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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 October 1, 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)
2711 Centerville Road,Suite 400 
Wilmington,Delaware19808
(Address of principal executive offices) (Zip Code)
(302)252-9160
(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 October 1, 2021, there were 154,781,842 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
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 EndedNine Months Ended
October 1, 2021October 2, 2020October 1, 2021October 2, 2020
Net sales$965,891 $805,931 $2,831,030 $2,242,647 
Cost of sales561,020 461,811 1,636,098 1,309,227 
Gross profit404,871 344,120 1,194,932 933,420 
Selling, general and administrative expense334,424 278,060 977,711 805,984 
Restructuring and other related charges6,457 4,129 15,983 23,589 
Operating income63,990 61,931 201,238 103,847 
Pension settlement gain  (11,208) 
Interest expense, net13,540 25,567 57,005 78,647 
Debt extinguishment charges  29,870  
Income from continuing operations before income taxes50,450 36,364 125,571 25,200 
Income tax expense22,349 19,528 38,421 2,638 
Net income from continuing operations28,101 16,836 87,150 22,562 
Loss from discontinued operations, net of taxes(1,244)(2,641)(10,351)(10,906)
Net income26,857 14,195 76,799 11,656 
Less: income attributable to noncontrolling interest, net of taxes1,009 789 3,235 2,243 
Net income attributable to Colfax Corporation$25,848 $13,406 $73,564 $9,413 
Net income (loss) per share - basic
Continuing operations$0.17 $0.12 $0.56 $0.15 
Discontinued operations$(0.01)$(0.02)$(0.07)$(0.08)
Consolidated operations$0.16 $0.10 $0.49 $0.07 
Net income (loss) per share - diluted
Continuing operations$0.17 $0.12 $0.55 $0.15 
Discontinued operations$(0.01)$(0.02)$(0.07)$(0.08)
Consolidated operations$0.16 $0.10 $0.48 $0.07 
    

See Notes to Condensed Consolidated Financial Statements.

2


COLFAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Dollars in thousands
(Unaudited)
Three Months EndedNine Months Ended
October 1, 2021October 2, 2020October 1, 2021October 2, 2020
Net income$26,857 $14,195 $76,799 $11,656 
Other comprehensive income (loss):
Foreign currency translation, net of tax expense of $1,948, $258, $5,124 and $652
(57,176)51,610 (101,573)(49,316)
Unrealized gain (loss) on hedging activities, net of tax expense (benefit) of $2,203, $(4,344), $5,709 and $(4,448)
6,424 (12,076)16,655 (12,700)
Amounts reclassified from Accumulated other comprehensive loss:
Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $327, $330, $958 and $767
1,093 1,152 3,193 2,814 
Other comprehensive income (loss)(49,659)40,686 (81,725)(59,202)
Comprehensive income (loss)(22,802)54,881 (4,926)(47,546)
Less: comprehensive income attributable to noncontrolling interest1,373 1,987 2,046 1,192 
Comprehensive income (loss) attributable to Colfax Corporation$(24,175)$52,894 $(6,972)$(48,738)


See Notes to Condensed Consolidated Financial Statements.

3


COLFAX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollars in thousands, except share amounts
(Unaudited)
October 1, 2021December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$177,482 $97,068 
Trade receivables, less allowance for credit losses of $34,677 and $37,666
603,214 517,006 
Inventories, net780,984 564,822 
Prepaid expenses85,540 69,515 
Other current assets78,467 113,418 
Total current assets1,725,687 1,361,829 
Property, plant and equipment, net510,828 486,960 
Goodwill3,497,355 3,314,541 
Intangible assets, net1,726,955 1,663,446 
Lease asset - right of use159,118 173,942 
Other assets352,368 350,831 
Total assets$7,972,311 $7,351,549 
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt$14,340 $27,074 
Accounts payable472,499 330,251 
Accrued liabilities488,632 454,333 
Total current liabilities975,471 811,658 
Long-term debt, less current portion1,611,690 2,204,169 
Non-current lease liability127,259 139,230 
Other liabilities627,367 608,618 
Total liabilities3,341,787 3,763,675 
Equity:
Common stock, $0.001 par value; 400,000,000 shares authorized; 154,781,842 and 118,496,687 shares issued and outstanding as of October 1, 2021 and December 31, 2020, respectively
155 118 
Additional paid-in capital4,528,097 3,478,008 
Retained earnings590,931 517,367 
Accumulated other comprehensive loss(532,642)(452,106)
Total Colfax Corporation equity4,586,541 3,543,387 
Noncontrolling interest43,983 44,487 
Total equity4,630,524 3,587,874 
Total liabilities and equity$7,972,311 $7,351,549 


See Notes to Condensed Consolidated Financial Statements.

4


COLFAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Dollars in thousands, except share amounts
(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 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 
Net income— — — 28,642 — 1,060 29,702 
Other comprehensive income (loss), net of tax of $473
— — — — 9,108 (1,429)7,679 
Conversion of tangible equity units into common stock6,174,000 6 (6)— — — — 
Common stock repurchases(710)— (32)— — — (32)
Common stock-based award activity571,025 1 23,541 — — — 23,542 
Balance at July 2, 2021142,341,646 142 4,225,248 565,083 (482,619)44,106 4,351,960 
Net income— — — 25,848 — 1,009 26,857 
Distributions to noncontrolling owners— — — — — (1,496)(1,496)
Other comprehensive income (loss), net of tax of $4,478
— — — — (50,023)364 (49,659)
Conversion of tangible equity units into common stock5,537,100 6 (6)— — — — 
Common stock issued for acquisition, net of issuance costs
6,544,522 7 285,674 — — — 285,681 
Common stock-based award activity358,574 — 17,181 — — — 17,181 
Balance at October 1, 2021154,781,842 $155 $4,528,097 $590,931 $(532,642)$43,983 $4,630,524 

See Notes to Condensed Consolidated Financial Statements.
















5


COLFAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Dollars in thousands, except share amounts
(Unaudited)
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 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 
Net income (loss)— — — (8,474)— 427 (8,047)
Distributions to noncontrolling owners— — — — — (3,734)(3,734)
Other comprehensive income, net of tax of $(3,917)
— — — — 60,658 344 61,002 
Common stock-based award activity61,608 — 8,591 — — — 8,591 
Balance at July 3, 2020118,389,013 118 3,462,532 470,749 (581,484)43,661 3,395,576 
Net income— — — 13,406 — 789 14,195 
Distributions to noncontrolling owners— — — — — (625)(625)
Other comprehensive income, net of tax of $(3,756)
— — — — 39,488 1,198 40,686 
Common stock-based award activity68,166 — 7,637 — — — 7,637 
Balance at October 2, 2020118,457,179 $118 $3,470,169 $484,155 $(541,996)$45,023 $3,457,469 


See Notes to Condensed Consolidated Financial Statements.


6


COLFAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands
(Unaudited)
Nine Months Ended
October 1, 2021October 2, 2020
Cash flows from operating activities:
Net income$76,799 $11,656 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other impairment charges197,641 181,114 
Stock-based compensation expense26,235 21,642 
Non-cash interest expense3,757 4,253 
Deferred income tax benefit(5,904)(30,946)
(Gain) loss on sale of property, plant and equipment(1,483)523 
Loss on debt extinguishment29,870  
Changes in operating assets and liabilities:
Trade receivables, net(70,407)44,592 
Inventories, net(130,348)28,556 
Accounts payable143,694 (42,869)
Other operating assets and liabilities(9,971)(45,388)
Net cash provided by operating activities259,883 173,133 
Cash flows from investing activities:
Purchases of property, plant and equipment(73,595)(81,583)
Proceeds from sale of property, plant and equipment2,908 4,929 
Acquisitions, net of cash received, and investments(222,961)(7,477)
Net cash used in investing activities(293,648)(84,131)
Cash flows from financing activities:
Payments under term credit facility (40,000)
Proceeds from borrowings on revolving credit facilities and other515,696 794,678 
Repayments of borrowings on revolving credit facilities and other(409,961)(866,215)
Repayments of borrowings on senior notes(700,000) 
Payment of debt issuance costs (4,560)
Proceeds from issuance of common stock, net738,177 2,930 
Payment of debt extinguishment costs(24,375) 
Deferred consideration payments and other(7,700)(12,411)
Net cash provided by (used in) financing activities111,837 (125,578)
Effect of foreign exchange rates on Cash and cash equivalents and Restricted cash(1,659)(6,633)
Increase (decrease) in Cash and cash equivalents and Restricted cash76,413 (43,209)
Cash and cash equivalents and Restricted Cash, beginning of period101,069 109,632 
Cash and cash equivalents, end of period$177,482 $66,423 
Supplemental disclosures of non-cash investing and financing activities:
Common stock issued for acquisition, net of issuance costs$285,681 $ 
    


See Notes to Condensed Consolidated Financial Statements.
7

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 expense on the Company’s Condensed Consolidated Statements of Operations. Research and development costs were $20.2 million and $61.4 million during the three and nine months ended October 1, 2021, respectively, and $16.8 million and $49.4 million during the three and nine months ended October 2, 2020, respectively.

On April 24, 2021, the Company used the proceeds from its March 2021 equity offering to redeem all $600 million of its 2024 senior notes and $100 million of outstanding principal on its 2026 senior notes. The Company paid an early redemption premium of $24.4 million and recorded a loss on the extinguishment of debt of $29.9 million. Additionally, a pension settlement gain of $11.2 million was recognized in the second quarter of 2021 when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.

The results of operations for the three and nine months ended October 1, 2021 are not necessarily indicative of the results of operations that may be achieved for the full year. Quarterly results are affected by seasonal variations in the Company’s businesses, and European operations typically experience a slowdown during the July, August and December holiday seasons. 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
8

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



actions taken by them in response to the situation have resulted in widespread economic disruptions, significantly affecting broader economies, financial markets, and overall demand for the Company’s products. While these impacts have lessened in 2021 due to broadening access to COVID-19 vaccines and gradual relaxing of some government-mandated restrictions, the surge of COVID-19 variant viruses in the third quarter of 2021 has led to the reinstatement of restrictions in certain jurisdictions, slowing the overall economic recovery. The COVID-19 outbreak has caused increased uncertainty in estimates and assumptions affecting the reported amounts of assets and liabilities in the Condensed Consolidated Financial Statements as the extent and period of recovery from the COVID-19 outbreak and related economic disruption are difficult to forecast. Furthermore, the historical seasonality trends have been disrupted by the commercial impacts caused by the COVID-19 pandemic.


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

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. Asbestos-related costs, net of taxes were $1.1 million and $3.5 million during the three and nine months ended October 1, 2021, respectively, and $2.0 million and $4.8 million during the three and nine months ended October 2, 2020, respectively. See Note 13, “Commitments and Contingencies” for further information.

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

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

4. Acquisitions

The Company completed one acquisition in its Fabrication Technology segment and five acquisitions in its Medical Technology segment during the nine months ended October 1, 2021 for net cash consideration of $208.1 million and equity consideration of $285.7 million. The acquisitions are accounted for under the acquisition method of accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the respective acquisition date. The Condensed Consolidated Balance Sheet as of October 1, 2021 reflects our preliminary estimates of fair value and are subject to adjustment. The Company also made two investments in medical technology
9

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



businesses during the nine months ended October 1, 2021 for a total of $14.8 million. Both investments are carried at cost, as they do not have a readily determinable fair value.
In the first quarter of 2021, the Medical Technology segment acquired Trilliant Surgical (“Trilliant”), a national provider of foot and ankle orthopedic implants. 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. In the second quarter of 2021, the Medical Technology segment acquired MedShape, Inc. (“MedShape”), a provider of innovative surgical solutions for foot and ankle surgeons using its patented superelastic nickel titanium (NiTiNOL) and shape memory polymer technologies. This acquisition further expands the Company's foot and ankle platform. These two acquisitions were completed for total consideration, net of cash received, of $205.4 million, subject to certain adjustments. Net working capital and intangible assets acquired represent 8% and 46% of the total consideration exchanged for these two acquisitions, respectively, with the residual amount primarily attributable to Goodwill. These amounts, as well as useful lives of the intangible assets, deferred taxes, and property, plant and equipment, are determined based upon certain valuations and studies that have yet to be finalized. The Goodwill acquired in the Trilliant acquisition is deductible for income tax purposes. The estimated proforma annual revenues of these two acquisitions are approximately 1% of Colfax’s consolidated revenues.

In the third quarter of 2021, the Medical Technology segment acquired Mathys AG Bettlach (“Mathys”) for total acquisition equity consideration of $285.7 million of Colfax Common stock, which included cash acquired of $14.7 million. Mathys, a Switzerland-based company, develops and distributes innovative products for artificial joint replacement, synthetic bone graft solutions, and sports medicine. The acquisition expands the Medical Technology segment’s reconstructive product portfolio with Mathys’ complimentary surgical solutions and broadens its international customer base.

The following table summarizes the Company’s best initial estimate of the aggregate fair value of the assets acquired and liabilities assumed at the date of the Mathys acquisition. These amounts, including inventories, deferred taxes, intangible assets, useful lives of the intangible assets, and property, plant and equipment, are determined based upon certain valuations and studies that have yet to be finalized. Accordingly, the assets acquired and liabilities assumed, as detailed below, are subject to adjustment once the detailed analyses are completed, which could be material. None of the Goodwill recognized is expected to be deductible for income tax purposes.

July 28, 2021
(In thousands)
Trade receivables
$20,050 
Inventories
81,809 
Property, plant and equipment
37,137 
Goodwill
120,127 
Intangible assets
93,105 
Accounts payable
(4,808)
Other assets and liabilities, net
(76,426)
Consideration, net of cash acquired
$270,994 

5. Revenue

The Company’s Fabrication Technology segment formulates, develops, manufactures and supplies consumable products and equipment for use in cutting, joining and automated welding, as well as gas control equipment. Substantially all revenue from the Fabrication Technology business is recognized at a point in time. The Company disaggregates its Fabrication Technology revenue into the following product groups:
10

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



Three Months EndedNine Months Ended
October 1, 2021October 2, 2020October 1, 2021October 2, 2020
(In thousands)
Equipment$192,365 $157,730 $564,971 $443,563 
Consumables413,603 333,767 1,238,929 987,838 
Total$605,968 $491,497 $1,803,900 $1,431,401 

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

The Company’s Medical Technology segment provides products and services spanning the orthopedic 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 EndedNine Months Ended
October 1, 2021October 2, 2020October 1, 2021October 2, 2020
(In thousands)
Prevention & Recovery(1)
$260,001 $242,591 $765,207 $626,227 
Reconstructive99,922 71,843 261,923 185,019 
Total$359,923 $314,434 $1,027,130 $811,246 
(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 October 1, 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 and nine months ended October 1, 2021, revenue recognized that was included in the contract liability balance at the beginning of the year was $6.3 million and $25.7 million, respectively. During the three and nine months ended October 2, 2020, revenue recognized that was included in the contract liability balance at the beginning of the year was $4.5 million and $13.2 million, respectively. As of October 1, 2021 and October 2, 2020, total contract liabilities were $30.7 million and $30.4 million, respectively, and were included in Accrued liabilities on the Company’s Condensed Consolidated Balance Sheets. The contract liabilities as of October 1, 2021 and December 31, 2020 included $7.2 million and $11.8 million, respectively, of certain one-time advance payments in the Medical Technology business.

Allowance for Credit Losses

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.
11

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



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:
Nine Months Ended October 1, 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 $(17)$(2,194)$(778)$34,677 

6. Net Income Per Share from Continuing Operations

Net income per share from continuing operations was computed as follows:
Three Months EndedNine Months Ended
October 1, 2021October 2, 2020October 1, 2021October 2, 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)
$27,092 $16,047 $83,915 $20,319 
Weighted-average shares of Common stock outstanding – basic
159,093,384 136,832,909 150,822,061 136,730,112 
Net income per share from continuing operations – basic
$0.17 $0.12 $0.56 $0.15 
Computation of Net income per share from continuing operations - diluted:
Net income from continuing operations attributable to Colfax Corporation (1)
$27,092 $16,047 $83,915 $20,319 
Weighted-average shares of Common stock outstanding – basic
159,093,384 136,832,909 150,822,061 136,730,112 
Net effect of potentially dilutive securities - stock options, restricted stock units and tangible equity units2,073,711 1,257,701 2,076,332 2,339,794 
Weighted-average shares of Common stock outstanding – diluted
161,167,095 138,090,610 152,898,393 139,069,906 
Net income per share from continuing operations – diluted
$0.17 $0.12 $0.55 $0.15 
(1) Net income from continuing operations attributable to Colfax Corporation for the respective periods is calculated using Net income from continuing operations less the income attributable to noncontrolling interest, net of taxes, of $1.0 million and $3.2 million for the three and nine months ended October 1, 2021, respectively, and $0.8 million and $2.2 million for the three and nine months ended October 2, 2020, respectively.

For all periods presented, the weighted-average shares of Common stock outstanding - basic includes the impact of 18.4 million shares related to the issuance of Colfax’s tangible equity units. During the three and nine months ended October 1, 2021, conversions of the Company’s tangible equity units resulted in the issuance of approximately 5.6 million and 12.1 million shares of Colfax common stock, respectively. All issuances of Colfax common stock related to the tangible equity units were converted at the minimum settlement rate 4.0000 shares of common stock for each purchase contract as a result of the Company’s share price. The issued shares are included in the Common stock issued and outstanding as of October 1, 2021. For the nine months ended October 2, 2020, the weighted-average shares of Common stock outstanding - diluted includes the
12

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



impact of an additional 1.2 million potentially issuable dilutive shares related to Colfax’s tangible equity units as a result of the Company’s share price in March 2020. See Note 8, “Equity” for details.

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

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

13

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



7. Income Taxes

During the three and nine months ended October 1, 2021, Income from continuing operations before income taxes was $50.5 million and $125.6 million, respectively, while income tax expense was $22.3 million and $38.4 million, respectively. The effective tax rates were 44.3% and 30.6% for the three and nine months ended October 1, 2021, respectively, which both differed from the 2021 U.S. federal statutory rate of 21% mainly due to withholding taxes, U.S. tax on international operations, and other non-deductible expenses offset in part by the effective settlements on uncertain tax positions, a benefit from U.S. state tax losses, and U.S. tax credits. The effective tax rate for the three months ended October 1, 2021 was primarily impacted by the relative unfavorable increase in U.S. tax on international operations due to lower U.S. forecasted income and increased taxable foreign exchange gains as compared to the three months ended July 2, 2021 and nine months ended October 1, 2021.

During the three and nine months ended October 2, 2020, Income from continuing operations before income taxes was $36.4 million and $25.2 million, respectively, while income tax expense was $19.5 million and $2.6 million, respectively. The effective tax rates were 53.7% and 10.5% for the three and nine months ended October 2, 2020, respectively. The effective tax rate for the three months ended October 2, 2020 differed from the 2020 U.S. federal statutory rate of 21% mainly due to the net impact of additional U.S. tax on international operations, withholding taxes, and certain non-deductible expenses. These unfavorable impacts were partially offset by the impact of U.S. tax credits, benefit from U.S. state tax losses, and the realization of tax benefits associated with effective settlements on uncertain tax positions. The effective tax rate for the nine months ended October 2, 2020 differed from the 2020 U.S. federal statutory rate of 21%, mainly due to the net impact of U.S. tax credits and benefits from U.S. state tax losses, a discrete tax benefit associated with the filing of timely elected changes to U.S. Federal tax returns to credit rather than to deduct foreign taxes, the impact of an enacted law change in India, and the realization of tax benefits associated with effective settlements on uncertain tax positions. These favorable impacts were partially offset by the impact of additional U.S. tax on international operations, withholding taxes, and certain non-deductible expenses. In conjunction with the filing of the timely elected changes to credit rather than to deduct foreign taxes, the Company obtained additional foreign tax credit carryforwards. The Company evaluated all positive and negative evidence in determining the realizability of these deferred tax assets and based on such evidence, concluded a full valuation allowance was needed.
14

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.

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

Share Repurchase Program

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 October 1, 2021, the remaining stock repurchase authorization provided by the Board of Directors was $100 million. The timing, amount and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors. 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 nine months ended October 1, 2021 and October 2, 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 December 31, 2020$(112,783)$(360,977)$21,654 $(452,106)
Other comprehensive income (loss) before reclassifications:
Foreign currency translation adjustment1,089 (124,824)(2,582)(126,317)
Gain on long-term intra-entity foreign currency transactions 25,933  25,933 
Gain on net investment hedges  16,655 16,655 
Other comprehensive income (loss) before reclassifications1,089 (98,891)14,073 (83,729)
Amounts reclassified from Accumulated other comprehensive loss3,193   3,193 
Net Other comprehensive income (loss) 4,282 (98,891)14,073 (80,536)
Balance at October 1, 2021$(108,501)$(459,868)$35,727 $(532,642)


15

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 December 31, 2019$(106,500)$(421,889)$44,544 $(483,845)
Other comprehensive income (loss) before reclassifications:
Foreign currency translation adjustment(389)(31,747)1,894 (30,242)
Loss on long-term intra-entity foreign currency transactions (18,023) (18,023)
Loss on net investment hedges  (12,700)(12,700)
Other comprehensive income (loss) before reclassifications(389)(49,770)(10,806)(60,965)
Amounts reclassified from Accumulated other comprehensive loss2,814   2,814 
Net Other comprehensive income (loss) 2,425 (49,770)(10,806)(58,151)
Balance at October 2, 2020$(104,075)$(471,659)$33,738 $(541,996)

Tangible equity unit (“TEU”) offering

On January 11, 2019, the Company issued 4.6 million TEUs 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 contracts”) and debt (the “TEU amortizing notes”) based on the relative fair value of the respective components of each TEU. See Note 10, “Debt” for further information regarding the TEU amortizing notes.
TEU prepaid stock purchase contracts

Unless previously settled at the holder’s option, for each TEU prepaid stock purchase contract the Company will deliver to holders on January 15, 2022 (subject to postponement in certain limited circumstances, the “mandatory settlement date”) a number of shares of common stock. The number of shares of common stock issuable upon settlement of each purchase contract (the “settlement rate”) will be determined using the arithmetic average of the volume average weighted price for the 20 consecutive trading days beginning on, and including, the 21st scheduled trading day immediately preceding January 15, 2022 (“the Applicable Market Value”) with reference to the following settlement rates:

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

Earnings per share impact of TEU prepaid stock purchase contracts

Unless the TEU prepaid stock purchase contracts are redeemed by the Company or settled earlier at the unit holder’s option, they are mandatorily convertible into shares of Colfax common stock at not less than 4.0000 shares per purchase contract or more than 4.8054 shares per purchase contract on January 15, 2022. This corresponds to not less than 18.4 million shares and not more than 22.1 million shares at the maximum. 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 higher than the reference price but is less than the threshold appreciation price. During the three and nine months ended October 1, 2021, 1.4 million and 3.0 million TEU prepaid stock purchase contracts were settled at the holder’s option
16

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



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

9. Inventories, Net

Inventories, net consisted of the following:
October 1, 2021December 31, 2020
(In thousands)
Raw materials$138,421 $110,848 
Work in process66,012 40,517 
Finished goods650,927 476,297 
855,360 627,662 
Less: allowance for excess, slow-moving and obsolete inventory(74,376)(62,840)
$780,984 $564,822 

10. Debt

Long-term debt consisted of the following:
October 1, 2021December 31, 2020
(In thousands)
Term loan$782,216 $781,557 
Euro senior notes403,234 425,045 
2024 and 2026 notes