cfx-20210402
Colfax CORP0001420800--12-31falseFY202100014208002021-01-012021-04-020001420800us-gaap:CommonStockMember2021-01-012021-04-020001420800cfx:TangibleEquityUnitMember2021-01-012021-04-02xbrli:shares00014208002021-04-02iso4217:USD00014208002020-01-012020-04-03iso4217:USDxbrli:shares00014208002020-12-310001420800us-gaap:CommonStockMember2020-12-310001420800us-gaap:AdditionalPaidInCapitalMember2020-12-310001420800us-gaap:RetainedEarningsMember2020-12-310001420800us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001420800us-gaap:NoncontrollingInterestMember2020-12-310001420800us-gaap:RetainedEarningsMember2021-01-012021-04-020001420800us-gaap:NoncontrollingInterestMember2021-01-012021-04-020001420800us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-04-020001420800us-gaap:CommonStockMember2021-01-012021-04-020001420800us-gaap:AdditionalPaidInCapitalMember2021-01-012021-04-020001420800us-gaap:CommonStockMember2021-04-020001420800us-gaap:AdditionalPaidInCapitalMember2021-04-020001420800us-gaap:RetainedEarningsMember2021-04-020001420800us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-020001420800us-gaap:NoncontrollingInterestMember2021-04-020001420800us-gaap:CommonStockMember2019-12-310001420800us-gaap:AdditionalPaidInCapitalMember2019-12-310001420800us-gaap:RetainedEarningsMember2019-12-310001420800us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001420800us-gaap:NoncontrollingInterestMember2019-12-3100014208002019-12-310001420800us-gaap:RetainedEarningsMembercfx:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001420800cfx:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001420800us-gaap:RetainedEarningsMember2020-01-012020-04-030001420800us-gaap:NoncontrollingInterestMember2020-01-012020-04-030001420800us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-04-030001420800us-gaap:CommonStockMember2020-01-012020-04-030001420800us-gaap:AdditionalPaidInCapitalMember2020-01-012020-04-030001420800us-gaap:CommonStockMember2020-04-030001420800us-gaap:AdditionalPaidInCapitalMember2020-04-030001420800us-gaap:RetainedEarningsMember2020-04-030001420800us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-030001420800us-gaap:NoncontrollingInterestMember2020-04-0300014208002020-04-030001420800cfx:AirandGasHandlingBusinessMember2021-01-012021-04-020001420800cfx:AirandGasHandlingBusinessMember2020-01-012020-04-030001420800cfx:Q12021AcquisitionsMember2021-01-012021-04-020001420800cfx:MedicalTechnologyBusinessesMember2021-01-012021-04-020001420800cfx:TrilliantSurgicalMember2021-01-012021-04-02xbrli:pure0001420800cfx:TrilliantSurgicalMember2021-04-020001420800cfx:EquipmentProductsMembercfx:FabricationTechnologyMember2021-01-012021-04-020001420800cfx:EquipmentProductsMembercfx:FabricationTechnologyMember2020-01-012020-04-030001420800cfx:ConsumableProductsMembercfx:FabricationTechnologyMember2021-01-012021-04-020001420800cfx:ConsumableProductsMembercfx:FabricationTechnologyMember2020-01-012020-04-030001420800cfx:FabricationTechnologyMember2021-01-012021-04-020001420800cfx:FabricationTechnologyMember2020-01-012020-04-03cfx:salesChannel0001420800cfx:PreventionRehabilitationMembercfx:MedicalTechnologyMember2021-01-012021-04-020001420800cfx:PreventionRehabilitationMembercfx:MedicalTechnologyMember2020-01-012020-04-030001420800cfx:MedicalTechnologyMembercfx:ReconstructiveMember2021-01-012021-04-020001420800cfx:MedicalTechnologyMembercfx:ReconstructiveMember2020-01-012020-04-030001420800cfx:MedicalTechnologyMember2021-01-012021-04-020001420800cfx:MedicalTechnologyMember2020-01-012020-04-030001420800cfx:TangibleEquityUnitMember2020-01-012020-04-03utr:Rate0001420800cfx:UnderwrittenPublicOfferingMember2021-03-192021-03-190001420800cfx:UnderwrittenPublicOfferingMember2021-03-190001420800cfx:PensionAndOtherPostretirementBenefitPlansDefinedBenefitMember2020-12-310001420800us-gaap:AccumulatedTranslationAdjustmentMember2020-12-310001420800cfx:UnrealizedGainLossOnHedgingActivitiesMember2020-12-310001420800cfx:PensionAndOtherPostretirementBenefitPlansDefinedBenefitMember2021-01-012021-04-020001420800us-gaap:AccumulatedTranslationAdjustmentMember2021-01-012021-04-020001420800cfx:UnrealizedGainLossOnHedgingActivitiesMember2021-01-012021-04-020001420800us-gaap:DesignatedAsHedgingInstrumentMember2021-01-012021-04-020001420800cfx:PensionAndOtherPostretirementBenefitPlansDefinedBenefitMember2021-04-020001420800us-gaap:AccumulatedTranslationAdjustmentMember2021-04-020001420800cfx:UnrealizedGainLossOnHedgingActivitiesMember2021-04-020001420800cfx:PensionAndOtherPostretirementBenefitPlansDefinedBenefitMember2019-12-310001420800us-gaap:AccumulatedTranslationAdjustmentMember2019-12-310001420800cfx:UnrealizedGainLossOnHedgingActivitiesMember2019-12-310001420800cfx:PensionAndOtherPostretirementBenefitPlansDefinedBenefitMember2020-01-012020-04-030001420800us-gaap:AccumulatedTranslationAdjustmentMember2020-01-012020-04-030001420800cfx:UnrealizedGainLossOnHedgingActivitiesMember2020-01-012020-04-030001420800us-gaap:DesignatedAsHedgingInstrumentMember2020-01-012020-04-030001420800cfx:PensionAndOtherPostretirementBenefitPlansDefinedBenefitMember2020-04-030001420800us-gaap:AccumulatedTranslationAdjustmentMember2020-04-030001420800cfx:UnrealizedGainLossOnHedgingActivitiesMember2020-04-0300014208002019-01-112019-01-1100014208002019-01-110001420800srt:MinimumMember2021-04-020001420800srt:MaximumMember2021-04-020001420800cfx:TermLoanMember2021-04-020001420800cfx:TermLoanMember2020-12-310001420800cfx:EuroSeniorNotesMember2021-04-020001420800cfx:EuroSeniorNotesMember2020-12-310001420800cfx:A2024And2026NotesMember2021-04-020001420800cfx:A2024And2026NotesMember2020-12-310001420800cfx:TEUAmortizingNotesMember2021-04-020001420800cfx:TEUAmortizingNotesMember2020-12-310001420800us-gaap:RevolvingCreditFacilityMember2021-04-020001420800us-gaap:RevolvingCreditFacilityMember2020-12-310001420800cfx:NewRevolvingCreditFacilityMemberus-gaap:RevolvingCreditFacilityMembercfx:DJOGlobalIncFinancingFacilitiesMember2021-04-020001420800cfx:TermA1LoanMember2021-04-020001420800cfx:NewRevolvingCreditFacilityMembercfx:DJOGlobalIncFinancingFacilitiesMember2018-12-172018-12-170001420800cfx:AmendedCreditFacilityMember2021-03-310001420800srt:ScenarioForecastMembercfx:AmendedCreditFacilityMember2021-06-300001420800srt:ScenarioForecastMembercfx:AmendedCreditFacilityMember2021-09-300001420800srt:ScenarioForecastMembercfx:AmendedCreditFacilityMember2021-12-310001420800srt:ScenarioForecastMembercfx:AmendedCreditFacilityMember2022-03-310001420800srt:ScenarioForecastMembercfx:AmendedCreditFacilityMember2022-09-300001420800cfx:AmendedCreditFacilityMember2020-05-01iso4217:EUR0001420800us-gaap:SeniorNotesMember2017-04-192017-04-190001420800us-gaap:SeniorNotesMember2021-04-020001420800cfx:A2024NotesMember2019-02-052019-02-050001420800cfx:A2024NotesMember2019-02-050001420800cfx:A2026NotesMember2019-02-052019-02-050001420800cfx:A2026NotesMember2019-02-050001420800cfx:A2026NotesMemberus-gaap:SubsequentEventMember2021-04-240001420800cfx:BilateralagreementsMember2021-04-020001420800us-gaap:EmployeeSeveranceMembercfx:FabricationTechnologyMember2020-12-310001420800us-gaap:EmployeeSeveranceMembercfx:FabricationTechnologyMember2021-01-012021-04-020001420800us-gaap:EmployeeSeveranceMembercfx:FabricationTechnologyMember2021-04-020001420800cfx:FabricationTechnologyMemberus-gaap:FacilityClosingMember2020-12-310001420800cfx:FabricationTechnologyMemberus-gaap:FacilityClosingMember2021-01-012021-04-020001420800cfx:FabricationTechnologyMemberus-gaap:FacilityClosingMember2021-04-020001420800cfx:FabricationTechnologyMember2020-12-310001420800cfx:FabricationTechnologyMember2021-04-020001420800cfx:MedicalTechnologyMemberus-gaap:EmployeeSeveranceMember2020-12-310001420800cfx:MedicalTechnologyMemberus-gaap:EmployeeSeveranceMember2021-01-012021-04-020001420800cfx:MedicalTechnologyMemberus-gaap:EmployeeSeveranceMember2021-04-020001420800cfx:MedicalTechnologyMemberus-gaap:FacilityClosingMember2020-12-310001420800cfx:MedicalTechnologyMemberus-gaap:FacilityClosingMember2021-01-012021-04-020001420800cfx:MedicalTechnologyMemberus-gaap:FacilityClosingMember2021-04-020001420800cfx:MedicalTechnologyMember2020-12-310001420800cfx:MedicalTechnologyMember2021-04-020001420800us-gaap:AccruedLiabilitiesMember2021-04-020001420800us-gaap:OtherNoncurrentLiabilitiesMember2021-04-020001420800us-gaap:FairValueInputsLevel1Member2021-04-020001420800us-gaap:FairValueInputsLevel2Membercfx:CustomerSalesContractsMember2021-04-020001420800cfx:CustomerSalesContractsMember2021-04-020001420800us-gaap:FairValueInputsLevel2Member2021-04-020001420800us-gaap:FairValueInputsLevel1Member2020-04-030001420800us-gaap:FairValueInputsLevel2Membercfx:CustomerSalesContractsMember2020-04-030001420800cfx:CustomerSalesContractsMember2020-04-030001420800us-gaap:FairValueInputsLevel2Member2020-04-030001420800us-gaap:NondesignatedMembercfx:CustomerSalesContractsMember2021-01-012021-04-020001420800us-gaap:NondesignatedMembercfx:CustomerSalesContractsMember2020-01-012020-04-03cfx:segment0001420800us-gaap:CorporateAndOtherMember2021-01-012021-04-020001420800us-gaap:CorporateAndOtherMember2020-01-012020-04-030001420800us-gaap:CostOfSalesMember2020-01-012020-04-030001420800cfx:A2024And2026NotesMemberus-gaap:SubsequentEventMember2021-04-240001420800us-gaap:SubsequentEventMembercfx:A2024NotesMember2021-04-242021-04-240001420800cfx:A2026NotesMemberus-gaap:SubsequentEventMember2021-04-242021-04-240001420800us-gaap:SubsequentEventMember2021-04-032021-07-020001420800cfx:MedShapeIncMemberus-gaap:SubsequentEventMember2021-04-232021-04-23

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 2, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number - 001-34045
Colfax Corporation
(Exact name of registrant as specified in its charter)
 
Delaware 54-1887631
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
420 National Business Parkway,5th Floor 
Annapolis Junction,Maryland20701
(Address of principal executive offices) (Zip Code)
(301)323-9000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareCFXNew York Stock Exchange
5.75% Tangible Equity UnitsCFXANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer     Accelerated filer         Non-accelerated filer
Smaller reporting company     Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of April 2, 2021, there were 135,597,331 shares of the registrant’s common stock, par value $.001 per share, outstanding.



TABLE OF CONTENTS
 Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
            Condensed Consolidated Statements of Operations
            Condensed Consolidated Statements of Comprehensive Income (Loss)
            Condensed Consolidated Balance Sheets
            Condensed Consolidated Statements of Equity
            Condensed Consolidated Statements of Cash Flows
            Notes to Condensed Consolidated Financial Statements
                 Note 1. General
                 Note 2. Recently Issued Accounting Pronouncements
                 Note 3. Discontinued Operations
                 Note 4. Acquisitions
                 Note 5. Revenue
                 Note 6. Net Income Per Share from Continuing Operations
                 Note 7. Income Taxes
                 Note 8. Equity
                 Note 9. Inventories, Net
                 Note 10. Debt
                 Note 11. Accrued Liabilities
                 Note 12. Financial Instruments and Fair Value Measurements
                 Note 13. Commitments and Contingencies
                 Note 14. Segment Information
                 Note 15. Subsequent Events
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
SIGNATURES

1


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements


COLFAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Dollars in thousands, except per share amounts
(Unaudited)
Three Months Ended
April 2, 2021April 3, 2020
Net sales$879,211 $816,356 
Cost of sales508,134 468,142 
Gross profit371,077 348,214 
Selling, general and administrative expense305,724 292,197 
Restructuring and other related charges4,046 9,180 
Operating income61,307 46,837 
Interest expense, net25,660 24,796 
Income from continuing operations before income taxes35,647 22,041 
Income tax expense7,917 13,173 
Net income from continuing operations27,730 8,868 
Loss from discontinued operations, net of taxes(7,490)(3,360)
Net income20,240 5,508 
Less: income attributable to noncontrolling interest, net of taxes1,166 1,027 
Net income attributable to Colfax Corporation$19,074 $4,481 
Net income (loss) per share - basic
Continuing operations$0.19 $0.06 
Discontinued operations$(0.05)$(0.02)
Consolidated operations$0.14 $0.03 
Net income (loss) per share - diluted
Continuing operations$0.19 $0.06 
Discontinued operations$(0.05)$(0.02)
Consolidated operations$0.13 $0.03 
    

See Notes to Condensed Consolidated Financial Statements.

2


COLFAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Dollars in thousands
(Unaudited)
Three Months Ended
April 2, 2021April 3, 2020
Net income$20,240 $5,508 
Other comprehensive income (loss):
Foreign currency translation, net of tax expense of $2,280 and $519
(53,181)(172,792)
Unrealized gain on hedging activities, net of tax expense of $4,243 and $3,873
12,381 11,036 
Amounts reclassified from Accumulated other comprehensive loss:
Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $317 and $252
1,055 866 
Other comprehensive loss(39,745)(160,890)
Comprehensive loss(19,505)(155,382)
Less: comprehensive income (loss) attributable to noncontrolling interest1,042 (1,567)
Comprehensive loss attributable to Colfax Corporation$(20,547)$(153,815)


See Notes to Condensed Consolidated Financial Statements.

3


COLFAX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollars in thousands, except share amounts
(Unaudited)
April 2, 2021December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$763,653 $97,068 
Trade receivables, less allowance for credit losses of $35,560 and $37,666
553,785 517,006 
Inventories, net606,208 564,822 
Prepaid expenses75,205 69,515 
Other current assets79,114 113,418 
Total current assets2,077,965 1,361,829 
Property, plant and equipment, net479,240 486,960 
Goodwill3,331,531 3,314,541 
Intangible assets, net1,652,957 1,663,446 
Lease asset - right of use170,620 173,942 
Other assets354,301 350,831 
Total assets$8,066,614 $7,351,549 
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt$727,369 $27,074 
Accounts payable406,744 330,251 
Accrued liabilities424,298 454,333 
Total current liabilities1,558,411 811,658 
Long-term debt, less current portion1,481,997 2,204,169 
Non-current lease liability137,329 139,230 
Other liabilities597,808 608,618 
Total liabilities3,775,545 3,763,675 
Equity:
Common stock, $0.001 par value; 400,000,000 shares authorized; 135,597,331 and 118,496,687 issued and outstanding as of April 2, 2021 and December 31, 2020, respectively
135 118 
Additional paid-in capital4,201,745 3,478,008 
Retained earnings536,441 517,367 
Accumulated other comprehensive loss(491,727)(452,106)
Total Colfax Corporation equity4,246,594 3,543,387 
Noncontrolling interest44,475 44,487 
Total equity4,291,069 3,587,874 
Total liabilities and equity$8,066,614 $7,351,549 


See Notes to Condensed Consolidated Financial Statements.

4


COLFAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Dollars in thousands, except share amounts and as noted
(Unaudited)
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestTotal
SharesAmount
Balance at December 31, 2020118,496,687 $118 $3,478,008 $517,367 $(452,106)$44,487 $3,587,874 
Net income— — — 19,074 — 1,166 20,240 
Distributions to noncontrolling owners— — — — — (1,054)(1,054)
Other comprehensive loss, net of tax expense of $6,840
— — — — (39,621)(124)(39,745)
Conversion of tangible equity units into common stock344,412 — — — — — — 
Common stock repurchases(21,082)— (971)— — — (971)
Common stock offering, net of issuance costs16,100,000 16 711,305 — — — 711,321 
Common stock-based award activity677,314 1 13,403 — — — 13,404 
Balance at April 2, 2021135,597,331 $135 $4,201,745 $536,441 $(491,727)$44,475 $4,291,069 

Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestTotal
SharesAmount
Balance at December 31, 2019118,059,082 $118 $3,445,597 $479,560 $(483,845)$48,198 $3,489,628 
Cumulative effect of accounting change— — — (4,818)— — (4,818)
Net income— — — 4,481 — 1,027 5,508 
Distributions to noncontrolling owners— — — — — (8)(8)
Other comprehensive loss, net of tax expense of $4,644
— — — — (158,297)(2,593)(160,890)
Common stock-based award activity268,323 — 8,344 — — — 8,344 
Balance at April 3, 2020118,327,405 $118 $3,453,941 $479,223 $(642,142)$46,624 $3,337,764 


See Notes to Condensed Consolidated Financial Statements.


5


COLFAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands
(Unaudited)
Three Months Ended
April 2, 2021April 3, 2020
Cash flows from operating activities:
Net income$20,240 $5,508 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other impairment charges62,785 58,336 
Stock-based compensation expense7,807 6,124 
Non-cash interest expense1,537 1,311 
Deferred income tax benefit(3,614)(567)
Loss on sale of property, plant and equipment257 976 
Changes in operating assets and liabilities:
Trade receivables, net(39,950)29,445 
Inventories, net(32,743)(16,431)
Accounts payable83,442 30,592 
Other operating assets and liabilities(15,379)(59,065)
Net cash provided by operating activities84,382 56,229 
Cash flows from investing activities:
Purchases of property, plant and equipment(24,537)(31,113)
Proceeds from sale of property, plant and equipment 1,688 
Acquisitions, net of cash received, and investments(103,475)(7,830)
Net cash used in investing activities(128,012)(37,255)
Cash flows from financing activities:
Proceeds from borrowings on revolving credit facilities and other179,367 608,673 
Repayments of borrowings on revolving credit facilities and other(185,643)(364,403)
Proceeds from issuance of common stock, net716,632 2,220 
Deferred consideration payments and other(2,704)(1,353)
Net cash provided by financing activities707,652 245,137 
Effect of foreign exchange rates on Cash and cash equivalents and Restricted cash(1,438)(8,139)
Increase in Cash and cash equivalents and Restricted cash662,584 255,972 
Cash and cash equivalents and Restricted Cash, beginning of period101,069 109,632 
Cash and cash equivalents, end of period$763,653 $365,604 


See Notes to Condensed Consolidated Financial Statements.
6

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1. General
Colfax Corporation (the “Company” or “Colfax”) is a leading diversified technology company that provides fabrication technology and medical device products and services to customers around the world, principally under the ESAB and DJO brands. The Company conducts its operations through two operating segments, “Fabrication Technology”, which incorporates the operations of ESAB and its related brands, and “Medical Technology”, which incorporates the operations of DJO and its related brands.

On March 4, 2021, the Company announced its intention to separate its fabrication technology and specialty medical technology businesses into two differentiated, independent, and publicly traded companies. The current Colfax entity will retain the specialty medical technology business under a new name, while the fabrication technology business will operate independently under the existing ESAB brand name. The separation is intended to be structured in a tax-free manner and is targeted to be completed in the first quarter of 2022. The assets, liabilities, revenues and expenses of the fabrication technology businesses are included in continuing operations of the Company in the accompanying Condensed Consolidated Financial Statements.

The Condensed Consolidated Financial Statements included in this quarterly report have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements. Certain prior period amounts have been reclassified to conform to the current period presentation. The Condensed Consolidated Balance Sheet as of December 31, 2020 is derived from the Company’s audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the SEC’s rules and regulations for interim financial statements. The Condensed Consolidated Financial Statements included herein should be read in conjunction with the audited financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), filed with the SEC on February 18, 2021.

The Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations as of and for the periods indicated. Intercompany transactions and accounts are eliminated in consolidation.

The Company makes certain estimates and assumptions in preparing its Condensed Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from those estimates.

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 expenses on the Company’s Condensed Consolidated Statements of Operations. Research and development costs were $19.9 million during the three months ended April 2, 2021, and $18.5 million during the three months ended April 3, 2020.

The results of operations for the three months ended April 2, 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. Medical Technology sales typically peak in the fourth quarter. General economic conditions may, however, impact future seasonal variations.

In December 2019, a novel coronavirus disease (“COVID-19”) was first reported in China. 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 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. 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.
7

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)





2. Recently Issued Accounting Pronouncements

Accounting Guidance Implemented in 2021
StandardDescriptionEffective Date
ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit PlansThe ASU modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The adoption of this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

January 1, 2021
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income TaxesThe ASU eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of accounting for income taxes. The Company adopted this ASU as of January 1, 2021 on a prospective basis, and the adoption did not have a material impact on the Company’s Condensed Consolidated Financial Statements. January 1, 2021


8

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



3. Discontinued Operations

The Company retained certain asbestos-related contingencies and insurance coverages from divested businesses for which it did not retain an interest in the ongoing operations subject to the contingencies. 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. During the three months ended April 2, 2021 and April 3, 2020, the Company recorded $0.9 million and $1.4 million, respectively, of asbestos-related costs, net of tax. See Note 13, “Commitments and Contingencies” for further information.

The Company also recorded Loss from discontinued operations, net of tax of $6.6 million and $2.0 million for the three months ended April 2, 2021 and April 3, 2020, respectively, related to its divested air and gas handling business, including a settlement executed in 2021, as well as certain professional, legal, and consulting fees in 2020.

Cash used in operating activities related to discontinued operations for the three months ended April 2, 2021 was $7.3 million. Cash provided by operating activities related to discontinued operations for the three months ended April 3, 2020 was $0.8 million.

4. Acquisitions

The Company completed one acquisition in its Fabrication Technology segment and two acquisitions in its Medical Technology segment during the three months ended April 2, 2021 for total consideration, net of cash received, of $88.7 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 Company also made two investments in medical technology businesses during the three months ended April 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.

Acquisitions in the Medical Technology segment included Trilliant Surgical (“Trilliant”), a national provider of foot and ankle orthopedics implants. The product technologies of Trilliant support the Medical Technology segment’s focused expansion into the adjacent foot and ankle market. Trilliant has a broad product portfolio that covers the full universe of foot reconstructive and fixation procedures, and includes the novel Arsenal Foot Plating System, designed for greater flexibility and speed of implant placement. The acquisition was completed for $82.3 million cash consideration, subject to certain adjustments. Net working capital and intangible assets acquired represent 18% and 46% of the total consideration paid, respectively, with the residual amount primarily attributable to Goodwill. All of the Goodwill acquired is expected to be deductible for income tax purposes. The estimated proforma annual revenues of the Trilliant acquisition are approximately 1% of Colfax consolidated revenues.

5. Revenue

The Company’s Fabrication Technology segment formulates, develops, manufactures and supplies consumable products and 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
April 2, 2021April 3, 2020
(In thousands)
Equipment$173,750 $156,800 
Consumables394,378 368,737 
Total$568,128 $525,537 

Contracts with customers in the consumables product grouping generally have a shorter fulfillment period than equipment contracts.


9

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



The Company’s Medical Technology segment provides products and services spanning the full continuum of patient care, from injury prevention to rehabilitation. While the Company’s Medical Technology sales are primarily derived from three sales channels including dealers and distributors, insurance, and direct to consumers and hospitals, substantially all its revenue is recognized at a point in time.

The Company disaggregates its Medical Technology revenue into the following product groups:
Three Months Ended
April 2, 2021April 3, 2020
(In thousands)
Prevention & Recovery(1)
$235,238 $223,785 
Reconstructive75,845 67,034 
Total$311,083 $290,819 
(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.

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 April 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. The Company includes estimated amounts of variable consideration in the transaction price to the extent that it is probable there will not be a significant reversal of revenue.

In some circumstances, customers are billed in advance of revenue recognition, resulting in contract liabilities. As of December 31, 2020 and 2019, total contract liabilities were $36.6 million and $14.8 million, respectively. During the three months ended April 2, 2021 and April 3, 2020, revenue recognized that was included in the contract liability balance at the beginning of the year was $14.3 million and $4.9 million, respectively. As of April 2, 2021 and April 3, 2020, total contract liabilities were $40.0 million and $17.0 million, respectively, and were included in Accrued liabilities on the Company’s Condensed Consolidated Balance Sheets. The contract liabilities as of April 2, 2021 and December 31, 2020 include $11.8 million of certain one-time advance payments in the Medical Technology business.

Allowance for Credit Losses

The Company’s estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. In calculating and applying its current expected credit losses, the Company disaggregates trade receivables into business segments due to risk characteristics unique to each segment given the individual lines of business and market. The business segments are further disaggregated based on either geography or product type.

The Company uses a loss rate methodology in calculating its current expected credit losses, leveraging historical write-offs over a defined lookback period in deriving a historical loss rate. The expected credit loss model further considers current conditions and reasonable and supportable forecasts using an adjustment for current and projected macroeconomic factors. 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:
Three Months Ended April 2, 2021
Balance at
Beginning
of Period
Charged to Expense, netWrite-Offs and DeductionsForeign
Currency
Translation
Balance at
End of
Period
(In thousands)
Allowance for credit losses$37,666 $239 $(1,062)$(1,283)$35,560 
10

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



6. Net Income Per Share from Continuing Operations

Net income per share from continuing operations was computed as follows:
Three Months Ended
April 2, 2021April 3, 2020
(In thousands, except share and per share data)
Computation of Net income per share from continuing operations - basic:
Net income from continuing operations attributable to Colfax Corporation (1)
$26,564 $7,841 
Weighted-average shares of Common stock outstanding – basic
139,603,389 136,601,111 
Net income per share from continuing operations – basic
$0.19 $0.06 
Computation of Net income per share from continuing operations - diluted:
Net income from continuing operations attributable to Colfax Corporation (1)
$26,564 $7,841 
Weighted-average shares of Common stock outstanding – basic
139,603,389 136,601,111 
Net effect of potentially dilutive securities - stock options, restricted stock units and tangible equity units2,167,918 4,868,927 
Weighted-average shares of Common stock outstanding – diluted
141,771,307 141,470,038 
Net income per share from continuing operations – diluted
$0.19 $0.06 
(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 $1.2 million for the three months ended April 2, 2021, and $1.0 million for the three months ended April 3, 2020, respectively.

For three months ended April 2, 2021 and April 3, 2020, 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. For the three months ended April 3, 2020, the weighted-average shares of Common stock outstanding - diluted includes the impact of an additional 3.7 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 months ended April 2, 2021 and April 3, 2020 excludes 1.4 million and 3.9 million, respectively, of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.


11

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



7. Income Taxes

During the three months ended April 2, 2021, Income from continuing operations before income taxes was $35.6 million, while the income tax expense was $7.9 million. The effective tax rate was 22.2% for the three months ended April 2, 2021. The effective tax rate for the three months ended April 2, 2021 differed from the 2021 U.S. federal statutory rate of 21% mainly due to withholding taxes, taxable foreign exchange gains and other non-deductible expenses partially offset by the benefit of U.S. tax credits.

During the three months ended April 3, 2020, Income from continuing operations before income taxes was $22.0 million, while the income tax expense was $13.2 million. The effective tax rate was 59.8% for the three months ended April 3, 2020. The effective tax rate for the three months ended April 3, 2020 differed from the 2020 U.S. federal statutory rate of 21% mainly due to the impact of additional U.S. tax on international operations and taxable foreign exchange gains offset in part by a discrete tax benefit associated with the enactment of a tax law change in India. Income taxes for the three months ended April 3, 2020 were calculated using the actual year-to-date effective tax rate, also known as the discrete method. The discrete method was used because of the high degree of uncertainty in estimating annual pretax earnings at that time caused by the COVID-19 pandemic market conditions.

12

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



8. Equity

Common Stock

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.

Share Repurchase Program

In 2018, the Company’s Board of Directors authorized the repurchase of shares of the Company’s Common stock from time-to-time on the open market or in privately negotiated transactions. No repurchases of the Company’s Common stock have been made under this plan since the third quarter of 2018. As of April 2, 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. There is no term associated with the remaining repurchase authorization.

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 three months ended April 2, 2021 and April 3, 2020. All amounts are net of tax and noncontrolling interest, if any.
Accumulated Other Comprehensive Loss Components
Net Unrecognized Pension and Other Post-Retirement Benefit CostForeign Currency Translation AdjustmentUnrealized Gain on Hedging ActivitiesTotal
(In thousands)
Balance at January 1, 2021$(112,783)$(360,977)$21,654 $(452,106)
Other comprehensive income (loss) before reclassifications:
Foreign currency translation adjustment709 (82,663)(2,201)(84,155)
Gain on long-term intra-entity foreign currency transactions 31,098  31,098 
Gain on net investment hedges  12,381 12,381 
Other comprehensive income (loss) before reclassifications709 (51,565)10,180 (40,676)
Amounts reclassified from Accumulated other comprehensive loss1,055   1,055 
Net Other comprehensive income (loss) 1,764 (51,565)10,180 (39,621)
Balance at April 2, 2021$(111,019)$(412,542)$31,834 $(491,727)


13

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Accumulated Other Comprehensive Loss Components
Net Unrecognized Pension and Other Post-Retirement Benefit CostForeign Currency Translation AdjustmentUnrealized Gain on Hedging ActivitiesTotal
(In thousands)
Balance at January 1, 2020$(106,500)$(421,889)$44,544 $(483,845)
Other comprehensive income (loss) before reclassifications:
Foreign currency translation adjustment1,672 (170,679)(1,310)(170,317)
Loss on long-term intra-entity foreign currency transactions (1,027) (1,027)
Gain on net investment hedges  12,180 12,180 
Other comprehensive income (loss) before reclassifications1,672 (171,706)10,870 (159,164)
Amounts reclassified from Accumulated other comprehensive loss867   867 
Net Other comprehensive income (loss) 2,539 (171,706)10,870 (158,297)
Balance at April 3, 2020$(103,961)$(593,595)$55,414 $(642,142)

Tangible equity unit (“TEU”) offering

On January 11, 2019, the Company issued 4.6 million tangible equity units at the stated amount of $100 per unit. 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. 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. 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 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; and
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. This corresponds to not less than 18.4 million shares and not more than 22.1 million shares at the maximum. The 18.4 million minimum shares are included in the calculation of weighted-average shares of Common stock outstanding - basic. The difference between the minimum and maximum shares represents potentially dilutive securities. 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
14

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



higher than the reference price but is less than the threshold appreciation price. During the three months ended April 2, 2021, 0.1 million stock purchase contracts were converted into approximately 0.3 million shares of Colfax common stock at a conversion rate of 4.0 shares per contract.

9. Inventories, Net

Inventories, net consisted of the following:
April 2, 2021December 31, 2020
(In thousands)
Raw materials$116,562 $110,848 
Work in process44,613 40,517 
Finished goods504,806 476,297 
665,981 627,662 
Less: allowance for excess, slow-moving and obsolete inventory(59,773)(62,840)
Inventories, net$606,208 $564,822 

10. Debt

Long-term debt consisted of the following:
April 2, 2021December 31, 2020
(In thousands)
Term loan$781,767 $781,557 
Euro senior notes408,611 425,045 
2024 and 2026 notes991,925 991,319 
TEU amortizing notes25,241 31,251 
Revolving credit facilities and other1,822 2,071 
Total debt2,209,366 2,231,243 
Less: current portion(727,369)(27,074)
Long-term debt$1,481,997 $2,204,169 
    
Term Loan and Revolving Credit Facility

The Company’s credit agreement (the “Credit Facility”) by and among the Company, as the borrower, certain U.S. subsidiaries of the Company, as guarantors, each of the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citizens Bank, N.A., as syndication agent, and the co-documentation agents named therein consists of a $975 million revolving credit facility (the “Revolver”) and a Term A-1 loan with an initial aggregate principal amount of $825 million (the “Term Loan”), each with a maturity date of December 6, 2024. The Revolver contains a $50 million swing line loan sub-facility. Certain U.S. subsidiaries of the Company guarantee the obligations under the Credit Facility.

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 6.50:1.00 for the quarter ending March 31, 2021, 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. 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
15

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



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 April 2, 2021, the Company was in compliance with the covenants under the Credit Facility.

As of April 2, 2021, the weighted-average interest rate of borrowings under the Credit Facility was 1.86%, excluding accretion of original issue discount and deferred financing fees, and there was $975 million available on the Revolver.

Euro Senior Notes

The Company has senior unsecured notes with an aggregate principal amount of €350 million (the “Euro Notes”). The Euro Notes are due in April 2025, have an interest rate of 3.25% and are guaranteed by certain of our domestic subsidiaries (the “Guarantees”). The Euro Notes and the Guarantees have not been, and will not be, registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction.

TEU Amortizing Notes

Each TEU amortizing note has an initial principal amount of $15.6099, bears interest at a rate of 6.50% per annum, and has equal quarterly cash installments of $1.4375 per TEU amortizing note on each January 15, April 15, July 15 and October 15 with a final installment payment date of January 15, 2022. The quarterly cash installment constitutes a payment of interest and a partial repayment of principal. The Company paid $6.6 million on the TEU amortizing notes in both the three months ended April 2, 2021 and April 3, 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. For more information on the Tangible equity units, refer to Note 8, “Equity.”

2024 Notes and 2026 Notes

The Company had senior notes with aggregate principal amounts of $600 million (the “2024 Notes”), which were due on February 15, 2024 and had an interest rate of 6.0%. The Company has senior notes with aggregate principal amounts of $400 million (the “2026 Notes”), which are due on February 15, 2026 and have an interest rate of 6.375%. Each tranche of notes is guaranteed by certain domestic subsidiaries of the Company. The Company redeemed all of its outstanding 2024 Notes and $100 million of the outstanding principal amount of its 2026 Notes on April 24, 2021. See Note 15, “Subsequent Events” for further information.

Other Indebtedness

In addition to the debt agreements discussed above, the Company is party to various bilateral credit facilities with a borrowing capacity of $192.1 million. As of April 2, 2021, there were no outstanding borrowings under these facilities.

The Company is party to letter of credit facilities with an aggregate capacity of $338.6 million. Total letters of credit of $64.9 million were outstanding as of April 2, 2021.

In total, the Company had deferred financing fees of $21.0 million included in its Condensed Consolidated Balance Sheet as of April 2, 2021, which will be charged to Interest expense, net, primarily using the effective interest method, over the life of the applicable debt agreements.


16

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



11. Accrued Liabilities

Accrued liabilities in the Condensed Consolidated Balance Sheets consisted of the following:
April 2, 2021December 31, 2020
(In thousands)
Accrued compensation and related benefits$85,509 $98,455 
Accrued taxes52,031 57,286 
Accrued asbestos-related liability42,411 41,626 
Warranty liability - current portion15,799 15,543 
Accrued restructuring liability - current portion7,385 7,889 
Accrued third-party commissions26,990 25,480 
Customer advances and billings in excess of costs incurred40,051 36,737 
Lease liability - current portion37,791 39,695 
Accrued interest14,653 27,153 
Other101,678 104,469 
Accrued liabilities$424,298 $454,333 

Warranty Liability
The activity in the Company’s warranty liability consisted of the following:
Three Months Ended
April 2, 2021April 3, 2020
(In thousands)
Warranty liability, beginning of period$15,543 $15,528 
Accrued warranty expense2,042 1,121 
Changes in estimates related to pre-existing warranties589 318 
Cost of warranty service work performed(2,472)(1,910)
Acquisition-related liability321  
Foreign exchange translation effect(224)(1,309)
Warranty liability, end of period$15,799 $13,748 
17

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)




Accrued Restructuring Liability

The Company’s restructuring programs include a series of actions to reduce the structural costs of the Company. 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:
Three Months Ended April 2, 2021
Balance at Beginning of PeriodProvisionsPaymentsForeign Currency Translation
Balance at End of Period(3)
(In thousands)
Restructuring and other related charges:
Fabrication Technology:
Termination benefits(1)
$5,336 $248 $(559)$(13)$5,012 
Facility closure costs(2)
591 2,827 (2,831)(4)583 
5,927 3,075 (3,390)(17)5,595 
Non-cash charges(2)
 
3,075 
Medical Technology:
Termination benefits(1)
1,884 358 (736) 1,506 
Facility closure costs(2)
297 613 (613) 297 
2,181 971 (1,349) 1,803 
Non-cash charges(2)
— 
971 
Total Colfax Corporation:
Total restructuring liability activity$8,108 $4,046 $(4,739)$(17)$7,398 
Total Non-cash charges 
$4,046 
(1) Includes severance and other termination benefits, including outplacement services.
(2) Includes the cost of relocating associates, relocating equipment and lease termination expense in connection with the closure of facilities. 
(3) As of April 2, 2021, $7.4 million of the Company’s restructuring liability was included in Accrued liabilities, whereas less than $0.1 million of the Company’s restructuring liability was included in Other liabilities.


18

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



12. Financial Instruments and Fair Value Measurements

The carrying values of financial instruments, including Trade receivables and Accounts payable, approximate their fair values due to their short-term maturities. The $2.3 billion estimated fair value of the Company’s debt as of April 2, 2021 and December 31, 2020 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:
April 2, 2021
Level
One
Level
Two
Level
Three
Total
(In thousands)
Assets:
 Cash equivalents$6,252 $— $— $6,252 
 Foreign currency contracts - not designated as hedges— 1,581 — 1,581 
 Deferred compensation plans— 11,802 — 11,802 
$6,252 $13,383 $— $19,635 
Liabilities:
 Foreign currency contracts - not designated as hedges$— $4,191 $— $4,191 
 Deferred compensation plans— 11,802 — 11,802 
$— $15,993 $— $15,993 

December 31, 2020
Level
One
Level
Two
Level
Three
Total
(In thousands)
Assets:
 Cash equivalents$7,420 $— $— $7,420 
 Foreign currency contracts - not designated as hedges— 2,194 — 2,194 
 Deferred compensation plans— 10,881 — 10,881 
$7,420 $13,075 $— $20,495 
Liabilities:
 Foreign currency contracts - not designated as hedges$— $1,781 $— $1,781 
 Deferred compensation plans— 10,881 — 10,881 
$— $12,662 $— $12,662 

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

19

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Foreign Currency Contracts

As of April 2, 2021 and December 31, 2020, the Company had foreign currency contracts related to purchases and sales with notional values of $309.4 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
April 2, 2021April 3, 2020
(In thousands)
Contracts Designated as Hedges:
Unrealized gain on net investment hedges(1)
$12,381 $12,180 
Contracts Not Designated in a Hedge Relationship:
Foreign Currency Contracts
  Unrealized gain (loss)(2,611)2,417 
  Realized gain (loss)51 (197)
(1) The unrealized gain on net investment hedges is attributable to the change in valuation of Euro denominated debt.

Restricted Cash

Financial instruments also include Restricted cash. Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are excluded from Cash and cash equivalents in the Condensed Consolidated Balance Sheets. Restricted cash is recorded as a component of Other current assets on the Condensed Consolidated Balance Sheets. The Restricted cash as of December 31, 2020 is related to an acquisition which closed in the first quarter of 2021.

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

April 2, 2021December 31, 2020
(In thousands)
Cash and cash equivalents$763,653 $97,068 
Restricted cash 4,001 
Cash and cash equivalents and Restricted cash$763,653 $101,069 



13. Commitments and Contingencies

For further description of the Company’s litigation and contingencies, reference is made to Note 18, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements in the Company’s 2020 Form 10-K. Since the Company did not retain an interest in the ongoing operations of its divested businesses, the retained asbestos-related activity has been classified in its Condensed Consolidated Statements of Operations as a component of Loss from discontinued operations, net of taxes.
20

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Asbestos Contingencies

Asbestos-related claims activity since December 31 is as follows:
Three Months Ended
April 2, 2021April 3, 2020
(Number of claims)
Claims unresolved, beginning of period14,809 16,299 
Claims filed(1)
1,067 1,043 
Claims resolved(2)
(581)(600)
Claims unresolved, end of period15,295 16,742 
(1) Claims filed include all asbestos claims for which notification has been received or a file has been opened.
(2) Claims resolved include all asbestos claims that have been settled, dismissed or that are in the process of being settled or dismissed based upon agreements or understandings in place with counsel for the claimants.

The Company’s Condensed Consolidated Balance Sheets included the following amounts related to asbestos-related litigation:
April 2, 2021December 31, 2020
(In thousands)
Long-term asbestos insurance asset(1)
$229,879 $232,712 
Long-term asbestos insurance receivable(1)
27,868 31,815 
Accrued asbestos liability(2)
42,411 41,626 
Long-term asbestos liability(3)
248,669 253,144 
(1) Included in Other assets in the Condensed Consolidated Balance Sheets.
(2) Represents current accruals for probable and reasonably estimable asbestos-related liability costs that the Company believes the subsidiaries will pay, and unpaid legal costs related to defending themselves against asbestos-related liability claims and legal action against the Company’s insurers, which is included in Accrued liabilities in the Condensed Consolidated Balance Sheets.
(3) Included in Other liabilities in the Condensed Consolidated Balance Sheets.

Management’s analyses are based on currently known facts and assumptions. Projecting future events, such as new claims to be filed each year, the average cost of resolving each claim, coverage issues among layers of insurers, the method in which losses will be allocated to the various insurance policies, interpretation of the effect on coverage of various policy terms and limits and their interrelationships, the continuing solvency of various insurance companies, the amount of remaining insurance available, as well as the numerous uncertainties inherent in asbestos litigation could cause the actual liabilities and insurance recoveries to be higher or lower than those projected or recorded which could materially affect the Company’s financial condition, results of operations or cash flow.

General Litigation

The Company is involved in other pending legal proceedings arising out of the ordinary course of the Company’s business. None of these legal proceedings are expected to have a material adverse effect on the financial condition, results of operations or cash flow of the Company. With respect to these proceedings and the litigation and claims described in the preceding paragraphs, management of the Company believes that it will either prevail, has adequate insurance coverage or has established appropriate accruals to cover potential liabilities. Any costs that management estimates may be paid related to these proceedings or claims are accrued when the liability is considered probable and the amount can be reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adverse to the Company, there could be a material adverse effect on the financial condition, results of operations or cash flow of the Company.

21

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



14. Segment Information

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.

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.
Certain amounts not allocated to the two reportable segments and intersegment eliminations are reported under the heading “Corporate and other.” The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and segment operating income (loss), which represents Operating income (loss) before Restructuring and other related charges and European Union Medical Devices Regulation (“MDR”) and other costs.

The Company’s segment results were as follows:
Three Months Ended
April 2, 2021April 3, 2020
(In thousands)
Net sales:
     Fabrication Technology$568,128 $525,537 
Medical Technology311,083 290,819 
$879,211 $816,356 
Segment operating income (loss)(1):