Edgar Filing: Colfax CORP

CFX 10-K - 2014

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

Form 10-K

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

For the fiscal year ended December 31, 2014

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

For the transition period from _______to_______

Commission File No. 001-34045

_________________________

COLFAX CORPORATION

(Exact name of registrant as specified in its charter)



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

420 National Business Parkway, 5th Floor	20701
Annapolis Junction, Maryland	(Zip Code)
(Address of principal executive offices)

301-323-9000

(Registrant’s telephone number, including area code)

_________________________

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:



TITLE OF EACH CLASS	NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value $0.001 per share	The New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

_________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act. Yes ¨ No þ

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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

(Do not check if a smaller reporting company) Smaller reporting company ¨

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

The aggregate market value of common shares held by non-affiliates of the Registrant on June 27, 2014 was $6.280 billion based upon the aggregate price of the registrant’s common shares as quoted on the New York Stock Exchange composite tape on such date.

As of February 2, 2015, the number of shares of the Registrant’s common stock outstanding was 123,760,391.

EXHIBIT INDEX APPEARS ON PAGE

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the Registrant’s definitive proxy statement for its 2015 annual meeting of stockholders to be filed pursuant to Regulation 14A within 120 days after the end of the Registrant’s fiscal year covered by this report. With the exception of the sections of the 2015 proxy statement specifically incorporated herein by reference, the 2015 proxy statement is not deemed to be filed as part of this Form 10-K.

TABLE OF CONTENTS



Item	Description	Page
	Special Note Regarding Forward-Looking Statements	2

	Part I
1	Business	3
1A	Risk Factors	9
1B	Unresolved Staff Comments	19
2	Properties	19
3	Legal Proceedings	19
4	Mine Safety Disclosures	19
	Executive Officers of the Registrant	20

	Part II
5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
6	Selected Financial Data	23
7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
7A	Quantitative and Qualitative Disclosures About Market Risk	39
8	Financial Statements and Supplementary Data	41
9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	91
9A	Controls and Procedures	91
9B	Other Information	92

	Part III
10	Directors, Executive Officers and Corporate Governance	92
11	Executive Compensation	92
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	92
13	Certain Relationships and Related Transactions, and Director Independence	92
14	Principal Accountant Fees and Services	92

	Part IV
15	Exhibits and Financial Statement Schedules	93

	Signatures	94
	Exhibit Index	96

Unless otherwise indicated, references in this Annual Report on Form 10-K (this “Form 10-K”) to “Colfax,” “the Company,” “we,” “our,” and “us” refer to Colfax Corporation and its subsidiaries.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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


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


•	a significant or sustained decline in commodity prices, including oil;


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


•	our exposure to unanticipated liabilities resulting from acquisitions;


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


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


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


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


•	material disruptions at any of our manufacturing facilities;


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


•	risks associated with our international operations;


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


•	our exposure to product liability claims;


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


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


•	the loss of key members of our leadership team;


•	restrictions in our credit agreement by and among the Company, Colfax UK Holdings Ltd, the other subsidiaries of the Company party thereto, the lenders party thereto and Deutsche Bank AG New York Branch, as administrative agent, as amended (the “Deutsche Bank Credit Agreement”) that may limit our flexibility in operating our business;


•	impairment in the value of intangible assets;


•	the funding requirements or obligations of our defined benefit pension plans and other post-retirement benefit plans;


•	significant movements in foreign currency exchange rates;


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


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


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


•	risks arising from changes in technology;


•	the competitive environment in our industry;


•	changes in our tax rates or exposure to additional income tax liabilities;


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


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


•	our financial performance; and


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

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

PART I

Item 1. Business

General

Colfax Corporation is a diversified global industrial manufacturing and engineering company that provides gas- and fluid-handling and fabrication technology products and services to commercial and governmental customers around the world under the Howden, ESAB and Colfax Fluid Handling brand names. Our business has been built through a series of acquisitions, as well as organic growth, since its founding in 1995. We seek to build an enduring premier global enterprise by applying the Colfax Business System (“CBS”) to pursue growth in revenues and improvements in operating margins and cash flow.

Colfax began with a series of acquisitions in the fluid-handling and mechanical power transmission sectors, most notably those of Imo and Allweiler in 1997 and 1998, respectively. In 2004, we divested our mechanical power transmission operations and focused on fluid handling. Through the end of 2011, we made a series of strategic acquisitions in this sector, including: Lubrication Systems Company (“LSC”), PD-Technik Ingenieurbüro GmbH (“PD-Technik”), Baric Group (“Baric”), Rosscor Holding B.V. (“Rosscor”) and COT-Puritech, Inc. (“COT-Puritech”).

On January 13, 2012, we closed the acquisition of Charter International plc (“Charter”) (the “Charter Acquisition”), which transformed Colfax from a fluid-handling business into a multi-platform enterprise with a broad global footprint. This acquisition provided an additional growth platform in the fragmented fabrication technology industry, while broadening the scope of our fluid-handling platform to include air- and gas-handling products.

Following the Charter Acquisition, we completed the following additional acquisitions that we expect will grow and strengthen our business:

Gas and Fluid Handling

In September 2012, we acquired Co-Vent Group Inc. (“Co-Vent”), a leading supplier of industrial fans based in Quebec, Canada.

In July 2013, we acquired Clarus Fluid Intelligence, LLC (“Clarus”), a domestic supplier of flushing services for marine applications primarily to U.S. government agencies, with primary operations in Bellingham, Washington.

In September 2013, we acquired certain business units of The New York Blower Company, including TLT-Babcock Inc. (“TLT-Babcock”) and Alphair Ventilating Systems Inc. (“Alphair”), suppliers of heavy duty and industrial fans in Akron, Ohio and Winnipeg, Manitoba, respectively.

In November 2013, we acquired ČKD Kompresory a.s. (“ČKDK”), a leading supplier of multi-stage centrifugal compressors to the oil & gas, petrochemical, power and steel industries, based in Prague, Czech Republic.

In November 2013, we acquired the remaining ownership of Sistemas Centrales de Lubrication S.A. de C.V. (“Sicelub”), previously a less than wholly owned subsidiary in which the Company did not have a controlling interest. Sicelub provides flushing services to Central and South American customers primarily in the oil, gas and petrochemical end market.

In November 2013, we acquired the global infrastructure and industry division of Fläkt Woods Group (“GII”), an international supplier of heavy duty industrial and cooling fans.

In May 2014, we acquired the remaining ownership of Howden Thomassen Middle East FCZO (“Howden Middle East”), increasing our ownership from 90% to 100%.

Fabrication Technology

In May 2012, we acquired the remaining ownership of CJSC Sibes (“Sibes”), a less than wholly owned Russian subsidiary in which the Company did not have a controlling interest.

In October 2012, we acquired approximately 91% of Soldex S.A. (“Soldex”), a leading South American supplier of welding products. In August 2013, we increased our ownership of Soldex to approximately 99%.

In April 2014, we acquired Victor Technologies Holdings, Inc. (“Victor”), a global manufacturer of cutting, gas control and specialty welding solutions (the “Victor Acquisition”).

In July 2014, we acquired the remaining ownership of ESAB-SVEL (“Svel”), increasing our ownership from 51% to 100%.

We employ a comprehensive set of tools that we refer to as CBS. CBS, modeled on the Danaher Business System, is our business management system. It is a repeatable, teachable process that we use to create superior value for our customers, shareholders and associates. Rooted in our core values, it is our culture. CBS provides the tools and techniques to ensure that we are continuously improving our ability to meet or exceed customer requirements on a consistent basis.

Each year, Colfax associates in every business are asked to develop aggressive strategic plans which are based on the Voice of the Customer. In these plans, we are very clear about our market realities, our threats, our risks, our opportunities and most importantly, our vision forward. Execution and measurement of our plans is important to the process. Our belief is that when we use the tools of CBS to drive the implementation of these plans, we are able to uniquely provide the customer with the world class quality, delivery, cost and growth they require. And that performance, we believe, is what ultimately helps our customers and Colfax grow and succeed on a sustainable basis.

Reportable Segments

We report our operations through the gas- and fluid-handling and fabrication technology segments. For certain financial information, including Net sales and long-lived assets by geographic area, see Note 16, “Segment Information” in the accompanying Notes to Consolidated Financial Statements in this Form 10-K.

Gas and Fluid Handling

Our gas- and fluid-handling segment is a global supplier of a broad range of products, including heavy-duty centrifugal and axial fans, rotary heat exchangers, gas compressors, pumps, fluid-handling systems and controls and specialty valves, which serves customers in the power generation, oil, gas and petrochemical, mining, marine (including defense) and general industrial and other end markets.

Our gas-handling products are principally marketed under the Howden brand name, and are manufactured and engineered in facilities located in Asia, Europe, North and South America, Australia and Africa. Our fluid-handling products are marketed principally under the Colfax Fluid Handling brand name, as well as a portfolio of brands, including Allweiler, Imo and Total Lubrication Management. We manufacture and assemble our fluid-handling products at locations in Europe, North America and Asia.

Our gas- and fluid-handling products and services are generally sold directly, though independent representatives and distributors are also used.

Fans

Howden fans primarily consist of heavy-duty axial, centrifugal and industrial cooling fans. Axial fans include non-variable pitch, variable pitch, OEM and mixed flow axial fans. Centrifugal fans consist of custom engineered, pre-engineered and OEM centrifugal fans. Ranging in diameter from 200mm to over 5m, and with a variety of impeller designs, control systems and layout options, our comprehensive series of axial and centrifugal fans satisfy virtually all industrial applications. Howden industrial cooling fans are designed for cooling towers, heat exchangers and steam condensers. They range in size from fans for packaged cooling systems to fans up to 25m diameter for cooling towers. Each of our cooling fan designs has its own unique characteristics in terms of efficiency, noise levels and application. We have developed our cooling fans over the last 50 years, and we believe that we offer the most reliable and quietest cooling fans available. We have fans operating in over 90 countries in a wide range of applications and uses that require the movement of large volumes of air in harsh applications, including the world’s largest power stations and latest high-speed locomotives. We believe that the experience gained from our wide range of applications is beneficial to our global engineers in meeting customer specifications.

Compressors

Howden process compressors and complete compressor packages are used in the petroleum, petrochemical, refrigeration and other markets where performance and reliability are crucial. Our product line includes screw, piston (reciprocating) diaphragm and multi-stage centrifugal process gas compressors as well as highly efficient turbo blowers capable of the most demanding end market conditions. Howden designed and supplied the first diaphragm compressor and was the first company to commercialize screw compressor technology.

Rotary Heat Exchangers

Rotary regenerative heat exchangers provide a compact, cost effective and reliable solution for heat recovery in power plant and flue gas desulfurization systems. With over 80 years of experience, Howden supplies highly efficient and reliable air preheaters for power boiler applications, rotary regenerative heat exchangers and replacement element baskets for rotary regenerative heat exchangers.

Pumps

Rotary Positive Displacement Pumps - We believe that we are a leading manufacturer of rotary positive displacement pumps with a broad product portfolio and globally recognized brands. Rotary positive displacement pumps consist of a casing containing screws, gears, vanes or similar components that are actuated by the relative rotation of that component to the casing, which results in the physical movement of the liquid from the inlet to the discharge at a constant rate. Positive displacement pumps generally offer precise, quiet and highly efficient transport of viscous fluids.

Specialty Centrifugal Pumps - Centrifugal pumps use the kinetic energy imparted by rotating an impeller inside a configured casing to create pressure. While traditionally used to transport large quantities of thin liquids, our centrifugal pumps use specialty designs and materials to offer customers high quality, reliability and customized solutions for a wide range of viscosities, temperatures and applications. We position our specialty centrifugal pumps for applications where customers clearly recognize our brand value or in markets where centrifugal and rotary pumps are complimentary.

Fluid-Handling Systems

We manufacture complete fluid-handling systems used primarily in the oil and gas, power generation, commercial marine and global defense markets. We offer turnkey systems and support, including design, manufacture, installation, commission and service. Our systems include:


•	lubrication systems, which are used in rotating equipment in oil refineries and other process industries;


•	custom designed packages used in crude oil pipeline applications;


•	lubrication and fuel forwarding systems used in power generation turbines; and


•	complete packages for commercial marine engine rooms.

Specialty Valves

Our specialty valves are used primarily in naval applications. Our valve business has specialized machining, welding and fabrication capabilities that enable us to serve as a supplier to the U.S. Navy. In addition to designing and manufacturing valves, we also offer repair and retrofit services for products manufactured by other valve suppliers through our aftermarket support centers located in Virginia Beach, Virginia and San Diego, California.

Reliability Services

Our reliability services offering provides lubrication system equipment and services to customers in end markets where lubrication system performance is critical, including: petroleum refining, petrochemical production, natural gas transmission, power generation, and military and commercial marine vessels. Our products include LubriMist® oil mist generators, Mistlock™ bearing lubrication cartridges and ThermoJet® oil purifiers. Our services include high velocity oil flushing, leakage oil reclamation and condition monitoring. We sell lubrication equipment globally, and provide reliability services primarily in North and South America.

Fabrication Technology

We formulate, develop, manufacture and supply consumable products and equipment for use in the cutting and joining of steels, aluminum and other metals and metal alloys. For the year ended December 31, 2014, welding consumables represented approximately 35% of our total Net sales. Our fabrication technology products are marketed under several brand names, most notably ESAB and Victor, which we believe are well known in the international welding industry. ESAB’s comprehensive range of welding consumables includes electrodes, cored and solid wires and fluxes. ESAB’s fabrication technology equipment ranges from portable welding machines to large customized automated cutting and welding systems. The Victor Acquisition complemented the geographic footprint of our fabrication technology segment and expanded our cutting equipment and consumables, gas control and specialty welding product lines. Products are sold into a wide range of end markets, including oil & gas, power generation, wind power, shipbuilding, pipelines, mobile/off-highway equipment and mining.

Many of our fabrication technology manufacturing facilities are located in low cost locations, in particular Central and Eastern Europe, South America and Asia. Our fabrication technology products are sold both through independent distributors and direct salespeople, depending on geography and end market.

The following discussions of Industry and Competition, International Operations, Research and Development, Intellectual Property, Raw Materials and Backlog, Seasonality, Working Capital, Associates and Company Information and Access to SEC Reports include information that is common to both of our reportable segments, unless indicated otherwise.

Industry and Competition

Our products and services are marketed worldwide. The markets served by our gas- and fluid-handling segment are highly fragmented and competitive. Because we compete in selected niches of these markets and due to the diversity of our products and services, no single company competes directly with us across all of our markets. We encounter a wide variety of competitors that differ by product line, including well-established regional competitors, competitors who are more specialized than we are in particular markets, as well as larger companies or divisions of companies that are larger than we are. The markets that our fabrication technology segment competes in are also served by the welding segments of Lincoln Electric and Illinois Tool Works, Inc.

Our customer base is broadly diversified across many sectors of the economy, and we believe customers place a premium on quality, reliability, availability, design and application engineering support. We believe the principal elements of competition in our served markets are the technical ability to meet customer specifications, product quality and reliability, brand names, price, application expertise and engineering capabilities and timely delivery and strong aftermarket support. Our management believes that we are a leading competitor in each of our markets.

Additionally, we utilize CBS to continuously improve our business, which we believe, in addition to our management team’s experience in the application of the CBS methodology, is one of our primary competitive strengths. CBS is our business system designed to encourage a culture of continuous improvement in all aspects of our operations and strategic planning.

International Operations

Our products and services are available worldwide. We believe this geographic diversity allows us to draw on the skills of a worldwide workforce, provides stability to our operations, allows us to drive economies of scale, provides revenue streams that may offset economic trends in individual economies and offers us an opportunity to access new markets for products. In addition, we believe that our exposure to developing economies will provide additional opportunities for growth in the future. Our principal markets outside the U.S. are in Europe, Asia, the Middle East and South America, and for the year ended December 31, 2014, approximately 48% of our Net sales were shipped to locations in emerging markets.

Our international operations subject us to certain risks. See Item 1A. “Risk Factors—Risks Related to Our Business—The majority of our sales are derived from international operations. We are subject to specific risks associated with international operations.”

Research and Development

Our research and development activities vary by operating segment. We closely integrate research and development with marketing, manufacturing and product engineering in meeting the needs of our customers. Our research and development efforts focus on innovation and developing new product applications, lowering the cost of manufacturing our existing products and redesigning existing product lines to increase efficiency and enhance performance. Our business product engineering teams are continuously enhancing our existing products and developing new product applications for our growing base of customers that require custom solutions. We believe these capabilities provide a significant competitive advantage in the development of high quality products.

Research and development expense was $43.0 million, $27.4 million and $19.4 million in 2014, 2013 and 2012, respectively. We expect to continue making significant expenditures for research and development in order to maintain and improve our competitive position.

Intellectual Property

We rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secrets and contractual provisions to protect our intellectual property. Although we highlight recent additions to our patent portfolio as part of our marketing efforts, we do not consider any one patent or trademark or any group thereof essential to our business as a whole or to any of our business operations. We also rely on proprietary product knowledge and manufacturing processes in our operations.

Raw Materials and Backlog

We obtain raw materials, component parts and supplies from a variety of sources, generally each from more than one supplier. Our principal raw materials are metals, castings, motors, seals and bearings. Our suppliers and sources of raw materials are globally based. We believe that our sources of raw materials are adequate for our needs for the foreseeable future and the loss of any one supplier would not have a material adverse effect on our business or results of operations.

Manufacturing turnaround time for our gas- and fluid-handling operating segment is generally sufficiently short to allow us to manufacture to order for most of our products, which helps to limit inventory levels. Backlog generally is a function of requested customer delivery dates and may range from days to several years. Backlog of gas- and fluid-handling orders as of December 31, 2014 was $1.4 billion, compared with $1.6 billion as of December 31, 2013. A substantial majority of the gas- and fluid-handling order backlog as of December 31, 2014 is expected to be filled within the current fiscal year.

Seasonality

As our gas- and fluid-handling customers seek to fully utilize capital spending budgets before the end of the year, historically our shipments have peaked during the fourth quarter. Also, all of our European operations typically experience a slowdown during the July and August and December holiday seasons. General economic conditions may, however, impact future seasonal variations.

Working Capital

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

Associates

The following table presents our worldwide associate base as of the dates indicated:



	December 31,
	2014	2013	2012
North America	3,340	2,667	2,805
Europe	6,415	6,761	6,107
Asia and Middle East	4,696	4,722	4,397
Central and South America	3,255	2,963	2,424
Other	645	646	553
Total associates	18,351	17,759	16,286

Approximately 1% of associates are covered by collective bargaining agreements with U.S. trade unions. In addition, approximately 18% of our associates are represented by foreign trade unions and work councils in Europe, Asia, Central and South America, Canada, Africa and Australia, which subjects us to arrangements very similar to collective bargaining agreements. We have not experienced any work stoppages or strikes that have had a material adverse impact on operations. We consider our relations with our associates to be good.

Company Information and Access to SEC Reports

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

We make available, free of charge through our website, our annual and quarterly reports on Form 10-K and Form 10-Q (including related filings in XBRL format), current reports on Form 8-K and any amendments to those reports as soon as practicable after filing or furnishing the material to the SEC. You may also request a copy of these filings, at no cost, by writing or telephoning us at: Investor Relations, Colfax Corporation, 420 National Business Parkway, 5th Floor, Annapolis Junction, MD 20701, telephone (301) 323-9000. Information contained on our website is not incorporated by reference in this report.

Item 1A. Risk Factors

An investment in our Common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Form 10-K and other documents we file with the SEC. The risks and uncertainties described below are those that we have identified as material, but may not be the only risks to which Colfax might be exposed. Additional risks and uncertainties, which are currently unknown to us or that we do not currently consider to be material, may materially affect the business of Colfax and could have material adverse effects on our business, financial condition and results of operations. If any of the following risks were to occur, our business, financial condition and results of operations could be materially adversely affected, the value of our Common stock could decline and investors could lose all or part of the value of their investment in Colfax shares. Our business is also subject to general risks and uncertainties that affect many other companies, such as overall U.S. and non-U.S. economic and industry conditions, a global economic slowdown, geopolitical events, changes in laws or accounting rules, fluctuations in interest rates, terrorism, international conflicts, natural disasters or other disruptions of expected economic or business conditions. We operate in a continually changing business environment, and new risk factors emerge from time to time which we cannot predict. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and financial condition.

Risks Related to Our Business

Changes in the general economy and the cyclical nature of the markets that we serve could negatively impact the demand for our products and services and harm our operations and financial performance.

Colfax's financial performance depends, in large part, on conditions in the markets we serve and on the general condition of the global economy, which impacts these markets. Any sustained weakness in demand for our products and services resulting from a downturn of or uncertainty in the global economy could reduce our sales and profitability.

In addition, we believe that many of our customers and suppliers are reliant on liquidity from global credit markets and, in some cases, require external financing to purchase products or finance operations. If our customers lack liquidity or are unable to access the credit markets, it may impact customer demand for our products and services and we may not be able to collect amounts owed to us.

Further, our products are sold in many industries, some of which are cyclical and may experience periodic downturns. Cyclical weakness in the industries that we serve could lead to reduced demand for our products and affect our profitability and financial performance.

The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

A significant or sustained decline in commodity prices, including oil, could negatively impact the levels of capital investment and maintenance expenditures by certain of our customers, which in turn could reduce the demand for our products and services and harm our operations and financial performance.

Demand for our products and services depends, in part, on the level of new capital investment and planned maintenance expenditures by certain of our customers. The level of capital expenditures by our customers is dependent, amongst other factors, on general economic conditions, availability of credit, economic conditions within their respective industries and expectations of future market behavior. Volatility in commodity prices, including oil, can negatively affect the level of these activities and can result in postponement of capital spending decisions or the delay or cancellation of existing orders. The ability of our customers to finance capital investment and maintenance may also be affected by the conditions in their industries. We believe demand for our products and services by many of our customers, particularly those within the oil, gas and petrochemical end market, to be primarily profit-driven, and historically these customers have tended to delay large capital projects, including expensive maintenance and upgrades, when the markets in which they participate experience volatility. Reduced demand for our products

and services could result in the delay or cancellation of existing orders or lead to excess manufacturing capacity, which unfavorably impacts our absorption of fixed manufacturing costs. This reduced demand could have a material adverse effect on our business, financial condition and results of operations.

Acquisitions have formed a significant part of our growth strategy in the past and are expected to continue to do so. If we are unable to identify suitable acquisition candidates or successfully integrate the businesses we acquire, our growth strategy may not succeed. Acquisitions involve numerous risks, including risks related to integration and undisclosed or underestimated liabilities.

Historically, our business strategy has relied on acquisitions. We expect to derive a significant portion of our growth by acquiring businesses and integrating those businesses into our existing operations. We intend to seek acquisition opportunities both to expand into new markets and to enhance our position in our existing markets. However, our ability to do so will depend on a number of steps, including our ability to:


•	identify suitable acquisition candidates;


•	negotiate appropriate acquisition terms;


•	obtain debt or equity financing that we may need to complete proposed acquisitions;


•	complete the proposed acquisitions; and


•	integrate the acquired business into our existing operations.

If we fail to achieve any of these steps, our growth strategy may not be successful.

Acquisitions involve numerous risks, including risks related to integration, and we may not realize the anticipated benefits of our acquisitions.

Acquisitions involve numerous risks, including difficulties in the assimilation of the operations, systems, controls, technologies, personnel, services and products of the acquired company, the potential loss of key employees, customers and distributors of the acquired company and the diversion of our management's attention from other business concerns. This is the case particularly in the fiscal quarters immediately following the completion of an acquisition because the operations of the acquired business are integrated into the acquiring business' operations during this period. We may not accurately anticipate all of the changing demands that any future acquisition may impose on our management, our operational and management information systems and our financial systems. The failure to successfully integrate acquired businesses in a timely manner, or at all, could have an adverse effect on our business, financial condition and results of operations.

In addition, the anticipated benefits of an acquisition may not be realized fully or at all, or may take longer to realize than we expect. Actual operating, technological, strategic and sales synergies, if achieved at all, may be less significant than we expect or may take longer to achieve than anticipated. If we are not able to realize the anticipated benefits and synergies expected from our acquisitions within a reasonable time, our business, financial condition and results of operations may be adversely affected.

Acquisitions may result in significant integration costs, and unanticipated integration expense may harm our business, financial condition and results of operations.

Integration efforts associated with our acquisitions may require significant capital and operating expense. Such expenses may include information technology integration fees, legal compliance costs, facility closure costs and other restructuring expenses. Significant unanticipated expenses associated with integration activities may harm our business, financial condition and results of operations.

Our acquisitions may expose us to significant unanticipated liabilities and could adversely affect our business, financial condition and results of operations.

We may underestimate or fail to discover liabilities relating to acquisitions during our due diligence investigations, and we, as the successor owner of an acquired company, might be responsible for those liabilities. Such liabilities could include employment, retirement or severance-related obligations under applicable law or other benefits arrangements, legal claims, tax liabilities, warranty or similar liabilities to customers, product liabilities and personal injury claims, environmental liabilities and claims by or amounts owed to vendors. The indemnification and warranty provisions in our acquisition agreements may not fully protect us from the impact of undiscovered liabilities. Indemnities or warranties are often limited in scope, amount or duration, and may not

fully cover the liabilities for which they were intended. The liabilities that are not covered by the limited indemnities or warranties could have a material adverse effect on our business, financial condition and results of operations.

We may require additional capital to finance our operating needs and to finance our growth. If the terms on which the additional capital is available are unsatisfactory, if the additional capital is not available at all or if we are not able to fully access credit under the Deutsche Bank Credit Agreement, we may not be able to pursue our growth strategy.

Our growth strategy will require additional capital investment to complete acquisitions, integrate the completed acquisitions into our existing operations and expand into new markets.

We intend to pay for future acquisitions using cash, capital stock, notes, assumption of indebtedness or any combination of the foregoing. To the extent that we do not generate sufficient cash internally to provide the capital we require to fund our growth strategy and future operations, we will require additional debt or equity financing. This additional financing may not be available or, if available, may not be on terms acceptable to us. Further, high volatility in the capital markets and in our stock price may make it difficult for us to access the capital markets at attractive prices, if at all. If we are unable to obtain sufficient additional capital in the future, it may limit our ability to implement fully our growth strategy. Even if future debt financing is available, it may result in (i) increased interest expense, (ii) increased term loan payments, (iii) increased leverage and (iv) decreased income available to fund further acquisitions and expansion. It may also limit our ability to withstand competitive pressures and make us more vulnerable to economic downturns. If future equity financing is available, issuances of our equity securities may significantly dilute our existing stockholders.

In addition, our credit facility agreement includes restrictive covenants which could limit our financial flexibility. See “—The Deutsche Bank Credit Agreement contains restrictions that may limit our flexibility in operating our business.” below.

Our restructuring activities may subject us to additional uncertainty in our operating results.

We have implemented, and plan to continue to implement, restructuring programs designed to facilitate key strategic initiatives and maintain long-term sustainable growth. As such, we have incurred and expect to continue to incur expense relating to restructuring activities. We may not achieve or sustain the anticipated benefits of these programs. Further, restructuring efforts are inherently risky, and we may not be able to predict the cost and timing of such actions accurately or properly estimate their impact. We also may not be able to realize the anticipated savings we expect from restructuring activities.

Available insurance coverage, the number of future asbestos-related claims and the average settlement value of current and future asbestos-related claims of certain subsidiaries could be different than we have estimated, which could materially and adversely affect our business, financial condition and results of operations.

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 our subsidiaries nor were the subsidiaries producers or direct suppliers of asbestos. For the purposes of our financial statements, we have estimated the future claims exposure and the amount of insurance available based upon certain assumptions with respect to future claims and liability costs. We estimate the liability costs to be incurred in resolving pending and forecasted claims for the next 15-year period.

Our decision to use a 15-year period is based on our belief that this is the extent of our ability to forecast liability costs. We also estimate the amount of insurance proceeds available for such claims based on the current financial strength of the various insurers, our estimate of the likelihood of payment and applicable current law. We reevaluate these estimates regularly. Although we believe our current estimates are reasonable, a change in the time period used for forecasting our liability costs, the actual number of future claims brought against us, the cost of resolving these claims, the likelihood of payment by, and the solvency of, insurers and the amount of remaining insurance available could be substantially different than our estimates, and future revaluation of our liabilities and insurance recoverables could result in material adjustments to these estimates, any of which could materially and adversely affect our business, financial condition and results of operations. In addition, we incur defense costs related to those claims, a portion of which has historically been reimbursed by our insurers. We also incur litigation costs in connection with actions against certain of the subsidiaries' insurers relating to insurance coverage. While these costs may be significant, we may not be able to predict the amount or duration of such costs. Additionally, we may experience delays in receiving reimbursement from insurers, during which time we may be required to pay cash for settlement or legal defense costs. Any increase in the actual number of future claims brought against us, the defense costs of resolving these claims, the cost of pursuing claims against our insurers,

the likelihood and timing of payment by, and the solvency of, insurers and the amount of remaining insurance available, could materially and adversely affect our business, financial condition and results of operations.

A material disruption at any of our manufacturing facilities could adversely affect our ability to generate sales and meet customer demand.

If operations at any of our manufacturing facilities were to be disrupted as a result of a significant equipment failure, natural disaster, power outage, fire, explosion, terrorism, cyber-based attack, adverse weather conditions, labor disputes or other reason, our financial performance could be adversely affected as a result of our inability to meet customer demand for our products. Interruptions in production could increase our costs and reduce our sales. Any interruption in production capability could require us to make substantial capital expenditures to remedy the situation, which could negatively affect our profitability and financial condition. We maintain property damage insurance which we believe to be adequate to provide for reconstruction of facilities and equipment, as well as business interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss. However, any recovery under our insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations, which could adversely affect our business, financial condition and results of operations.

Failure to comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other applicable anti-bribery laws could have an adverse effect on our business.

The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Recent years have seen a substantial increase in anti-bribery law enforcement activity with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the U.S. Securities and Exchange Commission, increased enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with all anti-bribery laws. However, we operate in certain countries that are recognized as having governmental and commercial corruption. Our internal control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or third-party intermediaries. Violations of these anti-bribery laws may result in criminal or civil sanctions, which could have a material adverse effect on our business, financial condition and results of operations.

We have done and may continue to do business in countries subject to U.S. sanctions and embargoes, and we may have limited managerial oversight over those activities. Failure to comply with various sanction and embargo laws may result in enforcement or other regulatory actions.

Certain of our independent foreign subsidiaries have conducted and may continue to conduct business in countries subject to U.S. sanctions and embargoes or may engage in business dealings with parties whose property or property interests may be blocked under non-country-specific U.S. sanctions programs, and we have limited managerial oversight over those activities. Failure to comply properly with various sanction and embargo laws to which we and our operations may be subject may result in enforcement or other regulatory actions. Specifically, from time to time, certain of our independent foreign subsidiaries sell products to companies and entities located in, or controlled by the governments of, certain countries that are or have previously been subject to sanctions and embargoes imposed by the U.S. government, United Nations or other countries where we maintain operations. In March 2010, our Board of Directors affirmatively prohibited any new sales to Iran by us and all of our foreign subsidiaries. With the exception of the U.S. sanctions against Cuba and Iran, the applicable sanctions and embargoes generally do not prohibit our foreign subsidiaries from selling non-U.S.-origin products and services to countries that are or have previously been subject to sanctions and embargoes. However, our U.S. personnel, each of our domestic subsidiaries, as well as our employees of foreign subsidiaries who are U.S. citizens, are prohibited from participating in, approving or otherwise facilitating any aspect of the business activities in those countries, including Syria. These constraints impose compliance cost and risk on our operations and may negatively affect the financial or operating performance of such business activities.

Our efforts to comply with U.S. and other applicable sanction and embargo laws may not be effective, and as a consequence we may face enforcement or other actions if our compliance efforts are not or are perceived as not being wholly effective. Actual or alleged violations of these laws could lead to substantial fines or other sanctions which could result in substantial costs. In addition, Syria, Iran and certain other sanctioned countries currently are identified by the U.S. State Department as state sponsors of terrorism, and have been subject to increasingly restrictive sanctions. Because certain of our independent foreign subsidiaries have contact with and transact limited business in certain U.S. sanctioned countries, including sales to enterprises controlled by agencies of the governments of such countries, our reputation may suffer due to our association with these countries, which may have a material adverse effect on the price of our shares and our business, financial condition and results of operations. In addition,

certain U.S. states and municipalities have enacted legislation regarding investments by pension funds and other retirement systems in companies that have business activities or contacts with countries that have been identified as state sponsors of terrorism and similar legislation may be pending in other states. As a result, pension funds and other retirement systems may be subject to reporting requirements with respect to investments in companies such as Colfax or may be subject to limits or prohibitions with respect to those investments that may have a material adverse effect on the price of our shares and our business, financial condition and results of operations.

One of our foreign subsidiaries made a small number of sales from 2003 through 2007 totaling approximately $60,000 in the aggregate to two customers in Cuba which may have been made in violation of regulations of the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). Cuba is also identified by the U.S. State Department as a state sponsor of terrorism. We have submitted a disclosure report to OFAC regarding these transactions. As a result of these sales, we may be subject to fines or other sanctions. Further, during the 2012 fiscal year a few of our independently-operated foreign subsidiaries which we acquired in 2012 made the final shipments necessary to wind down four sales agreements involving parties identified in section 560.304 of title 31 of the Code of Federal Regulations, which transactions were conducted in accordance with applicable U.S. and E.U. economic sanctions, statutes and regulations in effect at that time.

If we fail to comply with export control regulations, we could be subject to substantial fines or other sanctions.

Some of our products manufactured or assembled in the U.S. are subject to the U.S. Export Administration Regulations, administered by the U.S. Department of Commerce, Bureau of Industry and Security, which require that an export license is obtained before such products can be exported to certain countries. Additionally, some of our products are subject to the International Traffic in Arms Regulations, which restrict the export of certain military or intelligence-related items, technologies and services to non-U.S. persons. Failure to comply with these laws could harm our business by subjecting us to sanctions by the U.S. government, including substantial monetary penalties, denial of export privileges and debarment from U.S. government contracts. The occurrence of any of the foregoing could have a material and adverse effect on our business, financial condition and results of operations.

The majority of our sales are derived from international operations. We are subject to specific risks associated with international operations.

In the year ended December 31, 2014, we derived approximately 76% of our sales from operations outside of the U.S. and we have principal manufacturing facilities in 26 non-U.S. countries. Sales from international operations, export sales and the use of manufacturing facilities outside of the U.S. by us are subject to risks inherent in doing business outside the U.S. These risks include:


•	economic or political instability;


•	partial or total expropriation of international assets;


•	limitations on ownership or participation in local enterprises;


•	trade protection measures, including tariffs or import-export restrictions;


•	currency exchange rate fluctuations and restrictions on currency repatriation;


•	labor and employment laws that may be more restrictive than in the U.S.;


•	significant adverse changes in taxation policies or other laws or regulations;


•	unanticipated changes in laws and regulations or in how such provisions are interpreted or administered;


•	difficulties in hiring and maintaining qualified staff; and


•	the disruption of operations from political disturbances, terrorist activities, insurrection or war.

If any of these risks were to materialize, they may have a material adverse effect on our business, financial condition and results of operations.

If our employees represented by trade unions or works councils engage in a strike, work stoppage or other slowdown or if the representation committees responsible for negotiating with such trade unions or works councils are unsuccessful in negotiating new and acceptable agreements when the existing agreements with employees covered by collective bargaining expire, we could experience business disruptions or increased costs.

As of December 31, 2014, approximately 19% of our employees were represented by a number of different trade unions and works councils. Further, as of that date, we had approximately 15,200 employees, representing 83% of our worldwide employee base, in foreign locations. In Canada, Australia and various countries in Europe, Asia, and Central and South America, by law, certain of our employees are represented by a number of different trade unions and works councils, which subject us to employment arrangements very similar to collective bargaining agreements. Further, the laws of certain foreign countries may place restrictions on our ability to take certain employee-related actions or require that we conduct additional negotiations with trade unions, works councils or other governmental authorities before we can take such actions.

If our employees represented by trade unions or works councils were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations. Such disruption could interfere with our business operations and could lead to decreased productivity, increased labor costs and lost revenue. The representation committees that negotiate with the foreign trade unions or works councils on our behalf may not be successful in negotiating new collective bargaining agreements or other employment arrangements when the current ones expire. Furthermore, future labor negotiations could result in significant increases in our labor costs. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Our manufacturing business is subject to the possibility of product liability lawsuits, which could harm our business.

As the manufacturer of equipment for use in industrial markets, we face an inherent risk of exposure to product liability claims. Our products may not be free from defects. In addition, some of our products contain components manufactured by third parties, which may also have defects. We maintain insurance coverage for product liability claims. The insurance policies have limits, however, that may not be sufficient to cover claims made. In addition, this insurance may not continue to be available at a reasonable cost. With respect to components manufactured by third-party suppliers, the contractual indemnification that we seek from our third-party suppliers may be limited and thus insufficient to cover claims made against us. If insurance coverage or contractual indemnification is insufficient to satisfy product liability claims made against us, the claims could have an adverse effect on our business and financial condition. Even claims without merit could harm our reputation, reduce demand for our products, cause us to incur substantial legal costs and distract the attention of our management. The occurrence of any of the foregoing could have a material and adverse effect on our business, financial condition and results of operations.

As manufacturers, we are subject to a variety of environmental and health and safety laws for which compliance, or liabilities that arise as a result of noncompliance, could be costly.

Our businesses are subject to international, federal, state and local environmental and safety laws and regulations, including laws and regulations governing emissions of: regulated air pollutants; discharges of wastewater and storm water; storage and handling of raw materials; generation, storage, transportation and disposal of regulated wastes; and laws and regulations governing worker safety. These requirements impose on our businesses certain responsibilities, including the obligation to obtain and maintain various environmental permits. If we were to fail to comply with these requirements or fail to obtain or maintain a required permit, we could be subject to penalties and be required to undertake corrective action measures to achieve compliance. In addition, if our noncompliance with such regulations were to result in a release of hazardous materials into the environment, such as soil or groundwater, we could be required to remediate such contamination, which could be costly. Moreover, noncompliance could subject us to private claims for property damage or personal injury based on exposure to hazardous materials or unsafe working conditions. In addition, changes in applicable requirements or stricter interpretation of existing requirements may result in costly compliance requirements or otherwise subject us to future liabilities. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

As the present or former owner or operator of real property, or generator of waste, we could become subject to liability for environmental contamination, regardless of whether we caused such contamination.

Under various federal, state and local laws, regulations and ordinances, and, in some instances, international laws, relating to the protection of the environment, a current or former owner or operator of real property may be liable for the cost to remove or remediate contamination on, under, or released from such property and for any damage to natural resources resulting from such contamination. Similarly, a generator of waste can be held responsible for contamination resulting from the treatment or disposal of such waste at any off-site location (such as a landfill), regardless of whether the generator arranged for the treatment or disposal

of the waste in compliance with applicable laws. Costs associated with liability for removal or remediation of contamination or damage to natural resources could be substantial and liability under these laws may attach without regard to whether the responsible party knew of, or was responsible for, the presence of the contaminants. In addition, the liability may be joint and several. Moreover, the presence of contamination or the failure to remediate contamination at our properties, or properties for which we are deemed responsible, may expose us to liability for property damage or personal injury, or materially adversely affect our ability to sell our real property interests or to borrow using the real property as collateral. We could be subject to environmental liabilities in the future as a result of historic or current operations that have resulted or will result in contamination. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Failure to maintain and protect our intellectual property rights or challenges to these rights by third parties may affect our operations and financial performance.

The market for many of our products is, in part, dependent upon patent, trademark, copyright and trade secret laws, agreements with employees, customers and other third parties to establish and maintain our intellectual property rights, and the goodwill engendered by our trademarks and trade names. The protection of these intellectual property rights is therefore material to a portion of our businesses. The failure to protect these rights may have a material adverse effect on our business, financial condition and results of operations. Litigation may be required to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights of others. It may be particularly difficult to enforce our intellectual property rights in countries where such rights are not highly developed or protected. Any action we take to protect our intellectual property rights could be costly and could absorb significant management time and attention. As a result of any such litigation, we could lose any proprietary rights we have.

In addition, third parties may claim that we or our customers are infringing upon their intellectual property rights. Claims of intellectual property infringement may subject us to costly and time-consuming defense actions and, should defenses not be successful, may result in the payment of damages, redesign of affected products, entry into settlement or license agreements, or a temporary or permanent injunction prohibiting us from manufacturing, marketing or selling certain of our products. It is also possible that others will independently develop technology that will compete with our patented or unpatented technology. The occurrence of any of the foregoing could have a material and adverse effect on our business, financial condition and results of operations.

The loss of key leadership could have a material adverse effect on our ability to run our business.

We may be adversely affected if we lose members of our senior leadership. We are highly dependent on our senior leadership team as a result of their expertise in our industry and our business. The loss of key leadership or the inability to attract, retain and motivate sufficient numbers of qualified management personnel could have a material adverse effect on our business, financial condition and results of operations.

The Deutsche Bank Credit Agreement contains restrictions that may limit our flexibility in operating our business.

The Deutsche Bank Credit Agreement contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:


•	incur additional indebtedness;


•	pay dividends on, repurchase or make distributions in respect of, the capital stock of Colfax and its wholly-owned subsidiaries;


•	make certain investments;


•	create liens on certain assets to secure debt;


•	consolidate, merge, sell or otherwise dispose of all or substantially all our assets; and


•	enter into certain transactions with affiliates.

In addition, under the Deutsche Bank Credit Agreement, we are required to satisfy and maintain compliance with a total leverage ratio and an interest coverage ratio. Limitations imposed by the Deutsche Bank Credit Agreement's various covenants could have a materially adverse effect on our business, financial condition and results of operations.

Any impairment in the value of our intangible assets, including Goodwill, would negatively affect our operating results and total capitalization.

Our Total assets reflect substantial intangible assets, primarily Goodwill. The Goodwill results from our acquisitions, representing the excess of cost over the fair value of the net assets we have acquired. We assess at least annually whether there has been impairment in the value of our indefinite-lived intangible assets. If future operating performance at one or more of our business units were to fall significantly below current levels, if competing or alternative technologies emerge, or if market conditions for an acquired business decline, we could incur, under current applicable accounting rules, a non-cash charge to operating earnings for Goodwill impairment. Any determination requiring the write-off of a significant portion of unamortized intangible assets would adversely affect our business, financial condition, results of operations and total capitalization, the effect of which could be material.

Our defined benefit pension plans and post-retirement medical and death benefit plans are or may become subject to funding requirements or obligations that could adversely affect our business, financial condition and results of operations.

We operate defined benefit pension plans and post-retirement medical and death benefit plans for our current and former employees worldwide. Each plan's funding position is affected by the investment performance of the plan's investments, changes in the fair value of the plan's assets, the type of investments, the life expectancy of the plan's members, changes in the actuarial assumptions used to value the plan's liabilities, changes in the rate of inflation and interest rates, our financial position, as well as other changes in economic conditions. Furthermore, since a significant proportion of the plans' assets are invested in publicly traded debt and equity securities, they are, and will be, affected by market risks. Any detrimental change in any of the above factors is likely to worsen the funding position of each of the relevant plans, and this is likely to require the plans' sponsoring employers to increase the contributions currently made to the plans to satisfy our obligations. Any requirement to increase the level of contributions currently made could have a material adverse effect on our business, financial condition and results of operations.

Significant movements in foreign currency exchange rates may harm our financial results.

We are exposed to fluctuations in currency exchange rates. During the year ended December 31, 2014, approximately 76% of our sales were derived from operations outside the U.S. A significant portion of our revenues and income are denominated in foreign currencies. Large fluctuations in the rate of exchange between foreign currencies and the U.S. dollar could have a material adverse effect on our business, financial condition and results of operations. Changes in the currency exchange rates may impact the financial results positively or negatively in one period and not another, which may make it difficult to compare our operating results from different periods.

We also face exchange risk from transactions with customers in countries outside the U.S. and from intercompany transactions between affiliates. Although we use the U.S dollar as our functional currency for reporting purposes, we have manufacturing sites throughout the world and a substantial portion of our costs are incurred and sales are generated in foreign currencies. Costs incurred and sales recorded by subsidiaries operating outside of the U.S. are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. In particular, the Company has more sales in European currencies than it has expenses in those currencies. Although a significant portion of this difference is hedged, when European currencies strengthen or weaken against the U.S. dollar, operating profits are increased or decreased, respectively. Further, we may be subject to foreign currency translation losses depending upon whether foreign nations devalue their currencies, movements in exchange rates between highly inflationary currencies and our reporting currency and the amount of monetary assets and liabilities included in the balance sheets of our operations denominated in currencies considered to be highly inflationary.

We have generally accepted the exposure to exchange rate movements in translation without using derivative financial instruments to manage this risk. Both positive and negative movements in currency exchange rates against the U.S. dollar will therefore continue to affect the reported amount of sales, profit, assets and liabilities in our Consolidated Financial Statements.

We are dependent on the availability of raw materials, as well as parts and components used in our products.

While we manufacture many of the parts and components used in our products, we purchase a substantial amount of raw materials, parts and components from suppliers. The availability and prices for raw materials, parts and components may be subject to curtailment or change due to, among other things, suppliers' allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and prevailing price levels. Any significant change in the supply of, or price for, these raw materials, parts or components could materially affect our business, financial condition and results of operations. In addition, delays in delivery of raw materials, parts or components by suppliers could cause delays in our delivery of products to our customers.

We are currently working to streamline our supplier base. However, this could exacerbate certain of the risks described above. For example, as a result of maintaining relationships with fewer suppliers, we may become more dependent on such suppliers having adequate quantities of raw materials, parts or components that satisfy our requirements at prices that we consider appropriate, and on the timely delivery of such raw materials, parts or components to us. In addition, as a result of maintaining relationships with fewer suppliers, it may be more difficult or impossible to obtain raw materials, parts or components from alternative sources when such components and raw materials are not available from our regular suppliers.

New regulations and customer preferences reflecting an increased focus on environmental, social and governance responsibility may impose additional costs on us and expose us to new risks, including with respect to the sourcing of our products.

Regulators, stockholders and other interested constituencies have focused increasingly on the environmental, social and governance practices of companies, which has resulted in new regulations that may impose costs on us and expose us to new risks. For example, Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and its implementing SEC regulations, imposed supply chain diligence and disclosure requirements for certain manufacturers of products containing “conflict minerals” that originated in the Democratic Republic of the Congo or an adjoining country. Complying with these requirements has imposed and will continue to impose additional costs on us, including costs to determine the source of any conflict minerals used in our products, and we may face reputational challenges or the loss of customers if we are unable to verify the origins for any conflict minerals used in our products. In addition, these requirements could adversely affect the sourcing, availability and pricing of such minerals.

We may be subject to additional regulations in the future arising from the increased focus on environmental, social and governance responsibility. In addition, our customers may require us to implement environmental, social or governance responsibility procedures or standards before they will continue to do business with us. The occurrence of any of the foregoing could have a material adverse effect on the price of our shares and our business, financial condition and results of operations.

Our information technology infrastructure could be subject to service interruptions, data corruption, cyber-based attacks or network security breaches, which could result in the disruption of operations or the loss of data confidentiality.

We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities, including procurement, manufacturing, distribution, invoicing and collection. These technology networks and systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures or computer viruses. In addition, our efforts to avoid or mitigate the impact of cyber-based attacks and security breaches may not be successful in avoiding a material breach, which could result in unauthorized disclosure of confidential information or damage to our information technology networks and systems. If these information technology systems suffer severe damage, disruption or shutdown and business continuity plans do not effectively resolve the issues in a timely manner, our business, financial condition and results of operations could be materially adversely affected.

We may be subject to risks arising from changes in technology.

The supply chains in which we operate are subject to technological changes and changes in customer requirements. We may not successfully develop new or modified types of products or technologies that may be required by our customers in the future. Further, the development of new technologies by competitors that may compete with our technologies could reduce demand for our products and affect our financial performance. Should we not be able to maintain or enhance the competitive values of our products or develop and introduce new products or technologies successfully, or if new products or technologies fail to generate sufficient revenues to offset research and development costs, our business, financial condition and operating results could be materially adversely affected.

The markets we serve are highly competitive and some of our competitors may have superior resources. If we are unable to respond successfully to this competition, this could reduce our sales and operating margins.

We sell most of our products in highly fragmented and competitive markets. We believe that the principal elements of competition in our markets are:


•	the ability to meet customer specifications;


•	application expertise and design and engineering capabilities;


•	product quality and brand name;


•	timeliness of delivery;


•	price; and


•	quality of aftermarket sales and support.

In order to maintain and enhance our competitive position, we intend to continue investing in manufacturing quality, marketing, customer service and support and distribution networks. We may not have sufficient resources to continue to make these investments and we may not be able to maintain our competitive position. Our competitors may develop products that are superior to our products, develop methods of more efficiently and effectively providing products and services, or adapt more quickly than us to new technologies or evolving customer requirements. Some of our competitors may have greater financial, marketing and research and development resources than we have. As a result, those competitors may be better able to withstand the effects of periodic economic downturns. In addition, pricing pressures could cause us to lower the prices of some of our products to stay competitive. We may not be able to compete successfully with our existing competitors or with new competitors. If we fail to compete successfully, the failure may have a material adverse effect on our business, financial condition and results of operations.

Changes in our tax rates or exposure to additional income tax liabilities could adversely affect our financial results.

Our future effective income tax rates could be unfavorably affected by various factors including, among others, changes in the tax rates, rules and regulations in jurisdictions in which we generate income or the repatriation of income held in foreign jurisdictions. Our Cash and cash equivalents as of December 31, 2014 includes $279.4 million held in jurisdictions outside the U.S., which may be subject to U.S. income tax if repatriated into the U.S. and other restrictions. In addition, the U.S. and foreign countries have considered changes to existing tax laws, including allowing existing provisions to expire, that could significantly impact the treatment of income earned outside the U.S. An increase in our effective tax rate could have a material adverse effect on our after-tax results of operations.

In addition, the amount of income taxes we pay is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. If these audits result in assessments different from amounts recorded, our future financial results may include unfavorable tax adjustments.

Risks and Other Considerations Related to our Common Stock

The issuances of additional Common and Preferred stock or the resale of previously restricted Common stock may adversely affect the market price of Colfax Common stock.

In connection with the Charter Acquisition, we issued a total of 20,182,293 shares of Colfax Common stock to BDT CF Acquisition Vehicle, LLC (the “BDT Investor”), Mitchell P. Rales, Steven M. Rales and Markel Corporation (collectively, the “Investors”) and 13,877,552 shares of Colfax Series A Preferred Stock to the BDT Investor, which shares were converted into 12,173,291 shares of Colfax Common stock in February 2014. Pursuant to registration rights agreements we entered into with the Investors in January 2012, the Investors and their permitted transferees have registration rights for the resale of the shares of Colfax Common stock acquired as a result of the Charter Acquisition and, with respect to the BDT Investor, shares of Colfax Common stock issuable upon conversion of the Series A Preferred Stock. In April 2012, we filed a prospectus supplement under which the Investors may resell these shares. In addition, Mitchell P. Rales and Steven M. Rales have registration rights for the resale of certain shares of Colfax Common stock pursuant to a registration rights agreement entered into in 2003 and amended in 2013. These registration rights would facilitate the resale of such securities into the public market, and any such resale would increase the number of shares of Colfax Common stock available for public trading. For instance, in May 2013 the BDT Investor and certain of its permitted transferees sold 4,000,000 shares of Colfax Common stock to underwriters for public resale. Sales by the BDT Investor, Markel, Mitchell P. Rales or Steven M. Rales or their permitted transferees of a substantial number of shares of Colfax Common stock in the public market, or the perception that such sales might occur, could have a material adverse effect on the price of Colfax Common stock.

In March 2012, May 2013 and February 2014, we sold 9,000,000 shares, 7,500,000 shares and 9,200,000 shares, respectively, of newly issued Common stock to underwriters for public resale pursuant to a shelf registration statement. Under our Amended and Restated Certificate of Incorporation, there are additional authorized shares of Colfax Common stock, which, if subsequently issued, could have a further dilutive effect on outstanding Colfax Common stock.

The BDT Investor may exercise significant influence over us, including through its ability to elect up to two members of our Board of Directors, as a result of its ownership of a significant percentage of outstanding Colfax Common stock.

As of February 2, 2015, the BDT Investor beneficially owned approximately 11.1% of the outstanding Colfax Common stock.

Our Amended and Restated Certificate of Incorporation provides that the BDT Investor will have the right to exclusively nominate (1) two out of eleven directors to our Board of Directors so long as the BDT Investor and its permitted transferees beneficially own in the aggregate at least 20% of the outstanding Colfax Common stock, with one of its nominees to serve on the Audit Committee of our Board of Directors and one of its nominees to serve on the Compensation Committee of our Board of Directors, and (2) one out of ten directors to our Board of Directors so long as the BDT Investor and its permitted transferees beneficially own in the aggregate less than 20% but more than 10% of the outstanding Colfax Common stock, with such nominee to serve on the Audit Committee and the Compensation Committee of our Board of Directors. Further, so long as the BDT Investor and certain permitted transferees beneficially own at least 10% of the Colfax Common stock, the BDT Investor’s written consent is required to alter, amend or repeal the provisions of the Amended and Restated Certificate of Incorporation which set forth the authorized number of members of our Board and the BDT Investor’s nomination rights in respect of members of our Board.

Provisions in our governing documents and Delaware law, and the percentage of Common stock owned by our largest stockholders, may delay or prevent an acquisition of Colfax that may be beneficial to our stockholders.

Our Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and Delaware law contain provisions that may make it difficult for a third party to acquire us without the consent of our Board of Directors. These include provisions prohibiting stockholders from taking action by written consent, prohibiting special meetings of stockholders called by stockholders and prohibiting stockholder nominations and approvals without complying with specific advance notice requirements. In addition, our Board of Directors has the right to issue Preferred stock without stockholder approval, which our Board of Directors could use to effect a rights plan or “poison pill” that could dilute the stock ownership of a potential hostile acquirer and may have the effect of delaying, discouraging or preventing an acquisition of Colfax. Delaware law also imposes some restrictions on mergers and other business combinations between Colfax and any holder of 15% or more of its outstanding voting stock.

In addition, the percentage of Colfax Common stock owned by the BDT Investor, Mitchell P. Rales and Steven M. Rales, as well as the director nomination rights of the BDT Investor, could discourage a third party from proposing a change of control or other strategic transaction concerning Colfax.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters are located in Annapolis Junction, Maryland in a facility that we lease. As of December 31, 2014, our gas- and fluid-handling reportable segment had 11 principal production facilities in the U.S. representing approximately 748,508 and 63,700 square feet of owned and leased space, respectively, and 46 principal production facilities in 19 different countries in Asia, Europe, the Americas, Australia and South Africa, representing a total of 2.7 million and 0.8 million square feet of owned and leased space, respectively. Additionally, as of December 31, 2014, our fabrication technology operating segment had a total of 6 production facilities in the U.S., representing a total of 1.3 million and 0.4 million square feet of owned and leased space, and 30 outside the U.S., representing a total of 8.2 million and 1.9 million square feet of owned and leased facilities, respectively, in 17 countries in Australia, Central and Eastern Europe, Central and South America and Asia.

Item 3. Legal Proceedings

Discussion of legal matters is incorporated by reference to Part II, Item 8, Note 15, “Commitments and Contingencies,” in the Notes to the Consolidated Financial Statements.

Item 4. Mine Safety Disclosures

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below are the names, ages, positions and experience of our executive officers. All of our executive officers hold office at the pleasure of our Board of Directors.



Name	Age	Position
Steven E. Simms	59	President and Chief Executive Officer and Director, Colfax Corporation
C. Scott Brannan	56	Senior Vice President, Finance, Chief Financial Officer and Treasurer
Clay H. Kiefaber	59	Executive Vice President, Chief Executive Officer, ESAB Global and Director, Colfax Corporation
Daniel A. Pryor	46	Executive Vice President, Strategy and Business Development
Ian Brander	53	Chief Executive Officer, Howden
Lynn Clark	57	Senior Vice President, Global Human Resources
Darryl Mayhorn	50	Senior Vice President, President and CEO of Colfax Fluid Handling
A. Lynne Puckett	52	Senior Vice President, General Counsel and Secretary
Stephen J. Wittig	52	Senior Vice President, Colfax Business System and Supply Chain Strategy

Steven E. Simms has been President and Chief Executive Officer since April 2012. He has served as a Director of Colfax since July 2011. Mr. Simms also served as Chairman of the Board of Directors of Apex Tools and is a former Executive Vice President of Danaher Corporation. Mr. Simms held a variety of leadership roles during his 11-year career at Danaher. He became Executive Vice President in 2000 and served in that role through his retirement in 2007, during which time he was instrumental in Danaher’s international growth and success. He previously served as Vice President-Group Executive from 1998 to 2000 and as an executive in Danaher’s tools and components business from 1996 to 1998. Prior to joining Danaher, Mr. Simms held roles of increasing authority at Black & Decker Corporation, most notably President-European Operations and President-Worldwide Accessories. Mr. Simms started his career at the Quaker Oats Company where he held a number of brand management roles. He currently serves as a member of the Board of Trustees of The Boys’ Latin School of Maryland and is actively involved in a number of other educational and charitable organizations in the Baltimore area.

C. Scott Brannan has been the Senior Vice President, Finance, Chief Financial Officer and Treasurer since October 2010. Mr. Brannan served on the Colfax Board of Directors and was Chairman of the Audit Committee from 2008 to September 2010. Prior to joining Colfax in his current role‚ he was a partner at Aronson & Company‚ a public accounting firm‚ from 2003 to 2010. He was also previously employed at Danaher Corporation for 12 years in roles of increasing responsibility‚ including Chief Accounting Officer‚ Controller and Vice President of Administration. Prior to Danaher Corporation‚ he spent 8 years with Arthur Andersen & Co. He holds bachelors and masters degrees in accounting from Loyola University Maryland and is a certified public accountant.

Clay H. Kiefaber is Executive Vice President‚ Chief Executive Officer ESAB Global and a Director of Colfax Corporation. Mr. Kiefaber has served on the Colfax Board of Directors since the Company’s IPO in 2008 and was previously the President and Chief Executive Officer of Colfax from January 2010 through April 2012. Before joining Colfax‚ he spent nearly 20 years in increasingly senior executive positions at Masco Corporation. Most recently‚ he was a Group President‚ where he was responsible for a $2.8 billion group of architectural coatings‚ windows‚ and spa business units. Prior to becoming a Group President at Masco, Mr. Kiefaber was Group Vice President of Masco Builder Cabinet Group. He previously spent 14 years in increasingly senior positions in Masco’s Merillat Industries subsidiary. Mr. Kiefaber holds an M.B.A. degree from the University of Colorado and a B.A. degree from Miami University.

Daniel A. Pryor has served as our Executive Vice President‚ Strategy and Business Development since July 2013. Mr. Pryor was Senior Vice President, Strategy and Business Development from January 2011 through July 2013. Prior to joining Colfax‚ he was a Partner and Managing Director with The Carlyle Group‚ a global alternative asset manager, where he focused on industrial leveraged buyouts and led numerous portfolio company and follow-on acquisitions. While at The Carlyle Group, he served on the boards of portfolio companies Veyance Technologies, Inc., John Maneely Co., and HD Supply Inc. Prior to The Carlyle Group, he spent 11 years at Danaher Corporation in roles of increasing responsibility‚ most recently as Vice President - Strategic Development. Mr. Pryor earned his M.B.A. from Harvard Business School and his B.A. in Economics from Williams College.

Ian Brander has been the Chief Executive Officer of Howden since August 1, 2011. Prior to becoming Chief Executive Officer of Howden, he served as Operations Director beginning in 2008. His experience includes over 20 years at Howden in various roles in technical, project, commercial and general management positions associated with a wide range of products. He holds a Mechanical Engineering degree from the University of Strathclyde.

Lynn Clark has been the Senior Vice President, Global Human Resources since January 2013. Prior to joining Colfax, she served as senior vice president, global human resources for Mead Johnson Nutrition. Ms. Clark held roles of increasing responsibility in human resources at Bristol-Myers Squibb from 2001 to 2009, and prior to this with Lucent Technologies and Allied Signal Corporation from 1993 and 2001. Prior to her experience in human resources, she worked for 15 years in sales and marketing. Ms. Clark has a bachelor of science in education and a master of science in college student personnel from Bowling Green University in Ohio.

Darryl Mayhorn has been the Senior Vice President, President and CEO of Colfax Fluid Handling since July 2014. Prior to joining Colfax, Mr. Mayhorn was President of the Rexnord Aerospace Group and the Chief Human Resources Officer of Rexnord Corporation. His professional career includes leadership roles at various global industrial companies, including Danaher Corporation and Eaton Corporation. Mr. Mayhorn is an alumnus of the University of Missouri, where he earned a Bachelor of Science degree in Business Administration. He has a master’s degree in business administration from St. Louis University.

A. Lynne Puckett has served as our Senior Vice President, General Counsel and Secretary since September 2010. Prior to joining Colfax‚ she was a Partner with the law firm of Hogan Lovells US LLP from 1999 to 2010. Her experience includes a broad range of corporate and transactional matters‚ including mergers and acquisitions‚ venture capital financings‚ debt and equity offerings‚ and general corporate and securities law matters. Before entering the practice of law‚ Ms. Puckett worked for the U.S. Central Intelligence Agency and a major U.S. defense contractor. Ms. Puckett holds a J.D. from the University of Maryland School of Law and a B.S. degree from James Madison University.

Stephen J. Wittig has been the Senior Vice President, Colfax Business System and Supply Chain Strategy since August 2011. Prior to joining Colfax, he was the Vice President of Lean Manufacturing and Six Sigma for the Masco Cabinet Group of Masco Corporation. His experience includes over 20 years of experience in engineering, manufacturing, logistics and supply chain management and held a number of operations positions with Lear Corporation, Preferred Technical Group, Sumitomo Electric and United Technologies. He has also been a member of the adjunct faculty in the School of Management with the University of Michigan where he taught a number of operations management courses. Mr. Wittig is a Six Sigma Master Black Belt with a certification from the Juran Institute. He holds his M.S. in Engineering from the University of Michigan and his B.S. in Industrial Engineering from Kettering University (formerly General Motors Institute).

PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our Common stock began trading on the New York Stock Exchange under the symbol CFX on May 8, 2008. As of February 2, 2015, there were approximately 33,511 holders of record of our Common stock. The high and low sales prices per share of our Common stock, as reported on the New York Stock Exchange, for the fiscal periods presented are as follows:



	Year Ended December 31,
	2014				2013
	High		Low		High		Low
First Quarter	$	72.56	$	58.30	$	48.82	$	40.29
Second Quarter	$	75.37	$	67.16	$	53.65	$	42.22
Third Quarter	$	75.26	$	56.23	$	57.49	$	50.13
Fourth Quarter	$	58.63	$	45.48	$	64.37	$	54.53

We have not paid any dividends on our Common stock since inception, and we do not anticipate the declaration or payment of dividends at any time in the foreseeable future. The Deutsche Bank Credit Agreement (as defined and further discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”) limits the amount of cash dividends and Common stock repurchases the Company may make to a total of $50 million annually.

Performance Graph

The graph below compares the cumulative total stockholder return on our Common stock with the cumulative total return of the Russell 2000 Index and the Standard & Poor’s (“S&P”) Industrial Machinery Index. The graph assumes that $100 was invested on December 31, 2009 in each of our Common stock, the Russell 2000 Index and the S&P Industrial Machinery Index, and that all dividends were reinvested.

Issuer Purchase of Equity Securities

There were no Common stock repurchases during 2014, 2013 or 2012.

Item 6. Selected Financial Data



	Year Ended and As of December 31,
	2014⁽¹⁾			2013⁽²⁾		2012⁽³⁾			2011⁽⁴⁾		2010⁽⁵⁾
	(In thousands, except per share data)
Statement of Operations Data:
Net sales	$	4,624,476		$	4,207,209	$	3,913,856		$	693,392	$	541,987
Cost of sales	3,145,631			2,900,987		2,761,731			453,293		350,579
Gross profit	1,478,845			1,306,222		1,152,125			240,099		191,408
Selling, general and administrative expense	1,011,171			864,328		908,439			173,461		146,713
Charter acquisition-related expense	—			—		43,617			31,052		—
Restructuring and other related charges	58,121			35,502		60,060			9,680		10,323
Operating income	409,553			406,392		140,009			25,906		34,372
Interest expense	51,305			103,597		91,570			5,919		6,684
(Benefit from) provision for income taxes	(62,025		)	93,652		90,703			15,432		11,473
Net income (loss)	420,273			209,143		(42,264		)	4,555		16,215
Less: income attributable to noncontrolling interest, net of taxes	28,175			30,515		22,138			—		—
Dividends on preferred stock	2,348			20,396		18,951			—		—
Preferred stock conversion inducement payment	19,565			—		—			—		—
Net income (loss) available to Colfax Corporation common shareholders	$	370,185		$	158,232	$	(83,353	)	$	4,555	$	16,215
Net income (loss) per share—basic	$	3.06		$	1.56	$	(0.92	)	$	0.10	$	0.37
Net income (loss) per share—diluted	$	3.02		$	1.54	$	(0.92	)	$	0.10	$	0.37
Balance Sheet Data:
Cash and cash equivalents	$	305,448		$	311,301	$	482,449		$	75,108	$	60,542
Goodwill and Intangible assets, net	3,916,486			3,242,252		2,853,279			245,873		200,636
Total assets	7,245,098			6,601,184		6,129,727			1,088,543		1,022,077
Total debt, including current portion	1,539,244			1,487,091		1,728,311			111,518		82,500

__________

⁽¹⁾

During 2014, we completed the Victor Acquisition. See Note 4, “Acquisitions” in the accompanying Notes to Consolidated Financial Statements in this Form 10-K for additional information. In February 2014, we sold newly issued Common stock and entered into a Conversion Agreement with BDT CF Acquisition Vehicle, LLC (the “BDT Investor”) pursuant to which the BDT Investor exercised its option to convert its shares of Series A Perpetual Convertible Preferred Stock into shares of our Common stock plus cash. See Note 11, “Equity” in the accompanying Notes to Consolidated Financial Statements in this Form 10-K for additional information.

⁽²⁾

During 2013, we completed the acquisitions of GII, Clarus, TLT-Babcock, Alphair, ČKDK and Sicelub and increased our ownership of Soldex. In February 2013 and November 2013, we refinanced our Debt, and in May 2013 we sold newly issued Common stock. See Note 4, “Acquisitions” in the accompanying Notes to Consolidated Financial Statements in this Form 10-K and Part I, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information.

⁽³⁾

During 2012, we completed the acquisitions of Charter, Soldex and Co-Vent and increased our ownership of ESAB India Limited (“ESAB India”) and CJSC Sibes. The Charter Acquisition transformed Colfax from a fluid-handling business into a multi-platform enterprise with a broad global footprint, which makes financial comparison to previous periods difficult. Additionally, in conjunction with the Charter Acquisition in January 2012, we refinanced our Debt and sold newly issued Common stock and Series A Preferred Stock. In March 2012, we sold newly issued Common stock. See Part I, Item 1. “Business,” Note 4, “Acquisitions” in the accompanying Notes to Consolidated Financial Statements in this Form 10-K and Part I, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information.


⁽⁴⁾	During 2011, we completed the acquisitions of Rosscor and COT-Puritech in February and December, respectively. See Part I, Item 1. “Business” and Note 4, “Acquisitions” in the accompanying Notes to Consolidated Financial Statements in this Form 10-K for additional information.


⁽⁵⁾	In August 2010, we acquired Baric.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of Company’s management. This MD&A is divided into four main sections:

•Overview

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Policies

The following MD&A should be read together with Item 6. “Selected Financial Data”, Part I, Item 1A. “Risk Factors” and the accompanying Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this Form 10-K. The MD&A includes forward-looking statements. For a discussion of important factors that could cause actual results to differ materially from the results referred to in these forward-looking statements, see “Special Note Regarding Forward-Looking Statements.”

Overview

Please see Part I, Item 1. “Business” for a discussion of Colfax’s objectives and methodologies for delivering shareholder value. We report our operations through the following reportable segments:

•

Gas and Fluid Handling - a global supplier of a broad range of gas- and fluid-handling products, including heavy-duty centrifugal and axial fans, rotary heat exchangers, gas compressors, pumps, fluid-handling systems and controls and specialty valves, which serves customers in the power generation, oil, gas and petrochemical, mining, marine (including defense) and general industrial and other end markets; and


•	Fabrication Technology - a global supplier of welding equipment and consumables, cutting equipment and consumables and automated welding and cutting systems.

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

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

Outlook

We believe that we are well positioned to grow our businesses organically over the long term by enhancing our product offerings and expanding our customer base. Our business mix is expected to be well balanced between long- and short-cycle businesses, sales in emerging markets and developed nations and fore- and aftermarket products and services. Given this balance, management does not use indices other than general economic trends to predict the overall outlook for the Company. Instead, the individual businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and outlook for the future.

We face a number of challenges and opportunities, including the successful integration of new acquisitions, application and expansion of our CBS tools to improve margins and working capital management, rationalization of assets and back office functions, and consolidation of manufacturing facilities.

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

Results of Operations

The following discussion of Results of Operations addresses the comparison of the periods presented. The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and segment operating income (loss), which represents Operating income (loss) before Restructuring and other related charges.

Items Affecting Comparability of Reported Results

Our financial performance and growth are driven by many factors, principally our ability to serve global markets, fluctuations in the relationship of foreign currencies to the U.S. dollar, general economic conditions, the global economy and capital spending levels, the availability of capital, our estimates concerning the availability of insurance proceeds to cover asbestos litigation expense and liabilities, the amount of asbestos liabilities and litigation expense, the impact of restructuring initiatives, our ability to pass cost increases on through pricing, the impact of sales mix, and our ability to continue to grow through acquisitions. These key factors have impacted our results of operations in the past and are likely to affect them in the future.

Global Operations

Our products and services are available worldwide. The manner in which our products and services are sold differs by region. During 2014, approximately 78% of our sales were shipped to locations outside of the U.S. Accordingly, we are affected by levels of industrial activity and economic and political factors in countries throughout the world. Our ability to grow and our financial performance will be affected by our ability to address a variety of challenges and opportunities that are a consequence of our global operations, including efficiently utilizing our global sales, manufacturing and distribution capabilities, the expansion of market opportunities in Asia, successfully completing global strategic acquisitions and engineering innovative new product applications for end users in a variety of geographic markets. However, we believe that our geographic, end market and product diversification may limit the impact that any one country or economy could have on our consolidated results.

Foreign Currency Fluctuations

A significant portion of our Net sales, approximately 76% for the year ended December 31, 2014, is derived from operations outside the U.S., with the majority of those sales denominated in currencies other than the U.S. dollar. Because much of our manufacturing and employee costs are outside the U.S., a significant portion of our costs are also denominated in currencies other than the U.S. dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significant to our discussion. We expect the impact of changes in foreign exchange rates to negatively impact our results of operations beginning in the first quarter of 2015 as a result of the strengthening of the U.S. dollar against most currencies.

We may be subject to foreign currency translation losses depending upon movements in exchange rates between highly inflationary currencies and the parents’ reporting currency and the amount of monetary assets and liabilities included in the balance sheets of our operations denominated in currencies considered to be highly inflationary.

Economic Conditions

Demand for our products depends on the level of new capital investment and planned maintenance by our customers. The level of capital expenditures depends, in turn, on the general economic conditions as well as access to capital at reasonable cost. Additionally, volatility in commodity prices, including oil, can negatively affect the level of these activities and can result in postponement of capital spending decisions or the delay or cancellation of existing orders. While demand can be cyclical, we believe that our diversified operations limit the impact of a downturn in any one market on our consolidated results.

Seasonality

As our gas- and fluid-handling customers seek to fully utilize capital spending budgets before the end of the year, historically our shipments have peaked during the fourth quarter. Also, all of our European operations typically experience a slowdown during the July and August and December holiday season. General economic conditions may, however, impact future seasonal variations.

Pricing

We believe our customers place a premium on quality, reliability, availability, design and application engineering support. Our highly engineered gas- and fluid-handling products typically have higher margins than products with commodity-like qualities. However, we are sensitive to price movements in our raw materials supply base. Our largest material purchases are for components and raw materials including steel, iron, copper and aluminum. Historically, we have been generally successful in passing raw

material price increases on to our customers. While we seek to take actions to manage this risk, including commodity hedging where appropriate, such increased costs may adversely impact earnings.

Sales and Cost Mix

Our profit margins vary in relation to the relative mix of many factors, including the type of product, the geographic location in which the product is manufactured, the end market for which the product is designed, and the percentage of total revenue represented by consumables and aftermarket sales and services. Consumables are generally sold at lower margins in comparison to our foremarket products and equipment, whereas our aftermarket business, including spare parts and other value added services, is generally a higher margin business.

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



	Year Ended December 31,
	2014		2013		2012
Foremarket and equipment	47	%	47	%	45	%
Aftermarket and consumables	53	%	53	%	55	%

Strategic Acquisitions

We complement our organic growth with strategic acquisitions. Acquisitions can significantly affect our reported results and can complicate period to period comparisons of results. As a consequence, we report the change in our Net sales between periods both from existing and acquired businesses. Orders and order backlog are presented only for the gas- and fluid-handling segment, where this information is relevant. The change in Net sales due to acquisitions represents the change in sales due to the following acquisitions:

On January 13, 2012, Colfax acquired Charter, a global industrial manufacturing company focused on welding, cutting and automation and air and gas handling, for a total purchase price of approximately $2.6 billion. The impact of the additional 12 days of operations is included in the change in Net sales due to acquisitions in 2013.

Gas and Fluid Handling

On September 13, 2012, Colfax completed the acquisition of Co-Vent for $34.6 million. Co-Vent specializes in the custom design, manufacture, and testing of industrial fans, with its primary operations based in Quebec, Canada. As a result of this acquisition, Colfax has expanded its product offerings in the industrial fan market.

On July 9, 2013, Colfax completed the acquisition of the common stock of Clarus for $13.2 million, which included the fair value of an estimated additional contingent cash payment of $2.5 million at the acquisition date. The additional contingent payment would be paid during the year ending December 31, 2016 subject to the achievement of certain performance goals. However, we do not expect the performance goals to be achieved. Clarus is a domestic supplier of flushing services for marine applications primarily to U.S. government agencies, with primary operations based in Bellingham, Washington.

On September 30, 2013, the Company completed the acquisitions of TLT-Babcock and Alphair for an aggregate purchase price of $55.7 million. TLT-Babcock and Alphair are suppliers of heavy duty and industrial fans in Akron, Ohio and Winnipeg, Manitoba, respectively.

On November 1, 2013, the Company completed the acquisition of ČKDK for $69.4 million, including the assumption of debt. ČKDK is a leading supplier of multi-stage centrifugal compressors to the oil & gas, petrochemical, power and steel industries, based in Prague, Czech Republic.

On November 25, 2013, the Company increased its ownership of Sicelub, previously a less than wholly owned subsidiary in which the Company did not have a controlling interest, from 44% to 100%. Sicelub provides flushing services to Central and South American customers primarily in the oil, gas and petrochemical end market.

On November 29, 2013, the Company completed the acquisition of GII for $246.0 million, including the assumption of debt, subject to certain adjustments. GII has operations around the world and expanded the Company’s product offerings in the heavy duty industrial and cooling fan market.

Fabrication Technology

In May 2012, Colfax acquired the remaining 83.7% of Sibes not already owned by its ESAB business for $8.5 million, including the assumption of debt. Sibes is a leading supplier of welding electrodes to customers in Eastern Russia and strengthens ESAB’s position in the attractive Russian welding consumables market, particularly in the energy and natural resources end markets.

On October 31, 2012, Colfax completed the acquisition of approximately 91% of the outstanding common and investment shares of Soldex for $187.2 million. Soldex is organized under the laws of Peru and complements our existing fabrication technology segment by supplying welding products from its plants in Colombia and Peru. On August 5, 2013, Colfax completed a $14.9 million tender offer for common and investment shares of Soldex resulting in an increase in our ownership of the subsidiary from approximately 91% to 99%.

On April 14, 2014, Colfax completed the acquisition of Victor Technologies Holdings, Inc. ("Victor") for net cash consideration of $948.8 million, subject to certain adjustments (the “Victor Acquisition”). Victor is a pre-eminent global manufacturer of cutting, gas control and specialty welding solutions. The acquisition complemented the geographic footprint of our fabrication technology segment and expanded our product portfolio into new segments and applications. For the year ended December 31, 2013, Victor had net sales and operating income of $486.8 million and $64.0 million, respectively.

Sales, Orders and Backlog

Our Net sales increased from $3.9 billion in 2012 to $4.2 billion in 2013. In 2014, our Net sales increased to $4.6 billion. The following table presents components of our consolidated Net sales and, for our gas- and fluid-handling segment, order and backlog growth (decline):



	Net Sales					Orders⁽¹⁾					Backlog at Period End
	$			%		$			%		$			%
	(In millions)

As of and for the year ended December 31, 2012	$	3,913.9				$	1,996.0				$	1,431.5
Components of Change:
Existing businesses⁽²⁾	107.5			2.7	%	(15.3		)	(0.8	)%	(58.6		)	(4.1	)%
Acquisitions⁽³⁾	246.9			6.3	%	96.4			4.8	%	231.2			16.2	%
Foreign currency translation⁽⁴⁾	(61.1		)	(1.5	)%	(15.7		)	(0.7	)%	(26.7		)	(1.9	)%
	293.3			7.5	%	65.4			3.3	%	145.9			10.2	%
As of and for the year ended December 31, 2013	$	4,207.2				$	2,061.4				$	1,577.4
Components of Change:
Existing businesses⁽²⁾	(79.0		)	(1.9	)%	(0.1		)	—	%	(42.9		)	(2.7	)%
Acquisitions⁽³⁾	635.2			15.1	%	251.7			12.2	%	—			—	%
Foreign currency translation⁽⁴⁾	(138.9		)	(3.3	)%	(26.3		)	(1.3	)%	(132.2		)	(8.4	)%
	417.3			9.9	%	225.3			10.9	%	(175.1		)	(11.1	)%
As of and for the year ended December 31, 2014	$	4,624.5				$	2,286.7				$	1,402.3

⁽¹⁾Represents contracts for products or services, net of cancellations for the period, for our gas- and fluid-handling segment.

⁽²⁾Excludes the impact of foreign exchange rate fluctuations and acquisitions, thus providing a measure of growth due to factors such as price, product mix and volume.

⁽³⁾Represents the incremental sales, orders and order backlog as a result of our acquisitions.

⁽⁴⁾Represents the difference between prior year sales, orders and order backlog valued at the actual prior year foreign exchange rates and prior year sales, orders and order backlog valued at current year foreign exchange rates.

The decrease in Net sales from existing businesses during 2014 compared to 2013 was attributable to decreases of $47.7 million and $31.3 million in our fabrication technology and gas- and fluid-handling segments, respectively. Orders, net of cancellations, from existing businesses for our gas- and fluid-handling segment were flat during 2014 in comparison to 2013 as declines in the oil, gas and petrochemical, power generation and mining end markets were offset by growth in the marine and general industrial and other end markets.

The increase in Net sales from existing businesses during 2013 compared to 2012 was attributable to an increase of $138.1 million in our gas- and fluid-handling segment, which was partially offset by a decrease of $30.6 million in our fabrication technology segment. Orders, net of cancellations, from existing businesses for our gas- and fluid-handling segment decreased during 2013 in comparison to 2012 due to declines in the oil, gas and petrochemical, mining and general industrial and other end markets, which were partially offset by growth in the power generation and marine end markets.

Business Segments

As discussed further above, the Company reports results in two reportable segments: gas and fluid handling and fabrication technology. The following table summarizes Net sales by reportable segment for each of the following periods:



	Year Ended December 31,
	2014		2013		2012
	(In millions)
Gas and Fluid Handling	$	2,329.6	$	2,104.0	$	1,901.2
Fabrication Technology	2,294.9		2,103.2		2,012.7
Total Net sales	$	4,624.5	$	4,207.2	$	3,913.9

Gas and Fluid Handling

We design, manufacture, install and maintain gas- and fluid-handling products for use in a wide range of markets, including power generation, oil, gas and petrochemical, mining, marine (including defense) and general industrial and other. Our gas-handling products are principally marketed under the Howden brand name. Howden’s primary products are heavy-duty fans, rotary heat exchangers and compressors. The fans and heat exchangers are used in coal-fired and other types of power stations, both in combustion and emissions control applications, underground mines, steel sintering plants and other industrial facilities that require movement of large volumes of air in harsh applications. Howden’s compressors are mainly used in the oil, gas and petrochemical end market. Our fluid-handling products are marketed by Colfax Fluid Handling under a portfolio of brands including Allweiler and Imo. Colfax Fluid Handling is a supplier of a broad range of fluid-handling products, including pumps, fluid-handling systems and controls, and specialty valves.

The following table summarizes selected financial data for our gas- and fluid-handling segment:



	Year Ended December 31,
	2014			2013			2012
	(Dollars in millions)
Net sales	$	2,329.6		$	2,104.0		$	1,901.2
Gross profit	696.7			626.7			567.1
Gross profit margin	29.9		%	29.8		%	29.8		%
Restructuring and other related charges	$	26.5		$	10.4		$	8.7
Selling, general and administrative expense	438.9			355.9			425.6
Selling, general and administrative expense as a percentage of Net sales	18.8		%	16.9		%	22.4		%
Segment operating income	254.2			270.7			141.5
Segment operating income margin	10.9		%	12.9		%	7.4		%

The $31.3 million Net sales decrease due to existing businesses, as discussed and defined under “Sales, Orders and Backlog” above, during 2014 in comparison to 2013 was primarily due to declines in the oil, gas and petrochemical, power generation and marine end markets, partially offset by growth in the mining and general industrial and other end markets. Additionally, Net sales increased by $287.9 million due to acquisitions and changes in foreign exchange rates had a negative impact of $31.0 million. Gross profit increased during 2014 reflecting the impact of acquisitions. Gross profit margin increased during 2014 in comparison to 2013 as improved margins through cost control and restructuring savings in our gas-handling business were more than sufficient to offset the lower margins of the acquired entities. Restructuring and other related charges increased during 2014 primarily due to an increase in restructuring actions to reduce structural costs and integrate the acquisitions made during the fourth quarter of 2013. Selling, general and administrative expense for 2014 increased compared to 2013 primarily as a result of an increase of $66.3 million due to acquisitions, a $13.4 million impairment loss related to identifiable intangible assets, a $4.0 million loss on disposition of a small fluid-handling business line and a $1.3 million loss from the use of the SICAD II exchange rate at our Venezuelan fluid-handling business, partially offset by an unrealized gain of $2.9 million related to the Clarus contingent payment liability, as the performance criteria are no longer expected to be met.

The $138.1 million Net sales increase due to existing businesses, as discussed and defined under “Sales, Orders and Backlog” above, during 2013 in comparison to 2012 was primarily due to growth in the power generation, marine and general industrial and other end markets, partially offset by declines in the oil, gas and petrochemical and mining end markets. Additionally, Net sales increased by $83.9 million due to acquisition-related growth, including 12 additional days of activity in Howden, which was partially offset by a decrease of $19.2 million due to changes in foreign exchange rates. Gross profit increased during 2013 reflecting the impact of higher volumes. Gross profit margin remained consistent in 2013 with 2012 due to the positive impact of our strong cost control activities offset by the lower margins on the sales associated with the entities acquired in 2013. Additionally, $4.5 million of acquisition-related amortization expense was reflected in Gross profit for 2012. Selling, general and administrative expense for 2013 decreased compared to 2012 primarily due to a decrease of $56.6 million in acquisition-related amortization expense. Selling, general and administrative expense for 2013 was reduced by a $13.8 million gain to remeasure the Company’s equity investment in Sicelub to fair value upon increasing the Company’s ownership to 100%.

Fabrication Technology

We formulate, develop, manufacture and supply consumable products and equipment for use in the cutting and joining of steels, aluminum and other metals and metal alloys. Our fabrication technology products are marketed under several brand names, most notably ESAB and Victor, which we believe are well known in the international cutting and welding industry. ESAB’s comprehensive range of cutting and welding consumables includes electrodes, cored and solid wire and fluxes. ESAB’s fabrication technology equipment ranges from portable welding machines to large customized cutting and automated welding systems. The Victor Acquisition complemented the geographic footprint of our fabrication technology segment and expanded our cutting equipment and consumables, gas control and specialty welding product lines. Products are sold into a wide range of end markets, including oil & gas, power generation, wind power, shipbuilding, pipelines, mobile/off-highway equipment and mining.

The following table summarizes selected financial data for our fabrication technology segment:



	Year Ended December 31,
	2014			2013			2012
	(Dollars in millions)
Net sales	$	2,294.9		$	2,103.2		$	2,012.7
Gross profit	782.1			679.6			585.1
Gross profit margin	34.1		%	32.3		%	29.1		%
Restructuring and other related charges	$	31.6		$	25.1		$	45.2
Selling, general and administrative expense	516.3			459.9			444.9
Selling, general and administrative expense as a percentage of Net sales	22.5		%	21.9		%	22.1		%
Segment operating income	$	265.8		$	219.6		$	140.2
Segment operating income margin	11.6		%	10.4		%	7.0		%

The $191.7 million Net sales increase during 2014 compared to 2013 was primarily the result of acquisition-related growth of $347.3 million, partially offset by changes in foreign exchange rates which had a negative impact of $107.9 million. The $47.7 million Net sales decline due to existing businesses, as discussed and defined under “Sales, Orders and Backlog” above, during 2014 in comparison to 2013 was primarily the result of decreases in consumable volumes in most geographies. Gross profit and gross profit margin for 2014 increased reflecting the positive impact of cost control activities. Additionally, Gross profit and gross profit margin during 2014 were positively impacted by the higher gross margins at Victor, which were partially offset by acquisition-related inventory step up expense of $9.0 million. The increase in Selling, general and administrative expense during 2014 was primarily due to an acquisition-related increase of $95.5 million and a $5.0 million loss from the use of the SICAD II exchange rate at our Venezuelan fabrication technology business, partially offset by significant cost control activities and the impact of change in foreign exchange rates.

The $90.5 million Net sales increase during 2013 compared to 2012 was primarily the result of acquisition-related growth of $163.0 million, including 12 additional days of activity in ESAB. The $30.6 million Net sales decline due to existing businesses, as discussed and defined under “Sales, Orders and Backlog” above, during 2013 in comparison to 2012 was primarily the result of decreases in consumable volumes in Europe, Asia and North America. Net sales was also negatively impacted by $41.9 million due to the change in foreign exchange rates. Gross profit and gross profit margin for 2012 were impacted by acquisition-related inventory step-up expense of $18.7 million. In 2013, Gross profit and gross profit margin were favorably impacted by the fixed costs eliminated by several manufacturing site closings in late 2012 and the higher gross profit margins at Soldex. Additionally, Selling, general and administrative expense increased by $29.9 million due to the acquisition of Soldex. This amount includes the impact of the devaluation of the Venezuelan bolivar fuerte during the first quarter of 2013, which resulted in a foreign currency

transaction loss of $2.9 million recognized in Selling, general and administrative expense for 2013. Selling, general and administrative expense was also impacted by the inclusion of an additional 12 days of ESAB operations in 2013 compared to 2012. See Note 2, “Summary of Significant Accounting Policies” in the accompanying Notes to Consolidated Financial Statements included in this Form 10-K for additional discussion regarding the devaluation of the Venezuelan bolivar fuerte.

Gross Profit - Total Company



	Year Ended December 31,
	2014			2013			2012
	(Dollars in millions)
Gross profit	$	1,478.8		$	1,306.2		$	1,152.1
Gross profit margin	32.0		%	31.0		%	29.4		%

The $172.6 million increase in Gross profit during 2014 in comparison to 2013 was attributable to increases of $70.0 million and $102.6 million in our gas- and fluid-handling segment and our fabrication technology segment, respectively. The increase in gross profit margin in both of our segments during 2014 reflects the positive impact of cost control activities. Additionally, our fabrication technology segment was positively impacted during 2014 by the higher gross margins of Victor, which were partially offset by acquisition-related inventory step up expense. The increase in Gross profit in our gas- and fluid-handling segment during 2014 includes the impact of acquisitions, which also served to reduce gross profit margin. Changes in foreign exchange rates during 2014 had a $44.0 million negative impact on Gross profit.

The $154.1 million increase in Gross profit during 2013 in comparison to 2012 was attributable to increases of $59.6 million in our gas- and fluid-handling segment and $94.5 million in our fabrication technology segment. Gross profit increased during 2013 due to the non-recurrence of $21.6 million of acquisition-related inventory step-up expense incurred in 2012. The improvement in gross profit margin during the period was also due to the impact of our cost reduction efforts and favorable trends in sales price in comparison to raw material costs in our fabrication technology segment. Changes in foreign exchange rates during 2013 had a $14.7 million negative impact on Gross profit in comparison to 2012.

Operating Expenses - Total Company



	Year Ended December 31,
	2014			2013			2012
	(Dollars in millions)
Selling, general and administrative expense	$	1,011.2		$	864.3		$	908.5
Selling, general and administrative expense as a percentage of Net sales	21.9		%	20.5		%	23.2		%
Charter acquisition-related expense	$	—		$	—		$	43.6
Restructuring and other related charges	58.1			35.5			60.1

Selling, general and administrative expense increased $146.9 million during 2014 in comparison to 2013 primarily due to an increase of $161.8 million attributable to the addition of the operations associated with the Victor Acquisition and the gas- and fluid-handling acquisitions during 2013. Additionally, Selling, general and administrative expense for 2014 includes a $13.4 million impairment loss related to identifiable intangible assets, a $4.0 million loss on disposition of a small fluid-handling business line and a $6.3 million loss from the use of the SICAD II exchange rate at our Venezuelan businesses, partially offset by significant cost saving programs in both segments and an unrealized gain of $2.9 million related to the Clarus contingent payment liability, as the performance criteria are no longer expected to be met. Restructuring and other related charges increased compared to 2013 primarily due to an increase in restructuring actions to reduce structural costs and integrate the acquisitions made during 2014 and the fourth quarter of 2013.

Selling, general and administrative expense decreased $44.2 million during 2013 in comparison to 2012, primarily due to a decrease in acquisition-related amortization expense of $56.6 million, partially offset by the increase in expenses resulting from the additional 12 days of operations related to the entities acquired as part of the Charter Acquisition and the acquisitions of Soldex, Co-Vent, Clarus, ČKDK, GII, TLT-Babcock, Alphair and Sicelub. During 2012, we incurred $43.6 million of advisory, legal, valuation and other professional service fees and realized losses on acquisition-related foreign exchange derivatives in connection with the Charter Acquisition. Restructuring and other related charges decreased in 2013 in comparison to 2012 primarily as a result of the completion of several substantial cost reduction programs in the fabrication technology segment in 2012.

Interest Expense - Total Company



	Year Ended December 31,
	2014		2013		2012
	(Dollars in millions)
Interest expense	$	51.3	$	103.6	$	91.6

The decrease in Interest expense during 2014 was primarily attributable to the amendments to the Deutsche Bank Credit Agreement during 2013. During 2013, $29.4 million of certain deferred fees and original issue discount were written-off in connection with the amendments which reduced future accretion to Interest expense and did not reoccur in 2014. Additionally, the favorable impact of lower borrowing rates reduced Interest expense by $13.7 million and the lesser accretion of deferred fees and original issue discount decreased Interest expense by $6.2 million, which were also attributable to the amendments in 2013. A reduction of $3.1 million is included in Interest expense due to the change in expected settlement under the conditions specified in the contract of the mandatorily redeemable non-voting preferred stock of Sicelub, as the performance criteria were not met. See Note 4, “Acquisitions” in the accompanying Notes to Consolidated Financial Statements in this Form 10-K for addition information regarding the mandatorily redeemable non-voting preferred stock of Sicelub.

The increase in Interest expense during 2013 in comparison to 2012 was primarily attributable to the write-off of $29.4 million of certain deferred fees and original issue discount associated with the Second and Third Amendments to the Deutsche Bank Credit Agreement, as defined and further discussed under “—Liquidity and Capital Resources—Borrowing Arrangements” below, and $1.2 million of costs incurred in connection with the refinancings, partially offset by the favorable impact of lower borrowing rates associated with the Second and Third Amendments to the Deutsche Bank Credit Agreement and lower outstanding borrowing levels.

Provision for Income Taxes - Total Company

Income before income taxes was $358.2 million and the Benefit from income taxes was $62.0 million for 2014. The Benefit from income taxes was impacted by the reassessment of the realizability of certain deferred tax assets as a result of the effect of the Victor Acquisition on expected future U.S. income. This reassessment resulted in a decrease in the Company’s valuation allowance against U.S. deferred tax assets. The reduction in the valuation allowance created a non-cash income tax benefit for 2014 of $145.4 million. Additionally, a tax benefit of $21.8 million was included in Benefit from income taxes in the Consolidated Statements of Operations during 2014 associated with the resolution of a liability for unrecognized tax benefits. These items, as well as the impact of foreign earnings where international tax rates are lower than the U.S. tax rate, are the principal reasons for a tax benefit rather than a tax provision, which would result from the application of the U.S. federal statutory rate to the reported Income before income taxes for 2014.

The effective tax rate for 2013 was 30.9%, which was lower than the U.S. federal statutory tax rate primarily due to foreign earnings where international tax rates are lower than the U.S. tax rate, a discrete credit to income tax expense of $5.1 million from a reduction to deferred tax balances in certain territories associated with the enactment of lower corporate tax rates and the reduction of a liability for unrecognized tax benefits, which resulted in a gain of $2.3 million, all of which were offset in part by other discrete tax items and losses in certain jurisdictions where a tax benefit is not expected to be recognized in 2013.

Liquidity and Capital Resources

Overview

Historically, we have financed our capital and working capital requirements through a combination of cash flows from operating activities, borrowings under our bank credit facilities and the issuances of equity. We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures, asbestos-related cash outflows and funding of our pension plans. If additional funds are needed for strategic acquisitions or other corporate purposes, we believe we could raise additional funds in the form of debt or equity.

Equity Capital

In connection with the financing of the Charter Acquisition, on January 24, 2012, we sold to the BDT Investor (i) 14,756,945 shares of newly issued Colfax Common stock and (ii) 13,877,552 shares of newly created Series A perpetual convertible preferred stock, referred to as the Series A Preferred Stock, for an aggregate of $680 million (representing $24.50 per share of Series A Preferred Stock and $23.04 per share of Common stock) pursuant to the BDT Purchase Agreement with the BDT Investor as well as BDT Capital Partners Fund I-A, L.P., and Mitchell P. Rales, Chairman of our Board of Directors, and his brother, Steven M.

Rales (for the limited purpose of tag-along sales rights provided to the BDT Investor in the event of a sale or transfer of shares of our Common stock by either or both of Mitchell P. Rales and Steven M. Rales).

On January 24, 2012, we sold 2,170,139 shares of newly issued Colfax Common stock to each of Mitchell P. Rales and Steven M. Rales and 1,085,070 shares of newly issued Colfax Common stock to Markel Corporation (“Markel”) at $23.04 per share, for an aggregate of $125 million pursuant to separate securities purchase agreements with Mitchell P. Rales, Chairman of Colfax’s Board of Directors, and his brother Steven M. Rales, each of whom were beneficial owners of 20.9% of Colfax’s Common stock at the time of the sale, and Markel. Thomas S. Gayner, a member of Colfax’s Board of Directors, is President and Chief Investment Officer of Markel.

Consideration paid to Charter shareholders included 0.1241 shares of newly issued Colfax Common stock in exchange for each share of Charter’s ordinary stock, which resulted in the issuance of 20,735,493 shares of Common stock on January 24, 2012.

In conjunction with the issuance of the Common and Preferred stock issued in connection with the financing of the Charter Acquisition, the Company recognized $14.7 million in equity issuance costs which were recorded as a reduction to Additional paid-in capital during 2012.

On March 5, 2012, we sold 8,000,000 shares of newly issued Common stock to underwriters for public resale pursuant to a shelf registration statement for an aggregate purchase price of $272 million. Further, on March 9, 2012, the underwriters of the March 5, 2012 equity offering exercised their over-allotment option and we sold an additional 1,000,000 shares of newly issued Common stock to the underwriters for public resale pursuant to a shelf registration statement for an aggregate purchase price of $34 million. In conjunction with these issuances, we recognized $12.6 million in equity issuance costs which were recorded as a reduction to Additional paid-in capital during 2012.

On May 13, 2013, we sold 7,500,000 shares of newly issued Colfax Common stock to underwriters for public resale pursuant to a shelf registration statement for an aggregate purchase price of $331.9 million. In conjunction with this issuance, we recognized $12.0 million in equity issuance costs which were recorded as a reduction to Additional paid-in capital during 2013.

On September 12, 2013, we contributed 88,200 shares of newly issued Colfax Common stock to our U.S. defined benefit pension plan.

On January 15, 2014, we contributed 183,000 shares of newly issued Colfax Common stock to our U.S. defined benefit pension plan.

We entered into a Conversion Agreement with the BDT Investor, pursuant to which the BDT Investor exercised its option to convert 13,877,552 shares of Series A Perpetual Convertible Preferred Stock into 12,173,291 shares of the Company’s Common stock plus cash in lieu of a .22807018 share interest, which conversion occurred on February 12, 2014. As consideration for the BDT Investor’s agreement to exercise its optional conversion right, the Company paid approximately $23.4 million to the BDT Investor, of which $19.6 million represents the Preferred stock conversion inducement payment in the Consolidated Statement of Operations for 2014.

On February 20, 2014, we sold 9,200,000 shares of newly issued Colfax Common stock to underwriters for public resale pursuant to the shelf registration statement for an aggregate purchase price of $632.5 million. In conjunction with this issuance, we recognized $22.1 million in equity issuance costs, which were recorded as a reduction in Additional paid-in capital during 2014.

Borrowing Arrangements

We entered into the Deutsche Bank Credit Agreement on September 12, 2011. In connection with the closing of the Charter Acquisition, the Deutsche Bank Credit Agreement was amended on January 13, 2012 and we terminated our existing credit agreement as well as Charter’s outstanding indebtedness. We entered into a Second Amendment to the Deutsche Bank Credit Agreement on February 22, 2013 which, among other things, reallocated our borrowing capacities of the tranches of loans and reduced our interest rate margins when compared to the terms of the amended Deutsche Bank Credit Agreement on January 13, 2012.

On November 7, 2013, we entered into the Third Amendment to the Deutsche Bank Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, we further amended the credit agreement to, among other things, (i) reallocate borrowing capacities of the tranches of loans as follows: a $408.7 million term A-1 facility, a $380 million term A-2 facility, a

€149.7 million term A-3 facility, a €100 million term A-4 facility and two revolving credit subfacilities which total $898 million in commitments, (ii) provide for an interest rate margin on the term A-1 facility, the term A-2 facility and the revolving credit subfacilities ranging from 0.50% and 1.25% per annum for base rate loans and 1.50% to 2.25% per annum for Eurocurrency rate loans, in each case determined by the Company’s leverage ratio, (iii) provide for an interest margin on the term A-3 facility and the term A-4 facility ranging from 0.75% to 1.50% per annum for base rate loans and 1.75% and 2.50% per annum for Eurocurrency loans, in each case, determined by the Company’s leverage ratio and (iv) reset the maturity date for the term A facilities and the two revolving credit subfacilities as well as the amortization schedule for the term A facilities to a five year term commencing on November 7, 2013. In connection with the Third Amendment, the prior term B facility under the credit agreement, held primarily by institutional lenders, was repaid in its entirety.

In conjunction with the amendments, we recorded a charge to Interest expense in the Consolidated Statement of Operations for the year ended December 31, 2013 of $29.4 million to write-off certain deferred financing fees and original issue discount and expensed approximately $1.2 million of costs incurred in connection with the refinancing. The Company had an original issue discount of $12.6 million and deferred financing fees of $9.9 million included in its Consolidated Balance Sheet as of December 31, 2014, which will be accreted to Interest expense primarily using the effective interest method, over the life of the Deutsche Bank Credit Agreement. As of December 31, 2014, the weighted-average interest rate of borrowings under the amended Deutsche Bank Credit Agreement was 1.94%, excluding accretion of original issue discount and deferred financing fees, and there was $674.9 million available on the revolving credit subfacilities, including $199.9 million available on a letter of credit subfacility.

On May 14, 2014, we entered into an Incremental Amendment to the Term A-1 facility under the Deutsche Bank Credit Agreement, as amended. Pursuant to the Incremental Amendment, the borrowing capacity of the Term A-1 facility was increased by $150.0 million to an aggregate of $558.7 million, upon the same terms as the existing Term A-1 facility.

The Company is also party to additional letter of credit facilities with total capacity of $699.1 million. Total letters of credit of $381.2 million were outstanding as of December 31, 2014.

On December 22, 2014, we entered into a receivables financing facility, pursuant to which we established a wholly owned, special purpose bankruptcy-remote subsidiary which purchases trade receivables from certain of our subsidiaries on an ongoing basis and pledges them to support its obligation as borrower under the receivables financing facility. This special purpose subsidiary has a separate legal existence from its parent and its assets are not available to satisfy the claims of creditors of the selling subsidiaries or any other member of the consolidated group. Availability of funds may fluctuate over time given changes in eligible receivable balances, but will not exceed the $80 million program limit. As of December 31, 2014, the total outstanding borrowings under the receivables financing facility were $80 million and the interest rate was 0.9%. The scheduled termination date for the receivables financing facility is December 21, 2015, which may be extended from time to time. The facility contains representations, warranties, covenants and indemnities customary for facilities of this type. The facility does not contain any covenants that we view as materially constraining to the activities of our business.

In connection with the Deutsche Bank Credit Agreement, the Company has pledged substantially all of its domestic subsidiaries’ assets, other than the transferred receivables discussed above, and 65% of the shares of certain first tier international subsidiaries as collateral against borrowings to its U.S. companies. In addition, subsidiaries in certain foreign jurisdictions have guaranteed the Company’s obligations on borrowings of one of its European subsidiaries, as well as pledged substantially all of their assets for such borrowings to this European subsidiary under the Deutsche Bank Credit Agreement. The Deutsche Bank Credit Agreement contains customary covenants limiting the Company’s ability to, among other things, pay dividends, incur debt or liens, redeem or repurchase equity, enter into transactions with affiliates, make investments, merge or consolidate with others or dispose of assets. In addition, the Deutsche Bank Credit Agreement contains financial covenants requiring the Company to maintain a total leverage ratio, as defined therein, of not more than 4.75 to 1.0 and a minimum interest coverage ratio, as defined therein, of 2.50 to 1.0, measured at the end of each quarter. The minimum interest coverage ratio increases by 25 basis points each year until it reaches 3.0 to 1.0 for the year ending December 31, 2016 and each year thereafter. The maximum total leverage ratio decreases 25 basis points each year until it reaches 4.25 to 1.0 for the year ending December 31, 2016 and each year thereafter. The Deutsche Bank Credit Agreement contains various events of default, including failure to comply with the financial covenants referenced above, 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 loans and the revolving credit subfacilities and foreclose on the collateral. The Company is in compliance with all such covenants as of December 31, 2014. We believe that our sources of liquidity, including the Deutsche Bank Credit Agreement, are adequate to fund our operations for the next twelve months.

Cash Flows

As of December 31, 2014, we had $305.4 million of Cash and cash equivalents, a decrease of $5.9 million from $311.3 million as of December 31, 2013. The following table summarizes the change in Cash and cash equivalents during the periods indicated:



	Year Ended December 31,
	2014			2013			2012
	(In millions)
Net cash provided by operating activities	$	385.8		$	362.2		$	174.0
Purchases of fixed assets, net	(81.3		)	(71.5		)	(83.2		)
Acquisitions, net of cash received	(948.8		)	(372.5		)	(1,859.6		)
Loans to non-trade creditors	—			(31.0		)	—
Other, net	—			—			1.8
Net cash used in investing activities	(1,030.1		)	(475.0		)	(1,941.0		)
Proceeds from (repayments of) borrowings, net	90.9			(309.0		)	1,159.8
Proceeds from issuance of common stock, net	613.9			324.2			756.8
Proceeds from issuance of preferred stock, net	—			—			333.0
Acquisition of shares held by noncontrolling interest	(10.3		)	(14.9		)	(29.3		)
Preferred stock conversion inducement payment	(19.6		)	—			—
Other uses	(24.9		)	(45.4		)	(37.1		)
Net cash provided by (used in) financing activities	650.0			(45.1		)	2,183.2
Effect of exchange rates on Cash and cash equivalents	(11.6		)	(13.2		)	(8.9		)
(Decrease) increase in Cash and cash equivalents	$	(5.9	)	$	(171.1	)	$	407.3

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


•	Net cash received or paid for asbestos-related costs, net of insurance proceeds, including the disposition of claims, defense costs and legal expenses related to litigation against our insurers, creates variability in our operating cash flows. We had net cash outflows of $32.7 million, $39.6 million and $24.7 million during 2014, 2013 and 2012, respectively.

•

Funding requirements of our defined benefit plans, including pension plans and other post-retirement benefit plans, can vary significantly from period to period due to changes in the fair value of plan assets and actuarial assumptions. For 2014, 2013 and 2012 cash contributions for defined benefit plans were $59.6 million, $46.9 million and $61.2 million, respectively. Contributions for 2012 included $18.9 million of supplemental contributions to pension plans in the United Kingdom as a result of the financing of the Charter Acquisition.


•	During 2014, 2013 and 2012 cash payments of $43.5 million, $47.3 million and $45.1 million, respectively, were made related to our restructuring initiatives. Additionally, during 2012 cash payments of approximately $46.1 million were made for advisory, legal, valuation and other professional service fees related to the Charter Acquisition.

•

Changes in net working capital also affected the operating cash flows for the periods presented. We define working capital as Trade receivables, net and Inventories, net reduced by Accounts payable. During 2014, net working capital increased by $16.7 million primarily due to seasonal increases in receivables and decreases in payables, partially offset by a decrease in inventory as we reduced the high inventory levels attributable to the Victor Acquisition, which reduced our cash flows from operating activities. During 2013, net working capital decreased by $110 million, primarily due to a decrease in inventory from our CBS initiatives and an increase in payables associated with the timing of year-end purchases partially offset by the seasonal increase in receivables, which increased our cash flows from operating activities. During 2012, net working capital decreased, primarily due to a decrease in inventory and an increase in payable levels, which increased our cash flows from operating activities by $78.3 million, a significant contributor to 2012 cash flows from operating activities.

Cash flows from investing activities during 2014 were impacted by the net cash outflows of $948.8 million associated with the Victor Acquisition. During 2013, the acquisitions of GII, Clarus, ČKDK, TLT-Babcock, Alphair and Sicelub resulted in net cash outflows of $399.9 million. During 2013, the Company also made a loan in connection with an acquisition of $31.0 million,

which is expected to be repaid in 2015. In 2012, there were significant investing activities associated with the Charter Acquisition. The cash cost of the Charter Acquisition was approximately $1.7 billion, net of cash acquired.

Cash flows from financing activities during 2014 were impacted by the funding of the Victor Acquisition. The Victor Acquisition was funded through net proceeds of $610.4 million from the sale of newly issued Common stock and $338.4 million of borrowings under our Deutsche Bank Credit Agreement. Cash flows from financing activities during 2014 were also impacted by the conversion of the Series A Perpetual Convertible Preferred Stock further discussed above under “—Equity Capital.”

Cash flows from financing activities for 2013 were impacted by the amendments to the Deutsche Bank Credit Agreement further discussed above under “—Borrowing Arrangements” and the May 2013 sale of newly issued Common stock further discussed above under “—Equity Capital.” The sale of our Common stock in May 2013 generated $319.9 million cash inflows from financing activities.

Cash flows from financing activities for 2012 were significantly impacted by the Charter Acquisition. As discussed above under “—Equity Capital,” we raised $805.0 million of cash from sales of our equity securities to the BDT Investor, Steven and Mitchell Rales, and Markel. We borrowed approximately $1.8 billion of term loans, $70.3 million of which was repaid in 2012. The additional payment of borrowings under term loans of $455 million primarily represents the repayment of borrowings under our Bank of America Credit Agreement, in conjunction with the financing of the Charter Acquisition. Additionally, financing activities for 2012 included $293 million raised in a primary offering of our Common stock settled in March 2012.

Cash flows from financing activities were also impacted by acquisitions of shares of less than wholly owned subsidiaries. During 2014, cash flows from financing activities included the $10.3 million acquisition of the remaining ownership of Svel and Howden Middle East. During 2013, cash flows from financing activities included a $14.9 million acquisition of common and investment shares of Soldex resulting in an increase in our ownership of the subsidiary from approximately 91% to 99%. During 2012, cash flows from financing activities included a $29.3 million acquisition of shares in ESAB India Limited, a publicly traded, less than wholly owned subsidiary in which the Company acquired a controlling interest in the Charter Acquisition. This acquisition of shares was pursuant to a statutorily mandated tender offer triggered as a result of the Charter Acquisition.

Our Cash and cash equivalents as of December 31, 2014 included $279.4 million held in jurisdictions outside the U.S., which may be subject to tax penalties if repatriated into the U.S. and other restrictions.

Contractual Obligations

The following table summarizes our future contractual obligations as of December 31, 2014.



	Less Than One Year		1-3 Years		3-5 Years		More Than 5 Years		Total
	(In millions)
Debt	$	9.9	$	10.0	$	1,531.9	$	—	$	1,551.8
Interest payments on debt⁽¹⁾	29.2		58.3		21.3		—		108.8
Mandatorily redeemable preferred stock of a subsidiary	—		24.9		—		—		24.9
Dividend payment on mandatorily redeemable preferred stock of a subsidiary	—		2.7		—		—		2.7
Operating leases	36.0		46.4		26.6		44.2		153.2
Capital leases	1.2		0.3		0.1		0.3		1.9
Purchase obligations⁽²⁾	371.3		33.5		1.4		0.3		406.5
Total	$	447.6	$	176.1	$	1,581.3	$	44.8	$	2,249.8

__________


⁽¹⁾	Variable interest payments are estimated using a static rate of 1.89%.


⁽²⁾	Excludes open purchase orders for goods or services that are provided on demand, the timing of which is not certain.

We have funding requirements associated with our pension and other post-retirement benefit plans as of December 31, 2014, which are estimated to be $45.1 million for the year ending December 31, 2015. Other long-term liabilities, such as those for asbestos and other legal claims, employee benefit plan obligations, deferred income taxes and liabilities for unrecognized income tax benefits, are excluded from the above table since they are not contractually fixed as to timing and amount.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that provide liquidity, capital resources, market or credit risk support that expose us to any liability that is not reflected in our Consolidated Financial Statements at December 31, 2014 other than outstanding letters of credit of $381.2 million, unconditional purchase obligations with suppliers of $406.5 million, and $153.2 million of future operating lease payments.

The Company and its subsidiaries have in the past divested certain of its businesses and assets. In connection with these divestitures, certain representations, warranties and indemnities were made to purchasers to cover various risks or unknown liabilities. We cannot estimate the potential liability, if any, that may result from such representations, warranties and indemnities because they relate to unknown and unexpected contingencies; however, we do not believe that any such liabilities will have a material adverse effect on our financial condition, results of operations or liquidity.

Critical Accounting Policies

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

We believe the following accounting policies are the most critical in that they are important to the financial statements and they require the most difficult, subjective or complex judgments in the preparation of the financial statements. For a detailed discussion on the application of these and other accounting policies, see Note 2, “Summary of Significant Accounting Policies” in the accompanying Notes to Consolidated Financial Statements in this Form 10-K.

Asbestos Liabilities and Insurance Assets

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.

We have 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. This methodology is based upon risk equations, exposed population estimates, mortality rates, and other demographic statistics. In applying the Nicholson methodology for each subsidiary we performed: (1) an analysis of the estimated population likely to have been exposed or claim to have been exposed to products manufactured by the subsidiaries based upon national studies undertaken of the population of workers believed to have been exposed to asbestos; (2) a review of epidemiological and demographic studies to estimate the number of potentially exposed people that would be likely to develop asbestos-related diseases in each year; (3) an analysis of the subsidiaries’ recent claims history to estimate likely filing rates for these diseases and (4) an analysis of the historical asbestos liability costs to develop average values, which vary by disease type, jurisdiction and the nature of claim, to determine an estimate of costs likely to be associated with currently pending and projected asbestos claims. Our projections, based upon the Nicholson methodology, estimate both claims and the estimated cash outflows related to the resolution of such claims for periods up to and including the endpoint of asbestos studies referred to in item (2) above. It is our policy to record a liability for asbestos-related liability costs for the longest period of time that we can reasonably estimate. Accordingly, no accrual has been recorded for any costs which may be paid after the next 15 years.

Projecting future asbestos-related liability costs is subject to numerous variables that are difficult to predict, including, among others, the number of claims that might be received, the type and severity of the disease alleged by each claimant, the latency period associated with asbestos exposure, dismissal rates, costs of medical treatment, the financial resources of other companies that are co-defendants in the claims, funds available in post-bankruptcy trusts, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, including fluctuations in the timing of court actions and rulings, and the impact of potential changes in legislative or judicial standards, including potential tort reform. Furthermore, any projections with respect to these variables are subject to even greater uncertainty as the projection period lengthens. These trend factors have both positive and negative effects on the dynamics of asbestos litigation in the tort system and the related best estimate of our asbestos liability,

and these effects do not move in linear fashion but rather change over multiple year periods. Accordingly, we monitor these trend factors over time and periodically assess whether an alternative forecast period is appropriate. Taking these factors into account and the inherent uncertainties, we believe that we can reasonably estimate the asbestos-related liability for pending and future claims that will be resolved in the next 15 years and have recorded that liability as our best estimate. While it is reasonably possible that the subsidiaries will incur costs after this period, we do not believe the reasonably possible loss or range of reasonably possible loss 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.

We assessed the subsidiaries’ existing insurance arrangements and agreements, estimated the applicability of insurance coverage for existing and expected future claims, analyzed publicly available information bearing on the current creditworthiness and solvency of the various insurers, and employed such insurance allocation methodologies as we believed appropriate to ascertain the probable insurance recoveries for asbestos liabilities. The analysis took into account self-insurance retentions, policy exclusions, pending litigation, liability caps and gaps in coverage, existing and potential insolvencies of insurers as well as how legal and defense costs will be covered under the insurance policies.

Each subsidiary has separate insurance coverage acquired prior to our ownership of each independent entity. In our evaluation of the insurance asset, we use differing insurance allocation methodologies for each subsidiary based upon the applicable law pertaining to the affected subsidiary.

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 our financial condition, results of operations or cash flow.

See Note 15, “Commitments and Contingencies” in the accompanying Notes to Consolidated Financial Statements for additional information regarding our asbestos liabilities and insurance assets.

Retirement Benefits

Pension obligations and other post-retirement benefits are actuarially determined and are affected by several assumptions, including the discount rate, assumed annual rates of return on plan assets, and per capita cost of covered health care benefits. Changes in discount rate and differences from actual results for each assumption will affect the amounts of pension expense and other post-retirement expense recognized in future periods. These assumptions may also have an effect on the amount and timing of future cash contributions. See Note 13, “Defined Benefit Plans” in the accompanying Notes to Consolidated Financial Statements for further information.

Impairment of Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the costs in excess of the fair value of net assets acquired associated with our acquisitions.

We evaluate 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. Goodwill and indefinite-lived intangible assets are considered to be impaired when the net book value of a reporting unit or asset exceeds its estimated fair value.

In the evaluation of Goodwill for impairment, we first assess 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 we determine 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 we determine 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. If the carrying value of a reporting unit exceeds its fair value, Goodwill of that reporting unit is potentially impaired and step two of the impairment analysis is performed. In step two of the analysis, an impairment loss is recorded equal to the excess of the carrying value of the reporting unit’s Goodwill over its implied fair value should such a circumstance arise.

We measure fair value of reporting units based on a present value of future discounted cash flows or a market valuation approach. The discounted cash flows model indicates 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 flows model 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 of the Company 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 in estimating the fair value of the reporting units.

In the evaluation of indefinite-lived intangible assets for impairment, we first assess 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 we determine 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 we determine 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. We measure the fair value of our 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.

Prior to the annual impairment evaluation, an analysis was performed to evaluate indefinite-lived intangible assets related to a specific operation within the gas- and fluid-handling segment due to the decision to substantially reduce its operations. The analysis determined the indefinite-lived intangible assets, consisting of trade names, were no longer recoverable based upon relief from royalty measurements. The analysis resulted in a $2.9 million impairment loss included in Selling, general and administrative expense in the Consolidated Statement of Operations for 2014.

The annual impairment analyses performed as of September 27, 2014, September 28, 2013 and September 29, 2012 indicated no impairment to be present, except for $0.2 million of impairment loss related to an indefinite-lived intangible asset included in the gas- and fluid-handling segment for the year ended December 31, 2013. This impairment results from a decline in anticipated revenue related to this asset. The impairment loss is included in Selling, general and administrative expense in the accompanying Consolidated Statement of Operations and was calculated as the difference between the fair value of the asset under the relief from royalty method and its carrying value as of the date of the impairment test. See Note 2, “Summary of Significant Accounting Policies” in the accompanying Notes to Consolidated Financial Statements for further information.

Actual results could differ from our estimates and projections, which would affect the assessment of impairment. As of December 31, 2014, we have Goodwill of $2.9 billion and indefinite lived trade names of $410.6 million that are subject to at least annual review for impairment. See Note 7, “Goodwill and Intangible Assets” in the accompanying Notes to Consolidated Financial Statements for further information.

Income Taxes

We account for income taxes under the asset and liability method, which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion of the deferred tax asset will not be realized. In evaluating the need for a valuation allowance, we take into account various factors, including the expected level of future taxable income and available tax planning strategies. If actual results differ from the assumptions made in the evaluation of our valuation allowance, we record a change in valuation allowance through income tax expense in the period such determination is made. During 2014, the valuation allowance decreased from $360.9 million to $159.7 million primarily due to the impact of the Victor Acquisition.

Accounting Standards Codification 740, “Income Taxes” prescribes a recognition threshold and measurement attribute for a position taken in a tax return. Under this standard, we must presume the income tax position will be examined by a relevant tax authority and determine whether it is more likely than not that the income tax position will be sustained upon examination based on its technical merits. An income tax position that meets the more-likely-than-not recognition threshold is then measured to determine the amount of the benefit to be recognized in the financial statements. Liabilities for unrecognized income tax benefits are reviewed periodically and are adjusted as events occur that affect our estimates, such as the availability of new information, the lapsing of applicable statutes of limitations, the conclusion of tax audits and, if applicable, the conclusion of any court proceedings. To the extent we prevail in matters for which liabilities for unrecognized tax benefits have been established or are required to pay amounts in excess of our liabilities for unrecognized tax benefits, our effective income tax rate in a given period could be materially affected. The Company recognizes interest and penalties related to unrecognized tax benefits in the (Benefit from) provision for income taxes in the Consolidated Statements of Operations. Net liabilities for unrecognized income tax benefits,

including accrued interest and penalties, were $77.4 million as of December 31, 2014 and are included in Other liabilities in the accompanying Consolidated Balance Sheet.

Revenue Recognition

We recognize revenue and costs from product sales when title passes to the buyer and all of the following criteria are met: persuasive evidence of an arrangement exists, the price is fixed or determinable, product delivery has occurred or services have been rendered, there are no further obligations to customers, and collectibility is probable. Product delivery occurs when title and risk of loss transfer to the customer. Our shipping terms vary based on the contract. If any significant obligations to the customer with respect to such sale remain to be fulfilled following shipment, typically involving obligations relating to installation and acceptance by the buyer, revenue recognition is deferred until such obligations have been fulfilled. Any customer allowances and discounts are recorded as a reduction in reported revenues at the time of sale because these allowances reflect a reduction in the sales price for the products sold. These allowances and discounts are estimated based on historical experience and known trends. Revenue related to service agreements is recognized as revenue over the term of the agreement.

We recognize revenue and cost of sales on gas-handling long-term contracts using the “percentage of completion method” in accordance with GAAP. Under this method, contract revenues are recognized over the performance period of the contract in direct proportion to the costs incurred as a percentage of total estimated costs for the entirety of the contract. Any recognized revenues that have not been billed to a customer are recorded as a component of Trade receivables and any billings of customers in excess of recognized revenues are recorded as a component of Accounts payable. As of December 31, 2014, there were $190.7 million of revenues in excess of billings and $175.3 million of billings in excess of revenues on long-term contracts in the Consolidated Balance Sheet.

We have contracts in various stages of completion. Such contracts require estimates to determine the appropriate cost and revenue recognition. Significant management judgments and estimates, including estimated costs to complete projects, must be made and used in connection with revenue recognized during each period. Current estimates may be revised as additional information becomes available. The revisions are recorded in income in the period in which they are determined using the cumulative catch-up method of accounting.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. These allowances are based on recent trends of certain customers estimated to be a greater credit risk as well as general trends of the entire pool of customers. The allowance for doubtful accounts was $27.3 million and $31.3 million as of December 31, 2014 and 2013, respectively. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required.

Recently Issued Accounting Pronouncements

For detailed information regarding recently issued accounting pronouncements and the expected impact on our financial statements, see Note 3, “Recently Issued Accounting Pronouncements” in the accompanying Notes to Consolidated Financial Statements included in this Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

Interest Rate Risk

We are subject to exposure from changes in short-term interest rates related to interest payments on our borrowing arrangements. Under the Deutsche Bank Credit Agreement, substantially all of our borrowings as of December 31, 2014 are variable rate facilities based on LIBOR or EURIBOR. In order to mitigate our interest rate risk, we periodically enter into interest rate swap or collar agreements. A hypothetical increase in the interest rate of 1.00% during 2014 would have increased Interest expense by approximately $15.7 million.

Exchange Rate Risk

We have manufacturing sites throughout the world and sell our products globally. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar and against the currencies of other countries in which we manufacture and sell products and services. During 2014, approximately 76% of our sales were derived from operations outside the U.S. We have significant manufacturing operations in European countries that are not part of the Eurozone. Sales revenues are more highly weighted toward the Euro and U.S. dollar. We also have significant contractual obligations in U.S. dollars that are met with cash flows in other currencies as well as U.S. dollars. To better match revenue and expense as well as cash needs from contractual liabilities, we regularly enter into cross currency swaps and forward contracts.

We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries. The Euro denominated borrowings under the Deutsche Bank Credit Agreement, provide a natural hedge to a portion of our European net asset position. The effect of a change in currency exchange rates on our net investment in international subsidiaries, net of the translation effect of the Company’s euro denominated borrowings, is reflected in the Accumulated other comprehensive loss component of Equity. A 10% depreciation in major currencies, relative to the U.S. dollar as of December 31, 2014 (net of the translation effect of our euro denominated borrowings) would result in a reduction in Equity of approximately $150 million.

We also face exchange rate risk from transactions with customers in countries outside the U.S. and from intercompany transactions between affiliates. Although we use the U.S. dollar as our functional currency for reporting purposes, we have manufacturing sites throughout the world, and a substantial portion of our costs are incurred and sales are generated in foreign currencies. Costs incurred and sales recorded by subsidiaries operating outside of the U.S. are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. In particular, the Company has more sales in European currencies than it has expenses in those currencies. Although a significant portion of this difference is hedged, when European currencies strengthen or weaken against the U.S. dollar, operating profits are increased or decreased, respectively.

We have generally accepted the exposure to exchange rate movements in the translation of our financial statements into U.S. dollars without using derivative financial instruments to manage this risk. Both positive and negative movements in currency exchange rates against the U.S. dollar will, therefore, continue to affect the reported amount of sales, profit, assets and liabilities in our Consolidated Financial Statements.

Commodity Price Risk

We are exposed to changes in the prices of raw materials used in our production processes. Commodity futures contracts are periodically used to manage such exposure. As of December 31, 2014, we had no open commodity futures contracts.

See Note 14, “Financial Instruments and Fair Value Measurements” in the accompanying Notes to Consolidated Financial Statements included in this Form 10-K for additional information regarding our derivative instruments.

Item 8. Financial Statements and Supplementary Data

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS



	Page

Report of Independent Registered Public Accounting Firm – Internal Control Over Financial Reporting	42
Report of Independent Registered Public Accounting Firm – Consolidated Financial Statements	43
Consolidated Statements of Operations	44
Consolidated Statements of Comprehensive (Loss) Income	45
Consolidated Balance Sheets	46
Consolidated Statements of Equity	47
Consolidated Statements of Cash Flows	48
Notes to Consolidated Financial Statements	49
Note 1. Organization and Nature of Operations	49
Note 2. Summary of Significant Accounting Policies	49
Note 3. Recently Issued Accounting Pronouncements	54
Note 4. Acquisitions	55
Note 5. Net Income (Loss) Per Share	59
Note 6. Income Taxes	60
Note 7. Goodwill and Intangible Assets	63
Note 8. Property, Plant and Equipment, Net	64
Note 9. Inventories, Net	64
Note 10. Debt	65
Note 11. Equity	66
Note 12. Accrued Liabilities	71
Note 13. Defined Benefit Plans	73
Note 14. Financial Instruments and Fair Value Measurements	80
Note 15. Commitments and Contingencies	84
Note 16. Segment Information	88
Note 17. Selected Quarterly Data—(unaudited)	90

Report of Independent Registered Public Accounting Firm

Internal Control Over Financial Reporting

The Board of Directors and Shareholders of Colfax Corporation

We have audited Colfax Corporation’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Colfax Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in Management’s Annual Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Victor Technologies Holdings, Inc., which is included in the 2014 consolidated financial statements of Colfax Corporation and constituted 17% and 27% of total and net assets, respectively, as of December 31, 2014 and 8% and 10% of net sales and net income available to common shareholders, respectively, for the year then ended. Our audit of internal control over financial reporting of Colfax Corporation also did not include an evaluation of the internal control over financial reporting of Victor Technologies Holdings, Inc.

In our opinion, Colfax Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Colfax Corporation as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive (loss) income, equity and cash flows for each of the three years in the period ended December 31, 2014 of Colfax Corporation and our report dated February 17, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Baltimore, Maryland

February 17, 2015

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements

The Board of Directors and Shareholders of Colfax Corporation

We have audited the accompanying consolidated balance sheets of Colfax Corporation as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive (loss) income, equity and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Colfax Corporation at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Colfax Corporation’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 17, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Baltimore, Maryland

February 17, 2015

COLFAX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in thousands, except per share amounts



	Year Ended December 31,
	2014			2013		2012

Net sales	$	4,624,476		$	4,207,209	$	3,913,856
Cost of sales	3,145,631			2,900,987		2,761,731
Gross profit	1,478,845			1,306,222		1,152,125
Selling, general and administrative expense	1,011,171			864,328		908,439
Charter acquisition-related expense	—			—		43,617
Restructuring and other related charges	58,121			35,502		60,060
Operating income	409,553			406,392		140,009
Interest expense	51,305			103,597		91,570
Income before income taxes	358,248			302,795		48,439
(Benefit from) provision for income taxes	(62,025		)	93,652		90,703
Net income (loss)	420,273			209,143		(42,264		)
Less: income attributable to noncontrolling interest, net of taxes	28,175			30,515		22,138
Net income (loss) attributable to Colfax Corporation	392,098			178,628		(64,402		)
Dividends on preferred stock	2,348			20,396		18,951
Preferred stock conversion inducement payment	19,565			—		—
Net income (loss) available to Colfax Corporation common shareholders	$	370,185		$	158,232	$	(83,353	)
Net income (loss) per share- basic	$	3.06		$	1.56	$	(0.92	)
Net income (loss) per share- diluted	$	3.02		$	1.54	$	(0.92	)

See Notes to Consolidated Financial Statements.

COLFAX CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Dollars in thousands



	Year Ended December 31,
	2014			2013			2012
Net income (loss)	$	420,273		$	209,143		$	(42,264	)
Other comprehensive (loss) income:
Foreign currency translation, net of tax of $1,885, $(3,634) and $(304)	(356,243		)	6,210			117,703
Unrealized gain (loss) on hedging activities, net of tax of $4,141, $404 and $632	30,404			(10,404		)	(4,008		)
Changes in unrecognized pension and other post-retirement benefits cost, net of tax of $(20,117), $575 and $(5,835)	(89,920		)	77,071			(91,495		)
Changes in deferred tax related to pension and other postretirement benefit cost	1,934			—			—
Amounts reclassified from Accumulated other comprehensive loss:
Realized gain on hedging activities, net of tax of $0, $0 and $0	—			—			471
Net pension and other postretirement benefit cost, net of tax of $2,063, $715 and $256	5,282			10,022			8,557
Other comprehensive (loss) income	(408,543		)	82,899			31,228
Comprehensive income (loss)	11,730			292,042			(11,036		)
Less: comprehensive income attributable to noncontrolling interest	15,781			13,039			26,523
Comprehensive (loss) income attributable to Colfax Corporation	$	(4,051	)	$	279,003		$	(37,559	)

See Notes to Consolidated Financial Statements.

COLFAX CORPORATION

CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except share amounts



	December 31,
	2014			2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	305,448		$	311,301
Trade receivables, less allowance for doubtful accounts of $27,256 and $31,282	1,029,150			1,023,732
Inventories, net	442,732			443,536
Other current assets	322,133			353,589
Total current assets	2,099,463			2,132,158
Property, plant and equipment, net	729,728			754,261
Goodwill	2,872,903			2,409,699
Intangible assets, net	1,043,583			832,553
Other assets	499,421			472,513
Total assets	$	7,245,098		$	6,601,184

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	9,855		$	29,449
Accounts payable	780,287			862,125
Accrued liabilities	495,393			492,694
Total current liabilities	1,285,535			1,384,268
Long-term debt, less current portion	1,529,389			1,457,642
Other liabilities	1,077,730			1,018,151
Total liabilities	3,892,654			3,860,061
Equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized; none and 13,877,552 issued and outstanding	—			14
Common stock, $0.001 par value; 400,000,000 shares authorized; 123,730,578 and 101,921,613 issued and outstanding	124			102
Additional paid-in capital	3,200,832			2,541,005
Retained earnings	389,561			19,376
Accumulated other comprehensive loss	(443,691		)	(46,600		)
Total Colfax Corporation equity	3,146,826			2,513,897
Noncontrolling interest	205,618			227,226
Total equity	3,352,444			2,741,123
Total liabilities and equity	$	7,245,098		$	6,601,184

See Notes to Consolidated Financial Statements.

COLFAX CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

Dollars in thousands, except share amounts and as noted



	Common Stock			Preferred Stock					Additional Paid-In Capital		(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total
	Shares	$ Amount		Shares		$ Amount
Balance at January 1, 2012	43,697,570	$	44	—		$	—		$	415,527	$	(55,503	)	$	(170,793	)	$	—		$	189,275
Net (loss) income	—	—		—		—			—		(64,402		)	—			22,138			(42,264		)
Acquisitions	—	—		—		—			—		—			—			259,229			259,229
Sale of stock of entity previously controlled	—	—		—		—			—		—			—			(4,414		)	(4,414		)
Distributions to noncontrolling owners	—	—		—		—			—		—			—			(9,721		)	(9,721		)
Acquisition of shares held by noncontrolling interest	—	—		—		—			1,035		—			(2,644		)	(27,683		)	(29,292		)
Preferred stock dividend	—	—		—		—			—		(18,951		)	—			—			(18,951		)
Other comprehensive income, net of tax of $(5.3) million	—	—		—		—			—		—			26,843			4,385			31,228
Common stock issuances, net of costs of $20.2 million	49,917,786	50		—		—			1,432,921		—			—			—			1,432,971
Preferred stock issuances, net of costs of $7.0 million	—	—		13,877,552		14			332,958		—			—			—			332,972
Common stock-based award activity	452,062	—		—		—			15,253		—			—			—			15,253
Balance at December 31, 2012	94,067,418	94		13,877,552		14			2,197,694		(138,856		)	(146,594		)	243,934			2,156,286
Net income	—	—		—		—			—		178,628			—			30,515			209,143
Distributions to noncontrolling owners	—	—		—		—			—		—			—			(14,260		)	(14,260		)
Acquisition of shares held by noncontrolling interest	—	—		—		—			955		—			(381		)	(15,487		)	(14,913		)
Preferred stock dividend	—	—		—		—			—		(20,396		)	—			—			(20,396		)
Other comprehensive income (loss), net of tax of $(1.9) million	—	—		—		—			—		—			100,375			(17,476		)	82,899
Common stock issuances, net of costs of $12.0 million	7,500,000	8		—		—			319,890		—			—			—			319,898
Common stock-based award activity	265,995	—		—		—			17,589		—			—			—			17,589
Contribution to defined benefit pension plan	88,200	—		—		—			4,877		—			—			—			4,877
Balance at December 31, 2013	101,921,613	102		13,877,552		14			2,541,005		19,376			(46,600		)	227,226			2,741,123
Net income	—	—		—		—			—		392,098			—			28,175			420,273
Distributions to noncontrolling owners	—	—		—		—			—		—			—			(12,007		)	(12,007		)
Acquisition of shares held by noncontrolling interest	—	—		—		—			15,986		—			(942		)	(25,382		)	(10,338		)
Preferred stock dividend	—	—		—		—			—		(2,348		)	—			—			(2,348		)
Preferred stock conversion	12,173,291	12		(13,877,552	)	(14		)	2		(19,565		)	—			—			(19,565		)
Other comprehensive loss, net of tax of $(13.8) million and $(0.2) million	—	—		—		—			—		—			(396,149		)	(12,394		)	(408,543		)
Common stock issuance, net of costs of $22.1 million	9,200,000	9		—		—			610,354		—			—			—			610,363
Common stock-based award activity	252,674	—		—		—			21,636		—			—			—			21,636
Contribution to defined benefit pension plan	183,000	1		—		—			11,849		—			—			—			11,850
Balance at December 31, 2014	123,730,578	$	124	—		$	—		$	3,200,832	$	389,561		$	(443,691	)	$	205,618		$	3,352,444

See Notes to Consolidated Financial Statements.

COLFAX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in thousands



	Year Ended December 31,
	2014			2013			2012

Cash flows from operating activities:
Net income (loss)	$	420,273		$	209,143		$	(42,264	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and impairment charges	174,724			119,258			183,403
Stock-based compensation expense	17,580			13,334			9,373
Non-cash interest expense	9,094			44,377			16,997
Gain on revaluation of Sicelub investment	—			(13,784		)	—
Deferred income tax (benefit) provision	(139,488		)	9,946			7,222
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables, net	(19,916		)	(98,912		)	(37,338		)
Inventories, net	57,847			79,987			26,694
Accounts payable	(54,666		)	128,889			88,927
Changes in other operating assets and liabilities	(79,690		)	(130,069		)	(78,994		)
Net cash provided by operating activities	385,758			362,169			174,020
Cash flows from investing activities:
Purchases of fixed assets, net	(81,343		)	(71,482		)	(83,187		)
Acquisitions, net of cash received	(948,800		)	(372,476		)	(1,859,645		)
Loans to non-trade creditors	—			(31,012		)	—
Other, net	—			—			1,857
Net cash used in investing activities	(1,030,143		)	(474,970		)	(1,940,975		)
Cash flows from financing activities:
Borrowings under term credit facility	150,000			50,861			1,731,523
Payments under term credit facility	(15,542		)	(679,755		)	(531,415		)
Proceeds from borrowings on revolving credit facilities and other	1,370,626			648,000			13,149
Repayments of borrowings on revolving credit facilities and other	(1,414,146		)	(328,133		)	(53,414		)
Proceeds from issuance of common stock, net	613,927			324,153			756,762
Proceeds from issuance of preferred stock, net	—			—			332,969
Acquisition of shares held by noncontrolling interest	(10,338		)	(14,913		)	(29,292		)
Preferred stock conversion inducement payment	(19,565		)	—			—
Payments of dividend on preferred stock	(3,853		)	(20,396		)	(17,446		)
Other	(21,060		)	(24,870		)	(19,608		)
Net cash provided by (used in) financing activities	650,049			(45,053		)	2,183,228
Effect of foreign exchange rates on Cash and cash equivalents	(11,517		)	(13,294		)	(8,932		)
(Decrease) increase in Cash and cash equivalents	(5,853		)	(171,148		)	407,341
Cash and cash equivalents, beginning of period	311,301			482,449			75,108
Cash and cash equivalents, end of period	$	305,448		$	311,301		$	482,449

Supplemental Disclosure of Cash Flow Information:
Interest payments	$	42,041		$	58,970		$	79,857
Income tax payments, net	82,694			93,856			70,677

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 diversified global industrial manufacturing and engineering company that provides gas- and fluid-handling and fabrication technology products and services to customers around the world under the Howden, ESAB and Colfax Fluid Handling brand names.

During the year ended December 31, 2014, adjustments were made retrospectively to provisional amounts recorded as of December 31, 2013, primarily due to the Company’s valuation of specific items related to acquisitions that occurred in the three months ended December 31, 2013. See Note 4, “Acquisitions” for additional information regarding these adjustments.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The Company’s Consolidated Financial Statements include the accounts of the Company and its subsidiaries. Less than wholly owned subsidiaries, including joint ventures, are consolidated when it is determined that the Company has a controlling financial interest, which is generally determined when the Company holds a majority voting interest. 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 generally recognizes revenues and costs from product sales when title passes to the buyer and all of the following criteria are met: persuasive evidence of an arrangement exists, the price is fixed or determinable, product delivery has occurred or services have been rendered, there are no further obligations to customers, and collectibility is reasonably assured. Product delivery occurs when title and risk of loss transfer to the customer. The Company’s shipping terms vary based on the contract. If any significant obligations to the customer with respect to such sale remain to be fulfilled following shipments, typically involving obligations relating to installation and acceptance by the buyer, revenue recognition is deferred until such obligations have been fulfilled. Any customer allowances and discounts are recorded as a reduction in reported revenues at the time of sale because these allowances reflect a reduction in the sales price for the products sold. These allowances and discounts are estimated based on historical experience and known trends. Revenue related to service agreements is recognized as revenue over the term of the agreement. Progress billings are generally shown as a reduction of Inventories, net unless such billings are in excess of accumulated costs, in which case such balances are included in Accrued liabilities in the Consolidated Balance Sheets.

The Company recognizes revenue and cost of sales on gas-handling long-term contracts using the “percentage of completion method” in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under this method, contract revenues are recognized over the performance period of the contract in direct proportion to the costs incurred as a percentage of total estimated costs for the entirety of the contract. Any recognized revenues that have not been billed to a customer are recorded as a component of Trade receivables and any billings of customers in excess of recognized revenues are recorded as a component of Accounts payable. As of December 31, 2014, there were $190.7 million of revenues in excess of billings and $175.3 million of billings in excess of revenues on long-term contracts in the Consolidated Balance Sheet. As of December 31, 2013, there were $231.3 million of revenues in excess of billings and $214.8 million of billings in excess of revenues on long-term contracts in the Consolidated Balance Sheet.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company has contracts in various stages of completion. Such contracts require estimates to determine the appropriate cost and revenue recognition. Significant management judgments and estimates, including estimated costs to complete projects, must be made and used in connection with revenue recognized during each period. Current estimates may be revised as additional information becomes available. The revisions are recorded in income in the period in which they are determined using the cumulative catch-up method of accounting. See Note 16, “Segment Information” for sales by major product group.

Amounts billed for shipping and handling are recorded as revenue. Shipping and handling expenses are recorded as a component of Cost of sales.

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 $43.0 million, $27.4 million and $19.4 million for the years ended December 31, 2014, 2013 and 2012, respectively, are expensed as incurred and are included in Selling, general and administrative expense in the Consolidated Statements of Operations.

Advertising Costs

Advertising costs of $18.2 million, $17.0 million, and $15.7 million for the years ended December 31, 2014, 2013 and 2012, respectively, are expensed as incurred and are included in Selling, general and administrative expense in the Consolidated Statements of Operations.

Cash and Cash Equivalents

Cash and cash equivalents include all financial instruments purchased with an initial maturity of three months or less.

Trade Receivables

Accounts receivable 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 market. For gas-handling long-term contracts, cost is primarily determined based upon actual cost. 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 are stated at historical cost, which includes the fair values of such assets acquired. Depreciation of property, plant and equipment is recorded on a straight-line basis over estimated useful lives. Assets recorded under capital leases are amortized over the shorter of their estimated useful lives or the lease terms, which range from three to 15 years. Repair and maintenance expenditures are expensed as incurred unless the repair extends the useful life of the asset.

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 associated with acquisitions by the Company. Indefinite-lived intangible assets consist of 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.

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. If the carrying value of a reporting unit exceeds its fair value, the Goodwill attributable to that reporting unit is potentially impaired and step two of the impairment analysis is performed. In step two of the analysis, an impairment loss is recorded equal to the excess of the carrying value of the reporting unit’s Goodwill over its implied fair value should such a circumstance arise.

The Company measures fair value of reporting units based on a present value of future discounted cash flows or a market valuation approach. The discounted cash flows model indicates 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 flows model include: the weighted-average cost of capital; long-term rate of growth and profitability of the Company’s business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the Company 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 in estimating the fair value of the reporting units.

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 likely 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.

The analyses performed as of September 27, 2014, September 28, 2013 and September 29, 2012 resulted in no impairment charges, except for $0.2 million of an impairment loss related to an indefinite-lived intangible asset included in the gas- and fluid-handling segment for the year ended December 31, 2013. This impairment resulted from a decline in anticipated revenue related to this asset. The impairment loss is included in Selling, general and administrative expense in the Consolidated Statement of Operations for the year ended December 31, 2013 and was calculated as the difference between the fair value of the asset under the relief from royalty method and its carrying value as of the date of the impairment test. The fair value of that intangible asset was $2.8 million as of December 31, 2013, there was no value of this intangible asset as of December 31, 2014, and was included in Level Three of the fair value hierarchy.

Impairment of Long-Lived Assets Other than Goodwill and Indefinite-Lived Intangible Assets

Intangibles primarily represent acquired customer relationships, acquired order backlog, acquired technology and software license agreements. Acquired order backlog is amortized in the same period the corresponding revenue is recognized. A portion of the Company’s acquired customer relationships is being amortized on an accelerated basis over periods ranging from seven to

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

30 years based on the present value of the future cash flows expected to be generated from the acquired customers. All other intangibles are being amortized on a straight-line basis over their estimated useful lives, generally ranging from two to 20 years.

The Company assesses its long-lived assets other than Goodwill and indefinite-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 would be recognized, resulting in a write-down of the assets with a corresponding charge to earnings. The impairment loss is measured based upon the difference between the carrying amounts and the fair values of the assets. Assets to be disposed of are reported at the lower of the carrying 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 $4.6 million, $1.9 million and $3.2 million during the years ended December 31, 2014, 2013 and 2012, respectively, as a component of Restructuring and other related charges in the Consolidated Statements of Operations.

In addition, an analysis was performed during the year ended December 31, 2014 to evaluate certain long-lived intangible assets related to a specific operation within the gas- and fluid-handling segment due to the decision to substantially reduce its operations. The analysis determined the long-lived intangible assets, primarily consisting of acquired customer relationships and acquired technology, were no longer recoverable based upon projected undiscounted net cash flows. Further, as a result of management’s evaluation of projected cash flows related to another operation within the gas-and fluid-handling segment, an analysis was performed to evaluate the long-lived intangible assets related to that operation. The analysis determined certain long-lived intangible assets, primarily consisting of acquired customer relationships, were impaired. The impairment was calculated as the difference between the fair value of the remaining expected future cash flows to be generated from the asset group and its carrying value as of the measurement date. The Company recorded $10.5 million of intangible asset impairment losses related to these two operations as a component of Selling, general and administrative expense in the Consolidated Statement of Operations for the year ended December 31, 2014. The fair value of these assets of $3.3 million as of December 31, 2014 are included in Level Three of the fair value hierarchy and are not material to the Consolidated Financial Statements.

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’s Deutsche Bank Credit Agreement (as defined and further discussed in Note 10, “Debt”) includes a €147.9 million term A-3 facility and a €98.8 million term A-4 facility, which have been designated as net investment hedges in order to mitigate a portion of this 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 and fair value hedges. For all instruments designated as hedges, including net investment hedges, cash flow hedges and fair value 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. Gains and losses related to fair value hedges are recorded as an offset to the fair value of the underlying asset or liability, primarily Trade receivables and Accounts payable in the Consolidated Balance Sheets.

The Company does not enter into derivative contracts for trading purposes.

See Note 14, “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.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The activity in the Company’s warranty liability, which is included in Accrued liabilities and Other liabilities in the Company’s Consolidated Financial Statements, consisted of the following:



	Year Ended December 31,
	2014			2013
	(In thousands)
Warranty liability, beginning of period	$	65,512		$	40,437
Accrued warranty expense	23,019			25,013
Changes in estimates related to pre-existing warranties	(9,966		)	(638		)
Cost of warranty service work performed	(27,389		)	(21,082		)
Acquisitions⁽¹⁾	4,488			22,609
Foreign exchange translation effect	(4,529		)	(827		)
Warranty liability, end of period	$	51,135		$	65,512

⁽¹⁾During the year ended December 31, 2014, the Company retrospectively adjusted provisional amounts with respect to the four acquisitions completed during the three months ended December 31, 2013 to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. See Note 4, “Acquisitions” for further discussion regarding these adjustments.

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. The effect on deferred income tax assets and liabilities of a change in tax rates is generally recognized in (Benefit from) provision for income taxes 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 takes into account 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 (Benefit from) provision for income taxes 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 (Benefit from) provision for income taxes 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.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company considers the Venezuelan bolivar fuerte (“bolivar”) a highly inflationary currency. Therefore, financial statements of the Company’s Venezuelan operations are remeasured into their parents’ reporting currency. During the year ended December 31, 2013, Venezuela devalued its currency to an official rate of 6.3 bolivar to the U.S. dollar, representing an approximate 32% devaluation of its currency relative to the U.S. dollar. In February 2014, the Venezuelan government introduced an additional auction-based foreign exchange system (“SICAD II”) which began operating on March 24, 2014. As there are multiple legal mechanisms in Venezuela to exchange currency, the Company determined the SICAD II to be the most appropriate rate with which to remeasure the Company’s Venezuelan operations. The adoption of the SICAD II resulted in an 87% devaluation relative to the U.S. dollar from the previously used official rate of 6.3 bolivar to the U.S. dollar. Exchange gains and losses from the re-measurement of monetary assets and liabilities are reflected in Selling, general and administrative expense in the Consolidated Statement of Operations. Future impacts to earnings of applying highly inflationary accounting for Venezuela on the Company’s Consolidated Financial Statements will be dependent upon movements in the applicable exchange rates between the bolivar and the parents’ reporting currency and the amount of monetary assets and liabilities included in the Company’s Venezuelan operations’ balance sheets. As of and for the years ended December 31, 2014 and 2013, the Company's Venezuelan operations represented less than 1% of the Company's Total assets and Net sales. The bolivar-denominated monetary net asset position, primarily related to cash and cash equivalents, was $0.7 million and $5.5 million in the Consolidated Balance Sheets as of December 31, 2014 and 2013, respectively. The change in exchange rates resulted in foreign currency transaction losses of $6.3 million and $2.9 million recognized in Selling, general and administrative expense in the Consolidated Statements of Operations for the years ended December 31, 2014 and 2013, respectively.

During the year ended December 31, 2014, the Company recognized net foreign currency transaction losses of $5.1 million and $5.5 million in Interest expense and Selling, general and administrative expense in the Consolidated Statement of Operations, respectively, including the $6.3 million loss related to the Company’s adoption of the SICAD II exchange rate discussed above. During the year ended December 31, 2013, the Company recognized net foreign currency transaction losses of $4.1 million and $5.2 million in Interest expense and Selling, general and administrative expense in the Consolidated Statement of Operations, respectively, including the $2.9 million loss related to the devaluation of the bolivar discussed above. During the year ended December 31, 2012, the net foreign currency transaction loss recognized in Selling, general and administrative expense in the Consolidated Statement of Operations was $1.2 million.

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. Deferred issuance costs of $18.5 million and $18.2 million, respectively, were included in Other assets in the Consolidated Balance Sheets as of December 31, 2014 and 2013, net of $8.6 million and $4.7 million, respectively, of accumulated amortization. During the years ended December 31, 2014, 2013 and 2012, the Company deferred $0.3 million, $7.1 million and $9.9 million, respectively, of debt issuance costs. Further, the carrying value of Long-term 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 10, “Debt” for additional discussion regarding the Company’s borrowing arrangements.

Use of Estimates

The Company makes certain estimates and assumptions in preparing its Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities 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.

3. Recently Issued Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Income Taxes (Topic 740)” (“ASU No. 2013-11”). ASU No. 2013-11 is intended to clarify the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain circumstances. To the extent a carryforward is not available at the reporting date or the tax law of the applicable jurisdiction does not require the

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability. The adoption of ASU No. 2013-11 during the year ended December 31, 2014 did not have a material impact on the Company’s Consolidated Balance Sheet. As of December 31, 2014, $30.5 million of unrecognized tax benefit was presented as a reduction to the Company’s deferred tax asset, which is included in Other assets in the Consolidated Balance Sheet. As ASU No. 2013-11 was not adopted retrospectively, $9.2 million of unrecognized tax benefits are included in Other liabilities in the Consolidated Balance Sheet as of December 31, 2013.

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360)—Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU No. 2014-08”). ASU No. 2014-08 changes the requirements for reporting discontinued operations. Under ASU No. 2014-08, only disposals representing a strategic shift in operations and having a major effect on the entity’s operations and financial results should be presented as discontinued operations. Additionally, ASU No. 2014-08 requires expanded disclosures about discontinued operations. ASU No. 2014-08 is effective prospectively for fiscal years beginning after December 15, 2014, with early adoption permitted for disposals that have not been reported in financial statements previously issued. The Company will apply the provisions of ASU No. 2014-08 to future reporting of discontinued operations.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU No. 2014-09”). ASU No. 2014-09 clarifies the principles for recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance affects entities that enter into contracts with customers to transfer goods or services, and supersedes prior GAAP guidance, namely Accounting Standards Codification Topic 605—Revenue Recognition. ASU No. 2014-09 is effective for fiscal years beginning after December 15, 2016, and is to be applied retrospectively, or on a modified retrospective basis. Early adoption is not permitted. The Company is currently evaluating the impact of adopting ASU No. 2014-09 on its Consolidated Financial Statements.

4. Acquisitions

Charter International plc

On January 13, 2012, Colfax completed the acquisition of Charter for a total purchase price of approximately $2.6 billion, comprised of $1.9 billion of cash consideration and $0.7 billion fair value of Colfax Common stock on the date of acquisition. Charter is a global industrial manufacturing company focused on welding, cutting and automation and air and gas handling. The acquisition has:


•	enhanced the Company’s business profile by providing a meaningful recurring revenue stream and considerable exposure to emerging markets;


•	enabled Colfax to benefit from strong secular growth drivers, with a balance of short- and long-cycle businesses; and


•	provided an additional growth platform in the fragmented fabrication technology industry.

The Charter 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.

Other

The following acquisitions were accounted for using the acquisition method of accounting, except as otherwise noted, and, accordingly, the Consolidated Financial Statements include the financial position and results of operations from the respective date of acquisition:

Gas and Fluid Handling

On May 21, 2014, the Company completed the $0.8 million acquisition of the remaining ownership of Howden Thomassen Middle East FCZO (“Howden Middle East”), which resulted in an increase in the Company’s ownership of the subsidiary from 90% to 100% and was accounted for as an equity transaction, as the Company increased its controlling interest.

On November 29, 2013, the Company completed the acquisition of the global infrastructure and industry division of Fläkt Woods Group (“GII”) for approximately $246.0 million, including the assumption of debt, subject to certain adjustments. GII has operations around the world and expanded the Company’s product offerings in the heavy duty industrial and cooling fan market.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On November 25, 2013, the Company converted the common shares of Sistemas Centrales de Lubrication S.A. de C.V. (“Sicelub”), previously a less than wholly owned subsidiary in which the Company did not have a controlling interest, that were held by the majority owner into shares of mandatorily redeemable non-voting preferred stock of Sicelub valued at $31.7 million at the acquisition date, which resulted in an increase in the Company’s ownership from 44% to 100%. On the date of the acquisition, the Company held a $7.4 million equity investment representing the Company’s 44% investment in Sicelub and recognized a $13.8 million gain as a reduction in Selling, general and administrative expense in the Consolidated Statement of Operations to remeasure the investment to fair value at the acquisition date based upon the total enterprise value, adjusting for a control premium. Changes in settlement value of the mandatorily redeemable preferred stock are determined, in part, by the achievement of certain performance goals. The change in the settlement value of the mandatorily redeemable preferred stock for each period will be reflected in Interest expense. During the year ended December 31, 2014, a $3.1 million reduction to Interest expense is reflected in the Consolidated Statement of Operations due to the change in expected settlement value under the conditions specified in the contract of the mandatorily redeemable preferred stock, as the performance criteria were not met.

On November 1, 2013, the Company completed the acquisition of ČKD Kompresory a.s. (“ČKDK”) for approximately $69.4 million, including the assumption of debt. ČKDK is a leading supplier of multi-stage centrifugal compressors to the oil & gas, petrochemical, power and steel industries, based in Prague, Czech Republic.

On September 30, 2013, the Company completed the acquisition of certain business units of The New York Blower Company, including TLT-Babcock Inc. (“TLT-Babcock”) and Alphair Ventilating Systems Inc. (“Alphair”) for an approximate aggregate purchase price of $55.7 million. TLT-Babcock and Alphair are suppliers of heavy duty and industrial fans in Akron, Ohio and Winnipeg, Manitoba, respectively.

On July 9, 2013, the Company completed the acquisition of the common stock of Clarus Fluid Intelligence, LLC (“Clarus”) for $13.2 million, which included the fair value of an estimated additional contingent cash payment of $2.5 million at the acquisition date. The additional contingent payment, if any, would be paid during the year ending December 31, 2016 subject to the achievement of certain performance goals. See Note 14, “Financial Instruments and Fair Value Measurements” for discussion regarding the Company’s liability for contingent payments. Clarus is a domestic supplier of flushing services for marine applications primarily to U.S. government agencies, with primary operations based in Bellingham, Washington.

On September 13, 2012, the Company completed the acquisition of the common stock of Co-Vent Group Inc. (“Co-Vent”) for $34.6 million. Co-Vent specializes in the custom design, manufacture, and testing of industrial fans, with its primary operations based in Quebec, Canada. As a result of this acquisition, the Company has expanded its product offerings in the industrial fan market.

Fabrication Technology

On July 1, 2014, the Company completed the $9.5 million acquisition of the remaining ownership of ESAB-SVEL (“Svel”), which resulted in an increase in the Company’s ownership from 51% to 100% and was accounted for as an equity transaction, as the Company increased its controlling interest.

On April 14, 2014, Colfax completed the acquisition of the common stock of Victor Technologies Holdings, Inc. (“Victor”) for total net cash consideration of $948.8 million, subject to certain adjustments (the “Victor Acquisition”). Victor is a global manufacturer of cutting, gas control and specialty welding solutions. The acquisition complemented the geographic footprint of our fabrication technology segment and expanded our product portfolio into new segments and applications. The following table summarizes the Intangible assets acquired, excluding Goodwill as of April 14, 2014:



	Intangible Asset (In thousands)		Weighted-Average Amortization Period (Years)
	Intangible Asset (In thousands)		Weighted-Average Amortization Period (Years)

Customer relationships	$	291,800	12.83
Acquired technology	18,600		10.00
Other intangible assets	26,000		9.28
Total amortizable intangible assets	$	336,400	12.40
Trade names – indefinite life	$	53,300	n/a

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On October 31, 2012, the Company completed the acquisition of approximately 91% of the outstanding common and investment shares of Soldex S.A. (“Soldex”) for approximately $187.2 million (the “Soldex Acquisition”). Soldex is organized under the laws of Peru and complements the Company’s existing fabrication technology segment by supplying welding products from its plants in Colombia and Peru. On August 5, 2013, the Company completed a $14.9 million tender offer for additional common and investment shares of Soldex. This resulted in an increase in the Company’s ownership of the subsidiary from approximately 91% to 99% and was accounted for as an equity transaction, as the Company increased its controlling interest.

On April 13, 2012, the Company completed a $29.3 million acquisition of shares in ESAB India Limited, a publicly traded, less than wholly owned subsidiary in which the Company acquired a controlling interest in the Charter Acquisition. This resulted in an increase in the Company’s ownership of the subsidiary from 56% to 74%. This acquisition of shares was pursuant to a statutorily mandated tender offer triggered as a result of the Charter Acquisition and was accounted for as an equity transaction, as the Company increased its controlling interest.

In May 2012, the Company completed an $8.5 million acquisition, including the assumption of debt, of the remaining ownership of CJSC Sibes (“Sibes”), a less than wholly owned subsidiary in which the Company did not have a controlling interest. This resulted in an increase in the Company’s ownership of Sibes from 16% to 100%.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition for all acquisitions accounted for under the acquisition method of accounting and consummated during the years ended December 31, 2014, 2013 and 2012.



	2014			2013			2012
	(In thousands)
Trade receivables	$	76,678		$	74,387		$	714,486
Inventories	107,785			49,871			487,835
Property, plant and equipment	59,281			92,247			595,961
Goodwill	612,746			284,294			1,793,394
Intangible assets	389,700			104,272			794,333
Accounts payable	(34,271		)	(70,122		)	(391,131		)
Debt	—			(10,942		)	(437,564		)
Other assets and liabilities, net	(263,119		)	(99,205		)	(746,719		)
	948,800			424,802			2,810,595
Less: net assets attributable to noncontrolling interest	—			—			(259,329		)
Consideration, net of cash acquired	$	948,800		$	424,802		$	2,551,266

For the Victor Acquisition, the amounts represent the Company’s best estimate of the aggregate fair value of the assets acquired and liabilities assumed. These amounts are based upon certain valuations, studies and analyses that have yet to be finalized, and accordingly, the assets acquired and liabilities assumed, as detailed above, are subject to adjustment once the detailed analyses are completed. During the measurement period for the Victor Acquisition, the Company has made aggregate retrospective adjustments of $7.1 million during the year ended December 31, 2014, to provisional amounts that were recognized at the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The aggregate adjustments decreased the Goodwill balance and primarily relate to the Company’s valuation of intangible assets. Substantially all of the Goodwill recognized in conjunction with the Victor Acquisition is not expected to be deductible for income tax purposes.

During the three months ended December 31, 2013, the Company completed four acquisitions: GII, Sicelub, ČKDK, TLT-Babcock and Alphair. During the year ended December 31, 2014, the Company retrospectively adjusted provisional amounts with respect to these four acquisitions that were recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The aggregate adjustments for the year ended December 31, 2014 of $25.4 million increased the Goodwill balance and are summarized below.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	Acquisition Date Fair Values (Provisional)			Measurement Period			Acquisition Date Fair Values (Final)
	2013			Adjustments			2013
	(In thousands)
Trade receivables	$	80,258		$	(5,871	)	$	74,387
Inventories	53,551			(3,680		)	49,871
Property, plant and equipment	94,258			(2,011		)	92,247
Goodwill	258,901			25,393			284,294
Intangible assets	104,272			—			104,272
Accounts payable	(68,308		)	(1,814		)	(70,122		)
Debt	(10,942		)	—			(10,942		)
Other assets and liabilities, net	(87,188		)	(12,017		)	(99,205		)
Consideration, net of cash acquired	$	424,802		$	—		$	424,802

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for the individually significant acquisitions consummated, and all of the others collectively, during the year ended December 31, 2012:



	Charter			Soldex			Other			Total 2012
	(In thousands)
Trade receivables	$	683,976		$	22,848		$	7,662		$	714,486
Inventories	449,906			32,985			4,944			487,835
Property, plant and equipment	562,129			28,921			4,911			595,961
Goodwill	1,649,159			116,696			27,539			1,793,394
Intangible assets	715,643			65,325			13,365			794,333
Accounts payable	(378,114		)	(6,682		)	(6,335		)	(391,131		)
Debt	(399,466		)	(36,734		)	(1,364		)	(437,564		)
Other assets and liabilities, net	(706,052		)	(33,654		)	(7,013		)	(746,719		)
	2,577,181			189,705			43,709			2,810,595
Less: net assets attributable to noncontrolling interest	(241,201		)	(18,128		)	—			(259,329		)
Consideration, net of cash acquired	$	2,335,980		$	171,577		$	43,709		$	2,551,266

In connection with the Charter Acquisition, the Company incurred advisory, legal, valuation and other professional service fees, termination payments to Charter executives and realized losses on acquisition-related foreign exchange derivatives, which comprised Charter Acquisition-related expense in the Consolidated Statements of Operations. See Note 14, “Financial Instruments and Fair Value Measurements” for additional information regarding the Company’s derivative instruments. Excluding Charter Acquisition-related expenses, the Company incurred advisory, legal, valuation and other professional service fees of $2.7 million, $4.3 million and $3.1 million, during the years ended December 31, 2014, 2013 and 2012, respectively, in connection with completed acquisitions which are included in Selling, general and administrative expense in the Consolidated Statements of Operations.

During the period from April 14, 2014 through December 31, 2014, the Company’s Consolidated Statements of Operations included $347.3 million and $35.9 million of Net sales and Net income available to Colfax Corporation common shareholders, respectively, associated with the Victor Acquisition. During the year ended December 31, 2013, the Company’s Consolidated Statements of Operations included $59.9 million of Net sales associated with the acquisitions consummated during 2013. Net Income available to common shareholders associated with acquisitions consummated during year ended December 31, 2013 was not material. During the year ended December 31, 2012, the Company’s Consolidated Statements of Operations included $3.2 billion and $21.6 million of Net sales associated with the acquisitions of Charter and Soldex, respectively. The Net loss attributable to Colfax Corporation common shareholders for Soldex included in the Consolidated Statements of Operations for the year ended December 31, 2012 was $1.7 million. Due to the refinancing of the Company's borrowing arrangements, the restructuring of the Corporate function of both entities into a single corporate office and numerous other shared resources given the scale of the Charter

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Acquisition, quantification of the earnings included in the consolidated income statement for the year ended December 31, 2012 related to Charter is impracticable.

5. Net Income (Loss) Per Share

Net income (loss) per share available to Colfax Corporation common shareholders was computed as follows:



	Year Ended December 31,
	2014		2013			2012
	(In thousands, except share data)
Computation of Net income (loss) per share - basic:
Net income (loss) available to Colfax Corporation common shareholders	$	370,185	$	158,232		$	(83,353	)
Less: net income attributable to participating securities⁽¹⁾	—		(3,740		)	—
	$	370,185	$	154,492		$	(83,353	)
Weighted-average shares of Common stock outstanding - basic	121,143,790		99,198,570			91,069,640
Net income (loss) per share - basic	$	3.06	$	1.56		$	(0.92	)
Computation of Net income (loss) per share - diluted:
Net income (loss) available to Colfax Corporation common shareholders	$	370,185	$	158,232		$	(83,353	)
Less: net income attributable to participating securities⁽¹⁾	—		(3,740		)	—
	$	370,185	$	154,492		$	(83,353	)
Weighted-average shares of Common stock outstanding - basic	121,143,790		99,198,570			91,069,640
Net effect of potentially dilutive securities - stock options and restricted stock units	1,522,502		1,167,885			—
Weighted-average shares of Common stock outstanding - diluted	122,666,292		100,366,455			91,069,640
Net income (loss) per share - diluted	$	3.02	$	1.54		$	(0.92	)

⁽¹⁾Net income (loss) per share - diluted for the period from January 13, 2012 to April 23, 2013 was calculated consistently with the two-class method in accordance with GAAP, as further discussed below. Subsequent to April 23, 2013 and prior to February 12, 2014, Net income per share - diluted was calculated consistently with the if-converted method in accordance with GAAP, as further discussed below. However, for the year ended December 31, 2013, the calculation under this method was anti-dilutive.

On April 23, 2013, the Company and BDT CF Acquisition Vehicle, LLC (the “BDT Investor”) amended the Certificate of Designations of Series A Perpetual Convertible Preferred Stock of Colfax Corporation to eliminate the right of the Series A Perpetual Convertible Preferred Stock to share proportionately in any dividends or distributions made in respect of the Company’s Common stock. On February 12, 2014, the Company entered into a Conversion Agreement with the BDT Investor pursuant to which the BDT Investor exercised its option to convert 13,877,552 shares of Series A Perpetual Convertible Preferred Stock into 12,173,291 shares of Common stock plus cash. The BDT Investor was the sole holder of all issued and outstanding shares of the Company’s Series A Perpetual Convertible Preferred Stock. See Note 11, “Equity” for further discussion of the Series A Perpetual Convertible Preferred Stock conversion. For periods from January 13, 2012 to April 23, 2013, Net income (loss) available to Colfax Corporation common shareholders was allocated to participating securities, while any losses for those periods were not allocated to participating securities. Subsequent to April 23, 2013 and prior to February 12, 2014, the Company’s Net income per share - dilutive was computed using the “if-converted” method. Under the “if-converted” method, Net income per share - dilutive was calculated under the assumption that the shares of Series A Perpetual Convertible Preferred Stock had been converted into shares of Common stock as of the beginning of the respective period. For the years ended December 31, 2014 and 2013, the weighted-average computation of the dilutive effect of potentially issuable shares of Common stock excluded 1.4 million and 12.2 million, respectively, of Common stock equivalents, as inclusion of such shares would be anti-dilutive.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the years ended December 31, 2014, 2013 and 2012 excludes approximately 0.8 million, 0.6 million and 2.8 million outstanding stock-based compensation awards, respectively, as their inclusion would be anti-dilutive.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

6. Income Taxes

Income before income taxes and (Benefit from) provision for income taxes consisted of the following:



	Year Ended December 31,
	2014			2013			2012
	(In thousands)
Income (loss) before income taxes:
Domestic operations	$	53,153		$	(7,899	)	$	(73,467	)
Foreign operations	305,095			310,694			121,906
	$	358,248		$	302,795		$	48,439
Provision for (benefit from) income taxes:
Current:
Federal	$	798		$	(464	)	$	—
State	2,047			871			362
Foreign	74,618			83,299			83,119
	77,463			83,706			83,481
Deferred:
Domestic operations	$	(127,114	)	$	11,603		$	50,340
Foreign operations	(12,374		)	(1,657		)	(43,118		)
	(139,488		)	9,946			7,222
	$	(62,025	)	$	93,652		$	90,703

The Company’s (Benefit from) provision for income taxes differs from the amount that would be computed by applying the U.S. federal statutory rate as follows:



	Year Ended December 31,
	2014			2013			2012
	(In thousands)
Taxes calculated at the U.S. federal statutory rate	$	125,386		$	105,978		$	16,954
State taxes	2,323			871			362
Effect of tax rates on international operations	(34,619		)	(42,972		)	(24,070		)
Change in enacted international tax rates	(149		)	(5,217		)	(12,305		)
Changes in valuation allowance and tax reserves	(156,071		)	30,554			106,802
Other	1,105			4,438			2,960
(Benefit from) provision for income taxes	$	(62,025	)	$	93,652		$	90,703

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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. During the year ended December 31, 2014, adjustments were made retrospectively to provisional amounts recorded as of December 31, 2013, due to the finalization of the valuation of specific tax items related to the acquisitions consummated during the three months ended December 31, 2013. The significant components of deferred tax assets and liabilities, in addition to the reconciliation of the beginning and ending amount of gross unrecognized tax benefits below, include the impact of these retrospective adjustments. Significant components of the deferred tax assets and liabilities are as follows:



	December 31,
	2014			2013
	(In thousands)
Deferred tax assets:
Post-retirement benefit obligation	$	93,080		$	87,305
Expenses currently not deductible	116,648			155,488
Net operating loss carryforward	234,384			264,893
Tax credit carryforward	11,509			15,518
Depreciation and amortization	11,092			5,473
Other	22,291			6,596
Valuation allowance	(159,686		)	(360,910		)
Deferred tax assets, net	$	329,318		$	174,363
Deferred tax liabilities:
Depreciation and amortization	$	(360,602	)	$	(266,652	)
Post-retirement benefit obligation	(12,122		)	(17,844		)
Inventory	(16,696		)	(12,558		)
Other	(193,618		)	(59,036		)
Total deferred tax liabilities	$	(583,038	)	$	(356,090	)
Total deferred tax liabilities, net	$	(253,720	)	$	(181,727	)

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, 2014, the valuation allowance decreased from $360.9 million to $159.7 million with a net decrease of $134.2 million recognized in (Benefit from) provision for income taxes, a decrease of $66.0 million recognized in Other comprehensive (loss) income and reclassifications and a $2.8 million decrease related to changes in foreign currency rates, which were partially offset by an increase of $1.8 million attributable to the acquisition made during the year. As a result of the effect of the Victor Acquisition on expected future income in the United States, the realizability of certain deferred assets were reassessed. The reduction of valuation allowances associated with this reassessment resulted in a non-cash income tax benefit of $145.4 million for the year ended December 31, 2014. During the year ended December 31, 2013, the valuation allowance increased from $357.6 million to $360.9 million with an increase of $30.6 million recognized in (Benefit from) provision for income taxes and an increase of $4.9 million attributable to acquisitions made during the year, which were offset by a decrease of $27.2 million recognized in Other comprehensive (loss) income, a net $3.4 million decrease related to international tax rate changes and reclassifications and a $1.6 million decrease related to changes in foreign currency rates. Consideration was given to U.S. tax planning strategies and future U.S. 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 $346.8 million expiring in years 2017 through 2032, and alternative minimum tax credits of $10.2 million that may be carried forward indefinitely. Tax credit carryforwards include foreign tax credits that have been offset by a valuation allowance. 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.

For the years ended December 31, 2014, 2013 and 2012, all undistributed earnings of the Company’s controlled international subsidiaries are considered to be permanently reinvested outside the U.S. and no tax expense in the U.S. has been recognized under the applicable accounting standard for these reinvested earnings. The amount of unremitted earnings from the Company’s international subsidiaries, subject to local statutory restrictions, as of December 31, 2014 is $723.0 million. 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, 2012	$	85,723
Acquisitions	2,683
Addition for tax positions taken in prior periods	6,988
Addition for tax positions taken in the current period	7,730
Reduction for tax positions taken in prior periods	(31,156		)
Other, including the impact of foreign currency translation	(373		)
Balance, December 31, 2013	71,595
Acquisition	37,328
Addition for tax positions taken in prior periods	3,752
Addition for tax positions taken in the current period	894
Reduction for tax positions taken in prior periods	(27,601		)
Other, including the impact of foreign currency translation	(8,443		)
Balance, December 31, 2014	$	77,525

The Company is routinely examined by tax authorities around the world. Tax examinations remain in process in multiple countries, including but not limited to Sweden, Indonesia, France, Germany, Finland, Mexico, Brazil and various states. The Company files numerous group and separate tax returns in U.S. federal and state jurisdictions, as well as many international jurisdictions. In the U.S., tax years dating back to 2006 remain subject to examination, as well as the 2003 and 2005 tax years 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 2008.

The Company’s total unrecognized tax benefits were $77.5 million and $71.6 million as of December 31, 2014 and 2013, respectively, inclusive of $14.7 million and $13.4 million, respectively, of interest and penalties. These amounts were offset by tax benefits of $0.1 million as of both December 31, 2014 and 2013. The net liabilities for uncertain tax positions as of December 31, 2014 and 2013 were $77.4 million and $71.5 million, respectively, and, if recognized, would favorably impact the effective tax rate. The Company records interest and penalties on uncertain tax positions as a component of (Benefit from) provision for income taxes, which was $2.5 million, $4.0 million and $1.3 million for the years ended December 31, 2014, 2013 and 2012, 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 $23.8 million.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7. Goodwill and Intangible Assets

The following table summarizes the activity in Goodwill, by segment during the years ended December 31, 2014 and 2013:



	Gas and Fluid Handling			Fabrication Technology			Total
	(In thousands)
Balance, January 1, 2013	$	1,225,494		$	873,342		$	2,098,836
Goodwill attributable to acquisitions⁽¹⁾	284,294			—			284,294
Impact of foreign currency translation and other	22,413			4,156			26,569
Balance, December 31, 2013	1,532,201			877,498			2,409,699
Goodwill attributable to Victor acquisition	—			612,746			612,746
Impact of foreign currency translation and other	(103,843		)	(45,699		)	(149,542		)
Balance, December 31, 2014	$	1,428,358		$	1,444,545		$	2,872,903

The following table summarizes the Intangible assets, excluding Goodwill:



	December 31,
	2014					2013
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Trade names – indefinite life	$	410,600	$	—		$	414,275	$	—
Acquired customer relationships	593,799		(85,171		)	353,337		(51,675		)
Acquired technology	113,697		(27,681		)	114,647		(22,757		)
Acquired backlog	—		—			73,476		(65,919		)
Other intangible assets	50,287		(11,948		)	24,127		(6,958		)
	$	1,168,383	$	(124,800	)	$	979,862	$	(147,309	)

Amortization expense related to amortizable intangible assets was included in the Consolidated Statements of Operations as follows:



	Year Ended December 31,
	2014		2013		2012
	(In thousands)
Selling, general and administrative expense	$	67,052	$	41,012	$	85,106

See Note 2, “Summary of Significant Accounting Policies” for discussion of impairment of Intangible assets.

As of December 31, 2014, total amortization expense for amortizable intangible assets is expected to be $64.9 million, $61.8 million, $58.1 million, $55.1 million and $51.9 million for the years ending December 31, 2015, 2016, 2017, 2018 and 2019, respectively.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

8. Property, Plant and Equipment, Net



		December 31,
	Depreciable Life	2014			2013⁽¹⁾
	(In years)	(In thousands)
Land	n/a	$	52,539		$	48,353
Buildings and improvements	5-40	366,009			372,115
Machinery and equipment	3-15	524,723			501,387
Software	3-5	98,069			88,463
		1,041,340			1,010,318
Accumulated depreciation		(311,612		)	(256,057		)
Property, plant and equipment, net		$	729,728		$	754,261

Depreciation expense, including the amortization of assets recorded under capital leases, for the years ended December 31, 2014, 2013 and 2012, was $94.5 million, $78.1 million and $75.0 million, respectively. Depreciation expense for the years ended December 31, 2014, 2013 and 2012 includes $4.6 million, $1.9 million and $3.2 million of non-cash impairment of fixed assets, respectively. These amounts also include depreciation expense related to software for the years ended December 31, 2014, 2013 and 2012 of $15.7 million, $11.8 million and $10.5 million, respectively.

9. Inventories, Net

Inventories, net consisted of the following:



	December 31,
	2014			2013⁽¹⁾
	(In thousands)
Raw materials	$	164,115		$	145,335
Work in process	81,110			113,018
Finished goods	239,808			222,034
	485,033			480,387
Less: customer progress payments	(7,728		)	(4,078		)
Less: allowance for excess, slow-moving and obsolete inventory	(34,573		)	(32,773		)
Inventories, net	$	442,732		$	443,536

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

10. Debt

Long-term debt consisted of the following:



	December 31,
	2014			2013
	(In thousands)
Term loans	$	1,132,908		$	1,115,238
Trade receivables financing arrangement	80,000			—
Revolving credit facilities and other	326,336			371,853
Total Debt	1,539,244			1,487,091
Less: current portion	(9,855		)	(29,449		)
Long-term debt	$	1,529,389		$	1,457,642

The Company entered into a credit agreement by and among the Company, Colfax UK Holdings Ltd, the other subsidiaries of the Company party thereto, the lenders party thereto and Deutsche Bank AG New York Branch, as administrative agent (the “Deutsche Bank Credit Agreement”) on September 12, 2011. In connection with the closing of the Charter Acquisition, the Deutsche Bank Credit Agreement was amended on January 13, 2012 and the Company terminated its existing credit agreement as well as Charter’s outstanding indebtedness. A Second Amendment to the Deutsche Bank Credit Agreement was entered into on February 22, 2013 which among other things, reallocated borrowing capacities of the tranches of loans and reduced interest rate margins when compared to the terms of the amended Deutsche Bank Credit Agreement on January 13, 2012.

On November 7, 2013, the Company entered into the Third Amendment to the Deutsche Bank Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, the Company further amended its credit agreement to, among other things, (i) reallocate borrowing capacities of the tranches of loans as follows: a $408.7 million term A-1 facility, a $380 million term A-2 facility, a €149.7 million term A-3 facility, a €100 million term A-4 facility and two revolving credit subfacilities which total $898 million in commitments, (ii) provide for an interest rate margin on the term A-1 facility, the term A-2 facility and the revolving credit subfacilities ranging from 0.50% and 1.25% per annum for base rate loans and 1.50% to 2.25% per annum for Eurocurrency rate loans, in each case determined by the Company’s leverage ratio, (iii) provide for an interest margin on the term A-3 facility and the term A-4 facility ranging from 0.75% to 1.50% per annum for base rate loans and 1.75% and 2.50% per annum for Eurocurrency loans, in each case, determined by the Company’s leverage ratio and (iv) reset the maturity date for the term A facilities and the two revolving credit subfacilities as well as the amortization schedule for the term A facilities to a five year term commencing on November 7, 2013. In connection with the Third Amendment, the prior term B facility under the credit agreement, held primarily by institutional lenders, was repaid in its entirety.

On May 14, 2014, the Company entered into an Incremental Amendment to the Term A-1 facility under the Deutsche Bank Credit Agreement, as amended. Pursuant to the Incremental Amendment, the borrowing capacity of the Term A-1 facility was increased by $150.0 million to an aggregate of $558.7 million, upon the same terms as the existing Term A-1 facility.

In conjunction with the amendments to the Deutsche Bank Credit Agreement, the Company recorded a charge to Interest expense in the Consolidated Statement of Operations for the year ended December 31, 2013 of $29.4 million to write-off certain deferred financing fees and original issue discount and expensed approximately $1.2 million of costs incurred in connection with the refinancing. The Company had an original issue discount of $12.6 million and deferred financing fees of $9.9 million included in its Consolidated Balance Sheet as of December 31, 2014, which will be accreted to Interest expense primarily using the effective interest method, over the life of the Deutsche Bank Credit Agreement. As of December 31, 2014, the weighted-average interest rate of borrowings under the amended Deutsche Bank Credit Agreement was 1.94%, excluding accretion of original issue discount and deferred financing fees, and there was $674.9 million available on the revolving credit subfacilities, including $199.9 million available on a letter of credit subfacility.

The Company is also party to additional letter of credit facilities with total capacity of $699.1 million. Total letters of credit of $381.2 million were outstanding as of December 31, 2014.

On December 22, 2014, the Company entered into a receivables financing facility, pursuant to which it established a wholly owned, special purpose bankruptcy-remote subsidiary which purchases trade receivables from certain of the Company’s subsidiaries on an ongoing basis and pledges them to support its obligation as borrower under the receivables financing facility. This special purpose subsidiary has a separate legal existence from its parent and its assets are not available to satisfy the claims of creditors of the selling subsidiaries or any other member of the consolidated group. Availability of funds may fluctuate over time given changes in eligible receivable balances, but will not exceed the $80 million program limit. As of December 31, 2014, the total

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

outstanding borrowings under the receivables financing facility were $80 million and the interest rate was 0.9%. The scheduled termination date for the receivables financing facility is December 21, 2015, which may be extended from time to time. The facility contains representations, warranties, covenants and indemnities customary for facilities of this type. The facility does not contain any covenants that the Company views as materially constraining to the activities of its business.

The contractual maturities of the Company’s debt as of December 31, 2014 are as follows⁽¹⁾:



	(In thousands)
2015	$	9,855
2016	5,620
2017	4,452
2018	1,531,888
Total contractual maturities	1,551,815
Debt discount	(12,571		)
Total debt	$	1,539,244

________

⁽¹⁾ Represents scheduled payments required under the Deutsche Bank Credit Agreement through November 7, 2018, as well as the contractual maturities of other debt outstanding as of December 31, 2014, and reflects management’s intention to repay scheduled maturities of the term loans outstanding under the Deutsche Bank Credit Agreement and the trade receivables financing arrangement (if not extended) with proceeds from the revolving credit facility.

In connection with the Deutsche Bank Credit Agreement, the Company has pledged substantially all of its domestic subsidiaries’ assets, other than the transferred receivables discussed previously, and 65% of the shares of certain first tier international subsidiaries as collateral against borrowings to its U.S. companies. In addition, subsidiaries in certain foreign jurisdictions have guaranteed the Company’s obligations on borrowings of one of its European subsidiaries, as well as pledged substantially all of their assets for such borrowings to this European subsidiary under the Deutsche Bank Credit Agreement. The Deutsche Bank Credit Agreement contains customary covenants limiting the Company’s ability to, among other things, pay dividends, incur debt or liens, redeem or repurchase equity, enter into transactions with affiliates, make investments, merge or consolidate with others or dispose of assets. In addition, the Deutsche Bank Credit Agreement contains financial covenants requiring the Company to maintain a total leverage ratio, as defined therein, of not more than 4.75 to 1.0 and a minimum interest coverage ratio, as defined therein, of 2.50 to 1.0, measured at the end of each quarter. The minimum interest coverage ratio increases by 25 basis points each year until it reaches 3.0 to 1.0 for the year ending December 31, 2016 and each year thereafter. The maximum total leverage ratio decreases 25 basis points each year until it reaches 4.25 to 1.0 for the year ending December 31, 2016 and each year thereafter. The Deutsche Bank Credit Agreement contains various events of default, including failure to comply with the financial covenants referenced above, 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 loans and the revolving credit subfacilities and foreclose on the collateral. The Company is in compliance with all such covenants as of December 31, 2014.

11. Equity

Common and Preferred Stock

During the years ended December 31, 2014, 2013 and 2012, 252,674, 265,995 and 452,062 shares of Common stock, respectively, were issued in connection with stock option exercises and employee share-based payment arrangements that vested during the year.

On January 24, 2012, following approval by the Company’s stockholders, the Company’s Certificate of Incorporation was amended to increase the number of authorized shares from 210,000,000 shares to 420,000,000 shares, comprised of an increase in Common stock from 200,000,000 shares to 400,000,000 shares and an increase in Preferred stock from 10,000,000 shares to 20,000,000 shares.

In connection with the financing of the Charter Acquisition, on January 24, 2012, the Company sold (i) 14,756,945 newly issued shares of Colfax Common stock and (ii) 13,877,552 shares of newly created Series A perpetual convertible preferred stock, referred to as the Series A Preferred Stock, for an aggregate of $680 million (representing $24.50 per share of Series A Preferred Stock and $23.04 per share of Common stock) pursuant to a securities purchase agreement (the “BDT Purchase Agreement”) with the BDT Investor as well as BDT Capital Partners Fund I-A, L.P., and Mitchell P. Rales, Chairman of Colfax’s Board of Directors,

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

and his brother, Steven M. Rales (for the limited purpose of tag-along sales rights provided to the BDT Investor in the event of a sale or transfer of shares of Colfax Common stock by either or both of Mitchell P. Rales and Steven M. Rales). Under the terms of the Series A Preferred Stock, holders are entitled to receive cumulative cash dividends, payable quarterly, at a per annum rate of 6% of the liquidation preference (defined as $24.50, subject to customary antidilution adjustments), provided that the dividend rate shall be increased to a per annum rate of 8% if Colfax fails to pay the full amount of any dividend required to be paid on such shares until the date that full payment is made.

The Series A Preferred Stock is convertible, in whole or in part, at the option of the holders at any time after the date the shares were issued into shares of Colfax Common stock at a conversion rate determined by dividing the liquidation preference by a number equal to 114% of the liquidation preference, subject to certain adjustments. The Series A Preferred Stock is also convertible, in whole or in part, at the option of Colfax on or after the third anniversary of the issuance of the shares at the same conversion rate if, among other things: (i) for the preceding thirty trading days, the closing price of Colfax Common stock on the New York Stock Exchange exceeds 133% of the applicable conversion price and (ii) Colfax has declared and paid or set apart for payment all accrued but unpaid dividends on the Series A Preferred Stock.

On January 24, 2012, Colfax sold 2,170,139 to each of Mitchell P. Rales, Chairman of Colfax’s Board of Directors, and his brother Steven M. Rales and 1,085,070 to Markel Corporation, a Virginia corporation (“Markel”) of newly issued Colfax Common stock at $23.04 per share, for a total aggregate of $125 million, pursuant to separate securities purchase agreements with Mitchell P. Rales and Steven M. Rales, each of whom were beneficial owners of 20.9% of Colfax’s Common stock at the time of the sale, and Markel. Thomas S. Gayner, a member of Colfax’s Board of Directors, is President and Chief Investment Officer of Markel.

In conjunction with the issuance of the Common and Preferred stock discussed above, the Company recognized $14.7 million in equity issuance costs, which were recorded as a reduction to Additional paid-in capital during the year ended December 31, 2012.

On March 5, 2012, the Company sold 8,000,000 shares of newly issued Colfax Common stock to underwriters for public resale pursuant to a shelf registration statement for an aggregate purchase price of $272 million. Further, on March 9, 2012, the underwriters of the March 5, 2012 equity offering exercised their over-allotment option and the Company sold an additional 1,000,000 shares of newly issued Colfax Common stock to the underwriters for public resale pursuant to a shelf registration statement for an aggregate purchase price of $34 million. In conjunction with these issuances, the Company recognized $12.6 million in equity issuance costs which were recorded as a reduction to Additional paid-in capital during the year ended December 31, 2012.

On May 13, 2013, the Company sold 7,500,000 shares of newly issued Colfax Common stock to underwriters for public resale pursuant to a shelf registration statement for an aggregate purchase price of $331.9 million. In conjunction with this issuance, the Company recognized $12.0 million in equity issuance costs which were recorded as a reduction to Additional paid-in capital during the year ended December 31, 2013.

The Company contributed 88,200 and 183,000 shares of newly issued Colfax Common stock to its U.S. defined benefit pension plan on September 12, 2013 and January 15, 2014, respectively.

The Company entered into a Conversion Agreement with the BDT Investor, pursuant to which the BDT Investor exercised its option to convert 13,877,552 shares of Series A Perpetual Convertible Preferred Stock into 12,173,291 shares of the Company’s Common stock plus cash in lieu of a .22807018 share interest, which conversion occurred on February 12, 2014. As consideration for the BDT Investor’s agreement to exercise its optional conversion right, the Company paid approximately $23.4 million to the BDT Investor, of which $19.6 million represents the Preferred stock conversion inducement payment in the Consolidated Statement of Operations for the year ended December 31, 2014.

On February 20, 2014, the Company sold 9,200,000 shares of newly issued Colfax Common stock to underwriters for public resale pursuant to a shelf registration statement for an aggregate purchase price of $632.5 million. In conjunction with this issuance, the Company recognized $22.1 million in equity issuance costs, which were recorded as a reduction to Additional paid-in capital during the year ended December 31, 2014.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Dividend Restrictions

The Company is subject to dividend restrictions under the Deutsche Bank Credit Agreement, which limit the total amount of cash dividends the Company may pay and Common stock repurchases the Company may make to $50 million annually, in the aggregate.

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, 2014 and 2013. All amounts are net of tax and noncontrolling interest.



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

Balance at January 1, 2013	$	(247,332	)	$	104,718		$	(3,980	)	$	(146,594	)
Acquisition of shares held by noncontrolling interest	—			(381		)	—			(381		)
Other comprehensive income (loss) before reclassifications:
Net actuarial gain	77,515			—			—			77,515
Foreign currency translation adjustment	—			21,091			—			21,091
Gain on long-term intra-entity foreign currency transactions	—			2,176			—			2,176
Loss on net investment hedges	—			—			(14,261		)	(14,261		)
Unrealized gain on cash flow hedges	—			—			3,832			3,832
Other comprehensive income (loss) before reclassifications	77,515			23,267			(10,429		)	90,353
Amounts reclassified from Accumulated other comprehensive loss	10,022			—			—			10,022
Net current period Other comprehensive income (loss)	87,537			23,267			(10,429		)	100,375
Balance at December 31, 2013	$	(159,795	)	$	127,604		$	(14,409	)	$	(46,600	)
Acquisition of shares held by noncontrolling interest	—			(942		)	—			(942		)
Other comprehensive (loss) income before reclassifications:
Net actuarial loss	(89,379		)	—			—			(89,379		)
Foreign currency translation adjustment	—			(346,524		)	—			(346,524		)
Gain on long-term intra-entity foreign currency transactions	—			2,096			—			2,096
Gain on net investment hedges	—			—			39,374			39,374
Unrealized loss on cash flow hedges	—			—			(8,932		)	(8,932		)
Other	1,934			—			—			1,934
Other comprehensive (loss) income before reclassifications	(87,445		)	(344,428		)	30,442			(401,431		)
Amounts reclassified from Accumulated other comprehensive loss	5,282			—			—			5,282
Net current period Other comprehensive (loss) income	(82,163		)	(344,428		)	30,442			(396,149		)
Balance at December 31, 2014	$	(241,958	)	$	(217,766	)	$	16,033		$	(443,691	)

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The effect on Net income of amounts reclassified out of each component of Accumulated other comprehensive loss for the years ended December 31, 2014 and 2013 is as follows:



	Year Ended December 31, 2014							Year Ended December 31, 2013
	Amounts Reclassified From Accumulated Other Comprehensive Loss		Tax Benefit			Total		Amounts Reclassified From Accumulated Other Comprehensive Loss		Tax Benefit			Total
	(In thousands)							(In thousands)

Pension and other post-retirement benefit cost:
Amortization of net loss⁽¹⁾	$	7,097	$	(2,063	)	$	5,034	$	10,489	$	(715	)	$	9,774
Amortization of prior service cost⁽¹⁾	248		—			248		248		—			248
	$	7,345	$	(2,063	)	$	5,282	$	10,737	$	(715	)	$	10,022

⁽¹⁾Included in the computation of net periodic benefit cost. See Note 13, “Defined Benefit Plans” for additional details.

During the years ended December 31, 2014 and 2013, Noncontrolling interest decreased by $12.4 million and $17.5 million, respectively, as a result of Other comprehensive loss, primarily due to foreign currency translation adjustment.

Share-Based Payments

The Company adopted the Colfax Corporation 2008 Omnibus Incentive Plan on April 21, 2008, as amended and restated on April 2, 2012 (the “2008 Plan”). The 2008 Plan provides the Compensation Committee of the Company’s Board of Directors discretion in creating employee equity incentives. Awards under the 2008 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,
	2014		2013		2012
	(In thousands)
Stock-based compensation expense	$	17,580	$	13,334	$	9,373
Deferred tax benefit	4,054		434		305

As of December 31, 2014, the Company had $34.5 million of unrecognized compensation expense related to stock-based awards that will be recognized over a weighted-average period of approximately 1.6 years. The intrinsic value of awards exercised or issued upon vesting was $13.3 million, $9.2 million and $9.9 million during the years ended December 31, 2014, 2013 and 2012, respectively.

Stock Options

Under the 2008 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. In the case of an incentive stock option granted to a holder of 10% of the Company’s outstanding Common stock, the Company may grant options to purchase Common stock with a maximum term of 5 years, at a purchase price equal to 110% of the market value of the Company’s Common stock on the date of grant.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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,
	2014			2013			2012
Expected period that options will be outstanding (in years)	4.87			4.90			5.41
Interest rate (based on U.S. Treasury yields at the time of grant)	1.62		%	1.06		%	0.99		%
Volatility	34.67		%	43.22		%	42.59		%
Dividend yield	—			—			—
Weighted-average fair value of options granted	$	22.65		$	18.07		$	13.14

Expected volatility is estimated based on the historical volatility of comparable public companies. 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.

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, 2014	2,431,790		$	30.98
Granted	700,018		69.06
Exercised	(154,830	)	23.02
Forfeited	(60,525	)	49.34
Expired	(6,344	)	29.18
Outstanding at December 31, 2014	2,910,109		$	40.19	4.55	$	45,492
Vested or expected to vest at December 31, 2014	2,856,031		$	39.81	4.52	$	45,323
Exercisable at December 31, 2014	985,033		$	23.96	3.13	$	27,463

__________


⁽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 2008 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 various performance goals. 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. If the performance criteria are satisfied, the units are subject to additional time vesting requirements, by which units will vest fully in two equal installments on the fourth and fifth anniversary of the grant date, provided the individual remains an employee during this period. Under the 2008 Plan, the Compensation Committee of the Board of Directors may award non-performance-based restricted stock units (“RSUs”) to select executives, employees and outside directors. 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.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The fair value of PRSUs and RSUs is equal to the market value of a share of Common stock on the date of grant and the related compensation expense is recognized ratably over the requisite service period and, for PRSUs, when it is expected that any of the performance criterion will be achieved. The performance criterion was met for PRSUs granted during the year ended December 31, 2012, including PRSUs granted to the Company’s CEO as part of his initial employment agreement in April 2012, which were subject to a separate criterion. The performance criterion was met for the PRSUs granted during the year ended December 31, 2013. The performance criteria have not yet been met for the PRSUs granted during the year ended December 31, 2014.

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, 2014	576,742		$	27.86	121,789		$	43.81
Granted	119,300		69.79		87,922		67.28
Vested	(73,520	)	12.17		(20,380	)	35.61
Forfeited	(40,586	)	24.50		(20,420	)	51.17
Nonvested at December 31, 2014	581,936		$	38.67	168,911		$	56.13

The fair value of shares vested during the years ended December 31, 2014, 2013 and 2012 was $6.4 million, $2.5 million and $1.9 million, respectively.

12. Accrued Liabilities

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



	December 31,
	2014		2013⁽¹⁾
	(In thousands)
Accrued payroll	$	120,068	$	136,645
Advance payment from customers	58,049		53,280
Accrued taxes and deferred tax liability - current portion	58,009		71,533
Accrued asbestos-related liability	50,175		51,142
Warranty liability - current portion	47,966		59,017
Accrued restructuring liability - current portion	21,846		12,856
Accrued third-party commissions	11,026		13,095
Other	128,254		95,126
Accrued liabilities	$	495,393	$	492,694

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Accrued Restructuring Liability

The Company’s restructuring programs include a series of restructuring 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, 2014
	Balance at Beginning of Period		Provisions		Payments			Foreign Currency Translation			Balance at End of Period⁽³⁾
	(In thousands)
Restructuring and other related charges:
Gas and Fluid Handling:
Termination benefits⁽¹⁾	$	3,638	$	18,179	$	(13,887	)	$	(379	)	$	7,551
Facility closure costs⁽²⁾	756		5,491		(4,714		)	(88		)	1,445
	4,394		23,670		(18,601		)	(467		)	8,996
Non-cash impairment			2,863
			26,533
Fabrication Technology:
Termination benefits⁽¹⁾	7,033		26,790		(22,227		)	(441		)	11,155
Facility closure costs⁽²⁾	1,429		3,018		(2,355		)	(155		)	1,937
	8,462		29,808		(24,582		)	(596		)	13,092
Non-cash impairment			1,780
			31,588
Corporate and Other:
Facility closure costs⁽²⁾	1,259		—		(275		)	(62		)	922
	1,259		—		(275		)	(62		)	922
	$	14,115	53,478		$	(43,458	)	$	(1,125	)	$	23,010
Non-cash impairment			4,643
			$	58,121

⁽¹⁾Includes severance and other termination benefits, including outplacement services. The Company recognizes the cost of involuntary termination benefits at the communication date or ratably over any remaining expected future service period. Voluntary termination benefits are recognized as a liability and an expense when employees accept the offer and the amount can be reasonably estimated.

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

⁽³⁾As of December 31, 2014, $21.8 million and $1.2 million of the Company’s restructuring liability was included in Accrued liabilities and Other liabilities, respectively.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	Year Ended December 31, 2013
	Balance at Beginning of Period		Provisions		Payments			Foreign Currency Translation			Balance at End of Period⁽³⁾
	(In thousands)
Restructuring and other related charges:
Gas and Fluid Handling:
Termination benefits⁽¹⁾	$	3,060	$	9,413	$	(8,680	)	$	(155	)	$	3,638
Facility closure costs⁽²⁾	1,177		683		(1,137		)	33			756
Other related charges	—		333		(520		)	187			—
	4,237		10,429		(10,337		)	65			4,394
Fabrication Technology:
Termination benefits⁽¹⁾	14,637		22,775		(30,056		)	(323		)	7,033
Facility closure costs⁽²⁾	6,925		280		(5,736		)	(40		)	1,429
Other related charges	33		124		(432		)	275			—
	21,595		23,179		(36,224		)	(88		)	8,462
Non-cash impairment			1,894
			25,073
Corporate and Other:
Termination benefits⁽¹⁾	—		—		—			—			—
Facility closure costs⁽²⁾	1,522		—		(718		)	455			1,259
Other related charges	—		—		—			—			—
	1,522		—		(718		)	455			1,259
	$	27,354	33,608		$	(47,279	)	$	432		$	14,115
Non-cash impairment			1,894
			$	35,502

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

⁽³⁾As of December 31, 2013, $12.9 million and $1.2 million of the Company’s restructuring liability was included in Accrued liabilities and Other liabilities, respectively.

The Company expects to incur Restructuring and other related charges of approximately $50 million during the year ending December 31, 2015 related to these restructuring activities.

13. 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 31^st as the measurement date for all of its employee benefit plans.

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,
	2014			2013			2014			2013
	(In thousands)
Change in benefit obligation:
Projected benefit obligation, beginning of year	$	1,640,418		$	1,665,138		$	28,823		$	35,519
Acquisitions	48,938			6,356			1,011			—
Service cost	4,883			3,985			155			179
Interest cost	70,469			63,132			1,304			1,090
Actuarial loss (gain)	211,170			(28,831		)	5,553			(6,072		)
Foreign exchange effect	(97,525		)	17,919			—			—
Benefits paid	(111,971		)	(83,060		)	(1,761		)	(2,018		)
Settlements	(1,387		)	(4,189		)	—			—
Other	498			(32		)	—			125
Projected benefit obligation, end of year	$	1,765,493		$	1,640,418		$	35,085		$	28,823
Accumulated benefit obligation, end of year	$	1,739,642		$	1,617,651		$	35,085		$	28,823
Change in plan assets:
Fair value of plan assets, beginning of year	$	1,367,315		$	1,287,844		$	—		$	—
Acquisitions	42,051			2,787			—			—
Actual return on plan assets	174,065			100,300			—			—
Employer contribution⁽¹⁾	69,714			49,772			1,761			2,018
Foreign exchange effect	(70,851		)	13,076			—			—
Benefits paid	(111,971		)	(83,060		)	(1,761		)	(2,018		)
Settlements	(1,387		)	(3,565		)	—			—
Other	167			161			—			—
Fair value of plan assets, end of year	$	1,469,103		$	1,367,315		$	—		$	—
Funded status, end of year	$	(296,390	)	$	(273,103	)	$	(35,085	)	$	(28,823	)
Amounts recognized on the Consolidated Balance Sheet at December 31:
Non-current assets	$	58,997		$	38,177		$	—		$	—
Current liabilities	(5,328		)	(6,048		)	(2,749		)	(2,747		)
Non-current liabilities	(350,059		)	(305,232		)	(32,336		)	(26,076		)
Total	$	(296,390	)	$	(273,103	)	$	(35,085	)	$	(28,823	)

__________


⁽¹⁾	Contributions during the years ended December 31, 2014 and 2013 include contributions of 183,000 and 88,200 shares of Colfax Common stock, respectively, with values on the contribution dates of approximately $11.9 million and $4.9 million, respectively.

The accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $1.3 billion and $1.0 billion, respectively, as of December 31, 2014 and $1.2 billion and $0.9 billion, respectively, as of December 31, 2013.

The projected benefit obligation and fair value of plan assets for the pension plans with projected benefit obligations in excess of plan assets were $1.4 billion and $1.1 billion, respectively, as of December 31, 2014 and $1.2 billion and $0.9 billion, respectively, as of December 31, 2013.

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,
	2014			2013
	(In thousands)
Change in benefit obligation:
Projected benefit obligation, beginning of year	$	1,205,554		$	1,181,024
Acquisitions	21,578			3,952
Service cost	4,883			3,985
Interest cost	51,658			46,775
Actuarial loss	144,232			11,093
Foreign exchange effect	(97,525		)	17,919
Benefits paid	(64,347		)	(54,978		)
Settlements	(1,387		)	(4,189		)
Other	497			(27		)
Projected benefit obligation, end of year	$	1,265,143		$	1,205,554
Accumulated benefit obligation, end of year	$	1,239,292		$	1,182,786
Change in plan assets:
Fair value of plan assets, beginning of year	$	999,197		$	938,167
Acquisitions	20,873			651
Actual return on plan assets	139,460			62,914
Employer contribution	56,384			42,769
Foreign exchange effect	(70,851		)	13,076
Benefits paid	(64,347		)	(54,978		)
Settlements	(1,387		)	(3,565		)
Other	168			163
Fair value of plan assets, end of year	$	1,079,497		$	999,197
Funded status, end of year	$	(185,646	)	$	(206,357	)

Expected contributions to the Company’s pension and other post-employment benefit plans for the year ending December 31, 2015, related to plans as of December 31, 2014, are $45.1 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		Other Post-Retirement Benefits
	(In thousands)
2015	$	89,811	$	57,027	$	2,749
2016	89,908		57,222		2,758
2017	90,842		58,244		2,681
2018	91,140		58,780		2,539
2019	91,464		59,322		2,327
Thereafter	465,508		309,824		9,350

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
	2014		2013		Allocation
U.S. Plans:
Equity securities:
U.S.	43	%	41	%	30% - 45%
International	15	%	16	%	10% - 20%
Fixed income	41	%	39	%	30% - 50%
Other	1	%	3	%	0% - 20%
Cash and cash equivalents	—	%	1	%	0% - 5%
Foreign Plans:
Equity securities	30	%	30	%	10% - 50%
Fixed income securities	66	%	65	%	50% - 90%
Cash and cash equivalents	1	%	2	%	0% - 25%
Other	3	%	3	%	0% - 5%

A summary of the Company’s pension plan assets for each fair value hierarchy level for the periods presented follows (See Note 14, “Financial Instruments and Fair Value Measurements” for further description of the levels within the fair value hierarchy):



	December 31, 2014
	Level One		Level Two		Level Three		Total
	(In thousands)
U.S. Plans:
Equity securities:
U.S. large cap	$	3,901	$	100,263	$	—	$	104,164
U.S. small/mid cap	19,540		43,670		—		63,210
International	2,461		56,252		—		58,713
Fixed income mutual funds:
U.S. government and corporate	10,508		147,364		—		157,872
Structured loan fund	—		—		1,226		1,226
Other⁽¹⁾	1,623		2,798		—		4,421
Foreign Plans:
Cash and cash equivalents	12,951		—		—		12,951
Equity securities	286,797		39,310		—		326,107
Non-U.S. government and corporate bonds	308,705		399,285		—		707,990
Other⁽¹⁾	2,040		30,409		—		32,449
	$	648,526	$	819,351	$	1,226	$	1,469,103

__________


⁽¹⁾	Represents diversified portfolio funds, real estate and reinsurance contracts and money market funds.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	December 31, 2013
	Level One		Level Two		Level Three		Total
	(In thousands)
U.S. Plans:
Cash and cash equivalents	$	2,854	$	—	$	—	$	2,854
Equity securities:
U.S. large cap	101,702		—		—		101,702
U.S. small/mid cap	6,714		43,199		—		49,913
International	16,458		41,646		—		58,104
Fixed income mutual funds:
U.S. government and corporate	143,903		—		—		143,903
Structured loan fund	—		—		11,642		11,642
Foreign Plans:
Cash and cash equivalents	22,421		—		—		22,421
Equity securities	266,021		38,485		—		304,506
Non-U.S. government and corporate bonds	277,565		372,191		—		649,756
Other⁽¹⁾	2,107		20,407		—		22,514
	$	839,745	$	515,928	$	11,642	$	1,367,315

__________


⁽¹⁾	Represents diversified portfolio funds and reinsurance contracts maintained for certain foreign plans.

The Company’s pension assets included in Level Three of the fair value hierarchy consist of multi-strategy hedge funds and the fair value is equal to the aggregate net asset value of units held by the Company’s pension plans. There were no transfers in or out of Level Three during the years ended December 31, 2014 or 2013. A summary of changes in the fair value of the Company’s pension assets included in Level Three of the fair value hierarchy is as follows:



	(In thousands)
Balance, January 1, 2012	$	36,321
Realized gain	152
Unrealized gain	2,359
Balance, December 31, 2012	38,832
Sale proceeds	(28,440		)
Realized gain	338
Unrealized gain	912
Balance, December 31, 2013	11,642
Sale proceeds	(11,030		)
Realized gain	614
Balance, December 31, 2014	$	1,226

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table sets forth the components of net periodic benefit cost and Other comprehensive (loss) income 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,
	2014			2013			2012			2014			2013			2012
	(In thousands)
Components of Net Periodic Benefit Cost:
Service cost	$	4,883		$	3,985		$	3,381		$	155		$	179		$	110
Interest cost	70,469			63,132			67,745			1,304			1,090			1,507
Amortization	6,608			9,672			8,091			468			609			801
Settlement loss (gain)	190			(592		)	—			—			—			—
Other	328			(154		)	26			—			125			—
Expected return on plan assets	(69,055		)	(58,511		)	(61,094		)	—			—			—
Net periodic benefit cost	$	13,423		$	17,532		$	18,149		$	1,927		$	2,003		$	2,418
Change in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Loss) Income:
Current year net actuarial loss (gain)	$	96,005		$	(69,463	)	$	98,784		$	5,553		$	(6,072	)	$	(1,449	)
Less amounts included in net periodic benefit cost:
Amortization of net loss	(6,608		)	(9,672		)	(8,012		)	(220		)	(361		)	(553		)
Settlement loss	(190		)	(32		)	—			—			—			—
Amortization of prior service cost	—			—			(79		)	(248		)	(248		)	(248		)
Total recognized in Other comprehensive (loss) income	$	89,207		$	(79,167	)	$	90,693		$	5,085		$	(6,681	)	$	(2,250	)

The following table sets forth the components of net periodic benefit cost and Other comprehensive (loss) income of the foreign defined benefit pension plans, included in the table above:



	Foreign Pension Benefits
	Year Ended December 31,
	2014			2013			2012
	(In thousands)
Components of Net Periodic Benefit Cost:
Service cost	$	4,883		$	3,985		$	3,381
Interest cost	51,658			46,775			49,291
Amortization	1,669			2,305			944
Settlement loss (gain)	190			(592		)	—
Other	328			(154		)	28
Expected return on plan assets	(44,287		)	(34,541		)	(36,535		)
Net periodic benefit cost	$	14,441		$	17,778		$	17,109
Change in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Loss) Income:
Current year net actuarial loss (gain)	$	38,904		$	(16,121	)	$	65,689
Less amounts included in net periodic benefit cost:
Amortization of net loss	(1,669		)	(2,305		)	(865		)
Settlement loss	(190		)	(32		)	—
Amortization of prior service cost	—			—			(79		)
Total recognized in Other comprehensive (loss) income	$	37,045		$	(18,458	)	$	64,745

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 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,
	2014		2013		2014		2013
	(In thousands)
Net actuarial loss (gain)	$	285,250	$	196,044	$	4,576	$	(757	)
Prior service cost	—		—		807		1,055
Total	$	285,250	$	196,044	$	5,383	$	298

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, 2015 are as follows:



	Pension Benefits		Other Post- Retirement Benefits
	(In thousands)
Net actuarial loss	$	12,139	$	450
Prior service cost	—		248
Total	$	12,139	$	698

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,
	2014		2013		2014		2013
Weighted-average discount rate:
All plans	3.3	%	4.4	%	3.6	%	4.4	%
Foreign plans	3.3	%	4.4	%	—		—
Weighted-average rate of increase in compensation levels for active foreign plans	1.6	%	1.6	%	—		—

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,
	2014		2013		2012		2014		2013		2012
Weighted-average discount rate:
All plans	4.4	%	4.0	%	4.6	%	4.4	%	3.5	%	4.3	%
Foreign plans	4.4	%	4.2	%	4.7	%	—		—		—
Weighted-average expected return on plan assets:
All plans	5.4	%	5.1	%	5.3	%	—		—		—
Foreign plans	4.9	%	4.3	%	4.5	%	—		—		—
Weighted-average rate of increase in compensation levels for active foreign plans	1.7	%	1.5	%	1.3	%	—		—		—

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.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

For measurement purposes, a weighted-average annual rate of increase in the per capita cost of covered health care benefits of approximately 6.5% was assumed. The rate was assumed to decrease gradually to 4.5% by 2027 for four of the Company’s plans and to 5% by 2021 for another plan and remain at those levels thereafter for benefits covered under the plans. For one additional plan the rate has already reached its long term level of 5%.

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.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. 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, 2014	$	148	$	(118	)
Effect on post-retirement benefit obligation at December 31, 2014	3,502		(2,803		)

The Company maintains defined contribution plans covering certain union and non-union employees. The Company’s expense for the years ended December 31, 2014, 2013 and 2012 was $25.3 million, $21.5 million and $19.3 million, respectively.

14. 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 $1.5 billion as of both December 31, 2014 and 2013 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.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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



	December 31, 2014
	Level One		Level Two		Level Three		Total
	(In thousands)
Assets:
Cash equivalents	$	23,143	$	—	$	—	$	23,143
Foreign currency contracts related to sales - designated as hedges	—		4,524		—		4,524
Foreign currency contracts related to sales - not designated as hedges	—		1,007		—		1,007
Foreign currency contracts related to purchases - designated as hedges	—		1,980		—		1,980
Foreign currency contracts related to purchases - not designated as hedges	—		478		—		478
Deferred compensation plans	—		2,941		—		2,941
	$	23,143	$	10,930	$	—	$	34,073

Liabilities:
Foreign currency contracts related to sales - designated as hedges	$	—	$	7,163	$	—	$	7,163
Foreign currency contracts related to sales - not designated as hedges	—		2,793		—		2,793
Foreign currency contracts related to purchases - designated as hedges	—		695		—		695
Foreign currency contracts related to purchases - not designated as hedges	—		661		—		661
Deferred compensation plans	—		2,941		—		2,941
Liability for contingent payments	—		—		—		—
	$	—	$	14,253	$	—	$	14,253



	December 31, 2013
	Level One		Level Two		Level Three		Total
	(In thousands)
Assets:
Cash equivalents	$	22,032	$	—	$	—	$	22,032
Foreign currency contracts related to sales - designated as hedges	—		11,241		—		11,241
Foreign currency contracts related to sales - not designated as hedges	—		3,642		—		3,642
Foreign currency contracts related to purchases - designated as hedges	—		428		—		428
Foreign currency contracts related to purchases - not designated as hedges	—		2,543		—		2,543
Deferred compensation plans	—		2,414		—		2,414
	$	22,032	$	20,268	$	—	$	42,300

Liabilities:
Foreign currency contracts related to sales - designated as hedges	$	—	$	1,126	$	—	$	1,126
Foreign currency contracts related to sales - not designated as hedges	—		3,625		—		3,625
Foreign currency contracts related to purchases - designated as hedges	—		742		—		742
Foreign currency contracts related to purchases - not designated as hedges	—		846		—		846
Deferred compensation plans	—		2,414		—		2,414
Liability for contingent payments	—		—		6,176		6,176
	$	—	$	8,753	$	6,176	$	14,929

There were no transfers in or out of Level One, Two or Three during the year ended December 31, 2014.

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.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Derivatives

The Company periodically enters into foreign currency, interest rate swap and commodity derivative contracts. The Company uses interest rate swaps to manage exposure to interest rate fluctuations. Foreign currency contracts are used to manage exchange rate fluctuations. 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.

Interest Rate Swap. The Company’s interest rate swap was valued based on forward curves observable in the market. On January 11, 2012, the Company terminated its interest rate swap in conjunction with the repayment of the Bank of America Credit Agreement and reclassified $0.5 million of net losses from Accumulated other comprehensive loss to Interest expense in the Consolidated Statement of Operations.

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, 2014 and 2013, the Company had foreign currency contracts with the following notional values:



	December 31,
	2014		2013
	(In thousands)
Foreign currency contracts sold - not designated as hedges	$	124,838	$	244,755
Foreign currency contracts sold - designated as hedges	250,743		206,220
Foreign currency contracts purchased - not designated as hedges	36,080		273,714
Foreign currency contracts purchased - designated as hedges	53,944		46,728
Total foreign currency derivatives	$	465,605	$	771,417

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 December 31,
	2014		2013		2012
	(In thousands)
Contracts Designated as Hedges:
Interest Rate Swap:
Realized loss	—		—		(471	)
Foreign Currency Contracts - related to customer sales contracts:
Unrealized (loss) gain	(4,706	)	3,801		2,120
Realized (loss) gain	(5,776	)	654		2,297
Foreign Currency Contracts - related to supplier purchase contracts:
Unrealized (loss) gain	(1,719	)	397		(374	)
Realized gain (loss)	3,386		(298	)	(475	)
Unrealized gain (loss) on net investment hedges	39,374		(14,261	)	(7,783	)
Contracts Not Designated in a Hedge Relationship:
Foreign Currency Contracts - acquisition-related:
Realized loss	—		—		(7,177	)
Foreign Currency Contracts - related to customer sales contracts:
Unrealized (loss) gain	(1,389	)	(762	)	778
Realized (loss) gain	(4,342	)	1,112		712
Foreign Currency Contracts - related to supplier purchases contracts:
Unrealized (loss) gain	(1,304	)	1,687		(560	)
Realized gain	1,355		1,359		868

Liability for Contingent Payments

The Company’s liability for contingent payments represents the fair value of estimated additional cash payments related to its acquisitions of COT-Puritech, Inc. (“COT-Puritech”) in December 2011 and Clarus in July 2013, which are subject to the achievement of certain performance goals, and are included in Other liabilities in the Consolidated Balance Sheets. The fair value of the liability for contingent payments represents the present value of probability weighted expected cash flows based upon the Company’s internal model and projections and is included in Level Three of the fair value hierarchy. Accretion is recognized in Interest expense in the Consolidated Statements of Operations and realized or unrealized gains or losses are recognized in Selling, general and administrative expense in the Consolidated Statements of Operations. During 2014, the Company made the final cash payment, totaling $3.5 million, to settle the COT-Puritech contingent payment liability. During the year ended December 31, 2014, the Company recognized an unrealized gain related to the Clarus contingent payment liability, as the performance criteria are no longer expected to be met.

A summary of activity in the Company’s liability for contingent payments is as follows:



	(In thousands)
Balance, January 1, 2012	$	4,359
Interest accretion	712
Unrealized loss	1,446
Balance, December 31, 2012	6,517
Additions for Clarus acquisition	2,494
Interest accretion	665
Cash payment	(3,500		)
Balance, December 31, 2013	6,176
Cash payment	(3,500		)
Interest accretion	272
Unrealized gain	(2,948		)
Balance, December 31, 2014	$	—

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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. Customers purchasing from our operations in China represented 18% of the Company’s Accounts receivable, net as of December 31, 2014.

15. 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.

Claims activity since December 31 related to asbestos claims is as follows⁽¹⁾:



	Year Ended December 31,
	2014			2013			2012
	(Number of claims)
Claims unresolved, beginning of period	22,393			23,523			25,269
Claims filed⁽²⁾	4,850			6,299			4,347
Claims resolved⁽³⁾	(5,562		)	(7,429		)	(6,093		)
Claims unresolved, end of period	21,681			22,393			23,523
	(In dollars)
Average cost of resolved claims⁽⁴⁾	$	7,513		$	5,979		$	6,585

⁽¹⁾Excludes claims filed by one legal firm that have been “administratively dismissed.”

⁽²⁾Claims filed include all asbestos claims for which notification has been received or a file has been opened.

⁽³⁾ 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.

⁽⁴⁾ 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 range of reasonably possible loss 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.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Each subsidiary has separate insurance coverage acquired prior to Company ownership of each independent entity. In its evaluation of the insurance asset, the Company used differing insurance allocation methodologies for each subsidiary based upon the applicable law pertaining to the affected subsidiary.

For one of the subsidiaries, the Delaware Court of Chancery ruled on October 14, 2009 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) and that the subsidiary has rights to excess insurance policies purchased by a former owner of the business. Based upon this ruling mandating an “all sums” allocation, as well as more recent rulings by the Delaware Superior Court concerning the subsidiary’s coverage rights, the Company currently estimates that the subsidiary’s future expected recovery percentage is approximately 93% of asbestos-related costs with the subsidiary expected to be responsible for approximately 7% of its future asbestos-related costs. Depending on the outcome of the appeal discussed below, the expected insurance recovery percentage could change.

The subsidiary 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. Since then, the subsidiary has sought coverage from certain excess layer insurers whose terms and conditions follow form to the umbrella carrier. Certain first-layer excess insurers have defended and/or indemnified the subsidiary, subject to their reservations of rights and their applicable policy limits. A trial concerning the payment obligations of the Company’s excess insurers concluded during the fourth quarter of 2012 and the Superior Court issued a final judgment during the third quarter of 2014. Appeals have been entered. The subsidiary has been largely unsuccessful in obtaining defense and indemnity payments from its excess insurers. While not impacting the results of operations, the Company has funded $60.3 million that it expects its excess insurers to ultimately reimburse through December 31, 2014, and until the final rulings ordering payment by the insurers are issued, cash funding could range up to $10 million per quarter until final resolution. Due to a statistically significant increase in mesothelioma and lung cancer claims and higher settlement values per claim that have occurred and are expected to continue to occur in certain jurisdictions, partially offset by lower claims and lower settlement values per claim in other jurisdictions, the Company recorded a $0.6 million pre-tax charge during year ended December 31, 2013, which was included in Selling, general and administrative expense in the Consolidated Statements of Operations. The pre-tax charge was comprised of an increase in asbestos-related liabilities of $10.8 million partially offset by an increase in expected insurance recoveries of $10.2 million. Due to a higher number of asbestos claims settlements and a decline in the insurance recovery rate that have occurred, the Company recorded a $6.9 million pre-tax charge during the year ended December 31, 2014, comprised of an increase in asbestos-related liabilities of $14.5 million partially offset by an increase in expected insurance recoveries of $7.6 million.

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. Although none of these insurance companies contested coverage, they disputed the timing, reasonableness and allocation of payments.

For this subsidiary, it was determined by court ruling in 2007 that the allocation methodology mandated by the New Jersey courts will apply. Further court rulings in December of 2009 clarified the allocation calculation related to amounts currently due from insurers as well as amounts the Company expects to be reimbursed for asbestos-related costs incurred in future periods.

In connection with this litigation, the court engaged a special master to review the appropriate information and recommend an allocation formula in accordance with applicable law and the facts of the case. During 2010, the court-appointed special allocation master made its recommendation. In May 2011, the court accepted the recommendation with modifications. A final judgment at the trial court level in this litigation was rendered during the year ended December 31, 2011. The Appellate Division confirmed the trial court rulings during the year ended December 31, 2014, but appeals have been entered. The subsidiary expects to be responsible for approximately 19.5% of all future asbestos-related costs.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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



	December 31,
	2014		2013
	(In thousands)
Current asbestos insurance asset⁽¹⁾	$	34,540	$	32,872
Current asbestos insurance receivable⁽¹⁾	—		41,943
Long-term asbestos insurance asset⁽²⁾	282,679		299,057
Long-term asbestos insurance receivable⁽²⁾	82,340		21,411
Accrued asbestos liability⁽³⁾	50,175		51,142
Long-term asbestos liability⁽⁴⁾	346,099		358,288

⁽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 cost that the Company believes the subsidiaries will pay through the next 15 years, overpayments by certain insurers 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.

General Litigation

In March 2014, two alleged stockholders of the Company filed derivative complaints against our directors, the BDT Investor and BDT Capital Partners, LLC in the Court of Chancery of the State of Delaware alleging that the individual defendants engaged in waste and breached their fiduciary duties in connection with the cash payment and conversion pursuant to the Conversion Agreement. The complaints also allege claims against the BDT Investor and BDT Capital Partners, LLC for unjust enrichment and aiding and abetting the individual defendants’ alleged breaches of fiduciary duty. The complaints, which have been consolidated, seek compensatory damages plus interest, and an award of attorneys’ fees and expenses to the plaintiffs. After defendants answered the consolidated complaint, denying all material allegations of wrongdoing, the plaintiffs amended it to dismiss certain of their claims relating to breach of fiduciary duties. Defendants have moved to dismiss the new consolidated complaint. The litigation is in an early stage and is not currently expected to have a material adverse effect on the financial condition, results of operations or cash flow of the Company and the defendants intend to continue to vigorously defend against the claims.

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.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Minimum Lease Obligations

The Company’s minimum obligations under non-cancelable operating leases are as follows:



	December 31, 2014
	(In thousands)
2015	$	36,017
2016	28,697
2017	17,691
2018	14,483
2019	12,153
Thereafter	44,202
Total	$	153,243

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, 2014, 2013 and 2012, the Company’s net rental expense related to operating leases was $39.8 million, $35.4 million and $39.5 million, respectively.

Off-Balance Sheet Arrangements

As of December 31, 2014, the Company had $406.5 million of unconditional purchase obligations with suppliers, substantially all of which is expected to be paid by December 31, 2015.

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

16. Segment Information

The Company conducts its operations through three operating segments: gas handling, fluid handling and fabrication technology. The gas-handling and fluid-handling operating segments are aggregated into a single reportable segment. A description of the Company’s reportable segments is as follows:

▪

Gas and Fluid Handling - a global supplier of a broad range of gas- and fluid-handling products, including heavy-duty centrifugal and axial fans, rotary heat exchangers, gas compressors, pumps, fluid-handling systems, controls and specialty valves, which serves customers in the power generation, oil, gas and petrochemical, mining, marine (including defense) and general industrial and other end markets; and


▪	Fabrication Technology - a global supplier of welding equipment and consumables, cutting equipment and consumables and automated welding and cutting systems.

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

The Company’s segment results were as follows:



	Year Ended December 31,
	2014			2013			2012
	(In thousands)
Net sales:
Gas and fluid handling	$	2,329,598		$	2,104,048		$	1,901,132
Fabrication technology	2,294,878			2,103,161			2,012,724
Total Net sales	$	4,624,476		$	4,207,209		$	3,913,856

Segment operating income (loss)⁽¹⁾:
Gas and fluid handling	$	254,240		$	270,708		$	141,524
Fabrication technology	265,813			219,634			140,184
Corporate and other	(52,379		)	(48,448		)	(81,639		)
Total segment operating income	$	467,674		$	441,894		$	200,069

Depreciation, amortization and impairment charges:
Gas and fluid handling	$	96,763		$	62,792		$	112,389
Fabrication technology	76,406			55,339			69,708
Corporate and other	1,555			1,127			1,306
Total depreciation, amortization and impairment charges	$	174,724		$	119,258		$	183,403

Capital expenditures:
Gas and fluid handling	$	32,558		$	37,995		$	42,343
Fabrication technology	47,955			33,437			41,146
Corporate and other	3,966			50			97
Total capital expenditures	$	84,479		$	71,482		$	83,586

^_________

⁽¹⁾The following is a reconciliation of Income before income taxes to segment operating income:

COLFAX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	Year Ended December 31,
	2014		2013		2012

Income before income taxes	$	358,248	$	302,795	$	48,439
Interest expense	51,305		103,597		91,570
Restructuring and other related charges	58,121		35,502		60,060
Segment operating income	$	467,674	$	441,894	$	200,069



	December 31,
	2014		2013
	(In thousands)
Investments in Equity Method Investees:
Gas and fluid handling	$	7,085	$	7,097
Fabrication technology	45,411		43,698
	$	52,496	$	50,795

Total Assets:
Gas and fluid handling	$	3,660,361	$	4,028,675
Fabrication technology	3,489,388		2,477,534
Corporate and other	95,349		94,975
Total Assets	$	7,245,098	$	6,601,184

The detail of the Company’s operations by product type and geography is as follows:



	Year Ended December 31,
	2014		2013		2012
	(In thousands)
Net Sales by Major Product:
Gas handling	$	1,676,180	$	1,440,731	$	1,242,371
Fluid handling	653,418		663,317		658,761
Welding and cutting	2,294,878		2,103,161		2,012,724
Total Net sales	$	4,624,476	$	4,207,209	$	3,913,856



Net Sales by Origin⁽¹⁾:
United States	$	1,097,864	$	836,636	$	789,259
Foreign locations	3,526,612		3,370,573		3,124,597
Total Net sales	$	4,624,476	$	4,207,209	$	3,913,856

^_________

⁽¹⁾The Company attributes revenues from external customers to individual countries based upon the country in which the sale was originated.



	December 31,
	2014		2013
	(In thousands)
Property, Plant and Equipment, Net⁽¹⁾:
United States	$	180,154	$	145,829
Czech Republic	79,430		91,611
China	76,959		82,771
Other Foreign Locations	393,185		434,050
Property, plant and equipment, net	$	729,728	$	754,261

^_________

⁽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)

17. Selected Quarterly Data—(unaudited)

Provided below is selected unaudited quarterly financial data for the years ended December 31, 2014 and 2013.



	Quarter Ended
	March 28, 2014⁽¹⁾		June 27, 2014⁽²⁾		September 26, 2014		December 31, 2014⁽³⁾
	(In thousands, except per share data)
Net sales	$	1,054,331	$	1,199,336	$	1,164,453	$	1,206,356
Gross profit	325,632		388,171		373,195		391,847
Net income	54,837		198,344		81,303		85,789
Net income attributable to Colfax Corporation common shareholders	24,877		191,785		73,389		80,134
Net income per share – basic	$	0.22	$	1.55	$	0.59	$	0.65
Net income per share – diluted	$	0.22	$	1.53	$	0.59	$	0.64



	Quarter Ended
	March 29, 2013		June 28, 2013		September 27, 2013		December 31, 2013⁽⁴⁾
	(In thousands, except per share data)
Net sales	$	947,143	$	1,074,118	$	1,014,570	$	1,171,378
Gross profit	290,725		337,822		320,294		357,381
Net income	32,275		67,200		65,475		44,193
Net income attributable to Colfax Corporation common shareholders	22,553		53,306		50,389		31,984
Net income per share – basic	$	0.21	$	0.53	$	0.49	$	0.31
Net income per share – diluted	$	0.21	$	0.52	$	0.48	$	0.31

__________

⁽¹⁾On February 12, 2014 the Company entered into a Conversion Agreement with BDT CF Acquisition Vehicle, LLC (the “BDT Investor”). As consideration for the BDT Investor’s agreement to exercise its optional conversion right, the Company paid approximately $23.4 million to the BDT Investor, of which $19.6 million represents the Preferred stock conversion inducement payment. See Note 11, “Equity” for additional information regarding the Preferred stock conversion inducement payment.

⁽²⁾Net income and Net income per share for the three months ended June 27, 2014 includes the benefit of deferred tax assets as a result of the effect of the Victor Acquisition on expected future income. This reassessment resulted in a decrease in the Company’s valuation allowance against U.S. deferred tax assets. The reduction in the valuation allowance created a non-cash income tax benefit for the three months ended June 27, 2014 of $113.1 million.

⁽³⁾Net income and Net income per share for the three months ended December 31, 2014 were significantly impacted by the catch-up portion of the enactment of the U.S. tax extenders package related to the taxation of certain foreign income during the nine months ended September 26, 2014 in the U.S.

⁽⁴⁾Net income and Net income per share for the three months ended December 31, 2013 includes a $13.8 million gain to remeasure the Company’s equity investment in Sicelub to fair value upon increasing the Company’s ownership to 100%, which was included in Selling, general and administrative expense. See Note 4, “Acquisitions” for additional information regarding the Company’s acquisition of Sicelub. Additionally, during the three months ended December 31, 2013, the Company wrote-off $26.8 million of deferred financing fees and original issue discount associated with the Third Amendment to the Deutsche Bank Credit Agreement. See Note 10, “Debt” for additional information regarding the Third Amendment to the Deutsche Bank Credit Agreement.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2014. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective in providing reasonable assurance that the information required to be disclosed in this report on Form 10-K has been recorded, processed, summarized and reported as of the end of the period covered by this report on Form 10-K.

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

Changes in Internal Control over Financial Reporting

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

Management’s Annual Report on Internal Control Over Financial Reporting

The management of Colfax Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Internal control over financial reporting includes policies and procedures that:


(i)	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the company’s assets;


(ii)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with the authorization of management and directors of the company; and


(iii)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with existing policies or procedures may deteriorate.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an assessment of the effectiveness of internal control over financial reporting as of December 31, 2014 based on the criteria established in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2014.

In making its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014, management excluded Victor from its assessment, as provided by the Exchange Act and the applicable Securities and Exchange Commission’s rules and regulations concerning business combinations, because this entity was acquired by Colfax in April 2014, and the Company has not yet fully incorporated the internal control procedures of this business into the Company’s internal control over financial reporting. Victor represented 17% and 27% of the Company’s total and net assets, respectively, as of December 31, 2014 and 8% and 10% of Net sales and Net income available to Colfax Corporation common shareholders, respectively, for the year ended December 31, 2014.

Our independent registered public accounting firm is engaged to express an opinion on our internal control over financial reporting, as stated in its report which is included in Part II, Item 8 of this Form 10-K under the caption “Report of Independent Registered Public Accounting Firm—Internal Control Over Financial Reporting.”

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information relating to our Executive Officers is set forth in Part I of this Form 10-K under the caption “Executive Officers of the Registrant.” Additional information regarding our Directors, Audit Committee and compliance with Section 16(a) of the Exchange Act is incorporated by reference to such information included in our proxy statement for our 2015 annual meeting to be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K (the “2015 Proxy Statement”) under the captions “Election of Directors”, “Board of Directors and its Committees - Audit Committee” and “Section 16(a) Beneficial Ownership Reporting Compliance”.

As part of our system of corporate governance, our Board of Directors has adopted a code of ethics that applies to all employees, including our principal executive officer, our principal financial and accounting officer or other persons performing similar functions. A copy of the code of ethics is available on the Corporate Governance page of the Investor Relations section of our website at www.colfaxcorp.com. We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of our code of ethics by posting such information on our website at the address above.

Item 11. Executive Compensation

Information responsive to this item is incorporated by reference to such information included in our 2015 Proxy Statement under the captions “Executive Compensation”, “Director Compensation”, “Compensation Discussion and Analysis”, “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information responsive to this item is incorporated by reference to such information included in our 2015 Proxy Statement under the captions “Beneficial Ownership of Our Common Stock” and “Equity Compensation Plan Information.”

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information responsive to this item is incorporated by reference to such information included in our 2015 Proxy Statement under the captions “Certain Relationships and Related Person Transactions” and “Director Independence.”

Item 14. Principal Accountant Fees and Services

Information responsive to this item is incorporated by reference to such information included in our 2015 Proxy Statement under the captions “Independent Registered Public Accounting Firm Fees and Services” and “Audit Committee’s Pre-Approval Policies and Procedures.”

PART IV

Item 15. Exhibits and Financial Statement Schedules

(A) The following documents are filed as part of this report.

(1) Financial Statements. The financial statements are set forth under “Item 8. Financial Statements and Supplementary Data” of this report on Form 10-K.

(2) Schedules. An index of Exhibits and Schedules begins on page

of this report. Schedules other than those listed below have been omitted from this Annual Report because they are not required, are not applicable or the required information is included in the financial statements or the notes thereto.


(B)	Exhibits. The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 17, 2015.

COLFAX CORPORATION

By: /s/ STEVEN E. SIMMS

Steven E. Simms

President and Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Date: February 17, 2015

/s/ STEVEN E. SIMMS

Steven E. Simms

President and Chief Executive Officer

(Principal Executive Officer)

/s/ C. SCOTT BRANNAN

C. Scott Brannan

Senior Vice President, Finance, Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

/s/ MITCHELL P. RALES

Mitchell P. Rales

Chairman of the Board

/s/ PATRICK W. ALLENDER

Patrick W. Allender

Director

/s/ THOMAS S. GAYNER

Thomas S. Gayner

Director

/s/ RHONDA L. JORDAN

Rhonda L. Jordan

Director

/s/ CLAY H. KIEFABER

Clay H. Kiefaber

Director

/s/ SAN W. ORR, III

San W. Orr, III

Director

/s/ A. CLAYTON PERFALL

A. Clayton Perfall

Director

/s/ RAJIV VINNAKOTA

Rajiv Vinnakota

Director

COLFAX CORPORATION

INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULES



Schedules:	Page Number in Form 10-K

Valuation and Qualifying Accounts	101

EXHIBIT INDEX



Exhibit No.	Description	Location*
3.1	Amended and Restated Certificate of Incorporation of Colfax Corporation	Incorporated by reference to Exhibit 3.01 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on January 30, 2012.

3.2	Colfax Corporation Amended and Restated Bylaws	Incorporated by reference to Exhibit 3.2 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on May 13, 2008

4.1	Specimen Common Stock Certificate

10.1	Conversion Agreement, dated February 12, 2014, between Colfax Corporation and BDT CF Acquisition Vehicle, LLC	Incorporated by reference to Exhibit 10.01 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on February 12, 2014

10.2	Colfax Corporation 2008 Omnibus Incentive Plan**

10.3	Colfax Corporation 2008 Omnibus Incentive Plan, as amended and restated April 2, 2012**	Incorporated by reference to Exhibit 10.07 to Colfax Corporation’s Form 10-Q (File No. 001-34045) as filed with the SEC on August 7, 2012

10.4	Form of Non-Qualified Stock Option Agreement **

10.5	Form of Performance Stock Unit Agreement**

10.6	Form of Outside Director Restricted Stock Unit Agreement (Three Year Vesting)**

10.7	Form of Outside Director Deferred Stock Unit Agreement**

10.8	Form of Outside Director Deferred Stock Unit Agreement for deferral of grants of restricted stock (Three Year Vesting)**

10.9	Form of Outside Director Deferred Stock Unit Agreement for deferral of director fees**

10.10	Form of Outside Director Non-Qualified Stock Option Agreement**	Incorporated by reference to Exhibit 10.08 to Colfax Corporation’s Form 10-Q (File No. 001-34045) filed with the SEC on August 7, 2012

10.11	Form of Outside Director Restricted Stock Unit Agreement (One Year Vesting)**	Incorporated by reference to Exhibit 10.09 to Colfax Corporation’s Form 10-Q (File No. 001-34045) filed with the SEC on August 7, 2012

10.12	Form of Outside Director Deferred Stock Unit Agreement for deferral of grants of restricted stock units (One Year Vesting)**	Incorporated by reference to Exhibit 10.10 to Colfax Corporation’s Form 10-Q (File No. 001-34045) filed with the SEC on August 7, 2012



Exhibit No.	Description	Location*
10.13	Form of Outside Director Deferred Stock Unit Agreement for deferral of grants of restricted stock units**

10.14	Colfax Corporation Amended and Restated Excess Benefit Plan, effective as of January 1, 2013**	Incorporated by reference to Exhibit 10.13 to Colfax Corporation’s Form 10-K (File No. 001-34045) as filed with the SEC on February 19, 2013

10.15	Employment Agreement between Colfax Corporation and Steven E. Simms**	Incorporated by reference to Exhibit 10.1 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 23, 2012

10.16	Amendment No. 1 to the Employment Agreement between Colfax Corporation and Steven E. Simms**	Incorporated by reference to Exhibit 10.1 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 28, 2014

10.17	Employment Agreement between Colfax Corporation and Clay H. Kiefaber**	Incorporated by reference to Exhibit 10.1 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on March 28, 2011

10.18	Amendment No. 1 to the Employment Agreement between Colfax Corporation and Clay H. Kiefaber**	Incorporated by reference to Exhibit 10.2 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 23, 2012

10.19	Employment Agreement between Colfax Corporation and C. Scott Brannan**	Incorporated by reference to Exhibit 10.1 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on September 22, 2010

10.20	Employment Agreement between Colfax Corporation and Daniel A. Pryor**	Incorporated by reference to Exhibit 10.04 to Colfax Corporation’s Form 10-Q (File No. 001-34045) as filed with the SEC on August 7, 2012

10.21	Service Agreement between Howden Group Ltd. and Ian Brander dated December 3, 2010**	Incorporated by reference to Exhibit 10.01 to Colfax Corporation’s Form 10-Q (File No. 001-34045) as filed with the SEC on July 25, 2013

10.22	Colfax Corporation Annual Incentive Plan, as amended and restated April 2, 2012**	Incorporated by reference to Exhibit 10.24 to Colfax Corporation’s Form 10-K (File No. 001-34045) as filed with the SEC on February 19, 2013

10.23	Credit Agreement, dated September 12, 2011, by and among the Colfax Corporation, certain subsidiaries of Colfax Corporation identified therein, Deutsche Bank AG New York Branch and the lenders identified therein	Incorporated by reference to Exhibit 99.6 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on September 15, 2011



Exhibit No.	Description	Location*
10.24	Amendment No. 1 to the Credit Agreement, dated January 13, 2012, by and among the Colfax Corporation, certain subsidiaries of Colfax Corporation identified therein, Deutsche Bank AG New York Branch and the lenders identified therein	Incorporated by reference to Exhibit 10.1 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on January 17, 2012

10.25	Second Amendment to the Credit Agreement, dated February 22, 2013, by and among the Colfax Corporation, certain subsidiaries of Colfax Corporation identified therein, Deutsche Bank AG New York Branch and the lenders identified therein	Incorporated by reference to Exhibit 10.1 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on February 25, 2013

10.26	Third Amendment to the Credit Agreement, dated November 7, 2013 by and among the Colfax Corporation, certain subsidiaries of Colfax Corporation identified therein, Deutsche Bank AG New York Branch and the lenders identified therein	Incorporated by reference to Exhibit 10.1 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on November 14, 2013

10.27	Incremental Amendment, dated May 14, 2014, by and among certain subsidiaries of Colfax Corporation identified therein, Deutsche Bank AG New York Branch and the lenders identified therein	Incorporated by reference to Exhibit 10.1 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on May 14, 2014

10.28	Technical Amendment, dated December 10, 2014, by and among certain subsidiaries of Colfax Corporation identified therein and Deutsche Bank AG New York Branch	Filed herewith

10.29	Registration Rights Agreement, dated May 30, 2003, by and among Colfax Corporation, Colfax Capital Corporation, Janalia Corporation, Equity Group Holdings, L.L.C., and Mitchell P. Rales and Steven M. Rales

10.30	Amendment No. 1 to the Registration Rights Agreement, by and among Colfax Corporation and Mitchell P. Rales and Steven M. Rales, dated February 18, 2013	Incorporated by reference to Exhibit 10.30 to Colfax Corporation’s Form 10-K (File No. 001-34045) as filed with the SEC on February 19, 2013

10.31	Securities Purchase Agreement, dated September 12, 2011, between BDT CF Acquisition Vehicle, LLC and Colfax Corporation	Incorporated by reference to Exhibit 99.2 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on September 15, 2011

10.32	Securities Purchase Agreement, dated September 12, 2011, between Mitchell P. Rales and Colfax Corporation	Incorporated by reference to Exhibit 99.3 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on September 15, 2011

10.33	Securities Purchase Agreement, dated September 12, 2011, between Steven M. Rales and Colfax Corporation	Incorporated by reference to Exhibit 99.4 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on September 15, 2011



Exhibit No.	Description	Location*
10.34	Securities Purchase Agreement, dated September 12, 2011, between Markel Corporation and Colfax Corporation	Incorporated by reference to Exhibit 99.5 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on September 15, 2011

10.35	Registration Rights Agreement, dated as of January 24, 2012, between Colfax Corporation and BDT CF Acquisition Vehicle, LLC	Incorporated by reference to Exhibit 10.01 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on January 30, 2012

10.36	Registration Rights Agreement, dated as of January 24, 2012, between Colfax Corporation and Mitchell P. Rales	Incorporated by reference to Exhibit 10.02 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on January 30, 2012

10.37	Registration Rights Agreement, dated as of January 24, 2012, between Colfax Corporation and Steven M. Rales	Incorporated by reference to Exhibit 10.03 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on January 30, 2012

10.38	Registration Rights Agreement, dated as of January 24, 2012, between Colfax Corporation and Markel Corporation	Incorporated by reference to Exhibit 10.04 to Colfax Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on January 30, 2012

12.1	Computation of Ratio of Earnings to Fixed Charges	Filed herewith

21.1	Subsidiaries of registrant	Filed herewith

23.1	Consent of Independent Registered Public Accounting Firm	Filed herewith

31.1	Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith

31.2	Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith

32.1	Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.2	Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

101.INS	XBRL Instance Document	Filed herewith



Exhibit No.	Description	Location*
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith

101.CAL	XBRL Extension Calculation Linkbase Document	Filed herewith

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith

* Unless otherwise noted, all exhibits are incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 001-34045).

** Indicates management contract or compensatory plan, contract or arrangement.

100

COLFAX CORPORATION AND SUBSIDIARIES

SCHEDULE II–VALUATION AND QUALIFYING ACCOUNTS



	Balance at Beginning of Period		Charged to Cost and Expense ⁽¹⁾		Charged to Other Accounts ⁽²⁾			Write-Offs Write-Downs and Deductions			Acquisitions and Other⁽³⁾		Foreign Currency Translation			Balance at End of Period
	(In thousands)
Year Ended December 31, 2014:
Allowance for doubtful accounts	$	31,282	$	2,950	$	—		$	(4,100	)	$	—	$	(2,876	)	$	27,256
Allowance for excess slow-moving and obsolete inventory	32,773		8,748		—			(5,098		)	—		(1,850		)	34,573
Valuation allowance for deferred tax assets	360,910		11,933		(65,999		)	(146,177		)	1,790		(2,771		)	159,686
Year Ended December 31, 2013:
Allowance for doubtful accounts	$	16,464	$	12,707	$	—		$	—		$	2,753	$	(642	)	$	31,282
Allowance for excess slow-moving and obsolete inventory	9,221		21,629		—			(2,026		)	4,207		(258		)	32,773
Valuation allowance for deferred tax assets	357,638		30,554		(27,233		)	(3,373		)	4,925		(1,601		)	360,910
Year Ended December 31, 2012:
Allowance for doubtful accounts	$	2,578	$	13,917	$	—		$	(192	)	$	—	$	161		$	16,464
Allowance for excess slow-moving and obsolete inventory	6,735		3,341		—			(1,001		)	—		146			9,221
Valuation allowance for deferred tax assets	79,855		103,785		20,676			—			153,322		—			357,638

^____________


⁽¹⁾	Amounts charged to expense are net of recoveries for the respective period.


⁽²⁾	Represents amount charge to Accumulated other comprehensive loss and, for the year ended December 31, 2014, includes reclassifications to deferred tax asset accounts.


⁽³⁾	Includes reclassifications related to the Charter Acquisition during the year ended December 31, 2013. The valuation allowance for deferred tax assets during the year ended December 31, 2013 reflects the impact of retrospective adjustments recorded during the year ended December 31, 2014. See Note 4, "Acquisitions" for further discussion.

101