UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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. 001-35806

 

The ExOne Company

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

46-1684608

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

127 Industry Boulevard

North Huntingdon, Pennsylvania 15642

(Address of principal executive offices) (Zip Code)

(724) 863-9663

(Registrant’s telephone number, including area code)

 

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

Title of class

Trading symbol

Name of exchange on which registered

Common stock

XONE

The Nasdaq Stock Market

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, a 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.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

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 Exchange Act. 

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

As of May 7, 2020, 16,455,000 shares of common stock, par value $0.01, were outstanding.

 

 

 

 


PART I – FINANCIAL INFORMATION

Item 1.     Financial Statements.

The ExOne Company and Subsidiaries

Condensed Statement of Consolidated Operations and Comprehensive Loss (Unaudited)

(in thousands, except per-share amounts)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Revenue

 

$

13,383

 

 

$

9,579

 

Cost of sales

 

 

9,754

 

 

 

6,937

 

Gross profit

 

 

3,629

 

 

 

2,642

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

2,476

 

 

 

2,432

 

Selling, general and administrative

 

 

6,163

 

 

 

5,423

 

Gain from sale-leaseback of property and equipment

 

 

(1,462

)

 

 

 

 

 

 

7,177

 

 

 

7,855

 

Loss from operations

 

 

(3,548

)

 

 

(5,213

)

Other (income) expense

 

 

 

 

 

 

 

 

Interest expense

 

 

64

 

 

 

71

 

Other (income) expense  ̶  net

 

 

(190

)

 

 

12

 

 

 

 

(126

)

 

 

83

 

Loss before income taxes

 

 

(3,422

)

 

 

(5,296

)

Provision (benefit) for income taxes

 

 

226

 

 

 

(800

)

Net loss

 

$

(3,648

)

 

$

(4,496

)

Net loss per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.22

)

 

$

(0.28

)

Diluted

 

$

(0.22

)

 

$

(0.28

)

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(3,648

)

 

$

(4,496

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(838

)

 

 

(776

)

Comprehensive loss

 

$

(4,486

)

 

$

(5,272

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


The ExOne Company and Subsidiaries

Condensed Consolidated Balance Sheet (Unaudited)

(in thousands, except per-share and share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,813

 

 

$

5,265

 

Restricted cash

 

 

508

 

 

 

978

 

Accounts receivable  ̶  net

 

 

4,954

 

 

 

6,522

 

Current portion of net investment in sales-type leases

 

 

289

 

 

 

213

 

Inventories  ̶  net

 

 

21,653

 

 

 

19,770

 

Prepaid expenses and other current assets

 

 

2,787

 

 

 

2,182

 

Total current assets

 

 

47,004

 

 

 

34,930

 

Property and equipment  ̶  net

 

 

20,720

 

 

 

38,895

 

Operating lease right-of-use assets

 

 

4,789

 

 

 

432

 

Net investment in sales-type leases  ̶  net of current portion

 

 

712

 

 

 

738

 

Other noncurrent assets

 

 

244

 

 

 

371

 

Total assets

 

$

73,469

 

 

$

75,366

 

Liabilities

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

155

 

 

$

153

 

Accounts payable

 

 

4,385

 

 

 

5,818

 

Accrued expenses and other current liabilities

 

 

4,590

 

 

 

6,942

 

Current portion of operating lease liabilities

 

 

1,684

 

 

 

158

 

Current portion of contract liabilities

 

 

13,646

 

 

 

11,846

 

Total current liabilities

 

 

24,460

 

 

 

24,917

 

Long-term debt  ̶  net of current portion

 

 

1,171

 

 

 

1,211

 

Operating lease liabilities  ̶  net of current portion

 

 

3,105

 

 

 

274

 

Contract liabilities  ̶  net of current portion

 

 

230

 

 

 

286

 

Other noncurrent liabilities

 

 

115

 

 

 

96

 

Total liabilities

 

 

29,081

 

 

 

26,784

 

Contingencies and commitments

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 200,000,000 shares authorized,

   16,386,487 (2020) and 16,346,960 (2019) shares issued and outstanding

 

 

164

 

 

 

163

 

Additional paid-in capital

 

 

177,141

 

 

 

176,850

 

Accumulated deficit

 

 

(120,596

)

 

 

(116,948

)

Accumulated other comprehensive loss

 

 

(12,321

)

 

 

(11,483

)

Total stockholders' equity

 

 

44,388

 

 

 

48,582

 

Total liabilities and stockholders' equity

 

$

73,469

 

 

$

75,366

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


The ExOne Company and Subsidiaries

Condensed Statement of Consolidated Cash Flows (Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(3,648

)

 

$

(4,496

)

Adjustments to reconcile net loss to net cash used for operations:

 

 

 

 

 

 

 

 

Depreciation

 

 

923

 

 

 

1,165

 

Equity-based compensation

 

 

292

 

 

 

439

 

Amortization of debt issuance costs

 

 

19

 

 

 

23

 

Provision (recoveries) for bad debts  ̶  net

 

 

51

 

 

 

(73

)

Provision for slow-moving, obsolete and lower of cost or

   net realizable value inventories  ̶  net

 

 

22

 

 

 

107

 

Foreign exchange (gains) losses on intercompany transactions  ̶  net

 

 

(165

)

 

 

(11

)

Gain from sale-leaseback of property and equipment

 

 

(1,462

)

 

 

 

Gain from disposal of property and equipment  ̶  net

 

 

(2

)

 

 

 

Deferred income taxes

 

 

195

 

 

 

 

Changes in assets and liabilities, excluding effects of foreign currency

   translation adjustments:

 

 

 

 

 

 

 

 

Decrease in accounts receivable

 

 

1,487

 

 

 

2,877

 

(Increase) decrease in net investment in sales-type leases

 

 

(50

)

 

 

87

 

Increase in inventories

 

 

(2,146

)

 

 

(1,576

)

Increase in prepaid expenses and other assets

 

 

(672

)

 

 

(509

)

Decrease in accounts payable

 

 

(1,408

)

 

 

(793

)

Decrease in accrued expenses and other liabilities

 

 

(24

)

 

 

(1,748

)

Increase in contract liabilities

 

 

1,849

 

 

 

3,122

 

Net cash used for operating activities

 

 

(4,739

)

 

 

(1,386

)

Investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(338

)

 

 

(347

)

Proceeds from sale of property and equipment

 

 

16,228

 

 

 

 

Net cash provided by (used for) investing activities

 

 

15,890

 

 

 

(347

)

Financing activities

 

 

 

 

 

 

 

 

Payments on long-term debt

 

 

(39

)

 

 

(36

)

Proceeds from exercise of employee stock options

 

 

 

 

 

165

 

Taxes related to the net share settlement of equity-based awards

 

 

 

 

 

(68

)

Other

 

 

(3

)

 

 

(5

)

Net cash (used for) provided by financing activities

 

 

(42

)

 

 

56

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

(31

)

 

 

(121

)

Net change in cash, cash equivalents, and restricted cash

 

 

11,078

 

 

 

(1,798

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

6,243

 

 

 

9,140

 

Cash, cash equivalents, and restricted cash at end of period

 

$

17,321

 

 

$

7,342

 

Supplemental disclosure of noncash investing and financing activities

 

 

 

 

 

 

 

 

Transfer of internally developed 3D printing machines from inventories to

   property and equipment for internal use or leasing activities

 

$

852

 

 

$

819

 

Transfer of internally developed 3D printing machines from property

   and equipment to inventories for sale

 

$

823

 

 

$

 

Property and equipment included in accounts payable

 

$

56

 

 

$

23

 

Property and equipment included in accrued expenses and other current liabilities

 

$

 

 

$

7

 

Debt issuance costs included in accounts payable

 

$

41

 

 

$

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


The ExOne Company and Subsidiaries

Condensed Statement of Changes in Consolidated Stockholders’ Equity (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

other

 

 

Total

 

 

 

Common stock

 

 

Additional

 

 

Accumulated

 

 

comprehensive

 

 

stockholders'

 

 

 

Shares

 

 

$

 

 

paid-in capital

 

 

deficit

 

 

loss

 

 

equity

 

Balance at December 31, 2018

 

 

16,234

 

 

$

162

 

 

$

175,214

 

 

$

(101,853

)

 

$

(10,748

)

 

$

62,775

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(4,496

)

 

 

 

 

 

(4,496

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(776

)

 

 

(776

)

Equity-based compensation

 

 

 

 

 

 

 

 

439

 

 

 

 

 

 

 

 

 

439

 

Exercise of employee stock options

 

 

23

 

 

 

1

 

 

 

164

 

 

 

 

 

 

 

 

 

165

 

Taxes related to the net share settlement of

   equity-based awards

 

 

 

 

 

 

 

 

(68

)

 

 

 

 

 

 

 

 

(68

)

Common stock issued from equity incentive plan

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

 

16,285

 

 

$

163

 

 

$

175,749

 

 

$

(106,349

)

 

$

(11,524

)

 

$

58,039

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

16,347

 

 

$

163

 

 

$

176,850

 

 

$

(116,948

)

 

$

(11,483

)

 

$

48,582

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,648

)

 

 

 

 

 

(3,648

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(838

)

 

 

(838

)

Equity-based compensation

 

 

 

 

 

1

 

 

 

291

 

 

 

 

 

 

 

 

 

292

 

Common stock issued from equity incentive plan

 

 

39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

 

 

16,386

 

 

$

164

 

 

$

177,141

 

 

$

(120,596

)

 

$

(12,321

)

 

$

44,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


The ExOne Company and Subsidiaries

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(dollars in thousands, except per-share and share amounts)

Note 1. Basis of Presentation

Organization

The ExOne Company (“ExOne”) is a corporation organized under the laws of the state of Delaware. ExOne was formed on January 1, 2013, when The Ex One Company, LLC, a Delaware limited liability company, merged with and into a Delaware corporation, which survived and changed its name to The ExOne Company (the “Reorganization”). As a result of the Reorganization, The Ex One Company, LLC became ExOne, the common and preferred interest holders of The Ex One Company, LLC became holders of common stock and preferred stock, respectively, of ExOne, and the subsidiaries of The Ex One Company, LLC became the subsidiaries of ExOne. The condensed consolidated financial statements include the accounts of ExOne, its wholly-owned subsidiaries, ExOne Americas LLC (United States); ExOne GmbH (Germany); ExOne Property GmbH (Germany); and ExOne KK (Japan). Collectively, the consolidated group is referred to as the “Company”.

The Company filed a registration statement on Form S-3 (No. 333-223690) with the Securities and Exchange Commission on March 15, 2018. The purpose of the Form S-3 was to register various equity and debt securities. Subsidiaries of the Company are co-registrants with the Company (“Subsidiary Guarantors”), and the registration statement registered guarantees of debt securities by one or more of the Subsidiary Guarantors. The Subsidiary Guarantors are 100% owned by the Company and any guarantees by the Subsidiary Guarantors will be full and unconditional. There have been no transactions undertaken subject to the Form S-3 since its initial filing.

Basis of Presentation

The condensed consolidated financial statements of the Company are unaudited. The condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the results of operations, financial position and cash flows of the Company. All material intercompany transactions and balances have been eliminated in consolidation. The results reported in these condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year. The December 31, 2019 condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). This Quarterly Report on Form 10-Q should be read in connection with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which includes all disclosures required by GAAP.

The preparation of these condensed consolidated financial statements requires the Company to make certain judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. Areas that require significant judgments, estimates and assumptions include accounting for accounts receivable (including the allowance for doubtful accounts); inventories (including the allowance for slow-moving and obsolete inventories); product warranty reserves; contingencies; income taxes (including the valuation allowance on certain deferred tax assets and liabilities for uncertain tax positions); equity-based compensation (including the valuation of certain equity-based compensation awards issued by the Company); and testing for impairment of long-lived assets (including the identification of asset groups by management, estimates of future cash flows of identified asset groups and fair value estimates used in connection with assessing the valuation of identified asset groups). The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Certain amounts relating to operating lease right-of-use assets ($432), current portion of operating lease liabilities ($158) and operating lease liabilities – net of current portion ($274) in the accompanying condensed consolidated balance sheet at December 31, 2019, have been reclassified from other noncurrent assets, accrued expenses and other current liabilities and other noncurrent liabilities, respectively, to conform to current period presentation.

Certain amounts relating to foreign exchange (gains) losses on intercompany transactions – net, for 2019 ($11) in the accompanying condensed statement of consolidated cash flows have been reclassified from effect of exchange rate changes on cash, cash equivalents, and restricted cash, to conform to current period presentation.

COVID-19

In March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. The impact of the COVID-19 global pandemic and related economic, business and market disruptions are evolving rapidly, and their effects are uncertain. Other than a temporary closure of the Company’s North Huntingdon, Pennsylvania facility effective for the period from March 23 through March 30, 2020, the Company’s operations were not materially affected by the COVID-19 outbreak as of and for the three months ended March 31, 2020. Beginning in March 2020, restrictions imposed by various governmental authorities on international shipping and travel have caused a disruption to the timing of shipment of the Company’s 3D printing machines and the Company’s ability to complete installations of 3D printing machines. The duration and severity of the outbreak and its long-term impact on the Company’s business are uncertain at this time.

6


The Company is unable to predict the impact that COVID-19 will have on its future financial position, results of operations and cash flows.

Recently Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (the “FASB”). Recently issued ASUs not listed below either were assessed and determined to be not applicable or are currently expected to have no impact on the consolidated financial statements of the Company.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses.” This ASU added a new impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. As a smaller reporting company pursuant to Rule 12b-2 of the Securities Exchange Act of 1934, as amended, these changes become effective for the Company on January 1, 2023. Management is currently evaluating the potential impact of these changes on the consolidated financial statements of the Company.

Note 2. Liquidity

The Company has incurred a net loss in each of its annual periods since its inception. As shown in the accompanying condensed statement of consolidated operations and comprehensive loss, the Company incurred a net loss of $3,648 for the three months ended March 31, 2020. At March 31, 2020, the Company had $16,813 in unrestricted cash and cash equivalents.

In addition to its unrestricted cash and cash equivalents, the Company also has access to additional capital through its $10,000 related party revolving credit facility (Note 12). Also, on April 18, 2020, the Company received additional unrestricted cash proceeds of $2,194 in connection with a Paycheck Protection Program loan (Note 19).

Since its inception, the Company has received cumulative unrestricted net proceeds from the sale of its common stock (through its initial public offering and subsequent secondary offerings) of $168,361 to fund its operations. The Company maintains additional access to capital through its active shelf registration statement (Note 1) which allows for the sale of various equity or debt instruments up to an aggregate amount of $125,000. Future sales of securities through the Company’s active shelf registration are dependent on market conditions which may restrict the timing and extent of any future offering of securities by the Company.

The Company has previously exhibited its ability to modify its operating structure and support its liquidity position through various restructuring and other actions, including its 2018 global cost realignment program. In response to adverse market conditions associated with the COVID-19 global pandemic, beginning in March 2020 and through April 2020, the Company initiated various cost savings actions including a mix of employee terminations, furloughs and pay rate reductions, as well as reductions in consulting and other expenses, all in an effort to conserve cash and maintain adequate liquidity.  

Management believes that the Company’s existing capital resources will be sufficient to support the Company’s operating plan. If management anticipates that the Company’s actual results will differ from its operating plan, management believes it has sufficient capabilities to enact cost savings measures to preserve capital (in addition to those further described above). The Company may also seek to raise additional capital to support its growth through additional debt, equity or other alternatives (including asset sales) or a combination thereof.

Note 3. Accumulated Other Comprehensive Loss

The following table summarizes changes in the components of accumulated other comprehensive loss for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(11,483

)

 

$

(10,748

)

Other comprehensive loss

 

 

(838

)

 

 

(776

)

Balance at end of period

 

$

(12,321

)

 

$

(11,524

)

 

Foreign currency translation adjustments consist of the effect of translation of functional currency financial statements (denominated in the euro and Japanese yen) to the reporting currency of the Company (United States dollar) and certain long-term intercompany transactions between subsidiaries for which settlement is not planned or anticipated in the foreseeable future.

There were no tax impacts related to income tax rate changes and no amounts were reclassified to earnings for either of the periods presented.

7


Note 4. Loss Per Share

The Company presents basic and diluted loss per common share amounts. Basic loss per common share is calculated by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the applicable period. Diluted loss per common share is calculated by dividing net loss available to common stockholders by the weighted average number of common shares and common equivalent shares outstanding during the applicable period.

As the Company incurred a net loss during each of the three months ended March 31, 2020 and 2019, basic average common shares outstanding and diluted average common shares outstanding were the same because the effect of potential shares of common stock, including stock options (838,383 – 2020 and 594,539 – 2019) and unvested restricted stock issued (66,513 – 2020 and 69,501 – 2019), was anti-dilutive.

The information used to compute basic and diluted net loss per common share was as follows for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Net loss

 

$

(3,648

)

 

$

(4,496

)

Weighted average shares outstanding (basic and diluted)

 

 

16,369,390

 

 

 

16,253,104

 

Net loss per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.22

)

 

$

(0.28

)

Diluted

 

$

(0.22

)

 

$

(0.28

)

 

Note 5. Revenue

The Company derives revenue from the sale of 3D printing machines and 3D printed and other products, materials and services. Revenue is recognized when the Company satisfies its performance obligation(s) under a contract (either implicit or explicit) by transferring the promised product or service to a customer either when (or as) the customer obtains control of the product or service. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenue) basis. Shipping and handling costs are included in cost of sales.

Certain of the Company’s contracts with customers provide for multiple performance obligations. Sales of 3D printing machines may also include optional equipment, materials, replacement components and services (installation, training and other services, including maintenance services and/or an extended warranty). Certain other contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company’s best estimate of stand-alone selling price for each distinct product or service in the contract, which is generally based on an observable price.

The Company’s revenue from products is transferred to customers at a point in time. The Company’s contracts for 3D printing machines generally include substantive customer acceptance provisions. Revenue under these contracts is recognized when customer acceptance provisions have been satisfied. For all other product sales, the Company recognizes revenue at the point in time in which the customer obtains control of the product, which is generally when product title passes to the customer upon delivery. In limited cases, title does not transfer and revenue is not recognized until the customer has received the products at its physical location.

The Company’s revenue from service arrangements includes deferred maintenance contracts and extended warranties that can be purchased at the customer’s option. The Company generally provides a standard one-year warranty on the Company’s 3D printing machines, which is considered an assurance type warranty, and not considered a separate performance obligation (Note 9). Revenue associated with deferred maintenance contracts is generally recognized at a point in time when the related services are performed where sufficient historical evidence indicates that the costs of performing the related services under the contract are not incurred on a straight-line basis, with such revenue recognized in proportion to the costs expected to be incurred. Revenue associated with extended warranties is generally recognized over time on a straight-line basis over the related contract period.

The Company’s revenue from service arrangements includes contracts with the Federal government under fixed-fee, cost reimbursable and time and materials arrangements (certain of which may have periods of performance greater than one year). Revenue under these contracts is generally recognized over time using an input measure based upon labor hours incurred and provisional rates provided under the contracts. As such, the nature of these contracts may give rise to variable consideration, primarily based upon completion of the Company’s annual Incurred Cost Submission filing as required by the Federal government. Historically, amounts associated with variable consideration have not been significant.

8


The Company’s revenue from service arrangements includes certain research and development services. Revenue under research and development service contracts is generally recognized over time using an output measure, specifically units or parts delivered, based upon certain customer acceptance and delivery requirements. Revenue recognized over time using an output measure is not significant.

The following table summarizes the Company’s revenue by product group for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

2019

 

3D printing machines

 

$

6,317

 

 

$

3,329

 

3D printed and other products, materials and services

 

 

7,066

 

 

 

6,250

 

 

 

$

13,383

 

 

$

9,579

 

 

Revenue from 3D printing machines includes leasing revenue whereby the Company is the lessor of 3D printing machines to its customers. Leasing revenue is accounted for under ASU 2016-02 (Note 10).

The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled receivables (contract assets) and deferred revenue and customer prepayments (contract liabilities) in the accompanying condensed consolidated balance sheet. The Company considers a number of factors in its evaluation of the creditworthiness of its customers, including past due amounts, past payment history, and current economic conditions. For 3D printing machines, the Company’s terms of sale vary by transaction. To reduce credit risk in connection with 3D printing machine sales, the Company may, depending upon the circumstances, require customers to furnish letters of credit or bank guarantees or to provide advanced payment (either partial or in full). For 3D printed and other products and materials, the Company’s terms of sale generally require payment within 30 to 60 days after delivery, although the Company also recognizes that longer payment periods are customary in certain countries where it transacts business. Service arrangements are generally billed in accordance with specific contract terms and are typically billed in advance or in proportion to performance of the related services.

For the three months ended March 31, 2020, the Company recognized revenue of $3,902 related to contract liabilities at January 1, 2020. There were no other significant changes in contract liabilities during the three months ended March 31, 2020. Contract assets are not significant.

As of March 31, 2020, the Company has approximately $33,800 of remaining performance obligations (including contract liabilities), which is also referred to as backlog, of which approximately $29,800 is expected to be fulfilled during the next twelve months notwithstanding uncertainty related to the impact of the COVID-19 global pandemic (Note 1) including, but not limited to, international shipping and travel restrictions brought about by the global pandemic which could have an adverse effect on the timing of delivery of products and/or services to customers.

The Company has elected to apply the practical expedient associated with incremental costs of obtaining a contract, and as such, sales commission expense is generally expensed when incurred because the amortization period would be one year or less. These costs are recorded within selling, general and administrative expenses.

Accounts receivable and net investment in sales-type leases (Note 10) are reported at their net realizable value. The Company carries its investment in sales-type leases based on discounting the minimum lease payments by the interest rate implicit in the lease and less an allowance for doubtful accounts. The Company’s estimate of the allowance for doubtful accounts related to accounts receivable and net investment in sales-type leases is based on the Company’s evaluation of customer accounts with past-due outstanding balances or specific accounts for which it has information that the customer may be unable to meet its financial obligations. Based upon review of these accounts, and management’s analysis and judgment, the Company records a specific allowance for that customer’s accounts receivable or net investment in sales-type lease balance to reduce the outstanding balance to the amount expected to be collected. The allowance is re-evaluated and adjusted periodically as additional information is received that impacts the allowance amount reserved. At March 31, 2020 and December 31, 2019, the allowance for doubtful accounts was $548 and $508, respectively. During the three months ended March 31, 2020 and 2019, the Company recorded a net provision (recoveries) for bad debts of $51 and ($73), respectively.

9


Note 6. Cash, Cash Equivalents, and Restricted Cash

The following provides a reconciliation of cash, cash equivalents, and restricted cash as reported in the accompanying condensed consolidated balance sheet to the same such amounts shown in the accompanying condensed statement of consolidated cash flows as of the dates indicated:

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Cash and cash equivalents

 

$

16,813

 

 

$

5,265

 

Restricted cash

 

 

508

 

 

 

978

 

Cash, cash equivalents, and restricted cash

 

$

17,321

 

 

$

6,243

 

 

Restricted cash at both March 31, 2020 and December 31, 2019 included $508 associated with cash collateral required by a United States bank to offset certain short-term, unsecured lending commitments associated with the Company’s corporate credit card program. 

Restricted cash at December 31, 2019 included $470 associated with cash collateral required by a German bank for short-term financial guarantees issued by ExOne GmbH in connection with certain commercial transactions requiring security. Refer to Note 11 for further discussion related to an amendment to this cash collateral requirement effective in February 2020.

Each of the balances described above are considered legally restricted by the Company.

Note 7. Inventories

Inventories consisted of the following as of the dates indicated:

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Raw materials and components

 

$

9,374

 

 

$

8,841

 

Work in process

 

 

5,284

 

 

 

4,922

 

Finished goods

 

 

6,995

 

 

 

6,007

 

 

 

$

21,653

 

 

$

19,770

 

 

Raw materials and components consist of consumable materials and component parts and subassemblies associated with 3D printing machine manufacturing and support activities. Work in process consists of 3D printing machines and other products in varying stages of completion. Finished goods consist of 3D printing machines and other products prepared for sale in accordance with customer specifications.

At March 31, 2020 and December 31, 2019, the allowance for slow-moving and obsolete inventories was $3,370 and $3,443, respectively, and has been reflected as a reduction to inventories (principally raw materials and components). The following table summarizes changes in the allowance for slow-moving and obsolete inventories for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Balance at beginning of period

 

$

3,443

 

 

$

4,143

 

Provision for slow-moving and obsolete inventories  ̶  net

 

 

22

 

 

 

107

 

Reductions for physical disposal (sale or scrap) of previously reserved

   amounts

 

 

(36

)

 

 

 

Foreign currency translation adjustments

 

 

(59

)

 

 

(73

)

Balance at end of period

 

$

3,370

 

 

$

4,177

 

 

10


Note 8. Property and Equipment

Property and equipment consisted of the following as of the dates indicated:

 

 

 

March 31,

 

 

December 31,

 

 

Economic Life

 

 

2020

 

 

2019

 

 

(in years)

Land

 

$

3,378

 

 

$

6,980

 

 

N/A

Buildings and related improvements

 

 

9,989

 

 

 

25,675

 

 

5 - 40

Machinery and equipment

 

 

19,208

 

 

 

19,531

 

 

3 - 20

Other

 

 

6,049

 

 

 

7,086

 

 

3 - 20

 

 

 

38,624

 

 

 

59,272

 

 

 

Less: Accumulated depreciation

 

 

(18,306

)

 

 

(21,478

)

 

 

 

 

 

20,318

 

 

 

37,794

 

 

 

Construction-in-progress

 

 

402

 

 

 

1,101

 

 

 

Property and equipment  ̶  net

 

$

20,720

 

 

$

38,895

 

 

 

 

For the three months ended March 31, 2020 and 2019, depreciation expense was $923 and $1,165, respectively.

On February 18, 2020, the Company completed a sale-leaseback transaction associated with its European headquarters and operating facility in Gersthofen, Germany (Note 10). As a result of the completion of this transaction, the Company derecognized $17,282 in net property and equipment during the three months ended March 31, 2020. Sale of the facility resulted in a gain of $1,462 during the three months ended March 31, 2020.

During the three months ended March 31, 2020, as a result of continued operating losses and cash flow deficiencies, the Company identified a triggering event requiring a test for the recoverability of long-lived assets held and used at the asset group level. Assessing the recoverability of long-lived assets held and used requires significant judgments and estimates by management.

For purposes of testing long-lived assets for recoverability, the Company operates as three separate asset groups: United States, Europe and Japan. In assessing the recoverability of long-lived assets held and used, the Company determined the carrying amount of long-lived assets held and used to be in excess of the estimated future undiscounted net cash flows of the related assets. The Company proceeded to determine the fair value of its long-lived assets held and used, principally through use of the market approach. The Company’s use of the market approach included consideration of market transactions for comparable assets. Management concluded that the fair value of long-lived assets held and used exceeded their carrying value, and as such, no impairment loss was recorded.   

A significant decrease in the market price of a long-lived asset, adverse change in the use or condition of a long-lived asset, adverse change in the business climate or legal or regulatory factors impacting a long-lived asset and continued operating losses and cash flow deficiencies associated with a long-lived asset, among other indicators, could cause a future assessment to be performed which may result in an impairment of long-lived assets held and used, which could result in a material adverse effect on the financial position and results of operations of the Company.

Note 9. Product Warranty Reserves

Substantially all of the Company’s 3D printing machines are covered by a standard one-year warranty. Generally, at the time of sale, a liability is recorded (with an offset to cost of sales) based upon the expected cost of replacement parts and labor to be incurred over the life of the standard warranty. Expected cost is estimated using historical experience for similar products. The Company periodically assesses the adequacy of the product warranty reserves based on changes in these factors and records any necessary adjustments if actual experience indicates that adjustments are necessary. Future claims experience could be materially different from prior results because of the introduction of new, more complex products, a change in the Company’s warranty policy in response to industry trends, competition or other external forces, or manufacturing changes that could impact product quality. In the event that the Company determines that its current or future product repair and replacement costs exceed estimates, an adjustment to these reserves would be charged to cost of sales in the period such a determination is made.

11


The following table summarizes changes in product warranty reserves, which amounts were reflected in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Balance at beginning of period

 

$

866

 

 

$

1,670

 

     Provisions for new issuances

 

 

276

 

 

 

146

 

     Payments

 

 

(344

)

 

 

(391

)

     Reserve adjustments

 

 

20

 

 

 

(159

)

     Foreign currency translation adjustments

 

 

(8

)

 

 

(15

)

Balance at end of period

 

$

810

 

 

$

1,251

 

 

Note 10. Leases

Lessee

The Company leases facilities, machinery and other equipment and vehicles under operating lease arrangements (with initial terms greater than twelve months), expiring in various years through 2026. In addition, the Company leases certain equipment and vehicles under finance lease arrangements, which are not significant.

For all operating lease arrangements (with the exception of short-term lease arrangements), the Company presents at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. 

The Company has elected, as a practical expedient, not to separate non-lease components from lease components, and instead account for each separate component as a single lease component for all lease arrangements, as lessee. In addition, the Company has elected, as a practical expedient, not to apply lease recognition requirements to short-term lease arrangements, generally those with a lease term of less than twelve months, for all classes of underlying assets. In determination of the lease term, the Company considers the likelihood of lease renewal options and lease termination provisions. As a result, lease payments under these short-term lease arrangements are recognized in the accompanying condensed statement of consolidated operations and comprehensive loss on a straight-line basis over the lease term.  

The Company uses its incremental borrowing rate in determining the present value of lease payments, as the implicit rate of the lease arrangements is generally not readily determinable.

Through July 2019, certain of the Company’s operating lease arrangements were with related parties under common control (Note 17). Lease cost under operating lease agreements with related parties, included within short-term lease cost below, was $12 for the three months ended March 31, 2019.

Future minimum lease payments of operating lease arrangements (with initial terms greater than twelve months) at March 31, 2020, were as follows:

 

2020

 

$

1,419

 

2021

 

 

1,861

 

2022

 

 

1,827

 

2023

 

 

23

 

2024

 

 

11

 

Thereafter

 

 

2

 

Total minimum lease payments

 

 

5,143

 

Less: Present value discount

 

 

(354

)

Total operating lease liabilities

 

$

4,789

 

 

For the three months ended March 31, 2020 and 2019, lease cost under operating lease arrangements was $504 and $113, including $31 and $65 relating to short-term lease arrangements, respectively.

12


Supplemental information related to operating lease arrangements was as follows as of and for the three months ended March 31, 2020:

 

Operating lease right-of-use assets

 

$

4,789

 

Current portion of operating lease liabilities

 

$

1,684

 

Operating lease liabilities  ̶  net of current portion

 

$

3,105

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

$

4,785

 

Cash paid for amounts included in the measurement of operating lease liabilities

 

$

473

 

Weighted average remaining lease term (in years)

 

 

2.8

 

Weighted average discount rate

 

 

5.1

%

On December 10, 2019, ExOne Property GmbH and ExOne GmbH, the German subsidiaries of the Company (the “German Subsidiaries”), entered into a purchase agreement (the “Purchase Agreement”) with Solidas Immobilien und Grundbesitz GmbH, a private, unaffiliated German real estate investor (the “Buyer”), for the sale of the Company’s European headquarters and operating facility in Gersthofen, Germany (the “Facility”) for a purchase price of approximately $18,500 (€17,000), of which approximately $2,200 (€2,000) was received prior to December 31, 2019. Concurrent with the execution of the Purchase Agreement, ExOne GmbH and the Buyer entered into a rental contract (the “Lease”) for the leaseback of the Facility for an initial aggregate annual rent totaling approximately $1,700 (€1,500), plus applicable taxes, which is fixed during the initial three-year term and is subject to adjustment on an annual basis (in accordance with the consumer price index for Germany) during the two five-year option extension periods. The sale-leaseback transaction closed on February 18, 2020. In connection with the completion of the sale-leaseback transaction, the Company recorded an operating lease right-of-use asset and corresponding operating lease liability of $4,605, which was representative of the present value of future minimum lease payments over the initial three-year term, as there were no penalties or other factors associated with the lease that result in reasonable assurance of its extension at inception.

Lessor

The Company leases machinery and equipment to customers (principally 3D printing machines and related equipment) under lease arrangements classified as either operating leases or sales-type leases. The Company’s operating lease arrangements have initial terms generally ranging from one to five years, certain of which may contain extension or termination clauses, or both. Such operating lease arrangements also generally include a purchase option to acquire the related machinery and equipment at the end of the lease term for either a fixed amount as determined at inception, or a subsequently negotiated fair market value. At March 31, 2020, the Company estimated that the total fair market value significantly exceeded the related net book value of the machinery and equipment held under the Company’s operating lease arrangements. The Company’s sales-type lease arrangements generally include transfer of ownership at the end of the lease term, and as such, the Company’s net investment in sale-type lease arrangements presented in the Company’s accompanying condensed consolidated balance sheet generally does not include an amount of unguaranteed residual value.

For certain of its arrangements, the Company separates and allocates (Note 5) certain non-lease components (principally maintenance services) from lease components. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from lease income) basis. In determination of the lease term, the Company considers the likelihood of lease renewal options and lease termination provisions. Additionally, certain of the Company’s lease arrangements do not qualify as sale-type leases, as collectability is not reasonably assured.

The Company recognized the following components under operating and sales-type lease arrangements in the accompanying condensed statement of consolidated operations and comprehensive loss for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

 

Operating

 

 

Sales-type

 

 

Operating

 

 

Sales-type

 

Revenue

 

$

208

 

 

$

 

 

$

320

 

 

$

 

Interest income(a)

 

$

 

 

$

18

 

 

$

 

 

$

28

 

 

(a)

Interest income relating to sales-type leases is recorded as a component of revenue in the accompanying condensed statement of consolidated operations and comprehensive loss for each of the periods presented.

13


The Company’s net investment in sales-type leases consisted of the following as of the dates indicated:

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Future minimum lease payments receivable

 

$

1,624

 

 

$

1,595

 

Less: Allowance for doubtful accounts

 

 

(415

)

 

 

(424

)

Net future minimum lease payments receivable

 

 

1,209

 

 

 

1,171

 

Less: Unearned interest income

 

 

(208

)

 

 

(220

)

   Net investment in sales-type leases

 

$

1,001

 

 

$

951

 

 

Future minimum lease payments of non-cancellable operating and sales-type lease arrangements at March 31, 2020 were as follows:

 

 

 

Operating

 

 

Sales-type

 

2020

 

$

432

 

 

$

411

 

2021

 

 

48

 

 

 

427

 

2022

 

 

 

 

 

378

 

2023

 

 

 

 

 

408

 

2024

 

 

 

 

 

 

Thereafter

 

 

 

 

 

 

Total minimum lease payments

 

$

480

 

 

$

1,624

 

Less: Allowance for doubtful accounts

 

 

 

 

 

 

(415

)

Less: Present value discount

 

 

 

 

 

 

(208

)

Future minimum lease payments receivable

 

 

 

 

 

$

1,001

 

 

Note 11. Contingencies and Commitments

Contingencies

On March 1, 2018, the Company’s ExOne GmbH subsidiary notified Voxeljet AG that it had materially breached a 2003 Patent and Know-How Transfer Agreement and asserted its rights to set-off damages as a result of the breaches against the annual license fee due from the Company under the agreement. At this time, the Company cannot reasonably estimate a contingency, if any, related to this matter.

The Company is subject to various litigation, claims, and proceedings which have been or may be instituted or asserted from time to time in the ordinary course of business. Management does not believe that the outcome of any pending or threatened matters will have a material adverse effect, individually or in the aggregate, on the financial position, results of operations or cash flows of the Company.

Commitments

In the normal course of its operations, ExOne GmbH issues short-term financial guarantees and letters of credit to third parties in connection with certain commercial transactions requiring security through a credit facility with a German bank.

On February 24, 2020, ExOne GmbH entered into an amendment and replacement of its credit facility with a German bank. The credit facility amendments included the elimination of the overdraft credit and short-term loan features of the prior agreement and replaced them with an increased capacity amount of approximately $3,800 (€3,500) for the issuance of financial guarantees and letters of credit for commercial transactions requiring security. The cash collateral requirement for the issuance of financial guarantees and letters of credit for commercial transactions requiring security was eliminated for amounts up to approximately $1,100 (€1,000) as the amendment provided the German bank with a collateral interest in the accounts receivable of ExOne GmbH. Amounts in excess of approximately $1,100 (€1,000) continue to require cash collateral under the amended credit facility.

At March 31, 2020, total outstanding financial guarantees and letters of credit issued by ExOne GmbH under the amended credit facility were $863 (€785), with expiration dates ranging from October 2020 through February 2023. At December 31, 2019, total outstanding financial guarantees and letters of credit issued by ExOne GmbH under the former credit facility were $560 (€499).

 

14


Note 12. Related Party Revolving Credit Facility

On March 12, 2018, the Company and its ExOne Americas LLC and ExOne GmbH subsidiaries, as guarantors (collectively, the “Loan Parties”), entered into a Credit Agreement and related ancillary agreements with LBM Holdings, LLC (“LBM”), a company controlled by S. Kent Rockwell, who was the Executive Chairman of the Company (a related party) at such date and is currently Chairman of the Company, relating to a $15,000 revolving credit facility (the “Credit Agreement”) to provide additional funding to the Company for working capital and general corporate purposes. The Credit Agreement provided a credit facility for a term of three years (through March 12, 2021), bearing interest at a rate of one-month LIBOR plus an applicable margin of 500 basis points (6.8% at December 31, 2019 and 6.0% at March 31, 2020). The Credit Agreement required a commitment fee of 75 basis points, or 0.75%, on the unused portion of the facility, payable monthly in arrears. In addition, an up-front commitment fee of 125 basis points, or 1.25% ($188), was required at closing. Borrowings under the Credit Agreement were collateralized by the accounts receivable, inventories and machinery and equipment of the Loan Parties.

On February 18, 2020, the Loan Parties and LBM entered into a First Amendment to the Credit Agreement (the “Amendment”) which (i) reduced the available capacity under the revolving credit facility to $10,000, (ii) extended the term of the credit facility until March 31, 2024, (iii) increased the commitment fee to 100 basis points, or 1.00%, on the unused portion of the revolving credit facility, and (iv) provided a process for the replacement of the LIBOR index after 2021. In addition, the accounts receivable of ExOne GmbH no longer serve as collateral for borrowings under the amended revolving credit facility.

Borrowings under the credit facility are required to be made in minimum increments of $1,000. The Company may terminate or reduce the credit commitment at any time during the term of the amended Credit Agreement without penalty. The Company may also make prepayments against outstanding borrowings under the amended Credit Agreement at any time without penalty. At December 31, 2019 and March 31, 2020, the total estimated value of collateral was in significant excess of the maximum borrowing capacity under the credit facility.

The amended Credit Agreement contains several affirmative covenants including prompt payment of liabilities and taxes; maintenance of insurance, properties, and licenses; and compliance with laws. The amended Credit Agreement also contains several negative covenants including restricting the incurrence of certain additional debt; prohibiting future liens (other than permitted liens); prohibiting investment in third parties; limiting the ability to pay dividends; limiting mergers, acquisitions, and dispositions; and limiting the sale of certain property and equipment of the Loan Parties. The amended Credit Agreement does not contain any financial covenants. The amended Credit Agreement also contains events of default, including, but not limited to, cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants.

The Company does not consider the Credit Agreement, as amended, indicative of a fair market value lending, as LBM was determined to be a related party based on common control by S. Kent Rockwell. S. Kent Rockwell is the indirect sole owner of LBM. Prior to execution, each of the Credit Agreement and the Amendment was reviewed and approved by the Audit Committee of the Board of Directors (the “Board”), in accordance with The ExOne Company Policy and Procedures with Respect to Related Person Transactions, and subsequently by a sub-committee of independent members of the Board. At the time of execution of the Credit Agreement, the available loan proceeds were deposited into an escrow account with an unrelated, third party financial institution acting as escrow agent pursuant to a separate Escrow Agreement by and among the parties. Loan proceeds held in escrow are available to the Company upon its submission to the escrow agent of a loan request. Such proceeds will not be available to LBM until payment in-full of the obligations under the amended Credit Agreement and termination of the amended Credit Agreement. Payments of principal and other obligations will be made to the escrow agent, while interest payments will be made directly to LBM. Provided there exists no potential default or event of default, the amended Credit Agreement and Escrow Agreement prohibit any acceleration of repayment of any amount outstanding under the amended Credit Agreement and prohibit termination of the amended Credit Agreement or withdrawal from escrow of any unused portion of the available loan proceeds.

There were no borrowings under the credit facility during the three months ended March 31, 2020 or 2019.

The Company incurred $265 in debt issuance costs associated with the inception of the credit facility (including the aforementioned up-front commitment fee paid at closing to LBM) and $41 in debt issuance costs associated with the Amendment.

During the three months ended March 31, 2020, the Company recorded interest expense relating to the credit facility of $45. Included in interest expense for the three months ended March 31, 2020 was $18 associated with amortization of debt issuance costs (resulting in $130 in remaining debt issuance costs at March 31, 2020, of which $33 was included in prepaid expenses and other current assets and $97 was included in other noncurrent assets in the accompanying consolidated balance sheet). Included in interest expense for the three months ended March 31, 2020 was $27 associated with the commitment fee on the unused portion of the revolving credit facility all of which was included in accounts payable in the accompanying consolidated balance sheet at March 31, 2020. In connection with the Company’s efforts to conserve cash as a result of the COVID-19 global pandemic, LBM agreed to defer cash payments of its commitment fee on the unused portion of the revolving credit facility to a future date (to be determined upon mutual agreement by the parties). There are no incremental interest or other fees to be incurred by the Company as a result of this deferral.

During the three months ended March 31, 2019, the Company recorded interest expense related to the credit facility of $50.

 

15


Note 13. Income Taxes

The provision (benefit) for income taxes for the three months ended March 31, 2020 and 2019 was $226 and ($800), respectively. The Company has completed a discrete period computation of its provision (benefit) for income taxes for each of the periods presented. The discrete period computation was required as a result of jurisdictions with losses before income taxes for which no tax benefit can be recognized and an inability to generate reliable estimates for results in certain jurisdictions as a result of inconsistencies in generating net operating profits (losses) in those jurisdictions.

The effective tax rate for the three months ended March 31, 2020 and 2019 was 6.6% (provision on a loss) and 15.1% (benefit on a loss), respectively. For the three months ended March 31, 2020, the effective tax rate differed from the United States federal statutory rate of 21.0% primarily due to net changes in valuation allowances for the period. For the three months ended March 31, 2019, the effective tax rate differed from the United States federal statutory rate of 21.0% primarily due to the reversal of previously recorded liabilities for uncertain tax positions (further described below) and net changes in valuation allowances for the period.

The Company has provided a valuation allowance for certain of its net deferred tax assets as a result of the Company not generating consistent net operating profits in certain jurisdictions in which it operates. As such, certain benefits from deferred taxes in the periods presented have been fully offset by changes in the valuation allowance for the related net deferred tax assets. The Company continues to assess its future taxable income by jurisdiction based on recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that the Company may be able to enact in future periods, the impact of potential operating changes on the business and forecast results from operations in future periods based on available information at the end of each reporting period. To the extent that the Company is able to reach the conclusion that net deferred tax assets are realizable based on any combination of the above factors in a single, or in multiple, taxing jurisdictions, a reversal of the related portion of the Company’s existing valuation allowances may occur.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (including accrued interest and penalties) was as follows for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Balance at beginning of period

 

$

 

 

$

1,186

 

Additions based on tax positions related to the current year

 

 

 

 

 

 

Additions for tax positions of prior years

 

 

 

 

 

1

 

Reductions for tax positions of prior years

 

 

 

 

 

(1,075

)

Settlements

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

(10

)

Balance at end of period

 

$

 

 

$

102

 

 

The Company includes interest and penalties related to income taxes as a component of the provision (benefit) for income taxes in the accompanying condensed statement of consolidated operations and comprehensive loss. There were no such interest or penalties included in the provision (benefit) for income taxes for the three months ended March 31, 2020 or 2019.

At December 31, 2018, the Company’s ExOne GmbH (2010-2013) and ExOne Property GmbH (2013) subsidiaries were under examination by local taxing authorities in Germany. In January 2019, this examination was concluded by the local taxing authorities in Germany without significant adjustment to previously established tax positions. As a result, during the three months ended March 31, 2019, the Company recorded a reversal of certain of its previously recorded liabilities for uncertain tax positions of $1,075, of which $257 was offset against net operating loss carryforwards.

Note 14. Equity-Based Compensation

On January 24, 2013, the Board adopted the 2013 Equity Incentive Plan (the “Plan”). In connection with the adoption of the Plan, 500,000 shares of common stock were reserved for issuance pursuant to the Plan, with automatic increases in such reserve available each year annually on January 1 from 2014 through 2023 equal to the lesser of 3.0% of the total outstanding shares of common stock as of December 31 of the immediately preceding year or, a number of shares of common stock determined by the Board, provided that the maximum number of shares authorized under the Plan could not exceed 1,992,241 shares, subject to certain adjustments. The maximum number of shares authorized under the Plan was reached on January 1, 2017. At March 31, 2020, 602,283 shares remained available for future issuance under the Plan.

Stock options and restricted stock issued by the Company under the Plan are generally subject to service conditions resulting in annual vesting on the anniversary of the date of grant over a period typically ranging between one and three years. Certain stock options and restricted stock issued by the Company under the Plan vest immediately upon issuance. Stock options issued by the Company under the Plan have contractual lives which expire over a period typically ranging between five and ten years from the date of grant, subject to continued service to the Company by the participant.

16


On February 6, 2019, the Compensation Committee of the Board adopted the 2019 Annual Incentive Program (the “2019 Program”) as a subplan under the Plan. The 2019 Program provided an opportunity for performance-based compensation to senior executive officers of the Company, among others. The target annual incentive for each 2019 Program participant was expressed as a percentage of base salary and was conditioned on the achievement of certain financial goals (as approved by the Compensation Committee of the Board). The Compensation Committee of the Board retained negative discretion over amounts payable under the 2019 Program. During the three months ended March 31, 2019, the Company recorded $142 in equity-based compensation expense based on the estimated outcome of the defined financial goals for 2019 under the 2019 Program.

On February 5, 2020, the Compensation Committee of the Board adopted the 2020 Annual Incentive Program (the “2020 Program”) as a subplan under the Plan. The 2020 Program provided an opportunity for performance-based compensation to senior executive officers of the Company, among others. The target annual incentive for each 2020 Program participant was expressed as a percentage of base salary and was conditioned on the achievement of certain financial goals (as approved by the Compensation Committee of the Board). The Compensation Committee of the Board retained negative discretion over amounts payable under the 2020 Program. During the three months ended March 31, 2020, the Company recorded no equity-based compensation expense based on the estimated outcome of the defined financial goals for 2020 under the 2020 Program.

The following table summarizes the total equity-based compensation expense recognized by the Company for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Equity-based compensation expense recognized:

 

 

 

 

 

 

 

 

Stock options

 

$

145

 

 

$

166

 

Restricted stock

 

 

141

 

 

 

129

 

Other(a)