UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________to____________

Commission File No. 001-34220

__________________________

3D SYSTEMS CORPORATION

(Exact name of Registrant as specified in its Charter)

__________________________


Delaware			95-4431352
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

333 Three D Systems Circle

Rock Hill, South Carolina 29730

(Address of Principal Executive Offices and Zip Code)

(Registrant’s Telephone Number, Including Area Code): (803) 326-3900

_________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

DDD

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

~~(Do not check if smaller reporting company)~~

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Shares of Common Stock, par value $0.001 per share, outstanding as of ~~May 1,~~November 2, 2020: ~~118,878,168~~124,141,935

3D SYSTEMS CORPORATION

Form 10-Q

For the Quarter and Nine Months Ended ~~March 31,~~September 30, 2020

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			2023
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			2933
Item 4. Controls and Procedures.			2933
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.			3033
Item 1A. Risk Factors.			3034
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			3334
Item 6. Exhibits.			3435

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


(In thousands, except par value)	(In thousands, except par value)	March 31, 2020 (unaudited)		December 31, 2019		(In thousands, except par value)	September 30, 2020 (unaudited)		December 31, 2019
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	112,776	$	133,665	Cash and cash equivalents	$	75,264	$	133,665
Accounts receivable, net of reserves — $9,013 (2020) and $8,762 (2019)		108,769		109,408
Accounts receivable, net of reserves — $8,243 and $8,762						Accounts receivable, net of reserves — $8,243 and $8,762	98,755		109,408
Inventories	Inventories	113,240		111,106		Inventories	126,882		111,106
Prepaid expenses and other current assets	Prepaid expenses and other current assets	32,688		18,991		Prepaid expenses and other current assets	34,671		18,991

Total current assets	Total current assets	367,473		373,170		Total current assets	335,572		373,170
Property and equipment, net	Property and equipment, net	89,373		92,940		Property and equipment, net	81,433		92,940
Intangible assets, net	Intangible assets, net	43,788		48,338		Intangible assets, net	36,888		48,338
Goodwill	Goodwill	218,207		223,176		Goodwill	179,536		223,176
Right of use assets	Right of use assets	34,991		36,890		Right of use assets	44,366		36,890
Deferred income tax asset	Deferred income tax asset	5,040		5,408		Deferred income tax asset	6,502		5,408
Other assets, net	Other assets, net	24,840		27,390		Other assets, net	22,985		27,390
Total assets	Total assets	$	783,712	$	807,312	Total assets	$	707,282	$	807,312
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long term debt		$	2,506	$	2,506
Current portion of long-term debt						Current portion of long-term debt	$	1,758	$	2,506
Current right of use liabilities	Current right of use liabilities	9,416		9,569		Current right of use liabilities	9,431		9,569
Accounts payable	Accounts payable	55,862		49,851		Accounts payable	41,674		49,851
Accrued and other liabilities	Accrued and other liabilities	50,803		63,095		Accrued and other liabilities	66,749		63,095

Customer deposits	Customer deposits	5,060		5,712		Customer deposits	4,463		5,712

Deferred revenue	Deferred revenue	42,659		32,231		Deferred revenue	36,353		32,231
Total current liabilities	Total current liabilities	166,306		162,964		Total current liabilities	160,428		162,964
Long-term debt, net of deferred financing costs	Long-term debt, net of deferred financing costs	44,619		45,215		Long-term debt, net of deferred financing costs	19,804		45,215
Long-term right of use liabilities	Long-term right of use liabilities	33,880		35,402		Long-term right of use liabilities	44,521		35,402
Deferred income tax liability	Deferred income tax liability	3,553		4,027		Deferred income tax liability	5,121		4,027
Other liabilities	Other liabilities	46,685		45,808		Other liabilities	48,890		45,808
Total liabilities	Total liabilities	295,043		293,416		Total liabilities	278,764		293,416
Commitments and contingencies (Note 14)

Commitments and contingencies (Note 13)						Commitments and contingencies (Note 13)

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock,$0.001 par value, authorized 220,000 shares; issued 121,661 (2020) and 121,266 (2019)		121		120
Common stock, $0.001 par value, authorized 220,000 shares; issued 127,664 and 121,266						Common stock, $0.001 par value, authorized 220,000 shares; issued 127,664 and 121,266	128		120
Additional paid-in capital	Additional paid-in capital	1,370,174		1,371,564		Additional paid-in capital	1,404,265		1,371,564
Treasury stock, at cost — 3,838 shares (2020) and 3,670 shares (2019)		(19,718)		(18,769)
Treasury stock, at cost — 3,456 shares and 3,670 shares						Treasury stock, at cost — 3,456 shares and 3,670 shares	(22,590)		(18,769)
Accumulated deficit	Accumulated deficit	(812,633)		(793,709)		Accumulated deficit	(923,473)		(793,709)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(49,275)		(37,047)		Accumulated other comprehensive loss	(29,812)		(37,047)
Total 3D Systems Corporation stockholders' equity	Total 3D Systems Corporation stockholders' equity	488,669		522,159		Total 3D Systems Corporation stockholders' equity	428,518		522,159
Noncontrolling interests	Noncontrolling interests	—		(8,263)		Noncontrolling interests	0		(8,263)
Total stockholders’ equity	Total stockholders’ equity	488,669		513,896		Total stockholders’ equity	428,518		513,896
Total liabilities, redeemable noncontrolling interests and stockholders’ equity	Total liabilities, redeemable noncontrolling interests and stockholders’ equity	$	783,712	$	807,312	Total liabilities, redeemable noncontrolling interests and stockholders’ equity	$	707,282	$	807,312

See accompanying notes to condensed consolidated financial statements.

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Quarter Ended March 31,							Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2020		2019		(in thousands, except per share amounts)	2020		2019		2020		2019
Revenue:	Revenue:					Revenue:
Products	Products	$	78,809	$	92,347	Products	$	77,267	$	94,506	$	217,572	$	280,611
Services	Services	55,896		59,633		Services	57,880		60,766		164,340		183,913
Total revenue	Total revenue	134,705		151,980		Total revenue	135,147		155,272		381,912		464,524
Cost of sales:	Cost of sales:					Cost of sales:
Products	Products	48,896		55,760		Products	49,010		58,044		150,395		166,809
Services	Services	28,677		30,515		Services	27,510		29,947		80,591		91,430
Total cost of sales	Total cost of sales	77,573		86,275		Total cost of sales	76,520		87,991		230,986		258,239
Gross profit	Gross profit	57,132		65,705		Gross profit	58,627		67,281		150,926		206,285
Operating expenses:	Operating expenses:					Operating expenses:
Selling, general and administrative	Selling, general and administrative	56,106		65,107		Selling, general and administrative	59,065		58,275		167,213		195,036
Research and development	Research and development	19,244		21,903		Research and development	18,866		20,940		55,107		63,654
Impairment of goodwill						Impairment of goodwill	48,300		0		48,300		0
Total operating expenses	Total operating expenses	75,350		87,010		Total operating expenses	126,231		79,215		270,620		258,690
Loss from operations	Loss from operations	(18,218)		(21,305)		Loss from operations	(67,604)		(11,934)		(119,694)		(52,405)
Interest and other (expense) income, net	Interest and other (expense) income, net	(2,564)		(1,201)		Interest and other (expense) income, net	(2,419)		(2,818)		(7,598)		(6,774)
Loss before income taxes	Loss before income taxes	(20,782)		(22,506)		Loss before income taxes	(70,023)		(14,752)		(127,292)		(59,179)
Benefit (provision) for income taxes		1,858		(1,844)
Provision for income taxes						Provision for income taxes	(2,866)		(2,010)		(2,472)		(5,793)
Net loss	Net loss	(18,924)		(24,350)		Net loss	(72,889)		(16,762)		(129,764)		(64,972)
Less: net income attributable to noncontrolling interests	Less: net income attributable to noncontrolling interests	—		44		Less: net income attributable to noncontrolling interests	0		81		0		195
Net loss attributable to 3D Systems Corporation	Net loss attributable to 3D Systems Corporation	$	(18,924)	$	(24,394)	Net loss attributable to 3D Systems Corporation	$	(72,889)	$	(16,843)	$	(129,764)	$	(65,167)

Net loss per share available to 3D Systems Corporation common stockholders - basic and diluted	Net loss per share available to 3D Systems Corporation common stockholders - basic and diluted	$	(0.17)	$	(0.22)	Net loss per share available to 3D Systems Corporation common stockholders - basic and diluted	$	(0.61)	$	(0.15)	$	(1.12)	$	(0.57)

See accompanying notes to condensed consolidated financial statements.

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


		Quarter Ended March 31,							Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2020		2019		(in thousands, except per share amounts)	2020		2019		2020		2019
Net loss	Net loss	$	(18,924)	$	(24,350)	Net loss	$	(72,889)	$	(16,762)	$	(129,764)	$	(64,972)
Other comprehensive income (loss), net of taxes:	Other comprehensive income (loss), net of taxes:					Other comprehensive income (loss), net of taxes:
Pension adjustments	Pension adjustments	164		92		Pension adjustments	(47)		91		130		207
Derivative financial instruments	Derivative financial instruments	(1,659)		—		Derivative financial instruments	11		(798)		(413)		(798)
Foreign currency translation	Foreign currency translation	(10,172)		(752)		Foreign currency translation	11,214		(8,101)		8,079		(6,854)
Total other comprehensive income (loss), net of taxes:		(11,667)		(660)
Total other comprehensive income (loss), net of taxes						Total other comprehensive income (loss), net of taxes	11,178		(8,808)		7,796		(7,445)
Total comprehensive loss, net of taxes	Total comprehensive loss, net of taxes	(30,591)		(25,010)		Total comprehensive loss, net of taxes	(61,711)		(25,570)		(121,968)		(72,417)
Comprehensive income attributable to noncontrolling interests	Comprehensive income attributable to noncontrolling interests	—		24		Comprehensive income attributable to noncontrolling interests	0		60		0		128
Comprehensive loss attributable to 3D Systems Corporation	Comprehensive loss attributable to 3D Systems Corporation	$	(30,591)	$	(25,034)	Comprehensive loss attributable to 3D Systems Corporation	$	(61,711)	$	(25,630)	$	(121,968)	$	(72,545)

See accompanying notes to condensed consolidated financial statements.

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Quarter Ended March 31,							Nine Months Ended September 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2020		2019
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(18,924)	$	(24,350)	Net loss	$	(129,764)	$	(64,972)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:						Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	11,690		13,144		Depreciation and amortization	34,830		39,305
Stock-based compensation	Stock-based compensation	6,312		6,706		Stock-based compensation	16,621		19,221

Provision for inventory obsolescence and revaluation						Provision for inventory obsolescence and revaluation	10,894		0
Loss on hedge accounting de-designation						Loss on hedge accounting de-designation	1,235		0
Provision for bad debts	Provision for bad debts	817		219		Provision for bad debts	1,039		1,152
Loss on the disposition of property, equipment and other assets	Loss on the disposition of property, equipment and other assets	137		—		Loss on the disposition of property, equipment and other assets	434		1,620
Provision for deferred income taxes	Provision for deferred income taxes	(106)		(498)		Provision for deferred income taxes	0		(1,346)
Impairment of assets		1,100		180
Impairment of goodwill and assets						Impairment of goodwill and assets	54,072		1,728
Changes in operating accounts:	Changes in operating accounts:					Changes in operating accounts:
Accounts receivable	Accounts receivable	1,568		(2,928)		Accounts receivable	12,668		12,290
Inventories	Inventories	(2,694)		(5,192)		Inventories	(23,987)		6,481
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(14,298)		354		Prepaid expenses and other current assets	(15,376)		(3,122)
Accounts payable	Accounts payable	6,616		(11,987)		Accounts payable	(9,166)		(12,885)
Deferred revenue and customer deposits	Deferred revenue and customer deposits	10,242		11,811		Deferred revenue and customer deposits	2,714		4,491
Accrued and other current liabilities	Accrued and other current liabilities	(8,068)		(5,531)		Accrued and other current liabilities	6,309		1,199
All other operating activities	All other operating activities	3,323		2,914		All other operating activities	4,828		4,922
Net cash used in operating activities		(2,285)		(15,158)
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(32,649)		10,084
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(4,366)		(8,837)		Purchases of property and equipment	(11,015)		(18,265)
Proceeds from sale of assets	Proceeds from sale of assets	552		—		Proceeds from sale of assets	552		1,620
Purchase of noncontrolling interest	Purchase of noncontrolling interest	(12,500)		(2,500)		Purchase of noncontrolling interest	(12,500)		(2,500)
Other investing activities	Other investing activities	(284)		(37)		Other investing activities	504		(1,744)
Net cash used in investing activities	Net cash used in investing activities	(16,598)		(11,374)		Net cash used in investing activities	(22,459)		(20,889)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from borrowings		—		100,000
Repayment of borrowings/long term debt		(627)		(25,000)
Proceeds from revolving credit facilities						Proceeds from revolving credit facilities	20,000		0
Payments on revolving credit facilities						Payments on revolving credit facilities	(20,000)		0
Proceeds from borrowings/long-term debt						Proceeds from borrowings/long-term debt	0		100,000
Repayment of borrowings/long-term debt						Repayment of borrowings/long-term debt	(26,547)		(66,013)
Proceeds from issuance of common stock						Proceeds from issuance of common stock	25,003		0
Proceeds from inventory financing agreements	Proceeds from inventory financing agreements	2,509		—		Proceeds from inventory financing agreements	2,509		0

Payments related to net-share settlement of stock based compensation		(949)		(483)
Payments related to net-share settlement of stock-based compensation						Payments related to net-share settlement of stock-based compensation	(5,034)		(3,029)
Other financing activities	Other financing activities	296		(780)		Other financing activities	296		(1,125)
Net cash provided by financing activities		1,229		73,737
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(3,773)		29,833
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(3,241)		57		Effect of exchange rate changes on cash, cash equivalents and restricted cash	526		(1,400)
Net (decrease) increase in cash, cash equivalents and restricted cash	Net (decrease) increase in cash, cash equivalents and restricted cash	(20,895)		47,262		Net (decrease) increase in cash, cash equivalents and restricted cash	(58,355)		17,628
Cash, cash equivalents and restricted cash at the beginning of the period ^(a)	Cash, cash equivalents and restricted cash at the beginning of the period ^(a)	134,617		110,919		Cash, cash equivalents and restricted cash at the beginning of the period (a)	134,617		110,919
Cash, cash equivalents and restricted cash at the end of the period ^(a)	Cash, cash equivalents and restricted cash at the end of the period ^(a)	$	113,722	$	158,181	Cash, cash equivalents and restricted cash at the end of the period (a)	$	76,262	$	128,547


Supplemental cash flow information	Supplemental cash flow information					Supplemental cash flow information
Cash interest payments	Cash interest payments	$	1,069	$	642	Cash interest payments	$	1,836	$	3,020
Cash income tax payments, net	Cash income tax payments, net	$	1,832	$	4,862	Cash income tax payments, net	$	2,861	$	8,984
Transfer of equipment from inventory to property and equipment, net ^(b)	Transfer of equipment from inventory to property and equipment, net ^(b)	$	350	$	154	Transfer of equipment from inventory to property and equipment, net (b)	$	671	$	2,861


~~Noncash financing activity~~
~~Purchase of noncontrolling interest~~ ^(c)	$	—	$	~~(11,000)~~


Noncash financing activity
Purchase of noncontrolling interest (c)	$	0	$	(11,000)

(a)The amounts for cash and cash equivalents shown above include restricted cash of ~~$946~~$998 and ~~$921~~$931 as of ~~March 31,~~September 30, 2020 and 2019, respectively, and $952 and $921 as of December 31, 2019, and 2018, respectively, which were included in Other assets, net, in the condensed consolidated balance sheets.

(b)Inventory is transferred from inventory to property and equipment at cost when we require additional machines for training or demonstration or for placement into on demand manufacturing services locations.

(c)Purchase of noncontrolling interest to be paid in installments over a four-year period recorded to Accrued and other liabilities and Other liabilities on the condensed consolidated balance sheets.

See accompanying notes to condensed consolidated financial statements.

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


		Quarters Ended																															Quarters Ended September 30, 2020 and 2019
		Common Stock																			Common Stock
(in thousands, except par value)	(in thousands, except par value)	Par Value $0.001		Additional Paid In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total 3D Systems Corporation Stockholders' Equity		Equity Attributable to Noncontrolling Interests		Total Stockholders' Equity		(in thousands, except par value)	Par Value $0.001		Additional Paid In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total 3D Systems Corporation Stockholders' Equity		Equity Attributable to Noncontrolling Interests		Total Stockholders' Equity
December 31, 2019		$	120	$	1,371,564	$	(18,769)	$	(793,709)	$	(37,047)	$	522,159	$	(8,263)	$	513,896
June 30, 2020																		June 30, 2020	$	124	$	1,377,468	$	(22,590)	$	(850,584)	$	(40,990)	$	463,428	$	—	$	463,428
Issuance (repurchase) of stock	Issuance (repurchase) of stock	1		—		(949)		—		—		(948)		—		(948)		Issuance (repurchase) of stock	4		23,785		—		—		—		23,789		—		23,789
Acquisition of non-controlling interest		—		(7,702)		—		—		(561)		(8,263)		8,263		—

Stock-based compensation expense																		Stock-based compensation expense	—		3,012		—		—		—		3,012		—		3,012
Net income (loss)																		Net income (loss)	—		—		—		(72,889)		—		(72,889)		—		(72,889)
Pension adjustment																		Pension adjustment	—		—		—		—		(47)		(47)		—		(47)

Derivative financial instrument gain																		Derivative financial instrument gain	—		—		—		—		11		11		—		11
Foreign currency translation adjustment																		Foreign currency translation adjustment	—		—		—		—		11,214		11,214		—		11,214
September 30, 2020																		September 30, 2020	$	128	$	1,404,265	$	(22,590)	$	(923,473)	$	(29,812)	$	428,518	$	0	$	428,518

June 30, 2019																		June 30, 2019	$	120	$	1,361,569	$	(16,519)	$	(771,025)	$	(37,313)	$	536,832	$	(8,386)	$	528,446
Issuance (repurchase) of stock																		Issuance (repurchase) of stock	0		—		(2,082)		—		—		(2,082)		—		(2,082)

Stock-based compensation expense	Stock-based compensation expense	—		6,312		—		—		—		6,312		—		6,312		Stock-based compensation expense	—		5,629		—		—		—		5,629		—		5,629
Net income (loss)	Net income (loss)	—		—		—		(18,924)		—		(18,924)				(18,924)		Net income (loss)	—		—		—		(16,843)		—		(16,843)		81		(16,762)
Pension adjustment	Pension adjustment	—		—		—		—		164		164		—		164		Pension adjustment	—		—		—		—		91		91		—		91
Derivative financial instrument loss	Derivative financial instrument loss	—		—		—		—		(1,659)		(1,659)		—		(1,659)		Derivative financial instrument loss	—		—		—		—		(798)		(798)		—		(798)
Foreign currency translation adjustment	Foreign currency translation adjustment	—		—		—		—		(10,172)		(10,172)				(10,172)		Foreign currency translation adjustment	—		—		—		—		(8,080)		(8,080)		(21)		(8,101)
March 31, 2020		$	121	$	1,370,174	$	(19,718)	$	(812,633)	$	(49,275)	$	488,669	$	—	$	488,669

December 31, 2018		$	117	$	1,355,503	$	(15,572)	$	(722,701)	$	(38,978)	$	578,369	$	(2,382)	$	575,987
Issuance (repurchase) of stock		1		—		(484)		—		—		(483)		—		(483)
Acquisition of non-controlling interest		—		(7,526)		—		—		256		(7,270)		(6,072)		(13,342)
Stock-based compensation expense		—		6,706		—		—		—		6,706		—		6,706
Net income (loss)		—		—		—		(24,394)		—		(24,394)		44		(24,350)
Pension adjustment		—		—		—		—		92		92		—		92
Foreign currency translation adjustment		—		—		—		—		(732)		(732)		(20)		(752)
March 31, 2019		$	118	$	1,354,683	$	(16,056)	$	(747,095)	$	(39,362)	$	552,288	$	(8,430)	$	543,858
September 30, 2019																		September 30, 2019	$	120	$	1,367,198	$	(18,601)	$	(787,868)	$	(46,100)	$	514,749	$	(8,326)	$	506,423

See accompanying notes to condensed consolidated financial statements.

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)

(Unaudited)


	Nine Months Ended September 30, 2020 and 2019
	Common Stock
(in thousands, except par value)	Par Value $0.001		Additional Paid In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total 3D Systems Corporation Stockholders' Equity		Equity Attributable to Noncontrolling Interests		Total Stockholders' Equity
December 31, 2019	$	120	$	1,371,564	$	(18,769)	$	(793,709)	$	(37,047)	$	522,159	$	(8,263)	$	513,896
Issuance (repurchase) of stock	8		23,782		(3,821)		—		—		19,969		—		19,969
Acquisition of non-controlling interest	—		(7,702)		—		—		(561)		(8,263)		8,263		0
Stock-based compensation expense	—		16,621		—		—		—		16,621		—		16,621
Net income (loss)	—		—		—		(129,764)		—		(129,764)		—		(129,764)
Pension adjustment	—		—		—		—		130		130		—		130
Derivative financial instrument loss	—		—		—		—		(1,648)		(1,648)		—		(1,648)
De-designation of derivative instrument	—		—		—		—		1,235		1,235		—		1,235
Foreign currency translation adjustment	—		—		—		—		8,079		8,079		—		8,079
September 30, 2020	$	128	$	1,404,265	$	(22,590)	$	(923,473)	$	(29,812)	$	428,518	$	0	$	428,518

December 31, 2018	$	117	$	1,355,503	$	(15,572)	$	(722,701)	$	(38,978)	$	578,369	$	(2,382)	$	575,987
Issuance (repurchase) of stock	3		—		(3,029)		—		—		(3,026)		—		(3,026)
Acquisition of non-controlling interest	—		(7,526)		—		—		256		(7,270)		(6,072)		(13,342)
Stock-based compensation expense	—		19,221		—		—		—		19,221		—		19,221
Net income (loss)	—		—		—		(65,167)		—		(65,167)		195		(64,972)
Pension adjustment	—		—		—		—		207		207		—		207
Derivative financial instrument loss	—		—		—		—		(798)		(798)		—		(798)
Foreign currency translation adjustment	—		—		—		—		(6,787)		(6,787)		(67)		(6,854)
September 30, 2019	$	120	$	1,367,198	$	(18,601)	$	(787,868)	$	(46,100)	$	514,749	$	(8,326)	$	506,423

See accompanying notes to condensed consolidated financial statements.

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of 3D Systems Corporation and

all majority-owned subsidiaries and entities in which a controlling interest is maintained (“3D Systems” or the “Company” or “we” or “us”). All significant intercompany transactions and balances have been eliminated in consolidation. A non-controlling interest in a subsidiary is considered an ownership interest in a majority-owned subsidiary that is not attributable to the parent. We include noncontrolling interests as a component of total equity in the condensed consolidated balance sheets and the net income attributable to noncontrolling interests are presented as an adjustment from net loss used to arrive at net loss attributable to 3D Systems Corporation in the condensed consolidated statements of operations and comprehensive loss. As of March 31, 2020, there were no longer any non-controlling interests held by us.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim reports. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). Our annual reporting period is the calendar year.

In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments, consisting of adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The results of operations for the quarter and nine months ended ~~March 31,~~September 30, 2020 are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates and assumptions.

Our operations in ~~Americas, EMEA~~North America and ~~APAC~~South America (collectively referred to as "Americas"), Europe and the Middle East (collectively referred to as "EMEA") and the Asia Pacific region ("APAC") expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic. While the COVID-19 pandemic has impacted the Company’s reported results for the ~~first~~ quarter and nine months ended September 30, 2020, we are unable to predict the ~~longer term~~longer-term impact that the pandemic may have on our business, results of operations, financial position or cash flows. The extent to which our operations may be impacted by the dynamic nature of the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the financial markets remain unknown.

As ~~a result~~ of ~~these matters, the Company~~September 30, 2020, we experienced a triggering event due to a drop in our stock price, which ultimately had been negatively impacted by the ~~current quarter~~business environment as a result of the COVID-19 pandemic, and performed a quantitative analysis for potential impairment of ~~its~~our goodwill orand long-lived asset balances. Based on ~~currently~~ available information and analysis as of ~~March 31,~~September 30, 2020, we determined the ~~Company continues to believe~~carrying value of the EMEA reporting unit exceeded its fair value and recorded a non-cash goodwill impairment charge of $48,300. We determined the fair value of the Americas and APAC reporting units ~~exceeds~~exceeded their carrying values and the carrying value of our long-lived assets is ~~recoverable. In~~recoverable for all reporting units.

Fair value was determined using a combination of an income approach, which estimates fair value based upon projections of future revenues, expenses, and cash flows discounted to its present value, and a market approach. The valuation methodology and underlying financial information included in the ~~event that these matters are not satisfactorily resolved,~~Company's determination of fair value required significant judgments by management. The principal assumptions used in the Company's discounted cash flow analysis consisted of (a) the long-term projections of future financial performance and (b) the weighted-average cost of capital of market participants, adjusted for the risk attributable to the Company ~~could experience another triggering event or impairment of its goodwill or long-lived asset balances~~and the industry in ~~future periods.~~which it operates. Under the market approach, the principal assumption included an estimate for a control premium.

All dollar amounts presented in the accompanying footnotes are presented in thousands, except for per share information.

Recently Adopted Accounting Standards

In June 2016, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update (“ASU”) 2016-13, ~~“Measurement~~“Measurement of Credit Losses on Financial ~~Instruments”~~Instruments” (“ASU 2016-13”), as revised in July 2018, which provides guidance regarding the measurement of credit losses for financial assets and certain other instruments that are not accounted for at fair value through net income, including trade and other receivables, debt securities, net investment in sales type and direct financing leases, and off-balance sheet credit exposures. The new guidance requires companies to replace the current incurred loss impairment methodology with a methodology that measures all expected credit losses for financial assets based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted this guidance during the ~~current period and the~~first quarter of 2020. The implementation did not have a material effect on our financial position or results of operations.

In January 2017, the FASB issued ASU No. 2017-04, ~~“Intangibles~~“Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill ~~Impairment”~~Impairment” (“ASU 2017-04”), which eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any ~~tax deductible~~tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The Company adopted this guidance during the ~~current period and the~~first quarter of 2020. The implementation did not have a material effect on our financial position or results of operations. We followed this guidance during our goodwill impairment analysis this quarter.

Accounting Standards Issued But Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in Accounting Standards Codification 740, Income Taxes. It also clarifies certain aspects of the existing guidance to promote more consistent application. This standard is effective for calendar-year public business entities in 2021 and interim periods within that year, and early adoption is permitted. We are currently not planning to early ~~adopting~~adopt and are in the process of evaluating the impact the new standard will have on our consolidated financial statements.

No other new accounting pronouncements, issued or effective during 2020, have had or are expected to have a significant impact on our consolidated financial statements.

(2) Revenue

We account for revenue in accordance with ASC Topic 606, ~~“Revenue~~“Revenue from Contracts with ~~Customers.~~Customers.”

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

At ~~March 31,~~September 30, 2020, we had ~~$98,551~~$104,758 of outstanding performance ~~obligations.~~obligations, comprised of deferred revenue, customer order backlog and customer deposits. We expect to recognize approximately 9194 percent of our remaining performance obligations as revenue within the next twelve months, an additional 52 percent by the end of 2021 and the remaining balance thereafter.

~~See Note 13~~Revenue Recognition

Revenue is recognized when control of the promised products or services is transferred to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Many of our contracts with customers include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative stand-alone selling price (“SSP”). Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. The amount of consideration received and revenue recognized may vary based on changes in marketing incentive programs offered to our customers. Our marketing incentive programs take many forms, including volume discounts, trade-in allowances, rebates and other discounts.

A majority of our revenue is recognized at the point in time when products are shipped or services are delivered to customers. Please see below for further discussion.

Hardware and Materials

Revenue from hardware and material sales is recognized when control has transferred to the customer, which typically occurs when the goods have been shipped to the customer, risk of loss has transferred to the customer and we have a present right to payment. In limited circumstances, when printer or other hardware sales include substantive customer acceptance provisions, revenue is recognized either when customer acceptance has been obtained, customer acceptance provisions have lapsed, or we have objective evidence that the criteria specified in the customer acceptance provisions have been satisfied.

Printers and certain other products include a warranty under which we provide maintenance for periods up to one year. For these initial product warranties, estimated costs are accrued at the time of the sale of the product. These cost estimates are established using historical information based on the nature, frequency and average cost of claims for each type of printer or other product as well as assumptions about future activity and events. Revisions to expense accruals are made as necessary based on changes in these historical and future factors.

Software

We also market and sell software tools that enable our customers to capture and customize content using our printers, design optimization and simulation software, and reverse engineering and inspection software. Software does not require significant modification or customization and the license provides the customer with a right to use the software as it exists when made available. Revenue from these software licenses is recognized either upon delivery of the product or of a key code which allows the customer to download the software. Customers may purchase post-sale support. Generally, the first year is included but subsequent years are optional. This optional support is considered a separate obligation from the software and is deferred at the time of sale and subsequently recognized ratably over future periods.

Services

We offer training, installation and non-contract maintenance services for our products. Additionally, we offer maintenance contracts customers can purchase at their option. For maintenance contracts, revenue is deferred at the time of sale based on the stand-alone selling prices of these services and costs are expensed as incurred. Deferred revenue is recognized ratably over the term of the maintenance period on a straight-line basis. Revenue from training, installation and non-contract maintenance services is recognized at the time of performance of the service.

On demand manufacturing and healthcare service sales are included within services revenue and revenue is recognized upon shipment or delivery of the parts or performance of the service, based on the terms of the arrangement.

Terms of Sale

Shipping and handling activities are treated as fulfillment costs rather than as an additional promised service. We accrue the costs of shipping and handling when the related revenue is recognized. Our incurred costs associated with shipping and handling are included in product cost of sales.

Credit is extended, and creditworthiness is determined, based on an evaluation of each customer’s financial condition. New customers are generally required to complete a credit application and provide references and bank information ~~related~~ to ~~revenue~~facilitate an analysis of creditworthiness. Customers with a favorable profile may receive credit terms that differ from our general credit terms. Creditworthiness is considered, among other things, in evaluating our relationship with customers with past due balances.

Our terms of sale generally provide payment terms that are customary in the countries where we transact business. To reduce credit risk in connection with certain sales, we may, depending upon the circumstances, require significant deposits or payment in full prior to shipment. For maintenance services, we either bill customers on a time-and-materials basis or sell maintenance contracts that provide for payment in advance on either an annual or other periodic basis.

Significant Judgments

Our contracts with customers often include promises to transfer multiple products and services to a customer. For such arrangements, we allocate revenues to each performance obligation based on its relative SSP.

Judgment is required to determine the SSP for each distinct performance obligation in a contract. For the majority of items, we estimate SSP using historical transaction data. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when the product or service is not sold separately, we determine the SSP using information that may include market conditions and other observable inputs.

In some circumstances, we have more than one SSP for individual products and services due to the stratification of those products and services by ~~reportable segment~~customers, geographic region or other factors. In these instances, we may use information such as the size of the customer and ~~major lines~~geographic region in determining the SSP.

The determination of ~~business.~~SSP is an ongoing process and information is reviewed regularly in order to ensure SSP reflects the most current information or trends.

The nature of our marketing incentives may lead to consideration that is variable. Judgment is exercised at contract inception to determine the most likely outcome of the contract and resulting transaction price. Ongoing assessments are performed to determine if updates are needed to the original estimates.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer deposits and deferred revenues (contract liabilities) on the condensed consolidated balance sheets. Timing of revenue recognition may differ from the timing of invoicing to customers. We record a receivable when revenue is recognized at the time of invoicing, or unbilled receivables when revenue is recognized prior to invoicing. For most of our contracts, customers are invoiced when products are shipped or when services are performed resulting in billed accounts receivables for the remainder of the owed contract price. Unbilled receivables generally result from items being shipped where the customer has not been charged, but for which revenue had been recognized. In our on demand manufacturing business, customers may be required to pay in full before work begins on their orders, resulting in customer deposits. We typically bill in advance for installation, training and maintenance contracts as well as extended warranties, resulting in deferred revenue. Changes in contract asset and liability balances were not materially impacted by any other factors for the period ended ~~March 31,~~September 30, 2020.

Through ~~March 31,~~September 30, 2020, we recognized revenue of ~~$12,659~~$27,041 related to our contract liabilities at December 31, 2019.

Practical Expedients and Exemptions

We generally expense sales commissions when incurred because the amortization period would be one year or less. These costs are recorded within selling, general and administrative expenses.

(3) Leases

We have various lease agreements for our facilities, equipment and vehicles with remaining lease terms ranging from one to ~~seventeen~~sixteen years. We determine if an arrangement contains a lease at inception. Some leases include the options to purchase, terminate or extend for one or more years; these options are included in the ~~ROU~~right-of-use (“ROU”) asset and liability lease term when it is reasonably certain an option will be exercised. Our leases do not contain any material residual value guarantees or material restrictive covenants.

Most of our leases do not provide an implicit rate, therefore we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of the future lease payments.

Certain of our leases include variable costs. Variable costs include non-lease components that were incurred based upon actual terms rather than contractually fixed amounts. In addition, variable costs are incurred for lease payments that are indexed to a change in rate or index. Because the ROU asset recorded on the balance sheet was determined based upon factors considered at the commencement date, subsequent changes in the rate or index that were not contemplated in the ROU asset balances recorded on the balance sheet result in variable expenses being incurred when paid during the lease term.

Components of lease cost (income) were as follows:


							Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	Quarter ended March 31, 2020		Quarter Ended March 31, 2019		(in thousands)	2020		2019		2020		2019
Operating lease cost	Operating lease cost	$	2,895	$	3,789	Operating lease cost	$	3,014	$	3,646	$	9,020	$	11,110
Loss due to remeasurement						Loss due to remeasurement	1,627		0		1,627		0
Finance lease cost - amortization expense	Finance lease cost - amortization expense	204		206		Finance lease cost - amortization expense	241		174		681		592
Finance lease cost - interest expense	Finance lease cost - interest expense	161		115		Finance lease cost - interest expense	167		114		495		344
Short-term lease cost	Short-term lease cost	27		24		Short-term lease cost	52		30		105		80
Variable lease cost	Variable lease cost	914		—		Variable lease cost	205		102		498		137
Sublease income	Sublease income	(152)		—		Sublease income	(155)		(33)		(459)		(33)
Total	Total	$	4,049	$	4,134	Total	$	5,151	$	4,033	$	11,967	$	12,230

Balance sheet classifications at ~~March 31,~~September 30, 2020 and December 31, 2019 are summarized below:


		2020										2019											2020				2019
(in thousands)	(in thousands)	Right of use assets		Current right of use liabilities		Long-term right of use liabilities		Right of use assets		Current right of use liabilities		Long-term right of use liabilities		(in thousands)	Right of use assets		Current right of use liabilities		Long-term right of use liabilities		Right of use assets		Current right of use liabilities		Long-term right of use liabilities
Operating Leases	Operating Leases	$	27,085	$	8,544	$	23,768	$	28,571	$	9,231	$	24,835	Operating Leases	$	36,391	$	8,463	$	34,398	$	28,571	$	9,231	$	24,835
Finance Leases	Finance Leases	7,906		872		10,112		8,319		338		10,567		Finance Leases	7,975		968		10,123		8,319		338		10,567
Total	Total	$	34,991	$	9,416	$	33,880	$	36,890	$	9,569	$	35,402	Total	$	44,366	$	9,431	$	44,521	$	36,890	$	9,569	$	35,402

On September 1, 2020, we closed 2 facilities in connection with our restructuring plan. These facilities occupied leased office space that terminates in 2024. In conjunction with these closings, we recorded impairment charges totaling $1,627 related to our ROU assets and impairment charges totaling $1,953 related to leasehold improvements.

Our future minimum lease payments as of ~~March 31,~~September 30, 2020 under operating lease and finance leases, with initial or remaining lease terms in excess of one year, were as follows:


		March 31, 2020							September 30, 2020
(in thousands)	(in thousands)	Operating Leases		Finance Leases		(in thousands)	Operating Leases		Finance Leases
Years ending March 31:
Years ending September 30:						Years ending September 30:
2021	2021	$	8,086	$	1,153	2021	$	10,640	$	1,671
2022	2022	7,988		1,443		2022	8,846		1,630
2023	2023	6,699		1,446		2023	7,162		1,622
2024	2024	5,343		1,440		2024	6,308		1,534
2025	2025	3,781		1,392		2025	4,552		1,427
Thereafter	Thereafter	6,633		8,017		Thereafter	15,511		6,881
Total lease payments	Total lease payments	38,530		14,891		Total lease payments	53,019		14,765
Less: imputed interest	Less: imputed interest	(6,218)		(3,907)		Less: imputed interest	(10,158)		(3,674)
Present value of lease liabilities	Present value of lease liabilities	$	32,312	$	10,984	Present value of lease liabilities	$	42,861	$	11,091

Supplemental cash flow information related to our operating leases for the periods ending ~~March 31,~~September 30, 2020 and ~~March 31,~~September 30, 2019 were as follows:


(in thousands)	(in thousands)	March 31, 2020		March 31, 2019		(in thousands)	September 30, 2020		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	Operating cash outflow from operating leases	$	3,157	$	3,857	Operating cash outflow from operating leases	$	9,654	$	11,657
Operating cash outflow from finance leases	Operating cash outflow from finance leases	$	139	$	115	Operating cash outflow from finance leases	$	493	$	343
Financing cash (inflow) outflow from finance leases		$	(296)	$	167
Financing cash outflow from finance leases						Financing cash outflow from finance leases	$	186	$	513

Weighted-average remaining lease terms and discount rate for our operating leases for the period ending ~~March 31,~~September 30, 2020, were as follows:

March 31, 2020

September 30, 2020

Operating

Financing

Operating

Financing

Weighted-average remaining lease term

5.1 years

10.2 years

Weighted-average remaining lease term

6.1 years

9.8 years

Weighted-average discount rate

6.49

6.01

Weighted-average discount rate

6.26

5.97

(4) Inventories

Components of inventories at ~~March 31,~~September 30, 2020 and December 31, 2019 are summarized as follows:


(in thousands)	(in thousands)	March 31, 2020		December 31, 2019		(in thousands)	September 30, 2020		December 31, 2019
Raw materials	Raw materials	$	35,736	$	42,066	Raw materials	$	40,371	$	42,066
Work in process	Work in process	12,502		5,496		Work in process	8,584		5,496
Finished goods and parts	Finished goods and parts	65,002		63,544		Finished goods and parts	77,927		63,544
Inventories	Inventories	$	113,240	$	111,106	Inventories	$	126,882	$	111,106

We record a reserve to the carrying value of our inventory to reflect the rapid technological change in our industry that impacts the market for our products. The inventory reserve was ~~$12,832~~$18,222 and $12,812 as of ~~March 31,~~September 30, 2020 and December 31, 2019, respectively.

In June 2020, as part of our assessment of prospective sales and evaluation of inventory, we determined the end-of-life for certain product lines. The end-of-life determination for these products reflects management's plans to focus our resources that are better aligned with our new strategic focus, as further discussed in Note 15. As a result, for the nine months ended September 30, 2020, we recorded a charge of $10,894 to products costs of sales, primarily attributable to inventory, accessories and inventory commitments for these products. We have ceased production for these items.

(5) Intangible Assets

Intangible assets, net, other than goodwill, at ~~March 31,~~September 30, 2020 and December 31, 2019 are summarized as follows:


		2020										2019												2020					2019
(in thousands)	(in thousands)	Gross ^(a)		Accumulated Amortization		Net		Gross ^(a)		Accumulated Amortization		Net		Weighted Average Useful Life Remaining (in years)	(in thousands)	Gross (a)		Accumulated Amortization		Net		Gross (a)		Accumulated Amortization		Net		Weighted Average Useful Life Remaining (in years)
Intangible assets with finite lives:	Intangible assets with finite lives:														Intangible assets with finite lives:
Customer relationships	Customer relationships	$	102,920	$	(78,996)	$	23,924	$	103,661	$	(77,021)	$	26,640	4	Customer relationships	$	106,098	$	(86,068)	$	20,030	$	103,661	$	(77,021)	$	26,640	4
Acquired technology	Acquired technology	53,665		(51,554)		2,111		54,378		(51,875)		2,503		1	Acquired technology	54,795		(53,329)		1,466		54,378		(51,875)		2,503		1
Trade names	Trade names	23,397		(19,086)		4,311		23,907		(19,133)		4,774		4	Trade names	23,754		(20,224)		3,530		23,907		(19,133)		4,774		4
Patent costs	Patent costs	11,974		(9,607)		2,367		11,760		(9,535)		2,225		15	Patent costs	19,112		(10,345)		8,767		11,760		(9,535)		2,225		15
Trade secrets	Trade secrets	19,530		(16,257)		3,273		19,494		(15,714)		3,780		2	Trade secrets	19,857		(17,535)		2,322		19,494		(15,714)		3,780		2
Acquired patents	Acquired patents	16,207		(14,954)		1,253		16,215		(14,706)		1,509		7	Acquired patents	16,266		(15,498)		768		16,215		(14,706)		1,509		7
Other	Other	25,664		(19,115)		6,549		26,256		(19,349)		6,907		1	Other	19,707		(19,702)		5		26,256		(19,349)		6,907		1
Total intangible assets	Total intangible assets	$	253,357	$	(209,569)	$	43,788	$	255,671	$	(207,333)	$	48,338	5	Total intangible assets	$	259,589	$	(222,701)	$	36,888	$	255,671	$	(207,333)	$	48,338	5

^(a) Change in gross carrying amounts consists primarily of charges for license and patent costs and foreign currency translation.

Amortization expense related to intangible assets was ~~$4,402~~$4,260 and ~~$5,520~~$12,806 for the ~~quarters~~quarter and nine months ended ~~March 31,~~September 30, 2020, respectively, compared to $5,287 and ~~March 31,~~$16,525 for the quarter and nine months ended September 30, 2019, respectively.

(6) Accrued and Other Liabilities

Accrued liabilities at ~~March 31,~~September 30, 2020 and December 31, 2019 are summarized as follows:


(in thousands)	(in thousands)	2020		2019		(in thousands)	2020		2019
Compensation and benefits	Compensation and benefits	$	18,281	$	21,139	Compensation and benefits	$	27,148	$	21,139
Vendor accruals	Vendor accruals	10,665		9,734		Vendor accruals	11,466		9,734
Payable to owners of redeemable noncontrolling interests		—		10,000
Accrued taxes	Accrued taxes	8,661		9,840		Accrued taxes	14,927		9,840
Accrued other	Accrued other	5,159		4,223		Accrued other	7,146		4,223
Product warranty liability	Product warranty liability	2,677		2,908		Product warranty liability	2,142		2,908
Arbitration awards	Arbitration awards	2,256		2,256		Arbitration awards	0		2,256
Accrued professional fees	Accrued professional fees	1,500		1,545		Accrued professional fees	2,700		1,545
Royalties payable	Royalties payable	1,604		1,450		Royalties payable	1,220		1,450
Payable to owners of redeemable noncontrolling interests						Payable to owners of redeemable noncontrolling interests	0		10,000
Total	Total	$	50,803	$	63,095	Total	$	66,749	$	63,095

Other liabilities at ~~March 31,~~September 30, 2020 and December 31, 2019 are summarized as follows:

(in thousands) 2020 2019
Long term employee indemnity $ 13,021 $ 14,408
Long term tax liability 10,653 5,011
Defined benefit pension obligation 10,104 10,357
Long term deferred revenue 6,518 7,370
Other long term liabilities 6,389 8,662
Total $ 46,685 $ 45,808


(in thousands)	2020		2019
Long-term employee indemnity	$	13,846	$	14,408
Long-term tax liability	10,999		5,011
Defined benefit pension obligation	10,770		10,357
Long-term deferred revenue	5,986		7,370
Other long-term liabilities	7,289		8,662
Total	$	48,890	$	45,808

(7) Borrowings

Credit Facility

We hold a 5-year $100,000 senior secured term loan facility (the “Term Facility”) and a 5-year $100,000 senior secured revolving credit facility (the “Revolving Facility” and, together with the Term Facility, the “Senior Credit Facility”) ~~that are intended~~ to support working capital and general corporate purposes. The Senior Credit Facility is guaranteed by certain of our subsidiaries. The guarantors guarantee, among other things, all our obligations and each other guarantor's obligations under the Senior Credit Facility. From time to time, we may be required to cause additional domestic subsidiaries to become guarantors under the Senior Credit Facility. The Senior Credit Facility is scheduled to mature on February 26, 2024, at which time all amounts outstanding thereunder will be due and payable. However, the maturity date of the Revolving Facility may be extended at our election with the consent of the lenders subject to the terms set forth in the Senior Credit Facility. The Senior Credit Facility contains customary covenants, some of which require us to maintain certain financial ratios that determine the amounts available and terms of borrowings and events of default. We were in compliance with all covenants at ~~March 31,~~September 30, 2020.

The payment of dividends on our common stock is restricted under provisions of the Senior Credit Facility, which limits the amount of cash dividends that we may pay in any one fiscal year to $30,000. We currently do not pay, and have not paid, any dividends on our common stock, and currently intend to retain any future earnings for use in our business.

Borrowings under the Senior Credit Facility are subject to interest at varying spreads above quoted market rates and a commitment fee is paid on the total unused commitment. At ~~March 31,~~September 30, 2020, our floating interest rate was ~~3.0%~~1.9%. Subject to certain terms and conditions contained in the Revolving Facility, we have the right to request up to 4 increases to the amount of the Revolving Facility in an aggregate amount not to exceed $100,000. As of September 30, 2020, there was $10,000 of outstanding letters of credit and $30,601 of available borrowings under the Revolving Facility.

We had a balance of ~~$47,605~~$21,685 outstanding on the Term Facility at ~~March 31,~~September 30, 2020, with ~~$2,506 of~~$1,758 in principal payments due in the next twelve months.

1215

As a result of the Term Facility, we have exposure to floating interest rates. To manage interest expense, we entered into a floating to fixed interest rate swap to reduce exposure to changes in floating interest rates on the Term Facility. The interest rate swap ~~has~~at September 30, 2020 had a notional value of ~~$40,000~~$15,000 and will expire on February 26, 2024, concurrent with the Term Facility. The notional value will decline over the term of the interest rate swap as amortization payments reduce the principal amount of the Term Facility. As a result of the interest rate swap, the percentage of total principal debt (excluding capital leases) that is subject to floating interest rates is approximately ~~16.0%~~31%. ~~We designated~~Due to an amendment to the swap on June 30, 2020, the swap is no longer designated as a cash flow hedge for accounting treatment purposes. See Note 8 for additional information.

On October 9, 2020, we amended the Senior Credit Facility eliminating the $50,000 cap on the sale, transfer or lease of assets, in one or more transactions in any fiscal year, while the $200,000 cap during the life of the agreement remained intact. In addition we modified the terms of LIBOR replacement when that benchmark is no longer available.

(8) Hedging Activities and Financial Instruments

~~Derivatives Designated as Hedging Instruments~~Interest Rate Swap Contract

On July 8, 2019, we entered into ana $50,000 interest rate swap contract, designated as a cash flow hedge, to minimize the risk associated with the variability of cash flows in interest payments from variable-rate debt due to fluctuations in the one-month USD-LIBOR, subject to a 0% floor, through February 26, 2024. Changes in the interest rate swap are expected to offset the changes in cash flows attributable to fluctuations of the one-month USD-LIBOR for the interest payments associated with our variable-rate debt.

On June 30, 2020, we executed an amendment to the swap which reduced the notional amount to $15,000 and resulted in the de-designation as a cash flow hedge. The reduction required a mark-to-market settlement of $1,253 paid in July 2020. Amounts previously recognized in Accumulated Other Comprehensive Loss ("AOCL") of $1,235 were released and reclassified into “Interest and other expense, net” on the accompanying condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2020. Subsequent to June 2020, changes in the swap’s fair value are recognized currently in earnings and included in the line item “Interest and other expense, net” and the remaining $731 in AOCL as of September 30, 2020 will be amortized to “Interest and other expense, net” when those future cash flows are expected to occur.

The notional amount and fair value of the derivative on our balance sheet at ~~March 31,~~September 30, 2020 and December 31, 2019 ~~are disclosed below:~~were as follows:


(in thousands)	(in thousands)	Balance Sheet location	Notional amount		Fair value		(in thousands)	Balance Sheet location	Notional amount		Fair value
2020
September 30, 2020							September 30, 2020
Interest rate swap contract	Interest rate swap contract	Other liabilities	$	40,000	$	(1,976)	Interest rate swap contract	Other liabilities	$	15,000	$	(774)
2019
December 31, 2019							December 31, 2019
Interest rate swap contract	Interest rate swap contract	Other liabilities	$	40,000	$	(318)	Interest rate swap contract	Other liabilities	$	40,000	$	(318)

~~Amounts~~Except as noted above, amounts released from ~~Accumulated Other Comprehensive Loss (AOCL)~~AOCL and reclassified into “Interest and other expense, net” did not have a material impact on our condensed consolidated statements of operations and comprehensive loss for the ~~quarter March 31, 2020.~~quarters and nine months ended September 30, 2020 and 2019. The net amount of AOCL expected to be reclassified to losses in the next 12 months is approximately ~~$589. We did not have a similar instrument during the quarter ended March 31, 2019.~~$59.

~~Derivatives Not Designated as Hedging Instruments~~Foreign Currency Contracts

We conduct business in various countries using both the functional currencies of those countries and other currencies to effect cross border transactions. As a result, we are subject to the risk that fluctuations in foreign exchange rates between the dates that those transactions are entered into and their respective settlement dates will result in a foreign exchange gain or loss. When practicable, we endeavor to match assets and liabilities in the same currency on our balance sheet and those of our subsidiaries in order to reduce these risks. When appropriate, we enter into foreign currency contracts to hedge exposures arising from those transactions. We have elected not to prepare and maintain the documentation to qualify for hedge accounting treatment under ASC 815, “Derivatives and Hedging,” and therefore, all gains and losses (realized or unrealized) are recognized in “Interest and other expense, net” in the condensed consolidated statements of operations and comprehensive loss. Depending on their fair value at the end of the reporting period, derivatives are recorded either in prepaid expenses and other current assets or in accrued liabilities on the condensed consolidated balance ~~sheet.~~sheets.

We had ~~$100,403~~$98,965 and $102,407 in notional foreign exchange contracts outstanding as of ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. The fair values of these contracts were not material.

We translate foreign currency balance sheets from each international businesses’ functional currency (generally the respective local currency) to U.S. dollars at end-of-period exchange rates, and statements of earnings at average exchange rates for each period. The resulting foreign currency translation adjustments are a component of other comprehensive income (loss). We do not hedge the fluctuation in reported revenue and earnings resulting from the translation of these international operations' results into U.S. dollars.

(9) Inventory Financing Agreements

On December 1, 2018 and January 17, 2020, we entered into a Manufacturing Services Agreement and Amendment One to Manufacturing Services Agreement (together, the "Agreement"), with an assembling manufacturer to produce products on behalf of 3D Systems Corporation. During the ~~current period,~~quarter ended March 31, 2020, as part of the Agreement, we sold $12,100 of inventory to the assembling manufacturer that we have an obligation to repurchase. At ~~March 31,~~September 30, 2020, ~~we recorded a liability,~~our obligation to ~~repurchases~~repurchase inventory, included in "Accrued and other liabilities" on our condensed consolidated balance sheets, ~~for $2,271 related~~was $712, relating to the initial sale of inventory to the assembly ~~manufacturer.~~manufacturer and adjusted for transactions. The inventory sold ~~consists~~consisted of raw materials, packaging materials and consumables representing stock on hand related to certain product families for which the manufacturing has been outsourced to the assembling manufacturer. Although the assembling manufacturer holds legal title, we account for the inventory similar to a product financing arrangement; therefore, the inventories sold to the assembling manufacturer will continue to be included in "Inventories" on our condensed consolidated balance sheets until processed into finished goods and sold back to us. At ~~March 31,~~September 30, 2020, inventory held at assemblers was ~~$8,471.~~$4,270.

Additionally, as part of the Agreement, we have a commitment to purchase certain materials and supplies that the assembling manufacturer purchased from third parties. At ~~March 31,~~September 30, 2020, we had a commitment of ~~$2,300~~$3,004 with the assembling manufacturer.

(10) Net Loss Per Share

We compute basic loss per share using net loss attributable to 3D Systems Corporation and the weighted average number of common shares outstanding during the applicable period. Diluted loss per share incorporates the additional shares issuable upon assumed exercise of stock options and the release of restricted stock and restricted stock units, except in such case when their inclusion would be anti-dilutive.


		Quarter Ended March 31,							Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2020		2019		(in thousands, except per share amounts)	2020		2019		2020		2019
Numerator for basic and diluted net loss per share:	Numerator for basic and diluted net loss per share:					Numerator for basic and diluted net loss per share:
Net loss attributable to 3D Systems Corporation	Net loss attributable to 3D Systems Corporation	$	(18,924)	$	(24,394)	Net loss attributable to 3D Systems Corporation	$	(72,889)	$	(16,843)	$	(129,764)	$	(65,167)

Denominator for basic and diluted net loss per share:	Denominator for basic and diluted net loss per share:					Denominator for basic and diluted net loss per share:
Weighted average shares	Weighted average shares	114,590		113,267		Weighted average shares	118,527		114,053		116,216		113,587

Net loss per share - basic and diluted	Net loss per share - basic and diluted	$	(0.17)	$	(0.22)	Net loss per share - basic and diluted	$	(0.61)	$	(0.15)	$	(1.12)	$	(0.57)

On August 5, 2020, we entered into an Equity Distribution Agreement for an At-The-Market equity offering program (“ATM Program”) where we may issue and sell, from time to time, shares of our common stock. Our ATM Program allows for an aggregate gross sales price of up to a total of $150,000, depending upon market conditions and our liquidity requirements, through Truist Securities, Inc. and HSBC Securities (USA) Inc. For the three months ended September 30, 2020, we sold 4,616 shares of our common stock under our ATM Program for net proceeds of $24,965, net of $548 in fees, commissions and other costs. As of September 30, 2020, we had $124,487 in availability remaining under the ATM Program.

For the quarters and nine months ended ~~March 31,~~September 30, 2020 and ~~March 31,~~ 2019, the effect of dilutive securities, including non-vested stock options and restricted stock awards/units, was excluded from the denominator for the calculation of diluted net loss per share because we recognized a net loss for the period and their inclusion would be anti-dilutive. Dilutive securities excluded for the ~~quarters~~quarter and nine months ended ~~March 31,~~September 30, 2020 were 4,453 compared to 5,786 for the quarter and ~~March 31,~~nine months ended September 30, 2019, ~~were 6,135 and 5,534,~~ respectively.

(11) Fair Value Measurements

ASC 820, “Fair Value Measurements and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities;

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The above standard applies to cash equivalents, Israeli severance funds and derivatives. We utilize the market approach to measure fair value for financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Assets and liabilities measured at fair value on a recurring basis are summarized below:


		Fair Value Measurements as of March 31, 2020													Fair Value Measurements as of September 30, 2020
(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Total
Description	Description									Description
Cash equivalents^(a)	Cash equivalents^(a)	$	23,532	$	—	$	—	$	23,532	Cash equivalents (a)	$	196	$	0	$	196
Israeli severance funds ^(b)	Israeli severance funds ^(b)	$	—	$	7,192	$	—	$	7,192	Israeli severance funds (b)	$	0	$	7,455	$	7,455
Derivative financial instruments^(c)	Derivative financial instruments^(c)	$	—	$	(1,976)	$	—	$	(1,976)	Derivative financial instruments(c)	$	0	$	(774)	$	(774)

		Fair Value Measurements as of December 31, 2019													Fair Value Measurements as of December 31, 2019
(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Total
Description	Description									Description
Cash equivalents ^(a)	Cash equivalents ^(a)	$	20,869	$	—	$	—	$	20,869	Cash equivalents (a)	$	20,869	$	0	$	20,869
Israeli severance funds ^(b)	Israeli severance funds ^(b)	$	—	$	7,449	$	—	$	7,449	Israeli severance funds (b)	$	0	$	7,449	$	7,449
Derivative financial instruments ^(c)	Derivative financial instruments ^(c)	$	—	$	(318)	$	—	$	(318)	Derivative financial instruments (c)	$	0	$	(318)	$	(318)

(a)Cash equivalents include funds held in money market instruments and are reported at their current carrying value, which approximates fair value due to the short-term nature of these instruments and are included in cash and cash equivalents in the consolidated balance sheet.

(b)We partially fund a liability for our Israeli severance requirement through monthly deposits into fund accounts, the value of these contributions ~~are~~is recorded to non-current assets on the consolidated balance sheet.

(c)Derivative instruments are reported based on published market prices for similar assets or are estimated based on published market prices for similar assets or are estimated based on observable inputs such as interest rates, yield curves, credit risks, spot and future commodity prices and spot and future exchange rates. See Note 8 for additional information on our derivative financial instruments.

We did not have any transfers of assets and liabilities between Level 1, Level 2 and Level 3 of the fair value measurement hierarchy during the quarter and nine months ended ~~March 31,~~September 30, 2020.

In addition to the assets and liabilities included in the above table, certain of our assets and liabilities are to be initially measured at fair value on a non-recurring basis. This includes goodwill and other intangible assets measured at fair value for impairment assessment, in addition to redeemable noncontrolling interests. For additional discussion, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates” in the 2019 Form 10-K.

(12) Income Taxes

We maintain the exception under ASC 740-270-30-36(b), ~~"Accounting~~"Accounting for Income ~~Taxes"~~Taxes", for jurisdictions that ~~jurisdictions~~ do not have reliable estimates of ordinary income ~~for the 2020 year~~ due to the volatility in the industry. Based on the increased global financial uncertainty due to the COVID-19 pandemic and continued volatility in the industry, we have continued to use a ~~year to date~~year-to-date methodology in determining the quarterly effective tax rate for the quarter and nine months ended ~~March 31,~~September 30, 2020.

For the quarter and nine months ended ~~March 31,~~September 30, 2020, ~~we recorded a tax benefit of $1,858, resulting in an~~the Company's effective tax rate ~~of 8.9%.~~was (4.1)% and (1.9)%, respectively. For the quarter and nine months ended ~~March 31,~~September 30, 2019, ~~we recorded a tax expense of $1,844, resulting in an~~the Company's effective tax rate ~~of 8.20%.~~was (13.6)% and (9.8)%, respectively. The difference between the statutory tax rate and the effective tax rate for the quarter and nine months ended September 30, 2020 is ~~driven primarily by the valuation allowances in various jurisdictions,~~comprised of the foreign rate differential between the U.S. tax rate and foreign tax rates, impairment of non-deductible goodwill, and the change in U.S. tax law allowing for the carryback of certain U.S. net operating losses ("NOLs") as explained in the subsequent ~~paragraph.~~paragraph, and the presence of a full valuation allowance in various jurisdictions. The effective tax rate for the quarter and nine months ended September 30, 2019 differs from the statutory tax rate due to withholding tax expense, reduction of a liability for uncertain tax positions, the foreign rate differential between the U.S. tax rate and foreign tax rates, and the presence of a full valuation allowance in various jurisdictions.

In response to the global pandemic resulting from COVID-19, the U.S. government enacted tax legislation on March 27, 2020 under the Coronavirus Aid Relief, and Economic Security Act ("CARES Act"). This legislation allows us to carryback NOLs generated in the 2018 and 2019 tax years up to five years. ~~We intend to carryback such NOLs to the 2013 and 2014 tax years and request a refund for cash taxes paid. During the current quarter, we recorded a~~A tax receivable was recorded during the first quarter for the ~~NOL~~anticipated carryback in the amount of ~~$8,886.~~$8.9 million. We also recorded the associated tax benefit of ~~$3,175,~~$3.2 million, which is net of recorded uncertain tax positions of ~~$5,711. We have also assessed~~$5.7 million.During the ~~non-income tax related provisions of the CARES Act and do not believe that they will have a material impact on our consolidated financial statements.~~

~~Due~~second quarter, these NOLs were carried back to the one-time transition tax, the majority of our previously unremitted earnings have now been subjected to U.S. federal income tax, although, other additional taxes such as withholding tax could be applicable. We continue to assert that our foreign earnings are indefinitely reinvested in our overseas operations with the exception of Japan. The change in this assertion has no material effect. As such, we have not provided for any additional taxes on approximately $182,050 of unremitted earnings. We estimate the unrecognized deferred tax liability related to these earnings is approximately $20,804.

~~Tax years~~ 2013 and 2014 ~~remain subject to examination~~tax years and a refund was requested for cash taxes paid. As of the close of the third quarter, approximately $2.5 million has been received by the IRS for certain tax credit carryforwards, while tax years 2016 through 2018 remain open to examination by the IRS. State income tax returns are generally subject to examination for a period of three to four years after filing the respective tax returns. We file income tax returns (which are open to examination beginning in the year shown in parentheses) in Australia (2015), Belgium (2016), Brazil (2014), China (2016), France (2016), Germany (2015), India (2014), Israel (2015), Italy (2014), Japan (2014), Korea (2014), Mexico (2014), Netherlands (2014), Switzerland (2014), the United Kingdom (2018) and Uruguay (2014).

Company thus far.

~~(13) Segment Information~~

We operate as 1 segment and conduct our business through various offices and facilities located throughout the Americas region (United States, Canada, Brazil, Mexico and Uruguay), EMEA region (Belgium, France, Germany, Israel, Italy, the Netherlands, Switzerland and the United Kingdom), and APAC region (Australia, China, India, Japan and Korea). We have historically disclosed summarized financial information for the geographic areas of operations as if they were segments in accordance with ASC 280, “~~Segment Reporting.” Financial information concerning our geographical locations is based on the location of the selling entity.~~

Quarter Ended March 31,
(in thousands) 2020 2019
Revenue from unaffiliated customers:
United States $ 61,987 $ 71,398
Other Americas 1,815 2,305
EMEA 56,467 59,644
Asia Pacific 14,436 18,633
Total revenue $ 134,705 $ 151,980

Quarter Ended March 31,
(in thousands) 2020 2019
Revenue by class of product and service:
Products $ 37,432 $ 50,917
Materials 41,377 41,430
Services 55,896 59,633
Total revenue $ 134,705 $ 151,980

Quarter ended March 31, 2020
Intercompany Sales to
(in thousands) Americas EMEA Asia Pacific Total
Americas $ 254 $ 9,980 $ 3,521 $ 13,755
EMEA 13,575 14,444 862 28,881
Asia Pacific 1,558 579 446 2,583
Total intercompany sales $ 15,387 $ 25,003 $ 4,829 $ 45,219

Quarter ended March 31, 2019
Intercompany Sales to
(in thousands) Americas EMEA Asia Pacific Total
Americas $ 446 $ 16,708 $ 3,837 $ 20,991
EMEA 16,678 6,936 1,572 25,186
Asia Pacific 745 21 801 1,567
Total intercompany sales $ 17,869 $ 23,665 $ 6,210 $ 47,744

Quarter Ended March 31,
(in thousands) 2020 2019
(Loss) income from operations:
Americas $ (22,087) $ (26,832)
EMEA 2,228 2,917
Asia Pacific 1,641 2,610
Total $ (18,218) $ (21,305)

~~(14)~~(13) Commitments and Contingencies

We have an inventory purchase commitment with an assembling manufacturer, see Note 9.

Litigation

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

On August 23, 2013, Ronald Barranco, a former Company employee, filed 2 lawsuits against us and certain of our 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 our acquisition of Print3D Corporation (of which Mr. Barranco was a 50% shareholder) and our subsequent employment of Mr. Barranco. 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 our acquisition of certain website domains from Mr. Barranco and our subsequent employment of Mr. Barranco. Both Barranco I and Barranco II allege we breached certain purchase agreements in order to avoid paying Mr. Barranco additional monies pursuant to royalty and earn out provisions in the agreements.

With regard to Barranco I, the Hawaii district court, on February 28, 2014, denied our motion to dismiss and our motion to transfer venue to South Carolina for the convenience of the parties. However, the Hawaii court recognized that Barranco’s claims were all subject to mandatory and binding arbitration in Charlotte, North Carolina. The parties selected an arbitrator and arbitration took place in September 2015 in Charlotte, North Carolina.

On September 28, 2015, the arbitrator issued a final award in favor of Barranco with respect to two alleged breaches of contract and implied covenants arising out of the contract. The arbitrator found that we did not commit fraud or make any negligent misrepresentations to Barranco. Pursuant to the award, we were directed to pay approximately $11,282, which includes alleged actual damages of $7,254, fees and expenses of $2,318 and prejudgment interest of $1,710.

On August 3, 2018, following an unsuccessful appeal to the federal court in the Western District of North Carolina and the United States Court of Appeals for the Fourth Circuit, we paid $9,127 of the Barranco I judgment, net setoff. On September 28, 2018, the parties filed a Consent Stipulation Resolving Motion for Setoff of Judgment, stipulating that subject only to vacatur or amendment reducing the Barranco II judgment in Barranco’s appeal to the Ninth Circuit related to the Barranco II action discussed below, the Barranco II judgment in the amount of $2,182 was setoff against the Barranco I judgment (“Stipulated Setoff”). We paid Barranco the $101 balance remaining due after the Stipulated Setoff.

With regard to Barranco II, the case was tried to a jury in Hawaii district court in May 2016, and on May 27, 2016 the jury found that we were not liable for either breach of contract or breach of the implied covenant of good faith and fair dealing. Additionally, the jury found in our favor on our counterclaim against Barranco and determined that Barranco violated his non-competition covenant with us. On March 30, 2018, the court entered Findings of Fact and Conclusions of Law and Order requiring Barranco to disgorge, and us recover, $523, representing all but four months of the full amount paid to Barranco as salary during his employment with us as well as a portion of the up front and buyout payments made to Barranco in connection with the purchase of certain web domains. In addition, the court ordered Barranco to pay pre-judgment interest to us to be calculated beginning as of his first breach of the non-competition covenant in August 2011. Judgment was entered thereafter on April 2, 2018.

On September 13, 2018, the Hawaii district court entered its Amended Judgment in a Civil Case, awarding us a final amended judgment of $2,182. On September 19, 2018, Barranco filed an Amended Notice of Appeal. On January 13, 2019, Barranco filed Appellant’s Opening Brief in the Ninth Circuit. On March 15, 2019, we filed our Answering Brief. On April 14, 2019, Barranco filed his Reply Brief. Oral Arguments took place on October 24, 2019. On March 12, 2020, the Ninth Circuit affirmed the district court’s evidentiary rulings and reversed and vacated the monetary judgment in our favor on our breach of contract counterclaim. The formal mandate was issued on April 17, 2020. On April 20, Barranco filed a Motion to Recall and Amend Mandate to Conform with Rule 37(b) in the Ninth Circuit. We filed an opposition brief on April 28 and the Ninth Circuit denied Barranco’s motion the same day. On April 21, 2020, the district court issued a Minute Order regarding issues on remand from the Ninth Circuit. The district court directed the parties to file simultaneous initial briefs on May 21 addressing what relief we are entitled to receive in light of the Ninth Circuit’s opinion. Both parties ~~may file~~filed responsive briefs in June 2020. On August 31, 2020, the Court issued its decision regarding post-remand issues, which determined that no ~~later than June 19, 2020.~~further proceedings were warranted on remand and ordered the case closed. Thereafter, the parties agreed to resolve the matter and reconcile the amount setoff for the Amended Judgment to reflect the award vacated by the Ninth Circuit and to resolve any and all remaining claims between the parties. The Court entered the Stipulation of Dismissal With Prejudice of All Claims Against All Parties on October 22, 2020 and closed the case.

Export Controls and Government Contracts Compliance Matter

In October 2017, we received an administrative subpoena from the Bureau of Industry and Security of the Department of Commerce (“BIS”) requesting the production of records in connection with possible violations of U.S. export control laws, including with regard to our Quickparts.com, Inc. subsidiary. In addition, while collecting information responsive to the above-referenced subpoena, our internal investigation identified potential violations of the International Traffic in Arms Regulations (“ITAR”) administered by the Directorate of Defense Trade Controls of the Department of State (“DDTC”) and potential violations of the Export Administration Regulations administered by the BIS.

On June 8, 2018 and thereafter, we submitted voluntary disclosures to BIS and DDTC identifying numerous potentially unauthorized exports of technical data. As part of our ongoing review of trade compliance risks and our cooperation with the government, on November 20, 2019, we submitted to the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) an initial notice of voluntary disclosure regarding potential violations of economic sanctions related to Iran. We ~~are continuing~~continued to investigate this issue and ~~will file~~filed a final disclosure with OFAC ~~when our review is complete.~~on May 20, 2020. We have and will continue to implement compliance enhancements to our export controls, trade sanctions, and government contracting compliance program to address the issues identified through our ongoing internal investigation and will cooperate with DDTC and BIS, as well as the U.S. Departments of Justice, Defense, Homeland Security and Treasury in their ongoing reviews of these matters. In connection with these ongoing reviews, in August 2020, the Company received two federal grand jury subpoenas issued by the U.S. District Court for the Northern District of Texas. The Company responded to these two subpoenas and will continue to fully cooperate with the U.S. Department of Justice in the related investigation.

In addition, on July 19, 2019, we received a notice of immediate suspension of federal contracting from the United States Air Force, pending the outcome of an ongoing investigation. The suspension applied to 3D Systems, its subsidiaries and affiliates, and was related to the potential export controls violations involving our On Demand manufacturing business described above. Under the suspension, we were generally prohibited from receiving new federal government contracts or subcontracts from any executive branch agency as described in the provisions of 48 C.F.R Subpart 9.4 of the Federal Acquisition Regulation. The suspension allowed us to continue to perform current federal contracts, and also to receive awards of new subcontracts for items under $35 and for items considered commercially available off-the-shelf items. The Air Force lifted the suspension on September 6, 2019 following the execution of a ~~two-year~~two-year Administrative Agreement with us. We are now eligible to obtain and perform U.S. government contracts and subcontracts without restrictions. Under the Administrative Agreement, we will be monitored and evaluated by independent monitors who will report to the Air Force on our compliance with the terms of the Company’s Ethics & Compliance Program, including its overall culture, government contracting compliance program, and

export controls compliance program.

Although we cannot predict the ultimate resolution of these matters, we have incurred and expect to continue to incur significant legal costs and other expenses in connection with responding to the U.S. government agencies.

Other

We are involved in various other legal matters incidental to our business. Although we cannot predict the results of the litigation with certainty, we believe that the disposition of all these various other legal matters will not have a material adverse effect, individually or in the aggregate, on our consolidated results of operations, consolidated cash flows or consolidated financial position.

~~(15)~~(14) Noncontrolling Interests

As of ~~March 31,~~September 30, 2020, we owned 100% of the capital and voting rights of Robtec, a service bureau and distributor of 3D printing and scanning products in Brazil. Approximately 70% of the capital and voting rights of Robtec were acquired on November 25, 2014. On January 7, 2020, we made a payment equal to the redemption price of $10,000 and acquired the remaining 30% of the capital and voting rights.

(15) Restructuring and Exit Activity Costs

On August 5, 2020, we announced, in connection with the new strategic focus and organizational realignment, a restructuring plan intended to align our operating costs with current revenue levels and better position the Company for future sustainable and profitable growth. The restructuring plan includes a reduction of nearly 20% of our workforce, with the majority of the workforce reduction expected to be completed by December 31, 2020. We expect that the restructuring plan, in conjunction with other cost reduction measures, will reduce our annualized costs by approximately $100,000 by the end of December 31, 2021. Cost reduction efforts include reducing the number of facilities and examining every aspect of our manufacturing and operating costs. We will incur cash charges for severance, facility closing and other costs, primarily in the second half of this year. We may incur additional charges in 2021 as we finalize all the actions to be taken. Non-cash charges related to these actions are expected to be $7,600 and are included in facility closing costs. We are also evaluating the divestiture of parts of the business that do not align with this strategic focus. See Note 16.

In connection with the restructuring plan, we recorded pre-tax costs during the quarter and nine months ended September 30, 2020, included within Selling, general and administrative in the condensed consolidated income statement, and expect to incur total costs as follows:


	Total Costs Expected to be Incurred		Costs Incurred during quarter and nine months ended September 30, 2020
Severance, termination benefits and other employee costs	$	21,100	$	8,237
Facility closing costs	7,600		3,621
Other costs	3,700		0
Total	$	32,400	$	11,858

1921

The liabilities at September 30, 2020 related to these costs were principally recorded in accrued expenses in the condensed consolidated balance sheets and were as follows:


	Liability at December 31, 2019		Costs Incurred during 2020		Costs Paid During 2020		Non-cash adjustments		Liability at September 30, 2020
Severance, termination benefits and other employee costs	$	0	$	8,237	$	(3,699)	$	0	$	4,538
Facility closing costs	0		3,621		0		(3,621)		0
Other costs	0		0		0		0		0
Total	$	0	$	11,858	$	(3,699)	$	(3,621)	$	4,538

(16) Subsequent Events

For information on subsequent events related to borrowings, see Note 7.

On November 2, 2020 we entered into an agreement with ST Acquisition Co., an affiliate of Battery Ventures, to sell 100% of the equity interests of Cimatron Ltd., the subsidiary that operates our Cimatron integrated CAD/CAM software for tooling business and its GibbsCAM CNC programming software business, for an aggregate transaction value of approximately $65,000. This transaction is expected to close during the fourth quarter of 2020, contingent upon satisfaction of customary closing conditions.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read together with the unaudited condensed consolidated financial statements and the notes thereto included in Item 1 (the “Financial Statements”) of this Quarterly Report on Form 10-Q (“Form 10-Q”). Also, we are subject to a number of risks and uncertainties that may affect our future performance that are discussed in greater detail in the sections entitled “Forward-Looking Statements” at the end of this Item 2 and that are discussed or referred to in Item 1A of Part II of this Form 10-Q.

Business Overview

3D Systems Corporation (“3D Systems” or the “Company” or “we” or “us”) is a holding company incorporated in Delaware in 1993 that markets our products and services through subsidiaries in North America and South America (collectively referred to as “Americas”), Europe and the Middle East (collectively referred to as “EMEA”) and the Asia Pacific region (“APAC”). We provide comprehensive ~~3D printing and digital~~additive manufacturing solutions ~~including 3D printers~~ for ~~plastics and metals, materials, software, on~~applications in growing markets that demand ~~manufacturing services and digital design tools.~~high reliability products. Our solutions support ~~advanced~~markets and applications where a premium is placed upon performance and reliability, with engineering and technology cultures that seek product innovation as a means of delivering value to their customers, and with processes that tend to be highly controlled. Through our two key market verticals of Healthcare and Industrials, we offer hardware, software, materials and services, combined with leadership in application knowledge to provide additive manufacturing solutions for specific, high-value applications in ~~a wide range of industries and verticals, including~~growing markets like healthcare, ~~dental,~~ aerospace, automotive and ~~durable goods.~~defense. Our precision healthcare capabilities include simulation; Virtual Surgical Planning (VSP^®)(“VSP”); and printing of medical and dental devices, models, and surgical guides and instruments. We have over 30 years of experience and expertise which have proven vital to our development of ~~an ecosystem and~~ end-to-end digital workflow solutions ~~which~~that enable customers to optimize product designs, transform workflows, bring innovative products to market, and drive new business models.

~~Customers can use~~As of September 30, 2020, we experienced a triggering event due to a drop in our ~~3D solutions to design~~stock price, which ultimately had been negatively impacted by the business environment as a result of the COVID-19 pandemic, and ~~manufacture complex~~performed a quantitative analysis for potential impairment of our goodwill or long-lived asset balances. Based on available information and ~~unique parts, eliminate expensive tooling, produce parts locally or in small batches~~analysis as of September 30, 2020, we determined the carrying value of the EMEA reporting unit exceeded its fair value and ~~reduce lead times~~recorded a non-cash goodwill impairment charge of $48.3 million. We determined the fair value of the Americas and ~~time to market. A growing number~~APAC reporting units exceeded their carrying values and the carrying value of ~~customers are shifting from prototyping applications to also using 3D printing~~our long-lived assets is recoverable for production. We believe this shift will be further driven by our continued advancement and innovation of 3D printing solutions that improve durability, reliability, repeatability and total cost of operations.all reporting units. See Note 1 for additional discussion.

COVID-19 Pandemic Response

~~Our~~As we continue to closely monitor the COVID-19 pandemic, our top priority ~~during the ongoing COVID-19 pandemic~~ remains the health and safety of our employees and their ~~families. As global governments institute restrictions~~families and communities. Our Crisis Response Steering Committee regularly reviews and adapts our protocols based on ~~commercial~~evolving research and guidance related to the virus. While essential operations continue, we have restricted travel and meetings, published pertinent information, and adapted to a world where many in our workforce are remote and those coming on-site are following new safety measures. We have a multi-phase plan to return to working on-site, and remain committed to ~~ensure~~protecting our ~~compliance~~employees, delivering for our customers and supporting our communities.

Our Employees

Since the start of the pandemic, employees who are necessary to our facilities’ operations have continued to work on-site. The additional safety measures and practices we put in place during the first quarter of 2020 to protect these employees, including maintaining physical distancing, utilizing enhanced cleaning protocols and usage of personal protective equipment, continue to be implemented subject to each location’s return on-site processes. Our plan for returning the remainder of our workforce to work on-site involves multiple phases that gradually allow additional workers to return while ~~also maintaining business continuity for operations.~~practicing social distancing and other safety measures. This plan considers the varying needs of each location and site and depends on local government regulations, community case trends, and recommendations from public health organizations.

Our New Strategic Focus, Restructuring and Liquidity

While no company is immune to global economic challenges, our business portfolio is well-balanced across end markets and geographies and includes a high degree of businesses serving critical sectors such as ~~the~~ healthcare, aerospace and durable goods. In May 2020, a new CEO and President, Dr. Jeffrey Graves, was hired. Dr. Graves completed his initial assessment of the Company and on August 5, 2020, a new strategic focus (outlined in the Business Overview) and reorganization was announced and, to align our cost structure to the current level of revenues, a restructuring plan was also announced. We expect the restructuring effort, when complete and in conjunction with other cost reduction measures, to reduce annualized costs by approximately $100 million by the end of 2021. This should enable us to be profitable at current revenue levels and be well positioned to leverage the sales growth as it returns. Other cost reduction efforts include reducing the number of facilities and examining every aspect of our manufacturing and operating costs. We estimate to incur total cash charges in the range of $25 to $30 million for severance, facility closings and other costs in accomplishing these efforts. We have already incurred restructuring charges in the third quarter of 2020 and expect to incur much of the remaining charges prior to the end of 2020, though we may incur additional charges in 2021 as we finalize all the actions to be taken. We are also evaluating the divestiture of parts of the business that do not align with this strategic focus. See Note 15 and Note 16 for additional discussion.

To provide additional financial flexibility while executing our restructuring plan, on August 5, 2020, we entered into an Equity Distribution Agreement for an At-The-Market equity offering program ("ATM Program") where we may issue and sell, from time to time, shares of our common stock. Our ATM Program allows for an aggregate gross sales price of up to a total of $150.0 million, depending upon market conditions and our liquidity requirements, through Truist Securities, Inc. (“Truist Securities”) and HSBC Securities (USA) Inc. (“HSBC,” and together with Truist Securities, the “Sales Agents”). For the quarter ended September 30, 2020, we sold 4,616 shares of our common stock under our ATM Program for net proceeds of $25.0 million, net of $0.5 million in fees, commissions and other costs. As of September 30, 2020, we have $124.5 million in availability remaining under the ATM Program. Based on projected cash flows, the results of our cost savings initiatives, availability under our Revolving Facility, and potential divestitures (see Note 16), we do not anticipate issuing shares under the ATM Program during the fourth quarter of 2020.

We believe our balance sheet is well positioned and had ~~$112.8~~cash on hand of $75.3 million and total debt of ~~cash and cash equivalents~~$21.7 million at ~~March 31, 2020, and~~September 30, 2020. We had a ~~committed~~$100 million unused revolving credit facility ~~maturing in 2024~~ with ~~$42.2~~approximately $30.6 million of ~~credit available~~availability at ~~March 31, 2020. We are in discussions with our lenders to ensure continued availability of funds in future quarters given the prospect of further economic downturn.~~

~~Our Employees~~

We are in the midst of what is a historic deployment of remote work and digital access to services. Our Crisis Response Steering Committee is highly engaged with local site leaders across our company in safeguarding the well-being of our employees and minimizing the spread of this infection. Employees whose tasks can be done offsite have been instructed to work from home. Approximately 80% of our total personnel continue to work from home. We only allow employees in our facilities who are essential to the facilities’ operations under best practices guidelines on maintaining physical distancing, utilizing enhanced cleaning protocols and usage of personal protective equipment.

~~Our Customers~~

We are committed to our customers to enable the support they need to continue providing vital services and tools. Our global businesses and manufacturing sites remain operational to meet customer needs during the pandemic in compliance with the orders and restrictions imposed by government authorities in each of our locations, and we are working with our customers to meet their specific shipment needs. While the pandemic has created minor delaysSeptember 30, 2020, based on the ~~inbound supply chain at~~terms of the agreement. Additionally, our ~~partners~~ATM Program may be used as a source of additional liquidity, if needed. In the second and third quarters of 2020, we began reducing our cost structure by focusing on cost of sales and operating expenses to drive future profitability. We implemented an employee furlough program, executive and Board pay reductions, reduced our hiring and lowered travel expenses. We also implemented a restructuring plan, which included workforce reductions and facility closings. We believe these actions and our ~~own facilities and both inbound and outbound logistical challenges, we have been able~~current financial position will enable us to ~~identify alternative solutions such that none~~handle the near-term impacts of the ~~issues have had a material impact on our ability to fulfill demand.~~

~~Our Community~~

Our team has worked hard to connect people in need during this pandemic with those who can help using digital manufacturing solutions. Together with our committed partners and customers, we have worked to architect solutions specific to user needs through a combination of materials, hardware platforms, software and professional services. This helps to integrate additive manufacturing into traditional production environments and allows companies to reduce dependency on the supply chain, manufacture parts internally or make them on demand. Additionally, the COVID-19 pandemic has created the need for protective measures for both healthcare professionals and patients resulting from bottlenecks and shortages in the worldwide supply of personal protective equipment and other vital medical devices and equipment.

In response. we asked our network of partners, customers and others within the additive manufacturing community to circumvent the supply chain and help produce these parts as quickly as possible, to meet the urgent needs of the healthcare sector as they care for patients and contain the spread of the COVID-19 virus. We received offers from the community for everything from printer materials, usage of facilities for printing, engineers’ time and expertise and even offers to fund efforts. We believe that collaboration like this will be key to saving lives.

We have collaborated with our additive manufacturing community on several projects to combat the effect of the pandemic. We identified face shields as being something additive manufacturing could quickly support. We designed and developed a high efficiency face shield frame. Our printers can output 100 face shields every 24 hours. We offer this the data file free of charge to the additive manufacturing community in order to enable others who have an SLS printer to go from CAD file to production in minutes.

Lonati SpA, a manufacturing company based in Brescia, Italy, deployed our ProX SLS 6100 printer with DuraForm materials to 3D print more than 100 venturi ventilator valves for respiratory machines. These valves were designed, developed, produced and delivered in just three days, evidencing the key capabilities of our technology and the value proposition of fast response time. We now have ventilator projects going on all over the world, including in hospitals, and we are working with the National Health Service in the United Kingdom on venturi valves that can be deployed quickly and close to the point of care.

With the recent trend of moving from ventilators to CPAP masks for treatment of infected patient, we have been involved in the production of CPAP adapter components, turning what would have been a one to two month project into a solution on day one, with unit build time of just over one hour and a finished product the same day.

Finally, as widespread diagnostic testing of COVID-19 begins to ramp, there are known shortages of diagnostic tools such as nasal swabs. Our customers have been looking at repurposing dental and industrial Figure 4 printers to 3D print nasal swabs using dental and industrial grade resinscurrent economic uncertainty as well as medical grade nylon 12. A single Figure 4 printer has demonstrated the ability to produce over 18,000 swabs per week. We have received interest from both hospitals and OEMs and are currently engaged in clinical validations with several teams.

These activities demonstrate our thought leadership in additive manufacturing, our commitment to partnering with our community in combating the pandemic and a balanced approach to how our industry can quickly address supply and demand needs amid COVID-19.position us for future profitable growth.

Looking Forward

Our operations in Americas, EMEA and APAC expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic. While the COVID-19 pandemic has impacted ~~the Company’s~~our reported results for the ~~first~~ quarter and nine months ended September 30, 2020, we are unable to predict the ~~longer term~~longer-term impact that the pandemic may have on our business, results of operations, financial position or cash flows. The extent to which our operations may be impacted by the dynamic nature of the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the financial markets remain unknown. Additional information regarding COVID-19 ~~risks~~risk appears in Part II, Item 1A, “Risk Factors” of ~~this~~the Form ~~10-Q.~~10-Q for the quarters ended March 31, 2020 and June 30, 2020.

Summary of ~~First~~Third Quarter 2020 Financial Results

Total consolidated revenue for the third quarter ~~ended March 31,~~of 2020 decreased ~~by 11.4%, or $17.3 million,~~13.0% compared to ~~$134.7~~the same period last year. The lower demand was across all products and services and due primarily to the COVID-19 pandemic, as many customers were on a significantly reduced level of activity. Total consolidated revenue for the third quarter of 2020 increased 20.6% compared to the second quarter of 2020 as customer activity levels increased. Revenue from Healthcare increased 6.1% to $59.8 million, compared to ~~$152.0~~the same period last year, driven by stronger sales to the dental market. Industrial sales decreased 23.8% to $75.3 million, ~~for~~compared to the ~~quarter ended March 31, 2019. These results reflect a 35.5% decrease~~same period last year; decreases were in ~~printers revenue~~all products and ~~a 12.8% decrease from on demand manufacturing revenue as our customers purchases were impacted by the COVID-19 pandemic. Materials revenue decreased 0.1% to $41.4 million.~~services across all geographies.

Healthcare revenue includes sales of products, materials and services for healthcare-related applications, including simulation, training, planning, anatomical models, surgical guides and instruments and medical and dental devices. For the quarter ended March 31, 2020, healthcare revenue decreased by 7.3%, to $46.3 million, and made up 34.4% of total revenue, compared to $50.0 million, or 32.9% of total revenue, for the quarter ended March 31, 2019.

For the quarter ended March 31, 2020, total software revenue from products and services decreased by 7.7% to $21.2 million, and made up 15.7% of total revenue, compared to $23.0 million, or 15.1% of total revenue, for the quarter ended March 31, 2019.

Gross profit for the quarter ended ~~March 31,~~September 30, 2020 decreased by ~~13.0%~~12.9%, or ~~$8.6~~$8.7 million, to ~~$57.1~~$58.6 million, compared to ~~$65.7~~$67.3 million for the quarter ended ~~March 31,~~September 30, 2019. Gross profit margin for the quarters ended ~~March 31,~~September 30, 2020 and ~~March 31,~~September 30, 2019 was ~~42.4%~~43.4% and ~~43.2%~~43.3%, respectively. The decrease in gross profit was primarily due to lower sales volumes resulting from COVID-19, as many of our customers were on a significantly reduced level of activity.

Operating expenses for the quarter ended ~~March 31,~~September 30, 2020 ~~decreased~~increased by ~~13.4%~~59.4%, or ~~$11.7~~$47.0 million, to ~~$75.4~~$126.2 million, compared to ~~$87.0~~$79.2 million for the quarter ended ~~March 31,~~September 30, 2019. Excluding our goodwill impairment charge, operating expenses for the quarter ended September 30, 2020 decreased by 1.6%, or $1.3 million, to $77.9 million, compared to $79.2 million for the quarter ended September 30, 2019. Selling, general and administrative expenses for the quarter ended ~~March 31,~~September 30, 2020 ~~decreased~~increased by ~~13.8%~~1.4%, or ~~$9.0~~$0.8 million, to ~~$56.1~~$59.1 million, compared to ~~$65.1~~$58.3 million for the quarter ended ~~March 31,~~September 30, 2019. Research and development expenses for the quarter ended ~~March 31,~~September 30, 2020 decreased by ~~12.1%~~9.9%, or ~~$2.7~~$2.1 million, to ~~$19.2~~$18.9 million, compared to ~~$21.9~~$20.9 million for the quarter ended ~~March 31,~~September 30, 2019. ~~Lower~~For the quarter ended September 30, 2020, we recorded a non-cash goodwill impairment charge of $48.3 million. See Note 1 for additional discussion. No similar charge was recorded in the prior year. Excluding the goodwill impairment charge, our lower operating expenses reflect ~~savings~~reduced hiring and lower travel expenses incurred in the current year, resulting from ~~2019 cost optimization activities~~the COVID-19 pandemic, as well as ~~short term~~savings achieved in the current year from cost ~~savings from reduced hiring, travel,~~restructuring activities, including personnel and ~~outside service expenses.~~marketing activities, originating in 2019; partially offset by costs associated with restructuring efforts including employee severance and facility closings and related impairment charges.

Our operating loss for the quarter ended ~~March 31,~~September 30, 2020 was ~~$18.2~~$67.6 million, compared to an operating loss of ~~$21.3~~$11.9 million for the quarter ended ~~March 31,~~September 30, 2019. The higher loss was predominantly due to the non-cash goodwill impairment charge of $48.3 million recorded in the current quarter. See Note 1 for additional discussion.

For the ~~quarters~~nine months ended ~~March 31,~~September 30, 2020, ~~and March 31, 2019,~~ we used ~~$2.3 million and $15.2~~$32.6 million of cash from operations, ~~respectively, as further discussed below.~~primarily driven by the increase in inventories. For the nine months ended September 30, 2019, we generated $10.1 million of cash from operations. In total, our unrestricted cash balance at ~~March 31,~~September 30, 2020 and December 31, 2019, was ~~$112.8~~$75.3 million and $133.7 million, respectively. The lower cash balance ~~was~~ primarily ~~the result~~resulted from $32.6 million for operations, $26.5 million for repayments of ~~the $10.0~~debt, $12.5 million ~~payment~~for payments to ~~acquire the remaining capital~~purchase noncontrolling interests and ~~voting rights of the noncontrolling interest in Brazil, $4.4~~$11.0 million infor capital expenditures, ~~and a $3.2~~offset by net proceeds of $25.0 million ~~negative effect of exchange rates.~~from third quarter common stock issuances under our ATM Program.

Results of Operations

~~Comparison of revenue~~Revenue

~~Due~~Current year revenue has been greatly impacted by COVID-19, most severely toward the end of the first quarter and into the second quarter, as many of our customers were shutdown or on a significantly reduced level of activity. The third quarter has experienced some return in activity, though levels remain lower than that of prior year. Excluding impacts due to the pandemic, due to the relatively high price of certain 3D printers and a corresponding lengthy selling cycle as well as relatively low unit volume of the higher priced printers in any particular period, a shift in the timing and concentration of orders and shipments from one period to another can affect reported revenue in any given period.

In addition to changes in sales volumes, there are two other primary drivers of changes in revenue from one period to another: (1) the combined effect of changes in product mix and average selling prices and (2) the impact of fluctuations in foreign currencies. As used in this Management’s Discussion and Analysis, the price and mix effects relate to changes in revenue that are not able to be specifically related to changes in unit volume.

~~Comparison of revenue by geographic region~~

~~The following table sets forth changes in revenue by geographic region for the quarters ended March 31, 2020 and 2019.~~

~~Table 1~~

(Dollars in thousands) Americas EMEA Asia Pacific Total
Revenue — first quarter 2019 $ 73,703 48.5 % $ 59,644 39.2 % $ 18,633 12.3 % $ 151,980 100.0 %
Change in revenue:
Volume (8,749) (11.9) % 927 1.6 % (5,367) (28.8) % (13,189) (8.7) %
Price/Mix (981) (1.3) % (3,500) (5.9) % 1,484 8.0 % (2,997) (2.0) %
Foreign currency translation (171) (0.2) % (604) (1.0) % (314) (1.7) % (1,089) (0.7) %
Net change (9,901) (13.4) % (3,177) (5.3) % (4,197) (22.5) % (17,275) (11.4) %
Revenue — first quarter 2020 $ 63,802 47.4 % $ 56,467 41.9 % $ 14,436 10.7 % $ 134,705 100.0 %

Consolidated revenue decreased by 11.4%, predominantly driven by lower sales volume in the Americas and Asia Pacific regions driven by plastics printers, on demand manufacturing, healthcare, and exiting the entertainment business in the prior year and unfavorable price/mix in the EMEA region driven by metals/material and healthcare; partially offset by favorable sales volume for metals printers in the Americas region.

~~For the quarters ended March 31, 2020 and 2019, revenue from operations outside the U.S. was 54.0% and 53.0% of total revenue, respectively.~~

~~Comparison of revenue by class~~

We earn revenue from the sale of products ~~materials~~ and services. The products category includes 3D printers and corresponding materials, healthcare simulators and digitizers, software licenses, 3D scanners and haptic devices. The ~~materials category includes a wide range~~majority of materials ~~to be~~ used ~~with~~in our 3D printers ~~the majority of which~~ are ~~proprietary, as well as conventional dental materials.~~proprietary. The services category includes maintenance contracts and services on 3D printers and simulators, software maintenance, on demand solutions and healthcare services.

The following ~~table sets~~tables set forth the change in revenue ~~by class~~ for the quarters and nine months ended ~~March 31,~~September 30, 2020 and 2019.

Table2 1


(Dollars in thousands)	(Dollars in thousands)	Products						Materials						Services								Total						(Dollars in thousands)	Products				Services	Total
Revenue — first quarter 2019		$	50,917	33.5	%	$	41,430	27.3	%	$	59,633	39.2	%	$	151,980	100.0	%
Revenue — third quarter 2019																		Revenue — third quarter 2019	$	94,506	60.9		%	$	60,766	39.1	%		$	155,272	100.0	%
Change in revenue:	Change in revenue:																	Change in revenue:
Volume	Volume	(12,045)		(23.7)	%	2,021		4.9	%	(3,165)		(5.3)	%	(13,189)		(8.7)	%	Volume	(19,342)		(20.5)		%	(3,903)		(6.4)	%		(23,245)		(15.0)	%
Price/Mix	Price/Mix	(1,307)		(2.6)	%	(1,690)		(4.1)	%	—		—	%	(2,997)		(2.0)	%	Price/Mix	540		0.6		%	1		—	%		541		0.3	%
Foreign currency translation	Foreign currency translation	(133)		(0.3)	%	(384)		(0.9)	%	(572)		(1.0)	%	(1,089)		(0.7)	%	Foreign currency translation	1,563		1.7		%	1,016		1.7	%		2,579		1.7	%
Net change	Net change	(13,485)		(26.5)	%	(53)		(0.1)	%	(3,737)		(6.3)	%	(17,275)		(11.4)	%	Net change	(17,239)		(18.2)		%	(2,886)		(4.7)	%		(20,125)		(13.0)	%
Revenue — first quarter 2020		$	37,432	27.8	%	$	41,377	30.7	%	$	55,896	41.5	%	$	134,705	100.0	%
Revenue — third quarter 2020																		Revenue — third quarter 2020	$	77,267	57.2		%	$	57,880	42.8	%		$	135,147	100.0	%

Consolidated revenue decreased ~~11.4%~~13.0%, predominantly due to lower products volume, ~~which was~~ driven by ~~plastics~~decreased sales of printers and ~~software.~~lower on demand volume, partially offset by the favorable impact of foreign currency. The lower demand was due to COVID-19, as many of our customers were on a significantly reduced level of activity. For the quarters ended ~~March 31,~~September 30, 2020 and 2019, revenue from printers contributed ~~$19.3~~$21.7 million and ~~$29.9~~$30.4 million, respectively. Software revenue included in the products category ~~including scanners and haptic devices,~~ contributed ~~$10.8~~$10.2 million and ~~$12.2~~$13.3 million for the quarters ended ~~March 31,~~September 30, 2020 and 2019, respectively. Materials revenue included in the products category contributed $39.0 million and $41.4 million for the quarters ended September 30, 2020 and 2019, respectively.

Revenue from services decreased 4.7%, or $2.9 million, as compared to the third quarter of 2019. The decrease was primarily comprised of a 19.0%, or $4.4 million, decline in our on demand manufacturing services, partially offset by an increase in services on printers and simulators, software maintenance and healthcare services.

For the quarters ended ~~March 31,~~September 30, 2020 and 2019, revenue from operations outside the U.S. was 50.9% and 51.3% of total revenue, respectively.

Table 2


(Dollars in thousands)	Products				Services				Total
Revenue — nine months 2019	$	280,611	60.4	%	$	183,913	39.6	%	$	464,524	100.0	%
Change in revenue:
Volume	(64,437)		(23.0)	%	(19,295)		(10.5)	%	(83,732)		(18.0)	%
Price/Mix	836		0.3	%	1		—	%	837		0.2	%
Foreign currency translation	562		0.2	%	(279)		(0.2)	%	283		0.1	%
Net change	(63,039)		(22.5)	%	(19,573)		(10.6)	%	(82,612)		(17.8)	%
Revenue — nine months 2020	$	217,572	57.0	%	$	164,340	43.0	%	$	381,912	100.0	%

Consolidated revenue decreased 17.8%, predominantly due to lower products volume, driven by decreased sales of printers and corresponding materials and lower on demand volume. The lower demand was due to COVID-19, as many of our customers were shutdown or on a significantly reduced level of activity starting in the latter part of the first quarter. For the nine months ended September 30, 2020 and 2019, revenue from printers contributed $58.1 million and $90.3 million, respectively. Software revenue included in the products category contributed $31.0 million and $39.2 million for the nine months ended September 30, 2020 and 2019, respectively. Materials revenue included in the products category contributed $109.0 million and $124.0 million for the nine months ended September 30, 2020 and 2019, respectively.

Revenue from services decreased 10.6%, or $19.6 million, as compared to the nine months ended 2019. The decrease was primarily comprised of a 21.2%, or $14.8 million, decline in our on demand manufacturing services. The remaining decrease resulted from maintenance contracts and services ~~contributed $19.7 million~~on printers and ~~$22.6 million, respectively. For the quarters ended March 31, 2020~~simulators, software maintenance and ~~2019, software services revenue contributed $10.4 million and $10.8 million, respectively.~~healthcare services.

2326

Gross profit and gross profit margins

The following ~~table sets~~tables set forth gross profit and gross profit margins for the quarters and nine months ended ~~March 31,~~September 30, 2020 and 2019.

Table 3


		Quarter Ended March 31,																							Quarter Ended September 30,
		2020						2019						Change in Gross Profit							Change in Gross Profit Margin						2020				2019			Change in Gross Profit	Change in Gross Profit Margin
(Dollars in thousands)	(Dollars in thousands)	Gross Profit		Gross Profit Margin		Gross Profit		Gross Profit Margin		$		%		Percentage Points	%		(Dollars in thousands)	Gross Profit		Gross Profit Margin			Gross Profit		Gross Profit Margin		$		%		Percentage Points	%
Products	Products	$	1,422	3.8	%	$	7,750	15.2	%	$	(6,328)	(81.7)	%	(11.4)	(75.0)	%	Products	$	28,257	36.6		%	$	36,462	38.6	%	$	(8,205)	(22.5)	%	(2.0)	(5.2)	%
Materials		28,491		68.9	%	28,837		69.6	%	(346)		(1.2)	%	(0.7)	(1.0)	%
Services	Services	27,219		48.7	%	29,118		48.8	%	(1,899)		(6.5)	%	(0.1)	(0.2)	%	Services	30,370		52.5		%	30,819		50.7	%	(449)		(1.5)	%	1.8	3.6	%
Total	Total	$	57,132	42.4	%	$	65,705	43.2	%	$	(8,573)	(13.0)	%	(0.8)	(1.9)	%	Total	$	58,627	43.4		%	$	67,281	43.3	%	$	(8,654)	(12.9)	%	0.1	0.2	%

The decrease in total consolidated gross profit is predominantly due to the ~~decrease in product sales, primarily~~ lower sales ~~of printers.~~

volume as previously discussed. Products gross profit ~~margin~~ decreased primarily due to the under absorption of supply chain overhead, resulting from lower ~~production,~~production.

Table 4


	Nine Months Ended September 30,
	2020				2019				Change in Gross Profit				Change in Gross Profit Margin
(Dollars in thousands)	Gross Profit		Gross Profit Margin		Gross Profit		Gross Profit Margin		$		%		Percentage Points	%
Products	$	67,177	30.9	%	$	113,802	40.6	%	$	(46,625)	(41.0)	%	(9.7)	(23.9)	%
Services	83,749		51.0	%	92,483		50.3	%	(8,734)		(9.4)	%	0.7	1.4	%
Total	$	150,926	39.5	%	$	206,285	44.4	%	$	(55,359)	(26.8)	%	(4.9)	(11.0)	%

The decrease in ~~addition~~total consolidated gross profit is predominantly due to the ~~impact~~lower sales volume as previously discussed, as well as an end-of-life inventory charge of $10.9 million. Excluding the ~~mix of sales. Total~~end-of-life inventory charge, total gross profit margin ~~reflects favorable mix.~~would have been 42.4%. See Note 4 for additional discussion.

Products gross profit decreased primarily due to an end-of-life inventory charge of $10.9 million as well as the under absorption of supply chain overhead, resulting from lower production. Excluding the end-of-life inventory charge, products gross profit margin would have been 35.9%. See Note 4 for additional discussion.

Operating expenses

The following ~~table sets~~tables set forth the components of operating expenses for the quarters and nine months ended ~~March 31,~~September 30, 2020 and 2019.

Table 45


		Quarter Ended March 31,																			Quarter Ended September 30,
		2020						2019								Change					2020				2019		Change
(Dollars in thousands)	(Dollars in thousands)	Amount		% Revenue		Amount		% Revenue		$		%		(Dollars in thousands)	Amount		% Revenue		Amount		% Revenue		$		%
Selling, general and administrative expenses	Selling, general and administrative expenses	$	56,106	41.7	%	$	65,107	42.8	%	$	(9,001)	(13.8)	%	Selling, general and administrative expenses	$	59,065	43.7	%	$	58,275	37.5	%	$	790	1.4	%
Research and development expenses	Research and development expenses	19,244		14.3	%	21,903		14.4	%	(2,659)		(12.1)	%	Research and development expenses	18,866		14.0	%	20,940		13.5	%	(2,074)		(9.9)	%
Impairment of goodwill														Impairment of goodwill	48,300		35.7	%	—		—	%	48,300		100.0	%
Total operating expenses	Total operating expenses	$	75,350	55.9	%	$	87,010	57.2	%	$	(11,660)	(13.4)	%	Total operating expenses	$	126,231	93.4	%	$	79,215	51.0	%	$	47,016	59.4	%

Selling, general and administrative expenses increased slightly due to restructuring efforts, predominantly employee severance and facility closings, and related impairment charges. See Note 15 for additional discussion regarding restructuring charges. See Note 3 for additional discussion regarding facility closings and related impairment charges. These costs were partially offset by

reduced hiring and lower travel expenses incurred in the current year, resulting from the COVID-19 pandemic, as well as savings achieved in the current year from cost restructuring activities, including personnel and marketing activities, originating in 2019.

Research and development expenses decreased due to current year savings achieved from cost restructuring activities, including personnel reductions, originating in 2019, as well as lower overall program spend.

For the quarter ended September 30, 2020, we recorded a non-cash goodwill impairment charge of $48.3 million, related to the EMEA reporting unit, that was ultimately due to the negative impact of the business environment as a result of the COVID-19 pandemic. See Note 1 for additional discussion.

Table 6


	Nine Months Ended September 30,
	2020				2019				Change
(Dollars in thousands)	Amount		% Revenue		Amount		% Revenue		$		%
Selling, general and administrative expenses	$	167,213	43.8	%	$	195,036	42.0	%	$	(27,823)	(14.3)	%
Research and development expenses	55,107		14.4	%	63,654		13.7	%	(8,547)		(13.4)	%
Impairment of goodwill	48,300		12.6	%	—		—	%	48,300		100.0	%
Total operating expenses	$	270,620	70.9	%	$	258,690	55.7	%	$	11,930	4.6	%

Selling, general and administrative expenses decreased due to ~~lower~~an employee ~~costs from 2019 cost structure activities as well as short term cost savings from~~furlough program in the second quarter of 2020; reduced hiring and lower travel expenses incurred in the current year, resulting from the COVID-19 pandemic; savings achieved in the current year from cost restructuring activities, including personnel and ~~outside service expenses.~~marketing activities, originating in 2019; reduced litigation and legal fees incurred in the current year; and the run-out of certain intangible amortization. These savings were partially offset by restructuring efforts, predominantly employee severance and facility closings, and related impairment charges. See Note 15 for additional discussion regarding restructuring charges. See Note 3 for additional discussion regarding facility closings and related impairment charges.

Research and development expenses decreased due to ~~lower~~an employee ~~costs~~furlough program in the secondquarter of 2020, current year savings achieved from ~~2019~~ cost ~~structure~~restructuring activities, including personnel, originating in 2019, as well as lower overall program spend; partially offset by an increase in materials spend.

24For the nine months ended September 30, 2020, we recorded a non-cash goodwill impairment charge of $48.3 million, related to the EMEA reporting unit, that was ultimately due to the negative impact of the business environment as a result of the COVID-19 pandemic. See Note 1 for additional discussion.

Loss from operations

The following table sets forth ~~(loss) income~~loss from operations ~~by geographic region~~ for the quarters and nine months ended ~~March 31,~~September 30, 2020 and 2019.

Table 57

Quarter Ended March 31,
(Dollars in thousands) 2020 2019
(Loss) income from operations:
Americas $ (22,087) $ (26,832)
EMEA 2,228 2,917
Asia Pacific 1,641 2,610
Total $ (18,218) $ (21,305)


	Quarter Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2020		2019		2020		2019




Loss from operations:	$	(67,604)	$	(11,934)	$	(119,694)	$	(52,405)

See “~~Comparison of revenue by geographic region~~Revenue,” “Gross profit and gross profit margins” and “Operating expenses” above.

Interest and other (expense) income, net

The following table sets forth the components of interest and other (expense) income, net, for the quarters and nine months ended ~~March 31,~~September 30, 2020 and 2019.

Table 68


		Quarter Ended March 31,							Quarter Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		(Dollars in thousands)	2020		2019		2020		2019
Interest and other (expense) income, net	Interest and other (expense) income, net					Interest and other (expense) income, net
Foreign exchange (loss) gain	Foreign exchange (loss) gain	$	(112)	$	(1,039)	Foreign exchange (loss) gain	$	(601)	$	(1,095)	$	(1,584)	$	(2,204)
Interest expense, net	Interest expense, net	(1,038)		(576)		Interest expense, net	(611)		(953)		(3,699)		(2,393)
Other (expense) income, net	Other (expense) income, net	(1,414)		414		Other (expense) income, net	(1,207)		(770)		(2,315)		(2,177)
Total interest and other (expense) income, net	Total interest and other (expense) income, net	$	(2,564)	$	(1,201)	Total interest and other (expense) income, net	$	(2,419)	$	(2,818)	$	(7,598)	$	(6,774)

~~The increase in total~~Total interest and other ~~expense,~~(expense) income, net, for the quarter ended ~~March 31,~~September 30, 2020 as compared to the quarter ended ~~March 31,~~September 30, 2019 ~~was primarily driven by losses recorded on investments.~~remained relatively flat.

Total interest and other (expense) income, net, for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 resulted in a higher loss as amounts previously recognized in Accumulated Other Comprehensive Loss ("AOCL") were released in the second quarter of 2020 and reclassified to "Interest and other expense, net," as a result of the reduction in the interest rate swap. See Note 8 for additional discussion. For the nine months ended September 30, 2020 and 2019, losses on equity investments were recorded in both periods to "Other (expense) income, net".

Net loss attributable to 3D Systems

The following ~~table sets~~tables set forth the primary components of net loss attributable to 3D Systems for the quarters and nine months ended ~~March 31,~~September 30, 2020 and 2019.

Table7 9


		Quarter Ended March 31,									Quarter Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		Change		(Dollars in thousands)	2020		2019		Change
Loss from operations	Loss from operations	$	(18,218)	$	(21,305)	$	3,087	Loss from operations	$	(67,604)	$	(11,934)	$	(55,670)
Other non-operating items:	Other non-operating items:							Other non-operating items:
Interest and other (expense) income, net	Interest and other (expense) income, net	(2,564)		(1,201)		(1,363)		Interest and other (expense) income, net	(2,419)		(2,818)		399
Benefit (provision) for income taxes		1,858		(1,844)		3,702
Provision for income taxes								Provision for income taxes	(2,866)		(2,010)		(856)
Net loss	Net loss	(18,924)		(24,350)		5,426		Net loss	(72,889)		(16,762)		(56,127)
Less: net income attributable to noncontrolling interests	Less: net income attributable to noncontrolling interests	—		44		(44)		Less: net income attributable to noncontrolling interests	—		81		(81)
Net loss attributable to 3D Systems Corporation	Net loss attributable to 3D Systems Corporation	$	(18,924)	$	(24,394)	$	5,470	Net loss attributable to 3D Systems Corporation	$	(72,889)	$	(16,843)	$	(56,046)

Weighted average shares, basic and diluted	Weighted average shares, basic and diluted	114,590		113,267				Weighted average shares, basic and diluted	118,527		114,053
Net loss per share - basic and diluted	Net loss per share - basic and diluted	$	(0.17)	$	(0.22)			Net loss per share - basic and diluted	$	(0.61)	$	(0.15)

Table 10


	Nine Months Ended September 30,
(Dollars in thousands)	2020		2019		Change
Loss from operations	$	(119,694)	$	(52,405)	$	(67,289)
Other non-operating items:
Interest and other (expense) income, net	(7,598)		(6,774)		(824)
Provision for income taxes	(2,472)		(5,793)		3,321
Net loss	(129,764)		(64,972)		(64,792)
Less: net income attributable to noncontrolling interests	—		195		(195)
Net loss attributable to 3D Systems Corporation	$	(129,764)	$	(65,167)	$	(64,597)

Weighted average shares, basic and diluted	116,216		113,587
Net loss per share - basic and diluted	$	(1.12)	$	(0.57)

The ~~decrease~~increase in net loss for the quarter and nine months ended ~~March 31,~~September 30, 2020, as compared to the quarter and nine months ended ~~March 31,~~September 30, 2019, was primarily driven by ~~a decrease~~an increase in loss from operations, which was impacted by a goodwill impairment charge of $48.3 million, restructuring charges of $11.9 million, and an end-of-life inventory charge of $10.9 million. See Note 1 for additional discussion regarding the ~~tax benefit associated with certain net operating loss tax carrybacks, partially offset by losses recorded on investments.~~ goodwill impairment charge. See Note 4 for additional discussion regarding the end-of-life inventory charge. See Note 15 for additional discussion regarding the restructuring charges.

See “Gross profit and gross profit margins” and “Operating expenses” above, and Note 12.

Liquidity and Capital Resources

~~Table~~8

Change
(Dollars in thousands) March 31, 2020 December 31, 2019 $ %
Cash and cash equivalents $ 112,776 $ 133,665 $ (20,889) (15.6) %
Accounts receivable, net 108,769 109,408 (639) (0.6) %
Inventories 113,240 111,106 2,134 1.9 %
334,785 354,179 (19,394)
Less:
Current portion of long term debt 2,506 2,506 — — %
Current right of use liabilities 9,416 9,569 (153) (1.6) %
Accounts payable 55,862 49,851 6,011 12.1 %
Accrued and other liabilities 50,803 63,095 (12,292) (19.5) %
118,587 125,021 (6,434)
Operating working capital $ 216,198 $ 229,158 $ (12,960) (5.7) %

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, the number of days our sales are outstanding, inventory turns, capital expenditure commitments, ~~and~~ accounts payable ~~turns.~~turns and funding requirements. Our cash requirements primarily consist of funding working capital and capital expenditures.

26At September 30, 2020, we had cash on hand of $75.3 million and total debt of $21.7 million. We also had a $100 million unused revolving credit facility with approximately $30.6 million of availability, based on the terms of the agreement. Additionally, our ATM Program may be used as a source of additional liquidity, if needed. Cash on hand decreased $58.4 million since December 31, 2019. The uses of cash included $32.6 million for operations, $26.5 million for repayments of debt, $12.5 million for payments to purchase noncontrolling interests and $11.0 million for capital expenditures. The primary use of cash in operations related to our net loss as well was our inability to slow down our inventory levels fast enough earlier in the year, specifically for committed lead times with our contract manufacturers and suppliers due to COVID-19. Cash provided included net proceeds of $25.0 million from third quarter common stock issuances under our ATM Program.

Cash flow from operations, cash and cash equivalents, and other sources of liquidity such as bank credit facilities and issuing equity or debt securities, are expected to be available and sufficient to meet foreseeable cash requirements. We hold a 5-year ~~$100,000~~$100.0 million senior secured term loan facility (the “Term Facility”) and a 5-year ~~$100,000~~$100.0 million senior secured revolving credit facility (the “Revolving Facility” and, together with the Term Facility, the “Senior Credit Facility”) that are intended to support working capital and general corporate purposes. The Senior Credit Facility is scheduled to mature on February 26, 2024, at which time all amounts outstanding thereunder will be due and payable. As of ~~March 31,~~September 30, 2020, we ~~have availability~~had $10.0 million of outstanding letters of credit and $30.6 million of available borrowings under the Revolving ~~Facility of $42.2 million.~~Facility. For additional information on the Senior Credit Facility, see Note 7 for further discussion. We also launched an ATM Program to provide us with additional financial flexibility to complete our reorganization and to work through these uncertain times caused by the pandemic. Our ATM Program allows us from time to time to issue up to a total of $150 million of shares of our common stock to the ~~condensed consolidated financial statements in~~public, at our discretion. We intend to use the net proceeds from this ~~Form 10-Q.~~offering for general corporate purposes, which may include repaying amounts outstanding under the Term Facility and the Revolving Facility. At September 30, 2020, we had approximately $124.5 million of availability remaining under the ATM Program; however, based on projected cash flows, the results of our cost savings initiatives, availability under the Revolving Facility, and potential divestitures (see Note 16), we do not anticipate issuing shares under the ATM Program during the fourth quarter of 2020.

Cash held outside the U.S. at ~~March 31,~~September 30, 2020 was ~~$72.9~~$53.8 million, or ~~64.7%~~71.5% of total cash and equivalents, compared to $75.7 million, or 56.5% of total cash and equivalents at December 31, 2019. As our previously unremitted earnings have been subjected to U.S. federal income tax, we expect any repatriation of these earnings to the U.S. would not incur significant ~~additional taxes related to such amounts.~~federal and state taxes. However, ~~our estimates~~these dividends are ~~provisional and~~ subject to ~~further analysis.~~foreign withholding taxes that are estimated to result in the Company incurring tax costs in excess of the cost to obtain cash through other means. Cash equivalents are comprised of funds held in money market instruments and are reported at their current carrying value, which approximates fair value due to the ~~short term~~short-term nature of these instruments. We strive to minimize our credit risk by investing primarily in investment grade, liquid instruments and limit exposure to any one issuer depending upon credit quality. See “Cash flow” discussion below.

Days’ sales outstanding (DSO) was 73 at March 31, 2020, compared to 67 days for the year at December 31, 2019. Accounts receivable more than 90 days past due decreased to 10.3% of gross receivables at March 31, 2020, from 12.1% at December 31, 2019. We review specific receivables periodically to determine the appropriate reserve for accounts receivable.

The majority of our inventory consists of finished goods, including products, materials and service parts. Inventory also consists of raw materials for certain printers and service products. Inventory balances may fluctuate during cycles of new product launch, commercialization and timing of ramp up of production and sales of products.

The changes that make up the other components of working capital not discussed above resulted from the ordinary course of business. Differences between the amounts of working capital item changes in the cash flow statement and the balance sheet changes for the corresponding items are primarily the result of foreign currency translation adjustments.

Cash flow

Cash flow from operations

Cash used in operating activities for the ~~quarters~~nine months ended ~~March 31,~~September 30, 2020 ~~and March 31,~~was $32.6 million, while cash provided by operating activities for the nine months ended September 30, 2019 was $2.3 million and $15.2 million, respectively. Excluding non-cash charges, the net loss provided cash of $1.0 million for the quarter ended March 31, 2020 and used cash of $4.6 million for the quarter ended March 31, 2019. Non-cash charges generally consist of depreciation, amortization, and stock-based compensation.$10.1 million.

Working capital used cash of ~~$3.3 million and $10.6~~$22.0 million for the ~~quarters~~nine months ended ~~March 31,~~September 30, 2020 and ~~March 31, 2019, respectively.~~provided cash of $13.4 million for the nine months ended September 30, 2019. In the ~~quarter~~nine months ended ~~March 31,~~September 30, 2020, drivers of working capital related to cash outflows were an increase in inventory and prepaid expenses ~~and inventory~~ and a decrease in ~~other accrued liabilities;~~accounts payable, partially offset by a decrease in accounts receivable and an increase in ~~deferred revenue and accounts payable. In the quarter ended March 31, 2019, cash outflows were mainly due to lower accounts payable, lower~~other accrued liabilities and ~~investments~~deferred revenue. In the nine months ended September 30, 2019, drivers of working capital related to cash inflows were a decrease in ~~inventory to support of new product commercialization, partially offset by~~accounts receivable and an increase in deferred revenues related to software and system maintenance ~~contracts.~~contracts, partially offset by a decrease in accounts payable and accrued and other current liabilities.

Cash flow from investing activities

For the ~~quarters~~nine months ended ~~March 31,~~September 30, 2020 and 2019, the primary outflows of cash relate to the purchases of noncontrolling ~~interest~~interests and capital expenditures. Purchases of noncontrolling interests were $10.0 million, related to Robtec, and $2.5 million, related to Easyway, for the nine months ended September 30, 2020 and 2019, respectively. See Note 14 for additional discussion. Capital expenditures were $11.0 million and $18.3 million for the nine months ended September 30, 2020 and 2019, respectively. The lower expenditures in 2020 reflect the reduced spending due to the lower revenue volume because of the pandemic.

Cash flow from financing activities

Cash used in financing activities was $3.8 million for the nine months ended September 30, 2020, while cash provided by financing activities was ~~$1.2 million and $73.7~~$29.8 million for the ~~quarters~~nine months ended ~~March 31,~~September 30, 2019. The primary outflow of cash for the nine months ended September 30, 2020 relates to repayment of the Term Facility and ~~March 31, 2019, respectively.~~settlements of stock-based compensation, partially offset by net proceeds from issuances of common stock under our ATM Program and proceeds from an inventory financing agreement. The primary inflow of cash for the ~~quarter~~nine months ended March 31, 2020 relates to the proceeds from the inventory financing agreements, partially offset by settlements of stock-based compensation and repayment of the Term Facility. The primary inflow of cash for the quarter ended March 31,September 30, 2019 relates to borrowing on the Term Facility, partially offset by repayments of the ~~Prior Credit Facility~~prior credit facility and Term Facility.

Recent Accounting Pronouncements

Refer to Note 1 - Basis of Presentation of the Notes to Financial Statements (Part I, Item 1 of this Form 10-Q) for further discussion.

Critical Accounting Policies and Significant Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

As of the date of this report, there have been no changes to our critical accounting policies and estimates described in the Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on February 26, 2020 that have had a material impact on our condensed consolidated financial statements and related notes, other than the following:

Our EMEA ~~APAC~~ and ~~Americas~~APAC reporting units carry approximately ~~$182.9 million, $35.3~~$142.6 million and $0$37.0 million of goodwill, respectively, as of ~~March 31,~~September 30, 2020. Goodwill in the Americas region was written off in 2015. The net carrying values of our long-lived assets in the EMEA, APAC, and Americas regions are approximately ~~$63.6~~$58.8 million, ~~$6.8~~$6.2 million, and ~~$62.8~~$53.3 million, respectively. In our 2019 impairment testing, we determined the EMEA and APAC reporting units had fair values in excess of their carrying values. Our 2019 impairment testing also indicated no impairment of long-lived assets in the Americas region as the undiscounted cash flows were in excess of the carrying value of long-lived assets. This headroom and recoverability were driven by our forecasts of future operating performance as well as external market indicators.

~~Our operating performance through~~As of March 31, 2020, ~~has~~we experienced a triggering event due to our operating performance, which had been negatively impacted by macroeconomic factors, the decrease and mix of sales, and the effect of the COVID-19 ~~pandemic. The Company is taking actions~~pandemic, and performed a quantitative analysis for potential impairment of our goodwill or long-lived asset balances. We also took action to counter these factors, including reducing our cost structure by focusing on cost of sales and operating expenses to drive future profitability. ~~Refer~~Based on available information and analysis as of March 31, 2020, we continued to ~~discussion~~believe the fair value of our reporting units exceed their carrying values and the ~~COVID-19 Pandemic in this Management’s Discussion and Analysis.~~ carrying value of our long-lived assets were recoverable.

As ~~a results~~ of ~~these matters, the Company~~September 30, 2020, we experienced a triggering event due to a drop in our stock price, which had been negatively impacted by the ~~current quarter~~business environment as a result of the COVID-19 pandemic, and performed a quantitative analysis for potential impairment of ~~its~~our goodwill or long-lived asset balances. Based on ~~currently~~ available information and analysis as of ~~March 31,~~September 30, 2020, we determined the ~~Company continues to believe~~carrying value of the EMEA reporting unit exceeded its fair value and recorded a non-cash goodwill impairment charge of $48.3 million. We determined the fair value of the Americas and APAC reporting units ~~exceeds~~exceeded their carrying values and the carrying value of our long-lived assets is recoverable. In the event that these matters are not satisfactorily resolved, the Company could experience another triggering event or impairment of its goodwill or long-lived asset balances in future periods.recoverable for all reporting units.

Forward-Looking Statements

Certain statements made in this Form 10-Q 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 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 expressed or implied by such forward-looking statements. In many cases, you can identify forward-looking statements by terms such as “believes,” “belief,” “expects,” “estimates,” “intends,” “anticipates,” or “plans” or the negative of these terms or other comparable terminology.

Forward-looking statements are based upon management’s beliefs, assumptions and current expectations concerning future events and trends, using information currently available, and are necessarily subject to uncertainties, many of which are outside our control. Although we believe that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements are not, and should not be relied upon as a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors include without limitation:

•impact of production, supply, contractual and other disruptions, including facility closures and furloughs, due to the spread of the COVID-19 pandemic;

•our ability to deliver products that meet changing technology and customer needs;

•our ability to successfully execute the strategic reorganization without significant disruption to our business;

•our ability to achieve the savings targeted in our recently announced restructuring program;

•our decisions regarding additional equity sales under the ATM Program;

•our ability to successfully raise additional funds from the ATM Program, if any, and the possible impact on our stock price;

•our ability to identify strategic acquisitions, to integrate such acquisitions into our business without disruption and to realize the anticipated benefits of such acquisitions;

•impact of future write-off or write-downs of goodwill and intangible assets;

•our ability to acquire and enforce intellectual property rights and defend such rights against third party claims;

•our ability to protect our intellectual property rights and confidential information, including our digital content, from third-party infringers or unauthorized copying, use or disclosure;

•failure of our information technology infrastructure or inability to protect against cyber-attack;

•our ability to generate net cash flow from operations;

•our ability to ~~obtain additional financing on acceptable terms;~~

•~~our ability to~~ comply with the covenants in our borrowing ~~agreements;~~agreements and maintain adequate borrowing capacity;

•impact of natural disasters, public health issues (including the COVID-19 pandemic), and other catastrophic events;

•impact of global economic, political and social conditions and financial markets on our business;

•fluctuations in our gross profit margins, operating income or loss and/or net income or loss;

•our ability to efficiently conduct business outside the U.S.;

•our dependence 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;

•our ability to manage the costs and effects of litigation, investigations or similar matters involving us or our subsidiaries;

•product quality problems that result in decreased sales and operating margin, product returns, product liability, warranty or other claims;

•our ability to retain our key employees and to attract and retain new qualified employees, while controlling our labor costs;

•our exposure to product liability claims and other claims and legal proceedings;

•disruption in our management information systems for inventory management, distribution, and other key functions;

•compliance with U.S. and other anti-corruption laws, data privacy laws, trade controls, economic sanctions, and similar laws and regulations;

•our ability to comply with the terms of the Administrative Agreement with the U.S. Air Force and to maintain our status as a responsible contractor under federal rules and regulations;

•changes in, or interpretation of, tax rules and regulations; ~~and~~

•compliance with, and related expenses and challenges concerning, conflict-free minerals regulations;

•our ability to complete the proposed sale of the Cimatron and GibbsCAM businesses in a timely manner (or at all); and

•the other factors discussed in the reports we file with or furnishes to the SEC from time to time, including the risks and important factors set forth in additional detail in Item 1A. “Risk Factors” in the 2019 Form 10-K and in Part II, Item 1A of the quarterly report on Form ~~10-Q.~~10-Q for the quarters ended March 31, 2020 and June 30, 2020.

Readers are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included herein are made only as of the date of this Form 10-Q and we undertake no obligation to publicly update or review any forward-looking statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or circumstances or otherwise. All subsequent written or oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by the cautionary statements referenced above.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

For a discussion of market risks at December 31, 2019, refer to Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in the 2019 ~~Form10-K.~~Form 10-K. During the first ~~three~~nine months of 2020, there were no material changes or developments that would materially alter the market risk assessment performed as of December 31, 2019.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

As of ~~March 31,~~September 30, 2020, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) pursuant to Rules 13a-15 and 15d-15 under the Exchange Act. These controls and procedures were designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner to allow timely decisions regarding required disclosures. Based on this evaluation, management has concluded that our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2020.

Changes in Internal Controls over Financial Reporting

There were no material changes in our internal controls over financial reporting during the period covered by this Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

The information set forth in ~~“Litigation” and~~“Litigation,” “Export Compliance Matter” and "Other" in Note 1413 – Commitments and Contingencies to the Financial Statements in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors.

There are no material changes to the risk factors previously disclosed in our 2019 Form 10-K in response to Item 1A to Part I of Form 10-K ~~other than below.~~and in Part II, Item 1A, “Risk Factors” of our Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020. However, the impact of the COVID-19 pandemic may exacerbate the risks ~~discussed below and~~ in Item 1A, “Risk Factors” in our 2019 Form 10-K and in Part II, Item 1A, “Risk Factors” of our Form 10-Q for the quarters ended March 31, 2020, and June 30, 2020, any of which could have a material effect on us. This situation is changing rapidly and additional impacts may arise that we are not aware of currently. See also Part I Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding our response to the COVID-19 pandemic and Part I, Item 3, Quantitative and Qualitative Disclosures About Market Risk.

~~The COVID-19 pandemic could materially adversely affect our financial condition and results of operations.~~

The novel strain of the coronavirus identified in China in late 2019 (COVID-19) has globally spread throughout other areas such as Asia, Europe, the Middle East, and North America and has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners. Each of the countries in which we operate has been affected by the outbreak and taken measures to try to contain it. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.

There is considerable uncertainty regarding the business impacts from such measures and potential future measures. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, these measures have resulted in reduced workforce availability at some of our sites. Restrictions on our access to customer facilities may impact our ability to meet customer demand and could have a material adverse effect on our financial condition and results of operations, particularly if prolonged. Our customers have experienced, and may continue to experience, disruptions in their operations, which can result in delayed, reduced, or canceled orders, or collection risks, and which may adversely affect our results of operations.

The pandemic has significantly increased economic and demand uncertainty. It is likely that the current outbreak and continued spread of COVID-19 will cause an economic slowdown, and it is possible that it could cause a global recession. There is a significant degree of uncertainty and lack of visibility as to the extent and duration of any such slowdown or recession. Risks related to a slowdown or recession are described in our risk factor titled “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,” below, and include the risk that demand for our products and services will be significantly harmed. Given the significant economic uncertainty and volatility created by the pandemic, it is difficult to predict the nature and extent of impacts on demand for our products and services. These expectations are subject to change without warning and investors are cautioned not to place undue reliance on them.

The pandemic has led to increased disruption and volatility in capital markets and credit markets. We implemented salary decreases for executives, 2-week furloughs for non-essential employees, and suspension of all non-essential capital expenditures measures to strengthen our liquidity position given the uncertainty regarding the length and severity of the pandemic and ongoing economic uncertainty. Unanticipated consequences of the pandemic and resulting economic uncertainty could result in a breach of the debt financial covenant, thus adversely affecting our liquidity and capital resources in the future, as well as incurring additional costs if an amendment to the credit agreement is required.

The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations, cancellation of physical participation in meetings, events and conferences, and social distancing measures), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, vendors, and suppliers. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our product development and testing, customer support, and other activities, which could have an adverse effect on our operations. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions.

We depend on outsourcing partners for assembly of our 3D printers and our supply chain for spare parts and for raw materials used in our materials. The ongoing COVID-19 pandemic has caused supply and logistical disruptions for both our outsourcing partners and supply chain partners. If these relationships were to terminate or these disruptions worsen, our business could be disrupted while we locate alternative suppliers and our expenses may increase.

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

•~~The risk that the parties that we retain to perform assembly activities may not perform in a satisfactory manner;~~

•The risk of disruption in the supply of printers or other products to our customers if such third parties either fail to perform in a satisfactory manner or are unable to supply us with the quantity of printers or other products that are needed to meet then current customer demand;

•~~The risk of work delays or supply chain disruptions stemming from governmental efforts to contain the COVID-19; and~~

•~~The risk of insolvency of suppliers, as well as the risks that we face, as discussed below, in dealing with a limited number of suppliers.~~

We purchase components and sub-assemblies for our printers from third-party suppliers that we provide to our customers as spare parts. Additionally, we purchase raw materials that are used in our materials, as well as certain of those materials, from third-party suppliers.

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

•~~Potential shortages of some key components;~~

•~~Disruptions in the operations of these suppliers;~~

•~~Product performance shortfalls; and~~

•~~Reduced control over delivery schedules, assembly capabilities, quality and costs.~~

The recent situation brought on by COVID-19 pandemic has created minor delays on the inbound supply chain at our partners and our own facilities. Additional delays on both inbound and outbound logistics have also created challenges. We have been able to identify alternative solutions such that none of the issues have had a material impact on our ability to fulfill demand.

While we believe that, if necessary, we can obtain all the components necessary for our spare parts and materials from other manufacturers, we require any new supplier to become “qualified” pursuant to our internal procedures, which could involve evaluation processes of varying durations. Our spare parts and raw materials used in our materials production are subject to various lead times. In addition, at any time, certain suppliers may decide to discontinue production of a part 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. There is considerable uncertainty on the business impact from current measures and potential future measures to contain the spread of the COVID-19 pandemic on our vendors, suppliers, and partners, especially if such measures are in effect for an extended period of time. If disruptions to global businesses from the pandemic continue or worsen, our business could face greater supply chain delays and difficulty shipping or receiving products and materials, which could have a material adverse effect on our financial condition and results of operations.

~~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, difficulties in the financial services sector and credit markets, geopolitical uncertainties, tariffs and other macroeconomic factors affecting spending behavior. Adverse changes in global or regional economic conditions, including recession or slowing growth, lower capital expenditures by businesses, increases in unemployment, and lower consumer confidence and spending, periodically occur.

The COVID-19 pandemic has significantly increased economic and demand uncertainty. It is likely that the current outbreak and continued spread of COVID-19 will cause an economic slowdown, and it is possible that it could cause a global recession. Adverse changes in economic conditions, including as a result of the pandemic, can significantly harm demand for our products and services and make it more challenging to forecast our operating results and make business decisions, including regarding prioritization of investments in our business. An economic downturn or increased uncertainty may also lead to increased credit and collectability risks, reduced liquidity, and asset impairments.

~~We also face risks that may arise from financial difficulties experienced by our suppliers, resellers or customers, including, among others, the following:~~

•Customers or partners to whom we sell our products and services may face financial difficulties or may become insolvent, which could lead to our inability to obtain payment of accounts receivable that those customers may owe;

•~~Customers and potential customers may experience deterioration of their businesses, which may result in the delay or cancellation of plans to purchase our products;~~

•Key suppliers of raw materials, finished products or components used in the products that we sell may face financial difficulties or may become insolvent, which could lead to disruption in the supply of printers, materials or spare parts to our customers; and

•~~The inability of customers, including resellers, suppliers and contract manufacturers, to obtain credit financing to finance purchases of our products and raw materials used to build those products.~~

~~Changes in business conditions may cause goodwill and other intangible assets to become impaired.~~

Goodwill and other intangible assets are subject to an impairment test on an annual basis and when circumstances indicate that an impairment is more likely than not. Such circumstances include a significant adverse change in the business climate or a decision to dispose of a business or product line. We face some uncertainty in our business environment due to a variety of challenges, including changes in customer demand. We may experience unforeseen circumstances that adversely affect the value of our goodwill or intangible assets and trigger an evaluation of the amount of the recorded goodwill and intangible assets. Future write-offs of goodwill or other intangible assets as a result of an impairment in the business could materially adversely affect our results of operations and financial condition.

Our EMEA, APAC and Americas reporting units carry approximately $182.9 million, $35.3 million and $0 of goodwill, respectively, as of March 31, 2020. Goodwill in the Americas region was written off in 2015. The net carrying values of our long-lived assets in the EMEA, APAC, and Americas regions are approximately $63.6 million, $6.8 million, and $62.8 million, respectively. In our 2019 impairment testing, we determined that no impairment of goodwill or long-lived assets was required. These conclusions were driven by our forecasts of future operating performance as well as external market indicators.

Our operating performance through March 31, 2020 has been negatively impacted by macroeconomic factors, the decrease and mix of sales and the effect of the COVID-19 pandemic. As a result of these matters, the Company experienced a triggering event in the current quarter and performed a quantitative analysis for potential impairment of its goodwill or long-lived asset balances. Based on currently available information and analysis as of March 31, 2020, the Company continues to believe the fair value of the reporting units exceeds their carrying values and the carrying value of our long-lived assets is recoverable.The Company is taking actions to counter these factors, including reducing our cost structure by focusing on cost of sales and operating expenses to drive future profitability. In the event that these matters are not satisfactorily resolved, we could experience another triggering event or impairment of goodwill or long-lived asset balances in future periods.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Issuances of Unregistered Securities

None.

Issuer Purchases of Equity Securities

The following table provides information about purchases of equity securities that are registered pursuant to Section 12 of the Exchange Act for the quarter ended ~~March 31,~~September 30, 2020:

Total number of shares (or units) purchased Average price paid per share (or unit)
Shares delivered or withheld pursuant to restricted stock awards
January 1, 2020 - January 31, 2020 1,880 $ 9.41
February 1, 2020 - February 29, 2020 49,592 $ 12.07
March 1, 2020 - March 31, 2020 29,048 $ 8.92
80,520 (a) $ 10.87 (b)


	Total number of shares (or units) purchased		Average price paid per share (or unit)
Shares delivered or withheld pursuant to restricted stock awards
July 1, 2020 - July 31, 2020	1,359		$	7.08
August 1, 2020 - August 31, 2020	189,717		$	5.81
September 1, 2020 - September 30, 2020	18,305		$	5.29
	209,381	(a)	$	5.77	(b)

(a)Reflects shares of common stock surrendered to the Company for payment of tax withholding obligations in connection with the vesting of restricted stock.

(b)The average price paid reflects the average market value of shares withheld for tax purposes.

3334

Item 6. Exhibits.


2.1			Share Purchase Agreement, dated as of November 2, 2020, by and among 3D Systems, Inc., 3D Systems Corporation and ST Acquisition Co. (incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on November 4, 2020.)

3.1			Certificate of Incorporation of Registrant. (Incorporated by reference to Exhibit 3.1 to Form 8-B filed on August 16, 1993, and the amendment thereto, filed on Form 8-B/A on February 4, 1994.)

3.2			Amendment to Certificate of Incorporation filed on May 23, 1995. (Incorporated by reference to Exhibit 3.2 to Registrant’s Registration Statement on Form S-2/A, filed on May 25, 1995.)

3.3			Certificate of Amendment of Certificate of Incorporation filed with Secretary of State of Delaware on May 19, 2004. (Incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, filed on August 5, 2004.)

3.4			Certificate of Amendment of Certificate of Incorporation filed with Secretary of State of Delaware on May 17, 2005. (Incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005, filed on August 1, 2005.)

3.5			Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of Delaware on October 7, 2011. (Incorporated by reference to Exhibit 3.1 to Form 8-K filed on October 7, 2011.)

3.6			Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of Delaware on May 21, 2013. (Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K, filed on May 22, 2013.)

3.7			Amended and Restated By-Laws of 3D Systems Corporation. (Incorporated by reference to Exhibit 3.1 of Registrant’s Current Report on Form 8-K filed on March 15, 2018.)

4.1*†			Amended and Restated 2015 Incentive Plan of 3D Systems Corporation, effective September 3, 2020.

10.1			Amendment No. 2, dated October 9, 2020, to the Credit Agreement, dated February 27, 2019 (as amended by Amendment No. 1, dated as of September 30, 2019), by and among 3D Systems Corporation, HSBC Bank USA, National Association, as Administrative Agent, Swing Loan Lender and Issuing Lender, the guarantors party thereto, and the other lenders party thereto.. (Incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed on October 14, 2020.)

10.2 *			Employment Agreement, dated August 21, 2020, by and between 3D Systems Corporation and Jagtar Narula. (Incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed on August 26, 2020.)

10.3*†			Employment Agreement, dated November 21, 2016, by and between 3D Systems Corporation and Menno Ellis.

10.4*†			Employment Agreement, dated October 1, 2020, by and between 3D Systems Corporation and Reji Puthenveetil.

10.5*†			Consulting Agreement, dated October 1, 2020, by and between 3D Systems Corporation and Reji Puthenveetil.

10.6*			Amendment to the Second Letter of Secondment, dated August 13, 2020, by and between 3D Systems Corporation and Herbert Koeck. (Incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed on August 17, 2020.)

10.7			Equity Distribution Agreement, dated August 5, 2020, by and among 3D Systems Corporation and Truist Securities, Inc. and HSBC Securities (USA) Inc. (Incorporated by reference to Exhibit 1.1 of Registrant’s Current Report on Form 8-K filed on August 5, 2020.)

31.1†			Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated ~~May 6,~~November 5, 2020.

31.2†			Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated ~~May 6,~~November 5, 2020.

~~32.~~32.1 1†			Certification of Principal Executive Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated ~~May 6,~~November 5, 2020.


32.2†			Certification of Principal Financial Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated ~~May 6,~~November 5, 2020.

~~101.INS~~101.INS†			XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.

~~101.SCH~~101.SCH†			XBRL Taxonomy Extension Schema Document.

~~101.CAL~~101.CAL†			XBRL Taxonomy Extension Calculation Linkbase Document.

~~101.DEF~~101.DEF†			XBRL Taxonomy Extension Definition Linkbase Document.

~~101.LAB~~101.LAB†			XBRL Taxonomy Extension Label Linkbase Document.

~~101.PRE~~101.PRE†			XBRL Taxonomy Extension Presentation Linkbase Document.

104			Cover Page Interactive Data File - this data file does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.

* Management contract or compensatory plan or arrangement

† Exhibits filed herein. All exhibits not so designated are incorporated by reference to a prior filing, as indicated.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			3D Systems Corporation

			By			/s/ ~~Todd A. Booth~~Jagtar Narula
						~~Todd A. Booth~~Jagtar Narula
						~~ExecutiveVice President and~~ Chief Financial Officer
						(principal financial~~and accounting~~ officer)

Date: ~~May 6,~~November 5, 2020

3537


	Quarter ended March 31, 2020
	Intercompany Sales to
(in thousands)	Americas		EMEA		Asia Pacific		Total
Americas	$	254	$	9,980	$	3,521	$	13,755
EMEA	13,575		14,444		862		28,881
Asia Pacific	1,558		579		446		2,583
Total intercompany sales	$	15,387	$	25,003	$	4,829	$	45,219