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, 2020

OR

☐ 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, outstanding as of May 1, 2020: 118,878,168

1

3D SYSTEMS CORPORATION

Form 10-Q

For the Quarter Ended March 31, 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.	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	29
Item 4. Controls and Procedures.	29
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.	30
Item 1A. Risk Factors.	30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	33
Item 6. Exhibits.	34

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)	March 31, 2020 (unaudited)		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	112,776	$	133,665
Accounts receivable, net of reserves — $9,013 (2020) and $8,762 (2019)	108,769		109,408
Inventories	113,240		111,106
Prepaid expenses and other current assets	32,688		18,991
Total current assets	367,473		373,170
Property and equipment, net	89,373		92,940
Intangible assets, net	43,788		48,338
Goodwill	218,207		223,176
Right of use assets	34,991		36,890
Deferred income tax asset	5,040		5,408
Other assets, net	24,840		27,390
Total assets	$	783,712	$	807,312
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long term debt	$	2,506	$	2,506
Current right of use liabilities	9,416		9,569
Accounts payable	55,862		49,851
Accrued and other liabilities	50,803		63,095
Customer deposits	5,060		5,712
Deferred revenue	42,659		32,231
Total current liabilities	166,306		162,964
Long-term debt, net of deferred financing costs	44,619		45,215
Long-term right of use liabilities	33,880		35,402
Deferred income tax liability	3,553		4,027
Other liabilities	46,685		45,808
Total liabilities	295,043		293,416
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock,$0.001 par value, authorized 220,000 shares; issued 121,661 (2020) and 121,266 (2019)	121		120
Additional paid-in capital	1,370,174		1,371,564
Treasury stock, at cost — 3,838 shares (2020) and 3,670 shares (2019)	(19,718)		(18,769)
Accumulated deficit	(812,633)		(793,709)
Accumulated other comprehensive loss	(49,275)		(37,047)
Total 3D Systems Corporation stockholders' equity	488,669		522,159
Noncontrolling interests	—		(8,263)
Total stockholders’ equity	488,669		513,896
Total liabilities, redeemable noncontrolling interests and stockholders’ equity	$	783,712	$	807,312

See accompanying notes to condensed consolidated financial statements.

3

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Quarter Ended March 31,
(in thousands, except per share amounts)	2020		2019
Revenue:
Products	$	78,809	$	92,347
Services	55,896		59,633
Total revenue	134,705		151,980
Cost of sales:
Products	48,896		55,760
Services	28,677		30,515
Total cost of sales	77,573		86,275
Gross profit	57,132		65,705
Operating expenses:
Selling, general and administrative	56,106		65,107
Research and development	19,244		21,903
Total operating expenses	75,350		87,010
Loss from operations	(18,218)		(21,305)
Interest and other (expense) income, net	(2,564)		(1,201)
Loss before income taxes	(20,782)		(22,506)
Benefit (provision) for income taxes	1,858		(1,844)
Net loss	(18,924)		(24,350)
Less: net income attributable to noncontrolling interests	—		44
Net loss attributable to 3D Systems Corporation	$	(18,924)	$	(24,394)
Net loss per share available to 3D Systems Corporation common stockholders - basic and diluted	$	(0.17)	$	(0.22)

See accompanying notes to condensed consolidated financial statements.

4

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Quarter Ended March 31,
(in thousands, except per share amounts)	2020		2019
Net loss	$	(18,924)	$	(24,350)
Other comprehensive income (loss), net of taxes:
Pension adjustments	164		92
Derivative financial instruments	(1,659)		—
Foreign currency translation	(10,172)		(752)
Total other comprehensive income (loss), net of taxes:	(11,667)		(660)
Total comprehensive loss, net of taxes	(30,591)		(25,010)
Comprehensive income attributable to noncontrolling interests	—		24
Comprehensive loss attributable to 3D Systems Corporation	$	(30,591)	$	(25,034)

See accompanying notes to condensed consolidated financial statements.

5

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Quarter Ended March 31,
(in thousands)	2020		2019
Cash flows from operating activities:
Net loss	$	(18,924)	$	(24,350)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	11,690		13,144
Stock-based compensation	6,312		6,706
Provision for bad debts	817		219
Loss on the disposition of property, equipment and other assets	137		—
Provision for deferred income taxes	(106)		(498)
Impairment of assets	1,100		180
Changes in operating accounts:
Accounts receivable	1,568		(2,928)
Inventories	(2,694)		(5,192)
Prepaid expenses and other current assets	(14,298)		354
Accounts payable	6,616		(11,987)
Deferred revenue and customer deposits	10,242		11,811
Accrued and other current liabilities	(8,068)		(5,531)
All other operating activities	3,323		2,914
Net cash used in operating activities	(2,285)		(15,158)
Cash flows from investing activities:
Purchases of property and equipment	(4,366)		(8,837)
Proceeds from sale of assets	552		—
Purchase of noncontrolling interest	(12,500)		(2,500)
Other investing activities	(284)		(37)
Net cash used in investing activities	(16,598)		(11,374)
Cash flows from financing activities:
Proceeds from borrowings	—		100,000
Repayment of borrowings/long term debt	(627)		(25,000)
Proceeds from inventory financing agreements	2,509		—
Payments related to net-share settlement of stock based compensation	(949)		(483)
Other financing activities	296		(780)
Net cash provided by financing activities	1,229		73,737
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(3,241)		57
Net (decrease) increase in cash, cash equivalents and restricted cash	(20,895)		47,262
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)	$	113,722	$	158,181

Supplemental cash flow information
Cash interest payments	$	1,069	$	642
Cash income tax payments, net	$	1,832	$	4,862
Transfer of equipment from inventory to property and equipment, net (b)	$	350	$	154

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

(a)The amounts for cash and cash equivalents shown above include restricted cash of $946 and $921 as of March 31, 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.

6

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

	Quarters Ended
	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	1		—		(949)		—		—		(948)		—		(948)
Acquisition of non-controlling interest	—		(7,702)		—		—		(561)		(8,263)		8,263		—
Stock-based compensation expense	—		6,312		—		—		—		6,312		—		6,312
Net income (loss)	—		—		—		(18,924)		—		(18,924)				(18,924)
Pension adjustment	—		—		—		—		164		164		—		164
Derivative financial instrument loss	—		—		—		—		(1,659)		(1,659)		—		(1,659)
Foreign currency translation adjustment	—		—		—		—		(10,172)		(10,172)				(10,172)
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

See accompanying notes to condensed consolidated financial statements.

7

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.

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 ended March 31, 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 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 reported results for the first quarter, we are unable to predict the 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 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. 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.

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 issued ASU 2016-13, “Measurement of Credit Losses on Financial 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 implementation did not have a material effect on our financial position or results of operations.

8

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill 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 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 implementation did not have a material effect on our financial position or results of operations.

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 early adopting 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 from Contracts with 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, 2020, we had $98,551 of outstanding performance obligations. We expect to recognize approximately 91 percent of our remaining performance obligations as revenue within the next twelve months, an additional 5 percent by the end of 2021 and the balance thereafter.

See Note 13 for additional information related to revenue by reportable segment and major lines of business.

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, 2020.

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

(3) Leases

We have various lease agreements for our facilities, equipment and vehicles with remaining lease terms ranging from one to seventeen 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 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.

9

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:

(in thousands)	Quarter ended March 31, 2020		Quarter Ended March 31, 2019
Operating lease cost	$	2,895	$	3,789
Finance lease cost - amortization expense	204		206
Finance lease cost - interest expense	161		115
Short-term lease cost	27		24
Variable lease cost	914		—
Sublease income	(152)		—
Total	$	4,049	$	4,134

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

	2020						2019
(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	$	27,085	$	8,544	$	23,768	$	28,571	$	9,231	$	24,835
Finance Leases	7,906		872		10,112		8,319		338		10,567
Total	$	34,991	$	9,416	$	33,880	$	36,890	$	9,569	$	35,402

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

	March 31, 2020
(in thousands)	Operating Leases		Finance Leases
Years ending March 31:
2021	$	8,086	$	1,153
2022	7,988		1,443
2023	6,699		1,446
2024	5,343		1,440
2025	3,781		1,392
Thereafter	6,633		8,017
Total lease payments	38,530		14,891
Less: imputed interest	(6,218)		(3,907)
Present value of lease liabilities	$	32,312	$	10,984

10

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

(in thousands)	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	3,157	$	3,857
Operating cash outflow from finance leases	$	139	$	115
Financing cash (inflow) outflow from finance leases	$	(296)	$	167

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

	March 31, 2020
	Operating		Financing
Weighted-average remaining lease term	5.1 years		10.2 years
Weighted-average discount rate	6.49	%	6.01	%

(4) Inventories

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

(in thousands)	March 31, 2020		December 31, 2019
Raw materials	$	35,736	$	42,066
Work in process	12,502		5,496
Finished goods and parts	65,002		63,544
Inventories	$	113,240	$	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 and $12,812 as of March 31, 2020 and December 31, 2019, respectively.

(5) Intangible Assets

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

	2020						2019
(in thousands)	Gross (a)		Accumulated Amortization		Net		Gross (a)		Accumulated Amortization		Net		Weighted Average Useful Life Remaining (in years)
Intangible assets with finite lives:
Customer relationships	$	102,920	$	(78,996)	$	23,924	$	103,661	$	(77,021)	$	26,640	4
Acquired technology	53,665		(51,554)		2,111		54,378		(51,875)		2,503		1
Trade names	23,397		(19,086)		4,311		23,907		(19,133)		4,774		4
Patent costs	11,974		(9,607)		2,367		11,760		(9,535)		2,225		15
Trade secrets	19,530		(16,257)		3,273		19,494		(15,714)		3,780		2
Acquired patents	16,207		(14,954)		1,253		16,215		(14,706)		1,509		7
Other	25,664		(19,115)		6,549		26,256		(19,349)		6,907		1
Total intangible assets	$	253,357	$	(209,569)	$	43,788	$	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 and $5,520 for the quarters ended March 31, 2020 and March 31, 2019, respectively.

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(6) Accrued and Other Liabilities

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

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

Other liabilities at March 31, 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

(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, 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, 2020, our floating interest rate was 3.0%. Subject to certain terms and conditions contained in the Revolving Facility, we have the right to request up to four increases to the amount of the Revolving Facility in an aggregate amount not to exceed $100,000.

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

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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 a notional value of $40,000 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%. We designated the swap as a cash flow hedge for accounting treatment purposes. See Note 8 for additional information.

(8) Hedging Activities and Financial Instruments

Derivatives Designated as Hedging Instruments

On July 8, 2019, we entered into an 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.

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

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

Amounts released from Accumulated Other Comprehensive Loss (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. 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.

Derivatives Not Designated as Hedging Instruments

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.

We had $100,403 and $102,407 in notional foreign exchange contracts outstanding as of March 31, 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.

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(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, 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, 2020, we recorded a liability, obligation to repurchases inventory, included in "Accrued and other liabilities" on our condensed consolidated balance sheets for $2,271 related to the initial sale of inventory to the assembly manufacturer. The inventory sold consists 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, 2020, inventory held at assemblers was $8,471.

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, 2020, we had a commitment of $2,300 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,
(in thousands, except per share amounts)	2020		2019
Numerator for basic and diluted net loss per share:
Net loss attributable to 3D Systems Corporation	$	(18,924)	$	(24,394)
Denominator for basic and diluted net loss per share:
Weighted average shares	114,590		113,267
Net loss per share - basic and diluted	$	(0.17)	$	(0.22)

For the quarters ended March 31, 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 ended March 31, 2020 and March 31, 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.

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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
(in thousands)	Level 1		Level 2		Level 3		Total
Description
Cash equivalents (a)	$	23,532	$	—	$	—	$	23,532
Israeli severance funds (b)	$	—	$	7,192	$	—	$	7,192
Derivative financial instruments(c)	$	—	$	(1,976)	$	—	$	(1,976)