Company filed a motion for modification on September 30, 2015, based on mathematical errors in the computation of damages and fees. On October 16, 2015, the arbitrator issued an order denying the Company’s motion and sua sponte issuing a modified final award in favor of Mr. Barranco in the same above-referenced amounts, but making certain substantive changes to the award, which changes the Company believes were improper and outside the scope of his authority and the American Arbitration Association rules. On November 20, 2015, the Company filed a motion to vacate the arbitration award in the federal court in the Western District of North Carolina.  Claimants also filed a motion to confirm the arbitration award. A hearing was held on the motions on June 29, 2016 in federal court in the Western District of North Carolina. The court requested supplemental briefing by the parties, which briefs were filed on July 11, 2016.

On August 31, 2016, the court issued an Order granting in part and denying in part Plaintiff’s motion to confirm the arbitration award and for judgment, entering judgment in the principal amount of the arbitration award and denying Plaintiff’s motion for fees and costs.  The court denied the Company’s motion to vacate.  On September 7, 2016, Plaintiff filed a motion to amend the judgment to include prejudgment interest.  The Company opposed that motion and the parties submitted briefing, which is currently pending before the court. On September 28, 2016 the Company filed a motion to alter or amend the judgment.  Plaintiff opposed the motion and the parties submitted briefing, which is currently pending before the court.

Notwithstanding the Company’s right to appeal, given the arbitrator’s decision, the Company recorded an $11.3 million expense provision for this matter in the quarter ended September 30, 2015. The provision is subject to adjustment based on the ultimate outcome of the Company’s appeal. If it is ultimately determined that money is owed following the full appellate process in federal court, the Company intends to fund any amounts to be paid from cash on hand. This amount has been classified as a long-term liability given the customary timeline of an appeals process. The Company will review this classification periodically.

With regard to Barranco II, the Hawaii district court, on March 17, 2014, denied the Company’s motion to dismiss and its motion to transfer venue to South Carolina. However, the Hawaii court dismissed Count II in plaintiff’s complaint alleging breach of the employment agreement.  The Company filed an answer to the complaint in the Hawaii district court on March 31, 2014.  On November 19, 2014, the Company filed a motion for summary judgment on all claims which was heard on January 20, 2015. On January 30, 2015, the court entered an order granting in part and denying in Part II, Item 8the Company’s motion for summary judgment. The Order narrowed the plaintiff’s claim for breach of this Annual Reportcontract and dismissed the plaintiff’s claims for fraud and negligent misrepresentation. As a result, Messrs. Reichental and Gregoire were dismissed from the lawsuit. The case was tried to a jury in May 2016, and on Form 10-K.May 27, 2016 the jury found that the Company was not liable for either breach of contract or breach of the implied covenant of good faith and fair dealing.  Additionally, the jury found in favor of the Company on its counterclaim against Mr. Barranco and determined that Mr. Barranco violated his non-competition covenant with the Company. The Court is expected to order an accounting with respect to the counterclaim.

The Company is involved in various other legal matters incidental to its business. Although the Company cannot predict the results of litigation with certainty, the Company believes that the disposition of these legal matters will not have a material adverse effect on its consolidated results of operations or consolidated financial position.



Item 4. Mine Safety Disclosures



Not applicable.

PART II



Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



On May 26, 2011, we transferred the listing of our Common Stock toOur common stock is listed on the New York Stock Exchange (“NYSE”) under the trading symbol “DDD.” Prior to that, our Common Stock was listed on The NASDAQ Global Market (“NASDAQ”) and traded under the symbol “TDSC.” The following table sets forth, for the periods indicated, the range of high and low prices of our common stock, $0.001 par value, as quoted on The NASDAQ Global Market and the NYSE, with tickers TDSC and DDD, respectively. In addition, we completed a three-for-two stock split in the form of a 50% stock dividend, effective February 15, 2013,  which is reflected in the prices in the table below.NYSE.







As of February 19, 2014,22, 2017, our outstanding common stock was held by approximately 633955  stockholders of record. This figure does not reflect the beneficial ownership of shares held in the nominee name.



Dividends



We do not currently pay, and have not paid, any dividends on our common stock, and we currently intend to retain any future earnings for use in our business. Any future determination as to the declaration of dividends on our common stock will be made at the discretion of the Board of Directors and will depend on our earnings, operating and financial condition, capital requirements and other factors deemed relevant by the Board of Directors, including the applicable requirements of the Delaware General Corporation Law, which provides that dividends are payable only out of surplus or current net profits.



Thepayment of dividends on our common stock may be restricted by the provisions of credit agreements or other financing documents that we may enter into or the terms of securities that we may issue from time to time.  Currently, no such agreements or documents limit our declaration of dividends or payments of dividends.dividends, other than our $150 million five-year revolving, unsecured credit facility with PNC Bank, National Association, which limits the amount of cash dividends that we may pay in any one fiscal year to $30.0 million.



Issuance of Unregistered Securities and Issuer Purchases of Equity Securities



On November 21, 2011, we issued $152 million aggregate principal amount of 5.50% Senior Convertible Notes due 2016 to institutional accredited investors and qualified institutional buyers in a transaction exempt from registration under Section 4(2) of the Securities Act of 1933, as amended. During 2013, note holders converted $80.8 million aggregate principal amount of 5.50% Senior Convertible Notes, which converted into 5.5 million shares of common stock. During 2012, note holders converted $61.0 million aggregate principal amount of 5.50% Senior Convertible Notes, which converted into 2.8 million shares of common stock. As of December 31, 2013, the aggregate principal amount of notes outstanding was $12.5 million. See Note 11 to the Consolidated Financial Statements.

We did not repurchase any of our equity securities during the year ended 2013,2016, except for unvested restricted stock awards repurchased or forfeited pursuant to our 2004 and 2015 Incentive Stock Plan. See Note 14 to the Consolidated Financial Statements.Plans. For information regarding the securities authorized for issuance under our equity compensation plans, see “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – Equity Compensation Plans” under Part III, Item 12.12 of this Form 10-K. Also see Note 14 to the Consolidated Financial Statements.

Issuer purchases of equity securities



Stock Performance Graph



The graph below shows, for the five years ended December 31, 2013,2016, the cumulative total return on an investment of $100 assumed to have been made on December 31, 20082011 in our common stock. For purposes of the graph, cumulative total return assumes the reinvestment of all dividends. The graph compares such return with those of comparable investments assumed to have been made on the same date in (a) the NYSE Composite Index,  (b) the S&P 500 Information Technology Index and (c) the S&P Mid-Cap 400 Index, which are published market indices with which we are sometimes compared.



Although total return for the assumed investment assumes the reinvestment of all dividends on December 31 of the year in which such dividends were paid, we paid no cash dividends on our common stock during the periods presented.



Our common stock is listed on the NYSE (trading symbol: DDD). 



COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*





*  $100 invested on 12/31/08 in stock or index, including reinvestment of dividends. Fiscal yearyears ending December 31.





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