UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~April 2,~~October 1, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number - 001-34045

Colfax Corporation

(Exact name of registrant as specified in its charter)


Delaware		54-1887631
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

~~420 National Business Parkway,~~2711 Centerville Road,	~~5th Floor~~Suite 400
~~Annapolis Junction,~~Wilmington,	~~Maryland~~Delaware	~~20701~~19808
(Address of principal executive offices)		(Zip Code)


~~(301)~~(302)			~~323-9000~~252-9160
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	CFX	New York Stock Exchange
5.75% Tangible Equity Units	CFXA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑Accelerated filer ☐Non-accelerated filer ☐

Smaller reporting company ☐Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~April 2,~~October 1, 2021, there were ~~135,597,331~~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			2
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Comprehensive Income (Loss)			3
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Equity			5
Condensed Consolidated Statements of Cash Flows			67
Notes to Condensed Consolidated Financial Statements			78
Note 1. General			78
Note 2. Recently Issued Accounting Pronouncements			89
Note 3. Discontinued Operations			9
Note 4. Acquisitions			9
Note 5. Revenue			910
Note 6. Net Income Per Share from Continuing Operations			1112
Note 7. Income Taxes			1213
Note 8. Equity			1315
Note 9. Inventories, Net			1517
Note 10. Debt			1517
Note 11. Accrued Liabilities			1719
Note 12. Financial Instruments and Fair Value Measurements			1921
Note 13. Commitments and Contingencies			2022
Note 14. Segment Information			22
~~Note 15. Subsequent Events~~			2324
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2425
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3741
Item 4. Controls and Procedures			3943

PART II - OTHER INFORMATION
Item 1. Legal Proceedings			4044
Item 1A. Risk Factors			4044
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4145
Item 3. Defaults Upon Senior Securities			4145
Item 4. Mine Safety Disclosures			4145
Item 5. Other Information			4145
Item 6. Exhibits			4247

SIGNATURES			4348

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

COLFAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in thousands, except per share amounts

(Unaudited)


		Three Months Ended				Three Months Ended				Nine Months Ended
		April 2, 2021		April 3, 2020				October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020

Net sales	Net sales	$	879,211	$	816,356		Net sales	$	965,891	$	805,931	$	2,831,030	$	2,242,647
Cost of sales	Cost of sales	508,134		468,142			Cost of sales	561,020		461,811		1,636,098		1,309,227
Gross profit	Gross profit	371,077		348,214			Gross profit	404,871		344,120		1,194,932		933,420
Selling, general and administrative expense	Selling, general and administrative expense	305,724		292,197			Selling, general and administrative expense	334,424		278,060		977,711		805,984
Restructuring and other related charges	Restructuring and other related charges	4,046		9,180			Restructuring and other related charges	6,457		4,129		15,983		23,589
Operating income	Operating income	61,307		46,837			Operating income	63,990		61,931		201,238		103,847

Pension settlement gain							Pension settlement gain	—		—		(11,208)		—
Interest expense, net	Interest expense, net	25,660		24,796			Interest expense, net	13,540		25,567		57,005		78,647

Debt extinguishment charges							Debt extinguishment charges	—		—		29,870		—
Income from continuing operations before income taxes	Income from continuing operations before income taxes	35,647		22,041			Income from continuing operations before income taxes	50,450		36,364		125,571		25,200
Income tax expense	Income tax expense	7,917		13,173			Income tax expense	22,349		19,528		38,421		2,638
Net income from continuing operations	Net income from continuing operations	27,730		8,868			Net income from continuing operations	28,101		16,836		87,150		22,562

Loss from discontinued operations, net of taxes	Loss from discontinued operations, net of taxes	(7,490)		(3,360)			Loss from discontinued operations, net of taxes	(1,244)		(2,641)		(10,351)		(10,906)
Net income	Net income	20,240		5,508			Net income	26,857		14,195		76,799		11,656
Less: income attributable to noncontrolling interest, net of taxes	Less: income attributable to noncontrolling interest, net of taxes	1,166		1,027			Less: income attributable to noncontrolling interest, net of taxes	1,009		789		3,235		2,243
Net income attributable to Colfax Corporation	Net income attributable to Colfax Corporation	$	19,074	$	4,481		Net income attributable to Colfax Corporation	$	25,848	$	13,406	$	73,564	$	9,413
Net income (loss) per share - basic	Net income (loss) per share - basic						Net income (loss) per share - basic
Continuing operations	Continuing operations	$	0.19	$	0.06		Continuing operations	$	0.17	$	0.12	$	0.56	$	0.15
Discontinued operations	Discontinued operations	$	(0.05)	$	(0.02)		Discontinued operations	$	(0.01)	$	(0.02)	$	(0.07)	$	(0.08)
Consolidated operations	Consolidated operations	$	0.14	$	0.03		Consolidated operations	$	0.16	$	0.10	$	0.49	$	0.07
Net income (loss) per share - diluted	Net income (loss) per share - diluted						Net income (loss) per share - diluted
Continuing operations	Continuing operations	$	0.19	$	0.06		Continuing operations	$	0.17	$	0.12	$	0.55	$	0.15
Discontinued operations	Discontinued operations	$	(0.05)	$	(0.02)		Discontinued operations	$	(0.01)	$	(0.02)	$	(0.07)	$	(0.08)
Consolidated operations	Consolidated operations	$	0.13	$	0.03		Consolidated operations	$	0.16	$	0.10	$	0.48	$	0.07

See Notes to Condensed Consolidated Financial Statements.

COLFAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

Dollars in thousands

(Unaudited)

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


	Three Months Ended				Nine Months Ended
	October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020
Net income	$	26,857	$	14,195	$	76,799	$	11,656
Other comprehensive income (loss):
Foreign currency translation, net of tax expense 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 interest	1,373		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.

COLFAX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except share amounts

(Unaudited)


		April 2, 2021		December 31, 2020			October 1, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
CURRENT ASSETS:	CURRENT ASSETS:					CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	763,653	$	97,068	Cash and cash equivalents	$	177,482	$	97,068

Trade receivables, less allowance for credit losses of $35,560 and $37,666		553,785		517,006
Trade receivables, less allowance for credit losses of $34,677 and $37,666						Trade receivables, less allowance for credit losses of $34,677 and $37,666	603,214		517,006
Inventories, net	Inventories, net	606,208		564,822		Inventories, net	780,984		564,822
Prepaid expenses	Prepaid expenses	75,205		69,515		Prepaid expenses	85,540		69,515
Other current assets	Other current assets	79,114		113,418		Other current assets	78,467		113,418

Total current assets	Total current assets	2,077,965		1,361,829		Total current assets	1,725,687		1,361,829
Property, plant and equipment, net	Property, plant and equipment, net	479,240		486,960		Property, plant and equipment, net	510,828		486,960
Goodwill	Goodwill	3,331,531		3,314,541		Goodwill	3,497,355		3,314,541
Intangible assets, net	Intangible assets, net	1,652,957		1,663,446		Intangible assets, net	1,726,955		1,663,446
Lease asset - right of use	Lease asset - right of use	170,620		173,942		Lease asset - right of use	159,118		173,942
Other assets	Other assets	354,301		350,831		Other assets	352,368		350,831

Total assets	Total assets	$	8,066,614	$	7,351,549	Total assets	$	7,972,311	$	7,351,549

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
CURRENT LIABILITIES:	CURRENT LIABILITIES:					CURRENT LIABILITIES:
Current portion of long-term debt	Current portion of long-term debt	$	727,369	$	27,074	Current portion of long-term debt	$	14,340	$	27,074
Accounts payable	Accounts payable	406,744		330,251		Accounts payable	472,499		330,251

Accrued liabilities	Accrued liabilities	424,298		454,333		Accrued liabilities	488,632		454,333

Total current liabilities	Total current liabilities	1,558,411		811,658		Total current liabilities	975,471		811,658
Long-term debt, less current portion	Long-term debt, less current portion	1,481,997		2,204,169		Long-term debt, less current portion	1,611,690		2,204,169
Non-current lease liability	Non-current lease liability	137,329		139,230		Non-current lease liability	127,259		139,230
Other liabilities	Other liabilities	597,808		608,618		Other liabilities	627,367		608,618

Total liabilities	Total liabilities	3,775,545		3,763,675		Total liabilities	3,341,787		3,763,675
Equity:	Equity:					Equity:
Common stock, $0.001 par value; 400,000,000 shares authorized; 135,597,331 and 118,496,687 issued and outstanding as of April 2, 2021 and December 31, 2020, respectively		135		118
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						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 capital	Additional paid-in capital	4,201,745		3,478,008		Additional paid-in capital	4,528,097		3,478,008
Retained earnings	Retained earnings	536,441		517,367		Retained earnings	590,931		517,367
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(491,727)		(452,106)		Accumulated other comprehensive loss	(532,642)		(452,106)
Total Colfax Corporation equity	Total Colfax Corporation equity	4,246,594		3,543,387		Total Colfax Corporation equity	4,586,541		3,543,387
Noncontrolling interest	Noncontrolling interest	44,475		44,487		Noncontrolling interest	43,983		44,487
Total equity	Total equity	4,291,069		3,587,874		Total equity	4,630,524		3,587,874
Total liabilities and equity	Total liabilities and equity	$	8,066,614	$	7,351,549	Total liabilities and equity	$	7,972,311	$	7,351,549

See Notes to Condensed Consolidated Financial Statements.

COLFAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Dollars in thousands, except share amounts ~~and as noted~~

(Unaudited)


		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total			Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
		Shares	Amount													Shares	Amount
Balance at December 31, 2020	Balance at December 31, 2020	118,496,687	$	118	$	3,478,008	$	517,367	$	(452,106)	$	44,487	$	3,587,874	Balance at December 31, 2020	118,496,687	$	118	$	3,478,008	$	517,367	$	(452,106)	$	44,487	$	3,587,874

Net income	Net income	—	—		—		19,074		—		1,166		20,240		Net income	—	—		—		19,074		—		1,166		20,240
Distributions to noncontrolling owners	Distributions to noncontrolling owners	—	—		—		—		—		(1,054)		(1,054)		Distributions to noncontrolling owners	—	—		—		—		—		(1,054)		(1,054)
Other comprehensive loss, net of tax expense of $6,840		—	—		—		—		(39,621)		(124)		(39,745)
Other comprehensive loss, net of tax of $6,840															Other comprehensive loss, net of tax of $6,840	—	—		—		—		(39,621)		(124)		(39,745)
Conversion of tangible equity units into common stock	Conversion of tangible equity units into common stock	344,412	—		—		—		—		—		—		Conversion of tangible equity units into common stock	344,412	—		—		—		—		—		—
Common stock repurchases	Common stock repurchases	(21,082)	—		(971)		—		—		—		(971)		Common stock repurchases	(21,082)	—		(971)		—		—		—		(971)
Common stock offering, net of issuance costs	Common stock offering, net of issuance costs	16,100,000	16		711,305		—		—		—		711,321		Common stock offering, net of issuance costs	16,100,000	16		711,305		—		—		—		711,321
Common stock-based award activity	Common stock-based award activity	677,314	1		13,403		—		—		—		13,404		Common stock-based award activity	677,314	1		13,403		—		—		—		13,404
Balance at April 2, 2021	Balance at April 2, 2021	135,597,331	$	135	$	4,201,745	$	536,441	$	(491,727)	$	44,475	$	4,291,069	Balance at April 2, 2021	135,597,331	135		4,201,745		536,441		(491,727)		44,475		4,291,069
Net income															Net income	—	—		—		28,642		—		1,060		29,702

Other comprehensive income (loss), net of tax of $473															Other comprehensive income (loss), net of tax of $473	—	—		—		—		9,108		(1,429)		7,679
Conversion of tangible equity units into common stock															Conversion of tangible equity units into common stock	6,174,000	6		(6)		—		—		—		—
Common stock repurchases															Common stock repurchases	(710)	—		(32)		—		—		—		(32)
Common stock-based award activity															Common stock-based award activity	571,025	1		23,541		—		—		—		23,542
Balance at July 2, 2021															Balance at July 2, 2021	142,341,646	142		4,225,248		565,083		(482,619)		44,106		4,351,960

Net income															Net income	—	—		—		25,848		—		1,009		26,857
Distributions to noncontrolling owners															Distributions to noncontrolling owners	—	—		—		—		—		(1,496)		(1,496)

Other comprehensive income (loss), net of tax of $4,478															Other comprehensive income (loss), net of tax of $4,478	—	—		—		—		(50,023)		364		(49,659)
Conversion of tangible equity units into common stock															Conversion of tangible equity units into common stock	5,537,100	6		(6)		—		—		—		—

Common stock issued for acquisition, net of issuance costs															Common stock issued for acquisition, net of issuance costs	6,544,522	7		285,674		—		—		—		285,681
Common stock-based award activity															Common stock-based award activity	358,574	—		17,181		—		—		—		17,181
Balance at October 1, 2021															Balance at October 1, 2021	154,781,842	$	155	$	4,528,097	$	590,931	$	(532,642)	$	43,983	$	4,630,524

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total
Shares Amount
Balance at December 31, 2019 118,059,082 $ 118 $ 3,445,597 $ 479,560 $ (483,845) $ 48,198 $ 3,489,628
Cumulative effect of accounting change — — — (4,818) — — (4,818)
Net income — — — 4,481 — 1,027 5,508
Distributions to noncontrolling owners — — — — — (8) (8)
Other comprehensive loss, net of tax expense of $4,644 — — — — (158,297) (2,593) (160,890)
Common stock-based award activity 268,323 — 8,344 — — — 8,344
Balance at April 3, 2020 118,327,405 $ 118 $ 3,453,941 $ 479,223 $ (642,142) $ 46,624 $ 3,337,764
See Notes to Condensed Consolidated Financial Statements.

COLFAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Dollars in thousands, except share amounts

(Unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
	Shares	Amount
Balance at December 31, 2019	118,059,082	$	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 activity	268,323	—		8,344		—		—		—		8,344
Balance at April 3, 2020	118,327,405	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 activity	61,608	—		8,591		—		—		—		8,591
Balance at July 3, 2020	118,389,013	118		3,462,532		470,749		(581,484)		43,661		3,395,576

Net income	—	—		—		13,406		—		789		14,195
Distributions to noncontrolling owners	—	—		—		—		—		(625)		(625)

Other comprehensive income, net of tax of $(3,756)	—	—		—		—		39,488		1,198		40,686


Common stock-based award activity	68,166	—		7,637		—		—		—		7,637
Balance at October 2, 2020	118,457,179	$	118	$	3,470,169	$	484,155	$	(541,996)	$	45,023	$	3,457,469

See Notes to Condensed Consolidated Financial Statements.

COLFAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in thousands

(Unaudited)


		Three Months Ended					Nine Months Ended
		April 2, 2021		April 3, 2020			October 1, 2021		October 2, 2020

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	20,240	$	5,508	Net income	$	76,799	$	11,656
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization and other impairment charges	Depreciation, amortization and other impairment charges	62,785		58,336		Depreciation, amortization and other impairment charges	197,641		181,114
Stock-based compensation expense	Stock-based compensation expense	7,807		6,124		Stock-based compensation expense	26,235		21,642
Non-cash interest expense	Non-cash interest expense	1,537		1,311		Non-cash interest expense	3,757		4,253

Deferred income tax benefit	Deferred income tax benefit	(3,614)		(567)		Deferred income tax benefit	(5,904)		(30,946)
Loss on sale of property, plant and equipment		257		976
(Gain) loss on sale of property, plant and equipment						(Gain) loss on sale of property, plant and equipment	(1,483)		523

Loss on debt extinguishment						Loss on debt extinguishment	29,870		—
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade receivables, net	Trade receivables, net	(39,950)		29,445		Trade receivables, net	(70,407)		44,592
Inventories, net	Inventories, net	(32,743)		(16,431)		Inventories, net	(130,348)		28,556
Accounts payable	Accounts payable	83,442		30,592		Accounts payable	143,694		(42,869)

Other operating assets and liabilities	Other operating assets and liabilities	(15,379)		(59,065)		Other operating assets and liabilities	(9,971)		(45,388)
Net cash provided by operating activities	Net cash provided by operating activities	84,382		56,229		Net cash provided by operating activities	259,883		173,133
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(24,537)		(31,113)		Purchases of property, plant and equipment	(73,595)		(81,583)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	0		1,688		Proceeds from sale of property, plant and equipment	2,908		4,929
Acquisitions, net of cash received, and investments	Acquisitions, net of cash received, and investments	(103,475)		(7,830)		Acquisitions, net of cash received, and investments	(222,961)		(7,477)

Net cash used in investing activities	Net cash used in investing activities	(128,012)		(37,255)		Net cash used in investing activities	(293,648)		(84,131)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Payments under term credit facility						Payments under term credit facility	—		(40,000)
Proceeds from borrowings on revolving credit facilities and other	Proceeds from borrowings on revolving credit facilities and other	179,367		608,673		Proceeds from borrowings on revolving credit facilities and other	515,696		794,678
Repayments of borrowings on revolving credit facilities and other	Repayments of borrowings on revolving credit facilities and other	(185,643)		(364,403)		Repayments of borrowings on revolving credit facilities and other	(409,961)		(866,215)
Repayments of borrowings on senior notes						Repayments of borrowings on senior notes	(700,000)		—

Payment of debt issuance costs						Payment of debt issuance costs	—		(4,560)

Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	716,632		2,220		Proceeds from issuance of common stock, net	738,177		2,930

Payment of debt extinguishment costs						Payment of debt extinguishment costs	(24,375)		—
Deferred consideration payments and other	Deferred consideration payments and other	(2,704)		(1,353)		Deferred consideration payments and other	(7,700)		(12,411)
Net cash provided by financing activities		707,652		245,137
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	111,837		(125,578)

Effect of foreign exchange rates on Cash and cash equivalents and Restricted cash	Effect of foreign exchange rates on Cash and cash equivalents and Restricted cash	(1,438)		(8,139)		Effect of foreign exchange rates on Cash and cash equivalents and Restricted cash	(1,659)		(6,633)

Increase in Cash and cash equivalents and Restricted cash		662,584		255,972
Increase (decrease) in Cash and cash equivalents and Restricted cash						Increase (decrease) in Cash and cash equivalents and Restricted cash	76,413		(43,209)
Cash and cash equivalents and Restricted Cash, beginning of period	Cash and cash equivalents and Restricted Cash, beginning of period	101,069		109,632		Cash and cash equivalents and Restricted Cash, beginning of period	101,069		109,632
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	763,653	$	365,604	Cash and cash equivalents, end of period	$	177,482	$	66,423

Supplemental disclosures of non-cash investing and financing activities:						Supplemental disclosures of non-cash investing and financing activities:
Common stock issued for acquisition, net of issuance costs						Common stock issued for acquisition, net of issuance costs	$	285,681	$	—

See Notes to Condensed Consolidated Financial Statements.

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~~2 operating segments, “Fabrication Technology”, which incorporates the operations of ESAB and its related brands, and “Medical Technology”, which incorporates the operations of DJO and its related brands.

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

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

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

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

In the normal course of business, the Company incurs research and development costs related to new product development which are expensed as incurred and included in Selling, general and administrative ~~expenses~~expense on the Company’s Condensed Consolidated Statements of Operations. Research and development costs were ~~$19.9~~$20.2 million and $61.4 million during the three and nine months ended ~~April 2,~~October 1, 2021, respectively, and ~~$18.5~~$16.8 million and $49.4 million during the three and nine months ended October 2, 2020, respectively.

On April ~~3, 2020.~~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 ~~April 2,~~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.

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

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

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

Standard

Description

Effective Date

ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans

The 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 Taxes

The 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

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

3. Discontinued Operations

The Company retained certain asbestos-related contingencies and insurance coverages from divested businesses for which it did not retain an interest in the ongoing operations subject to the contingencies. The Company has classified asbestos-related selling, general and administrative activity in its Condensed Consolidated Statements of Operations as part of Loss from discontinued operations, net of taxes. ~~During the three months ended April 2, 2021 and April 3, 2020, the Company recorded $0.9 million and $1.4 million, respectively, of asbestos-related~~Asbestos-related costs, net of ~~tax.~~ 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 ~~tax~~taxes of ~~$6.6~~$0.2 million and ~~$2.0~~$6.8 million ~~for~~during the three and nine months ended ~~April~~October 1, 2021, respectively, and $0.6 million and $6.2 million during the three and nine months ended October 2, ~~2021 and April 3,~~ 2020, respectively, related to its divested air and gas handling business, including a settlement executed in the first quarter of 2021, as well as certain professional, legal, and consulting fees in 2020.

Cash used in operating activities related to discontinued operations for the ~~three~~nine months ended ~~April~~October 1, 2021 and October 2, ~~2021 was $7.3 million. Cash provided by operating activities related to discontinued operations for the three months ended April 3,~~ 2020 was ~~$0.8 million.~~$7.2 million and $18.4 million, respectively.

4. Acquisitions

The Company completed ~~one~~1 acquisition in its Fabrication Technology segment and ~~two~~5 acquisitions in its Medical Technology segment during the ~~three~~nine months ended ~~April 2,~~October 1, 2021 for ~~total~~net cash consideration ~~net~~ of ~~cash received,~~$208.1 million and equity consideration of ~~$88.7~~$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~~2 investments in medical technology

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

businesses during the ~~three~~nine months ended ~~April 2,~~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.

~~Acquisitions in~~In the first quarter of 2021, the Medical Technology segment ~~included~~acquired Trilliant Surgical (“Trilliant”), a national provider of foot and ankle ~~orthopedics~~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. ~~The~~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 ~~was~~further expands the Company's foot and ankle platform. These 2 acquisitions were completed for ~~$82.3~~total consideration, net of cash received, of $205.4 million, ~~cash consideration,~~ subject to certain adjustments. Net working capital and intangible assets acquired represent ~~18%~~8% and 46% of the total consideration ~~paid,~~exchanged for these 2 acquisitions, respectively, with the residual amount primarily attributable to Goodwill. ~~All~~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 ~~expected to be~~ deductible for income tax purposes. The estimated proforma annual revenues of ~~the Trilliant acquisition~~these 2 acquisitions are approximately 1% of ~~Colfax~~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:

Three Months Ended
April 2, 2021 April 3, 2020
(In thousands)
Equipment $ 173,750 $ 156,800
Consumables 394,378 368,737
Total $ 568,128 $ 525,537

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


	Three Months Ended				Nine Months Ended
	October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020
	(In thousands)
Equipment	$	192,365	$	157,730	$	564,971	$	443,563
Consumables	413,603		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.

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

The Company’s Medical Technology segment provides products and services spanning the ~~full~~orthopedic continuum of patient care, from injury prevention to rehabilitation. While the Company’s Medical Technology sales are primarily derived from 3 sales channels including dealers and distributors, insurance, and direct to consumers and hospitals, substantially all its revenue is recognized at a point in time.

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


		Three Months Ended			Three Months Ended						Nine Months Ended
			April 2, 2021			April 3, 2020			October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020
			(In thousands)						(In thousands)
Prevention & Recovery(1)	Prevention & Recovery(1)		$	235,238		$	223,785	Prevention & Recovery(1)	$	260,001	$	242,591	$	765,207	$	626,227
Reconstructive	Reconstructive		75,845			67,034		Reconstructive	99,922		71,843		261,923		185,019
Total	Total		$	311,083		$	290,819	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 ~~April 2,~~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 ~~April~~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, ~~2021 and April 3,~~ 2020, revenue recognized that was included in the contract liability balance at the beginning of the year was ~~$14.3~~$4.5 million and ~~$4.9~~$13.2 million, respectively. As of ~~April 2,~~October 1, 2021 and ~~April 3,~~October 2, 2020, total contract liabilities were ~~$40.0~~$30.7 million and ~~$17.0~~$30.4 million, respectively, and were included in Accrued liabilities on the Company’s Condensed Consolidated Balance Sheets. The contract liabilities as of ~~April 2,~~October 1, 2021 and December 31, 2020 ~~include~~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.

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:

Three Months Ended April 2, 2021
Balance at
Beginning
of Period Charged to Expense, net Write-Offs and Deductions Foreign
Currency
Translation Balance at
End of
Period
(In thousands)
Allowance for credit losses $ 37,666 $ 239 $ (1,062) $ (1,283) $ 35,560


	Nine Months Ended October 1, 2021
	Balance at Beginning of Period		Charged to Expense, net		Write-Offs and Deductions		Foreign Currency Translation		Balance at End of Period
	(In thousands)
Allowance for credit losses	$	37,666	$	(17)	$	(2,194)	$	(778)	$	34,677

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

6. Net Income Per Share from Continuing Operations

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


		Three Months Ended					Three Months Ended				Nine Months Ended
		April 2, 2021		April 3, 2020					October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020
		(In thousands, except share and per share data)				(In thousands, except share and per share data)
Computation of Net income per share from continuing operations - basic:	Computation of Net income per share from continuing operations - basic:							Computation of Net income per share from continuing operations - basic:
Net income from continuing operations attributable to Colfax Corporation (1)	Net income from continuing operations attributable to Colfax Corporation (1)	$	26,564	$	7,841			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	Weighted-average shares of Common stock outstanding – basic	139,603,389		136,601,111				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	Net income per share from continuing operations – basic	$	0.19	$	0.06			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:	Computation of Net income per share from continuing operations - diluted:							Computation of Net income per share from continuing operations - diluted:
Net income from continuing operations attributable to Colfax Corporation (1)	Net income from continuing operations attributable to Colfax Corporation (1)	$	26,564	$	7,841			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	Weighted-average shares of Common stock outstanding – basic	139,603,389		136,601,111				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 units	Net effect of potentially dilutive securities - stock options, restricted stock units and tangible equity units	2,167,918		4,868,927				Net effect of potentially dilutive securities - stock options, restricted stock units and tangible equity units	2,073,711		1,257,701		2,076,332		2,339,794
Weighted-average shares of Common stock outstanding – diluted	Weighted-average shares of Common stock outstanding – diluted	141,771,307		141,470,038				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	Net income per share from continuing operations – diluted	$	0.19	$	0.06			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 ~~$1.2~~$1.0 million and $3.2 million for the three and nine months ended ~~April 2,~~October 1, 2021, respectively, and ~~$1.0~~$0.8 million and $2.2 million for the three and nine months ended ~~April 3,~~October 2, 2020, respectively.

For ~~three months ended April 2, 2021 and April 3, 2020,~~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 ~~three~~nine months ended ~~April 3,~~October 2, 2020, the weighted-average shares of Common stock outstanding - diluted includes the

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

impact of an additional ~~3.7~~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 ~~April 2,~~October 1, 2021 ~~and April 3, 2020~~ excludes ~~1.4~~0.8 million and ~~3.9~~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.

1113

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

7. Income Taxes

During the three and nine months ended ~~April 2,~~October 1, 2021, Income from continuing operations before income taxes was ~~$35.6~~$50.5 million and $125.6 million, respectively, while ~~the~~ income tax expense was ~~$7.9 million.~~$22.3 million and $38.4 million, respectively. The effective tax ~~rate was 22.2%~~rates were 44.3% and 30.6% for the three and nine months ended ~~April 2, 2021. The effective tax rate for the three months ended April 2,~~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 ~~other non-deductible expenses partially offset by the benefit of U.S. tax credits.~~nine months ended October 1, 2021.

During the three and nine months ended ~~April 3,~~October 2, 2020, Income from continuing operations before income taxes was ~~$22.0~~$36.4 million and $25.2 million, respectively, while ~~the~~ income tax expense was ~~$13.2 million.~~$19.5 million and $2.6 million, respectively. The effective tax ~~rate was 59.8%~~rates were 53.7% and 10.5% for the three and nine months ended ~~April 3, 2020.~~October 2, 2020, respectively. The effective tax rate for the three months ended ~~April 3,~~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 ~~taxable foreign exchange gains~~certain non-deductible expenses. These unfavorable impacts were partially offset ~~in part~~ 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 ~~enactment~~filing of atimely 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. Income~~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, ~~for~~and certain non-deductible expenses. In conjunction with the ~~three months ended April 3, 2020 were calculated using the actual year-to-date effective tax rate, also known as the discrete method. The discrete method was used because~~filing of the ~~high degree~~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 ~~uncertainty in estimating annual pretax earnings at that time caused by the COVID-19 pandemic market conditions.~~

these deferred tax assets and based on such evidence, concluded a full valuation allowance was needed.

1214

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~~$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 ~~April 2,~~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 ~~three~~nine months ended ~~April 2,~~October 1, 2021 and ~~April 3,~~October 2, 2020. All amounts are net of tax and noncontrolling interest, if any.


		Accumulated Other Comprehensive Loss Components									Accumulated Other Comprehensive Loss Components
		Net Unrecognized Pension and Other Post-Retirement Benefit Cost		Foreign Currency Translation Adjustment		Unrealized Gain on Hedging Activities		Total			Net Unrecognized Pension and Other Post-Retirement Benefit Cost		Foreign Currency Translation Adjustment		Unrealized Gain on Hedging Activities		Total
		(In thousands)									(In thousands)

Balance at January 1, 2021		$	(112,783)	$	(360,977)	$	21,654	$	(452,106)
Balance at December 31, 2020										Balance at December 31, 2020	$	(112,783)	$	(360,977)	$	21,654	$	(452,106)

Other comprehensive income (loss) before reclassifications:	Other comprehensive income (loss) before reclassifications:									Other comprehensive income (loss) before reclassifications:

Foreign currency translation adjustment	Foreign currency translation adjustment	709		(82,663)		(2,201)		(84,155)		Foreign currency translation adjustment	1,089		(124,824)		(2,582)		(126,317)
Gain on long-term intra-entity foreign currency transactions	Gain on long-term intra-entity foreign currency transactions	0		31,098		0		31,098		Gain on long-term intra-entity foreign currency transactions	—		25,933		—		25,933
Gain on net investment hedges	Gain on net investment hedges	0		0		12,381		12,381		Gain on net investment hedges	—		—		16,655		16,655

Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	709		(51,565)		10,180		(40,676)		Other comprehensive income (loss) before reclassifications	1,089		(98,891)		14,073		(83,729)
Amounts reclassified from Accumulated other comprehensive loss	Amounts reclassified from Accumulated other comprehensive loss	1,055		0		0		1,055		Amounts reclassified from Accumulated other comprehensive loss	3,193		—		—		3,193

Net Other comprehensive income (loss)	Net Other comprehensive income (loss)	1,764		(51,565)		10,180		(39,621)		Net Other comprehensive income (loss)	4,282		(98,891)		14,073		(80,536)
Balance at April 2, 2021		$	(111,019)	$	(412,542)	$	31,834	$	(491,727)
Balance at October 1, 2021										Balance at October 1, 2021	$	(108,501)	$	(459,868)	$	35,727	$	(532,642)

1315

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


		Accumulated Other Comprehensive Loss Components									Accumulated Other Comprehensive Loss Components
		Net Unrecognized Pension and Other Post-Retirement Benefit Cost		Foreign Currency Translation Adjustment		Unrealized Gain on Hedging Activities		Total			Net Unrecognized Pension and Other Post-Retirement Benefit Cost		Foreign Currency Translation Adjustment		Unrealized Gain on Hedging Activities		Total
		(In thousands)									(In thousands)
Balance at January 1, 2020		$	(106,500)	$	(421,889)	$	44,544	$	(483,845)
Balance at December 31, 2019										Balance at December 31, 2019	$	(106,500)	$	(421,889)	$	44,544	$	(483,845)

Other comprehensive income (loss) before reclassifications:	Other comprehensive income (loss) before reclassifications:									Other comprehensive income (loss) before reclassifications:

Foreign currency translation adjustment	Foreign currency translation adjustment	1,672		(170,679)		(1,310)		(170,317)		Foreign currency translation adjustment	(389)		(31,747)		1,894		(30,242)
Loss on long-term intra-entity foreign currency transactions	Loss on long-term intra-entity foreign currency transactions	0		(1,027)		0		(1,027)		Loss on long-term intra-entity foreign currency transactions	—		(18,023)		—		(18,023)
Gain on net investment hedges		0		0		12,180		12,180
Loss on net investment hedges										Loss on net investment hedges	—		—		(12,700)		(12,700)

Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	1,672		(171,706)		10,870		(159,164)		Other comprehensive income (loss) before reclassifications	(389)		(49,770)		(10,806)		(60,965)
Amounts reclassified from Accumulated other comprehensive loss	Amounts reclassified from Accumulated other comprehensive loss	867		0		0		867		Amounts reclassified from Accumulated other comprehensive loss	2,814		—		—		2,814

Net Other comprehensive income (loss)	Net Other comprehensive income (loss)	2,539		(171,706)		10,870		(158,297)		Net Other comprehensive income (loss)	2,425		(49,770)		(10,806)		(58,151)
Balance at April 3, 2020		$	(103,961)	$	(593,595)	$	55,414	$	(642,142)
Balance at October 2, 2020										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 ~~tangible equity units~~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 ~~contract”~~contracts”) and debt (the “TEU amortizing notes”) based on the relative fair value of the respective components of each TEU. See Note 10, ~~“Debt ”~~“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 (the “minimum settlement rate”);~~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 (the “maximum settlement rate”).~~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 ~~4.0~~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

1416

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

~~higher than the reference price but is less than the threshold appreciation price. During the three months ended April 2, 2021, 0.1 million stock purchase contracts were converted~~ into approximately ~~0.3~~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:


		April 2, 2021		December 31, 2020			October 1, 2021		December 31, 2020
		(In thousands)					(In thousands)
Raw materials	Raw materials	$	116,562	$	110,848	Raw materials	$	138,421	$	110,848
Work in process	Work in process	44,613		40,517		Work in process	66,012		40,517
Finished goods	Finished goods	504,806		476,297		Finished goods	650,927		476,297
		665,981		627,662			855,360		627,662
Less: allowance for excess, slow-moving and obsolete inventory						Less: allowance for excess, slow-moving and obsolete inventory	(74,376)		(62,840)
							$	780,984	$	564,822
Less: allowance for excess, slow-moving and obsolete inventory		(59,773)		(62,840)
Inventories, net		$	606,208	$	564,822

10. Debt

Long-term debt consisted of the following:


		April 2, 2021		December 31, 2020			October 1, 2021		December 31, 2020
		(In thousands)					(In thousands)
Term loan	Term loan	$	781,767	$	781,557	Term loan	$	782,216	$	781,557
Euro senior notes	Euro senior notes	408,611		425,045		Euro senior notes	403,234		425,045
2024 and 2026 notes	2024 and 2026 notes	991,925		991,319		2024 and 2026 notes	297,780		991,319
TEU amortizing notes	TEU amortizing notes	25,241		31,251		TEU amortizing notes	12,875		31,251

Revolving credit facilities and other	Revolving credit facilities and other	1,822		2,071		Revolving credit facilities and other	129,925		2,071
Total debt	Total debt	2,209,366		2,231,243		Total debt	1,626,030		2,231,243
Less: current portion	Less: current portion	(727,369)		(27,074)		Less: current portion	(14,340)		(27,074)
Long-term debt	Long-term debt	$	1,481,997	$	2,204,169	Long-term debt	$	1,611,690	$	2,204,169

Term Loan and Revolving Credit Facility

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

The Credit Facility contains customary covenants limiting the ability of Colfax and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments or pay dividends. In addition, the Credit Facility contains financial covenants requiring Colfax to maintain (subject to certain exceptions) (i) a maximum total leverage ratio, calculated as the ratio of Consolidated Net Debt (as defined in the Credit Facility) to EBITDA (as defined in the Credit Facility) of ~~6.50:1.00 for the quarter ending March 31, 2021, 5.25:1.00 for the quarter ending June 30, 2021,~~ 4.50:1.00 for the quarter ending September 30, 2021, 4.25:1.00 for the quarters ending December 31, 2021 and March 31, 2022, 4.00:1.00 for the quarters ending June 30, 2022 and September 30, 2022, and 3.50:1.00 as of December 31, 2022 and for each fiscal quarter ending thereafter, and (ii) a minimum interest coverage ratio of ~~2.75:1.00 for each fiscal quarter until June 30, 2021, and then~~ 3.00:1.00 for the quarters ending September 30, 2021 and thereafter. The Credit Facility also includes a “springing” collateral provision (based upon the Gross Leverage Ratio as defined in the ~~Amendment to the~~ Credit Facility) which requires the obligations under ~~the Amendment to~~ the Credit Facility to be secured by substantially all personal property of Colfax and its U.S. subsidiaries and the equity of its first tier foreign subsidiaries, subject to customary exceptions, in the event Colfax’s gross leverage ratio under the Credit Facility is greater than 5.00:1.00 as of the last day of any fiscal quarter. The Credit Facility contains various events of default (including failure to comply with the covenants under the Credit Facility and related

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

agreements) and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Term Loan and the Revolver. As of ~~April 2,~~October 1, 2021, the Company was in compliance with the covenants under the Credit Facility.

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

As of ~~April 2,~~October 1, 2021, the weighted-average interest rate of borrowings under the Credit Facility was ~~1.86%~~1.59%, excluding accretion of original issue discount and deferred financing fees, and there was $~~975~~850 million available on the Revolver.

Euro Senior Notes

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

TEU Amortizing Notes

Each TEU amortizing note has an initial principal amount of $15.6099, bears interest at a rate of 6.50% per annum, and has equal quarterly cash installments of $1.4375 per TEU amortizing note ~~on each January 15, April 15, July 15 and October 15~~ with a final installment payment date of January 15, 2022. The quarterly cash installment constitutes a payment of interest and a partial repayment of principal. The Company paid ~~$6.6~~$18.6 million and $17.4 million of principal on the TEU amortizing notes in ~~both~~ the ~~three~~nine months ended ~~April 2,~~October 1, 2021 and ~~April 3,~~October 2, 2020, respectively. The TEU amortizing notes are the direct, unsecured and unsubordinated obligations of the Company and rank equally with all of the existing and future other unsecured and unsubordinated indebtedness of the Company. For more information on the ~~Tangible equity units,~~TEUs, refer to Note 8, “Equity.”

2024 Notes and 2026 Notes

The Company had senior notes with an initial aggregate principal ~~amounts~~amount of $600 million (the “2024 Notes”), which were due on February 15, 2024 and had an interest rate of 6.0%. The Company has senior notes with an aggregate initial principal ~~amounts~~amount of $400 million (the “2026 Notes”), which are due on February 15, 2026 and have an interest rate of 6.375%. ~~Each tranche of notes is~~The 2026 Notes are guaranteed by certain domestic subsidiaries of the Company. ~~The~~

On April 24, 2021, the Company redeemed all $600 million outstanding principal amount of its ~~outstanding~~ 2024 Notes and $100 million of the outstanding principal amount of its 2026 Notes for $724.4 million. The 2024 Notes were redeemed at a redemption price of 103.000% of their principal amount and the 2026 Notes were redeemed at a redemption price of 106.375% of their principal amount, plus, in each case, accrued and unpaid interest through the date of redemption. In the second quarter of 2021, a net loss on ~~April 24, 2021. See Note 15, “Subsequent Events” for further information.~~the early extinguishment of debt of $29.9 million was recorded and included $24.4 million of call premium on the retired debt.

Other Indebtedness

In addition to the debt agreements discussed above, the Company is party to various bilateral credit facilities with a borrowing capacity of ~~$192.1~~$170.0 million. As of ~~April 2,~~October 1, 2021, there were no outstanding borrowings under these facilities.

The Company is party to letter of credit facilities with an aggregate capacity of ~~$338.6~~$292.9 million. Total letters of credit of ~~$64.9~~$34.6 million were outstanding as of ~~April 2,~~October 1, 2021.

Deferred Financing Fees

In total, ~~the Company had~~ deferred financing fees ~~of $21.0~~related to the Company’s debt activities were $13.3 million ~~included in its Condensed Consolidated Balance Sheet~~ as of ~~April 2,~~October 1, 2021, which will be charged to Interest expense, net, primarily using the effective interest method, over the life of the applicable debt agreements.

1618

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

11. Accrued Liabilities

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


		April 2, 2021		December 31, 2020			October 1, 2021		December 31, 2020
		(In thousands)					(In thousands)
Accrued compensation and related benefits	Accrued compensation and related benefits	$	85,509	$	98,455	Accrued compensation and related benefits	$	136,759	$	98,455

Accrued taxes	Accrued taxes	52,031		57,286		Accrued taxes	53,614		57,286
Accrued asbestos-related liability	Accrued asbestos-related liability	42,411		41,626		Accrued asbestos-related liability	47,412		41,626
Warranty liability - current portion	Warranty liability - current portion	15,799		15,543		Warranty liability - current portion	17,594		15,543
Accrued restructuring liability - current portion	Accrued restructuring liability - current portion	7,385		7,889		Accrued restructuring liability - current portion	7,784		7,889
Accrued third-party commissions	Accrued third-party commissions	26,990		25,480		Accrued third-party commissions	30,352		25,480
Customer advances and billings in excess of costs incurred	Customer advances and billings in excess of costs incurred	40,051		36,737		Customer advances and billings in excess of costs incurred	30,707		36,737
Lease liability - current portion	Lease liability - current portion	37,791		39,695		Lease liability - current portion	35,857		39,695
Accrued interest	Accrued interest	14,653		27,153		Accrued interest	8,364		27,153
Other	Other	101,678		104,469		Other	120,189		104,469
Accrued liabilities		$	424,298	$	454,333
							$	488,632	$	454,333

Warranty Liability

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


		Three Months Ended					Nine Months Ended
		April 2, 2021		April 3, 2020			October 1, 2021		October 2, 2020
		(In thousands)					(In thousands)
Warranty liability, beginning of period	Warranty liability, beginning of period	$	15,543	$	15,528	Warranty liability, beginning of period	$	15,543	$	15,528
Accrued warranty expense	Accrued warranty expense	2,042		1,121		Accrued warranty expense	7,262		5,613
Changes in estimates related to pre-existing warranties	Changes in estimates related to pre-existing warranties	589		318		Changes in estimates related to pre-existing warranties	1,401		1,108
Cost of warranty service work performed	Cost of warranty service work performed	(2,472)		(1,910)		Cost of warranty service work performed	(6,716)		(7,003)
Acquisition-related liability	Acquisition-related liability	321		0		Acquisition-related liability	1,092		—
Foreign exchange translation effect	Foreign exchange translation effect	(224)		(1,309)		Foreign exchange translation effect	(277)		(255)
Warranty liability, end of period(1)	Warranty liability, end of period(1)	$	15,799	$	13,748	Warranty liability, end of period(1)	$	18,305	$	14,991

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

1719

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Accrued Restructuring Liability

The Company’s restructuring programs include a series of actions to reduce the structural costs of the Company. A summary of the activity in the Company’s restructuring liability included in Accrued liabilities and Other liabilities in the Condensed Consolidated Balance Sheets is as follows:


		Three Months Ended April 2, 2021								Nine Months Ended October 1, 2021
		Balance at Beginning of Period		Provisions		Payments		Foreign Currency Translation			Balance at End of Period(3)			Balance at Beginning of Period		Provisions		Payments		Foreign Currency Translation		Balance at End of Period(3)
		(In thousands)								(In thousands)
Restructuring and other related charges:	Restructuring and other related charges:												Restructuring and other related charges:
Fabrication Technology:	Fabrication Technology:												Fabrication Technology:
Termination benefits(1)	Termination benefits(1)	$	5,336	$	248	$	(559)	$	(13)		$	5,012	Termination benefits(1)	$	5,336	$	4,572	$	(4,611)	$	(43)	$	5,254
Facility closure costs(2)	Facility closure costs(2)	591		2,827		(2,831)		(4)			583		Facility closure costs(2)	591		5,186		(5,555)		(18)		204
		5,927		3,075		(3,390)		(17)			5,595			5,927		9,758		(10,166)		(61)		5,458
Non-cash charges(2)	Non-cash charges(2)			0									Non-cash charges(2)			1,033
				3,075												10,791
Medical Technology:	Medical Technology:												Medical Technology:
Termination benefits(1)	Termination benefits(1)	1,884		358		(736)		0			1,506		Termination benefits(1)	1,884		2,728		(2,149)		(9)		2,454
Facility closure costs(2)		297		613		(613)		0			297
Facility closure costs and other(2)													Facility closure costs and other(2)	297		2,464		(2,735)		—		26
		2,181		971		(1,349)		0			1,803			2,181		5,192		(4,884)		(9)		2,480
Non-cash charges(2)	Non-cash charges(2)			—									Non-cash charges(2)			—
				971												5,192

Total Colfax Corporation:	Total Colfax Corporation:												Total Colfax Corporation:
Total restructuring liability activity	Total restructuring liability activity	$	8,108	$	4,046	$	(4,739)	$	(17)		$	7,398	Total restructuring liability activity	$	8,108	14,950		$	(15,050)	$	(70)	$	7,938
Total Non-cash charges	Total Non-cash charges			0									Total Non-cash charges			1,033
				$	4,046											$	15,983

(1) Includes severance and other termination benefits, including outplacement services.

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

(3) As of ~~April 2,~~October 1, 2021, ~~$7.4~~$7.8 million of the Company’s restructuring liability was included in Accrued liabilities, whereas less than ~~$0.1~~$0.2 million of the Company’s restructuring liability was included in Other liabilities.

1820

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

12. Financial Instruments and Fair Value Measurements

The carrying values of financial instruments, including Trade receivables and Accounts payable, approximate their fair values due to their short-term maturities. The $1.6 billion and $2.3 billion estimated fair value of the Company’s debt as of ~~April 2,~~October 1, 2021 and December 31, 2020, respectively, was based on current interest rates for similar types of borrowings and is in Level Two of the fair value hierarchy. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future.

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


		April 2, 2021									October 1, 2021
		Level One		Level Two		Level Three		Total			Level One		Level Two		Level Three		Total
		(In thousands)									(In thousands)
Assets:	Assets:									Assets:
Cash equivalents	Cash equivalents	$	6,252	$	—	$	—	$	6,252	Cash equivalents	$	5,044	$	—	$	—	$	5,044

Foreign currency contracts - not designated as hedges	Foreign currency contracts - not designated as hedges	—		1,581		—		1,581		Foreign currency contracts - not designated as hedges	—		2,025		—		2,025

Deferred compensation plans	Deferred compensation plans	—		11,802		—		11,802		Deferred compensation plans	—		12,695		—		12,695
		$	6,252	$	13,383	$	—	$	19,635		$	5,044	$	14,720	$	—	$	19,764

Liabilities:	Liabilities:									Liabilities:

Foreign currency contracts - not designated as hedges	Foreign currency contracts - not designated as hedges	$	—	$	4,191	$	—	$	4,191	Foreign currency contracts - not designated as hedges	$	—	$	4,159	$	—	$	4,159

Deferred compensation plans	Deferred compensation plans	—		11,802		—		11,802		Deferred compensation plans	—		12,695		—		12,695
		$	—	$	15,993	$	—	$	15,993		$	—	$	16,854	$	—	$	16,854


	December 31, 2020
	Level One		Level Two		Level Three		Total
	(In thousands)
Assets:
Cash equivalents	$	7,420	$	—	$	—	$	7,420


Foreign currency contracts - not designated as hedges	—		2,194		—		2,194


Deferred compensation plans	—		10,881		—		10,881
	$	7,420	$	13,075	$	—	$	20,495

Liabilities:

Foreign currency contracts - not designated as hedges	$	—	$	1,781	$	—	$	1,781


Deferred compensation plans	—		10,881		—		10,881
	$	—	$	12,662	$	—	$	12,662

There were no transfers in or out of Level One, Two or Three during the ~~three~~nine months ended ~~April 2,~~October 1, 2021.

1921

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Foreign Currency Contracts

As of ~~April 2,~~October 1, 2021 and December 31, 2020, the Company had foreign currency contracts related to purchases and sales with notional values of ~~$309.4~~$310.6 million and $250.4 million, respectively.

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


		Three Months Ended				Three Months Ended						Nine Months Ended
			April 2, 2021				April 3, 2020			October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020
			(In thousands)							(In thousands)
Contracts Designated as Hedges:	Contracts Designated as Hedges:				Contracts Designated as Hedges:

Unrealized gain on net investment hedges(1)			$	12,381			$	12,180
Unrealized gain (loss) on net investment hedges(1)									Unrealized gain (loss) on net investment hedges(1)	$	6,424	$	(14,456)	$	16,655	$	(12,700)
Contracts Not Designated in a Hedge Relationship:	Contracts Not Designated in a Hedge Relationship:								Contracts Not Designated in a Hedge Relationship:
Foreign Currency Contracts	Foreign Currency Contracts								Foreign Currency Contracts
Unrealized gain (loss)	Unrealized gain (loss)		(2,611)				2,417		Unrealized gain (loss)	(2,134)		(894)		(7,023)		1,479
Realized gain (loss)	Realized gain (loss)		51				(197)		Realized gain (loss)	(1,355)		132		64		(1,022)

(1) The unrealized gain (loss) on net investment hedges is attributable to the change in valuation of Euro denominated debt.

Restricted Cash

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

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


		April 2, 2021		December 31, 2020			October 1, 2021		December 31, 2020
		(In thousands)					(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	763,653	$	97,068	Cash and cash equivalents	$	177,482	$	97,068
Restricted cash	Restricted cash	0		4,001		Restricted cash	—		4,001
Cash and cash equivalents and Restricted cash	Cash and cash equivalents and Restricted cash	$	763,653	$	101,069	Cash and cash equivalents and Restricted cash	$	177,482	$	101,069

13. Commitments and Contingencies

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

2022

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Asbestos Contingencies

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


		Three Months Ended			Nine Months Ended
		April 2, 2021	April 3, 2020		October 1, 2021	October 2, 2020
		(Number of claims)			(Number of claims)
Claims unresolved, beginning of period	Claims unresolved, beginning of period	14,809	16,299	Claims unresolved, beginning of period	14,809	16,299
Claims filed(1)	Claims filed(1)	1,067	1,043	Claims filed(1)	3,238	2,898
Claims resolved(2)	Claims resolved(2)	(581)	(600)	Claims resolved(2)	(3,504)	(3,712)
Claims unresolved, end of period	Claims unresolved, end of period	15,295	16,742	Claims unresolved, end of period	14,543	15,485

(1) Claims filed include all asbestos claims for which notification has been received or a file has been opened.

(2) Claims resolved include all asbestos claims that have been settled, dismissed or that are in the process of being settled or dismissed based upon agreements or understandings in place with counsel for the claimants.

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


		April 2, 2021		December 31, 2020			October 1, 2021		December 31, 2020
		(In thousands)					(In thousands)

Long-term asbestos insurance asset(1)	Long-term asbestos insurance asset(1)	$	229,879	$	232,712	Long-term asbestos insurance asset(1)	$	230,506	$	232,712
Long-term asbestos insurance receivable(1)	Long-term asbestos insurance receivable(1)	27,868		31,815		Long-term asbestos insurance receivable(1)	23,996		31,815
Accrued asbestos liability(2)	Accrued asbestos liability(2)	42,411		41,626		Accrued asbestos liability(2)	47,412		41,626
Long-term asbestos liability(3)	Long-term asbestos liability(3)	248,669		253,144		Long-term asbestos liability(3)	244,063		253,144

(1) Included in Other assets in the Condensed Consolidated Balance Sheets.

(2) Represents current accruals for probable and reasonably estimable asbestos-related liability costs that the Company believes the subsidiaries will pay, and unpaid legal costs related to defending themselves against asbestos-related liability claims and legal action against the Company’s insurers, which is included in Accrued liabilities in the Condensed Consolidated Balance Sheets.

(3) Included in Other liabilities in the Condensed Consolidated Balance Sheets.

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

General Litigation

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

2123

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

14. Segment Information

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

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

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

Certain amounts not allocated to the 2 reportable segments and intersegment eliminations are reported under the heading “Corporate and other.” The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and segment operating income (loss), which represents Operating income (loss) before Restructuring and other related charges and European Union Medical Devices Regulation (“MDR”) and other costs.

The Company’s segment results were as follows:


		Three Months Ended					Three Months Ended			Nine Months Ended
		April 2, 2021		April 3, 2020						October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020
		(In thousands)				(In thousands)
Net sales:	Net sales:							Net sales:
Fabrication Technology	Fabrication Technology	$	568,128	$	525,537				Fabrication Technology	$	605,968	$	491,497	$	1,803,900	$	1,431,401
Medical Technology	Medical Technology	311,083		290,819					Medical Technology	359,923		314,434		1,027,130		811,246
		$	879,211	$	816,356					$	965,891	$	805,931	$	2,831,030	$	2,242,647
Segment operating income (loss)(1):	Segment operating income (loss)(1):								Segment operating income (loss)(1):
Fabrication Technology	Fabrication Technology	$	82,305	$	69,036				Fabrication Technology	$	90,604	$	63,058	$	267,306	$	175,703
Medical Technology	Medical Technology	2,162		3,804					Medical Technology	10,845		22,869		31,254		5,877
Corporate and other	Corporate and other	(17,361)		(14,078)					Corporate and other	(29,100)		(15,079)		(75,765)		(44,730)
		$	67,106	$	58,762					$	72,349	$	70,848	$	222,795	$	136,850

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


		Three Months Ended				Three Months Ended		Nine Months Ended
		April 2, 2021		April 3, 2020				October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020
		(In thousands)				(In thousands)
Income from continuing operations before income taxes	Income from continuing operations before income taxes	$	35,647	$	22,041		Income from continuing operations before income taxes	$	50,450	$	36,364	$	125,571	$	25,200

Pension settlement gain							Pension settlement gain	—		—		(11,208)		—
Interest expense, net	Interest expense, net	25,660		24,796			Interest expense, net	13,540		25,567		57,005		78,647
Debt extinguishment charges							Debt extinguishment charges	—		—		29,870		—
Restructuring and other related charges(1)	Restructuring and other related charges(1)	4,046		11,025			Restructuring and other related charges(1)	6,457		6,328		15,983		28,514
MDR and other costs(2)	MDR and other costs(2)	1,753		900			MDR and other costs(2)	1,902		2,589		5,574		4,489
Segment operating income	Segment operating income	$	67,106	$	58,762		Segment operating income	$	72,349	$	70,848	$	222,795	$	136,850

(1)Restructuring and other related charges includes ~~$1.8~~$2.2 million and $4.9 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three and nine months ended ~~April 3,~~October 2, 2020, ~~only.~~respectively.

(2) Primarily related to costs specific to compliance with medical device reporting regulations and other requirements of the European Union ~~Medical Device Regulation~~MDR. These costs are classified as Selling, general and administrative expense on the Company’s Condensed Consolidated Statements of ~~2017.~~Operations for all periods presented.

2224

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~15. Subsequent Events~~

On April 24, 2021, the Company redeemed all of its outstanding 2024 Notes and $100 million of the outstanding principal amount of its 2026 Notes for $724.4 million in aggregate. The 2024 Notes were redeemed at a redemption price of 103.000% of its principal amount, and the 2026 Notes were redeemed at a redemption price of 106.375% of its principal amount, plus, in each case, accrued and unpaid interest through the date of redemption. In the second quarter of 2021, a net loss on the early extinguishment of debt of approximately $29.9 million will be recorded and will include $24.4 million of call premium on the retired debt.

On April 23, 2021, the Company completed the acquisition of 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. The acquisition, which expands Company’s foot and ankle platform, was completed for cash consideration of $125 million, subject to certain adjustments. The estimated proforma annual revenues of the MedShape acquisition are less than 1% of Colfax consolidated revenues.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of Colfax Corporation (“Colfax,” “the Company,” “we,” “our,” and “us”) should be read in conjunction with the Condensed Consolidated Financial Statements and related footnotes included in Part I. Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q for the quarterly period ended ~~April 2,~~October 1, 2021 (this “Form 10-Q”) and the Consolidated Financial Statements and related footnotes included in Part II. Item 8. “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 18, 2021.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Form 10-Q 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-Q is filed with the SEC. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including statements regarding: the intended separation of our fabrication and medical technology businesses into two differentiated, independent publicly traded companies (the “Separation”); See the section below entitled “The Separation” under “Results of Operations – Items Affecting Comparability of Reported Results” for further description); the timing and method of the Separation; the anticipated benefits of the Separation; the expected financial and operating performance of, and future opportunities for, each company following the Separation; the tax treatment of the Separation; the leadership of each company following the Separation; the impact of the COVID-19 global pandemic, including the rise, prevalence and severity of variants of the virus, the actions by governments, businesses and individuals in response to the situation, on the global and regional economies, financial markets, and overall demand for our products; 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 our 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.~~future (see Part II. Item 1A. “Risk Factors” in this form 10-Q for further discussion of risks related to the Separation). Forward-looking statements may be, but not always, 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 as of the filing date of this Form 10-Q 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 and actual results could differ materially due to numerous factors, including but not limited to the following:

•risks related to the impact of the COVID-19 global pandemic, including the rise, prevalence and severity of variants of the virus, actions by governments, businesses and individuals in response to the situation, such as the scope and duration of the outbreak, the nature and effectiveness of government actions and restrictive measures implemented in response, delays and cancellations of medical procedures, supply chain disruptions, the impact on creditworthiness and financial viability of customers, and other impacts on our business and ability to execute business continuity plans;

•risks related to the proposed Separation, targeted for the first quarter of 2022, including the ~~final approval of the Separation by our board of directors, the~~ uncertainty of obtaining regulatory approvals ~~including~~and a favorable tax opinion and/or U.S. Internal Revenue Service ~~rulings, if sought,~~(“IRS”) ruling, our ability to satisfactorily complete steps necessary for the Separation and related transactions for the Separation to be generally tax-free for U.S. federal income tax purposes, the ability to satisfy the necessary conditions to complete the Separation on a timely basis, or at all, our ability to realize the anticipated benefits of the Separation, developments related to the impact of the COVID-19 pandemic on the Separation and the financial and operating performance of each company following the ~~Separation;~~Separation, and final approval of the Separation by our board of directors;

•changes in the general economy, as well as the cyclical nature of the markets we serve;

•supply chain constraints and backlogs, including risks affecting raw material, part and component availability, labor shortages and inefficiencies, freight and logistical challenges, and inflation in raw material, part, component, freight and delivery costs;

•volatility in the commodity markets and certain commodity prices, including oil and steel, due to economic disruptions from the COVID-19 pandemic and various geopolitical events;

•our ability to identify, finance, acquire and successfully integrate attractive acquisition targets;

•our exposure to unanticipated liabilities resulting from acquisitions;

•our ability and the ability of our customers to access required capital at a reasonable cost;

•our ability to accurately estimate the cost of or realize savings from our restructuring programs;

•the amount of and our ability to estimate our asbestos-related liabilities;

•the solvency of our insurers and the likelihood of their payment for asbestos-related costs;

•material disruptions at any of our manufacturing facilities;

•noncompliance with various laws and regulations associated with our international operations, including anti-bribery laws, export control regulations and sanctions and embargoes;

•risks associated with our international operations, including risks from trade protection measures and other changes in trade relations;

•risks associated with the representation of our employees by trade unions and work councils;

•our exposure to product liability claims;

•potential costs and liabilities associated with environmental, health and safety laws and regulations;

•failure to maintain, protect and defend our intellectual property rights;

•the loss of key members of our leadership team;

•restrictions in our principal credit facility that may limit our flexibility in operating our business;

•impairment in the value of intangible assets;

•the funding requirements or obligations of our defined benefit pension plans and other postretirement benefit plans;

•significant movements in foreign currency exchange rates;

•~~availability and cost of raw materials, parts and components used in our products;~~

•new regulations and customer preferences reflecting an increased focus on environmental, social and governance issues, including new regulations related to the use of conflict minerals;

•service interruptions, data corruption, cyber-based attacks or network security breaches affecting our information technology infrastructure;

•risks arising from changes in technology;

•the competitive environment in our industries;

2526

•changes in our tax rates, realizability of deferred tax assets, or exposure to additional income tax liabilities, including the effects of the COVID-19 global pandemic and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”);

•our ability to manage and grow our business and execution of our business and growth strategies;

•the level of capital investment and expenditures by our customers in our strategic markets;

•our financial performance;

•difficulties and delays in integrating or fully realizing projected cost savings and benefits of our ~~acquisition;~~acquisitions; and

•other risks and factors, listed in Item 1A. “Risk Factors” in Part I of our 2020 Form 10-K andPart II. Item 1A. “Risk Factors” in this Form 10-Q.

The effects of the COVID-19 pandemic, including the rise, prevalence and severity of variants of the virus and actions by governments, businesses and individuals in response to the situation, may give rise or contribute to or amplify the risks associated with many of these factors.

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-Q 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 Part I. Item 1A. “Risk Factors” in our 2020 Form 10-K and Part II. Item 1A. “Risk Factors” in this Form 10-Q for a further discussion regarding some of the reasons that actual results may be materially different from those that we anticipate.

Overview

Please see Part I, Item 1. “Business” in our 2020 Form 10-K for a discussion of Colfax’s objectives and methodologies for delivering shareholder value.

Colfax conducts its operations through two operating segments: Fabrication Technology and Medical Technology.

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

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

We have a global footprint, with production facilities in Europe, North America, South America, Asia, Australia and Africa. We 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 industrial end markets.

Integral to our operations is Colfax Business System (“CBS”), our business management system. CBS is our culture and includes our values and behaviors, a comprehensive set of tools, and repeatable, teachable processes that we use to drive continuous improvement and create superior value for our customers, shareholders and associates. 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.

2627

Results of Operations

The following discussion of Results of Operations addresses the comparison of the periods presented. Our management evaluates the operating results of each of its reportable segments based upon Net sales, Segment operating income, which represents Operating income before Restructuring and other related charges and European Union Medical Devices Regulation (“MDR”) costs, and Adjusted EBITA as defined in the “Non-GAAP Measures” section.

Items Affecting Comparability of Reported Results

The comparability of our operating results for the three and nine months ended ~~April 2,~~October 1, 2021 to the ~~three months ended April 3,~~comparable periods in 2020 is affected by the number of selling days for each region and the following ~~additional~~other significant items:

Recent Events

During the second quarter of 2021, we used the proceeds from our March 2021 equity offering to redeem all $600 million of our 2024 senior notes and $100 million of outstanding principal on our 2026 senior notes. We paid an early redemption premium of $24.4 million and recorded a loss on the extinguishment of debt of $29.9 million. Additionally, we recognized a pension settlement gain of $11.2 million 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 Separation

We currently report our operations through our Fabrication Technology and Medical Technology segments. These businesses operate in distinct markets, with unique business opportunities and investment requirements. On March 4, 2021, we announced the intention to separate these businesses into two differentiated, independent publicly traded ~~companies (the “Separation”).~~companies. The Chairman of our board of directors and co-founder of Colfax, Mitchell P. Rales, is expected to serve on the boards of directors of both companies.

We expect that the Separation will allow each company to: (1) optimize capital allocation for internal investment, ~~M&A~~mergers and acquisitions, and return of capital to shareholders; (2) tailor investment to its specific business profile and strategic priorities in the most efficient manner possible; (3) increase operating flexibility and resources to capitalize on growth opportunities in its respective markets; and (4) improve both investor alignment with its clear value proposition and the ability for investors to value it based on its distinct strategic, operational and financial characteristics. The Separation would also provide each company with an appropriately valued acquisition currency that could be used for larger, transformational transactions.

We ~~intend for~~continue to make progress on the Separation ~~to be structured in a tax-free manner,~~ and we are targeting its completion ~~of the Separation for~~in the first quarter of 2022. Completion of the Separation is subject to, among other things, completion of financing and other transactions on satisfactory terms, other steps necessary to qualify the Separation as a tax-free transaction, receipt of ~~other~~ regulatory approvals, a favorable tax opinion and/or IRS ruling and final approval from our board of directors. There can be no assurance regarding the form and timing of the Separation or its completion. Details regarding the Separation will be included in our future filings with the SEC.

Please see Part II. ~~Items~~Item 1A. “Risk Factors” in this Form 10-Q for further discussion of the Company’s risks relating to the Separation.

The COVID-19 Pandemic

In December 2019, a novel coronavirus disease (“COVID-19”) was first reported in China. On March 11, 2020, due to worldwide spread of the virus, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 global pandemic has resulted in a widespread health crisis, and the resulting impact on governments, businesses and individuals and actions taken by them in response to the situation ~~have~~ resulted in widespread economic disruptions, ~~in 2020,~~ significantly affecting broader economies, financial markets, and overall demand for our products.

In an effort to protect the health and safety of our employees, we have taken actions to adopt social distancing policies at our locations around the world, including working from home, reducing the number of people in our sites at any one time, and suspending or restricting employee travel. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted measures throughout 2020 and into 2021, including periodically closing businesses not deemed “essential,”

isolating residents to their homes, limiting access to healthcare, curtailing activities including sporting events, and practicing social distancing. Increased access to vaccinations has contributed to slowing the spread of COVID-19 in certain jurisdictions, resulting in some or all restrictions being lifted in a number of jurisdictions around the world, allowing a return to more normal activity and operational levels during the first half of 2021. However, the emergence and subsequent spread of COVID-19 variants has led to the reinstatement of certain restrictions, which slowed the pace of recovery during the third quarter of 2021.

During 2020, we implemented a broad range of temporary actions to mitigate the effects of lower sales levels including temporarily reducing salaries, furloughing and laying-off employees, significantly curtailing discretionary expenses, re-phasing

of capital expenditures, reducing supplier purchase levels and / or prices, adjusting working capital practices and other measures. ~~Based on the return to more normal~~As sales volumes have improved in ~~the first quarter of~~ 2021, these measures have been removed.

As reflected in the discussions that follow, the pandemic and actions taken in response to it have had a variety of impacts on our results of operations during 2020 and 2021. In 2020, the pandemic began to impact our financial results in March, with the most severe financial impact occurring in the second quarter. Subsequently, we observed a partial recovery in the second half of 2020. The surge in COVID-19 cases in the fourth quarter of 2020 contributed to certain jurisdictions putting further restrictions into place, which slowed recovery in the fourth quarter of 2020, and the impact continued into the beginning of the first quarter of 2021, after which sales volumes began to normalize through the second quarter of 2021. Recovery of sales volumes slowed in the third quarter of 2021 due to increased restrictions in certain jurisdictions as a result of the spread of COVID-19 variants.

We continue to monitor the evolving situation and guidance from international and domestic authorities, including national and local public health authorities, and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control that require us to further adjust our operations. In the first quarter of 2021, we observed a gradual normalization in the global economic landscape primarily as a result of increased access to COVID-19 vaccines and relaxing of some government-mandated restrictions. However, givenGiven the continued dynamic nature of this situation, including the rise, prevalence and severity of variants of the virus, we cannot reasonably estimate the full impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

COVID-19 and other market dynamics have caused widespread supply chain challenges due to labor, raw material, and component shortages. As a result, we have experienced supply constraints in our businesses, which have led to cost inflation and logistics delays. We are taking actions in an effort to mitigate impacts to our supply chain, however, we expect these pressures to continue.

Please see ~~“Part I.~~Part II. Item 1A. ~~Risk~~“Risk Factors” in our 2020 Form 10-K for a further discussion of some of the risks related to the COVID-19 pandemic.

Strategic Acquisitions

We complement our organic growth plans with strategic acquisitions. Acquisitions can significantly affect our reported results, and we report the change in our Net sales between periods both from existing and acquired businesses. The change in Net sales due to acquisitions for the ~~periods~~three and nine months ended October 1, 2021 presented in this filing represents the incremental sales ~~as a result of acquisitions closed~~ subsequent to the ~~first quarter~~beginning of ~~2020.~~the prior year periods.

We completed one acquisition in our Fabrication Technology segment and ~~two~~five acquisitions in our Medical Technology segment during the ~~three~~nine months ended ~~April 2,~~October 1, 2021 for ~~total~~net cash consideration ~~net~~ of ~~cash received,~~$208.1 million and equity consideration of ~~$88.7~~$285.7 million. ~~This~~The largest of these acquisitions were in our Medical Technology segment, which includes ~~the acquisition of~~ Trilliant Surgical, a national provider of foot and ankle ~~orthopedics implants,~~orthopedic implants; MedShape, Inc., a provider of innovative surgical solutions for ~~$82.3 million cash consideration, within our Medical Technology segment.~~foot and ankle surgeons; and Mathys AG Bettlach, a Switzerland-based company that develops and distributes innovative products for artificial joint replacement, synthetic bone graft solutions and sports medicine.

Foreign Currency Fluctuations

A significant portion of our Net sales, approximately ~~61%~~59% for both the three and nine months ended ~~April 2,~~October 1, 2021, were 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 significant. For the ~~first quarter of~~nine months ended October 1, 2021 compared to the ~~first quarter of~~nine months ended October 2, 2020, fluctuations in foreign currencies had a favorable impact on the change in Net sales of approximately 2% and affected Gross profit and Selling, general and administrative expenses by less than 3%2%. For the third quarter of 2021 compared to the

third quarter of 2020, fluctuations in foreign currencies had a favorable impact on the change in Net sales of approximately 1%, and affected Gross profit and Selling, general and administrative expenses by less than 1%. The changes in foreign exchange rates since December 31, 2020 also decreased net assets by ~~less than~~approximately 2% as of ~~April 2,~~October 1, 2021.

Seasonality

~~Our~~ European operations in our Fabrication Technology segment typically experience a slowdown during the July, August and December vacation seasons. Sales in our Medical Technology segment typically peak in the fourth quarter. However, the business impact caused by the COVID-19 pandemic ~~may distort~~has distorted the effects of historical seasonality ~~patterns.~~patterns in 2020 and 2021.

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Non-GAAP Measures

Adjusted EBITA

Adjusted EBITA, a non-GAAP performance measure, is included in this report because it is a key metric used by our management to assess our operating performance. Adjusted EBITA excludes from Net income ~~(loss)~~ from continuing operations the effect of restructuring and other related charges, MDR and other costs, acquisition-related intangible asset amortization and other non-cash charges, and strategic transaction costs, as well as income tax expense, ~~(benefit),~~pension settlement gain, debt extinguishment charges and interest expense, net. We also 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 and other related charges, MDR and other costs, acquisition-related intangible asset amortization and other non-cash charges, and strategic transaction costs 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 and other initiatives that are fundamentally different from our ongoing productivity improvements. Colfax management also believes that presenting these measures allows investors to view its performance using the same measure that we use in evaluating our 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 GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. The following tables set forth a reconciliation of Net income from continuing operations, the most directly comparable GAAP financial measure, to Adjusted EBITA.


		Three Months Ended							Three Months Ended					Nine Months Ended
		April 2, 2021			April 3, 2020						October 1, 2021			October 2, 2020			October 1, 2021			October 2, 2020
		(Dollars in millions)						(Dollars in millions)
Net income from continuing operations (GAAP)	Net income from continuing operations (GAAP)	$	27.7		$	8.9				Net income from continuing operations (GAAP)	$	28.1		$	16.8		$	87.2		$	22.6
Income tax expense	Income tax expense	7.9			13.2					Income tax expense	22.3			19.5			38.4			2.6
Pension settlement gain										Pension settlement gain	—			—			(11.2)			—
Interest expense, net	Interest expense, net	25.7			24.8					Interest expense, net	13.5			25.6			57.0			78.6

Debt extinguishment charges										Debt extinguishment charges	—			—			29.9			—
Restructuring and other related charges(1)	Restructuring and other related charges(1)	4.0			11.0					Restructuring and other related charges(1)	6.5			6.3			16.0			28.5
MDR and other costs(2)	MDR and other costs(2)	1.8			0.9					MDR and other costs(2)	1.9			2.6			5.6			4.5
Strategic transaction costs(3)	Strategic transaction costs(3)	1.4			0.9					Strategic transaction costs(3)	17.9			0.6			27.3			3.2
Acquisition-related amortization and other non-cash charges(4)	Acquisition-related amortization and other non-cash charges(4)	38.5			35.8					Acquisition-related amortization and other non-cash charges(4)	41.3			36.2			118.8			108.1
Adjusted EBITA (non-GAAP)	Adjusted EBITA (non-GAAP)	$	107.1		$	95.5				Adjusted EBITA (non-GAAP)	$	131.6		$	107.7		$	368.9		$	248.2
Net income margin from continuing operations (GAAP)	Net income margin from continuing operations (GAAP)	3.2		%	1.1		%			Net income margin from continuing operations (GAAP)	2.9		%	2.1		%	3.1		%	1.0		%
Adjusted EBITA margin (non-GAAP)	Adjusted EBITA margin (non-GAAP)	12.2		%	11.7		%			Adjusted EBITA margin (non-GAAP)	13.6		%	13.4		%	13.0		%	11.1		%

(1) Restructuring and other related charges includes ~~$1.8~~$2.2 million and $4.9 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the three and nine months ended ~~April 3,~~October 2, 2020, ~~only.~~respectively.

(2) Primarily related to costs specific to compliance with medical device reporting regulations and other requirements of the European Union ~~Medical Device Regulation~~MDR. These costs are classified as Selling, general and administrative expense on our Condensed Consolidated Statements of ~~2017.~~Operations.

(3) For the three and nine months ended ~~April 2,~~October 1, 2021, Strategic transaction costs includes costs related to the ~~Separation.~~Separation and certain transaction and integration costs related to recent acquisitions. For the three and nine months ended ~~April 3,~~October 2, 2020, Strategic transaction costs includes costs incurred for the acquisition of DJO.

(4) Includes amortization of acquired intangibles and fair value charges on acquired inventory.

The following tables set forth a reconciliation of operating income (loss), the most directly comparable financial statement measure, to Adjusted EBITA by segment for the three and nine months ended ~~April 2,~~October 1, 2021 and ~~April 3,~~October 2, 2020.


		Three Months Ended April 2, 2021													Three Months Ended October 1, 2021					Nine Months Ended October 1, 2021
		Fabrication Technology			Medical Technology			Corporate and other			Total						Fabrication Technology			Medical Technology			Corporate and other			Total			Fabrication Technology			Medical Technology			Corporate and other			Total
		(Dollars in millions)												(Dollars in millions)
Operating income (loss) (GAAP)	Operating income (loss) (GAAP)	$	79.2		$	(0.6)		$	(17.4)		$	61.3				Operating income (loss) (GAAP)	$	86.4		$	6.7		$	(29.1)		$	64.0		$	256.5		$	20.5		$	(75.8)		$	201.2
Restructuring and other related charges	Restructuring and other related charges	3.1			1.0			—			4.0					Restructuring and other related charges	4.2			2.2			—			6.5			10.8			5.2			—			16.0
MDR and other costs	MDR and other costs	—			1.8			—			1.8					MDR and other costs	—			1.9			—			1.9			—			5.6			—			5.6
Segment operating income (loss) (non-GAAP)	Segment operating income (loss) (non-GAAP)	82.3			2.2			(17.4)			67.1					Segment operating income (loss) (non-GAAP)	90.6			10.8			(29.1)			72.3			267.3			31.3			(75.8)			222.8
Strategic transaction costs	Strategic transaction costs	—			—			1.4			1.4					Strategic transaction costs	0.7			1.1			16.1			17.9			0.8			1.1			25.4			27.3
Acquisition-related amortization and other non-cash charges	Acquisition-related amortization and other non-cash charges	9.1			29.4			—			38.5					Acquisition-related amortization and other non-cash charges	8.9			32.4			—			41.3			27.1			91.7			—			118.8
Adjusted EBITA (non-GAAP)	Adjusted EBITA (non-GAAP)	$	91.4		$	31.6		$	(15.9)		$	107.1				Adjusted EBITA (non-GAAP)	$	100.3		$	44.4		$	(13.0)		$	131.6		$	295.2		$	124.1		$	(50.4)		$	368.9
Segment operating income margin (non-GAAP)	Segment operating income margin (non-GAAP)	14.5		%	0.7		%	—		%	7.6		%			Segment operating income margin (non-GAAP)	15.0		%	3.0		%	—		%	7.5		%	14.8		%	3.0		%	—		%	7.9		%
Adjusted EBITA margin (non-GAAP)	Adjusted EBITA margin (non-GAAP)	16.1		%	10.2		%	—		%	12.2		%			Adjusted EBITA margin (non-GAAP)	16.5		%	12.3		%	—		%	13.6		%	16.4		%	12.1		%	—		%	13.0		%


		Three Months Ended April 3, 2020													Three Months Ended October 2, 2020					Nine Months Ended October 2, 2020
		Fabrication Technology			Medical Technology			Corporate and other			Total						Fabrication Technology			Medical Technology			Corporate and other			Total			Fabrication Technology			Medical Technology			Corporate and other			Total
		(Dollars in millions)												(Dollars in millions)
Operating income (loss) (GAAP)	Operating income (loss) (GAAP)	$	66.2		$	(5.3)		$	(14.1)		$	46.8				Operating income (loss) (GAAP)	$	60.5		$	16.5		$	(15.1)		$	61.9		$	164.3		$	(15.7)		$	(44.7)		$	103.8
Restructuring and other related charges(1)	Restructuring and other related charges(1)	2.8			8.2			—			11.0					Restructuring and other related charges(1)	2.5			3.8			—			6.3			11.4			17.1			—			28.5
MDR and other costs	MDR and other costs	—			0.9			—			0.9					MDR and other costs	—			2.6			—			2.6			—			4.5			—			4.5
Segment operating income (loss) (non-GAAP)	Segment operating income (loss) (non-GAAP)	69.0			3.8			(14.1)			58.8					Segment operating income (loss) (non-GAAP)	63.1			22.9			(15.1)			70.8			175.7			5.9			(44.7)			136.9
Strategic transaction costs	Strategic transaction costs	—			—			0.9			0.9					Strategic transaction costs	—			—			0.6			0.6			—			—			3.2			3.2
Acquisition-related amortization and other non-cash charges	Acquisition-related amortization and other non-cash charges	8.9			26.9			—			35.8					Acquisition-related amortization and other non-cash charges	9.1			27.1			—			36.2			26.8			81.3			—			108.1
Adjusted EBITA (non-GAAP)	Adjusted EBITA (non-GAAP)	$	77.9		$	30.7		$	(13.2)		$	95.5				Adjusted EBITA (non-GAAP)	$	72.2		$	50.0		$	(14.5)		$	107.7		$	202.5		$	87.2		$	(41.5)		$	248.2
Segment operating income margin (non-GAAP)		13.1		%	1.3		%	—		%	7.2		%
Segment operating income (loss) margin (non-GAAP)																Segment operating income (loss) margin (non-GAAP)	12.8		%	7.3		%	—		%	8.8		%	12.3		%	0.7		%	—		%	6.1		%
Adjusted EBITA margin (non-GAAP)	Adjusted EBITA margin (non-GAAP)	14.8		%	10.6		%	—		%	11.7		%			Adjusted EBITA margin (non-GAAP)	14.7		%	15.9		%	—		%	13.4		%	14.1		%	10.7		%	—		%	11.1		%

(1) Restructuring and other related charges includes ~~$1.8~~$2.2 million and $4.9 million of expense classified as Cost of sales on our Condensed Consolidated Statements of ~~Operations.~~Operations for the three and nine months ended October 2, 2020, respectively.

3032

Total Company

Sales

Net sales ~~increased~~ for the three and nine months ended ~~April 2,~~October 1, 2021 increased as compared with the three and nine months ended ~~April 3,~~October 2, 2020. The following table presents the components of changes in our consolidated Net sales.


		Three Months Ended					Three Months Ended				Nine Months Ended
		Net Sales		%					Net Sales		Change %		Net Sales		Change %
		(Dollars in millions)				(Dollars in millions)
For the three months ended April 3, 2020		$	816.4
For the three and nine months ended October 2, 2020								For the three and nine months ended October 2, 2020	$	805.9			$	2,242.6
Components of Change:	Components of Change:							Components of Change:
Existing Businesses(1)	Existing Businesses(1)	34.3		4.2	%			Existing Businesses(1)	110.2		13.7	%	462.3		20.6	%
Acquisitions(2)	Acquisitions(2)	14.4		1.8	%			Acquisitions(2)	46.0		5.7	%	84.0		3.7	%
Foreign Currency Translation(3)	Foreign Currency Translation(3)	14.2		1.7	%			Foreign Currency Translation(3)	3.9		0.5	%	42.1		1.9	%
		62.9		7.7	%				160.0		19.9	%	588.4		26.2	%
For the three months ended April 2, 2021		$	879.2
For the three and nine months ended October 1, 2021								For the three and nine months ended October 1, 2021	$	965.9			$	2,831.0

(1) Excludes the impact of foreign exchange rate fluctuations and acquisitions, thus providing a measure of change due to factors such as price, product mix and volume.

(2) Represents the incremental sales as a result of acquisitions closed subsequent to the ~~first quarter~~beginning of ~~2020.~~the prior year respective periods.

(3) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

The increase in Net sales during the ~~first quarter of~~three and nine months ended October 1, 2021 compared ~~with~~to the prior year ~~period~~periods was primarily attributable to ~~growth~~the recovery from the COVID-related sales downturn in ~~existing businesses due to~~2020, as well as acquisition-related sales and inflation-related pricing increases. During the ~~COVID-19 pandemic’s negative impact on sales late in~~three and nine months ended October 1, 2021, the ~~first quarter of 2020. The~~ existing business sales of our Fabrication Technology segment increased ~~$34.8~~$111.5 million and $342.5 million, respectively, while our Medical Technology segment ~~decreased $0.5 million. Net~~increased $119.8 million during the nine months ended October 1, 2021. Existing business sales ~~from existing business were impacted by the fewer selling days~~ in ~~the quarter, but were higher for both segments on a sales per day basis. Our~~our Fabrication Technology segment ~~benefited from~~increased in the three months ended October 1, 2021 primarily due to inflation-related pricing increases and, to a lesser extent, new product initiatives and improved sales volume. During the nine months ended October 1, 2021, existing business sales in our Fabrication Technology segment increased due to strong sales volume, inflation-related pricing increases and new product initiatives. Net sales from acquisitions increased during the three and nine months ended October 1, 2021 primarily due to acquisitions in our Medical Technology segment that closed in 2021 and in the fourth quarter of ~~2020 and first quarter of 2021.~~2020. The weakening of the U.S. dollar relative to other currencies resulted in ~~a $14.2~~$3.9 million and $42.1 million favorable foreign currency translation ~~impact.~~

impacts during the three and nine months ended October 1, 2021, respectively.

3133

Operating Results

The following table summarizes our results of continuing operations for the comparable periods.


		Three Months Ended							Three Months Ended					Nine Months Ended
		April 2, 2021			April 3, 2020						October 1, 2021			October 2, 2020			October 1, 2021			October 2, 2020
		(Dollars in millions)						(Dollars in millions)
Gross profit	Gross profit	$	371.1		$	348.2				Gross profit	$	404.9		$	344.1		$	1,194.9		$	933.4
Gross profit margin	Gross profit margin	42.2		%	42.7		%			Gross profit margin	41.9		%	42.7		%	42.2		%	41.6		%
Selling, general and administrative expense	Selling, general and administrative expense	$	305.7		$	292.2				Selling, general and administrative expense	$	334.4		$	278.1		$	977.7		$	806.0
Operating income	Operating income	$	61.3		$	46.8				Operating income	$	64.0		$	61.9		$	201.2		$	103.8
Operating income margin	Operating income margin	7.0		%	5.7		%			Operating income margin	6.6		%	7.7		%	7.1		%	4.6		%
Net income from continuing operations	Net income from continuing operations	$	27.7		$	8.9				Net income from continuing operations	$	28.1		$	16.8		$	87.2		$	22.6
Net income margin from continuing operations	Net income margin from continuing operations	3.2		%	1.1		%			Net income margin from continuing operations	2.9		%	2.1		%	3.1		%	1.0		%
Adjusted EBITA (non-GAAP)	Adjusted EBITA (non-GAAP)	$	107.1		$	95.5				Adjusted EBITA (non-GAAP)	$	131.6		$	107.7		$	368.9		$	248.2
Adjusted EBITA Margin (non-GAAP)		12.2		%	11.7		%
Adjusted EBITA margin (non-GAAP)										Adjusted EBITA margin (non-GAAP)	13.6		%	13.4		%	13.0		%	11.1		%
Items excluded from Adjusted EBITA:	Items excluded from Adjusted EBITA:									Items excluded from Adjusted EBITA:
Restructuring and other related charges(1)	Restructuring and other related charges(1)	$	4.0		$	11.0				Restructuring and other related charges(1)	$	6.5		$	6.3		$	16.0		$	28.5
MDR and other costs	MDR and other costs	$	1.8		$	0.9				MDR and other costs	$	1.9		$	2.6		$	5.6		$	4.5
Strategic transaction costs	Strategic transaction costs	$	1.4		$	0.9				Strategic transaction costs	$	17.9		$	0.6		$	27.3		$	3.2
Acquisition-related amortization and other non-cash charges	Acquisition-related amortization and other non-cash charges	$	38.5		$	35.8				Acquisition-related amortization and other non-cash charges	$	41.3		$	36.2		$	118.8		$	108.1

Pension settlement gain										Pension settlement gain	$	—		$	—		$	(11.2)		$	—
Interest expense, net	Interest expense, net	$	25.7		$	24.8				Interest expense, net	$	13.5		$	25.6		$	57.0		$	78.6
Debt extinguishment charges										Debt extinguishment charges	$	—		$	—		$	29.9		$	—
Income tax expense	Income tax expense	$	7.9		$	13.2				Income tax expense	$	22.3		$	19.5		$	38.4		$	2.6

~~First~~Third Quarter of 2021 Compared to ~~First~~Third Quarter of 2020

Gross profit increased ~~$22.9 million~~ in the ~~first~~third quarter of 2021 compared with the prior year period due to a ~~$11.0~~$33.0 million increase in our Fabrication Technology segment and a ~~$11.9~~$27.7 million increase in our Medical Technology segment. The Gross profit increase in our Fabrication Technology segment was primarily attributable to a rebound from lower sales volumes in the third quarter of 2020 caused by the COVID-19 impact. The Gross profit increase in our Medical Technology segment was due to acquisition ~~growth, new product initiatives~~growth. Improved Gross profit in both segments was partially offset by increased supply chain and ~~favorable foreign currency impacts.~~logistic costs. Gross profit margin ~~declined primarily~~was impacted by the same drivers as ~~a result of~~Gross profit, but decreased slightly due to inflation-related pricing and cost increases in our Fabrication Technology segment.

Selling, general and administrative expense increased ~~$13.5~~$56.3 million in the ~~first~~third quarter of 2021 compared to the prior year period due to ~~acquisition-related~~$36.1 million of costs related to acquired businesses, the cessation of prior year temporary cost reduction measures that were taken in response to COVID-19, and a $17.3 million increase in strategic transaction costs due to Separation-related costs.

Interest expense, net decreased in the third quarter of 2021 compared to the prior year period due to a reduction in debt balances, primarily as a result of the redemption of senior notes in the second quarter of 2021.

The effective tax rate for Net income from continuing operations during the third quarter of 2021 was 44.3%, which was higher than the 2021 U.S. federal statutory tax rate of 21%, mainly due to 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. The effective tax rate for the third quarter of 2020 was 53.7%, which was higher than the 2020 U.S. federal statutory tax 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, a benefit from U.S. state tax losses, and the realization of tax benefits associated with effective settlements of uncertain tax positions.

Net income from continuing operations increased in the third quarter of 2021 compared with the prior year period primarily due to the strong recovery from the prior year COVID-related sales downturn and related cost impacts. The sales-related benefits from this recovery were partially offset by increases in expenses attributable to the cessation of aforementioned temporary cost reductions in place during the third quarter of 2020 in reaction to COVID-driven sales reductions, as well as increased supply chain and ~~unfavorable~~logistic costs and higher Selling, general and administrative expenses associated with the Separation. Net income margin from continuing operations increased by 80 basis points due to the aforementioned factors. Adjusted EBITA increased due to the improved sales volumes, partially offset by higher supply chain and logistic costs and the cessation of third quarter 2020 temporary cost reductions. Adjusted EBITA margin increased for the same reasons Adjusted EBITA increased, partially offset by inflation-related pricing and cost increases in our Fabrication Technology segment, as well as recent acquisitions in our Medical Technology segment which were dilutive to the margin, but are expected to be accretive in future years.

Nine months ended October 1, 2021 Compared to Nine months ended October 2, 2020

Gross profit increased in the nine months ended October 1, 2021 compared with the prior year period due to a $122.5 million increase in our Fabrication Technology segment and a $139.1 million increase in our Medical Technology segment. The Gross profit increase was primarily attributable to higher sales volumes and the related improved production variances compared to the nine months ended October 2, 2020, during which sales volumes were negatively impacted by the COVID-19 pandemic. During the nine months ended October 1, 2021, Gross profit also improved due to acquisition growth, new product initiatives and favorable foreign currency ~~translation impacts.~~impacts, partially offset by increased supply chain and logistic costs in both segments. Gross profit margin increased for the same reasons, partially offset by inflation-related pricing and cost increases in our Fabrication Technology segment.

Selling, general and administrative expense increased $171.7 million in the nine months ended October 1, 2021 compared to the prior year period, primarily due to a $69.9 million increase in costs associated with acquisitions and the related integration costs from the newly acquired businesses, primarily within our Medical Technology segment, the cessation of prior year temporary cost reduction measures that were taken in response to COVID-19, and increased sales commissions from increased sales levels. A $24.1 million increase in strategic transaction costs related to the Separation also increased Selling, general and administrative expense during the nine months ended October 1, 2021. Restructuring and other related charges decreased due to the completion of certain restructuring programs in our Medical Technology ~~segment restructuring programs.~~segment.

Additionally, during the nine months ended October 1, 2021, a pension settlement gain of $11.2 million was recognized when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.

Debt extinguishment charges of $29.9 million were recorded in the second quarter of 2021 due to an early redemption of certain senior notes. Interest expense, net ~~increased slightly~~decreased in the ~~first quarter of~~nine months ended October 1, 2021 compared to the same period in the prior year, primarily due ~~primarily~~ to ~~foreign currency gains in the prior year first quarter, partially offset by lower interest rates in the first quarter of 2021 and~~ an overall reduction in debt ~~balances.~~balances during the current year period as a result of the aforementioned redemption of senior notes.

The effective tax rate for Net income ~~(loss)~~ from continuing operations during the ~~first quarter of~~nine months ended October 1, 2021 was ~~22.2%~~30.6%, which was higher than the 2021 U.S. federal statutory tax rate of 21%, mainly due to withholding taxes, ~~taxable foreign exchange gains~~U.S. tax on international operations, and other non-deductible expenses, ~~partially~~ offset in part by the effective settlements of uncertain tax positions, a benefit offrom U.S. state tax losses, and U.S. tax credits. The effective tax rate for the ~~first quarter of~~nine months ended October 2, 2020 was ~~59.8%~~10.5%, which was ~~higher~~lower than the 2020 U.S. federal statutory tax rate of 21% mainly due to the net impact of U.S. tax credits, a benefit 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 of uncertain tax positions. These favorable impacts were partially offset by the impact of additional U.S. tax on international operations, withholding taxes, and ~~taxable foreign exchange gains offset in part by a discrete tax benefit associated with the enactment of a tax law change in India.~~certain non-deductible expenses.

Net income from continuing operations increased in the ~~first quarter of~~nine months ended October 1, 2021 compared with the prior year period primarily due to ~~improved~~the strong recovery from the prior year COVID-related sales ~~and lower tax expense,~~downturn. The sales-related benefits from this recovery in the nine months ended October 1, 2021 were partially offset by ~~the~~ increases in ~~acquisition-related expenses.~~expenses attributable to the

cessation of aforementioned temporary cost reductions implemented during the nine months ended October 2, 2020 in reaction to COVID-driven sales reductions, as well as increased supply chain and logistic costs. In the nine months ended October 1, 2021, we incurred higher sales commissions related to greater sales and debt extinguishment charges. Net income margin from

continuing operations increased by 210 basis points due to the aforementioned factors. Adjusted EBITA ~~and related margins~~ increased primarily due to the improved sales volumes, new product initiatives, and benefits from previously-completed restructuring ~~programs.~~programs, partially offset by the aforementioned supply chain and logistic costs and sales commission increases, and the cessation of the aforementioned temporary cost reductions. Adjusted EBITA margin increased for the same reasons Adjusted EBITA increased, partially offset by inflation-related pricing increases in our Fabrication Technology segment, as well as recent acquisitions in our Medical Technology segment which were dilutive to the margin, but are expected to be accretive in future years.

Business Segments

As discussed ~~further~~ above, we report results in two reportable segments: Fabrication Technology and Medical Technology.

Fabrication Technology

We formulate, develop, manufacture and supply consumable products and equipment, including cutting, joining, and automated welding products, as well as gas control equipment. Our fabrication technology products are marketed under several brand names, most notably ESAB, providing a wide range of products with innovative technologies to solve challenges in virtually any 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 including electrodes, nozzles, shields and tips. ESAB’s fabrication technology equipment ranges from portable welding machines to large customized automated cutting and welding systems. ESAB also offers a range of digital software and solutions to help its customers increase their productivity, remotely monitor their welding operations and digitize their documentation. Products are sold into a wide range of end markets, including infrastructure, wind power, marine, ~~medical /~~ medical/life sciences, pipelines, mobile/off-highway equipment, oil, gas, and mining.

The following table summarizes selected financial results for our Fabrication Technology segment:


		Three Months Ended							Three Months Ended					Nine Months Ended
		April 2, 2021			April 3, 2020						October 1, 2021			October 2, 2020			October 1, 2021			October 2, 2020
		(Dollars in millions)						(Dollars in millions)
Net sales	Net sales	$	568.1		$	525.5				Net sales	$	606.0		$	491.5		$	1,803.9		$	1,431.4
Gross profit	Gross profit	$	199.8		$	188.8				Gross profit	$	207.0		$	174.0		$	625.2		$	502.7
Gross profit margin	Gross profit margin	35.2		%	35.9		%			Gross profit margin	34.2		%	35.4		%	34.7		%	35.1		%
Selling, general and administrative expense	Selling, general and administrative expense	$	117.5		$	119.8				Selling, general and administrative expense	$	116.4		$	110.9		$	357.9		$	327.0
Segment operating income		$	82.3		$	69.0
Segment operating income margin		14.5		%	13.1		%
Segment operating income (non-GAAP)										Segment operating income (non-GAAP)	$	90.6		$	63.1		$	267.3		$	175.7
Segment operating income margin (non-GAAP)										Segment operating income margin (non-GAAP)	15.0		%	12.8		%	14.8		%	12.3		%
Adjusted EBITA (non-GAAP)	Adjusted EBITA (non-GAAP)	$	91.4		$	77.9				Adjusted EBITA (non-GAAP)	$	100.3		$	72.2		$	295.2		$	202.5
Adjusted EBITA margin (non-GAAP)	Adjusted EBITA margin (non-GAAP)	16.1		%	14.8		%			Adjusted EBITA margin (non-GAAP)	16.5		%	14.7		%	16.4		%	14.1		%
Items excluded from Adjusted EBITA:	Items excluded from Adjusted EBITA:									Items excluded from Adjusted EBITA:
Restructuring and other related charges	Restructuring and other related charges	$	3.1		$	2.8				Restructuring and other related charges	$	4.2		$	2.5		$	10.8		$	11.4
Strategic transaction costs										Strategic transaction costs	$	0.7		$	—		$	0.8		$	—
Acquisition-related amortization and other non-cash charges	Acquisition-related amortization and other non-cash charges	$	9.1		$	8.9				Acquisition-related amortization and other non-cash charges	$	8.9		$	9.1		$	27.1		$	26.8

~~First~~Third Quarter of 2021 Compared to ~~First~~Third Quarter of 2020

Net sales in our Fabrication Technology segment increased ~~$42.6~~$114.5 million in the ~~first~~third quarter of 2021 compared with the prior year period driven by inflation-related pricing impacts, which comprised approximately 15% of the increase, as well as new product initiatives and improved sales volumes due to continued market recovery from COVID-19. Gross profit increased $33.0 million due to the higher sales volumes compared to the prior year period. Gross profit margin decreased 120 basis points due to inflation-related pricing and cost increases, which compressed the margin. Selling, general and administrative expense increased primarily due to the cessation of temporary cost reductions in place during the third quarter of 2020, partially offset by favorable resolutions of certain trade receivables and other risks. Segment operating income and Adjusted EBITA improved

due to increased sales volumes, partially offset by increased Selling, general and administrative expenses. The related margins increased for the same reasons, partially offset by inflation-related pricing and cost increases during the third quarter of 2021.

Nine months ended October 1, 2021 Compared to Nine months ended October 2, 2020

Net sales increased $372.5 million in the nine months ended October 1, 2021 compared with the prior year period due to the strong recovery from the COVID-19 effects in the nine months ended October 2, 2020, as well as new product initiatives, inflation-related pricing impacts, and a ~~$7.4~~$28.4 million favorable foreign currency ~~impact, offset by fewer selling days.~~translation impact. Gross profit increased ~~due to increases in~~$122.5 million during the nine months ended October 1, 2021 as a result of improved sales volumes and production efficiencies, while Gross profit margin decreased 7040 basis points due to inflation-related pricing and cost ~~increases.~~increases, which compressed the margin. Selling, general and administrative expense ~~decreased despite~~ increased ~~sales volumes and unfavorable foreign currency impacts~~in the period primarily due to the cessation of temporary cost reductions implemented in the second quarter of 2020, partially offset by benefits from restructuring ~~initiatives to reduce costs.~~initiatives. Segment operating income and Adjusted EBITA ~~and related margins improved~~increased in the nine months ended October 1, 2021 compared to the prior year period due to ~~increased~~the improved sales ~~and reduced~~volumes, partially offset by increased Selling, general and administrative ~~expenses.~~costs. The related margins increased for the same reasons, partially offset by inflation-related pricing and cost increases over the same period.

Medical Technology

We develop, manufacture and distribute high-quality medical devices and services across the continuum 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 include orthopedic braces, rehabilitation devices, footwear, surgical implants, and bone growth stimulators.

The following table summarizes the selected financial results for our Medical Technology segment:


		Three Months Ended							Three Months Ended					Nine Months Ended
		April 2, 2021			April 3, 2020						October 1, 2021			October 2, 2020			October 1, 2021			October 2, 2020
		(Dollars in millions)						(Dollars in millions)
Net sales	Net sales	$	311.1		$	290.8				Net sales	$	359.9		$	314.4		$	1,027.1		$	811.2
Gross profit	Gross profit	$	171.3		$	159.4				Gross profit	$	197.9		$	170.2		$	569.8		$	430.7
Gross profit margin	Gross profit margin	55.1		%	54.8		%			Gross profit margin	55.0		%	54.1		%	55.5		%	53.1		%
Selling, general and administrative expense	Selling, general and administrative expense	$	170.9		$	157.4				Selling, general and administrative expense	$	188.9		$	152.1		$	544.1		$	434.3
Segment operating income		$	2.2		$	3.8
Segment operating income margin		0.7		%	1.3		%
Segment operating income (non-GAAP)										Segment operating income (non-GAAP)	$	10.8		$	22.9		$	31.3		$	5.9
Segment operating income margin (non-GAAP)										Segment operating income margin (non-GAAP)	3.0		%	7.3		%	3.0		%	0.7		%
Adjusted EBITA (non-GAAP)	Adjusted EBITA (non-GAAP)	$	31.6		$	30.7				Adjusted EBITA (non-GAAP)	$	44.4		$	50.0		$	124.1		$	87.2
Adjusted EBITA margin (non-GAAP)	Adjusted EBITA margin (non-GAAP)	10.2		%	10.6		%			Adjusted EBITA margin (non-GAAP)	12.3		%	15.9		%	12.1		%	10.7		%
Items excluded from Adjusted EBITA:	Items excluded from Adjusted EBITA:									Items excluded from Adjusted EBITA:
Restructuring and other related charges(1)	Restructuring and other related charges(1)	$	1.0		$	8.2				Restructuring and other related charges(1)	$	2.2		$	3.8		$	5.2		$	17.1
MDR and other costs	MDR and other costs	$	1.8		$	0.9				MDR and other costs	$	1.9		$	2.6		$	5.6		$	4.5
Strategic transaction costs										Strategic transaction costs	$	1.1		$	—		$	1.1		$	—
Acquisition-related amortization and other non-cash charges	Acquisition-related amortization and other non-cash charges	$	29.4		$	26.9				Acquisition-related amortization and other non-cash charges	$	32.4		$	27.1		$	91.7		$	81.3

(1) Restructuring and other related charges includes ~~$1.8~~$2.2 million and $4.9 million of expense classified as Cost of sales on ~~the Company’s~~our Condensed Consolidated Statements of Operations for the three and nine months ended ~~April 3,~~October 2, 2020, ~~only.~~respectively.

~~First~~Third Quarter of 2021 Compared to ~~First~~Third Quarter of 2020

Net sales increased ~~for~~in our Medical Technology segment in the ~~first~~third quarter of 2021 compared with the prior year period primarily due to acquisition-related sales growth of ~~$14.0~~$45.5 million ~~a favorable foreign currency translation effect of $6.8 million, and higher sales per day volumes, partially offset by fewer selling days. Sales volumes early~~ in the ~~first quarter of 2021~~current year period. Sales from existing business were ~~negatively~~relatively flat and were unfavorably impacted by approximately $7 million of non-recurring sales of personal protective equipment in the prior year period. As a result of the surge in cases of COVID-19 variants, certain jurisdictions ~~putting~~put further

COVID-19-related restrictions in place during the third quarter of 2021, which decelerated the recovery in response to the surge in COVID-19 cases late in 2020. Volumes began to normalize as the quarter progressed and resulted in organic growth on a sales per day basis in comparison to the prior year, which was negatively impacted from pandemic-related sales declines late in the quarter.elective surgical procedure volumes. Gross profit and gross profit margins increased in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020 primarily due ~~primarily~~ to acquisition-related ~~growth.~~growth and favorable product mix, partially offset by increased supply chain and logistic costs. Selling, general and administrative expense increased over the same period primarily due to the cessation of temporary employee cost reductions in place during the third quarter of 2020 and costs associated with acquisitions, ~~as well as the related~~including integration costs ~~from~~for the ~~newly acquired businesses, partially offset by reduced travel costs.~~newly-acquired businesses. Segment operating income and ~~Segment operating income margin~~Adjusted EBITA decreased primarily due to the ~~increase in Selling, general~~aforementioned cessation of temporary employee cost reductions and ~~administrative expenses. Adjusted EBITA~~ increased ~~primarily due to higher gross profit, while adjusted EBITA margin declined due to~~supply chain and logistic costs. The related margins decreased for the ~~costs associated with increased acquisition activity.~~same reasons, as well as a result of the dilutive impact of recent acquisitions. Restructuring and other related charges decreased by ~~$7.2~~$1.6 million due to the completion of certain projects in earlier periods.

Nine months ended October 1, 2021 Compared to Nine months ended October 2, 2020

Net sales increased in our Medical Technology segment in the nine months ended October 1, 2021 compared with the prior year period due to a recovery in sales volumes from the decline related to COVID-19 during the nine months ended October 2, 2020, as well as continued expansion in the reconstructive product group from key products launched in 2020, acquisition-related sales growth of $82.4 million and a favorable foreign currency translation impact of $13.7 million. After a surge of COVID-19 cases in the fourth quarter of 2020, which negatively impacted sales volumes early in 2021, sales volumes began normalizing late in the first quarter and through the second quarter of 2021. However, as a result of the aforementioned surge in cases of COVID-19 variants, recovery slowed during the third quarter of 2021, primarily due to a deceleration in elective surgical procedure volumes. Gross profit and Gross profit margins increased during the nine months ended October 1, 2021 compared to the prior year period due to improved sales volumes and acquisition-related growth, partially offset by increased supply chain and logistic costs. Selling, general and administrative expense also increased primarily due to costs associated with acquisitions and the related integration costs for the newly-acquired businesses, the cessation of temporary employee cost reductions implemented during the nine months ended October 2, 2020, and higher sales commissions in the current year period. Segment operating income, Adjusted EBITA, and related margins all increased as a result of the aforementioned factors. Restructuring and other related charges decreased by $11.9 million due to the completion of certain projects.

Liquidity and Capital Resources

Overview

We finance our long-term 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, Separation costs, capital expenditures, restructuring, asbestos-related cash outflows, and debt service and required amortization of principal. We believe we could raise additional funds in the form of debt or equity if it was determined to be appropriate for strategic acquisitions or other corporate purposes.

Equity Capital

On March 19, 2021, we completed the underwritten public offering of 16.1 million shares of our 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. We used these proceeds to pay down certain of our senior notes, as discussed further below.

In 2018, our Board of Directors authorized the repurchase of our Common stock from time-to-time on the open market or in privately negotiated transactions. No stock repurchases have been made under this plan since the third quarter of 2018. As of ~~April 2,~~October 1, 2021, the remaining stock repurchase authorization provided by our Board of Directors was $100.0 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.

Term Loan and Revolving Credit Facility

Our credit agreement (the “Credit Facility”) by and among the Company, as the borrower, certain U.S. subsidiaries of the Company, as guarantors, each of the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citizens Bank, N.A., as syndication agent, and the co-documentation agents named therein consists of a $975 million revolving credit facility (the “Revolver”) and a Term A-1 loan in an initial aggregate principal amount of $825 million, ~~(the “Term Loan”),~~ each with a maturity date of December 6, 2024. The Revolver contains a $50 million swing line loan sub-facility. Refer to Note 10, “Debt” in the accompanying Notes to the Condensed Consolidated Financial Statements for more information.

As of ~~April 2,~~October 1, 2021, we are in compliance with the covenants under the Credit Facility. As of ~~April 2,~~October 1, 2021, the weighted-average interest rate of borrowings under the Credit Facility was ~~1.86%~~1.59%, excluding accretion of original issue discount and deferred financing fees, and there was $~~975~~850 million available on the Revolver.

Euro Senior Notes

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

TEU Amortizing Notes

Our TEU amortizing notes with an initial principal amount of $15.6099 per unit, bear interest at a rate of 6.50% per annum, and have equal quarterly cash installments of $1.4375 per TEU amortizing note ~~on each January 15, April 15, July 15 and October 15~~ with a final installment payment date of January 15, 2022. The quarterly cash installment constitutes a payment of interest and a partial repayment of principal. We paid ~~$6.6~~$18.6 million and $17.4 million of principal on the TEU amortizing notes in ~~both~~ the ~~three~~nine months ended ~~April 2,~~October 1, 2021 and ~~April 3,~~October 2, 2020, respectively. The TEU amortizing notes are the direct, unsecured and unsubordinated obligations of the Company and rank equally with all of the existing and future other unsecured and unsubordinated indebtedness of the Company. Refer to Note ~~8, “Equity”~~10, “Debt” in the accompanying Notes to Condensed Consolidated Financial Statements for more information.

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2024 Notes and 2026 Notes

We had senior notes with an aggregate principal ~~amounts~~amount of $600 million (the “2024 Notes”), which were due on February 15, 2024 and had an interest rate of 6.0%. We have senior notes with an initial aggregate principal ~~amounts~~amount of $400 million (the “2026 ~~Notes)~~Notes”), which are due on February 15, 2026 and have an interest rate of 6.375%. ~~Each tranche of notes is~~The 2026 Notes are guaranteed by certain of our domestic subsidiaries. ~~The Company~~We redeemed all of ~~its~~the outstanding 2024 Notes and $100 million of the outstanding principal amount of ~~its~~our 2026 Notes on April 24, 2021. Refer to Note ~~15, “Subsequent Events”~~10, “Debt”, in the accompanying Notes to Condensed Consolidated Financial Statements for more information.

Other Indebtedness

In addition, we are party to various bilateral credit facilities with a borrowing capacity of ~~$192.1~~$170.0 million. As of ~~April 2,~~October 1, 2021, there were no outstanding borrowings under these facilities.

We are also party to letter of credit facilities with an aggregate capacity of ~~$338.6~~$292.9 million. Total letters of credit of ~~$64.9~~$34.6 million were outstanding as of ~~April 2,~~October 1, 2021.

We believe that our sources of liquidity are adequate to fund our operations for the next twelve months.

Cash Flows

As of ~~April 2,~~October 1, 2021, we had ~~$763.7~~$177.5 million of Cash and cash equivalents, an increase of ~~$662.6~~$76.4 million from the balance as of December 31, 2020 of $101.1 million, which included $4.0 million of Restricted cash. The following table summarizes the change in Cash and cash equivalents during the periods indicated:

Three Months Ended
April 2, 2021 April 3, 2020
(Dollars in millions)
Net cash provided by operating activities $ 84.4 $ 56.2
Purchases of property, plant and equipment (24.5) (31.1)
Proceeds from sale of property, plant and equipment — 1.7
Acquisitions, net of cash received, and investments (103.5) (7.8)
Net cash used in investing activities (128.0) (37.3)
Proceeds (repayments) from borrowings, net (6.3) 244.3
Proceeds from issuance of common stock and other 713.9 0.9
Net cash provided by financing activities 707.7 245.1
Effect of foreign exchange rates on Cash and cash equivalents (1.4) (8.1)
Increase in Cash and cash equivalents $ 662.6 $ 256.0

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


	Nine Months Ended
	October 1, 2021		October 2, 2020
	(Dollars in millions)
Net cash provided by operating activities	$	259.9	$	173.1
Purchases of property, plant and equipment	(73.6)		(81.6)
Proceeds from sale of property, plant and equipment	2.9		4.9
Acquisitions, net of cash received, and investments	(223.0)		(7.5)


Net cash used in investing activities	(293.6)		(84.1)
Repayments from borrowings, net	(594.3)		(116.1)



Proceeds from issuance of common stock, net	738.2		2.9
Payment of debt extinguishment costs	(24.4)		—
Other	(7.7)		(12.4)
Net cash provided by (used in) financing activities	111.8		(125.6)
Effect of foreign exchange rates on Cash and cash equivalents	(1.7)		(6.6)
Increase (decrease) in Cash and cash equivalents	$	76.4	$	(43.2)

Cash flows from operating activities can fluctuate significantly from period to period due to changes in working capital and the timing of payments for items such as pension funding, asbestos-related costs and ~~restructuring program funding.~~restructuring. Changes in significant operating cash flow items are discussed below.

•During the ~~three~~nine months ended ~~April 2,~~October 1, 2021 and ~~April 3,~~October 2, 2020, cash payments of ~~$4.7~~$15.1 million and ~~$14.5~~$31.4 million, respectively, were made related to our restructuring initiatives.

•During the nine months ended October 1, 2021, cash payments of $6.3 million were made related to the Separation.

•Year-to-date 2021 results include ~~$8.3~~$69.0 million of ~~inflows~~outflows from working capital ~~due to an increase~~as a result of business growth and supply chain challenges, which have caused certain increases in ~~accounts payable.~~inventory levels. Results in the comparable prior year

period provided cash of ~~$46.5~~$44.6 million ~~excluding the impact of foreign exchange,~~ due to decreases in receivables and inventories, partially offset by a decrease in ~~receivables and increase in~~ accounts payable ~~partially offset by an increase in inventory.~~due to COVID-related declines.

•Year-to-date 2021 net cash provided by operating activities also included a cash inflow from a $36.0 million U.S. federal tax ~~refund.~~refund received in the first quarter of 2021.

•Cash used in operating activities related to discontinued operations for the nine months ended October 1, 2021 was $7.2 million, primarily due to a settlement related to a disposed business, partially offset by net asbestos inflows. Cash used in operating activities related to discontinued operations for the nine months ended October 2, 2020 was $18.4 million, which included $11.2 million of asbestos outflows and $7.2 million related to our divested air and gas handling business.

Cash flows used in investing activities during the ~~three~~nine months ended ~~April 2,~~October 1, 2021 increased due to cash paid for acquisitions and investments in our Medical Technology segment of ~~$98.5~~$218.0 million, as well as an acquisition outlay in our Fabrication Technology segment of $5.0 million.

Cash flows provided by financing activities for the ~~three~~nine months ended ~~April 2,~~October 1, 2021 included the $711.3 million net proceeds from the public offering of 16.1 million shares of Colfax Common stock on March 19, 2021. The net proceeds were used in the $600 million full redemption of our 2024 Notes and the $100 million partial redemption of our 2026 Notes. Cash flows ~~provided by~~from financing activities ~~for three months ended April 3, 2020 were impacted by a~~includes net ~~increase in~~ borrowings ~~from~~on our Revolver ~~for working capital, general corporate or other purposes.~~of $125 million in 2021 and net repayments of $50.0 million and $40.0 million on our Revolver and Term A-1 loan, respectively, in 2020.

Our Cash and cash equivalents as of ~~April 2,~~October 1, 2021 include ~~$43.2~~$44.6 million held in jurisdictions outside the U.S. ~~We reduced these levels by $7.1~~, a decrease of $6.0 million in the ~~first~~third quarter of 2021. Cash repatriation of non-U.S. cash into the U.S. may be subject to taxes, other local statutory restrictions and minority owner distributions.

Critical Accounting Policies

The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on our results of operations and financial position. We evaluate our estimates and judgments on an ongoing basis. Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what our management anticipates, and different assumptions or estimates about the future could have a material impact on our results of operations and financial position.

There have been no other significant additions or changes to the methods, estimates and judgments included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies” in our 2020 Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in short-term interest rates, foreign currency exchange rates and commodity prices that could impact our results of operations and financial condition. We address our exposure to these risks through our normal operating and financing activities. We do not enter into derivative contracts for trading purposes.

Interest Rate Risk

We are subject to exposure from changes in short-term interest rates related to interest payments on our borrowing arrangements. A significant amount of our borrowings as of ~~April 2,~~October 1, 2021 are variable-rate facilities based on ~~LIBOR or EURIBOR.~~LIBOR. In order to mitigate our interest rate risk, we may enter into interest rate swap or collar agreements. A hypothetical increase in interest rates of 1% during the three and nine months ended ~~April 2,~~October 1, 2021 would have increased Interest expense for our variable rate-based debt by approximately ~~$2.0 million.~~$2.2 million and $6.6 million, respectively.

Exchange Rate Risk

We have manufacturing sites throughout the world and sell our products globally. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar and against the currencies of other countries in which we manufacture and sell products and services. During both the three and nine months ended ~~April 2,~~October 1, 2021, approximately ~~61%~~59% of our sales were derived from operations outside the U.S. We have significant manufacturing operations in European countries that are not part of the Eurozone. Sales are more highly weighted toward the Euro and U.S. dollar. We also have significant contractual obligations in U.S. dollars that are met with cash flows in other currencies as well as U.S. dollars. To better match revenue and expense, as well as cash needs from contractual liabilities, we regularly enter into currency swaps and forward contracts.

We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries. Euro denominated borrowings under the Euro Senior Notes provide a natural hedge to a portion of our European net asset position. The effect of a change in currency exchange rates on our net investment in international subsidiaries, net of the translation effect of our Euro denominated borrowings, is reflected in the Accumulated other comprehensive loss component of Equity. A 10% depreciation in major currencies relative to the U.S. dollar as of ~~April 2,~~October 1, 2021 (net of the translation effect of our Euro denominated borrowings) would result in a reduction in Equity of approximately ~~$160~~$201 million.

We also face exchange rate risk from intercompany transactions between affiliates. Although we use the U.S. dollar as our functional currency for reporting purposes, we have manufacturing sites throughout the world, and a substantial portion of our costs are incurred and sales are generated in foreign currencies. Costs incurred and sales recorded by subsidiaries operating outside of the U.S. are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. Similarly, tax costs may increase or decrease as local currencies strengthen or weaken against the U.S. dollar.

Commodity Price Risk

We are exposed to changes in the prices of raw materials used in our production processes. In order to manage commodity price risk, we periodically enter into fixed price contracts directly with suppliers.

See Note 12, “Financial Instruments and Fair Value Measurements” in our Notes to Condensed Consolidated Financial Statements included in this Form 10-Q for additional information regarding our derivative instruments.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of ~~April 2,~~October 1, 2021. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in providing reasonable assurance that the information required to be disclosed in this report on Form 10-Q has been recorded, processed, summarized and reported as of the end of the period covered by this report on Form 10-Q.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Discussion of legal proceedings is incorporated by reference to Note 13, “Commitments and Contingencies,” in the Notes to Condensed Consolidated Financial Statements included in Part I. Item 1. “Financial Statements” of this Form 10-Q.

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. In addition to risk factors included in “Part I. Item 1A. Risk Factors” in our 2020 Form 10-K, we face the following risks:

Risks Relating to the Separation

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

In March 2021, we announced our intention to separate our fabrication technology and medical technology business into two, differentiated, independent publicly traded companies (the “Separation”). We are targeting completion of the Separation in the first quarter of 2022. Completion of the Separation is subject to, among other things, completion of financing and other transactions on satisfactory terms, other steps necessary to qualify the Separation as a generally tax-free transaction, receipt of other regulatory approvals, obtaining final approvals from our board of directors and market conditions. The Separation is complex in nature, and unanticipated developments or changes, including changes in the law, macroeconomic environment and competitive conditions of our markets, the need both to receive regulatory approvals or clearances and to satisfy the requirements to effectuate a generally tax-free transaction, the uncertainty of the financial markets and challenges in executing the Separation, could delay or prevent the completion of the Separation or cause the Separation to occur on terms or conditions that are different or less favorable than expected.

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

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

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

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

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

Additionally, volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets. Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions. These conditions may adversely affect our anticipated timeline to complete the Separation and the expected benefits of the Separation, including by increasing the time and expense involved in the Separation. Other challenges associated with effectively executing the Separation include attracting, retaining and motivating key management and employees during the pendency of the Separation and following its completion, addressing any disruptions to our supply chain, manufacturing, sales and distribution, and other operations resulting from separating our fabrication and specialty medical technology business into two, differentiated, independent publicly traded companies. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or the price of our common stock. Furthermore, if the Separation is completed, we cannot provide assurance that

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the Separation will achieve the full strategic and financial benefits expected to result from the Separation, nor can we provide assurance that each independent company will be successful in meeting its objectives.

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

If the Separation occurs, it will result in two smaller, less diversified companies, each with a more concentrated area of focus. As a result, each company may be more vulnerable to changing market conditions and competitive pressures, which could have a material adverse effect on our business, financial condition and results of operations. The diversification of revenues, costs and cash flows will diminish as a result of the Separation, such that each company’s results of operations, cash flows, working capital, effective tax rate and financing requirements may be subject to increased volatility, and each company’s ability to fund capital expenditures, investments and service our debt may be diminished. There can be no assurance that the combined value of the common stock of the two independent publicly traded companies following the completion of the Separation will be equal to or greater than what the value of our common stock would have been had the Separation not occurred.

If the Separation and/or certain related transactions do not qualify as transactions that are generally tax-free for U.S. federal income tax purposes, we and our stockholders could be subject to significant tax liabilities.

Notwithstanding that we intend to structure the Separation to generally be a tax-free transaction, the U.S. Internal Revenue Service (the “IRS”) could determine that the Separation and/or certain related transactions should be treated as taxable transactions for U.S. federal income tax purposes. Accordingly, there can be no assurance that the IRS will not assert that the Separation and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge. In the event the IRS were to prevail with such challenge, we and our stockholders could be subject to significant U.S. federal income tax liability.

If the Separation, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), in general, for U.S. federal income tax purposes, we would recognize taxable gain as if we had sold the common stock of the separated entity in a taxable sale for its fair market value (unless we and the separated entity jointly make an election under Section 336(e) of the Code with respect to the Separation, in which case, in general, (a) we would recognize taxable gain as if the separated entity had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of its common stock and the assumption of all its liabilities and (b) the separated entity would obtain a related step-up in the basis of its assets), and our stockholders who receive shares of common stock of the separated entity in the Separation would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~On July 28, 2021, as consideration for the acquisition by the Company of all of the issued and outstanding shares of Mathys AG Bettlach (“Mathys”), the Company issued 6,544,522 shares of our Common stock to the former shareholders of Mathys, representing total acquisition consideration of approximately $286 million. The issuance of Common stock was made in reliance on an exemption from registration under the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereunder, as a transaction by the Company not involving a public offering.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit No.			Exhibit Description

3.01*			Amended and Restated Certificate of Incorporation.

3.02**			Colfax Corporation Amended and Restated Bylaws.

~~10.1#~~			~~Form of Retention Restricted Stock Unit Agreement (2020 Plan) (incorporated by reference to Exhibit 10.1 to Colfax Corporation’s Form 8-K (File No. 001-3405) as filed with the SEC on March 5, 2021).~~

~~10.2#~~			Retention Agreement, dated March 5, 2021, by and between Colfax Corporation and Matthew Trerotola (incorporated by reference to Exhibit 10.2 to Colfax Corporation’s Form 8-K (File No. 001-3405) as filed with the SEC on March 5, 2021).

~~10.3#~~			Retention Agreement, dated March 5, 2021, by and between Colfax Corporation and Christopher Hix (incorporated by reference to Exhibit 10.3 to Colfax Corporation’s Form 8-K (File No. 001-3405) as filed with the SEC on March 5, 2021).

~~10.4#~~			Retention Agreement, dated March 5, 2021, by and between Colfax Corporation and Daniel Pryor (incorporated by reference to Exhibit 10.4 to Colfax Corporation’s Form 8-K (File No. 001-3405) as filed with the SEC on March 5, 2021).

~~10.5#~~			Retention Agreement, dated March 5, 2021, by and between Colfax Corporation and Shyam Kambeyanda (incorporated by reference to Exhibit 10.5 to Colfax Corporation’s Form 8-K (File No. 001-3405) as filed with the SEC on March 5, 2021).

~~10.6#~~			Retention Agreement, dated March 5, 2021, by and between Colfax Corporation and Brady Shirley (incorporated by reference to Exhibit 10.6 to Colfax Corporation’s Form 8-K (File No. 001-3405) as filed with the SEC on March 5, 2021).

~~10.7#~~			Change in Control Agreement, dated March 5, 2021, by and between Colfax Corporation and Shyam Kambeyanda (incorporated by reference to Exhibit 10.7 to Colfax Corporation’s Form 8-K (File No. 001-3405) as filed with the SEC on March 5, 2021).

31.01			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.02			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.01			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.02			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document.

101.CAL			Inline XBRL Extension Calculation Linkbase Document.

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104			Cover Page Interactive Data File - The cover page from this Quarterly Report on Form 10-Q for the quarter ended ~~April 2,~~October 1, 2021 is formatted in Inline XBRL (included as Exhibit 101).

*			Incorporated by reference to Exhibit 3.01 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on January 30, 2012.

**			Incorporated by reference to Exhibit 3.02 to Colfax Corporation’s Form 10-Q (File No. 001-34045) as filed with the SEC on July 23, 2015.

#			~~Indicates management contract or compensatory plan, contract or arrangement.~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Registrant: Colfax Corporation

By:

/s/ Matthew L. Trerotola

President and Chief Executive Officer

Matthew L. Trerotola

(Principal Executive Officer)

~~April 29,~~November 4, 2021

/s/ Christopher M. Hix

Executive Vice President, Finance

Christopher M. Hix

Chief Financial Officer

~~April 29,~~November 4, 2021

(Principal Financial Officer)

/s/ Douglas J. Pitts

Vice President

Douglas J. Pitts

Controller and Chief Accounting Officer

~~April 29,~~November 4, 2021

(Principal Accounting Officer)

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