What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-07-28 · 187 added, 142 removed, 504 unchanged (39% of the section changed)

3 unchanged sentences

Dollars in thousands, except per share amounts

Three Months Ended Six Months Ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

Three Months Ended Nine Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Net sales $ 965,891 $ 805,931 $ 2,831,030 $ 2,242,647

3 unchanged sentences

Restructuring and other related charges 6,457 4,129 15,983 23,589

Operating income (loss) 75,941 ( 4,921 ) 137,248 41,916

Operating income 63,990 61,931 201,238 103,847

Pension settlement gain — — ( 11,208 ) —

1 unchanged sentence

Debt extinguishment charges — — 29,870 —

Income (loss) from continuing operations before income taxes 39,474 ( 33,205 ) 75,121 ( 11,164 )

Income tax expense (benefit) 8,155 ( 30,063 ) 16,072 ( 16,890 )

Net income (loss) from continuing operations 31,319 ( 3,142 ) 59,049 5,726

Income from continuing operations before income taxes 50,450 36,364 125,571 25,200

Income tax expense 22,349 19,528 38,421 2,638

Net income from continuing operations 28,101 16,836 87,150 22,562

Loss from discontinued operations, net of taxes ( 1,244 ) ( 2,641 ) ( 10,351 ) ( 10,906 )

Net income (loss) 29,702 ( 8,047 ) 49,942 ( 2,539 )

Net income 26,857 14,195 76,799 11,656

income attributable to noncontrolling interest, net of taxes 1,009 789 3,235 2,243

Net income (loss) attributable to Colfax Corporation $ 28,642 $ ( 8,474 ) $ 47,716 $ ( 3,993 )

Net income attributable to Colfax Corporation $ 25,848 $ 13,406 $ 73,564 $ 9,413

Net income (loss) per share - basic

10 unchanged sentences

Dollars in thousands

Three Months Ended Six Months Ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

Net income (loss) $ 29,702 $ ( 8,047 ) $ 49,942 $ ( 2,539 )

Three Months Ended Nine Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Net income $ 26,857 $ 14,195 $ 76,799 $ 11,656

Other comprehensive income (loss):

Foreign currency translation, net of tax expense (benefit) of $ 896 , $( 125 ), $ 3,176 and $ 394

Foreign currency translation, net of tax expense of $ 1,948 , $ 258 , $ 5,124 and $ 652

( 57,176 ) 51,610 ( 101,573 ) ( 49,316 )

6 unchanged sentences

Comprehensive income (loss) ( 22,802 ) 54,881 ( 4,926 ) ( 47,546 )

comprehensive income (loss) attributable to noncontrolling interest ( 369 ) 772 673 ( 795 )

comprehensive income attributable to noncontrolling interest 1,373 1,987 2,046 1,192

Comprehensive income (loss) attributable to Colfax Corporation $ ( 24,175 ) $ 52,894 $ ( 6,972 ) $ ( 48,738 )

3 unchanged sentences

Dollars in thousands, except share amounts

July 2, 2021 December 31, 2020

October 1, 2021 December 31, 2020

CURRENT ASSETS:

24 unchanged sentences

400,000,000 shares authorized;

142,341,646 and 118,496,687 issued and outstanding as of July 2, 2021 and December 31, 2020, respectively

154,781,842 and 118,496,687 shares issued and outstanding as of October 1, 2021 and December 31, 2020, respectively

Additional paid-in capital 4,528,097 3,478,008

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Dollars in thousands, except share amounts and as noted

Dollars in thousands, except share amounts

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total

11 unchanged sentences

Net income — — — 28,642 — 1,060 29,702

Other comprehensive income, net of tax of $ 473

Other comprehensive income (loss), net of tax of $ 473

— — — — 9,108 ( 1,429 ) 7,679

3 unchanged sentences

Balance at July 2, 2021 142,341,646 142 4,225,248 565,083 ( 482,619 ) 44,106 4,351,960

Net income — — — 25,848 — 1,009 26,857

Distributions to noncontrolling owners — — — — — ( 1,496 ) ( 1,496 )

Other comprehensive income (loss), net of tax of $ 4,478

— — — — ( 50,023 ) 364 ( 49,659 )

Conversion of tangible equity units into common stock 5,537,100 6 ( 6 ) — — — —

Common stock issued for acquisition, net of issuance costs

6,544,522 7 285,674 — — — 285,681

Common stock-based award activity 358,574 — 17,181 — — — 17,181

Balance at October 1, 2021 154,781,842 $ 155 $ 4,528,097 $ 590,931 $ ( 532,642 ) $ 43,983 $ 4,630,524

See Notes to Condensed Consolidated Financial Statements.

COLFAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Dollars in thousands, except share amounts

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total

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Balance at July 3, 2020 118,389,013 118 3,462,532 470,749 ( 581,484 ) 43,661 3,395,576

Net income — — — 13,406 — 789 14,195

Distributions to noncontrolling owners — — — — — ( 625 ) ( 625 )

Other comprehensive income, net of tax of $( 3,756 )

— — — — 39,488 1,198 40,686

Common stock-based award activity 68,166 — 7,637 — — — 7,637

Balance at October 2, 2020 118,457,179 $ 118 $ 3,470,169 $ 484,155 $ ( 541,996 ) $ 45,023 $ 3,457,469

See Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

Dollars in thousands

Six Months Ended

July 2, 2021 July 3, 2020

Nine Months Ended

October 1, 2021 October 2, 2020

Cash flows from operating activities:

Net income (loss) $ 49,942 $ ( 2,539 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net income $ 76,799 $ 11,656

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization and other impairment charges 197,641 181,114

2 unchanged sentences

Deferred income tax benefit ( 5,904 ) ( 30,946 )

Gain on sale of property, plant and equipment ( 1,437 ) ( 3,400 )

(Gain) loss on sale of property, plant and equipment ( 1,483 ) 523

Loss on debt extinguishment 29,870 —

11 unchanged sentences

Cash flows from financing activities:

Payments under term credit facility — ( 40,000 )

Proceeds from borrowings on revolving credit facilities and other 515,696 794,678

1 unchanged sentence

Repayments of borrowings on senior notes ( 700,000 ) —

Payment of debt issuance costs — ( 4,560 )

Proceeds from issuance of common stock, net 738,177 2,930

3 unchanged sentences

Effect of foreign exchange rates on Cash and cash equivalents and Restricted cash ( 1,659 ) ( 6,633 )

Decrease in Cash and cash equivalents and Restricted cash ( 38,760 ) ( 43,236 )

Increase (decrease) in Cash and cash equivalents and Restricted cash 76,413 ( 43,209 )

Cash and cash equivalents and Restricted Cash, beginning of period 101,069 109,632

Cash and cash equivalents, end of period $ 177,482 $ 66,423

Supplemental disclosures of non-cash investing and financing activities:

Common stock issued for acquisition, net of issuance costs $ 285,681 $ —

See Notes to Condensed Consolidated Financial Statements.

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In the normal course of business, the Company incurs research and development costs related to new product development which are expensed as incurred and included in Selling, general and administrative expense on the Company’s Condensed Consolidated Statements of Operations.

Research and development costs were $ 21.3 million and $ 41.2 million during the three and six months ended July 2, 2021, respectively, and $ 14.1 million and $ 32.6 million during the three and six months ended July 3, 2020, respectively.

During the three months ended July 2, 2021, the Company used the proceeds from its March 2021 equity offering to redeem all $ 600 million of its 2024 senior notes and $ 100 million of outstanding principal on its 2026 senior notes.

The Company paid an early redemption premium of $ 24.4 million and recorded a loss on the extinguishment of $ 29.9 million.

Additionally, during the three months ended July 2, 2021, a pension settlement gain of $ 11.2 million was recognized when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.

The results of operations for the three and six months ended July 2, 2021 are not necessarily indicative of the results of operations that may be achieved for the full year.

Research and development costs were $ 20.2 million and $ 61.4 million during the three and nine months ended October 1, 2021, respectively, and $ 16.8 million and $ 49.4 million during the three and nine months ended October 2, 2020, respectively.

On April 24, 2021, the Company used the proceeds from its March 2021 equity offering to redeem all $ 600 million of its 2024 senior notes and $ 100 million of outstanding principal on its 2026 senior notes.

The Company paid an early redemption premium of $ 24.4 million and recorded a loss on the extinguishment of debt of $ 29.9 million.

Additionally, a pension settlement gain of $ 11.2 million was recognized in the second quarter of 2021 when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.

The results of operations for the three and nine months ended October 1, 2021 are not necessarily indicative of the results of operations that may be achieved for the full year.

Quarterly results are affected by seasonal variations in the Company’s businesses, and European operations typically experience a slowdown during the July, August and December holiday seasons.

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On March 11, 2020, due to worldwide spread of the virus, the World Health Organization characterized COVID-19 as a pandemic.

The COVID-19 global

The COVID-19 global pandemic has resulted in a widespread health crisis, and the resulting impact on governments, businesses and individuals and

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

pandemic has resulted in a widespread health crisis, and the resulting impact on governments, businesses and individuals and actions taken by them in response to the situation have resulted in widespread economic disruptions, significantly affecting broader economies, financial markets, and overall demand for the Company’s products.

In 2021, these impacts continue to be observed, though to a lesser extent than 2020, primarily as a result of broadening access to COVID-19 vaccines and gradual relaxing of some government-mandated restrictions.

actions taken by them in response to the situation have resulted in widespread economic disruptions, significantly affecting broader economies, financial markets, and overall demand for the Company’s products.

While these impacts have lessened in 2021 due to broadening access to COVID-19 vaccines and gradual relaxing of some government-mandated restrictions, the surge of COVID-19 variant viruses in the third quarter of 2021 has led to the reinstatement of restrictions in certain jurisdictions, slowing the overall economic recovery.

The COVID-19 outbreak has caused increased uncertainty in estimates and assumptions affecting the reported amounts of assets and liabilities in the Condensed Consolidated Financial Statements as the extent and period of recovery from the COVID-19 outbreak and related economic disruption are difficult to forecast.

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The Company has classified asbestos-related selling, general and administrative activity in its Condensed Consolidated Statements of Operations as part of Loss from discontinued operations, net of taxes.

Asbestos-related costs, net of taxes were $ 1.6 million and $ 2.5 million during the three and six months ended July 2, 2021, respectively, and $ 1.4 million and $ 2.8 million during the three and six months ended July 3, 2020, respectively .

Asbestos-related costs, net of taxes were $ 1.1 million and $ 3.5 million during the three and nine months ended October 1, 2021, respectively, and $ 2.0 million and $ 4.8 million during the three and nine months ended October 2, 2020, respectively .

See Note 13, “Commitments and Contingencies” for further information.

The Company also recorded Loss from discontinued operations, net of taxes of $ 0.1 million and $ 6.6 million during the three and six months ended July 2, 2021, respectively, and $ 3.5 million and $ 5.5 million during the three and six months ended July 3, 2020, respectively, related to its divested air and gas handling business, including a settlement executed in the first quarter of 2021, as well as certain professional, legal, and consulting fees in 2020.

Cash used in operating activities related to discontinued operations for the six months ended July 2, 2021 and July 3, 2020 was $ 4.6 million and $ 7.9 million, respectively.

The Company completed one acquisition in its Fabrication Technology segment and three acquisitions in its Medical Technology segment during the six months ended July 2, 2021 for total consideration, net of cash received, of $ 215.9 million.

The Company also recorded Loss from discontinued operations, net of taxes of $ 0.2 million and $ 6.8 million during the three and nine months ended October 1, 2021, respectively, and $ 0.6 million and $ 6.2 million during the three and nine months ended October 2, 2020, respectively, related to its divested air and gas handling business, including a settlement executed in the first quarter of 2021, as well as certain professional, legal, and consulting fees in 2020.

Cash used in operating activities related to discontinued operations for the nine months ended October 1, 2021 and October 2, 2020 was $ 7.2 million and $ 18.4 million, respectively.

The Company completed one acquisition in its Fabrication Technology segment and five acquisitions in its Medical Technology segment during the nine months ended October 1, 2021 for net cash consideration of $ 208.1 million and equity consideration of $ 285.7 million.

The acquisitions are accounted for under the acquisition method of accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the respective acquisition date.

The Condensed Consolidated Balance Sheet as of July 2, 2021 reflects our preliminary estimates of fair value and are subject to adjustment.

The Company also made two investments in medical technology businesses during the six months ended July 2, 2021 for a total of $ 14.8 million.

Both investments are carried at cost, as they do not have a readily determinable fair value.

The Condensed Consolidated Balance Sheet as of October 1, 2021 reflects our preliminary estimates of fair value and are subject to adjustment.

The Company also made two investments in medical technology

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

businesses during the nine months ended October 1, 2021 for a total of $ 14.8 million.

Both investments are carried at cost, as they do not have a readily determinable fair value.

In the first quarter of 2021, the Medical Technology segment acquired Trilliant Surgical (“Trilliant”), a national provider of foot and ankle orthopedic implants.

5 unchanged sentences

These two acquisitions were completed for total consideration, net of cash received, of $ 205.4 million, subject to certain adjustments.

Net working capital and intangible assets acquired represent 9 % and 47 % of the total consideration paid for these two acquisitions, respectively, with the residual amount primarily attributable to Goodwill.

The Goodwill acquired in the Trilliant acquisition is expected to be deductible for income tax purposes.

The estimated proforma annual revenues, as if the Trilliant and MedShape acquisitions occurred on January 1, 2021, are approximately 1 % of Colfax’s consolidated revenues.

In addition, on June 7, 2021, the Company entered a definitive agreement to acquire Mathys AG Bettlach (“Mathys”) for total acquisition consideration of approximately $ 285 million, expected to be financed with Colfax common stock.

Net working capital and intangible assets acquired represent 8 % and 46 % of the total consideration exchanged for these two acquisitions, respectively, with the residual amount primarily attributable to Goodwill.

These amounts, as well as useful lives of the intangible assets, deferred taxes, and property, plant and equipment, are determined based upon certain valuations and studies that have yet to be finalized.

The Goodwill acquired in the Trilliant acquisition is deductible for income tax purposes.

The estimated proforma annual revenues of these two acquisitions are approximately 1 % of Colfax’s consolidated revenues.

In the third quarter of 2021, the Medical Technology segment acquired Mathys AG Bettlach (“Mathys”) for total acquisition equity consideration of $ 285.7 million of Colfax Common stock, which included cash acquired of $ 14.7 million.

Mathys, a Switzerland-based company, develops and distributes innovative products for artificial joint replacement, synthetic bone graft solutions, and sports medicine.

The acquisition expands the Medical Technology segment’s reconstructive product portfolio with Mathys’ complimentary surgical solutions and international customer base.

The transaction is expected to close on July 28, 2021 subsequent to the filing of this Form 10-Q, subject to the satisfaction of closing conditions.

The Company’s Fabrication Technology segment formulates, develops, manufactures and supplies consumable products and equipment.

The acquisition expands the Medical Technology segment’s reconstructive product portfolio with Mathys’ complimentary surgical solutions and broadens its international customer base.

The following table summarizes the Company’s best initial estimate of the aggregate fair value of the assets acquired and liabilities assumed at the date of the Mathys acquisition.

These amounts, including inventories, deferred taxes, intangible assets, useful lives of the intangible assets, and property, plant and equipment, are determined based upon certain valuations and studies that have yet to be finalized.

Accordingly, the assets acquired and liabilities assumed, as detailed below, are subject to adjustment once the detailed analyses are completed, which could be material.

None of the Goodwill recognized is expected to be deductible for income tax purposes.

July 28, 2021

(In thousands)

Trade receivables

Property, plant and equipment

Intangible assets

Accounts payable

Other assets and liabilities, net

Consideration, net of cash acquired

The Company’s Fabrication Technology segment formulates, develops, manufactures and supplies consumable products and equipment for use in cutting, joining and automated welding, as well as gas control equipment.

Substantially all revenue from the Fabrication Technology business is recognized at a point in time.

The Company disaggregates its Fabrication Technology revenue into the following product groups:

Three Months Ended Six Months Ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Three Months Ended Nine Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

(In thousands)

6 unchanged sentences

The Company disaggregates its Medical Technology revenue into the following product groups:

Three Months Ended Six Months Ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

Three Months Ended Nine Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

(In thousands)

4 unchanged sentences

(1) For the periods presented, the Prevention & Recovery product group includes bone growth stimulation products, which were previously classified as part of the Reconstructive product group.

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Given the nature of the Fabrication Technology and Medical Technology businesses, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of July 2, 2021 is immaterial.

The nature of the Company’s contracts gives rise to certain types of variable consideration, including rebates, implicit price concessions, and other discounts.

2 unchanged sentences

As of December 31, 2020 and 2019, total contract liabilities were $ 36.6 million and $ 14.8 million, respectively.

During the three and six months ended July 2, 2021, revenue recognized that was included in the contract liability balance at the beginning of the year was $ 5.1 million and $ 19.4 million, respectively.

During the three and six months ended July 3, 2020, revenue recognized that was included in the contract liability balance at the beginning of the year was $ 3.8 million and $ 8.7 million, respectively.

As of July 2, 2021 and July 3, 2020, total contract liabilities were $ 33.5 million and $ 33.1 million, respectively, and were included in Accrued liabilities on the Company’s Condensed Consolidated Balance Sheets.

The contract liabilities as of July 2, 2021 and December 31, 2020 include $ 9.9 million and $ 11.8 million of certain one-time advance payments in the Medical Technology business, respectively.

During the three and nine months ended October 1, 2021, revenue recognized that was included in the contract liability balance at the beginning of the year was $ 6.3 million and $ 25.7 million, respectively.

During the three and nine months ended October 2, 2020, revenue recognized that was included in the contract liability balance at the beginning of the year was $ 4.5 million and $ 13.2 million, respectively.

As of October 1, 2021 and October 2, 2020, total contract liabilities were $ 30.7 million and $ 30.4 million, respectively, and were included in Accrued liabilities on the Company’s Condensed Consolidated Balance Sheets.

The contract liabilities as of October 1, 2021 and December 31, 2020 included $ 7.2 million and $ 11.8 million, respectively, of certain one-time advance payments in the Medical Technology business.

Allowance for Credit Losses

4 unchanged sentences

The expected credit loss model further considers current conditions and reasonable and supportable forecasts using an adjustment for current and projected macroeconomic factors.

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Management identified appropriate macroeconomic indicators based on tangible correlation to historical losses considering the location and risks associated with the Company.

A summary of the activity in the Company’s allowance for credit losses included within Trade receivables in the Condensed Consolidated Balance Sheets is as follows:

Six Months Ended July 2, 2021

Nine Months Ended October 1, 2021

of Period Charged to Expense, net Write-Offs and Deductions Foreign

2 unchanged sentences

Allowance for credit losses $ 37,666 $ ( 17 ) $ ( 2,194 ) $ ( 778 ) $ 34,677

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net Income (Loss) Per Share from Continuing Operations

Net Income Per Share from Continuing Operations

Net income per share from continuing operations was computed as follows:

Three Months Ended Six Months Ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

Three Months Ended Nine Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

(In thousands, except share and per share data)

Computation of Net income (loss) per share from continuing operations - basic:

Net income (loss) from continuing operations attributable to Colfax Corporation (1)

Computation of Net income per share from continuing operations - basic:

Net income from continuing operations attributable to Colfax Corporation (1)

$ 27,092 $ 16,047 $ 83,915 $ 20,319

1 unchanged sentence

159,093,384 136,832,909 150,822,061 136,730,112

Net income (loss) per share from continuing operations – basic

Net income per share from continuing operations – basic

$ 0.17 $ 0.12 $ 0.56 $ 0.15

Computation of Net income (loss) per share from continuing operations - diluted:

Net income (loss) from continuing operations attributable to Colfax Corporation (1)

Computation of Net income per share from continuing operations - diluted:

Net income from continuing operations attributable to Colfax Corporation (1)

$ 27,092 $ 16,047 $ 83,915 $ 20,319

4 unchanged sentences

161,167,095 138,090,610 152,898,393 139,069,906

Net income (loss) per share from continuing operations – diluted

Net income per share from continuing operations – diluted

$ 0.17 $ 0.12 $ 0.55 $ 0.15

(1) Net income (loss) from continuing operations attributable to Colfax Corporation for the respective periods is calculated using Net income (loss) from continuing operations less the income attributable to noncontrolling interest, net of taxes, of $ 1.1 million and $ 2.2 million for the three and six months ended July 2, 2021, respectively, and $ 0.4 million and $ 1.5 million for the three and six months ended July 3, 2020, respectively.

(1) Net income from continuing operations attributable to Colfax Corporation for the respective periods is calculated using Net income from continuing operations less the income attributable to noncontrolling interest, net of taxes, of $ 1.0 million and $ 3.2 million for the three and nine months ended October 1, 2021, respectively, and $ 0.8 million and $ 2.2 million for the three and nine months ended October 2, 2020, respectively.

For all periods presented, the weighted-average shares of Common stock outstanding - basic includes the impact of 18.4 million shares related to the issuance of Colfax’s tangible equity units.

During the three and six months ended July 2, 2021, conversions of the Company’s tangible equity units resulted in the issuance of approximately 6.2 million and 6.5 million shares of Colfax common stock, respectively.

The issued shares are included in the Common stock issued and outstanding as July 2, 2021.

For the six months ended July 3, 2020, the weighted-average shares of Common stock outstanding - diluted includes the impact of an additional 1.9 million potentially issuable dilutive shares related to Colfax’s tangible equity units as a result of the Company’s share price in March 2020.

During the three and nine months ended October 1, 2021, conversions of the Company’s tangible equity units resulted in the issuance of approximately 5.6 million and 12.1 million shares of Colfax common stock, respectively.

All issuances of Colfax common stock related to the tangible equity units were converted at the minimum settlement rate 4.0000 shares of common stock for each purchase contract as a result of the Company’s share price.

The issued shares are included in the Common stock issued and outstanding as of October 1, 2021.

For the nine months ended October 2, 2020, the weighted-average shares of Common stock outstanding - diluted includes the

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

impact of an additional 1.2 million potentially issuable dilutive shares related to Colfax’s tangible equity units as a result of the Company’s share price in March 2020.

See Note 8, “Equity” for details.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three and six months ended July 2, 2021 excludes 1.6 million and 1.3 million, respectively, of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three and six months ended July 3, 2020 excludes 4.9 million and 4.2 million, respectively, of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three and nine months ended October 1, 2021 excludes 0.8 million and 1.3 million, respectively, of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three and nine months ended October 2, 2020 excludes 2.8 million and 4.2 million, respectively, of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the three and six months ended July 2, 2021, Income from continuing operations before income taxes was $ 39.5 million and $ 75.1 million, respectively, while the income tax expense was $ 8.2 million and $ 16.1 million, respectively.

The effective tax rates were 20.7 % and 21.4 % for the three and six months ended July 2, 2021, respectively, which both differed slightly from the 2021 U.S.

federal statutory rate of 21% mainly due to the effective settlements on uncertain tax positions and U.S.

tax credits, offset by withholding taxes, U.S.

tax on international operations, and other non-deductible expenses.

During the three and six months ended July 3, 2020, Loss from continuing operations before income taxes was $ 33.2 million and $ 11.2 million, respectively, while the income tax benefit was $ 30.1 million and $ 16.9 million, respectively.

The effective tax rates were 90.5 % and 151.3 % for the three and six months ended July 3, 2020, respectively.

The effective tax rate for the three months ended July 3, 2020 differed from the 2020 U.S.

federal statutory rate of 21% mainly due to the net impact of U.S.

tax credits and state taxes on the forecasted rate and a $ 6.8 million discrete tax benefit associated with the filing of timely elected changes to U.S.

Federal tax returns to credit rather than to deduct foreign taxes and the realization of tax benefits associated with effective settlements on uncertain tax positions.

These favorable impacts were partially offset by the impact of additional U.S.

tax on international operations and taxable foreign exchange gains.

The effective tax rate for the six months ended July 3, 2020 differed from the 2020 U.S.

During the three and nine months ended October 1, 2021, Income from continuing operations before income taxes was $ 50.5 million and $ 125.6 million, respectively, while income tax expense was $ 22.3 million and $ 38.4 million, respectively.

The effective tax rates were 44.3 % and 30.6 % for the three and nine months ended October 1, 2021, respectively, which both differed from the 2021 U.S.

federal statutory rate of 21% mainly due to withholding taxes, U.S.

tax on international operations, and other non-deductible expenses offset in part by the effective settlements on uncertain tax positions, a benefit from U.S.

state tax losses, and U.S.

The effective tax rate for the three months ended October 1, 2021 was primarily impacted by the relative unfavorable increase in U.S.

tax on international operations due to lower U.S.

forecasted income and increased taxable foreign exchange gains as compared to the three months ended July 2, 2021 and nine months ended October 1, 2021.

During the three and nine months ended October 2, 2020, Income from continuing operations before income taxes was $ 36.4 million and $ 25.2 million, respectively, while income tax expense was $ 19.5 million and $ 2.6 million, respectively.

The effective tax rates were 53.7 % and 10.5 % for the three and nine months ended October 2, 2020, respectively.

The effective tax rate for the three months ended October 2, 2020 differed from the 2020 U.S.

federal statutory rate of 21% mainly due to the net impact of additional U.S.

tax on international operations, withholding taxes, and certain non-deductible expenses.

These unfavorable impacts were partially offset by the impact of U.S.

tax credits, benefit from U.S.

state tax losses, and the realization of tax benefits associated with effective settlements on uncertain tax positions.

The effective tax rate for the nine months ended October 2, 2020 differed from the 2020 U.S.

federal statutory rate of 21%, mainly due to the net impact of U.S.

tax credits and state taxes on the forecasted rate and the previously mentioned discrete tax benefit associated with the filing of timely elected changes to U.S.

tax credits and benefits from U.S.

state tax losses, a discrete tax benefit associated with the filing of timely elected changes to U.S.

Federal tax returns to credit rather than to deduct foreign taxes, the impact of an enacted law change in India, and the realization of tax benefits associated with effective settlements on uncertain tax positions.

These favorable impacts were partially offset by the impact of additional U.S.

tax on international operations and taxable foreign exchange gains.

Income taxes for the six months ended July 3, 2020 were calculated forecasting an estimated annual effective tax rate for the full year.

Income taxes for the three months ended July 3, 2020 were calculated forecasting an estimated annual effective tax rate for the full year less the income tax expense for the period ended April 3, 2020.

tax on international operations, withholding taxes, and certain non-deductible expenses.

In conjunction with the filing of the timely elected changes to credit rather than to deduct foreign taxes, the Company obtained additional foreign tax credit carryforwards.

3 unchanged sentences

On March 19, 2021, the Company completed the underwritten public offering of 16.1 million shares of Colfax Common stock at a price to the public of $ 46.00 per share, resulting in net proceeds of approximately $ 711.3 million, after deducting offering expenses and underwriters’ discount and commissions.

On July 28, 2021, the Company issued 6.5 million shares of Colfax Common stock to the former shareholders of Mathys for acquisition consideration of $ 285.7 million.

Share Repurchase Program

1 unchanged sentence

No repurchases of the Company’s Common stock have been made under this plan since the third quarter of 2018.

As of July 2, 2021, the remaining stock repurchase authorization provided by the Board of Directors was $ 100 million.

As of October 1, 2021, the remaining stock repurchase authorization provided by the Board of Directors was $ 100 million.

The timing, amount and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors.

1 unchanged sentence

Accumulated Other Comprehensive Loss

The following tables present the changes in the balances of each component of Accumulated other comprehensive loss including reclassifications out of Accumulated other comprehensive loss for the six months ended July 2, 2021 and July 3, 2020.

All amounts are net of tax and noncontrolling interest, if any.

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(In thousands)

Balance at January 1, 2021 $ ( 112,783 ) $ ( 360,977 ) $ 21,654 $ ( 452,106 )

Balance at December 31, 2020 $ ( 112,783 ) $ ( 360,977 ) $ 21,654 $ ( 452,106 )

Other comprehensive income (loss) before reclassifications:

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Net Other comprehensive income (loss) 4,282 ( 98,891 ) 14,073 ( 80,536 )

Balance at July 2, 2021 $ ( 110,100 ) $ ( 402,328 ) $ 29,809 $ ( 482,619 )

Balance at October 1, 2021 $ ( 108,501 ) $ ( 459,868 ) $ 35,727 $ ( 532,642 )

COLFAX CORPORATION

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(In thousands)

Balance at January 1, 2020 $ ( 106,500 ) $ ( 421,889 ) $ 44,544 $ ( 483,845 )

Balance at December 31, 2019 $ ( 106,500 ) $ ( 421,889 ) $ 44,544 $ ( 483,845 )

Other comprehensive income (loss) before reclassifications:

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Loss on long-term intra-entity foreign currency transactions — ( 18,023 ) — ( 18,023 )

Gain on net investment hedges — — 1,756 1,756

Loss on net investment hedges — — ( 12,700 ) ( 12,700 )

Other comprehensive income (loss) before reclassifications ( 389 ) ( 49,770 ) ( 10,806 ) ( 60,965 )

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Net Other comprehensive income (loss) 2,425 ( 49,770 ) ( 10,806 ) ( 58,151 )

Balance at July 3, 2020 $ ( 104,284 ) $ ( 522,224 ) $ 45,024 $ ( 581,484 )

Balance at October 2, 2020 $ ( 104,075 ) $ ( 471,659 ) $ 33,738 $ ( 541,996 )

Tangible equity unit (“TEU”) offering

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Net cash of $ 447.7 million was received upon closing.

A portion of the proceeds from the issuance of the TEUs were allocated initially to equity (the “TEU prepaid stock purchase contract”) and debt (the “TEU amortizing notes”) based on the relative fair value of the respective components of each TEU.

A portion of the proceeds from the issuance of the TEUs were allocated initially to equity (the “TEU prepaid stock purchase contracts”) and debt (the “TEU amortizing notes”) based on the relative fair value of the respective components of each TEU.

See Note 10, “Debt” for further information regarding the TEU amortizing notes.

TEU prepaid stock purchase contracts

Unless previously settled at the holder’s option, for each purchase contract the Company will deliver to holders on January 15, 2022 (subject to postponement in certain limited circumstances, the “mandatory settlement date”) a number of shares of common stock.

Unless previously settled at the holder’s option, for each TEU prepaid stock purchase contract the Company will deliver to holders on January 15, 2022 (subject to postponement in certain limited circumstances, the “mandatory settlement date”) a number of shares of common stock.

The number of shares of common stock issuable upon settlement of each purchase contract (the “settlement rate”) will be determined using the arithmetic average of the volume average weighted price for the 20 consecutive trading days beginning on, and including, the 21st scheduled trading day immediately preceding January 15, 2022 (“the Applicable Market Value”) with reference to the following settlement rates:

• if the Applicable Market Value of the common stock is greater than the threshold appreciation price of $ 25.00 , the holder will receive 4.0000 shares of common stock for each purchase contract (the “minimum settlement rate”);

• if the Applicable Market Value of the common stock is greater than the threshold appreciation price of $ 25.00 , the holder will receive 4.0000 shares of common stock for each purchase contract;

• if the Applicable Market Value of the common stock is greater than or equal to the reference price of $ 20.81 , but less than or equal to the threshold appreciation price of $ 25.00 , the holder will receive a number of shares of common stock for each purchase contract having a value, based on the Applicable Market Value, equal to $ 100 ;

• if the Applicable Market Value of the common stock is less than the reference price of $ 20.81 , the holder will receive 4.8054 shares of common stock for each purchase contract (the “maximum settlement rate”).

Earnings per share

Unless the TEU stock purchase contracts are redeemed by the Company or settled earlier at the unit holder’s option, they are mandatorily convertible into shares of Colfax common stock at not less than 4.0 shares per purchase contract or more than 4.8054 shares per purchase contract on January 15, 2022.

• if the Applicable Market Value of the common stock is less than the reference price of $ 20.81 , the holder will receive 4.8054 shares of common stock for each purchase contract.

Earnings per share impact of TEU prepaid stock purchase contracts

Unless the TEU prepaid stock purchase contracts are redeemed by the Company or settled earlier at the unit holder’s option, they are mandatorily convertible into shares of Colfax common stock at not less than 4.0000 shares per purchase contract or more than 4.8054 shares per purchase contract on January 15, 2022.

This corresponds to not less than 18.4 million shares and not more than 22.1 million shares at the maximum.

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The Company includes them in its calculation of weighted-average shares of Common stock outstanding - diluted on a pro rata basis to the extent the effect is not anti-dilutive and the average Applicable Market Value is higher than the reference price but is less than the threshold appreciation price.

During the three and six months ended July 2,

During the three and nine months ended October 1, 2021, 1.4 million and 3.0 million TEU prepaid stock purchase contracts were settled at the holder’s option

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2021, 1.5 million and 1.6 million stock purchase contracts were converted into approximately 6.2 million and 6.5 million shares of Colfax common stock, respectively, at a conversion rate of 4.0 shares per contract.

into approximately 5.6 million and 12.1 million shares of Colfax common stock, respectively, at a conversion rate of 4.0 shares per contract.

Inventories, Net

Inventories, net consisted of the following:

July 2, 2021 December 31, 2020

October 1, 2021 December 31, 2020

(In thousands)

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allowance for excess, slow-moving and obsolete inventory ( 74,376 ) ( 62,840 )

Inventories, net $ 663,540 $ 564,822

$ 780,984 $ 564,822

Long-term debt consisted of the following:

July 2, 2021 December 31, 2020

October 1, 2021 December 31, 2020

(In thousands)

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The Credit Facility contains customary covenants limiting the ability of Colfax and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments or pay dividends.

In addition, the Credit Facility contains financial covenants requiring Colfax to maintain (subject to certain exceptions) (i) a maximum total leverage ratio, calculated as the ratio of Consolidated Net Debt (as defined in the Credit Facility) to EBITDA (as defined in the Credit Facility) of 5.25 :1.00 for the quarter ending June 30, 2021, 4.50 :1.00 for the quarter ending September 30, 2021, 4.25 :1.00 for the quarters ending December 31, 2021 and March 31, 2022, 4.00 :1.00 for the quarters ending June 30, 2022 and September 30, 2022, and 3.50 :1.00 as of December 31, 2022 and for each fiscal quarter ending thereafter, and (ii) a minimum interest coverage ratio of 2.75 :1.00 for each fiscal quarter until June 30, 2021, and then 3.00 :1.00 for the quarters ending September 30, 2021 and thereafter.

The Credit Facility also includes a “springing” collateral provision (based upon the Gross Leverage Ratio as defined in the Amendment to the Credit Facility) which requires the obligations under the Amendment to the Credit Facility to be secured by substantially all personal property of Colfax and its U.S.

In addition, the Credit Facility contains financial covenants requiring Colfax to maintain (subject to certain exceptions) (i) a maximum total leverage ratio, calculated as the ratio of Consolidated Net Debt (as defined in the Credit Facility) to EBITDA (as defined in the Credit Facility) of 4.50 :1.00 for the quarter ending September 30, 2021, 4.25 :1.00 for the quarters ending December 31, 2021 and March 31, 2022, 4.00 :1.00 for the quarters ending June 30, 2022 and September 30, 2022, and 3.50 :1.00 as of December 31, 2022 and for each fiscal quarter ending thereafter, and (ii) a minimum interest coverage ratio of 3.00 :1.00 for the quarters ending September 30, 2021 and thereafter.

The Credit Facility also includes a “springing” collateral provision (based upon the Gross Leverage Ratio as defined in the Credit Facility) which requires the obligations under the Credit Facility to be secured by substantially all personal property of Colfax and its U.S.

subsidiaries and the equity of its first tier foreign subsidiaries, subject to customary exceptions, in the event Colfax’s gross leverage ratio under the Credit Facility is greater than 5.00 :1.00 as of the last day of any fiscal quarter.

The Credit Facility contains various events of default (including failure to comply with the covenants under the Credit Facility and related agreements) and upon an event of default the lenders

The Credit Facility contains various events of default (including failure to comply with the covenants under the Credit Facility and related agreements) and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Term Loan and the Revolver.

As of October 1, 2021, the Company was in compliance with the covenants under the Credit Facility.

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Term Loan and the Revolver.

As of July 2, 2021, the Company was in compliance with the covenants under the Credit Facility.

As of July 2, 2021, the weighted-average interest rate of borrowings under the Credit Facility was 1.84 %, excluding accretion of original issue discount and deferred financing fees, and there was $ 890 million available on the Revolver.

As of October 1, 2021, the weighted-average interest rate of borrowings under the Credit Facility was 1.59 %, excluding accretion of original issue discount and deferred financing fees, and there was $ 850 million available on the Revolver.

Euro Senior Notes

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The quarterly cash installment constitutes a payment of interest and a partial repayment of principal.

The Company paid $ 12.3 million and $ 11.5 million of principal on the TEU amortizing notes in the six months ended July 2, 2021 and July 3, 2020, respectively.

The Company paid $ 18.6 million and $ 17.4 million of principal on the TEU amortizing notes in the nine months ended October 1, 2021 and October 2, 2020, respectively.

The TEU amortizing notes are the direct, unsecured and unsubordinated obligations of the Company and rank equally with all of the existing and future other unsecured and unsubordinated indebtedness of the Company.

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In addition to the debt agreements discussed above, the Company is party to various bilateral credit facilities with a borrowing capacity of $ 170.0 million.

As of July 2, 2021, there were no outstanding borrowings under these facilities.

As of October 1, 2021, there were no outstanding borrowings under these facilities.

The Company is party to letter of credit facilities with an aggregate capacity of $ 292.9 million.

Total letters of credit of $ 70.1 million were outstanding as of July 2, 2021.

Total letters of credit of $ 34.6 million were outstanding as of October 1, 2021.

Deferred Financing Fees

In total, deferred financing fees related to the Company’s debt activities were $ 14.4 million as of July 2, 2021, which will be charged to Interest expense, net, primarily using the effective interest method, over the life of the applicable debt agreements.

In total, deferred financing fees related to the Company’s debt activities were $ 13.3 million as of October 1, 2021, which will be charged to Interest expense, net, primarily using the effective interest method, over the life of the applicable debt agreements.

COLFAX CORPORATION

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Accrued liabilities in the Condensed Consolidated Balance Sheets consisted of the following:

July 2, 2021 December 31, 2020

October 1, 2021 December 31, 2020

(In thousands)

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Other 120,189 104,469

Accrued liabilities $ 425,223 $ 454,333

$ 488,632 $ 454,333

Warranty Liability

The activity in the Company’s warranty liability consisted of the following:

Six Months Ended

July 2, 2021 July 3, 2020

Nine Months Ended

October 1, 2021 October 2, 2020

(In thousands)

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Warranty liability, end of period (1)

$ 18,305 $ 14,991

(1) As of October 1, 2021, $ 17.6 million of the Company’s Warranty liability was included in Accrued expenses, whereas $ 0.7 million of the Company’s Warranty liability was included in Other liabilities on the Company’s Condensed Consolidated Balance Sheet.

COLFAX CORPORATION

3 unchanged sentences

A summary of the activity in the Company’s restructuring liability included in Accrued liabilities and Other liabilities in the Condensed Consolidated Balance Sheets is as follows:

Six Months Ended July 2, 2021

Nine Months Ended October 1, 2021

Balance at Beginning of Period Provisions Payments Foreign Currency Translation Balance at End of Period (3)

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(2) Includes the cost of relocating associates, relocating equipment and lease termination expense in connection with the closure of facilities.

(3) As of July 2, 2021, $ 6.0 million of the Company’s restructuring liability was included in Accrued liabilities, whereas less than $ 0.3 million of the Company’s restructuring liability was included in Other liabilities.

(3) As of October 1, 2021, $ 7.8 million of the Company’s restructuring liability was included in Accrued liabilities, whereas less than $ 0.2 million of the Company’s restructuring liability was included in Other liabilities.

COLFAX CORPORATION

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The carrying values of financial instruments, including Trade receivables and Accounts payable, approximate their fair values due to their short-term maturities.

The $ 1.6 billion and $ 2.3 billion estimated fair value of the Company’s debt as of July 2, 2021 and December 31, 2020, respectively, was based on current interest rates for similar types of borrowings and is in Level Two of the fair value hierarchy.

The $ 1.6 billion and $ 2.3 billion estimated fair value of the Company’s debt as of October 1, 2021 and December 31, 2020, respectively, was based on current interest rates for similar types of borrowings and is in Level Two of the fair value hierarchy.

The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future.

A summary of the Company’s assets and liabilities that are measured at fair value for each fair value hierarchy level for the periods presented is as follows:

October 1, 2021

(In thousands)

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$ — $ 12,662 $ — $ 12,662

There were no transfers in or out of Level One, Two or Three during the six months ended July 2, 2021.

There were no transfers in or out of Level One, Two or Three during the nine months ended October 1, 2021.

COLFAX CORPORATION

1 unchanged sentence

Foreign Currency Contracts

As of July 2, 2021 and December 31, 2020, the Company had foreign currency contracts related to purchases and sales with notional values of $ 322.1 million and $ 250.4 million, respectively.

As of October 1, 2021 and December 31, 2020, the Company had foreign currency contracts related to purchases and sales with notional values of $ 310.6 million and $ 250.4 million, respectively.

The Company recognized the following in its Condensed Consolidated Financial Statements related to its derivative instruments:

Three Months Ended Six Months Ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

Three Months Ended Nine Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

(In thousands)

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The following table summarizes the Company’s Cash and cash equivalents and Restricted cash:

July 2, 2021 December 31, 2020

October 1, 2021 December 31, 2020

(In thousands)

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Asbestos-related claims activity since December 31 is as follows:

Six Months Ended

July 2, 2021 July 3, 2020

Nine Months Ended

October 1, 2021 October 2, 2020

(Number of claims)

7 unchanged sentences

The Company’s Condensed Consolidated Balance Sheets included the following amounts related to asbestos-related litigation:

July 2, 2021 December 31, 2020

October 1, 2021 December 31, 2020

(In thousands)

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The Company conducts its continuing operations through the Fabrication Technology and Medical Technology operating segments, which also represent the Company’s reportable segments.

▪ Fabrication Technology - a leading global supplier of consumable products and equipment for use in the cutting, joining and automated welding, as well as gas control equipment, providing a wide range of products with innovative technologies to solve challenges in a wide range of industries.

▪ Fabrication Technology - a leading global supplier of consumable products and equipment for use in cutting, joining and automated welding, as well as gas control equipment, providing a wide range of products with innovative technologies to solve challenges in a wide range of industries.

• Medical Technology - a leader in orthopedic solutions, providing devices, software and services spanning the full continuum of patient care, from injury prevention to joint replacement to rehabilitation.

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The Company’s segment results were as follows:

Three Months Ended Six Months Ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

Three Months Ended Nine Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

(In thousands)

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(1) Following is a reconciliation of Income (loss) from continuing operations before income taxes to segment operating income:

Three Months Ended Six Months Ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

Three Months Ended Nine Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

(In thousands)

Income (loss) from continuing operations before income taxes $ 39,474 $ ( 33,205 ) $ 75,121 $ ( 11,164 )

Income from continuing operations before income taxes $ 50,450 $ 36,364 $ 125,571 $ 25,200

Pension settlement gain — — ( 11,208 ) —

6 unchanged sentences

Segment operating income $ 72,349 $ 70,848 $ 222,795 $ 136,850

(1) Restructuring and other related charges includes $ 0.9 million and $ 2.7 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three and six months ended July 3, 2020, respectively.

(1) Restructuring and other related charges includes $ 2.2 million and $ 4.9 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three and nine months ended October 2, 2020, respectively.

(2) Primarily related to costs specific to compliance with medical device reporting regulations and other requirements of the European Union MDR.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements