SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Form 10-K that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-K is filed with the Securities and Exchange Commission (the “SEC”). All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements regarding: projections of revenue, profit margins, expenses, tax provisions and tax rates, earnings or losses from operations, impact of foreign exchange rates, cash flows, pension and benefit obligations and funding requirements, synergies or other financial items; plans, strategies and objectives of management for future operations including statements relating to potential acquisitions, compensation plans or purchase commitments; developments, performance or industry or market rankings relating to products or services; future economic conditions or performance; the outcome of outstanding claims or legal proceedings including asbestos-related liabilities and insurance coverage litigation; potential gains and recoveries of costs; assumptions underlying any of the foregoing; and any other statements that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Forward-looking statements may be characterized by terminology such as “believe,” “anticipate,” “should,” “would,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “targets,” “aims,” “seeks,” “sees,” and similar expressions. These statements are based on assumptions and assessments made by our management in light of their experience and perception of historical trends, current conditions, expected future developments and other factors we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including but not limited to the following:

Any such forward-looking statements are not guarantees of future performance and actual results, developments and business decisions may differ materially from those envisaged by such forward-looking statements. These forward-looking statements speak only as of the date this Form 10-K is filed with the SEC. We do not assume any obligation and do not intend to update any forward-looking statement except as required by law. See Item 1A. “Risk Factors” in Part I of this Form 10-K for a further discussion regarding some of the factors that may cause actual results to differ materially from those that we anticipate.

PART I

Colfax Corporation (the “Company”, “Colfax”, “we” or “us”) is a leading diversified industrial technology company that provides airfabrication technology and gas handling and fabricationmedical technology products and services to customers around the world principally under the HowdenESAB and ESABDJO brands. The Company has been built through a series of acquisitions, as well as organic growth, since its founding in 1995. We seek to build an enduring premier global enterprise by applying the Colfax Business System (“CBS”) to continuously improve our Company and pursue growth in revenues and improvements in profit and cash flow.

On January 13, 2012, we closedcompleted the acquisition of Charter International plc (“Charter”), which transformed Colfax from its historical roots as a fluid handling business into a diversified industrial enterprise with a broad global footprint. This acquisition provided an additional growth platform in the fragmented fabrication technology sector, while broadening the scope of our fluid handling platform to include air and gas handling products.

Following the Charter acquisition, of Charter, we completed 20fifteen acquisitions in the fluid handling and air and gas handling operations to grow and strengthen our business. Four of those acquisitions related to our fluid handling operations, which we soldthe businesses before divesting the platforms in December 2017 and September 2019, respectively, as discussed below. During the most recent three-year period, we completed four acquisitions in our Air and Gas Handling segment that expanded our portfolio of gas compression products and enhanced our fan product offering with ventilation control software. We also completed four acquisitions in our Fabrication Technology segment during the most recent three-year period that broadened our product offering and technology content.

InOn December 11, 2017, we completed the divestiture of our fluid handling business. This representsrepresented a strategic milestone in the development of our portfolio and strengthensstrengthened our balance sheet, providing more flexibility to execute our strategic growth strategy. See Note 4, “Discontinued Operations”, for further information.

On February 22, 2019, we completed the acquisition of DJO Global, Inc. (“DJO”), a global developer, manufacturer and distributor of high-quality medical devices with a broad range of products used for orthopedic bracing, reconstructive implants, rehabilitation, pain management and physical therapy. DJO products address the continuum of patient care from injury prevention to rehabilitation from injury or degenerative disease, enabling people to regain or maintain their natural motion. The DJO acquisition is part of our strategic evolution creating a new growth platform in the accompanying Notes to Consolidated Financial Statements in this Form 10-Khigh-margin orthopedic solutions market. See Note 5, “Acquisitions”, for more information about this transaction. We plan to continue our acquisition strategy in attractive markets thatfurther information.

On September 30, 2019, we believe will strengthencompleted the coredivestiture of our Air and Gas Handling business and/or will broadenfor an aggregate purchase price of $1.8 billion, including $1.67 billion of cash paid at closing, subject to certain adjustments pursuant to the purchase agreement, and diversifythe assumption of certain liabilities and minority interests. We used cash proceeds, net of transaction expenses and estimated taxes, of approximately $1.6 billion to pay down debt. See Note 4, “Discontinued Operations”, for further information.

We believe the completion of the DJO acquisition and Air & Gas Handling divestiture has created a much stronger portfolio - less cyclical, higher margin, and with more stable cash generation and an attractive long-term growth outlook. Our fabrication technology and medical technology platforms are expected to provide us a foundation on which to drive continuous improvement and compound our portfolio.results by investing in innovation and attractive acquisitions. During the most recent three-year period, we have complemented our organic growth plans with five strategic acquisitions that have broadened our product offering and technology content in our Fabrication Technology segment.

Integral to our operations is the Colfax Business System, or “CBS”. CBS is ourOur business management system, includingCBS, is integral to our operations. CBS consists of a comprehensive set of tools. Ittools that includes repeatable, teachable processes that we use to drive continuous improvement and create superior value for our customers, shareholders and associates. Rooted in our core values, it is our culture. We believe that our management team’s access to, and experience in, the application of the CBS methodology is one of our primary competitive strengths.

We report our operations through the Air and Gas Handling and Fabrication Technology segments. For certain financial information, including Net sales and long-lived assets by geographic area, see Note 17, “Segment Information” in the accompanying Notes to Consolidated Financial Statements in this Form 10-K.Medical Technology segments.

We formulate, develop, manufacture and supply consumable products and equipment for use in the cutting, joining and automated welding of steels, aluminum and other metals and metal alloys. For the year ended December 31, 2017,2019, welding consumables represented approximately 42%69% of our total Net sales.sales in our Fabrication Technology segment. Our fabrication technology products are marketed under several brand names, most notably ESAB, which we believe is well known in the international welding industry. ESAB’s comprehensive range of welding consumables includes electrodes, cored and solid wires and fluxes using a wide range of specialty and other materials, and cutting consumables includes electrodes, nozzles, shields and tips. ESAB’s fabrication technology equipment ranges from portable welding machines to large customized automated cutting and welding systems. Products are sold into a wide range of end markets, including infrastructure, wind power, marine, pipelines, mobile/off-highway equipment, oil, gas, and mining. Our sales channels include both independent distributors and direct salespeople, depending on geography and end market.

Our Fabrication Technology segment products and services are marketed worldwide. Theworldwide and the markets served by our Air and Gas Handling segmentwe serve are fragmented and competitive. Because we compete in selected niches of these markets and due to the diversity of our products and services, no single company competes directly with us across all our markets. We encounter a wide variety of competitors that differ by product line, including well-established regional competitors, competitors with greater specialization in particular markets, as well as larger competitors. The markets that our Fabrication Technology segment competes in are also served by Lincoln Electric and the welding business within Illinois Tool Works, Inc.

Our Fabrication Technology segment products and services are available worldwide. We believe this geographic diversity allows us to draw on the skills of a global workforce, provides stability to our operations, allows us to drive economies of scale, provides revenue streams that may offset economic trends in individual economies, and offers an opportunity to access new markets for products. In addition, we believe that our exposure to developing economies will provide additional opportunities for growth in the future.

Our principal markets as a whole outside the U.S. are in Europe, Asia, South America, and the Middle East and South America.East. For the year ended December 31, 2017,2019, approximately 78%60% of our Net sales were shipped to locations outside of the U.S., with approximately 51.2%33% shipped to locations in emerging markets.

Our research and development activities vary by operating segment, focusing on innovation; developing new products, software and services;services, as well as the enhancement of existing products with the latest technology and updated designs; creating new applications for existing products; lowering the cost of manufacturing our existing products; and, redesigning existing product lines to increase efficiency, improve durability, enhance performance and enhance performance.usability.

Research and development expense was $42.9$61.8 million, $39.3$34.2 million and $38.0$32.8 million in 2017, 20162019, 2018 and 2015,2017, respectively. These amounts do not include development and application engineering costs incurred in conjunction with fulfilling customer orders and executing customer projects. We expect to continue making significant expenditures for research and development to

We rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secrets and contractual provisions to protect our intellectual property.property both in the U.S. and around the world for both our Fabrication Technology and Medical Technology segments. Although we highlight recent additions to our patent portfolio as part of our marketing efforts, we do not consider any one patent or trademark or any group thereof essential to our business as a whole or to any of our business operations. We also rely on proprietary product knowledge and manufacturing processes in our operations. We do not rely solely on our patents and other intellectual property rights to maintain our competitive position. We believe that the development and marketing of new products and improvement of existing ones is, and will continue to be, more important to our competitive position than relying solely on existing products and intellectual property.

We obtain raw materials, component parts and supplies from a variety of global sources, generally each from more than one supplier. Our principal raw materials and components for our Fabrication Technology segment are metals, castings, motors, sealssteel, iron, copper and bearings.aluminum. Our principal raw materials and components for our Medical Technologies segment are foam ethylene vinyl acetate, copolymer for our bracing and vascular products and cobalt chromium alloy, stainless steel alloys, titanium alloy and ultra high molecular weight polyethylene for our surgical implant products. We believe that our sources of raw materials are adequate for our needs for the foreseeable future and the loss of any one supplier would not have a material adverse effect on our business or results of operations.

As our air and gas handling customers seek to fully utilize capital spending budgets before the end of the year, historically our shipments have peaked during the fourth quarter. Also, ourOur European operations typically experience a slowdown during the July, August and December vacation seasons.seasons for our Fabrication Technology segment. Sales in our Medical Technology segment typically peak in the fourth quarter. General economic conditions may, however, impact future seasonal variations.

We maintain an adequate level of working capital to support our business needs. There are no unusual industry practices or requirements related to working capital items.

As of December 31, 2017,2019, we employed approximately 14,30015,000 persons, of whom approximately 2,5002,800 were employed in the United States and approximately 11,80012,200 were employed outside of the United States.

Approximately 2%1% of associates are covered by collective bargaining agreements with U.S. trade unions. In addition, approximately 41%39% of our associates are represented by foreign trade unions and work councils in Europe, Asia, Central and South America, Canada, Africa and Australia, which subjects us to arrangements very similar to collective bargaining agreements. We have not experienced any work stoppages or strikes that have had a material adverse impact on operations. We consider our relations with our associates to be good.

We were organized as a Delaware corporation in 1998. Our principal executive offices are located at 420 National Business Parkway, 5th Floor, Annapolis Junction, MD 20701, and our main telephone number at that address is (301) 323-9000. Our corporate website address is www.colfaxcorp.com.

Our corporate headquarters are located in Annapolis Junction, Maryland in a facility that we lease. As of December 31, 2017, our Air and Gas Handling reportable segment had 7 principal production facilities in the U.S. representing approximately 0.7 million and 0.1 million square feet of owned and leased space, and 28 principal production facilities in 17 different countries in Asia, Europe, the Americas, Australia and South Africa, representing a total of 2.6 million and 0.3 million square feet of owned and leased space, respectively. Additionally, as of December 31, 2017,2019, our Fabrication Technology segment had a total of 65 production facilities in the U.S., representing a total of 0.6 million and 0.90.7 million square feet of owned and leased space, respectively, and 3332 production facilities outside the U.S., representing a total of 6.97 million and 2.41.9 million square feet of owned and leased space, respectively, in 16 countries in Australia, Central and Eastern Europe, Central and South America and Asia. As of December 31, 2019, our Medical Technology segment had a total of 4 production facilities in the U.S., representing a total of 0.1 million and 0.2 million square feet of owned and leased space, respectively, and 2 production facilities outside the U.S., representing a total of 0.3 million square feet of leased space in 2 countries in Central America and Africa.

Discussion of legal matters is incorporated by reference to Part II, Item 8, Note 16,18, “Commitments and Contingencies,” in the Notes to the Consolidated Financial Statements.

Certain amounts not allocated to the two reportable segments and intersegment eliminations are reported under the heading “Corporate and other.”

We have a global geographic footprint, with production facilities in Europe, North America, South America, Asia, Australia and Africa. Through our reportable segments, weWe serve a global customer base across multiple markets through a combination of direct sales and third-party distribution channels. Our customer base is highly diversified in the medical and includes commercial, industrial and government customers.end markets.

Integral to our operations is CBS.CBS, our business management system. CBS is our business management system, includingculture and includes our values and behaviors, a comprehensive set of tools. It includestools, and repeatable, teachable processes that we use to drive continuous improvement and create superior value for our customers, shareholders and associates. Rooted in our core values, it is our culture. We believe that our management team’s access to, and experience in, the application of the CBS methodology is one of our primary competitive strengths.

We believe that we are well positioned to grow our businesses organically over the long term by enhancing our product offerings and expanding our customer base. Our Medical Technology segment orthopedic business enjoys sustainable secular drivers such as aging populations that require increasing levels of medical care that should contribute to reduced cyclicality of our Company. In addition, the shift to greater outpatient surgeries is expected to benefit our rehabilitation and recovery business as patients require proper bracing and other support during recoveries. Our Fabrication Technology business mix is expected to be well balanced between long- and short-cycle businesses, sales in emerging markets and developed nations, and fore-equipment and aftermarketconsumables. We intend to continue to utilize our strong global presence and worldwide network of salespeople and distributors to capitalize on growth opportunities by selling regionally-developed and/or marketed products and services.solutions throughout our served markets. Our geographic and end market diversity helps mitigate the effects from cyclical industrial market exposures. Given this balance, management does not use indices other than general economic trends and business initiatives to predict the overall outlook for the Company. Instead, theour individual businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and outlook for the future.

We face a number of challenges and opportunities, including the successful integration of new acquisitions,acquired businesses, application and expansion of our CBS tools to improve margins and working capital management,business performance, and rationalization of assets and costs.

We expect strategic acquisitions to contribute to our growth. We believe that the extensive experience of our leadership team in acquiring and effectively integrating acquisition targets should enable us to capitalize on future opportunities.

Results of Operations

The following discussion of Results of Operations addresses the comparison of the periods presented. The Company’sOur management evaluates the operating results of each of its reportable segments based upon Net sales, and Segment operating income (loss), which represents Operating income before Goodwill and intangible asset impairment charge, Pension settlement loss and Restructuring and other related charges.charges, and Adjusted EBITA as defined in the “Non-GAAP Measures” section.

Our financial performance and growth are driven by many factors, principally our ability to serve global markets,customers with market-leading delivery and innovation; the mix of products sold in any period; the impact of competitive forces, economic and market conditions; reimbursement levels for products in certain medical sales channels; availability of capital and attractive acquisition opportunities; our ability to continuously improve our cost structure; fluctuations in the relationship of foreign currencies to the U.S. dollar, general economic market conditions, the global economy and capital spending levels, the availability of capital, our estimates concerningdollar; asbestos litigation expense and liabilities and availability of insurance thereto, the impact of restructuring initiatives,thereto; and our ability to pass cost increases on to customers through pricing, the impact of sales mix, our ability to continue to grow through acquisitions, and other factors.pricing. These key factors have impacted our results of operations in the past and are likely to affect them in the future.

 

 

Our products and services are available worldwide. The manner in which our products and services are sold differs by region. During 2017,2019, approximately 78%60% of our sales were shipped to locations outside of the U.S., mostly from locations outside the U.S. Accordingly, we are affected by levels of industrial activity andmarket demand, economic and political factors in countries throughout the world. Our ability to grow and our financial performance will be affected by our ability to address a variety of challenges and opportunities that are a consequence of our global operations, including efficiently utilizing our global sales, manufacturing and distribution capabilities, participating in the expansion of market opportunities in emerging markets, successfully completing global strategic acquisitions and engineering innovative new product applications for end users in a variety of geographic markets. However, we believe that our geographic, end market, customer and product diversification may limit the impact that any one country or economy could have on our consolidated results.

 

 

A significant portion of our Net sales, approximately 76%56% for 2017,2019, is derived from operations outside the U.S., with the majority of those sales denominated in currencies other than the U.S. dollar. Because much of our manufacturing and employee costs are outside the U.S., a significant portion of our costs are also denominated in currencies other than the U.S. dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significantsignificant. For the year-ended December 31, 2019 compared to our discussion. Changes2018, fluctuations in foreign exchange ratescurrencies had an overall negligibleunfavorable impacts on the change in Net sales and Income from continuing operations before income taxes of approximately 4% and 8%, respectively. For the year ended December 31, 2018 compared to 2017, fluctuations in foreign currencies had unfavorable impact on Net sales and Income from continuing operations before income taxes for the year ended December 31, 2017. Changesby approximately 2% and 3%, respectively. The changes in foreign exchange rates since December 31, 2016 increased2018 decreased net assets by approximately 8%.a negligible amount as of December 31, 2019.

During 2016, we determined that an other-than-temporary lack of exchangeability between2018, Argentina became a highly inflationary economy, resulting in the Venezuelan bolivar and U.S. dollar, due to government controls, restricted our Venezuelan operations ability to pay dividends and satisfy other obligations denominated in U.S. dollars. In addition, other government-imposed restrictions affecting labor, production, and distribution prohibited the Company from controlling key operating decisions. These circumstances have caused us to no longer meet the accounting criteria of control in order to continue consolidating our Venezuelan operations. Therefore, we deconsolidated the financial statementsremeasurement of our VenezuelanArgentinian operations as of September 30, 2016. As a resultinto Brazilian real, the functional currency of the deconsolidation, we recorded a chargeArgentinian entity’s direct parent. Gains and losses from the remeasurement are reflected in current earnings. Future impacts to earnings of $2.4 million,applying highly inflationary accounting for Argentina on our Consolidated Financial Statements will be dependent upon movements in the applicable exchange rates. As of which $0.5 million is included in Selling, general and administrative expense and $1.9 million is included in Income (loss) from discontinued operations, net of taxes, for the yearyears ended December 31, 2016. Substantially all of this amount related to accumulated foreign currency translation charges previously included in Accumulated other comprehensive loss. Due to loss of control, we have applied2019 and 2018, the cost method of accounting for our Venezuelan operations beginning on September 30, 2016. Prior to, and at the date of deconsolidation, our Venezuelan operationsArgentina operation represented less than 1%2% of our netTotal assets revenues and Net sales. The devaluation of the peso resulted in losses of $4.0 million and $2.5 million in our Fabrication Technology segment operating income.income during 2019 and 2018, respectively.

 

Demand for our Fabrication Technology segment products depends in part on the level of new capital investment and planned maintenance by our customers. The level of capital expenditures depends, in turn, on general economic conditions as well as access to capital at reasonable cost. Additionally, volatility in commodity prices including oil, can negatively affect the level of these activities and can result in postponement of capital spending decisions or the delay or cancellation of existing orders. While demand can be cyclical, we believe that our diversified operations generally limit the impact of a downturn in any one market on our consolidated results. During in the second half of 2017, declines in activity in the oil, gas, and petrochemical and power generation end markets impacted our Air and Gas Handling segment. These declines reduced the levels of capital invested and maintenance expenditures made by certain of our customers, which in turn has reduced the demand for our products and services.

 

As our air and gas handling customers seek to fully utilize capital spending budgets before the end of the year, historically our shipments have peaked during the fourth quarter. Also, ourOur European operations typically experience a slowdown during the July, August and December vacation seasons. Sales in our Medical Technology segment typically peak in the fourth quarter. General economic conditions may, however, impact future seasonal variations.

 

We believe our customers place a premium on quality, reliability, availability, design and application engineering support. Our Fabrication Technology segment results may be sensitive to price movementscost changes in our raw materials. Our largest material purchases are for components and raw materials including steel, iron, copper and aluminum. Our principal raw materials and components for our Medical Technology segment are foam ethylene vinyl acetate, copolymer for our bracing and vascular products and cobalt chromium alloy, stainless steel alloys, titanium alloy and ultra high molecular weight polyethylene for our surgical implant products. Historically, we have been generally successful in passing raw material pricecost increases on to our customers.customers in the form of higher prices. While we seek to take actions to manage this risk, future changes in component and raw material costs may adversely impact earnings.

 

 

OurThe gross profit margins within our Fabrication Technology segment vary in relation to the relative mix of many factors, including the type of product, the location in which the product is manufactured, the end market application for which the product is designed, and the percentage of total revenue represented by aftermarket sales and services,consumables, which tend to often have higher margins than foremarketequipment. Gross profit margins within our Medical Technology segment vary primarily based on the type of product and distribution channel. Reconstructive products tend to have higher margins than the prevention and consumables.rehabilitation products.

The mix of sales was as follows for the periods presented:

Adjusted EBITA, a non-GAAP performance measure, is included in this report because it is a key metric used by management to assess our consolidated and segment operating performance. Adjusted EBITA excludes from Net income (loss) from continuing operations the effect of restructuring and other related charges, acquisition-related intangible asset amortization and other non-cash charges, strategic transaction costs, income tax expense (benefit), loss on short term investments, interest expense, net and pension settlement loss. We complement our organic growthalso present Adjusted EBITA margin, which is subject to the same adjustments as Adjusted EBITA. Further, we present Adjusted EBITA (and Adjusted EBITA margin) on a segment basis, where we exclude the impact of restructuring, strategic transaction costs, and acquisition-related amortization and other non-cash charges from segment operating income. Adjusted EBITA assists Colfax management in comparing its operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans that are fundamentally different from the ongoing productivity improvements of the Company. Colfax management also believes that presenting these measures allows investors to view its performance using the same measure that the Company uses in evaluating its financial and business performance and trends.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with strategic acquisitions. Acquisitions can significantly affect our reported results, and we reportU.S. GAAP. Investors are encouraged to review the change in ourreconciliation of these non-GAAP measures to their most directly comparable U.S. GAAP financial measures. The following tables set forth a reconciliation of Net sales between periods bothincome (loss) from existing and acquired businesses. Orders and order backlog are presented onlycontinuing operations, the most directly comparable U.S. GAAP financial measure, to Adjusted EBITA.

The $37.1$671.7 million increase in Gross profit during 20172019 in comparison to 20162018 was primarily attributable to an increaseour newly-acquired Medical Technology segment, which contributed Gross profit of $49.6$604.2 million during 2019. Gross profit in our Fabrication Technology segment partially offset by a declinegrew $68.8 million during 2019 in comparison to 2018 including acquisition-related growth of $12.5 million in our Air and Gas Handling segment. Acquisition-related growth in both segments contributed $32.1 million of Gross profit in 2017, and foreign exchange translation added another $14.0 million to the increase. These increases combined with $26.8 million of savings from restructuring initiatives, helped offset the impact of lower new build project margins and higher material costs experienced in 2017, keeping$39.7 million. Improved Gross profit margin consistent with the prior year.in 2019 in comparison to 2018 was primarily attributed to higher gross margin in our new Medical Technology segment.

Selling, general and administrative expense increased by $35.5$583.3 million during 20172019 in comparison to 2016, which2018. The increase was attributable to increases in both Air and Gas Handling and Fabrication Technology. The increases were mainly driven by $28.3the inclusion of $516.5 million increases associated with acquisitions completed in 2017, a $14.2 million increase in business development related expenses, partially offset by the incremental benefits realized from our restructuring programsnewly-acquired Medical Technology segment including $138.5 million of acquisition-related amortization and cost savings initiatives.other non-cash charges and $61.0 million of strategic transaction costs. Restructuring and other related charges increased during 2017 compared2019 in comparison to 2016, driven by accelerated cost reduction programs2018, mainly due to eliminate excess costrestructuring activities in response to the current market conditions.our Medical Technology segment.

During 2017, we recorded impairment charges totaling $152.7 million. These charges consisted of a goodwill impairment of $150.2 million and an indefinite-lived trademark impairment charge of $2.5 million. Both charges related to our Air and Gas Handling segment. Additionally, weWe incurred a $46.9$33.6 million non-cash pension settlement loss in connection with a third-party buyout of one of the Company’sour pension plans.plans in 2019. There was no third-party buyout of pension in 2018.

Interest expense during 20172019 increased by $10.8$70.4 million compared to 2016,2018, primarily attributable to increases in debt related to our acquisition of DJO.

The Loss on short term investments of $10.1 million during 2018 was due to the senior note offeringchange in fair value and subsequent sale of €350 millionthe CIRCOR Shares received in Aprilconnection with the December 2017 and higher interest rates on our senior unsecured debt.Fluid Handling business sale.

LossIncome from continuing operations before income taxes was $12.0$50.5 million and Income tax expense was $31.6 million for 2019. The effective tax rate for continuing operations in 2019 was 62.6%, which is higher than the U.S. federal statutory tax rate primarily due to taxation of foreign earnings, non-deductible transaction costs and unfavorable changes to the realization of deferred tax assets. These unfavorable adjustments were partially offset by lower effective tax rates of foreign jurisdictions, U.S. R&D and foreign tax credits, and the realization of deferred tax assets that previously had valuation allowances. Income from continuing operations before income taxes was $92.4 million and the ProvisionBenefit for income taxes was $42.6$29.5 million for 2017.2018. The effective tax rate for continuing operations during 20172018 was (355.0)(31.9)%, which was higherlower than the U.S. federal statutory tax rate primarily due to a reduction in Tax Act related amounts originally provided for in the year ended December 31, 2018, U.S. R&D and foreign tax credits, the realization of deferred tax assets that previously had valuation allowances and the net favorable reduction of uncertain tax positions. These favorable items were offset in part by losses in certain jurisdictions where a tax benefit is not expected to be recognized and permanent adjustments in an international jurisdiction primarily due to non-deductible impairment losses, losses in certain jurisdictions where a tax benefit is not expected to be recognized offset in part by foreign earnings where international tax rates that are lower than the 20172018 U.S. tax rate. The Tax Act provisional amounts did not have a significant net impact on the effective tax rate for 2018.

The $57.8 million increase in Gross profit during 2018 in comparison to 2017 was attributable to the Fabrication Technology segment. Acquisitions contributed $43.2 million of gross profit and restructuring initiatives added $4.0 million when compared to 2017. Gross profit margin for 2018 included the effect of higher customer prices for certain products to offset input cost inflation, which commensurately increased both Net sales and Cost of sales and compressed total Company Gross profit margin by 150 basis points.

Income from continuing operations before income taxes was $206.5$92.4 million and Income tax benefit was $29.5 million for 2018. The effective tax rate for continuing operations during 2018 was (31.9)%, which was lower than the ProvisionU.S. federal statutory tax rate primarily due to a reduction in Tax Act-related amounts originally provided for in the year ended December 31, 2018, U.S. R&D and foreign tax credits, the realization of deferred tax assets that previously had valuation allowances, and net favorable reductions of uncertain tax positions. These favorable items were offset in part by losses in certain jurisdictions where a tax benefit is not expected to be recognized and permanent adjustments in an international jurisdiction primarily due to non-deductible impairment losses, losses in certain jurisdictions where a tax benefits is not expected to be recognized offset in part by foreign earnings where international tax rates are lower than the 2018 U.S. federal tax rate. The Tax Act provisional amounts did not have a significant net impact on the effective tax rate for 2018. Income from continuing operations before income taxes was $51.8$48.6 million and Income tax expense was $2.5 million for 2016,2017, resulting in a 25.1%5.1% effective tax rate that was primarily driven by foreign earnings where international tax rates are lower than the U.S. federal tax rate.

The 13.2% Net sales increase during 20172018 compared to 20162017 was primarily the result of an increase in existing businesses of $59.0$171.5 million led by a market recovery in North America andwith continued growth in certain developing regions. Acquisition-related growth contributed $48.1 million of incremental sales in 2017,most markets and foreign currency translation had a positive impact of $29.7 million. Gross profit increased in 2017 due to acquisition-related growth of $23.4$119.6 million. Changes in foreign exchange rates had a negative impact of $35.3 million on Net sales. The growth rate from existing businesses included 4.8% from increased customer prices to address higher material and inflation costs, and 4.1% from higher volumes. The increase in Gross profit during 2018 is driven by the acquisition-related growth of $43.2 million and increases in volumes from existing businesses. Costs savings associated with restructuring programs added another $8.2 million of additional gross profit in the current year. These increases were partially offset by a $38.6 million increase in cost of goods sold due to higher commodity prices in 2017.increased sales volumes. Gross margin increased 20decreased 140 basis points due to the positive impact from increased volumes and favorable mix, which was partially offsetdilutive effect of input cost inflation being addressed by higher raw material costs during the year.customer prices for certain products. Selling, general and administrative expense increased by $20.6$32.2 million in 20172018 as compared to 20162017, primarily driven by a $33.2 million acquisition-related increase and was primarily attributablehigher costs to support growth initiatives, offset by a $17.9$10.9 million increasenet benefit from facility sales in acquisition-related cost. Segment operating income margin expanded approximately 80 basis points due to higher sales and improved profit margin.the fourth quarter. Restructuring and other related items decreasedincreased in 20172018 in comparison to 2016, consistent with management’s plan.2017, as a result of expanded

The Net sales decrease during 2016 compared to 2015 was primarily the result of a decrease in existing businesses of $102.2 million and changes in foreign exchange rates which had a negative impact of $83.9 million, partially offset by acquisition-related growth of $1.3 million. The $102.2 million Net sales decline due to existing businesses, as discussed and defined under “Sales, Orders and Backlog” above, during 2016 in comparison to 2015 was primarily the result of decreases in equipment sales and consumable volumes in North America. The lower volumes decreased Gross profit for 2016 by approximately $40 million as compared to 2015, and changes in foreign exchange rates contributed $24 million to the decrease. Gross profit margin for the segment increased in the current year due to favorable consumable pricing in selected markets and materials costs savings initiatives across the segment. The decrease in Selling, general and administrative expense during 2016 was primarily due to benefits realized from our restructuring programs and cost savings initiatives, totaling approximately $29 million. Changes in foreign exchange rates decreased Selling, general and administrative expense by approximately $16 million in 2016.reduction programs. Segment operating income margin increased despiteand Adjusted EBITA margin remained consistent during 2018 compared to 2017.

We develop, manufacture and distribute high-quality medical devices and services across the lower overall volumescontinuum of patient care from injury prevention to joint replacement to rehabilitation after surgery, injury or from degenerative disease, enabling people to regain or maintain their natural motion. Our products are used by orthopedic specialists, spine surgeons, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers and other healthcare professionals. Our products primarily due toinclude orthopedic braces, rehabilitation devices, footwear, surgical implants, and bone growth stimulators.

The following table summarizes the selected 10-month financial data for our execution on cost control. Medical Technology segment, which was acquired at the end of fiscal February of 2019:

Net sales for our Medical Technology segment for the Fabrication Technology segment remained relatively consistent in 2016 asyear ended December 31, 2019 on a year-to-date basis since the segment respondsacquisition date compared to the cyclical market downturn.same period in 2018, prior to our acquisition of DJO, delivered organic growth of approximately 4.4%. Profit margins in the fourth quarter of 2019 compared to both the second and third quarters of 2019 have improved as a result of cost reductions and productivity improvements beginning to be realized as well as reduction of acquisition-related inventory fair value charges. Year-to-date acquisition-related amortization and other non-cash charges include inventory fair value charges of $18.2 million.

Liquidity and Capital Resources

We have financedfinance our capital and working capital requirements through a combination of cash flows from operating activities, various borrowings and the issuances of equity. We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures, restructuring, asbestos-related expensescash outflows, and fundingdebt service and required amortization of pension plans. If determined appropriate for strategic acquisitions or other corporate purposes, weprincipal. We believe we could raise additional funds in the form of debt or equity.equity if it was determined to be appropriate for strategic acquisitions or other corporate purposes.

On May 21, 2015, we contributed 66,000 shares of newly issued Colfax Common stock to our U.S. defined benefit pension plan. No contributions of our Common stock were made in 2016 and 2017.

On June 5, 2015,December 17, 2018, we entered into a credit agreement (the “Credit Facility”) by and among the Company, as the borrower, certain U.S. subsidiaries of the Company identified therein, as guarantors, each of the lenders party thereto, and DeutscheJPMorgan Chase Bank, AG New York Branch,N.A., as administrative agent, Credit Suisse Loan Funding LLC, as syndication agent, and the co-documentation agents named therein. The Credit facility was subsequently amended on December 6, 2019, as discussed further below. Prior to the amendment, the Credit Facility initially consisted of a revolving credit facility totaling $1.3 billion in commitments (the “Revolver”) and a Term A-1 loan in an aggregate amount of $1.2 billion, each of which matured in five years, and a Term A-2 loan in an aggregate amount of $500 million, which matured in two years (together, the “Term Loan Facilities”). The Revolver contained a $50 million swing line lender and global coordinator (the “DBloan sub-facility.

The initial credit extensions under the Credit Agreement”)Facility were only made available on the date of consummation of the DJO acquisition, which occurred on February 22, 2019 (see Note 5, “Acquisitions” for details). TheAt closing, the proceeds of the loans under the DB Credit AgreementFacility were used by us to repay in full balances under ourthe preexisting credit agreement as well as to finance a portion of the purchase price for working capitalthe DJO acquisition and general corporate purposes. other related fees.

The DB Credit Agreement consistsFacility required, under certain circumstances, any funds received as net proceeds from the sale of certain of the Company’s assets or subsidiaries be used to repay outstanding balances on the Term Loan Facilities, as well as outstanding balances under the Revolver. On September 30, 2019, upon the completion of the sale of its Air and Gas Handling business (see Note 4, “Discontinued Operations” for details), we were required to use $1.65 billion of the net sale proceeds to repay a termportion of the Term loans and Revolver, and the Term A-2 loan was repaid in full. Accordingly, a corresponding amount of interest associated with the Term Loan Facilities and Revolver has been included in Loss from discontinued operations, net of taxes on the Consolidated Statements of Operations.

On December 6, 2019, we entered into an amendment to the Credit Facility decreasing the total commitments under the Revolver to $975 million from $1.3 billion and extending the maturity date of each of the Revolver and Term A-1 Loan to December 6, 2024. The amendment also adjusted the timeline for leverage ratio step downs and removed the “springing” collateral provision in the aggregate amount of $750.0 million (the “Term Loan”) and a revolving credit facility (the “Revolver”) with a commitment capacity of $1.3 billion, each of which had an initial maturity term of five years. The Revolver contains a $50.0 million swing line loan sub-facility. In conjunction with the DB Credit Agreement, we recorded a charge to Interest expense in the Consolidated Statement of Income for the year ended December 31, 2015 of $4.7 million to write-off certain deferred financing fees and original issue discount and expensed $0.4 million of costs incurred in connection with the refinancing of the DB Credit Agreement.Facility.

On April 19, 2017, we issued senior unsecured notes with an aggregate principal amount of €350 million (the “Euro Notes”). The Euro Notes are due onin April 15, 2025, and have an interest rate of 3.25%, and are guaranteed by certain of our domestic subsidiaries (the “Guarantees”). The proceeds from the Euro Notes offering were used to repay borrowings under our DB Credit Agreement and bilateralprevious credit facilities

totaling €283.5 million, as well as for general corporate purposes, and are guaranteed by certain of our domestic subsidiaries (the “Guarantees”).purposes. The Euro Notes and the Guarantees have not been, and will not be, registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any other jurisdiction.

On January 11, 2019, we issued $460 million and deferred financing fees of $9.2in tangible equity units. We offered 4 million included in its Consolidated Balance Sheet as of December 31, 2017, which will be accreted to Interest expense primarily using the effective interest method, over the life of the applicable debt agreements.5.75% tangible equity units at the stated amount of $100 per unit and an option to purchase up to an additional 600,000 tangible equity units at the stated amount of $100 per unit, which was exercised in full at settlement. Total cash of $447.7 million was received upon closing, comprised of $377.8 million TEU prepaid stock purchase contracts and $69.9 million of TEU amortizing notes due January 2022. The proceeds were used to finance a portion of the purchase price for the DJO acquisition and for general corporate purposes. Refer to Note 14, “Equity” in the accompanying Notes to Consolidated Financial Statements for more information.

In addition, to the debt agreements discussed above, the Company iswe are party to various bilateral credit facilities with a borrowing capacity of $217.9$271.7 million. As of December 31, 2017,2019, outstanding borrowings under these facilities totaled $22.8$1.0 million, with a weighted average borrowing rate of 1.00%3.39%.

We are also party to letter of credit facilities with an aggregate capacity of $780.6$416.2 million. Total letters of credit of $418.8$153.4 million were outstanding as of December 31, 2017.2019.

During 2019, we repurchased all of the Company’s subsidiariesnoncontrolling interest shares of our South Africa consolidated subsidiary from existing shareholders under a general offer. As a part of our Air and Gas Handling business, this subsidiary was subsequently sold on an ongoing basis and pledged them to support its obligation as borrower under the receivables financing facility. This special purpose subsidiary has a separate legal existence from its parent and its assets are not available to satisfy the claims of creditors of the selling subsidiaries or any other member of the consolidated group. According to the receivable financing facility agreement, the program limit was not to exceed $80 millionSeptember 30, 2019, and the scheduled termination dateresults of operations are included in discontinued operations for the receivables financing facility was December 19, 2017. On December 15, 2017, the Company paid off the total outstanding borrowings under the receivables financing facility of $52.4 million, and the agreement was terminated.all periods presented.

As of December 31, 2017,2019, we had $262.0$109.6 million of Cash and cash equivalents, an increasea decrease of $40.3$135.4 million from $221.7$245.0 million as of December 31, 2016.2018. The Cash and cash equivalents as of December 31, 20162018 includes $12.9$167.9 million related to the FluidAir and Gas Handling business which was reported in Current portion of assets held for sale inon the Consolidated Balance Sheet.Sheets. The following table summarizes the change in Cash and cash equivalents during the periods indicated:indicated and includes cash flows related to the Air and Gas business: