What changed in this filing

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Item 1A. Risk Factors

2022-02-22 compared with 2021-02-18 · 161 added, 63 removed, 398 unchanged (36% of the section changed)

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If any of the following risks were to occur, our business, financial condition, results of operations and liquidity could be materially adversely affected, the value of our Common stock could decline and investors could lose all or part of the value of their investment in Colfax shares.

Risks in this section are grouped in the following categories:

(1) Risks Related to Our Business and Operations;

(2) Risks Related to Our Medical Technology Business;

(3) Risks Related to Litigation and Regulatory Compliance;

(4) Risks Relating to the Separation;

and (5) General and Other Risks.

Many risks affect more than one category, and the risks are not in order of significance or probability of occurrence because they have been grouped by categories.

RISK FACTOR SUMMARY

The following summarizes the principal factors that make an investment in Colfax speculative or risky, all of which are more fully described in the “Risk Factors” section below.

This summary should be read in connection with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business.

The following factors could materially adversely affect our business, financial condition, results of operations, liquidity and the trading price of our common stock.

Risks Related to Our Business and Operations

• An inability to identify suitable acquisition candidates, complete any proposed acquisitions or successfully integrate the businesses we acquire.

• The terms on which additional capital is available.

• Our indebtedness and our debt agreements, which contain restrictions that limit our flexibility in operating our business.

• Our ability to generate sufficient cash to service all of our indebtedness.

• The effects of the COVID-19 global pandemic.

• A continued significant or sustained decline in the levels of new capital investment and maintenance expenditures by certain of our customers, which could reduce the demand for our fabrication technology products and services.

• Our restructuring activities, which may subject us to additional uncertainty in our operating results.

• Any impairment in the value of our intangible assets, including Goodwill.

• The possibility of product liability lawsuits.

• Our information technology infrastructure could be subject to service interruptions, data corruption, cyber-based attacks or network security breaches, which could result in the disruption of operations or the loss of data confidentiality.

• A material disruption at any of our manufacturing facilities.

• Specific risks associated with international operations.

• If our associates represented by trade unions or works councils engage in a strike, work stoppage or other slowdown or if the representation committees responsible for negotiating with such trade unions or works councils are unsuccessful in negotiating new and acceptable agreements when the existing agreements with associates covered by collective bargaining expire.

• Any failure to maintain and protect our intellectual property rights or challenges to these rights by third parties.

• Our defined benefit pension plans and post-retirement medical and death benefit plans are or may become subject to funding requirements or obligations.

• Significant movements in foreign currency exchange rates, which may harm our financial results.

• The availability of raw materials, as well as parts and components used in our products, as well as the impact of raw material, energy and labor price fluctuations and supply shortages.

• The competitive environment in which we operate.

• Changes in our tax rates or exposure to additional income tax liabilities.

Risks Related to Our Medical Technology Business

• Our ability to obtain coverage and adequate levels of reimbursement from third-party payors for our medical device products.

• Federal and state health reform and cost control efforts.

• Failure to comply with government regulations relating to the safety, efficacy, testing, manufacturing, labeling, and marketing of our medical device products.

• Our relationships with leading surgeons who assist with the development and testing of our products and our ability to comply with enhanced disclosure requirements regarding payments to physicians.

• Our reliance on a variety of distribution methods to market and sell our medical device products and our ability to effectively manage the distribution of such products.

• Audits or denials of claims by government agencies, which could reduce our revenues or profits.

• Failure to comply with healthcare and other governmental regulations.

• Managed care and buying groups have put downward pressure on the prices of medical device products.

Risks Related to Litigation and Regulatory Compliance

• Available insurance coverage, the number of future asbestos-related claims and the average settlement value of current and future asbestos-related claims of certain subsidiaries, which could be different than we have estimated.

• Failure to comply with various export control regulations, which could lead to fines or other sanctions.

• Failure to comply with export control regulations, we could be subject to substantial fines or other sanctions.

• Various environmental and health and safety laws for which compliance, or liabilities that arise as a result of noncompliance, could be costly.

• Certain regulatory and financial risks related to climate change.

Risks Relating to the Separation

• Our ability to complete the Separation on the currently contemplated timeline, or at all, and achieve the intended benefits.

• Changes to our financial and operational profile as a result of the Separation.

• If the Separation and/or certain related transactions do not qualify as transactions that are generally tax-free for U.S.

federal income tax purposes, we and our stockholders could be subject to significant tax liabilities.

General and Other Risks

• Changes in the general economy and the cyclical nature of the markets that we serve.

• The loss of key leadership or the inability to attract, develop, engage, and retain qualified employees.

• The issuances of additional Common and Preferred stock or the resale of previously restricted Common stock, which may adversely affect the market price of Colfax Common stock.

• Provisions in our governing documents and Delaware law, and the percentage of Common stock owned by our largest stockholders, which may delay or prevent an acquisition of Colfax that may be beneficial to our stockholders.

Risks Related to Our Business and Operations

Acquisitions have formed a significant part of our growth strategy in the past and are expected to continue to do so.

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The COVID-19 global 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 our products.

It is uncertain when and to what extent these conditions will subside and whether and how quickly businesses will return to levels that existed before the outbreak of the pandemic.

As a result of the COVID-19 outbreak, we have experienced and expect to continue to experience disruptions that severely impact and may continue to severely impact our businesses including, but not limited to:

• Material delays and cancellations of elective medical procedures;

orthopedic clinics and physical therapy centers operating at reduced capacity and only serving critical patients;

and cancellation of professional, college, high school and youth sports programs impacting our Medical Technology business;

• Reductions in levels of new capital investment and maintenance expenditures or a sustained industrial downturn impacting our Fabrication Technology business.

As a result of such impacts, we experienced significant decreases in sales at each of our Medical Technology and Fabrication Technology businesses in 2020 and expect pressures to continue into at least the first quarter of 2021 and possibly beyond.

It is uncertain when and to what extent these conditions will completely subside.

As a result of the COVID-19 outbreak and the emergence and spread of COVID-19 variants, we have experienced and may continue to experience disruptions that severely impact and may continue to severely impact our businesses including, but not limited to:

• Material delays and periodic cancellations of elective medical procedures;

orthopedic clinics and physical therapy centers operating at reduced levels;

and periodic cancellation of professional, college, high school and youth sports programs impacting our Medical Technology business;

• Reductions in levels of new capital investment and maintenance expenditures impacting our Fabrication Technology business.

In 2021, we recognized a strong recovery from the prior year COVID-related sales downturn despite experiencing pressures from the emergence and spread of COVID-19 variants, and we expect these pressures may continue into at least the first quarter of 2022.

To the extent there is a resurgence of COVID-19 or restrictions are reinstated, our businesses could be further negatively impacted.

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Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding, which could adversely affect our businesses, financial condition and results of operations.

The degree to which the COVID-19 situation continues to impact our businesses, results of operations and financial condition, including the duration and magnitude of such impacts, will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, including any resurgences, its severity, the actions to contain the virus or treat its impact, the availability and public acceptance of approved vaccines and how quickly and to what extent normal economic and operating conditions resume.

Even to the extent conditions begin to improve, the duration and sustainability of any such improvements will be uncertain and continuing adverse impacts and/or the degree of improvement may vary dramatically by geography and line of business.

The degree to which the COVID-19 situation continues to impact our businesses, results of operations and financial condition, including the duration and magnitude of such impacts, will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, including any resurgences and spread of COVID-19 variants, its severity, the actions to contain the virus or treat its impact, the availability and public acceptance of approved vaccines and how quickly and to what extent normal economic and operating conditions resume.

Even to the extent conditions improve, the duration and sustainability of any such improvements will be uncertain and continuing adverse impacts and/or the degree of improvement may vary dramatically by geography and line of business.

Additionally, the effects of the COVID-19 pandemic, including actions by governments, businesses and individuals in response, could give rise or contribute to or amplify many of the risks discussed in our other risk factors, included in this Part 1, Item A of this Form 10-K.

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Demand for our fabrication technology products and services depends significantly on the level of new capital investment and planned maintenance expenditures by certain of our customers.

The level of new capital expenditures by our fabrication technology customers is dependent upon many factors, including general economic conditions, availability of credit, economic conditions and investment activities within their respective industries and expectations of future market behavior.

The level of new capital expenditures by our fabrication technology customers is dependent upon many factors, including general economic conditions, availability of credit,

economic conditions and investment activities within their respective industrie s and expectations of future market behavior.

In addition, volatility in commodity prices can negatively affect the level of these new activities and can result in postponement of capital spending decisions or the delay or cancellation of existing orders.

A reduction in demand for our fabrication technology products and services has resulted in the past, and in the future could result in the delay or cancellation of existing orders or lead to excess manufacturing capacity, which unfavorably impacts our absorption of fixed manufacturing costs.

For example, in 2020, we experienced a decline in customer demand for our fabrication technology products and services as a result of the COVID-19 pandemic.

This reduced demand could have a material adverse effect on our business, financial condition and results of operations.

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We assess at least annually whether there has been impairment in the value of our indefinite-lived intangible assets.

If future operating performance at one or more of our business units were to fall significantly below current levels, if competing or alternative technologies emerge, or if market conditions for

an acquired business decline, we could incur, under current applicable accounting rules, a non-cash charge to operating earnings for Goodwill impairment.

If future operating performance at one or more of our business units were to fall significantly below current levels, if competing or alternative technologies emerge, or if market conditions for an acquired business decline, we could incur, under current applicable accounting rules, a non-cash charge to operating earnings for Goodwill impairment.

Any determination requiring the write-off of a significant portion of unamortized intangible assets would adversely affect our business, financial condition, results of operations and total capitalization, the effect of which could be material.

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Any such future attacks could have a material adverse effect on our business, financial condition, results of operations or liquidity.

We can provide no assurance that our efforts to actively manage technology risks potentially

affecting our systems and networks will be successful in eliminating or mitigating risks to our systems, networks and data or in effectively resolving such risks when they materialize.

We can provide no assurance that our efforts to actively manage technology risks potentially affecting our systems and networks will be successful in eliminating or mitigating risks to our systems, networks and data or in effectively resolving such risks when they materialize.

A failure of or breach in information technology security of our own systems, or those of our third-party vendors, could expose us and our employees, customers, dealers and suppliers to risks of misuse of information or systems, the compromise of confidential information, manipulation and destruction of data, defective products, production downtimes and operations disruptions.

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A material disruption at any of our manufacturing facilities could adversely affect our ability to generate sales and meet customer demand.

If operations at any of our manufacturing facilities were to be disrupted as a result of a significant equipment failure, natural disaster, power outage, fire, explosion, terrorism, cyber-based attack, health epidemic or pandemic or other contagious outbreak, such as the COVID-19 pandemic, adverse weather conditions, labor dispute or other reason, our financial performance could be adversely affected as a result of our inability to meet customer demand for our products.

If operations at any of our manufacturing facilities were to be disrupted as a result of a significant equipment failure, natural disaster or adverse weather conditions (including events that may be caused or exacerbated by climate change), power outage, fire, explosion, terrorism, cyber-based attack, health epidemic or pandemic or other contagious outbreak, such as the COVID-19 pandemic, labor dispute or shortage or other reason, our financial performance could be adversely affected as a result of our inability to meet customer demand for our products.

Interruptions in production could increase our costs and reduce our sales.

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difficulties in hiring and maintaining qualified staff and managing geographically diverse operations;

the disruption of operations from natural disasters, world health events, including the COVID-19 pandemic, labor or political disturbances, terrorist activities, insurrection or war;

the disruption of operations from natural disasters or adverse weather conditions (including events that may be caused or exacerbated by climate change), world health events, including the COVID-19 pandemic, labor or political disturbances, terrorist activities, insurrection or war;

the imposition of additional foreign governmental controls or regulations on the sale of our products;

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policy regarding international trade, including import and export regulation and international trade agreements, could also negatively impact our business.

In 2018, the United States imposed tariffs on steel and aluminum as well as on goods imported from China and certain other countries, which has resulted in

retaliatory tariffs by China and other countries.

In 2018, the United States imposed tariffs on steel and aluminum as well as on goods imported from China and certain other countries, which has resulted in retaliatory tariffs by China and other countries.

Additional tariffs imposed by the United States on a broader range of imports, or further retaliatory trade measures taken by China or other countries in response, could result in an increase in supply chain costs that we may not be able to offset or otherwise adversely impact our results of operations.

The impact of the United Kingdom’s withdrawal from the European Union and its full effects are still uncertain and will depend on among other things, the financial, trade, regulatory, and legal implications of the trade and cooperation agreement the United Kingdom and the European Union enter into and any future agreements.

This uncertainty regarding the economic outlook of the United Kingdom has caused, and may continue to cause, volatility in foreign exchange rates, which could have an adverse effect on our revenue growth in future periods.

Any trade barriers resulting from the exit may disrupt distribution channels, increase our Cost of sales, and limit our ability to achieve future product margin growth.

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If our associates represented by trade unions or works councils were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations.

Such disruption could interfere with our business operations and could lead to decreased productivity, increased labor costs and lost revenue.

The representation committees that negotiate with the foreign trade unions or works councils on our behalf may not be successful in negotiating new collective bargaining agreements or other employment arrangements when the current ones expire.

Such disruption could interfere with our business operations and could lead to decreased productivity, increased labor costs and lost revenue, as well as adversely impact our reputation.

The representation committees that negotiate with the foreign trade unions or works councils on our behalf may

not be successful in negotiating new collective bargaining agreements or other employment arrangements when the current ones expire.

Furthermore, future labor negotiations could result in significant increases in our labor costs.

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Claims of intellectual property infringement and litigation regarding patent and other intellectual property rights are commonplace in the medical technology industry.

Any claims of intellectual property infringement may subject us to costly and

time-consuming defense actions and, should our defenses not be successful, may result in the payment of damages, redesign of affected products, entry into settlement or license agreements, or a temporary or permanent injunction prohibiting us from manufacturing, marketing or selling certain of our products.

Any claims of intellectual property infringement may subject us to costly and time-consuming defense actions and, should our defenses not be successful, may result in the payment of damages, redesign of affected products, entry into settlement or license agreements, or a temporary or permanent injunction prohibiting us from manufacturing, marketing or selling certain of our products.

It is also possible that others will independently develop technology that will compete with our patented or unpatented technology.

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dollars using exchange rates effective during the respective period.

As a result, we are exposed to movements in the exchange rates of various currencies against the U.S.

As a result, we are exposed to movements in the

exchange rates of various currencies against the U.S.

Further, we may be subject to foreign currency translation losses depending upon whether foreign nations devalue their currencies.

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Any significant change in the supply of, or price for, these raw materials, parts or components could materially affect our business, financial condition and results of operations.

In addition, delays in the delivery of raw materials, parts or components by suppliers could cause delays in our delivery of products to our customers.

Certain of our products use components obtained from single sources.

For example, the microprocessor used in our OL1000 and SpinaLogic devices is from a single manufacturer.

Establishment of additional or replacement suppliers for these components cannot be accomplished quickly and the loss of a single-source supplier, the deterioration of our relationship with a

single-source supplier, or any unilateral modification to the contractual terms under which we are supplied components by a single-source supplier could have a material adverse effect on our business, financial condition and results of operations.

Establishment of additional or replacement suppliers for these components cannot be accomplished quickly and the loss of a single-source supplier, the deterioration of our relationship with a single-source supplier, or any unilateral modification to the contractual terms under which we are supplied components by a single-source supplier could have a material adverse effect on our business, financial condition and results of operations.

In addition, we rely on third parties to manufacture some of our medical device products.

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The loss of suppliers in these areas, any other interruption or delay in the supply of required materials or our inability to obtain these materials at acceptable prices and within a reasonable amount of time could impair our ability to meet scheduled product deliveries to our customers and could hurt our reputation and cause customers to cancel orders.

We are vulnerable to raw material, energy and labor price fluctuations and supply shortages, which have impacted and could continue to impact our results of operations, financial condition and cash flows.

In the normal course of our business, we are exposed to market risks related to the availability of and price fluctuations in the purchase of raw materials, energy and commodities used in the manufacturing of our products (including steel and oil).

The availability and prices for raw materials, energy and commodities are subject to volatility and are influenced by worldwide economic conditions, including the current rising inflationary pressure.

They are also influenced by import duties and tariffs speculative action, world supply and demand balances, inventory levels, availability of substitute materials, currency exchange rates, anticipated or perceived shortages, geopolitical tensions, government trade practices and regulations and other factors.

Further, the labor market for skilled manufacturing remains tight as the U.S.

and global economy recovers after the COVID-19 pandemic shutdowns, and our labor costs have increased as a result.

Energy, commodity, raw material energy, labor and other cost inflation has impacted and could continue to impact our results of operations, financial condition and cash flows.

The markets we serve are highly competitive and some of our competitors may have superior resources.

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As a result, those competitors may be better able to withstand the effects of periodic economic downturns.

In addition, pricing pressures could cause us to lower the prices of some of our products to stay competitive.

In addition, pricing pressures could cause us to adjust the prices of some of our products to stay

The development of new technologies by competitors that may compete with our technologies could reduce demand for our products and affect our financial performance.

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A number of countries where we do business, including the United States and many countries in the European Union, have implemented, and are considering implementing, changes in relevant tax, accounting and other laws, regulations and interpretations.

Moreover, the recent change in the U.S.

presidential administration may increase the likelihood of changes to U.S.

federal income tax law.

Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are subject to potential evolution.

For example, an outgrowth of the Organization for Economic Co-operation and Development’s (“OECD”) original Base Erosion and Profit Shifting (“BEPS”) project is an ongoing project undertaken by the 139 member countries of the expanded OECD Inclusive Framework focused on “Addressing the Challenges of the Digitalization of the Economy,” which may impact all multinational businesses by potentially redefining jurisdictional taxation rights with Pillar One and Pillar Two blueprints.

As these and other tax laws, regulations and norms change or evolve, our financial results could

be materially impacted.

For example, the Organization for Economic Co-operation and Development’s (“OECD”), a global coalition of member countries, proposed a two-pillar plan to reform international taxation.

The proposals aim to ensure a fairer distribution of profits among countries and to impose a floor on tax competition through the introduction of a global minimum tax.

As these and other tax laws, regulations and norms change or evolve, our financial results could be materially impacted.

Given the unpredictability of these possible changes, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our financial results.

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If these audits result in assessments different from amounts recorded, our future financial results may include unfavorable tax adjustments.

Risk Related to Our Medical Technology Business

Risks Related to Our Medical Technology Business

If coverage and adequate levels of reimbursement from third-party payors for our medical device products are not obtained, healthcare providers and patients may be reluctant to use our medical device products, our margins may suffer and revenue and profits may decline.

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For instance, they may attempt to control costs by (i) authorizing fewer elective surgical procedures, including joint reconstructive surgeries, (ii) requiring the use of the least expensive product available, (iii) reducing the reimbursement for or limiting the number of authorized visits for rehabilitation procedures, (iv) bundling reimbursement for all services related to an episode of care, or (v) otherwise restricting coverage or reimbursement of our medical device products or procedures using these products.

Medicare payment for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (“DMEPOS”) also can be impacted by the DMEPOS competitive bidding program, under which Medicare rates are based on bid amounts for certain products in designated geographic areas, rather than the Medicare fee schedule amount.

products in designated geographic areas, rather than the Medicare fee schedule amount.

Only those suppliers selected through the competitive bidding process within each designated competitive bidding area (“CBA”) are eligible to have their products reimbursed by Medicare.

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Such laws could reduce the number of potential customers by restricting our sales representatives’ activities in those jurisdictions or reduce demand for our products by reducing the number of professionals who fit and sell them.

addition, legislation has been adopted, but not implemented to date, requiring that certain certification or licensing requirements be met for individuals and suppliers furnishing certain custom-fabricated orthotic devices as a condition of Medicare payment.

In addition, legislation has been adopted, but not implemented to date, requiring that certain certification or licensing requirements be met for individuals and suppliers furnishing certain custom-fabricated orthotic devices as a condition of Medicare payment.

Medicare currently follows state policies in those states that require the use of an orthotist or prosthetist for furnishing of orthotics or prosthetics.

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On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

The Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) enacted on April 16, 2015, repealed the formula by which Medicare made annual payment adjustments to physicians and replaced the former formula with fixed annual updates and a new system of incentive payments that became effective in 2019 that are based on various performance measures and physicians’ participation in alternative payment models such as accountable care organizations.

physicians’ participation in alternative payment models such as accountable care organizations.

It is unclear what effect new quality and payment programs, such as MACRA, may have on our business, financial condition, results of operations or cash flows.

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If we or any of our contract manufacturers’ or component suppliers’ facilities fail a quality system inspection, our product sales and profitability could be adversely affected.

significant civil or criminal exposure, administrative obligations and costs, and/or other potential penalties from, and/or agreements with, the federal government.

In addition, the FDA has taken the position that device manufacturers are prohibited from promoting their products other than for the uses and indications set forth in the approved product labeling, and any failure to comply could subject us to significant civil or criminal exposure, administrative obligations and costs, and/or other potential penalties from, and/or agreements with, the federal government.

With respect to our operations in the EU, we have incurred and will need to incur additional costs to comply, which may be significant.

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The success of our surgical implant products depends on our relationships with leading surgeons who assist with the development and testing of our products, and our ability to comply with enhanced disclosure requirements regarding payments to physicians.

A key aspect of the development and sale of our surgical implant products is the use of designing and consulting arrangements with orthopedic surgeons who are highly qualified and experienced in their field.

A key aspect of the development of our surgical implant products is the use of designing and consulting arrangements with orthopedic surgeons who are highly qualified and experienced in their field.

These surgeons assist in the development and clinical testing of new surgical implant products.

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As part of our Medical Technology business, we submit claims on behalf of patients directly to, and receive payments directly from, the Medicare and Medicaid programs and private payors.

Therefore, we are subject to extensive government

regulation, including detailed requirements for submitting reimbursement claims under appropriate codes and maintaining certain documentation to support our claims.

Therefore, we are subject to extensive government regulation, including detailed requirements for submitting reimbursement claims under appropriate codes and maintaining certain documentation to support our claims.

Medicare contractors and Medicaid agencies periodically conduct pre- and post-payment reviews and other audits of claims and are under increasing pressure to more closely scrutinize healthcare claims and supporting documentation.

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We expect a continued emphasis on healthcare cost controls, alternate payment models such as bundled payments, and managed care in the United States and in these international markets, which could put further downward pressure on product pricing, which, in turn may adversely affect our sales and profitability.

We have experienced and may continue to experience increases in the cost of raw materials and freight costs in our supply chain due to inflation and COVID-related impacts, which we have responded to through pricing increases to our customers.

To the extent we are unable to pass these costs onto our customers due to contractual pricing with managed care or buying groups, there could be an material adverse impact on our results of operations and financial condition.

Risks Related to Litigation and Regulatory Compliance

Available insurance coverage, the number of future asbestos-related claims and the average settlement value of current and future asbestos-related claims of certain subsidiaries could be different than we have estimated, which could materially and adversely affect our business, financial condition and results of operations.

Certain of our subsidiaries are one of many defendants in a large number of lawsuits that claim personal injury as a result of exposure to asbestos from products manufactured with components that are alleged to have contained asbestos.

Certain of our subsidiaries are one of many defendants in a large number of lawsuits that claim personal injury as a result of exposure to asbestos from products manufactured or used with components that are alleged to have contained asbestos.

Such components were acquired from third-party suppliers and were not manufactured by any of our subsidiaries nor were the subsidiaries producers or direct suppliers of asbestos.

Additionally, pursuant to the definitive purchase agreements related to the sale of our Fluid Handling and Howden businesses, we have retained the asbestos-related contingencies and insurance coverage related to these businesses, even though we do not retain an interest in the ongoing operations of the Fluid Handling or Howden businesses.

Additionally, pursuant to the definitive purchase agreements related to the sale of our Fluid Handling and Howden businesses, we and our subsidiaries have retained the asbestos-related contingencies and insurance coverage related to these businesses, even though we and our subsidiaries sold the operating assets of the Fluid Handling or Howden businesses.

For the purposes of our financial statements, we have estimated the future claims exposure and the amount of insurance available based upon certain assumptions with respect to future claims and liability costs.

We estimate the liability

costs to be incurred in resolving pending and forecasted claims for the next 15-year period as well as the amount of insurance proceeds available for such claims.

We estimate the liability costs to be incurred in resolving pending and forecasted claims for the next 15-year period as well as the amount of insurance proceeds available for such claims.

We reevaluate these estimates regularly.

Although we believe our current estimates are reasonable, a change in the time period used for forecasting our liability costs, the actual number of future claims brought against us, the cost of resolving these claims, the likelihood of payment by, and the solvency of, insurers and the amount of remaining insurance available could be substantially different than our estimates, and future revaluation of our liabilities and insurance recoveries could result in material adjustments to these estimates, any of which could materially and adversely affect our business, financial condition and results of operations.

In addition, we incur defense costs related to those claims, a portion of which has historically been reimbursed by our insurers.

We also incur litigation costs in connection with actions against certain of the subsidiaries’ insurers relating to insurance coverage.

In addition, we incur defense, settlement, and/or judgment costs related to those claims, a portion of which has historically been reimbursed by our insurers.

We also incur legal costs in connection with efforts to recover insurance from certain of the subsidiaries’ insurers relating to insurance coverage.

These costs may be significant, and we may not be able to predict the amount or duration of such costs.

Additionally, we may experience delays in receiving reimbursement from insurers, during which time we may be required to pay cash for settlement or legal defense costs.

Any increase in the actual number of future claims brought against us, the defense costs of resolving these claims, the costs of pursuing claims against our insurers, the likelihood and timing of payment by, and the solvency of, insurers and the amount of remaining insurance available, could materially and adversely affect our business, financial condition and results of operations.

Any increase in the actual number of future claims brought against us, the costs of defending or resolving these claims, the costs of pursuing claims against our insurers, the likelihood and timing of payment by, and the solvency of, insurers and the amount of remaining insurance available, could materially and adversely affect our business, financial condition and results of operations.

We have done and may continue to do business in countries subject to U.S.

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Specifically, from time to time, certain of our independent foreign subsidiaries sell products to companies and entities located in, or controlled by the governments of, certain countries that are or have previously been subject to sanctions and embargoes imposed by the U.S.

government, the United Nations or other countries where we maintain operations.

government, the United Nations or other

countries where we maintain operations.

With the exception of the U.S.

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Export Administration Regulations, administered by the U.S.

Department of Commerce, Bureau of Industry and Security, which require that an export license is obtained before such products can be exported to certain countries, and the U.S.

Treasury Department’s Office of

Foreign Assets Control’s trade and economic sanctions programs.

Department of Commerce, Bureau of Industry and Security (“BIS”), which require that an export license is obtained before such products can be exported to certain countries, and the U.S.

Treasury Department’s Office of Foreign Assets Control’s (“OFAC”) trade and economic sanctions programs.

Additionally, some of our products are subject to the International Traffic in Arms Regulations, which restrict the export of certain military or intelligence-related items, technologies and services to non-U.S.

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origin goods, either directly or indirectly through distributors, involving sales to specially designated nationals and/or to the Crimea region of Ukraine, which may have been made in violation of relevant trade sanctions or export control laws.

We have submitted a voluntary disclosure report to relevant U.S.

We submitted a voluntary disclosure report to relevant U.S.

government agencies regarding these transactions.

As a result of these transactions, we may be subject to fines or other sanctions.

On March 26, 2021 and August 26, 2021, the Company received letters from BIS and OFAC, respectively, warning the Company against future violations and closing the matter without further action.

The Company has received no further communications from any other relevant U.S.

government agencies.

We are subject to a variety of environmental and health and safety laws for which compliance, or liabilities that arise as a result of noncompliance, could be costly.

Our businesses are subject to international, federal, state and local environmental and safety laws and regulations, including laws and regulations governing emissions of regulated air pollutants;

Our businesses are subject to international, federal, state and local environmental and safety laws and regulations, including laws and regulations governing emissions of regulated air pollutants and greenhouse gases;

discharges of wastewater and storm water;

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In addition, under various federal, state and local laws, regulations and ordinances, and, in some instances, international laws, relating to the protection of the environment, a current or former owner or operator of real property may be liable for the cost to remove or remediate contamination on, under, or released from such property and for any damage to natural resources, such as soil or groundwater, resulting from such contamination.

Similarly, a generator of waste can be held responsible for contamination resulting from the treatment or disposal of such waste at any off-site location (such as a landfill), regardless of whether the generator arranged for the treatment or disposal of the waste in compliance with applicable laws.

Similarly, a generator of waste can be held

responsible for contamination resulting from the treatment or disposal of such waste at any off-site location (such as a landfill), regardless of whether the generator arranged for the treatment or disposal of the waste in compliance with applicable laws.

Costs associated with liability for removal or remediation of contamination or damage to natural resources could be substantial and liability under these laws may attach without regard to whether the responsible party knew of, or was responsible for, the presence of the contaminants.

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The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

We are exposed to certain regulatory and financial risks related to climate change, which could adversely affect our business, financial condition, results of operations and cash flows.

Continuing political and social attention to the issue of climate change has resulted in both existing and pending international agreements and national, regional or local legislation and regulatory measures to limit greenhouse gas emissions, such as cap and trade regimes, carbon taxes, restrictive permitting, increased fuel efficiency standards and incentives or mandates for renewable energy.

Such measures could subject us to additional costs and restrictions and require significant operating and capital expenditures, which could impact our business, financial condition, results of operations and cash flows.

Additionally, such measures may impact our customers, which could impact their ability or desire to continue to operate at similar levels in certain jurisdictions as historically seen or as currently anticipated, which could negatively impact their demand for our products and services.

Risks Relating to the Separation

The separation of our fabrication technology and medical technology business into two, differentiated, independent publicly traded companies may not be completed on the currently contemplated timeline, or at all, and may not achieve the intended benefits.

In March 2021, we announced our intention to separate our fabrication technology and medical technology business into two, differentiated, independent publicly traded companies.

We are targeting completion of the Separation near the end of the first quarter of 2022.

Completion of the Separation is subject to, among other things, completion of financing and other transactions on satisfactory terms, other steps necessary to qualify the Separation as a generally tax-free transaction, receipt of other regulatory approvals, obtaining final approvals from our board of directors and market conditions.

The Separation is complex in nature, and unanticipated developments or changes, including changes in the law, macroeconomic environment and competitive conditions of our markets, the need both to receive regulatory approvals or clearances and to satisfy the requirements to effectuate a generally tax-free transaction, the uncertainty of the financial markets and challenges in executing the Separation, could delay or prevent the completion of the Separation or cause the Separation to occur on terms or conditions that are different or less favorable than expected.

Whether or not we complete the Separation, our ongoing businesses may face material challenges in connection with the Separation, including, but not limited to:

• the diversion of our management’s attention from operating and growing our business as a result of the significant amount of time and effort required to execute the Separation;

• foreseen and unforeseen costs and expenses that will be incurred in connection with the Separation, including accounting, tax, legal and other professional services costs, and potential prepayment charges and write-offs of deferred costs related to establishing new capital structures;

• retaining existing business and operational relationships, including with customers, suppliers and employees, as well as cultivating new business relationships;

• potential negative reactions from the financial markets if we fail to complete the Separation in its currently intended form, within the anticipated time frame or at all.

Additionally, volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets.

Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions.

These conditions may adversely affect our anticipated timeline to complete the Separation and the expected benefits of the Separation, including by increasing the time and expense involved in the Separation.

Other challenges associated with effectively executing the Separation include attracting, retaining and motivating key management and employees during the pendency of the Separation and following its completion, addressing any disruptions to our supply chain, manufacturing, sales and distribution, and other operations resulting from separating our fabrication and specialty medical technology business into two, differentiated, independent publicly traded companies.

Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or the price of our common stock.

Furthermore, if the Separation is completed, we cannot provide assurance that the Separation will achieve the full strategic and financial benefits expected to result from the Separation, nor can we provide assurance that each independent company will be successful in meeting its objectives.

If the Separation occurs, our financial and operational profile will change, and we will be a smaller, less diversified company than we are today.

If the Separation occurs, it will result in two smaller, less diversified companies, each with a more concentrated area of focus.

As a result, each company may be more vulnerable to changing market conditions and competitive pressures, which could have a material adverse effect on our business, financial condition and results of operations.

The diversification of revenues, costs and cash flows will diminish as a result of the Separation, such that each company’s results of operations, cash flows, working capital, effective tax rate and financing requirements may be subject to increased volatility, and each company’s ability to fund capital expenditures, investments and service our debt may be diminished.

There can be no assurance that the combined value of the common stock of the two independent publicly traded companies following the completion of the Separation will be equal to or greater than what the value of our common stock would have been had the Separation not occurred.

If the Separation and/or certain related transactions do not qualify as transactions that are generally tax-free for U.S.

federal income tax purposes, we and our stockholders could be subject to significant tax liabilities.

Notwithstanding that we intend to structure the Separation to generally be a tax-free transaction, the U.S.

Internal Revenue Service (the “IRS”) could determine that the Separation and/or certain related transactions should be treated as taxable transactions for U.S.

federal income tax purposes.

Accordingly, there can be no assurance that the IRS will not assert that the Separation and/or certain related transactions do not qualify for tax-free treatment for U.S.

federal income tax purposes or that a court would not sustain such a challenge.

In the event the IRS were to prevail with such challenge, we and our stockholders could be subject to significant U.S.

federal income tax liability.

If the Separation, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S.

federal income tax purposes under Sections 355 and 368(a)(1)(D) of the U.S.

Internal Revenue Code of 1986, as amended (the “Code”), in general, for U.S.

federal income tax purposes, we would recognize taxable gain as if we had sold the common stock of the separated entity in a taxable sale for its fair market value (unless we and the separated entity jointly make an election under Section 336(e) of the Code with respect to the Separation, in which case, in general, (a) we would recognize taxable gain as if the separated entity had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of its common stock and the assumption of all its liabilities and (b) the separated entity would obtain a related step-up in the basis of its assets), and our stockholders who receive shares of common stock of the separated entity in the Separation would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.

General and Other Risks

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If our customers lack liquidity or are unable to access the credit markets, it may impact customer demand for our products and services and we may not be able to collect amounts owed to us.

Further, our products are

sold in many industries, some of which are cyclical and may experience periodic downturns.

Further, our products are sold in many industries, some of which are cyclical and may experience periodic downturns.

Cyclical weakness in the industries that we serve could lead to reduced demand for our products and affect our profitability and financial performance.

The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

The loss of key leadership could have a material adverse effect on our ability to run our business.

The loss of key leadership or the inability to attract, develop, engage, and retain qualified employees could have a material adverse effect on our ability to run our business.

We may be adversely affected if we lose members of our senior leadership.

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The loss of key leadership or the inability to attract, retain and motivate sufficient numbers of qualified management personnel could have a material adverse effect on our business, financial condition and results of operations.

Additionally, our continued success depends, in part, on our ability to identify and attract qualified candidates with the requisite education, background, and experience as well as our ability to develop, engage, and retain qualified employees.

Failure to attract, develop, engage, and retain qualified employees, whether as a result of an insufficient number of qualified applicants, difficulty in recruiting new employees, or inadequate resources to train, integrate, and retain qualified employees, could impair our ability to execute our business strategy and could have a material adverse effect on our business, financial condition and results of operations.

The issuances of additional Common and Preferred stock or the resale of previously restricted Common stock may adversely affect the market price of Colfax Common stock.

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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-K

Item 1A. Risk Factors