COLFAX CORPORATION
CONSOLIDATED BALANCE SHEETS
Dollars in thousands, except share amounts
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
ASSETS
|
|
|
|
CURRENT ASSETS:
|
|
|
|
Cash and cash equivalents
|
$
|
109,632
|
|
|
$
|
77,153
|
|
Trade receivables, less allowance for doubtful accounts of $32,634 and $26,844
|
561,865
|
|
|
386,588
|
|
Inventories, net
|
571,558
|
|
|
359,655
|
|
Other current assets
|
161,190
|
|
|
137,801
|
|
Current portion of assets held for sale
|
—
|
|
|
997,244
|
|
Total current assets
|
1,404,245
|
|
|
1,958,441
|
|
Property, plant and equipment, net
|
491,241
|
|
|
327,155
|
|
Goodwill
|
3,202,517
|
|
|
1,497,832
|
|
Intangible assets, net
|
1,719,019
|
|
|
628,300
|
|
Lease asset - right of use
|
173,320
|
|
|
—
|
|
Other assets
|
396,490
|
|
|
463,525
|
|
Assets held for sale, less current portion
|
—
|
|
|
1,740,705
|
|
Total assets
|
$
|
7,386,832
|
|
|
$
|
6,615,958
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
Current portion of long-term debt
|
$
|
27,642
|
|
|
$
|
5,020
|
|
Accounts payable
|
359,782
|
|
|
291,233
|
|
Accrued liabilities
|
469,890
|
|
|
290,844
|
|
Current portion of liabilities held for sale
|
—
|
|
|
612,248
|
|
Total current liabilities
|
857,314
|
|
|
1,199,345
|
|
Long-term debt, less current portion
|
2,284,184
|
|
|
1,192,408
|
|
Non-current lease liability
|
136,399
|
|
|
—
|
|
Other liabilities
|
619,307
|
|
|
651,864
|
|
Liabilities held for sale, less current portion
|
—
|
|
|
95,395
|
|
Total liabilities
|
3,897,204
|
|
|
3,139,012
|
|
Equity:
|
|
|
|
Common stock, $0.001 par value; 400,000,000 shares authorized; 118,059,082 and 117,275,217 issued and outstanding as of December 31, 2019 and 2018, respectively
|
118
|
|
|
117
|
|
Additional paid-in capital
|
3,445,597
|
|
|
3,057,982
|
|
Retained earnings
|
479,560
|
|
|
991,838
|
|
Accumulated other comprehensive loss
|
(483,845
|
)
|
|
(780,177
|
)
|
Total Colfax Corporation equity
|
3,441,430
|
|
|
3,269,760
|
|
Noncontrolling interest
|
48,198
|
|
|
207,186
|
|
Total equity
|
3,489,628
|
|
|
3,476,946
|
|
Total liabilities and equity
|
$
|
7,386,832
|
|
|
$
|
6,615,958
|
|
See Notes to Consolidated Financial Statements.
COLFAX CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
Dollars in thousands, except share amounts and as noted
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
Additional Paid-In Capital
|
Retained Earnings
|
Accumulated Other Comprehensive Loss
|
Noncontrolling Interest
|
Total
|
|
Shares
|
Amount
|
Balance at January 1, 2017
|
122,780,261
|
|
$
|
123
|
|
$
|
3,199,682
|
|
$
|
685,411
|
|
$
|
(988,345
|
)
|
$
|
196,473
|
|
$
|
3,093,344
|
|
Cumulative effect of accounting change
|
—
|
|
—
|
|
—
|
|
9,989
|
|
—
|
|
—
|
|
9,989
|
|
Net income
|
—
|
|
—
|
|
—
|
|
151,090
|
|
—
|
|
18,417
|
|
169,507
|
|
Distributions to noncontrolling owners
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(4,051
|
)
|
(4,051
|
)
|
Other comprehensive income, net of tax of $15.7 million
|
—
|
|
—
|
|
—
|
|
—
|
|
413,973
|
|
16,010
|
|
429,983
|
|
Common stock-based award activity
|
465,566
|
|
—
|
|
28,492
|
|
—
|
|
—
|
|
—
|
|
28,492
|
|
Balance at December 31, 2017
|
123,245,827
|
|
123
|
|
3,228,174
|
|
846,490
|
|
(574,372
|
)
|
226,849
|
|
3,727,264
|
|
Cumulative effect of accounting change, net of tax of $2,808
|
—
|
|
—
|
|
—
|
|
5,152
|
|
(5,152
|
)
|
—
|
|
—
|
|
Net income
|
—
|
|
—
|
|
—
|
|
140,196
|
|
—
|
|
14,277
|
|
154,473
|
|
Distributions to noncontrolling owners
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(11,172
|
)
|
(11,172
|
)
|
Other comprehensive loss, net of tax of $9.1 million
|
—
|
|
—
|
|
—
|
|
—
|
|
(200,653
|
)
|
(22,768
|
)
|
(223,421
|
)
|
Common stock repurchases
|
(6,449,425
|
)
|
(6
|
)
|
(199,994
|
)
|
—
|
|
—
|
|
—
|
|
(200,000
|
)
|
Common stock-based award activity
|
478,815
|
|
—
|
|
29,802
|
|
—
|
|
—
|
|
—
|
|
29,802
|
|
Balance at December 31, 2018
|
117,275,217
|
|
117
|
|
3,057,982
|
|
991,838
|
|
(780,177
|
)
|
207,186
|
|
3,476,946
|
|
Cumulative effect of accounting change
|
—
|
|
—
|
|
—
|
|
15,368
|
|
(15,368
|
)
|
—
|
|
—
|
|
Net income (loss)
|
—
|
|
—
|
|
—
|
|
(527,646
|
)
|
—
|
|
10,500
|
|
(517,146
|
)
|
Distributions to noncontrolling owners
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(12,379
|
)
|
(12,379
|
)
|
Noncontrolling interest share repurchase
|
—
|
|
—
|
|
(24,037
|
)
|
—
|
|
(19,960
|
)
|
(49,508
|
)
|
(93,505
|
)
|
Other comprehensive income, net of tax of $1.0 million
|
—
|
|
—
|
|
—
|
|
—
|
|
331,660
|
|
(107,601
|
)
|
224,059
|
|
Issuance of Tangible Equity Units
|
—
|
|
—
|
|
377,814
|
|
—
|
|
—
|
|
—
|
|
377,814
|
|
Common stock-based award activity
|
783,865
|
|
1
|
|
33,838
|
|
—
|
|
—
|
|
—
|
|
33,839
|
|
Balance at December 31, 2019
|
118,059,082
|
|
$
|
118
|
|
$
|
3,445,597
|
|
$
|
479,560
|
|
$
|
(483,845
|
)
|
$
|
48,198
|
|
$
|
3,489,628
|
|
See Notes to Consolidated Financial Statements.
COLFAX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income (loss)
|
$
|
(517,146
|
)
|
|
$
|
154,473
|
|
|
169,507
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
Divestiture impairment loss
|
449,000
|
|
|
—
|
|
|
—
|
|
Impairment of goodwill, intangibles and property, plant and equipment
|
—
|
|
|
7,086
|
|
|
183,751
|
|
Depreciation, amortization and other impairment charges
|
236,026
|
|
|
141,877
|
|
|
132,203
|
|
Stock-based compensation expense
|
21,960
|
|
|
25,103
|
|
|
21,548
|
|
Non-cash interest expense
|
9,937
|
|
|
4,415
|
|
|
4,519
|
|
Loss on short-term investments
|
—
|
|
|
10,128
|
|
|
—
|
|
Deferred income tax expense (benefit)
|
(590
|
)
|
|
(66,573
|
)
|
|
12,066
|
|
Loss (gain) on sale of property, plant and equipment
|
61
|
|
|
(21,108
|
)
|
|
(11,243
|
)
|
(Gain) loss on sale of business
|
(14,233
|
)
|
|
4,337
|
|
|
(308,388
|
)
|
Pension settlement loss (gain)
|
77,390
|
|
|
(39
|
)
|
|
46,933
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Trade receivables, net
|
49,924
|
|
|
(72,405
|
)
|
|
(44,345
|
)
|
Inventories, net
|
(44,887
|
)
|
|
(47,156
|
)
|
|
(34,023
|
)
|
Accounts payable
|
(119,325
|
)
|
|
70,085
|
|
|
10,266
|
|
Changes in other operating assets and liabilities
|
(17,169
|
)
|
|
16,144
|
|
|
35,976
|
|
Net cash provided by operating activities
|
130,948
|
|
|
226,367
|
|
|
218,770
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Purchases of property, plant and equipment
|
(125,402
|
)
|
|
(69,646
|
)
|
|
(68,765
|
)
|
Proceeds from sale of property, plant and equipment
|
7,781
|
|
|
34,829
|
|
|
21,224
|
|
Acquisitions, net of cash received
|
(3,151,056
|
)
|
|
(290,918
|
)
|
|
(346,764
|
)
|
Proceeds from sale of business, net
|
1,635,920
|
|
|
18,404
|
|
|
490,308
|
|
Sale of short-term investments, net
|
—
|
|
|
139,480
|
|
|
—
|
|
Other, net
|
—
|
|
|
—
|
|
|
(6,127
|
)
|
Net cash (used in) provided by investing activities
|
(1,632,757
|
)
|
|
(167,851
|
)
|
|
89,876
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from borrowings on term credit facility
|
1,725,000
|
|
|
—
|
|
|
—
|
|
Payments under term credit facility
|
(1,387,500
|
)
|
|
(131,250
|
)
|
|
(65,628
|
)
|
Proceeds from borrowings on revolving credit facilities and other
|
2,045,083
|
|
|
1,271,051
|
|
|
1,046,457
|
|
Repayments of borrowings on revolving credit facilities and other
|
(2,273,802
|
)
|
|
(981,563
|
)
|
|
(1,632,658
|
)
|
Proceeds from borrowings on senior unsecured notes
|
1,000,000
|
|
|
—
|
|
|
374,450
|
|
Payment of debt issuance costs
|
(23,380
|
)
|
|
—
|
|
|
—
|
|
Proceeds from prepaid stock purchase contracts
|
377,814
|
|
|
—
|
|
|
—
|
|
Proceeds from issuance of common stock, net
|
11,879
|
|
|
4,699
|
|
|
6,944
|
|
Payment for noncontrolling interest share repurchase
|
(93,505
|
)
|
|
—
|
|
|
—
|
|
Payments for common stock repurchases
|
—
|
|
|
(200,000
|
)
|
|
—
|
|
Other
|
(12,095
|
)
|
|
(10,090
|
)
|
|
(10,012
|
)
|
Net cash provided by (used in) financing activities
|
1,369,494
|
|
|
(47,153
|
)
|
|
(280,447
|
)
|
Effect of foreign exchange rates on Cash and cash equivalents
|
(3,072
|
)
|
|
(28,363
|
)
|
|
12,090
|
|
(Decrease) increase in Cash and cash equivalents
|
(135,387
|
)
|
|
(17,000
|
)
|
|
40,289
|
|
Cash and cash equivalents, beginning of period
|
245,019
|
|
|
262,019
|
|
|
221,730
|
|
Cash and cash equivalents, end of period
|
$
|
109,632
|
|
|
$
|
245,019
|
|
|
$
|
262,019
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
Non-cash consideration received from sale of business
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
206,415
|
|
Interest payments
|
$
|
139,268
|
|
|
$
|
50,389
|
|
|
$
|
43,496
|
|
Income tax payments, net
|
$
|
134,915
|
|
|
$
|
97,452
|
|
|
$
|
70,668
|
|
See Notes to Consolidated Financial Statements.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Nature of Operations
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 under the ESAB and DJO brands. The Company completed the purchase of DJO Global, Inc. (“DJO”) on February 22, 2019. See Note 5, “Acquisitions”, for further information. Previously, the Company provided air and gas handling products and services under the Howden brand. On September 30, 2019, Colfax completed the sale of its Air and Gas Handling business pursuant to the previously disclosed purchase agreement, dated May 15, 2019. See Note 4, “Discontinued Operations”, for further information.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The Company’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all majority-owned subsidiaries over which the Company exercises control and, when applicable, entities or joint ventures for which the Company has a controlling financial interest or is the primary beneficiary. When protective rights, substantive rights or other factors exist, further analysis is performed in order to determine whether or not there is a controlling financial interest. The Consolidated Financial Statements reflect the assets, liabilities, revenues and expenses of consolidated subsidiaries and the noncontrolling parties’ ownership share is presented as a noncontrolling interest. All significant intercompany accounts and transactions have been eliminated.
Equity Method Investments
Investments in joint ventures, where the Company has a significant influence but not a controlling interest, are accounted for using the equity method of accounting. Investments accounted for under the equity method are initially recorded at the amount of the Company’s initial investment and adjusted each period for the Company’s share of the investee’s income or loss and dividends paid. All equity investments are reviewed periodically for indications of other-than-temporary impairment, including, but not limited to, significant and sustained decreases in quoted market prices or a series of historic and projected operating losses by investees. If the decline in fair value is considered to be other than temporary, an impairment loss is recorded and the investment is written down to a new carrying value. Investments in joint ventures acquired in a business combination are recognized in the opening balance sheet at fair value.
Revenue Recognition
The Company accounts for revenue in accordance with Topic 606, “Revenue from Contracts with Customers,” which the Company adopted on January 1, 2018, using the full retrospective method. The Company recognizes revenue when control of promised goods or services is transferred to the customer. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for transferring the goods or services. The nature of the Company’s contracts gives rise to certain types of variable consideration, including rebates 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. Estimates are based on historical or anticipated performance and represent the Company’s best judgment at the time. Any estimates are evaluated on a quarterly basis until the uncertainty is resolved. Additionally, related to sales of its medical device products and services, the Company maintains provisions for estimated contractual allowances for reimbursement amounts from certain third-party payers based on negotiated contracts, historical experience for non-contracted payers, and the impact of new contract terms or modifications of existing arrangements with these customers. We report these allowances as a reduction to net sales.
The Company provides a variety of products and services to its customers. Most of the Company’s contracts consist of a single, distinct performance obligation or promise to transfer goods or services to a customer.
A majority of revenue recognized by the Company relates to contracts with customers for standard or off-the-shelf products. As control typically transfers to the customer upon shipment of the product in these circumstances, revenue is generally recognized at that point in time. Revenue recognition and billing typically occur simultaneously for contracts recognized at a point in time. Therefore, we do not have material revenues in excess of customer billings or billings to customers in excess of recognized revenues.
For service contracts, the Company recognizes revenue ratably over the period of performance as the customer simultaneously receives and consumes the benefits of the services provided. The Company applies the available practical expedient involving
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the existence of a significant financing component. As the Company generally does not receive payments greater than one year in advance or arrears of revenue recognition, the Company does not consider any arrangements to include financing components.
The period of benefit for the Company’s incremental costs of obtaining a contract generally have less than a one-year duration; therefore, the Company applies the practical expedient available and expenses costs to obtain a contract when incurred.
Taxes Collected from Customers and Remitted to Governmental Authorities
The Company collects various taxes and fees as an agent in connection with the sale of products and remits these amounts to the respective taxing authorities. These taxes and fees have been presented on a net basis in the Consolidated Statements of Operations and are recorded as a component of Accrued liabilities in the Consolidated Balance Sheets until remitted to the respective taxing authority.
Research and Development Expense
Research and development costs of $61.8 million, $34.2 million and $32.8 million for the years ended December 31, 2019, 2018 and 2017, respectively, are expensed as incurred and are included in Selling, general and administrative expense in the Consolidated Statements of Operations. These amounts do not include development and application engineering costs incurred in conjunction with fulfilling customer orders and executing customer projects.
Interest Expense, Net
Interest expense, net includes interest income of $3.2 million, $2.5 million and $1.9 million for the years ended December 31, 2019, 2018 and 2017, respectively, primarily associated with interest bearing deposits of certain foreign subsidiaries.
Cash and Cash Equivalents
Cash and cash equivalents include all financial instruments purchased with an initial maturity of three months or less. Cash and cash equivalents for the divested Air & Gas Handling business is presented within Current portion of assets held for sale on the Consolidated Balance Sheets at December 31, 2018. See Note 4, “Discontinued Operations”, for further information.
Trade Receivables
Trade receivables are presented net of an allowance for doubtful accounts. The Company records an allowance for doubtful accounts based upon estimates of amounts deemed uncollectible and a specific review of significant delinquent accounts, factoring in current and expected economic conditions. Estimated losses are based on historical collection experience, and are reviewed periodically by management.
Inventories
Inventories, net include the cost of material, labor and overhead and are stated at the lower of cost (determined under various methods including average cost, last-in, first-out and first-in, first-out, but predominantly first-in, first-out) or net realizable value. The value of inventory stated using the last-in, first-out method as of December 31, 2019 and 2018 was $121.8 million and $103.9 million, respectively. The Company periodically reviews its quantities of inventories on hand and compares these amounts to the expected usage of each particular product. The Company records as a charge to Cost of sales any amounts required to reduce the carrying value of inventories to net realizable value.
Property, Plant and Equipment
Property, plant and equipment, net is stated at historical cost, which includes the fair values of such assets acquired through acquisitions. Repair and maintenance expenditures are expensed as incurred unless the repair extends the useful life of the asset. The Company capitalizes surgical implant instruments that are provided to surgeons, free of charge, for use while implanting our products and the related depreciation expense is recorded as a component of Selling, general and administrative expense.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Impairment of Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the costs in excess of the fair value of net assets acquired through acquisitions by the Company. Indefinite-lived intangible assets consist of certain trade names.
The Company evaluates the recoverability of Goodwill and indefinite-lived intangible assets annually or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount. The annual impairment test date elected by the Company is the first day of our fourth quarter. Goodwill and indefinite-lived intangible assets are considered to be impaired when the carrying value of a reporting unit or asset exceeds its fair value. The Company currently has two reporting units: Medical Technology and Fabrication Technology.
In the evaluation of goodwill for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting entity is less than its carrying value. If the Company determines that it is not more likely than not for a reporting unit’s fair value to be less than its carrying value, a calculation of the fair value is not performed. If the Company determines that it is more likely than not for a reporting unit’s fair value to be less than its carrying value, a calculation of the reporting entity’s fair value is performed and compared to the carrying value of that entity. In certain instances, the Company may elect to forgo the qualitative assessment and proceed directly to the quantitative impairment test. If the carrying value of a reporting unit exceeds its fair value, goodwill of that reporting unit is impaired and an impairment loss is recorded equal to the excess of the reporting unit’s carrying value over its fair value.
When a quantitative impairment test is needed, the Company measures fair value of reporting units based on a present value of future discounted cash flows and a market valuation approach. The discounted cash flow models indicate the fair value of the reporting units based on the present value of the cash flows that the reporting units are expected to generate in the future. Significant estimates in the discounted cash flow models include: the weighted average cost of capital; long-term rate of growth and profitability of our business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison against certain market information. Significant estimates in the market approach model include identifying appropriate market multiples and assessing earnings before interest, income taxes, depreciation and amortization.
A qualitative annual impairment assessment of Goodwill was performed for the Fabrication Technology reporting unit for the years ended December 31, 2019, 2018 and 2017, which indicated no impairment existed. A qualitative annual impairment assessment of Goodwill was also performed for our Medical Technology reporting unit for the year ended December 31, 2019, which indicated no impairment existed.
In the evaluation of indefinite-lived intangible assets for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value. If the Company determines that it is not more likely than not for the indefinite-lived intangible asset’s fair value to be less than its carrying value, a calculation of the fair value is not performed. If the Company determines that it is more likely than not that the indefinite-lived intangible asset’s fair value is less than its carrying value, a calculation is performed and compared to the carrying value of the asset. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The Company measures the fair value of its indefinite-lived intangible assets using the “relief from royalty” method. Significant estimates in this approach include projected revenues and royalty and discount rates for each trade name evaluated. A combination of quantitative and qualitative assessment was performed for the Fabrication Technology reporting unit trade names for the years ended December 31, 2019, 2018 and 2017, which indicated no impairment existed.
Impairment of Long-Lived Assets Other than Goodwill and Indefinite-Lived Intangible Assets
Intangible assets primarily represent acquired trade names, customer relationships, acquired technology and software license agreements. A portion of the Company’s acquired customer relationships is being amortized on an accelerated basis over periods ranging from seven to 25 years based on the present value of the future cash flows expected to be generated from the acquired customers. All other intangible assets are being amortized on a straight-line basis over their estimated useful lives, generally ranging from two to twenty years.
The Company assesses its long-lived assets and finite-lived intangible assets for impairment whenever facts and circumstances indicate that the carrying amounts may not be fully recoverable. To analyze recoverability, the Company projects undiscounted net future cash flows over the remaining lives of such assets. If these projected cash flows are less than the carrying amounts, an impairment loss equal to the difference between the carrying amount of the asset and its fair value would be recognized, resulting in a write-down of the assets with a corresponding charge to earnings. Assets held for sale are reported at the lower of the carrying
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
amounts or fair value less cost to sell. Management determines fair value using the discounted cash flow method or other accepted valuation techniques.
The Company recorded asset impairment losses related to facility closures totaling $4.2 million, $5.5 million and $31.0 million during the years ended December 31, 2019, 2018 and 2017, respectively, as a component of Restructuring and other related charges in the Consolidated Statements of Operations. The aggregate carrying value of these assets subsequent to impairment was $44.6 million, $39.8 million and $53.7 million as of December 31, 2019, 2018 and 2017, respectively.
Derivatives
The Company is subject to foreign currency risk associated with the translation of the net assets of foreign subsidiaries to United States (“U.S.”) dollars on a periodic basis. The Company issued senior unsecured notes with an aggregate principal amount of €350 million (as defined and further discussed in Note 13, “Debt”) during the year ended December 31, 2017, which has been designated as a net investment hedge in order to mitigate a portion of its foreign currency risk.
Derivative instruments are generally recognized on a gross basis in the Consolidated Balance Sheets in either Other current assets, Other assets, Accrued liabilities or Other liabilities depending upon their respective fair values and maturity dates. The Company designates a portion of its foreign exchange contracts as cash flow hedges. For all instruments designated as hedges, including net investment hedges and cash flow hedges, the Company formally documents the relationship between the hedging instrument and the hedged item, as well as the risk management objective and the strategy for using the hedging instrument. The Company assesses whether the relationship between the hedging instrument and the hedged item is highly effective at offsetting changes in the fair value both at inception of the hedging relationship and on an ongoing basis. For cash flow hedges and net investment hedges, unrealized gains and losses are recognized as a component of Accumulated other comprehensive loss in the Consolidated Balance Sheets to the extent that it is effective at offsetting the change in the fair value of the hedged item and realized gains and losses are recognized in the Consolidated Statements of Operations consistent with the underlying hedged instrument.
The Company does not enter into derivative contracts for speculative purposes.
See Note 17, “Financial Instruments and Fair Value Measurements” for additional information regarding the Company’s derivative instruments.
Warranty Costs
Estimated expenses related to product warranties are accrued as the revenue is recognized on products sold to customers and included in Cost of sales in the Consolidated Statements of Operations. Estimates are established using historical information as to the nature, frequency, and average costs of warranty claims.
The activity in the Company’s warranty liability, which is included in Accrued liabilities and Other liabilities in the Company’s Consolidated Balance Sheets, consisted of the following:
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Warranty liability, beginning of period
|
$
|
12,312
|
|
|
$
|
10,949
|
|
Accrued warranty expense
|
6,038
|
|
|
7,239
|
|
Changes in estimates related to pre-existing warranties
|
1,668
|
|
|
1,709
|
|
Cost of warranty service work performed
|
(9,502
|
)
|
|
(8,559
|
)
|
Acquisition-related liability
|
5,520
|
|
|
1,556
|
|
Foreign exchange translation effect
|
(508
|
)
|
|
(582
|
)
|
Warranty liability, end of period
|
$
|
15,528
|
|
|
$
|
12,312
|
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Income Taxes
Income taxes for the Company are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the Consolidated Financial Statements and their respective tax basis. Deferred income tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets and liabilities are reported in Other assets and Other liabilities in the Company’s Consolidated Balance Sheets, respectively. The effect on deferred income tax assets and liabilities of a change in tax rates is generally recognized in Income tax expense (benefit) in the period that includes the enactment date.
Valuation allowances are recorded if it is more likely than not that some portion of the deferred income tax assets will not be realized. In evaluating the need for a valuation allowance, the Company considers various factors, including the expected level of future taxable income and available tax planning strategies. Any changes in judgment about the valuation allowance are recorded through Income tax expense (benefit) and are based on changes in facts and circumstances regarding realizability of deferred tax assets.
The Company must presume that an income tax position taken in a tax return will be examined by the relevant tax authority and determine whether it is more likely than not that the tax position will be sustained upon examination based upon the technical merits of the position. An income tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Company establishes a liability for unrecognized income tax benefits for income tax positions for which it is more likely than not that a tax position will not be sustained upon examination by the respective taxing authority to the extent such tax positions reduce the Company’s income tax liability. The Company recognizes interest and penalties related to unrecognized income tax benefits in the Income tax expense (benefit) in the Consolidated Statements of Operations.
Foreign Currency Exchange Gains and Losses
The Company’s financial statements are presented in U.S. dollars. The functional currencies of the Company’s operating subsidiaries are generally the local currencies of the countries in which each subsidiary is located. Assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the balance sheet date. The amounts recorded in each year in Foreign currency translation are net of income taxes to the extent the underlying equity balances in the entities are not deemed to be permanently reinvested. Revenues and expenses are translated at average rates of exchange in effect during the year.
Transactions in foreign currencies are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated for inclusion in the Consolidated Balance Sheets are recognized in Selling, general and administrative expense or Interest expense in the Consolidated Statements of Operations for that period.
During the year ended December 31, 2019, the Company recognized net foreign currency transaction gains of $0.5 million and net foreign currency transaction loss of $0.7 million in Interest expense and Selling, general and administrative expense, respectively, in the Consolidated Statements of Operations. During the year ended December 31, 2018, the Company recognized net foreign currency transaction loss of $1.4 million and $7.8 million in Interest expense and Selling, general and administrative expense, respectively, in the Consolidated Statements of Operations. During the year ended December 31, 2017, the Company recognized net foreign currency transaction gain of $3.1 million and net foreign currency transaction loss of $2.7 million in Interest expense and Selling, general and administrative expense, respectively, in the Consolidated Statements of Operations.
Debt Issuance Costs and Debt Discount
Costs directly related to the placement of debt are capitalized and amortized to Interest expense primarily using the effective interest method over the term of the related obligation. Net deferred issuance costs of $12.1 million and $6.9 million, respectively, were included in the Consolidated Balance Sheets as of December 31, 2019 and 2018, which includes $26.1 million and $14.6 million, respectively, of accumulated amortization. As of December 31, 2019, $6.1 million and $6.0 million of deferred issuance costs were included in Other assets and as a reduction of Long-term debt, respectively. As of December 31, 2018, $2.2 million and $4.7 million of deferred issuance costs were included in Other assets and as a reduction of Long-term debt, respectively. Further, the carrying value of debt is reduced by an original issue discount, which is accreted to Interest expense using the effective interest method over the term of the related obligation. See Note 13, “Debt” for additional discussion regarding the Company’s borrowing arrangements.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Use of Estimates
The Company makes certain estimates and assumptions in preparing its Consolidated Financial Statements in accordance with U.S. GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses for the period presented. Actual results may differ from those estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform to current year presentations. The amounts related to the Air and Gas Handling business, which was sold on September 30, 2019, are presented as Discontinued Operations in the Consolidated Statements of Operations. The net assets of the Air and Gas Handling business as of December 31, 2018 are presented as Held for Sale.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. Recently Issued Accounting Pronouncements
Accounting Guidance Implemented in 2019
|
|
|
|
|
|
Standards Adopted
|
|
Description
|
|
Effective Date
|
ASU 2016-02, Leases (Topic 842)
|
|
The standard requires a lessee to recognize assets and liabilities associated with the rights and obligations
attributable to most leases but also recognize expenses similar to current lease accounting. The standard also
requires certain qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases, along with additional key information about leasing arrangements. The Company adopted ASU No. 2016-02, “Leases (Topic 842)”, as of January 1, 2019, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a full retrospective approach without restating prior periods. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the standard, which among other things, allowed historical lease classification to be carried forward. Additionally, the Company elected the practical expedient approach to consolidate less significant non-lease components into the lease component for all asset classes. The Company made an accounting policy election, as permitted by Topic 842, to only record a right-of-use asset and related liability for leases with an initial term in excess of 12 months. The Company recognizes those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term. The Company has recognized a right-of-use asset of $173.3 million, with corresponding related lease liabilities on the Consolidated Balance Sheet. For more information, refer to Note 12, “Leases”.
|
|
January 1, 2019
|
ASU 2018-02, Income Statement -
Reporting Comprehensive Income
(Topic 220): Reclassification of
Certain Tax Effects from
Accumulated Other
Comprehensive Income
|
|
The standard provides entities the option to reclassify to retained earnings the tax effects resulting from the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”) related to items stranded in accumulated other comprehensive income. The guidance was applied retrospectively as of January 1, 2019. As a result of this accounting guidance, $15.4 million of tax benefit previously booked to Other Comprehensive Income was reclassified to retained earnings.
|
|
January 1, 2019
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
New Accounting Guidance to be Implemented
|
|
|
|
|
|
|
|
Standards Pending Adoption
|
|
Description
|
|
Anticipated Impact
|
|
Effective/Adoption Date
|
ASU No. 2016-13,
Financial Instruments -
Credit Losses (Topic
326): Measurement of
Credit Losses on
Financial Instruments
|
|
The ASU eliminates the probable initial recognition threshold under current U.S. GAAP and broadens the information an entity must consider when developing its expected credit loss estimates to include forward-looking information. The standard applies to most financial assets held at amortized costs, as well as certain other instruments. Under the current expected credit loss “(CECL)” model, entities must estimate losses over the entire contractual term of the asset from the date of initial recognition. In determining expected losses, consideration must be given to historical loss experience, current conditions, and reasonable and supportable forecasts incorporating forward looking information.
|
|
This accounting standard update is effective for the Company prospectively beginning January 1, 2020. The Company has selected a compliant methodology, and the new guidance is not expected to have a material impact on the Company’s trade receivables or results of operations.
|
|
January 1, 2020
|
ASU 2018-13, Fair Value
Measurement (Topic
820): Disclosure
Framework-Changes to
the Disclosure
Requirements for Fair
Value Measurement
|
|
The ASU modifies the disclosure requirements for fair value measurements.
|
|
This accounting standard update impacts disclosure only. The Company is currently evaluating the impact of this ASU on its consolidated financial statement disclosures.
|
|
January 1, 2020
|
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.
|
|
This accounting standard update impacts disclosure only. The Company is currently evaluating the impact of this ASU on its consolidated financial statement disclosures and the timing of adoption.
|
|
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 is currently evaluating the impact of this ASU on its consolidated financial statements and the timing of adoption.
|
|
January 1, 2021
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
4. Discontinued Operations
Sale of Air and Gas Handling Business
As discussed previously in Note 1, “Organization and Nature of Operations,” the Company completed the sale of its Air and Gas Handling business in the Company’s fiscal fourth quarter on September 30, 2019. The accounting requirements for reporting a business to be divested as a discontinued operation were met as of the end of the second quarter of 2019. Accordingly, the accompanying Consolidated Financial Statements for all periods presented reflect the Air and Gas Handling business as a discontinued operation.
The total consideration for the sale was $1.8 billion, including $1.67 billion in cash paid at closing, subject to certain adjustments pursuant to the purchase agreement, and the assumption by the Purchaser of certain liabilities and minority interests.
Based on the purchase price and the carrying value of the net assets being sold, the Company recorded an impairment loss of $481 million in the second quarter of 2019, which is included in Loss from discontinued operations, net of taxes in the Consolidated Statements of Operations. The impairment loss included a $449 million goodwill impairment charge and a $32 million valuation allowance charge on assets held for sale relating to the initial estimated cost to sell the business. An accumulated other comprehensive loss of approximately $350 million associated with the Air and Gas Handling business was included in the determination of the goodwill impairment charge, which is mostly attributable to the recognition of cumulative foreign currency translation effects from the long-term strengthening of the U.S. Dollar. The total divestiture-related expenses incurred for the Air and Gas Handling sale was $48.6 million for the year ended December 31, 2019.
The Company recorded a pre-tax gain on disposal of $14.2 million which is included in Income (loss) from discontinued operations, net of taxes in the Consolidated Statements of Operations.
In connection with the purchase agreement, the Company entered into various agreements to provide a framework for its relationships after the disposition, including a transition services agreement. The amounts to be billed for future transition services under the above agreements are not expected to be material to the Company’s results of operations.
The key components of Income (loss) from discontinued operations, net of taxes related to the Air and Gas Handling business for the years ended December 31, 2019, 2018 and 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Net sales
|
$
|
998,793
|
|
|
$
|
1,473,729
|
|
|
$
|
1,362,902
|
|
Cost of sales
|
689,004
|
|
|
1,070,266
|
|
|
1,005,006
|
|
Selling, general and administrative expense
|
194,589
|
|
|
269,447
|
|
|
231,692
|
|
Restructuring and other related charges
|
13,354
|
|
|
48,609
|
|
|
33,018
|
|
Goodwill impairment charge
|
449,000
|
|
|
—
|
|
|
152,700
|
|
Divestiture-related expense(1)
|
48,640
|
|
|
—
|
|
|
—
|
|
Operating income (loss)
|
(395,794
|
)
|
|
85,407
|
|
|
(59,514
|
)
|
Interest expense (income)(2)
|
47,553
|
|
|
(5,031
|
)
|
|
1,031
|
|
Pension settlement loss
|
43,774
|
|
|
—
|
|
|
—
|
|
Gain on disposal
|
14,233
|
|
|
—
|
|
|
—
|
|
Income (loss) from discontinued operations before income taxes
|
(472,888
|
)
|
|
90,438
|
|
|
(60,545
|
)
|
Income tax expense (3)
|
44,062
|
|
|
29,487
|
|
|
40,071
|
|
Income (loss) from discontinued operations, net of taxes
|
$
|
(516,950
|
)
|
|
$
|
60,951
|
|
|
$
|
(100,616
|
)
|
(1) Primarily related to professional and consulting fees associated with the divestiture including seller due diligence and preparation of regulatory filings, as well as other disposition-related activities.
(2) The Company reclassified the portion of its interest expense associated with the mandatory pay down of the Term Loan Facilities using net proceeds from the sale of the business.
(3) Income tax expense for the year ended December 31, 2019 is largely due to nondeductible items that do not provide a tax benefit on the loss.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Total income attributable to noncontrolling interest related to the Air and Gas Handling business, net of taxes was $5.9 million, $13.6 million, and $16.8 million for the years ended December 31, 2019, 2018 and 2017, respectively.
The following table summarizes the the major classes of assets and liabilities held for sale that were included in the Company’s
consolidated balance sheets as of December 31, 2018.
|
|
|
|
|
|
December 31, 2018
|
|
(In thousands)
|
ASSETS HELD FOR SALE
|
|
Cash and Cash equivalents
|
$
|
167,866
|
|
Trade receivables, less allowance for doubtful accounts of $8,308
|
602,830
|
|
Inventories, net
|
136,880
|
|
Other current assets
|
89,668
|
|
Property, plant and equipment, net
|
176,189
|
|
Goodwill
|
1,078,785
|
|
Intangible assets, net
|
384,613
|
|
Other assets
|
101,118
|
|
Total assets held for sale
|
2,737,949
|
|
Less: current portion
|
997,244
|
|
Total assets held for sale, less current portion
|
$
|
1,740,705
|
|
|
|
LIABILITIES HELD FOR SALE
|
|
Current portion of long-term debt
|
$
|
1,314
|
|
Accounts payable
|
349,434
|
|
Customer advances and billings in excess of costs incurred
|
130,480
|
|
Accrued liabilities
|
131,020
|
|
Other liabilities
|
95,395
|
|
Total liabilities held for sale
|
707,643
|
|
Less: current portion
|
612,248
|
|
Total liabilities held for sale, less current portion
|
$
|
95,395
|
|
Cash used in operating activities of discontinued operations related to the sale of the Air and Gas Handling business for the year ended December 31, 2019 was $18.1 million. Cash provided by operating activities of discontinued operations related to the sale of the Air and Gas Handling business for the years ended December 31, 2018 and 2017 was $127.8 million and $48.0 million, respectively. Cash used in investing activities of discontinued operations related to the sale of the Air and Gas Handling business was $27.5 million, $43.6 million and $244.1 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Sale of Fluid Handling Business
The Company sold its Fluid Handling business to CIRCOR on December 11, 2017. After certain post-closing adjustments, total consideration for the sale was $860.6 million, consisting of $551.0 million of cash, 3.3 million shares of CIRCOR common stock (“CIRCOR Shares”), and assumption of $168.0 million of net retirement liabilities. All cash consideration was collected as of June 29, 2018.
During the second quarter of 2018, the Company sold its CIRCOR Shares for $139.5 million, net of $5.8 million of underwriters' fees. The related loss of $10.1 million on the disposition of the shares was recorded in Loss on short-term investments in the Consolidated Statements of Operations for the year ended December 31, 2018 and was reflected in the Company’s continuing operations.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The key components of Income (loss) from discontinued operations related to the Fluid Handling business for the years ended December 31, 2019, 2018 and 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
436,682
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
294,946
|
|
Selling, general and administrative expense(1)
|
23,106
|
|
|
7,156
|
|
|
118,740
|
|
Divestiture-related expense, net(2)
|
—
|
|
|
4,321
|
|
|
5,257
|
|
Restructuring and other related charges(3)
|
—
|
|
|
—
|
|
|
(6,768
|
)
|
Operating income (loss)
|
(23,106
|
)
|
|
(11,477
|
)
|
|
24,507
|
|
Interest income(4)
|
—
|
|
|
—
|
|
|
473
|
|
Gain (loss) on disposal
|
—
|
|
|
(4,337
|
)
|
|
308,388
|
|
Income (loss) from discontinued operations before income taxes
|
(23,106
|
)
|
|
(15,814
|
)
|
|
333,368
|
|
Income tax expense (benefit)(5)
|
(4,047
|
)
|
|
12,536
|
|
|
109,321
|
|
Income (loss) from discontinued operations, net of taxes
|
$
|
(19,059
|
)
|
|
$
|
(28,350
|
)
|
|
$
|
224,047
|
|
(1) Pursuant to the Purchase Agreement, the Company retained its asbestos-related contingencies and insurance coverages. However, as the Company did not retain an interest in the ongoing operations of the business subject to the contingencies, the Company has classified asbestos-related activity in its Consolidated Statements of Operations as part of Loss from discontinued operations. See Note 18, “Commitments and Contingencies” for further information.
(2) Primarily related to professional and consulting fees associated with the divestiture including due diligence and preparation of regulatory filings, as well as employee benefit arrangements and other disposition-related activities.
(3) During the year ended December 31, 2017, the Company recorded a gain of approximately $12 million from the sale of a facility that was previously closed as part of restructuring activities.
(4) Interest expense was not allocated to the discontinued operations related to the Fluid Handling business.
(5) Income tax expense for the year ended December 31, 2018 includes incremental tax expense due to changes in the estimated gain allocation by jurisdiction.
Cash used by operating activities of discontinued operations related to the Fluid Handling business was $2.5 million and $5.6 million for the years ended December 31, 2019 and 2018, respectively, which primarily includes net cash outflows related to asbestos claims. Cash provided by operating activities of discontinued operations related to the Fluid Handling business was $65.2 million for the year ended December 31, 2017. Cash used in investing activities of discontinued operations was $10.1 million for the year ended December 31, 2017.
5. Acquisitions
On February 22, 2019, Colfax completed the purchase of DJO pursuant to the previously disclosed Agreement and Plan of Merger (the “Merger Agreement”), dated November 19, 2018. Colfax paid an aggregate net purchase price of $3.15 billion, subject to certain adjustments set forth in the Merger Agreement (the “Purchase Price”). See Note 14, “Equity” and Note 13, “Debt” for a discussion of the respective financing components of the DJO acquisition.
DJO is a global leader in orthopedic solutions, providing orthopedic devices, reconstructive implants, and services
spanning the full continuum of patient care, from injury prevention to rehabilitation. DJO has approximately 5,000 employees
across 18 locations around the world. The acquisition is expected to evolve the Company to higher margins, faster growth, and
lower cyclicality, while providing opportunities for significant bolt-on and adjacent acquisitions over time. The value included as Goodwill for this acquisition is reflective of these expected benefits in conjunction with anticipated synergies as the Company uses Colfax Business System (“CBS”) to drive further operating improvement, margin expansion, and long-term growth. CBS is the Company’s business management system, combining a comprehensive set of tools and repeatable, teachable processes, that the Company uses to create superior value for its customers, shareholders and associates.
During the year ended December 31, 2019, the Company incurred $60.8 million of advisory, legal, audit, valuation and other professional service fees in connection with the DJO acquisition, which are included in Selling, general and administrative expense in the Consolidated Statements of Operations. As of December 31, 2019, there is $2.3 million related to these expenses included in Accrued liabilities in the Consolidated Balance Sheet.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The DJO acquisition was accounted for using the acquisition method of accounting and accordingly, the Consolidated Financial Statements include the financial position and results of operations from the date of acquisition. The following unaudited proforma financial information presents Colfax’s consolidated financial information assuming the acquisition had taken place on January 1, 2018. These amounts are presented in accordance with U.S. GAAP, consistent with the Company’s accounting policies.
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Net sales
|
$
|
3,496,624
|
|
|
$
|
3,395,018
|
|
Net income from continuing operations attributable to Colfax Corporation
|
105,491
|
|
|
97,410
|
|
The following table summarizes the Company’s current estimate of the aggregate fair value of the assets acquired and
liabilities assumed at the date of acquisition. The assets acquired and liabilities assumed, as detailed below, are subject to adjustment, principally for income taxes, which could be material. Substantially all of the Goodwill recognized is not expected to be deductible for income tax purposes.
|
|
|
|
|
|
February 22, 2019
|
|
(In thousands)
|
Trade receivables
|
$
|
155,728
|
|
Inventories
|
198,550
|
|
Property, plant and equipment
|
169,526
|
|
Goodwill
|
1,672,053
|
|
Intangible assets
|
1,202,000
|
|
Accounts payable
|
(105,607
|
)
|
Other assets and liabilities, net
|
(156,632
|
)
|
Total
|
3,135,618
|
|
Less: net assets attributable to noncontrolling interest
|
(1,861
|
)
|
Consideration, net of cash acquired
|
$
|
3,133,757
|
|
The following table summarizes Intangible assets acquired, excluding Goodwill, as of February 22, 2019:
|
|
|
|
|
|
|
|
Intangible
Asset
|
|
Weighted-Average Amortization Period
|
|
(In thousands)
|
|
(Years)
|
|
|
|
|
Trademarks
|
$
|
371,000
|
|
|
20
|
Customer relationships
|
459,000
|
|
|
9
|
Acquired technology
|
372,000
|
|
|
13
|
Intangible assets
|
$
|
1,202,000
|
|
|
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fabrication Technology
During year ended December 31, 2018, the Company completed two acquisitions in our Fabrication Technology segment for total consideration, net of cash received, of $245.1 million, subject to certain purchase price adjustments. These acquisitions expand the segment’s presence in specialty gas applications and broaden the Company’s global presence.
During the year ended December 31, 2017, the Company completed three acquisitions in our Fabrication Technology segment for total consideration, net of cash received, of $129.2 million. These acquisitions expanded and improved the segment’s high quality welding equipment and consumables.
General
During the years ended December 31, 2019, 2018 and 2017, the Company’s Consolidated Statements of Operations included $1,080.4 million, $78.9 million, and $21.4 million of Net sales associated with acquisitions consummated during the respective period. Net Income attributable to Colfax Corporation common shareholders associated with acquisitions consummated during the year ended December 31, 2019 was $57.3 million. Net Income attributable to Colfax Corporation common shareholders associated with acquisitions consummated during the years ended December 31, 2018 and 2017 was not material for each respective period.
Acquisitions consummated during the year ended December 31, 2019 are accounted for under the acquisition method of accounting. The assets acquired and liabilities assumed reported on the Consolidated Balance Sheets represent the Company’s best estimate.
6. Revenue
The Company’s Fabrication Technology segment formulates, develops, manufactures and supplies consumable products and equipment. Substantially all revenue from the Fabrication Technology business is recognized at a point in time. The Company further disaggregates its Fabrication Technology revenue into the following product groups:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Equipment
|
$
|
703,024
|
|
|
$
|
623,987
|
|
|
$
|
557,130
|
|
Consumables
|
1,544,002
|
|
|
1,569,096
|
|
|
1,380,152
|
|
Total
|
$
|
2,247,026
|
|
|
$
|
2,193,083
|
|
|
$
|
1,937,282
|
|
Contracts with customers in the consumables product grouping generally have a shorter fulfillment period than equipment contracts.
The Company’s Medical Technology segment provides products and services spanning the full continuum of patient care,
from injury prevention to rehabilitation. While the Company’s Medical Technology sales are primarily derived from three sales
channels including dealers and distributors, insurance, and direct to consumers and hospitals, substantially all its revenue is
recognized at a point in time. The Company disaggregates its Medical Technology revenue into the following product groups:
|
|
|
|
|
|
Year Ended
|
|
December 31, 2019
|
|
(In thousands)
|
Prevention & Rehabilitation
|
$
|
766,429
|
|
Reconstructive
|
314,003
|
|
Total
|
$
|
1,080,432
|
|
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 December 31, 2019 is immaterial.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 for both over-time and point-in-time contracts, customers are billed in advance of revenue recognition, resulting in contract liabilities. As of December 31, 2019, 2018 and 2017, total contract liabilities were $14.8 million, $13.0 million and $17.3 million, respectively. During the years ended December 31, 2019 and 2018, revenue recognized that was included in the contract liability balance at the beginning of the respective year was $13.0 million and $17.3 million.
7. Net Income Per Share from Continuing Operations
Net income per share from continuing operations was computed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands, except share and per share data)
|
Computation of Net income per share from continuing operations:
|
|
|
|
|
|
Net income from continuing operations attributable to Colfax Corporation (1)
|
$
|
14,245
|
|
|
$
|
121,211
|
|
|
$
|
44,503
|
|
Weighted-average shares of Common stock outstanding - basic
|
135,716,944
|
|
|
120,288,297
|
|
|
123,229,806
|
|
Net income per share from continuing operations - basic
|
$
|
0.10
|
|
|
$
|
1.01
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
Computation of Net income per share from continuing operations - diluted:
|
|
|
|
|
|
Net income from continuing operations attributable to Colfax Corporation (1)
|
$
|
14,245
|
|
|
$
|
121,211
|
|
|
$
|
44,503
|
|
Weighted-average shares of Common stock outstanding - basic
|
135,716,944
|
|
|
120,288,297
|
|
|
123,229,806
|
|
Net effect of potentially dilutive securities - stock options and restricted stock units
|
949,942
|
|
|
506,759
|
|
|
766,395
|
|
Weighted-average shares of Common stock outstanding - diluted
|
136,666,886
|
|
|
120,795,056
|
|
|
123,996,201
|
|
Net income per share from continuing operations - diluted
|
$
|
0.10
|
|
|
$
|
1.00
|
|
|
$
|
0.36
|
|
(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 $4.6 million, $0.7 million and $1.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.
For the year ended December 31, 2019, 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. See Note 14, “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 years ended December 31, 2019, 2018 and 2017 excludes 4.3 million, 3.4 million and 5.0 million outstanding stock-based compensation awards, respectively, as their inclusion would be anti-dilutive.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
8. Income Taxes
Income from continuing operations before income taxes and Income tax expense (benefit) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Income (loss) from continuing operations before income taxes:
|
|
|
|
|
|
|
|
|
Domestic operations
|
$
|
(129,182
|
)
|
|
$
|
(60,352
|
)
|
|
$
|
(60,159
|
)
|
Foreign operations
|
179,675
|
|
|
152,716
|
|
|
108,718
|
|
|
$
|
50,493
|
|
|
$
|
92,364
|
|
|
$
|
48,559
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
$
|
811
|
|
|
$
|
(15,132
|
)
|
|
$
|
36,236
|
|
State
|
6,712
|
|
|
816
|
|
|
(1,450
|
)
|
Foreign
|
56,477
|
|
|
41,831
|
|
|
23,686
|
|
|
$
|
64,000
|
|
|
$
|
27,515
|
|
|
$
|
58,472
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Domestic operations
|
$
|
(24,151
|
)
|
|
$
|
(21,908
|
)
|
|
$
|
(54,958
|
)
|
Foreign operations
|
(8,219
|
)
|
|
(35,115
|
)
|
|
(1,031
|
)
|
|
(32,370
|
)
|
|
(57,023
|
)
|
|
(55,989
|
)
|
|
$
|
31,630
|
|
|
$
|
(29,508
|
)
|
|
$
|
2,483
|
|
See Note 4, “Discontinued Operations” for the income (loss) from discontinued operations before income taxes and related income taxes.
On December 22, 2017, the Tax Act was signed into law making significant changes to the Internal Revenue Code which included how the U.S. imposes income tax on multinational corporations. Key changes in the Tax Act which were relevant to the Company and generally effective January 1, 2018 include a flat corporate income tax rate of 21 percent to replace the marginal rates that range from 15 percent to 35 percent, elimination of the corporate alternative minimum tax, the creation of a territorial tax system replacing the worldwide tax system, a one-time tax on accumulated foreign subsidiary earnings to transition to the territorial system, a “minimum tax” on certain foreign earnings above an enumerated rate of return, a new base erosion anti-abuse tax that subjects certain payments made by a U.S. company to its foreign subsidiary to additional taxes, and an incentive for U.S. companies to sell, lease or license goods and services outside the U.S. by taxing the income at a reduced effective rate. The new tax also imposes limits on executive compensation and interest expense deductions, while permitting the immediate expensing for the cost of new investments in certain property acquired after September 27, 2017.
On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. SAB 118 allows registrants to include a provisional amount to account for the implications of the Tax Act where a reasonable estimate can be made and requires the completion of the accounting no later than one year from the date of enactment of the Tax Act or December 22, 2018. The Company filed its 2017 U.S. income tax return in the fourth quarter of 2018 which changed our tax basis in temporary differences and Transition Tax estimated as of December 31, 2017 resulting in an adjustment to the tax provision to the re-measurement amount recorded in the financial statements.
ASC 740 requires changes in tax rates and tax laws to be accounted for in the period of enactment in continuing operations. Accordingly, of significance, the Company included a provisional estimate of approximately $52 million for the Transition Tax, payable over 8 years for its year ended December 31, 2017. Pursuant to SAB 118, the Company reduced its provisional amount for Transition Tax by $10.8 million for the year ended December 31, 2018. Generally, the foreign earnings subject to the Transition Tax can be distributed without additional U.S. tax; however, if distributed, the amount could be subject to foreign taxes and U.S. state and local taxes. The Company continues to maintain its indefinite reinvestment assertion related to its foreign earnings.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s Income tax expense (benefit) from continuing operations differs from the amount that would be computed by applying the U.S. federal statutory rate as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Taxes calculated at the U.S. federal statutory rate
|
$
|
10,677
|
|
|
$
|
19,392
|
|
|
$
|
16,988
|
|
State taxes
|
(5,358
|
)
|
|
(3,543
|
)
|
|
(209
|
)
|
Effect of tax rates on international operations
|
(14,115
|
)
|
|
(5,877
|
)
|
|
(17,735
|
)
|
Change in enacted international tax rates
|
(2,843
|
)
|
|
(2,403
|
)
|
|
536
|
|
Changes in valuation allowance
|
11,196
|
|
|
(11,577
|
)
|
|
105
|
|
Changes in tax reserves
|
1,119
|
|
|
(1,704
|
)
|
|
(9,623
|
)
|
Tax Act - re-measurement of U.S. deferred taxes
|
—
|
|
|
(667
|
)
|
|
(54,988
|
)
|
Tax Act - mandatory repatriation taxes
|
—
|
|
|
(10,804
|
)
|
|
52,431
|
|
Non-deductible impairment expenses
|
—
|
|
|
—
|
|
|
—
|
|
Research and development tax credits
|
(4,029
|
)
|
|
(7,123
|
)
|
|
—
|
|
Foreign tax credits
|
—
|
|
|
(16,120
|
)
|
|
—
|
|
Net items not deductible in an international jurisdiction
|
10,060
|
|
|
12,077
|
|
|
10,019
|
|
SubPart F and GILTI
|
14,108
|
|
|
7,065
|
|
|
6,108
|
|
US Deal Costs and other non-deductibles
|
6,270
|
|
|
—
|
|
|
|
Other
|
4,545
|
|
|
(8,224
|
)
|
|
(1,149
|
)
|
Income tax expense (benefit)
|
$
|
31,630
|
|
|
$
|
(29,508
|
)
|
|
$
|
2,483
|
|
Deferred income taxes, net reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The significant components of deferred tax assets and liabilities included in continuing operations and assets held for sale, in addition to the reconciliation of the beginning and ending amount of gross unrecognized tax benefits, are as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Deferred tax assets:
|
|
|
|
Post-retirement benefit obligation
|
$
|
11,295
|
|
|
$
|
17,053
|
|
Expenses currently not deductible
|
131,921
|
|
|
77,888
|
|
Net operating loss carryforward
|
342,442
|
|
|
153,967
|
|
Tax credit carryforward
|
16,727
|
|
|
22,805
|
|
Depreciation and amortization
|
6,487
|
|
|
11,560
|
|
Other
|
42,407
|
|
|
45,131
|
|
Valuation allowance
|
(149,037
|
)
|
|
(148,023
|
)
|
Deferred tax assets, net
|
$
|
402,242
|
|
|
$
|
180,381
|
|
Deferred tax liabilities:
|
|
|
|
|
|
Depreciation and amortization
|
$
|
(415,888
|
)
|
|
$
|
(263,324
|
)
|
U.K. and other foreign benefit obligation
|
—
|
|
|
(19,514
|
)
|
Inventory
|
(3,694
|
)
|
|
(11,891
|
)
|
Outside basis differences and other
|
(84,706
|
)
|
|
(104,886
|
)
|
Total deferred tax liabilities
|
$
|
(504,288
|
)
|
|
$
|
(399,615
|
)
|
Total deferred tax liabilities, net
|
$
|
(102,046
|
)
|
|
$
|
(219,234
|
)
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company evaluates the recoverability of its deferred tax assets on a jurisdictional basis by considering whether deferred tax assets will be realized on a more likely than not basis. To the extent a portion or all of the applicable deferred tax assets do not meet the more likely than not threshold, a valuation allowance is recorded. During the year ended December 31, 2019, the valuation allowance increased from $148.0 million to $149.0 million with a net increase of $11.2 million recognized in Income tax expense (benefit), $9.1 million increase attributed to an acquired company, a $18.6 million decrease primarily attributable to the Air and Gas Handling divestiture and a $0.7 million decrease related to changes in foreign currency rates. Consideration was given to tax planning strategies and future taxable income as to how much of the relevant deferred tax asset could be realized on a more likely than not basis.
The Company has U.S. net operating loss carryforwards of $703.2 million expiring in years 2022 through 2037 and $166.1 million that may be carried forward indefinitely. The Company’s ability to use these various carryforwards to offset any taxable income generated in future taxable periods may be limited under Section 382 and other federal tax provisions. At December 31, 2019 the Company also has $520.0 million foreign net operating loss carryforwards primarily in Brazil, Germany, the Netherlands, Sweden, Switzerland, and the United Kingdom that may be subject to local tax restrictive limitations including changes in ownership. The foreign net operating losses can be carried forward indefinitely, except in applicable jurisdictions that make up less than five percent of the available net operating losses.
The Company has U.S. foreign tax and R&D tax credits that may be used to offset U.S. tax in previous or future tax periods subject to Section 382 and other federal provisions. The Company’s $8.9 million foreign tax credit can be carried back one year and can be carried forward to tax years through 2027-2029. The Company’s $9.9 million R&D credit can be carried back one year and can be carried forward to tax years through 2020-2039. The Company also has approximately $3.4 million of minimum tax credit carryforward which may offset the regular tax liability for any taxable year after 2018 or are refundable through 2022.
For the year ended December 31, 2019, all undistributed earnings of the Company’s foreign subsidiaries, which are indefinitely reinvested outside the U.S., were provisionally estimated to be $103.2 million. The Company’s assessment of the amount of deferred tax liability that would have been recognized had such earnings not been indefinitely reinvested is not reasonably determinable.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company records a liability for unrecognized income tax benefits for the amount of benefit included in its previously filed income tax returns and in its financial results expected to be included in income tax returns to be filed for periods through the date of its Consolidated Financial Statements for income tax positions for which it is more likely than not that a tax position will not be sustained upon examination by the respective taxing authority. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (inclusive of associated interest and penalties):
|
|
|
|
|
|
(In thousands)
|
Balance, December 31, 2016
|
$
|
59,208
|
|
Addition for tax positions taken in prior periods
|
1,521
|
|
Addition for tax positions taken in the current period
|
424
|
|
Reductions related to settlements with taxing authorities
|
(10,708
|
)
|
Reductions resulting from a lapse of applicable statute of limitations
|
(3,677
|
)
|
Other, including the impact of foreign currency translation and U.S. tax rate changes
|
(5,750
|
)
|
Balance, December 31, 2017
|
$
|
41,018
|
|
Addition for tax positions taken in prior periods
|
2,525
|
|
Addition for tax positions taken in the current period
|
240
|
|
Reductions related to settlements with taxing authorities
|
(461
|
)
|
Reductions resulting from a lapse of applicable statute of limitations
|
(4,477
|
)
|
Other, including the impact of foreign currency translation and U.S. tax rate changes
|
(1,224
|
)
|
Balance, December 31, 2018
|
$
|
37,621
|
|
Acquisitions and divestitures
|
18,248
|
|
Addition for tax positions taken in prior periods
|
1,441
|
|
Addition for tax positions taken in the current period
|
2,054
|
|
Reductions related to settlements with taxing authorities
|
(118
|
)
|
Reductions resulting from a lapse of applicable statute of limitations
|
(3,643
|
)
|
Other, including the impact of foreign currency translation and U.S. tax rate changes
|
(123
|
)
|
Balance, December 31, 2019
|
$
|
55,480
|
|
The Company is routinely examined by tax authorities around the world. Tax examinations remain in process in multiple countries, including but not limited to the United States, Germany, Indonesia, the Netherlands, Mexico, Brazil and various U.S. states. The Company files numerous group and separate tax returns in U.S. federal and state jurisdictions, as well as international jurisdictions. In the U.S., tax years dating back to 2006 remain subject to examination, due to tax attributes available to be carried forward to open or future tax years. With some exceptions, other major tax jurisdictions generally are not subject to tax examinations for years beginning before 2014.
The Company’s total unrecognized tax benefits were $55.5 million and $37.6 million as of December 31, 2019 and 2018, respectively, inclusive of $5.7 million and $4.1 million respectively, of interest and penalties. The Company records interest and penalties on uncertain tax positions as a component of Income tax expense (benefit), which was $1.0 million, $1.1 million and $1.3 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Due to the difficulty in predicting with reasonable certainty when tax audits will be fully resolved and closed, the range of reasonably possible significant increases or decreases in the liability for unrecognized tax benefits that may occur within the next 12 months is difficult to ascertain. Currently, the Company estimates that it is reasonably possible that the expiration of various statutes of limitations, resolution of tax audits and court decisions may reduce its tax expense in the next 12 months up to $2.3 million.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
9. Goodwill and Intangible Assets
The following table summarizes the activity in Goodwill, by segment during the years ended December 31, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Technology
|
|
Fabrication
Technology
|
|
Total
|
|
(In thousands)
|
Balance, January 1, 2018
|
$
|
—
|
|
|
$
|
1,430,372
|
|
|
$
|
1,430,372
|
|
Goodwill attributable to acquisitions(1)
|
—
|
|
|
113,354
|
|
|
113,354
|
|
Impact of foreign currency translation
|
—
|
|
|
(45,894
|
)
|
|
(45,894
|
)
|
Balance, December 31, 2018
|
—
|
|
|
1,497,832
|
|
|
1,497,832
|
|
Goodwill attributable to acquisitions(1)
|
1,674,328
|
|
|
8,406
|
|
|
1,682,734
|
|
Impact of foreign currency translation
|
(1,407
|
)
|
|
23,358
|
|
|
21,951
|
|
Balance, December 31, 2019
|
$
|
1,672,921
|
|
|
$
|
1,529,596
|
|
|
$
|
3,202,517
|
|
Accumulated goodwill impairment as of December 31, 2019
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1) Includes purchase accounting adjustments associated with acquisitions discussed in Note 5, “Acquisitions”.
The following table summarizes the Company’s Intangible assets, excluding Goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
(In thousands)
|
Indefinite-Lived Intangible Assets
|
|
|
|
|
|
|
|
Trade names
|
$
|
193,465
|
|
|
$
|
—
|
|
|
$
|
200,990
|
|
|
$
|
—
|
|
Definite-Lived Intangible Assets
|
|
|
|
|
|
|
|
Acquired customer relationships
|
919,574
|
|
|
(182,813
|
)
|
|
458,762
|
|
|
(113,039
|
)
|
Acquired technology
|
440,719
|
|
|
(60,971
|
)
|
|
68,472
|
|
|
(30,639
|
)
|
Acquired trade names
|
389,112
|
|
|
(21,069
|
)
|
|
18,396
|
|
|
(3,903
|
)
|
Software
|
103,274
|
|
|
(71,644
|
)
|
|
73,308
|
|
|
(55,628
|
)
|
Other intangible assets
|
22,809
|
|
|
(13,437
|
)
|
|
23,038
|
|
|
(11,457
|
)
|
|
$
|
2,068,953
|
|
|
$
|
(349,934
|
)
|
|
$
|
842,966
|
|
|
$
|
(214,666
|
)
|
Amortization expense related to intangible assets was included in the Consolidated Statements of Operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Selling, general and administrative expense
|
$
|
135,769
|
|
|
$
|
43,703
|
|
|
$
|
39,797
|
|
See Note 2, “Summary of Significant Accounting Policies” for discussion regarding impairment of Intangible assets.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Expected Amortization Expense
The Company’s expected annual amortization expense for intangible assets for the next five years:
|
|
|
|
|
|
December 31, 2019
|
|
(In thousands)
|
2020
|
$
|
142,513
|
|
2021
|
141,519
|
|
2022
|
139,524
|
|
2023
|
134,280
|
|
2024
|
132,734
|
|
10. Property, Plant and Equipment, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Depreciable Life
|
|
2019
|
|
2018
|
|
(In years)
|
|
(In thousands)
|
Land
|
n/a
|
|
$
|
25,138
|
|
|
$
|
24,380
|
|
Buildings and improvements
|
5-40
|
|
196,810
|
|
|
197,333
|
|
Machinery and equipment
|
3-15
|
|
528,848
|
|
|
338,508
|
|
|
|
|
750,796
|
|
|
560,221
|
|
Accumulated depreciation
|
|
|
(259,555
|
)
|
|
(233,066
|
)
|
Property, plant and equipment, net
|
|
|
$
|
491,241
|
|
|
$
|
327,155
|
|
Depreciation expense for the years ended December 31, 2019, 2018 and 2017, was $76.1 million, $34.2 million and $34.7 million, respectively. Impairment of fixed assets recorded for the years ended December 31, 2019, 2018 and 2017 was $0.5 million, $3.1 million and $30.9 million, respectively.
11. Inventories, Net
Inventories, net consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Raw materials
|
$
|
115,587
|
|
|
$
|
120,383
|
|
Work in process
|
37,019
|
|
|
27,834
|
|
Finished goods
|
475,933
|
|
|
245,571
|
|
|
628,539
|
|
|
393,788
|
|
Less: allowance for excess, slow-moving and obsolete inventory
|
(56,981
|
)
|
|
(34,133
|
)
|
Inventories, net
|
$
|
571,558
|
|
|
$
|
359,655
|
|
12. Leases
The Company leases certain office spaces, warehouses, facilities, vehicles, and equipment. Leases with an initial term of
twelve months or less are not recorded on the balance sheet. Most leases include renewal options, which can extend the lease term into the future. The Company determines the lease term by assuming options that are reasonably certain of being renewed will be exercised. Certain of the Company’s leases include rental payments adjusted for inflation. The right-of-use lease asset and lease liability are recorded on the Consolidated Balance Sheet, with the current lease liability being included in Accrued liabilities. Operating lease expense was $39.6 million for the year ended December 31, 2019, and approximated cash paid for leases during the year.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
December 31, 2019
|
|
(In thousands)
|
Future lease payments by year:
|
|
2020
|
$
|
43,077
|
|
2021
|
35,008
|
|
2022
|
26,456
|
|
2023
|
21,158
|
|
2024
|
15,935
|
|
Thereafter
|
63,911
|
|
Total
|
205,545
|
|
Less: present value discount
|
(29,125
|
)
|
Present value of lease liabilities
|
$
|
176,420
|
|
|
|
Weighted-average remaining lease term (in years):
|
|
Operating leases
|
8.2
|
|
Weighted-average discount rate:
|
|
Operating leases
|
3.7
|
%
|
13. Debt
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Term loans
|
$
|
822,945
|
|
|
$
|
485,959
|
|
Euro senior notes
|
388,925
|
|
|
395,420
|
|
TEU amortizing notes
|
54,044
|
|
|
—
|
|
2024 and 2026 notes
|
989,236
|
|
|
—
|
|
Revolving credit facilities and other
|
56,676
|
|
|
316,049
|
|
Total debt
|
2,311,826
|
|
|
1,197,428
|
|
Less: current portion
|
(27,642
|
)
|
|
(5,020
|
)
|
Long-term debt
|
$
|
2,284,184
|
|
|
$
|
1,192,408
|
|
Term Loan Facilities and Revolving Credit Facility
On December 17, 2018, the Company entered into a credit agreement (the “Credit Facility”) by and among the Company, as the borrower, certain U.S. subsidiaries of the Company identified therein, as guarantors, each of the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Credit Suisse Loan Funding LLC, as syndication agent, and the co-documentation agents named therein. The Credit facility was subsequently amended on December 6, 2019, as discussed further below. Prior to the amendment, the Credit Facility initially consisted of a revolving credit facility totaling $1.3 billion in commitments (the “Revolver”) and a Term A-1 loan in an aggregate amount of $1.2 billion, each of which matured in five years, and a Term A-2 loan in an aggregate amount of $500 million, which matured in two years (together, the “Term Loan Facilities”). The Revolver contained a $50 million swing line loan sub-facility.
The initial credit extensions under the Credit Facility were only made available on the date of consummation of the DJO acquisition, which occurred on February 22, 2019 (see Note 5, “Acquisitions” for details). At closing, the proceeds of the loans under the Credit Facility were used to repay in full the preexisting credit agreement as well as to finance a portion of the purchase price for the DJO acquisition and other related fees.
The Credit Facility requires, under certain circumstances, any funds received as net proceeds from the sale of certain of the Company’s assets or subsidiaries be used to repay outstanding balances on the Term Loan Facilities, as well as outstanding balances under the Revolver. On September 30, 2019, upon the completion of the sale of its Air and Gas Handling business (see Note 4,
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
“Discontinued Operations” for details), the Company was required to use $1.65 billion of the net sale proceeds to repay a portion of the Term loans and Revolver, and the Term A-2 loan was repaid in full. Accordingly, a corresponding amount of interest associated with the Term Loan Facilities and Revolver has been included in Loss from discontinued operations, net of taxes on the Consolidated Statements of Operations.
On December 6, 2019, the Company entered into an amendment to the Credit Facility decreasing the total commitments under the Revolver to $975 million from $1.3 billion and extending the maturity date of each of the Revolver and Term A-1 Loan to December 6, 2024. The amendment also adjusted the timeline for leverage ratio step downs and removed the “springing” collateral provision in the Credit Facility.
In conjunction with the payoff of the preexisting credit facility, the pay down of the Credit Facility from the sale of the Air and Gas Handling business, and the amendment to the Credit Facility, the Company recorded charges of $3.9 million to Interest expense, net in the Consolidated Statements of Operations for the year ended December 31, 2019 to write-off certain original issue discount and deferred financing fees. Approximately $3.1 million of the charge, which was associated with the sale of the Air and Gas Handling business, was recorded in Loss from discontinued operations, net of taxes. In association with the Credit Facility, the Company has an aggregate $8.2 million in deferred financing fees recorded as of December 31, 2019, which is being accreted to Interest expense, net primarily using the effective interest method over the life of the facility.
The Term Loan Facilities and the Revolver bear interest, at the Company’s election, at either the base rate (as defined in the Credit Facility) or the Eurocurrency rate (as defined in the Credit Facility), in each case, plus the applicable interest rate margin. The Term Loan Facilities and the Revolver bear interest either at the Eurocurrency rate or the base rate plus the applicable interest rate margin, whichever results in the lower applicable interest rate margin (subject to certain exceptions), based upon either the total leverage ratio or corporate family rating of the Company as determined by Standard & Poor’s and Moody’s (ranging from 1.25% to 2.00%, in the case of the Eurocurrency margin, and 0.25% to 1.00%, in the case of the base rate margin). Each swing line loan denominated in dollars will bear interest at the base rate plus the applicable interest rate margin, and each swing line loan denominated in any other currency available under the Credit Facility will bear interest at the Eurocurrency rate plus the applicable interest rate margin.
Certain of the Company’s U.S. subsidiaries have agreed to guarantee Colfax’s 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 EBITDA (as defined in the Credit Facility) divided by Consolidated Total Debt (as defined in the Credit Facility), of 4.75:1.00 as of December 31, 2019 and March 31, 2020, 4.25:1.00 as of June 30, 2020, 4.00:1.00 as of each fiscal quarter ending during the period from September 30, 2020 through September 30, 2021, and 3.50:1.00 as of December 31, 2021 and for each fiscal quarter ending thereafter, and (ii) a minimum interest coverage ratio of 3.00:1:00. The Credit Facility contains various events of default (including failure to comply with the covenants under the Credit Facility and related 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 Facilities and the Revolver. As of December 31, 2019, the Company is in compliance with the covenants under the Credit Facility.
As of December 31, 2019, the weighted-average interest rate of borrowings under the Credit Facility was 3.35%, excluding accretion of original issue discount and deferred financing fees, and there was $925 million available on the Revolver.
Euro Senior Notes
On April 19, 2017, the Company issued 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 proceeds from the Euro Notes offering were used to repay borrowings under our previous credit facilities totaling €283.5 million, as well as for general corporate purposes. In conjunction with the issuance of the Euro notes, the Company recorded $6.0 million of deferred financing fees. 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
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On January 11, 2019, the Company issued $460 million in tangible equity units. The Company offered 4 million of its 5.75% tangible equity units at the stated amount of $100 per unit and an option to purchase up to an additional 600,000 tangible equity units at the stated amount of $100 per unit, which was exercised in full at settlement. Total cash of $447.7 million was received upon closing, comprised of $377.8 million TEU prepaid stock purchase contracts and $69.9 million of TEU amortizing notes due January 2022. The proceeds were used to finance a portion of the purchase price for the DJO acquisition and for general corporate purposes. For more information, refer to Note 14, “Equity.”
2024 Notes and 2026 Notes
On February 5, 2019, two tranches of senior notes with aggregate principal amounts of $600 million (the “2024 Notes”) and $400 million (the “2026 Notes”) were issued by CFX Escrow Corporation, an unaffiliated special purpose finance entity established to issue the notes and incorporated in the State of Delaware, to finance a portion of the purchase price for the DJO acquisition. The 2024 Notes are due on February 15, 2024 and have an interest rate of 6.0%. The 2026 Notes are due on February 15, 2026 and have an interest rate of 6.375%. Upon closing of the DJO acquisition, the Company assumed all of CFX Escrow Corporation’s obligations under the 2024 Notes and 2026 Notes. Each tranche of notes is guaranteed by certain of the Company’s domestic subsidiaries.
Other Indebtedness
In addition to the debt agreements discussed above, the Company is party to various bilateral credit facilities with a borrowing capacity of $271.7 million. As of December 31, 2019, outstanding borrowings under these facilities total $1.0 million, with a weighted average borrowing rate of 3.39%.
The Company is also party to letter of credit facilities with an aggregate capacity of $416.2 million. Total letters of credit of $153.4 million were outstanding as of December 31, 2019.
In total, the Company had deferred financing fees of $23.7 million included in its Consolidated Balance Sheet as of December 31, 2019, which will be charged to Interest expense, net, primarily using the effective interest method, over the life of the applicable debt agreements.
Total Debt
The contractual maturities of the Company’s debt as of December 31, 2019 are as follows:
|
|
|
|
|
|
(In thousands)
|
2020
|
$
|
27,642
|
|
2021
|
1,476
|
|
2022
|
—
|
|
2023
|
—
|
|
2024
|
1,507,510
|
|
Thereafter
|
792,867
|
|
Total contractual maturities
|
2,329,495
|
|
Debt discount
|
(17,669
|
)
|
Total debt
|
$
|
2,311,826
|
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
14. Equity
Share Repurchase Program
On February 12, 2018, the Company’s Board of Directors authorized the repurchase of up to $100 million of the Company’s Common stock from time-to-time on the open market or in privately negotiated transactions. The Board of Directors increased the repurchase authorization by an additional $100 million on June 6, 2018. On July 19, 2018, the Board of Directors increased the repurchase authorization by another $100 million. The timing, amount and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors.
During the year ended December 31, 2018, the Company repurchased 6,449,425 shares of our Common stock in open market transactions for $200 million. There were no repurchases made during the year ended December 31, 2019. As of December 31, 2019, the remaining stock repurchase authorization by the Company’s Board of Directors was $100 million. There is no term associated with the remaining repurchase authorization.
Accumulated Other Comprehensive Loss
The following table presents the changes in the balances of each component of Accumulated other comprehensive loss including reclassifications out of Accumulated other comprehensive loss for the years ended December 31, 2019, 2018 and 2017. All amounts are net of tax and noncontrolling interest, if any.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss Components
|
|
Net Unrecognized Pension And Other Post-Retirement Benefit Cost
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Gain (Loss) On Hedging Activities
|
|
Changes in Fair Value of Available-for-Sale Securities
|
|
Total
|
|
(In thousands)
|
Balance at January 1, 2017
|
$
|
(181,189
|
)
|
|
$
|
(860,789
|
)
|
|
$
|
53,633
|
|
|
$
|
—
|
|
|
$
|
(988,345
|
)
|
Other comprehensive income (loss) before reclassifications:
|
|
|
|
|
|
|
|
|
|
Net actuarial gain
|
4,185
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,185
|
|
Foreign currency translation adjustment
|
(5,689
|
)
|
|
288,354
|
|
|
18
|
|
|
—
|
|
|
282,683
|
|
Unrealized gain on available-for-sale securities
|
—
|
|
|
—
|
|
|
—
|
|
|
5,152
|
|
|
5,152
|
|
Loss on long-term intra-entity foreign currency transactions
|
—
|
|
|
(29,372
|
)
|
|
—
|
|
|
—
|
|
|
(29,372
|
)
|
Loss on net investment hedges
|
—
|
|
|
—
|
|
|
(32,388
|
)
|
|
—
|
|
|
(32,388
|
)
|
Unrealized gain on cash flow hedges
|
—
|
|
|
—
|
|
|
8,875
|
|
|
—
|
|
|
8,875
|
|
Other comprehensive (loss) income before reclassifications
|
(1,504
|
)
|
|
258,982
|
|
|
(23,495
|
)
|
|
5,152
|
|
|
239,135
|
|
Amounts reclassified from Accumulated other comprehensive loss(1)
|
6,981
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,981
|
|
Divestiture-related recognition of pension and other post-retirement cost and foreign currency translation
|
91,374
|
|
|
76,483
|
|
|
—
|
|
|
—
|
|
|
167,857
|
|
Net current period Other comprehensive income (loss)
|
96,851
|
|
|
335,465
|
|
|
(23,495
|
)
|
|
5,152
|
|
|
413,973
|
|
Balance at December 31, 2017
|
$
|
(84,338
|
)
|
|
$
|
(525,324
|
)
|
|
$
|
30,138
|
|
|
$
|
5,152
|
|
|
$
|
(574,372
|
)
|
Other comprehensive income (loss) before reclassifications:
|
|
|
|
|
|
|
|
|
|
Net actuarial gain
|
5,609
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,609
|
|
Foreign currency translation adjustment
|
1,145
|
|
|
(222,158
|
)
|
|
(424
|
)
|
|
—
|
|
|
(221,437
|
)
|
Loss on long-term intra-entity foreign currency transactions
|
—
|
|
|
(5,507
|
)
|
|
—
|
|
|
—
|
|
|
(5,507
|
)
|
Gain on net investment hedges
|
—
|
|
|
—
|
|
|
16,745
|
|
|
—
|
|
|
16,745
|
|
Unrealized loss on cash flow hedges
|
—
|
|
|
—
|
|
|
(2,153
|
)
|
|
—
|
|
|
(2,153
|
)
|
Other comprehensive (loss) income before reclassifications
|
6,754
|
|
|
(227,665
|
)
|
|
14,168
|
|
|
—
|
|
|
(206,743
|
)
|
Amounts reclassified from Accumulated other comprehensive loss(1)
|
6,090
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,090
|
|
Net current period Other comprehensive income (loss)
|
12,844
|
|
|
(227,665
|
)
|
|
14,168
|
|
|
—
|
|
|
(200,653
|
)
|
Cumulative effect of accounting change
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,152
|
)
|
|
(5,152
|
)
|
Balance at December 31, 2018
|
$
|
(71,494
|
)
|
|
$
|
(752,989
|
)
|
|
$
|
44,306
|
|
|
$
|
—
|
|
|
$
|
(780,177
|
)
|
Other comprehensive income (loss) before reclassifications:
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
(27,931
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,931
|
)
|
Foreign currency translation adjustment
|
(404
|
)
|
|
(78,468
|
)
|
|
(65
|
)
|
|
—
|
|
|
(78,937
|
)
|
Divestiture-related AOCI write-off
|
—
|
|
|
400,143
|
|
|
—
|
|
|
—
|
|
|
400,143
|
|
Gain on long-term intra-entity foreign currency transactions
|
—
|
|
|
29,385
|
|
|
—
|
|
|
—
|
|
|
29,385
|
|
Gain on net investment hedges
|
—
|
|
|
—
|
|
|
6,215
|
|
|
—
|
|
|
6,215
|
|
Unrealized loss on cash flow hedges
|
—
|
|
|
—
|
|
|
156
|
|
|
—
|
|
|
156
|
|
Other comprehensive (loss) income before reclassifications
|
(28,335
|
)
|
|
351,060
|
|
|
6,306
|
|
|
—
|
|
|
329,031
|
|
Amounts reclassified from Accumulated other comprehensive loss(1)
|
2,629
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,629
|
|
Noncontrolling interest share repurchase
|
—
|
|
|
(19,960
|
)
|
|
—
|
|
|
—
|
|
|
(19,960
|
)
|
Net current period Other comprehensive income (loss)
|
(25,706
|
)
|
|
331,100
|
|
|
6,306
|
|
|
—
|
|
|
311,700
|
|
Cumulative effect of accounting change
|
(9,300
|
)
|
|
—
|
|
|
(6,068
|
)
|
|
—
|
|
|
(15,368
|
)
|
Balance at December 31, 2019
|
$
|
(106,500
|
)
|
|
$
|
(421,889
|
)
|
|
$
|
44,544
|
|
|
$
|
—
|
|
|
$
|
(483,845
|
)
|
(1) Included in the computation of net periodic benefit cost. See Note 16, “Defined Benefit Plans” for additional details.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the year ended December 31, 2019, Noncontrolling interest decreased by $107.6 million as a result of Other comprehensive income, primarily due to the Howden sale and foreign currency translation adjustments. During the years ended December 31, 2018 and 2017, Noncontrolling interest decreased by $22.8 million and increased by $16.0 million, respectively, as a result of Other comprehensive income, primarily due to foreign currency translation adjustment.
Share-Based Payments
On May 13, 2016, the Company adopted the Colfax Corporation 2016 Omnibus Incentive Plan (the “2016 Plan”) which replaced the Colfax Corporation 2008 Omnibus Incentive Plan dated April 21, 2008, as amended and restated on April 2, 2012. The 2016 Plan provides the Compensation Committee of the Company’s Board of Directors discretion in creating employee equity incentives. Awards under the 2016 Plan may be made in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance shares, performance units, and other stock-based awards.
The Company measures and recognizes compensation expense related to share-based payments based on the fair value of the instruments issued. Stock-based compensation expense is generally recognized as a component of Selling, general and administrative expense in the Consolidated Statements of Operations, as payroll costs of the employees receiving the awards are recorded in the same line item.
The Company’s Consolidated Statements of Operations reflect the following amounts related to stock-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Stock-based compensation expense
|
$
|
21,960
|
|
|
$
|
25,103
|
|
|
$
|
21,548
|
|
Deferred tax benefit
|
1,280
|
|
|
3,418
|
|
|
7,079
|
|
As of December 31, 2019, the Company had $27.6 million of unrecognized compensation expense related to stock-based awards that will be recognized over a weighted-average period of 0.9 years. The intrinsic value of awards exercised or issued upon vesting was $11.2 million, $10.2 million and $12.3 million during the years ended December 31, 2019, 2018 and 2017, respectively.
Stock Options
Under the 2016 Plan, the Company may grant options to purchase Common stock, with a maximum term of 10 years at a purchase price equal to the market value of the Company’s Common stock on the date of grant.
Stock-based compensation expense for stock option awards is based upon the grant-date fair value using the Black-Scholes option pricing model. The Company recognizes compensation expense for stock option awards on a straight-line basis over the requisite service period of the entire award. The following table shows the weighted-average assumptions used to calculate the fair value of stock option awards using the Black-Scholes option pricing model, as well as the weighted-average fair value of options granted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Expected period that options will be outstanding (in years)
|
4.56
|
|
|
4.54
|
|
|
4.78
|
|
Interest rate (based on U.S. Treasury yields at the time of grant)
|
2.46
|
%
|
|
2.65
|
%
|
|
1.92
|
%
|
Volatility
|
34.51
|
%
|
|
31.89
|
%
|
|
32.15
|
%
|
Dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
Weighted-average fair value of options granted
|
$
|
8.80
|
|
|
$
|
10.37
|
|
|
$
|
12.16
|
|
During the years ended December 31, 2019, 2018 and 2017, expected volatility was estimated based on the historical volatility of the Company’s stock price. The Company considers historical data to estimate employee termination within the valuation model. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. Since the Company has limited option exercise history, it has generally elected to estimate the expected life of an award based upon the Securities and Exchange Commission-approved “simplified method” noted under the provisions of Staff Accounting Bulletin No. 107 with the continued use of this method extended under the provisions of Staff Accounting Bulletin No. 110.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Stock option activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Options
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
(In years)
|
|
Aggregate
Intrinsic
Value(1) (In thousands)
|
Outstanding at January 1, 2019
|
4,891,767
|
|
|
$
|
37.49
|
|
|
|
|
|
|
Granted
|
1,435,669
|
|
|
26.86
|
|
|
|
|
|
|
Exercised
|
(442,510
|
)
|
|
26.84
|
|
|
|
|
|
|
Forfeited and expired
|
(1,209,645
|
)
|
|
38.67
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
4,675,281
|
|
|
34.93
|
|
|
3.84
|
|
$
|
25,109
|
|
Vested or expected to vest at December 31, 2019
|
4,605,591
|
|
|
35.04
|
|
|
3.84
|
|
$
|
24,496
|
|
Exercisable at December 31, 2019
|
2,382,174
|
|
|
39.67
|
|
|
2.80
|
|
$
|
8,590
|
|
|
|
(1)
|
The aggregate intrinsic value is based upon the difference between the Company’s closing stock price at the date of the Consolidated Balance Sheet and the exercise price of the stock option for in-the-money stock options. The intrinsic value of outstanding stock options fluctuates based upon the trading value of the Company’s Common stock.
|
Restricted Stock Units
Under the 2016 Plan, the Compensation Committee of the Board of Directors may award performance-based restricted stock units (“PRSUs”), the vesting of which is contingent upon meeting service conditions and various performance goals. PRSUs were awarded in 2018 and 2017 based upon two discrete measures: an earnings performance metric and relative total shareholder return (TSR). The earnings performance metric, which accounts for 50% of the PRSU award upon issuance, is measured upon the completion of a three-year performance period. The vesting of the stock units is determined based on whether the Company achieves the applicable performance criteria established by the Compensation Committee of the Board of Directors. The remaining 50% of the PRSU award is tied exclusively to relative TSR performance, which will be measured against the three-year TSR of a custom index of companies. TSR relative to peers is considered a market condition under applicable authoritative guidance, while the earnings performance metric is considered a performance condition. If the market condition or performance goals are achieved, the units may be subject to additional time vesting requirements as determined at the time of grant.
Under the 2016 Plan, the Compensation Committee of the Board of Directors may also award non-performance-based restricted stock units (“RSUs”) to select executives, employees and outside directors, the vesting of which is contingent upon meeting service conditions. The Compensation Committee determines the terms and conditions of each award, including the restriction period and other criteria applicable to the awards. Directors may also elect to defer their annual board fees into RSUs with immediate vesting. Delivery of the shares underlying these director restricted stock units is deferred until termination of the director’s service on the Company’s Board of Directors.
The fair value of RSUs is equal to the market value of a share of Common stock on the date of grant. PRSUs with TSR conditions are valued using a binomial-lattice model (i.e., Monte Carlo simulation model), while PRSUs with an earnings performance metric are valued at the market value of a share of Common stock on the date of grant taking into consideration the probability of achieving the specified performance goal. The Company estimates the ultimate payout of PRSUs with an earnings performance metric and adjusts the cumulative expense based on its estimate and the percent of the requisite service period that has elapsed. PRSUs with TSR conditions are recognized on a straight-line basis over the performance periods regardless of the performance condition achievement because the probability is factored into the valuation of the award. The related compensation expense for each of the awards is recognized, on a straight-line basis, over the vesting period.
During the year ended December 31, 2019, the Company granted certain employees PRSUs, the vesting of which is fully based on the Company’s total shareholder return (“TSR”) ranking among a peer group over a three-year performance period. The awards also have a service requirement that equals to the respective performance periods. For these awards subject to market conditions, a binomial-lattice model (i.e., Monte Carlo simulation model) was used to calculate the fair value at grant date. The related compensation expense is recognized, on a straight-line basis, over the vesting period.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The activity in the Company’s PRSUs and RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSUs
|
|
RSUs
|
|
Number
of Units
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
Number
of Units
|
|
Weighted-
Average
Grant Date
Fair Value
|
Nonvested at January 1, 2019
|
647,163
|
|
|
$
|
34.24
|
|
|
495,470
|
|
|
$
|
33.96
|
|
Granted
|
363,584
|
|
|
24.77
|
|
|
566,751
|
|
|
27.58
|
|
Vested
|
(133,975
|
)
|
|
29.03
|
|
|
(234,140
|
)
|
|
33.88
|
|
Forfeited and expired
|
(135,397
|
)
|
|
32.41
|
|
|
(232,705
|
)
|
|
30.54
|
|
Nonvested at December 31, 2019
|
741,375
|
|
|
30.87
|
|
|
595,376
|
|
|
29.25
|
|
The fair value of shares vested during the years ended December 31, 2019, 2018 and 2017 was $10.9 million, $10.0 million and $7.3 million, respectively.
Tangible equity unit (“TEU”) offering
On January 11, 2019, the Company issued $460 million in tangible equity units. The Company offered 4 million of its 5.75% tangible equity units at the stated amount of $100 per unit and an option to purchase up to an additional 600,000 tangible equity units at the stated amount of $100 per unit, which was exercised in full at settlement. Total cash of $447.7 million was received upon closing.
The proceeds from the issuance of the TEUs were allocated initially to equity and debt based on the relative fair value of the respective components of each TEU as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TEU prepaid stock purchase contracts
|
|
TEU amortizing notes
|
|
Total
|
|
(In millions, except per unit amounts)
|
Fair value per unit
|
$
|
84.39
|
|
|
$
|
15.61
|
|
|
$
|
100.00
|
|
|
|
|
|
|
|
Gross proceeds
|
$
|
388.2
|
|
|
$
|
71.8
|
|
|
$
|
460.0
|
|
Less: Issuance costs
|
10.4
|
|
|
1.9
|
|
|
12.3
|
|
Net Proceeds
|
$
|
377.8
|
|
|
$
|
69.9
|
|
|
$
|
447.7
|
|
The $377.8 million fair value of the prepaid stock purchase contracts was recorded in Additional paid-in capital in the Consolidated Balance Sheets. The fair value of the $69.9 million of TEU amortizing notes due January 2022 has both a short-term and a long-term component. Upon the issuance of the TEUs, $47.3 million was initially recorded in Long-term debt, less current portion, and $22.6 million was initially recorded in Current portion of long-term debt in the Consolidated Balance Sheets. The Company deferred certain debt issuance costs associated with the debt component of the TEUs. These amounts offset the debt liability balance in the Consolidated Balance Sheets and are being amortized over its term. As of December 31, 2019, the TEU amortizing notes were recorded with $31.5 million in long-term debt and $23.4 million in Current portion of long-term debt in the Consolidated Balance Sheets.
TEU prepaid stock purchase contracts
Unless previously settled at the holder’s option, for each purchase contract the Company will deliver to holders on January 15, 2022 (subject to postponement in certain limited circumstances, the “mandatory settlement date”) a number of shares of common stock. The number of shares of common stock issuable upon settlement of each purchase contract (the “settlement rate”) will be determined using the arithmetic average of the volume average weighted price for the 20 consecutive trading days beginning on, and including, the 21st scheduled trading day immediately preceding January 15, 2022 (“the Applicable Market Value”) with reference to the following settlement rates:
|
|
•
|
if the Applicable Market Value of the common stock is greater than the threshold appreciation price of $25.00, then the holder will receive 4.0000 shares of common stock for each purchase contract (the “minimum settlement rate”);
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
•
|
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, then 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 the holder will receive 4.8054 shares of common stock for each purchase contract (the “maximum settlement rate”).
|
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 a final installment payment date of January 15, 2022. On each January 15, April 15, July 15 and October 15, commencing on April 15, 2019, the Company pays equal quarterly cash installments of $1.4375 per TEU amortizing note (except for the April 15, 2019 installment payment, which was $1.5014 per TEU amortizing note), which will constitute a payment of interest and a partial repayment of principal, and which cash payment in the aggregate per year will be equivalent to 5.75% per year with repect to the $100 stated amount per unit. The Company has paid $20.1 million representing a partial payment of principal and interest on the TEU amortizing notes in 2019. 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.
Earnings per share
Unless the 4.6 million stock purchase contracts are redeemed by the Company or settled earlier at the unit holder’s option, they are mandatorily convertible into shares of Colfax common stock at not less than 4.0 shares per purchase contract or more than 4.8054 shares per purchase contract on January 15, 2022. This corresponds to not less than 18.4 million shares and not more than 22.1 million shares at the maximum. The 18.4 million minimum shares are included in the calculation of weighted-average shares of Common stock outstanding - basic. The difference between the minimum and maximum shares represents potentially dilutive securities. The Company includes them in its calculation of weighted-average shares of Common stock outstanding - diluted on a pro rata basis to the extent the average Applicable Market Value is higher than the reference price but is less than the conversion price.
Repurchase of noncontrolling interest shares
During 2019, the Company repurchased all of the noncontrolling interest shares of its South Africa consolidated subsidiary from existing shareholders under a general offer. As a part of the Air and Gas Handling business, this subsidiary was subsequently sold on September 30, 2019, and its results of operations are included in discontinued operations for all periods presented.
15. Accrued Liabilities
Accrued liabilities in the Consolidated Balance Sheets consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Accrued compensation and related benefits
|
$
|
100,290
|
|
|
$
|
72,216
|
|
Accrued taxes
|
55,258
|
|
|
55,554
|
|
Accrued asbestos-related liability
|
64,394
|
|
|
56,045
|
|
Warranty liability - current portion
|
15,513
|
|
|
12,312
|
|
Accrued restructuring liability - current portion
|
6,961
|
|
|
5,475
|
|
Accrued third-party commissions
|
30,768
|
|
|
15,765
|
|
Customer advances and billings in excess of costs incurred
|
16,009
|
|
|
16,827
|
|
Lease liability - current portion
|
40,021
|
|
|
—
|
|
Accrued interest
|
27,333
|
|
|
2,956
|
|
Other
|
113,343
|
|
|
53,694
|
|
Accrued liabilities
|
$
|
469,890
|
|
|
$
|
290,844
|
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 Consolidated Balance Sheets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
Balance at Beginning of Period
|
|
Acquisitions
|
|
Provisions
|
|
Payments
|
|
Foreign Currency Translation
|
|
Balance at End of Period(3)
|
|
(In thousands)
|
Restructuring and other related charges:
|
Fabrication Technology:
|
|
|
|
|
|
|
|
|
|
|
|
Termination benefits(1)
|
$
|
5,494
|
|
|
$
|
—
|
|
|
$
|
7,131
|
|
|
$
|
(10,588
|
)
|
|
$
|
(399
|
)
|
|
$
|
1,638
|
|
Facility closure costs(2)
|
662
|
|
|
—
|
|
|
11,711
|
|
|
(11,136
|
)
|
|
47
|
|
|
1,284
|
|
|
6,156
|
|
|
—
|
|
|
18,842
|
|
|
(21,724
|
)
|
|
(352
|
)
|
|
2,922
|
|
Non-cash charges(2)
|
|
|
|
|
4,198
|
|
|
|
|
|
|
|
|
|
|
|
|
23,040
|
|
|
|
|
|
|
|
Medical Technology:
|
|
|
|
|
|
|
|
|
|
|
|
Termination benefits(1)
|
—
|
|
|
6,096
|
|
|
5,449
|
|
|
(7,626
|
)
|
|
—
|
|
|
3,919
|
|
Facility closure costs(2)
|
—
|
|
|
298
|
|
|
45,258
|
|
|
(45,299
|
)
|
|
—
|
|
|
257
|
|
|
—
|
|
|
6,394
|
|
|
50,707
|
|
|
(52,925
|
)
|
|
—
|
|
|
4,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
6,156
|
|
|
$
|
6,394
|
|
|
69,549
|
|
|
$
|
(74,649
|
)
|
|
$
|
(352
|
)
|
|
$
|
7,098
|
|
Non-cash charges(2)
|
|
|
|
|
4,198
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
73,747
|
|
|
|
|
|
|
|
(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. During the year ended December 31, 2019, the Company recorded a $4.2 million non-cash impairment charge for facilities in our Fabrication Technology segment as part of Corporate approved restructuring activities. Restructuring charges in the Medical Technology segment during the year ended December 31, 2019 includes costs related to product and distribution channel transformations, facilities optimization, and integration charges. Restructuring charges in the Medical Technology segment also includes $8.5 million classified as Cost of sales on the Company’s Consolidated Statements of Operations for the year ended December 31, 2019.
(3) As of December 31, 2019, $7.0 million and $0.1 million of the Company’s restructuring liability was included in Accrued liabilities and Other liabilities, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
|
Balance at Beginning of Period
|
|
Provisions
|
|
Payments
|
|
Foreign Currency Translation
|
|
Balance at End of Period(3)
|
|
(In thousands)
|
Restructuring and other related charges:
|
Fabrication Technology:
|
|
|
|
|
|
|
|
|
|
Termination benefits(1)
|
$
|
660
|
|
|
$
|
13,333
|
|
|
$
|
(8,513
|
)
|
|
$
|
14
|
|
|
$
|
5,494
|
|
Facility closure costs(2)
|
42
|
|
|
10,217
|
|
|
(9,596
|
)
|
|
(1
|
)
|
|
662
|
|
|
702
|
|
|
23,550
|
|
|
(18,109
|
)
|
|
13
|
|
|
6,156
|
|
Non-cash charges
|
|
|
5,509
|
|
|
|
|
|
|
|
|
|
|
29,059
|
|
|
|
|
|
|
|
Corporate and Other:
|
|
|
|
|
|
|
|
|
|
Facility closure costs(2)
|
84
|
|
|
18
|
|
|
(102
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
786
|
|
|
23,568
|
|
|
$
|
(18,211
|
)
|
|
$
|
13
|
|
|
$
|
6,156
|
|
Non-cash charges(2)
|
|
|
5,509
|
|
|
|
|
|
|
|
|
|
|
$
|
29,077
|
|
|
|
|
|
|
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(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. During the year ended December 31, 2018, the Company recorded a $5.5 million non-cash impairment charge for facilities in our Fabrication Technology segment as part of Corporate approved restructuring activities.
(3) As of December 31, 2018, $5.5 million and $0.7 million of the Company’s restructuring liability was included in Accrued liabilities and Other liabilities, respectively.
16. Defined Benefit Plans
The Company sponsors various defined benefit plans, defined contribution plans and other post-retirement benefits plans, including health and life insurance, for certain eligible employees or former employees. The Company uses December 31st as the measurement date for all of its employee benefit plans.
In connection with the sale of the Fluid Handling business, the buyer assumed the Fluid Handling liability for all foreign defined benefit plans specific to the Fluid Handling business, a portion of the U.S. defined benefit plan, and certain other postretirement obligations. Net benefit cost for the Fluid Handling business is included in Net income (loss) from discontinued operations, net of taxes, within the Consolidated Statements of Operations. See Note 4, “Discontinued Operations” for further information.
In connection with the sale of the Air and Gas Handling business, the purchaser assumed the Air and Gas Handling liability for all defined benefit plans specific to the Air and Gas Handling business. Net benefit cost for the Air and Gas Handling business is included in Net income (loss) from discontinued operations, net of taxes, within the Consolidated Statements of Operations. See Note 4, “Discontinued Operations” for further information.
During the year ended December 31, 2019, the Company settled two non-U.S. pension plans, one in our Fabrication
Technology and one in our Air and Gas Handling segments through third-party buyout arrangements. As a result of these settlements, the Company has no further funding obligations under these two plans and recognized a loss of $77.4 million, which is partly reflected in Pension settlement loss in the Consolidated Statements of Operations. As the Company divested its Air and Gas Handling segment during the year ended December 31, 2019, the related settlement of $43.8 million loss is included in Net income (loss) from discontinued operations, net of taxes, within the Consolidated Statements of Operations. See Note 4, “Discontinued Operations” for further information.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the total changes in the Company’s pension and accrued post-retirement benefits and plan assets and includes a statement of the plans’ funded status:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Post-Retirement Benefits
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In thousands)
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation, beginning of year
|
$
|
867,345
|
|
|
$
|
957,269
|
|
|
$
|
13,844
|
|
|
$
|
15,289
|
|
Acquisitions
|
2,264
|
|
|
52,544
|
|
|
—
|
|
|
—
|
|
Service cost
|
2,462
|
|
|
2,770
|
|
|
5
|
|
|
19
|
|
Interest cost
|
16,556
|
|
|
21,574
|
|
|
445
|
|
|
452
|
|
Plan amendment
|
464
|
|
|
3,800
|
|
|
15
|
|
|
—
|
|
Actuarial loss (gain) (1)
|
183,084
|
|
|
(74,513
|
)
|
|
(382
|
)
|
|
(727
|
)
|
Foreign exchange effect
|
(912
|
)
|
|
(41,759
|
)
|
|
(4
|
)
|
|
(24
|
)
|
Benefits paid
|
(40,131
|
)
|
|
(54,426
|
)
|
|
(866
|
)
|
|
(1,115
|
)
|
Divestitures
|
(50,468
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlements
|
(619,756
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Other
|
238
|
|
|
86
|
|
|
—
|
|
|
(50
|
)
|
Projected benefit obligation, end of year
|
$
|
361,146
|
|
|
$
|
867,345
|
|
|
$
|
13,057
|
|
|
$
|
13,844
|
|
Accumulated benefit obligation, end of year
|
$
|
356,741
|
|
|
$
|
861,507
|
|
|
$
|
13,057
|
|
|
$
|
13,844
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
$
|
850,024
|
|
|
$
|
904,346
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Acquisitions
|
—
|
|
|
40,231
|
|
|
—
|
|
|
—
|
|
Actual return on plan assets
|
88,869
|
|
|
(32,654
|
)
|
|
—
|
|
|
—
|
|
Employer contribution
|
10,793
|
|
|
35,229
|
|
|
866
|
|
|
1,115
|
|
Foreign exchange effect
|
1,236
|
|
|
(43,145
|
)
|
|
—
|
|
|
—
|
|
Benefits paid
|
(40,131
|
)
|
|
(54,426
|
)
|
|
(866
|
)
|
|
(1,115
|
)
|
Divestitures
|
(39,897
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlements
|
(619,756
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Other
|
153
|
|
|
443
|
|
|
—
|
|
|
—
|
|
Fair value of plan assets, end of year
|
$
|
251,291
|
|
|
$
|
850,024
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Funded status, end of year
|
$
|
(109,855
|
)
|
|
$
|
(17,321
|
)
|
|
$
|
(13,057
|
)
|
|
$
|
(13,844
|
)
|
Amounts recognized on the Consolidated Balance Sheet at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
$
|
—
|
|
|
$
|
111,285
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Current liabilities
|
(3,596
|
)
|
|
(3,890
|
)
|
|
(1,177
|
)
|
|
(1,355
|
)
|
Non-current liabilities
|
(106,259
|
)
|
|
(124,716
|
)
|
|
(11,880
|
)
|
|
(12,489
|
)
|
Total
|
$
|
(109,855
|
)
|
|
$
|
(17,321
|
)
|
|
$
|
(13,057
|
)
|
|
$
|
(13,844
|
)
|
(1) The reported actuarial loss in 2019 is primarily due to the settlements of two pension plans and decrease in discount rates in most markets.
For pension plans with accumulated benefit obligations in excess of plan assets, the accumulated benefit obligation and fair value of plan assets were $345.1 million and $238.9 million, respectively, as of December 31, 2019 and $350.4 million and $224.4 million, respectively, as of December 31, 2018.
For pensions plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and fair value of plan assets were $359.5 million and $249.6 million, respectively, as of December 31, 2019 and $354.5 million and $225.9 million, respectively, as of December 31, 2018.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the changes in the Company’s foreign pension benefit obligation, which is determined based upon an employee’s expected date of separation, and plan assets, included in the table above, and includes a statement of the plans’ funded status:
|
|
|
|
|
|
|
|
|
|
Foreign Pension Benefits
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Change in benefit obligation:
|
|
|
|
|
|
Projected benefit obligation, beginning of year
|
$
|
661,084
|
|
|
$
|
729,393
|
|
Acquisitions
|
2,264
|
|
|
52,544
|
|
Service cost
|
2,340
|
|
|
2,634
|
|
Interest cost
|
9,376
|
|
|
15,183
|
|
Plan amendments
|
464
|
|
|
3,800
|
|
Actuarial loss (gain) (1)
|
164,888
|
|
|
(61,995
|
)
|
Foreign exchange effect
|
(912
|
)
|
|
(41,759
|
)
|
Benefits paid
|
(24,779
|
)
|
|
(38,803
|
)
|
Divestitures
|
(50,468
|
)
|
|
—
|
|
Settlements
|
(619,756
|
)
|
|
—
|
|
Other
|
238
|
|
|
87
|
|
Projected benefit obligation, end of year
|
$
|
144,739
|
|
|
$
|
661,084
|
|
Accumulated benefit obligation, end of year
|
$
|
140,335
|
|
|
$
|
655,246
|
|
Change in plan assets:
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
$
|
691,758
|
|
|
$
|
717,085
|
|
Acquisitions
|
—
|
|
|
40,231
|
|
Actual return on plan assets
|
51,318
|
|
|
(11,093
|
)
|
Employer contribution
|
7,502
|
|
|
27,040
|
|
Foreign exchange effect
|
1,236
|
|
|
(43,145
|
)
|
Benefits paid
|
(24,779
|
)
|
|
(38,803
|
)
|
Divestitures
|
(39,897
|
)
|
|
—
|
|
Settlements
|
(619,756
|
)
|
|
—
|
|
Other
|
153
|
|
|
443
|
|
Fair value of plan assets, end of year
|
$
|
67,535
|
|
|
$
|
691,758
|
|
Funded status, end of year
|
$
|
(77,204
|
)
|
|
$
|
30,674
|
|
(1) The reported actuarial loss in 2019 is primarily due to the settlements of two pension plans and decrease in discount rates in most markets.
Expected contributions to the Company’s pension and other post-employment benefit plans for the year ending December 31, 2020, related to plans as of December 31, 2019, are $12.6 million. The following benefit payments are expected to be paid during each respective fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Post-Retirement Benefits
|
|
All Plans
|
|
Foreign Plans
|
|
|
(In thousands)
|
2020
|
$
|
23,985
|
|
|
$
|
7,879
|
|
|
$
|
1,177
|
|
2021
|
24,027
|
|
|
8,178
|
|
|
1,040
|
|
2022
|
23,594
|
|
|
8,040
|
|
|
967
|
|
2023
|
23,103
|
|
|
7,843
|
|
|
879
|
|
2024
|
22,443
|
|
|
7,577
|
|
|
830
|
|
2025 - 2029
|
107,504
|
|
|
40,010
|
|
|
3,842
|
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s primary investment objective for its pension plan assets is to provide a source of retirement income for the plans’ participants and beneficiaries. The assets are invested with the goal of preserving principal while providing a reasonable real rate of return over the long term. Diversification of assets is achieved through strategic allocations to various asset classes. Actual allocations to each asset class vary due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully implement investment allocation positions, and the timing of benefit payments and contributions. The asset allocation is monitored and rebalanced as required, as frequently as on a quarterly basis in some instances. The following are the actual and target allocation percentages for the Company’s pension plan assets:
|
|
|
|
|
|
|
|
|
|
Actual Asset Allocation
December 31,
|
|
Target
|
|
2019
|
|
2018
|
|
Allocation
|
U.S. Plans:
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
U.S.
|
44
|
%
|
|
40
|
%
|
|
30% - 45%
|
International
|
15
|
%
|
|
16
|
%
|
|
10% - 20%
|
Fixed income
|
39
|
%
|
|
41
|
%
|
|
30% - 50%
|
Other
|
—
|
%
|
|
2
|
%
|
|
0% - 20%
|
Cash and cash equivalents
|
2
|
%
|
|
1
|
%
|
|
0% - 5%
|
Foreign Plans:
|
|
|
|
|
|
|
|
Equity securities
|
27
|
%
|
|
11
|
%
|
|
0% - 40%
|
Fixed income securities
|
11
|
%
|
|
70
|
%
|
|
0% - 15%
|
Cash and cash equivalents
|
—
|
%
|
|
7
|
%
|
|
0% - 25%
|
Other
|
62
|
%
|
|
12
|
%
|
|
55% - 90%
|
A summary of the Company’s pension plan assets for each fair value hierarchy level for the periods presented follows (see Note 17, “Financial Instruments and Fair Value Measurements” for further description of the levels within the fair value hierarchy):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Measured at Net Asset Value(1)
|
|
Level
One
|
|
Level
Two
|
|
Level
Three
|
|
Total
|
|
(In thousands)
|
U.S. Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
2,855
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2,855
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. large cap
|
48,582
|
|
|
|
|
|
—
|
|
|
—
|
|
|
48,582
|
|
U.S. small/mid cap
|
20,093
|
|
|
12,268
|
|
|
—
|
|
|
—
|
|
|
32,361
|
|
International
|
28,573
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,573
|
|
Fixed income mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and corporate
|
70,334
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70,334
|
|
Other(2)
|
—
|
|
|
1,051
|
|
|
—
|
|
|
—
|
|
|
1,051
|
|
Foreign Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
—
|
|
|
215
|
|
|
—
|
|
|
—
|
|
|
215
|
|
Equity securities
|
—
|
|
|
18,462
|
|
|
—
|
|
|
—
|
|
|
18,462
|
|
Non-U.S. government and corporate bonds
|
—
|
|
|
5,299
|
|
|
1,911
|
|
|
—
|
|
|
7,210
|
|
Other(2)
|
—
|
|
|
—
|
|
|
41,648
|
|
|
—
|
|
|
41,648
|
|
|
$
|
167,582
|
|
|
$
|
40,150
|
|
|
$
|
43,559
|
|
|
$
|
—
|
|
|
$
|
251,291
|
|
|
|
(1)
|
Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient (the “NAV”) have not been classified in the fair value hierarchy. These investments, consisting of common/collective trusts, are valued using the NAV provided by the Trustee. The NAV is based on the underlying investments held by the fund, that are traded in an active market, less its liabilities. These investments are able to be redeemed in the near-term.
|
|
|
(2)
|
Represents diversified portfolio funds, reinsurance contracts and money market funds.
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Measured at Net Asset Value(1)
|
|
Level
One
|
|
Level
Two
|
|
Level
Three
|
|
Total
|
|
(In thousands)
|
U.S. Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
1,122
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,122
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. large cap
|
40,764
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,764
|
|
U.S. small/mid cap
|
16,387
|
|
|
7,047
|
|
|
—
|
|
|
—
|
|
|
23,434
|
|
International
|
24,649
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,649
|
|
Fixed income mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and corporate
|
64,414
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64,414
|
|
Other(2)
|
—
|
|
|
3,883
|
|
|
—
|
|
|
—
|
|
|
3,883
|
|
Foreign Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
—
|
|
|
47,801
|
|
|
—
|
|
|
—
|
|
|
47,801
|
|
Equity securities
|
—
|
|
|
79,000
|
|
|
—
|
|
|
—
|
|
|
79,000
|
|
Non-U.S. government and corporate bonds
|
—
|
|
|
485,575
|
|
|
1,590
|
|
|
—
|
|
|
487,165
|
|
Other(2)
|
—
|
|
|
308
|
|
|
77,484
|
|
|
—
|
|
|
77,792
|
|
|
$
|
146,214
|
|
|
$
|
624,736
|
|
|
$
|
79,074
|
|
|
$
|
—
|
|
|
$
|
850,024
|
|
|
|
(1)
|
Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient (the “NAV”) have not been classified in the fair value hierarchy. These investments, consisting primarily of common/collective trusts, are valued using the NAV provided by the Trustee. The NAV is based on the underlying investments held by the fund, that are traded in an active market, less its liabilities. These investments are able to be redeemed in the near-term.
|
|
|
(2)
|
Represents diversified portfolio funds, reinsurance contracts and money market funds.
|
The following table sets forth the components of net periodic benefit cost and Other comprehensive loss of the Company’s defined benefit pension plans and other post-retirement employee benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Post-Retirement Benefits
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Components of Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
2,462
|
|
|
$
|
2,770
|
|
|
$
|
4,951
|
|
|
$
|
5
|
|
|
$
|
19
|
|
|
$
|
11
|
|
Interest cost
|
16,556
|
|
|
21,574
|
|
|
42,177
|
|
|
445
|
|
|
452
|
|
|
951
|
|
Amortization
|
3,385
|
|
|
4,282
|
|
|
10,660
|
|
|
(255
|
)
|
|
(28
|
)
|
|
(839
|
)
|
Settlement loss (gain)
|
77,390
|
|
|
(39
|
)
|
|
46,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Divestitures gain
|
(4,354
|
)
|
|
—
|
|
|
(17,858
|
)
|
|
—
|
|
|
—
|
|
|
(13,744
|
)
|
Other
|
79
|
|
|
(458
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
207
|
|
Expected return on plan assets
|
(19,774
|
)
|
|
(29,306
|
)
|
|
(48,484
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Net periodic benefit cost
|
$
|
75,744
|
|
|
$
|
(1,177
|
)
|
|
$
|
38,379
|
|
|
$
|
195
|
|
|
$
|
443
|
|
|
$
|
(13,414
|
)
|
Change in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year net actuarial (gain) loss
|
$
|
113,995
|
|
|
$
|
(11,816
|
)
|
|
$
|
19,193
|
|
|
$
|
(380
|
)
|
|
$
|
(723
|
)
|
|
$
|
1,307
|
|
Current year prior service cost
|
464
|
|
|
3,800
|
|
|
19,389
|
|
|
15
|
|
|
—
|
|
|
35
|
|
Less amounts included in net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net (gain) loss
|
(3,285
|
)
|
|
(4,330
|
)
|
|
(10,682
|
)
|
|
270
|
|
|
31
|
|
|
971
|
|
Settlement/divestiture/other (gain) loss
|
(83,602
|
)
|
|
39
|
|
|
(163,199
|
)
|
|
—
|
|
|
—
|
|
|
1,787
|
|
Amortization of prior service cost
|
(100
|
)
|
|
48
|
|
|
23
|
|
|
(15
|
)
|
|
(3
|
)
|
|
(132
|
)
|
Total recognized in Other comprehensive loss
|
$
|
27,472
|
|
|
$
|
(12,259
|
)
|
|
$
|
(135,276
|
)
|
|
$
|
(110
|
)
|
|
$
|
(695
|
)
|
|
$
|
3,968
|
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net periodic benefit cost (gain) of $44.4 million, $(1.4) million and $6.7 million for the years ended December 31, 2019, 2018 and 2017, respectively, are included in Income (loss) from discontinued operations, net of taxes. Net periodic benefit cost included in loss from discontinued operations for the year ended December 31, 2019 includes $43.8 million in settlement loss related to the Air and Gas Handling segment. Each component of Net periodic benefit cost from continuing operations, with the exception of Settlement loss, is included in Selling, general and administrative expense.
The following table sets forth the components of net periodic benefit cost and Other comprehensive loss of the foreign defined benefit pension plans, included in the table above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Pension Benefits
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Components of Net Periodic Benefit Cost (Income):
|
|
Service cost
|
$
|
2,340
|
|
|
$
|
2,634
|
|
|
$
|
4,804
|
|
Interest cost
|
9,376
|
|
|
15,183
|
|
|
27,133
|
|
Amortization
|
334
|
|
|
1,039
|
|
|
4,229
|
|
Settlement loss (gain)
|
77,390
|
|
|
(39
|
)
|
|
45,110
|
|
Divestitures gain
|
(4,354
|
)
|
|
—
|
|
|
(56,798
|
)
|
Other
|
79
|
|
|
(458
|
)
|
|
—
|
|
Expected return on plan assets
|
(9,092
|
)
|
|
(18,310
|
)
|
|
(27,714
|
)
|
Net periodic benefit cost (income)
|
$
|
76,073
|
|
|
$
|
49
|
|
|
$
|
(3,236
|
)
|
Change in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Loss:
|
|
|
|
|
|
|
|
|
Current year net actuarial loss (gain)
|
$
|
122,667
|
|
|
$
|
(31,854
|
)
|
|
$
|
42,854
|
|
Current year prior service cost
|
464
|
|
|
3,800
|
|
|
19,389
|
|
Less amounts included in net periodic benefit cost:
|
|
|
|
|
|
|
|
|
Amortization of net loss
|
(234
|
)
|
|
(1,087
|
)
|
|
(4,251
|
)
|
Settlement/divestiture/other (gain) loss
|
(83,602
|
)
|
|
39
|
|
|
(96,331
|
)
|
Amortization of prior service cost
|
(100
|
)
|
|
48
|
|
|
23
|
|
Total recognized in Other comprehensive loss
|
$
|
39,195
|
|
|
$
|
(29,054
|
)
|
|
$
|
(38,316
|
)
|
The components of net unrecognized pension and other post-retirement benefit cost included in Accumulated other comprehensive loss in the Consolidated Balance Sheets that have not been recognized as a component of net periodic benefit cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Post-Retirement
Benefits
|
|
December 31,
|
|
December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In thousands)
|
Net actuarial loss (gain)
|
$
|
100,659
|
|
|
$
|
69,912
|
|
|
$
|
(3,405
|
)
|
|
$
|
(3,295
|
)
|
Prior service cost
|
449
|
|
|
3,671
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
101,108
|
|
|
$
|
73,583
|
|
|
$
|
(3,405
|
)
|
|
$
|
(3,295
|
)
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The components of net unrecognized pension and other post-retirement benefit cost included in Accumulated other comprehensive loss in the Consolidated Balance Sheet that are expected to be recognized as a component of net periodic benefit cost during the year ending December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Post-
Retirement
Benefits
|
|
(In thousands)
|
Net actuarial loss (gain)
|
$
|
4,988
|
|
|
$
|
(201
|
)
|
Prior service cost
|
53
|
|
|
—
|
|
Total
|
$
|
5,041
|
|
|
$
|
(201
|
)
|
The key economic assumptions used in the measurement of the Company’s pension and other post-retirement benefit obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Post-Retirement
Benefits
|
|
December 31,
|
|
December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Weighted-average discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
All plans
|
2.5
|
%
|
|
3.0
|
%
|
|
3.0
|
%
|
|
4.0
|
%
|
Foreign plans
|
1.9
|
%
|
|
2.7
|
%
|
|
—
|
%
|
|
—
|
%
|
Weighted-average rate of increase in compensation levels for active foreign plans
|
0.8
|
%
|
|
1.8
|
%
|
|
—
|
%
|
|
—
|
%
|
The key economic assumptions used in the computation of net periodic benefit cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Post-Retirement Benefits
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
Weighted-average discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All plans
|
3.0
|
%
|
|
2.6
|
%
|
|
2.9
|
%
|
|
4.0
|
%
|
|
3.4
|
%
|
|
3.9
|
%
|
Foreign plans
|
2.7
|
%
|
|
2.4
|
%
|
|
2.6
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Weighted-average expected return on plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All plans
|
3.1
|
%
|
|
3.8
|
%
|
|
4.1
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Foreign plans
|
2.4
|
%
|
|
3.2
|
%
|
|
3.3
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Weighted-average rate of increase in compensation levels for active foreign plans
|
1.8
|
%
|
|
2.1
|
%
|
|
1.6
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
In determining discount rates, the Company utilizes the single discount rate equivalent to discounting the expected future cash flows from each plan using the yields at each duration from a published yield curve as of the measurement date.
For measurement purposes, a weighted-average annual rate of increase in the per capita cost of covered health care benefits of 5.9% was assumed. The rate was assumed to decrease gradually to 4.50% by 2027 and remain at that level thereafter for benefits covered under the plans.
The expected long-term rate of return on plan assets was based on the Company’s investment policy target allocation of the asset portfolio between various asset classes and the expected real returns of each asset class over various periods of time that are consistent with the long-term nature of the underlying obligations of these plans.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A one-percentage point change in assumed health care cost trend rates would have the following pre-tax effects:
|
|
|
|
|
|
|
|
|
|
1% Increase
|
|
1% Decrease
|
|
(In thousands)
|
Effect on total service and interest cost components for the year ended December 31, 2019
|
$
|
23
|
|
|
$
|
(20
|
)
|
Effect on post-retirement benefit obligation at December 31, 2019
|
671
|
|
|
(569
|
)
|
The Company maintains defined contribution plans covering certain union and non-union employees. The Company’s expense for the years ended December 31, 2019, 2018 and 2017 was $6.9 million, $6.3 million and $6.2 million, respectively. Total expense included in Income (loss) income from discontinued operations, net of taxes for the years ended December 31, 2019, 2018 and 2017 was $4.2 million, $5.9 million and $8.4 million.
17. Financial Instruments and Fair Value Measurements
The Company utilizes fair value measurement guidance prescribed by accounting standards to value its financial instruments. The guidance establishes a fair value hierarchy based on the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
Level One: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level Two: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level Three: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The carrying values of financial instruments, including Trade receivables, other receivables and Accounts payable, approximate their fair values due to their short-term maturities. The estimated fair value of the Company’s debt of $2.3 billion and $1.2 billion as of December 31, 2019 and 2018, 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 on a recurring basis for each fair value hierarchy level for the periods presented is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Level
One
|
|
Level
Two
|
|
Level
Three
|
|
Total
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
13,125
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,125
|
|
Foreign currency contracts related to sales - not designated as hedges
|
—
|
|
|
74
|
|
|
—
|
|
|
74
|
|
Foreign currency contracts related to purchases - not designated as hedges
|
—
|
|
|
408
|
|
|
—
|
|
|
408
|
|
Deferred compensation plans
|
—
|
|
|
8,870
|
|
|
—
|
|
|
8,870
|
|
|
$
|
13,125
|
|
|
$
|
9,352
|
|
|
$
|
—
|
|
|
$
|
22,477
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Foreign currency contracts related to sales - not designated as hedges
|
$
|
—
|
|
|
$
|
328
|
|
|
$
|
—
|
|
|
$
|
328
|
|
Foreign currency contracts related to purchases - not designated as hedges
|
—
|
|
|
853
|
|
|
—
|
|
|
853
|
|
Deferred compensation plans
|
—
|
|
|
8,870
|
|
|
—
|
|
|
8,870
|
|
|
$
|
—
|
|
|
$
|
10,051
|
|
|
$
|
—
|
|
|
$
|
10,051
|
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Level
One
|
|
Level
Two
|
|
Level
Three
|
|
Total
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
5,388
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,388
|
|
Foreign currency contracts related to sales - not designated as hedges
|
—
|
|
|
326
|
|
|
—
|
|
|
326
|
|
Foreign currency contracts related to purchases - not designated as hedges
|
—
|
|
|
325
|
|
|
—
|
|
|
325
|
|
Deferred compensation plans
|
—
|
|
|
7,154
|
|
|
—
|
|
|
7,154
|
|
|
$
|
5,388
|
|
|
$
|
7,805
|
|
|
$
|
—
|
|
|
$
|
13,193
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Foreign currency contracts related to sales - not designated as hedges
|
$
|
—
|
|
|
$
|
133
|
|
|
$
|
—
|
|
|
$
|
133
|
|
Foreign currency contracts related to purchases - not designated as hedges
|
—
|
|
|
557
|
|
|
—
|
|
|
557
|
|
Deferred compensation plans
|
—
|
|
|
7,154
|
|
|
—
|
|
|
7,154
|
|
|
$
|
—
|
|
|
$
|
7,844
|
|
|
$
|
—
|
|
|
$
|
7,844
|
|
There were no transfers in or out of Level One, Two or Three during the year ended December 31, 2019 and year ended December 31, 2018.
Cash Equivalents
The Company’s cash equivalents consist of investments in interest-bearing deposit accounts and money market mutual funds which are valued based on quoted market prices. The fair value of these investments approximate cost due to their short-term maturities and the high credit quality of the issuers of the underlying securities.
Derivatives
The Company periodically enters into foreign currency, interest rate swap and commodity derivative contracts. As the Company has manufacturing sites throughout the world and sells its products globally, the Company is exposed to movements in the exchange rates of various currencies. As a result, the Company enters into cross currency swaps and forward contracts to mitigate this exchange rate risk. Additionally, to mitigate a portion of the foreign exchange risk associated with the translation of the net assets of foreign subsidiaries, the Company has senior unsecured notes denominated in Euro which has been designated as a net investment hedge. See Note 13, “Debt” for details. As the Company’s borrowings under the Credit Facility include variable interest rates, the Company periodically enters into interest rate swap or collar agreements to mitigate interest rate risk. Commodity futures contracts are used to manage costs of raw materials used in the Company’s production processes. There were no changes during the periods presented in the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis.
Foreign Currency Contracts
Foreign currency contracts are measured using broker quotations or observable market transactions in either listed or over-the-counter markets. The Company primarily uses foreign currency contracts to mitigate the risk associated with customer forward sale agreements denominated in currencies other than the applicable local currency, and to match costs and expected revenues where production facilities have a different currency than the selling currency.
As of December 31, 2019 and 2018, the Company had foreign currency contracts with the following notional values:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Foreign currency contracts sold - not designated as hedges
|
$
|
28,718
|
|
|
$
|
43,510
|
|
Foreign currency contracts purchased - not designated as hedges
|
107,090
|
|
|
75,102
|
|
Total foreign currency derivatives
|
$
|
135,808
|
|
|
$
|
118,612
|
|
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company recognized the following in its Consolidated Financial Statements related to its derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Contracts Designated as Hedges:
|
|
|
|
Unrealized gain (loss) on net investment hedges(1)
|
$
|
6,215
|
|
|
$
|
16,745
|
|
|
$
|
(32,388
|
)
|
Contracts Not Designated in a Hedge Relationship:
|
|
|
|
|
|
Foreign Currency Contracts - related to customer sales contracts:
|
|
|
|
|
|
Unrealized gain (loss)
|
(395
|
)
|
|
890
|
|
|
(1,725
|
)
|
Realized gain (loss)
|
(1,565
|
)
|
|
(1,083
|
)
|
|
1,712
|
|
Foreign Currency Contracts - related to supplier purchases contracts:
|
|
|
|
|
|
Unrealized gain (loss)
|
(216
|
)
|
|
(820
|
)
|
|
1,472
|
|
Realized gain (loss)
|
523
|
|
|
(407
|
)
|
|
(358
|
)
|
(1) The unrealized gain (loss) on net investment hedges is attributable to the change in valuation of Euro denominated debt.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. Concentrations of credit risk are considered to exist when there are amounts collectible from multiple counterparties with similar characteristics, which could cause their ability to meet contractual obligations to be similarly impacted by economic or other conditions. The Company performs credit evaluations of its customers prior to delivery or commencement of services and normally does not require collateral. Letters of credit are occasionally required when the Company deems necessary. There are no customers which represent more than 10% of the Company’s Accounts receivable, net as of December 31, 2019 and 2018.
18. Commitments and Contingencies
Asbestos and Other Product Liability Contingencies
Certain subsidiaries are each one of many defendants in a large number of lawsuits that claim personal injury as a result of exposure to asbestos from products manufactured with components that are alleged to have contained asbestos. Such components were acquired from third-party suppliers, and were not manufactured by any of the Company’s subsidiaries nor were the subsidiaries producers or direct suppliers of asbestos. The manufactured products that are alleged to have contained asbestos generally were provided to meet the specifications of the subsidiaries’ customers, including the U.S. Navy. The subsidiaries settle asbestos claims for amounts the Company considers reasonable given the facts and circumstances of each claim. The annual average settlement payment per asbestos claimant has fluctuated during the past several years. The Company expects such fluctuations to continue in the future based upon, among other things, the number and type of claims settled in a particular period and the jurisdictions in which such claims arise. To date, the majority of settled claims have been dismissed for no payment.
Pursuant to the Purchase Agreement from the Fluid Handling business divestiture, the Company retained its asbestos-related contingencies and insurance coverages. However, as the Company does not retain an interest in the ongoing operations of the business subject to the contingencies, asbestos-related activity is classified as part of Income (loss) from discontinued operations, net of taxes in its Consolidated Statements of Operations.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Claims activity since December 31 related to asbestos claims is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
2019
|
|
2018
|
|
2017
|
|
(Number of claims)
|
Claims unresolved, beginning of period
|
16,417
|
|
|
17,737
|
|
|
20,567
|
|
Claims filed(1)
|
4,486
|
|
|
4,078
|
|
|
4,543
|
|
Claims resolved(2)
|
(4,604
|
)
|
|
(5,398
|
)
|
|
(7,373
|
)
|
Claims unresolved, end of period
|
16,299
|
|
|
16,417
|
|
|
17,737
|
|
|
(In dollars)
|
Average cost of resolved claims(3)
|
$
|
9,455
|
|
|
$
|
7,497
|
|
|
$
|
6,154
|
|
(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.
(3) Excludes claims settled in Mississippi for which the majority of claims have historically been resolved for no payment and insurance recoveries.
The Company has projected each subsidiary’s future asbestos-related liability costs with regard to pending and future unasserted claims based upon the Nicholson methodology. The Nicholson methodology is a standard approach used by experts and has been accepted by numerous courts. It is the Company’s policy to record a liability for asbestos-related liability costs for the longest period of time that it can reasonably estimate.
The Company believes that it can reasonably estimate the asbestos-related liability for pending and future claims that will be resolved in the next 15 years and has recorded that liability as its best estimate. While it is reasonably possible that the subsidiaries will incur costs after this period, the Company does not believe the reasonably possible loss or a range of reasonably possible losses is estimable at the current time. Accordingly, no accrual has been recorded for any costs which may be paid after the next 15 years. Defense costs associated with asbestos-related liabilities as well as costs incurred related to litigation against the subsidiaries’ insurers are expensed as incurred.
Each subsidiary has separate insurance coverage acquired prior to Company ownership of each independent entity. The Company has evaluated the insurance assets for each subsidiary based upon the applicable policy language and allocation methodologies, and law pertaining to the affected subsidiary’s insurance policies.
One of the subsidiaries was notified in 2010 by the primary and umbrella carrier who had been fully defending and indemnifying the subsidiary for 20 years that the limits of liability of its primary and umbrella layer policies had been exhausted. The subsidiary has sought coverage from certain excess layer insurers whose coverage obligations were disputed in Delaware state court, and were the subject of various rulings, including a September 12, 2016 ruling on certain appealed issues by the Delaware Supreme Court. This litigation confirmed that asbestos-related costs should be allocated among excess insurers using an “all sums” allocation (which allows an insured to collect all sums paid in connection with a claim from any insurer whose policy is triggered, up to the policy’s applicable limits), that the subsidiary has the right to access coverage available under excess insurance policies purchased by a former owner of the business, and that, the subsidiary has a right to immediately access the excess layer policies. Further, the Delaware Supreme Court ruled in the subsidiary’s favor on a “trigger of coverage” issue, holding that every policy in place during or after the date of a claimant’s first significant exposure to asbestos was “triggered” and potentially could be accessed to cover that claimant’s claim. The Court also largely affirmed but reversed in part some of the prior lower court rulings on defense obligations and whether payment of defense costs erode policy limits or are payable in addition to policy limits.
Based upon these rulings, the Company currently estimates that the subsidiary’s future expected recovery percentage is 91.0% of asbestos-related costs, with the subsidiary expected to be responsible for 9.0% of its future asbestos-related costs.
Since approximately mid-2011, the Company had funded $149.0 million of the subsidiary’s asbestos-related defense and indemnity costs through December 31, 2019, which it expects to recover from insurers. Based on the above-referenced court rulings, the Company requested that its insurers reimburse all of the $149.0 million that remained outstanding at the time of the ruling, and the Company currently has received substantially all of that amount. The subsidiary also has requested that certain excess insurers provide ongoing coverage for future asbestos-related defense and/or indemnity costs. To the extent any disagreements concerning excess insurers’ payment obligations under the Delaware Supreme Court’s rulings remain, they are
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
expected to be resolved by Delaware court action, which is still pending and has been remanded to the Delaware Superior Court for any further proceedings. In the interim, and while not impacting the results of operations, the Company’s cash funding for future asbestos-related defense and indemnity costs for which it expects reimbursement from insurers could range up to $10 million per quarter.
In 2003, another subsidiary filed a lawsuit against a large number of its insurers and its former parent to resolve a variety of disputes concerning insurance for asbestos-related bodily injury claims asserted against it. Court rulings in 2007 and 2009 clarified the insurers allocation methodology as mandated by the New Jersey courts, the allocation calculation related to amounts currently due from insurers, and amounts the Company expects to be reimbursed for asbestos-related costs incurred in future periods.
A final judgment at the trial court level was rendered in 2011 and confirmed by the Appellate Division in 2014. In 2015, the New Jersey Supreme Court refused to grant certification of the appeals, effectively ending the matter. The subsidiary expects to be responsible for 21.7% of all future asbestos-related costs.
During the year ended December 31, 2017, the Company recorded an $8.3 million increase in asbestos-related liabilities due to higher settlement values per claim. The related insurance asset was accordingly increased $6.7 million, resulting in a net pre-tax charge of $1.6 million. During the year ended December 31, 2018, the Company recorded a $5.9 million increase in asbestos-related liabilities due to the rate of filings and higher settlement values per claim, relating to timing of the mix of claims resolved. The related insurance asset was accordingly increased $4.8 million, resulting in a net pre-tax charge of $1.1 million. During the year ended December 31, 2019, the Company recorded a $28.4 million increase in asbestos-related liabilities due to a revision in forecast assumptions for filing rates and resolution values. The related insurance asset was accordingly increased $15.1 million, resulting in a net pre-tax charge of $13.3 million. For all periods, the net pre-tax charge is included in Income (loss) from discontinued operations, net of taxes in the Consolidated Statements of Operations.
The Company’s Consolidated Balance Sheets included the following amounts related to asbestos-related litigation:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Current asbestos insurance receivable(1)
|
$
|
4,474
|
|
|
$
|
—
|
|
Long-term asbestos insurance asset(2)
|
281,793
|
|
|
278,662
|
|
Long-term asbestos insurance receivable(2)
|
41,629
|
|
|
62,523
|
|
Accrued asbestos liability(3)
|
64,394
|
|
|
56,045
|
|
Long-term asbestos liability(4)
|
286,105
|
|
|
288,962
|
|
(1) Included in Other current assets in the Consolidated Balance Sheets.
(2) Included in Other assets in the Consolidated Balance Sheets
(3) 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 Consolidated Balance Sheets.
(4) Included in Other liabilities in the Consolidated Balance Sheets.
Management’s analyses are based on currently known facts and a number of assumptions. However, 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.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
General Litigation
The Company is also involved in various 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.
Minimum Lease Obligations
The Company’s minimum obligations under non-cancelable operating leases are as follows:
|
|
|
|
|
|
December 31, 2019
|
|
(In thousands)
|
2020
|
$
|
43,077
|
|
2021
|
35,008
|
|
2022
|
26,456
|
|
2023
|
21,158
|
|
2024
|
15,935
|
|
Thereafter
|
63,911
|
|
Total
|
$
|
205,545
|
|
The Company’s operating leases extend for varying periods and, in some cases, contain renewal options that would extend the existing terms. During the years ended December 31, 2019, 2018 and 2017, the Company’s net rental expense related to operating leases was $34.3 million, $26.6 million and $26.9 million, respectively.
Off-Balance Sheet Arrangements
As of December 31, 2019, the Company had $292.2 million of unconditional purchase obligations with suppliers, the majority of which is expected to be paid by December 31, 2020.
19. 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 global supplier of consumable products and equipment for use in the cutting, joining and automated welding of steels, aluminum and other metals and metal alloys.
|
|
•
|
Medical Technology - global leader in orthopedic solutions, providing orthopedic devices, reconstructive implants, software and services spanning the full continuum of patient care, from injury prevention to rehabilitation.
|
Certain amounts not allocated to the two reportable segments and intersegment eliminations are reported under the heading “Corporate and other.” The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and segment operating income (loss), which represents Operating income (loss) before restructuring and certain other charges.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s segment results were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Net sales:
|
|
|
|
|
|
Fabrication Technology
|
$
|
2,247,026
|
|
|
$
|
2,193,083
|
|
|
$
|
1,937,282
|
|
Medical Technology
|
1,080,432
|
|
|
—
|
|
|
—
|
|
Total Net sales
|
$
|
3,327,458
|
|
|
$
|
2,193,083
|
|
|
$
|
1,937,282
|
|
|
|
|
|
|
|
Segment operating income (loss)(1):
|
|
|
|
|
|
Fabrication Technology
|
$
|
302,601
|
|
|
$
|
249,934
|
|
|
$
|
224,362
|
|
Medical Technology
|
96,170
|
|
|
—
|
|
|
—
|
|
Corporate and other
|
(121,412
|
)
|
|
(69,321
|
)
|
|
(53,431
|
)
|
Total segment operating income
|
$
|
277,359
|
|
|
$
|
180,613
|
|
|
$
|
170,931
|
|
|
|
|
|
|
|
Depreciation, amortization and other impairment charges:
|
|
|
|
|
|
Fabrication Technology
|
$
|
80,072
|
|
|
$
|
79,712
|
|
|
$
|
71,372
|
|
Medical Technology
|
134,001
|
|
|
—
|
|
|
—
|
|
Corporate and other
|
1,534
|
|
|
1,495
|
|
|
1,316
|
|
Total depreciation, amortization and other impairment charges
|
$
|
215,607
|
|
|
$
|
81,207
|
|
|
$
|
72,688
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
Fabrication Technology
|
$
|
44,454
|
|
|
$
|
40,512
|
|
|
$
|
34,167
|
|
Medical Technology
|
57,326
|
|
|
—
|
|
|
—
|
|
Corporate and other
|
59
|
|
|
1,275
|
|
|
277
|
|
Total capital expenditures
|
$
|
101,839
|
|
|
$
|
41,787
|
|
|
$
|
34,444
|
|
(1) The following is a reconciliation of Income (loss) before income taxes to segment operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
$
|
50,493
|
|
|
$
|
92,364
|
|
|
$
|
48,559
|
|
Loss on short-term investments
|
—
|
|
|
10,128
|
|
|
—
|
|
Pension settlement loss (gain)
|
33,616
|
|
|
(39
|
)
|
|
46,933
|
|
Interest expense, net
|
119,503
|
|
|
49,083
|
|
|
40,106
|
|
Restructuring and other related charges(1)
|
73,747
|
|
|
29,077
|
|
|
35,333
|
|
Segment operating income
|
$
|
277,359
|
|
|
$
|
180,613
|
|
|
$
|
170,931
|
|
(1) Restructuring and other related charges includes $8.5 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations for the year ended December 31, 2019.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Investments in Equity Method Investees:
|
|
|
|
Fabrication Technology
|
$
|
31,134
|
|
|
$
|
32,909
|
|
|
$
|
31,134
|
|
|
$
|
32,909
|
|
|
|
|
|
Total Assets:
|
|
|
|
Fabrication Technology
|
$
|
3,509,023
|
|
|
$
|
3,522,609
|
|
Medical Technology
|
3,480,815
|
|
|
—
|
|
Corporate and other
|
396,994
|
|
|
355,400
|
|
Total
|
$
|
7,386,832
|
|
|
$
|
3,878,009
|
|
The detail of the Company’s operations by geography is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Net Sales by Origin(1):
|
|
|
|
|
|
United States
|
$
|
1,464,152
|
|
|
$
|
540,533
|
|
|
$
|
478,338
|
|
Foreign locations
|
1,863,306
|
|
|
1,652,550
|
|
|
1,458,944
|
|
Total
|
$
|
3,327,458
|
|
|
$
|
2,193,083
|
|
|
$
|
1,937,282
|
|
(1) The Company attributes revenues from external customers to individual countries based upon the country in which the sale was originated.
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2019
|
|
2018
|
|
(In thousands)
|
Property, Plant and Equipment, Net(1):
|
|
|
|
United States
|
$
|
222,293
|
|
|
$
|
78,049
|
|
Czech Republic
|
62,469
|
|
|
68,636
|
|
India
|
41,528
|
|
|
43,562
|
|
Russia
|
23,149
|
|
|
19,814
|
|
Other Foreign locations
|
141,802
|
|
|
117,094
|
|
Total
|
$
|
491,241
|
|
|
$
|
327,155
|
|
(1) As the Company does not allocate all long-lived assets, specifically intangible assets, to each individual country, evaluation of long-lived assets in total is impracticable.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
20. Selected Quarterly Data—(unaudited)
Provided below is selected unaudited quarterly financial data for the years ended December 31, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
March 29,
2019 (1)
|
|
June 28,
2019
|
|
September 27,
2019
|
|
December 31,
2019
|
|
(In thousands, except per share data)
|
Net sales
|
$
|
683,919
|
|
|
$
|
908,647
|
|
|
$
|
846,519
|
|
|
$
|
888,373
|
|
Gross profit
|
261,013
|
|
|
376,058
|
|
|
368,142
|
|
|
395,843
|
|
Net income (loss) from continuing operations
|
(21,530
|
)
|
|
2,212
|
|
|
3,770
|
|
|
34,411
|
|
Income (loss) from discontinued operations, net of taxes
|
(26,472
|
)
|
|
(468,817
|
)
|
|
9,024
|
|
|
(49,744
|
)
|
Net income (loss) attributable to Colfax Corporation
|
(52,023
|
)
|
|
(469,234
|
)
|
|
10,474
|
|
|
(16,863
|
)
|
|
|
|
|
|
|
|
|
Net income (loss) per share - basic
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
(0.17
|
)
|
|
$
|
0.01
|
|
|
$
|
0.02
|
|
|
$
|
0.24
|
|
Discontinued operations
|
$
|
(0.22
|
)
|
|
$
|
(3.46
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.36
|
)
|
Consolidated operations
|
$
|
(0.39
|
)
|
|
$
|
(3.45
|
)
|
|
$
|
0.08
|
|
|
$
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
Net income (loss) per share - diluted
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
(0.17
|
)
|
|
$
|
0.01
|
|
|
$
|
0.02
|
|
|
$
|
0.24
|
|
Discontinued operations
|
$
|
(0.22
|
)
|
|
$
|
(3.46
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.36
|
)
|
Consolidated operations
|
$
|
(0.39
|
)
|
|
$
|
(3.45
|
)
|
|
$
|
0.08
|
|
|
$
|
(0.12
|
)
|
(1) The results for the Quarter ended March 29, 2019 were adjusted to present the Air and Gas Handling business as a discontinued operation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
March 30,
2018 (1)
|
|
June 29,
2018
|
|
September 28,
2018 (2)
|
|
December 31,
2018
|
|
(In thousands, except per share data)
|
Net sales
|
$
|
533,273
|
|
|
$
|
560,857
|
|
|
$
|
524,022
|
|
|
$
|
574,931
|
|
Gross profit
|
184,583
|
|
|
191,925
|
|
|
171,273
|
|
|
181,595
|
|
Net income from continuing operations
|
20,760
|
|
|
47,843
|
|
|
16,658
|
|
|
36,611
|
|
Income (loss) from discontinued operations, net of taxes
|
8,282
|
|
|
(6,064
|
)
|
|
18,544
|
|
|
11,839
|
|
Net income attributable to Colfax Corporation
|
24,535
|
|
|
38,457
|
|
|
31,310
|
|
|
45,894
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share - basic
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.16
|
|
|
$
|
0.38
|
|
|
$
|
0.14
|
|
|
$
|
0.32
|
|
Discontinued operations
|
$
|
0.04
|
|
|
$
|
(0.07
|
)
|
|
$
|
0.13
|
|
|
$
|
0.07
|
|
Consolidated operations
|
$
|
0.20
|
|
|
$
|
0.31
|
|
|
$
|
0.27
|
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share - diluted
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.16
|
|
|
$
|
0.38
|
|
|
$
|
0.14
|
|
|
$
|
0.32
|
|
Discontinued operations
|
$
|
0.04
|
|
|
$
|
(0.07
|
)
|
|
$
|
0.13
|
|
|
$
|
0.07
|
|
Consolidated operations
|
$
|
0.20
|
|
|
$
|
0.31
|
|
|
$
|
0.26
|
|
|
$
|
0.39
|
|
(1) The results for the Quarter ended March 30, 2018 were adjusted to present the Air and Gas Handling business as a discontinued operation.
(2) The sum of the net income per share amounts may not add due to rounding.
COLFAX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
21. Subsequent Events
None.