Colfax Reports Fourth Quarter 2017 Results

2/6/2018, 12:52 PM (Source: GlobeNewswire)

Colfax+0.82%

30.18
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Annapolis Junction, MD, Feb. 06, 2018 (GLOBE NEWSWIRE) --

  • Reported loss from continuing operations of $1.53 per diluted share and adjusted earnings per share of $0.45
  • Fabrication Technology achieved 7% organic sales growth; Air & Gas Handling reported 2% decline in orders
  • Completed divestiture of Fluid Handling business with $308 million pre-tax gain
  • Closed two acquisitions in the quarter

Colfax Corporation (NYSE: CFX), a leading diversified industrial technology company, today announced its financial results for the fourth quarter of 2017.

The Company reported fourth quarter 2017 net income of $13 million or $0.10 per diluted share. Income from discontinued operations of $202 million or $1.63 per diluted share includes a $308 million pre-tax gain resulting from the December 2017 sale of its Fluid Handling business to CIRCOR International, Inc. for $555 million of cash consideration, 3.3 million shares of CIRCOR common shares, and assumption of $168 million of net retirement liabilities. Net loss from continuing operations of $184 million or $1.53 per diluted share includes a $3 million estimated benefit relating to the recently-enacted U.S. tax legislation, and on a pre-tax basis, $153 million goodwill and intangible impairment charges in the Air & Gas Handling segment, a $47 million pension settlement charge, and $45 million of restructuring charges that included $27 million of asset impairments. Adjusted net income in the fourth quarter was $56 million, or $0.45 per share compared to $64 million or $0.52 per share for the same prior year period. These amounts reflect the previously-announced changes to Colfax’s definition of Adjusted net income to exclude intangibles amortization and other noncash acquisition-related charges.

Fourth quarter 2017 net sales of $874 million grew 7.6% versus the comparable period of 2016, including the impact of acquisitions and foreign currency translation effects (FX). Excluding acquisitions and FX, Fabrication Technology segment sales grew 6.9%, and Air & Gas Handling sales decreased 14.9%. Fourth quarter 2017 Air & Gas Handling orders increased 12.1% to $369 million compared to orders of $329 million for the fourth quarter of 2016. Excluding acquisitions and FX, orders decreased 2.3%. Air & Gas Handling finished the period with backlog of $893 million.

“Fabrication Technology sales growth accelerated again in the fourth quarter as we achieved growth in all regions,” said Matthew Trerotola, President and Chief Executive Officer. “The business benefited from improving market conditions in North America, as well as new products, higher customer service levels, and deeper application of CBS to improve operational execution. In our Air & Gas Handling business, orders reflect continued growth in General Industrial applications and project wins in Oil & Gas, but these benefits were more than offset by declines in the Power market. Recently-announced restructuring initiatives support the business’ strategic pivot to faster-growing regions and applications.”

During the fourth quarter, the Company completed its previously-announced acquisition of Siemens Turbomachinery Equipment (STE) into its Air & Gas Handling segment for cash consideration of $215 million. It also acquired EWAC Alloys Limited (EWAC), the India market leader in hard facing applications, for $75 million. As part of the Fabrication Technology segment, EWAC provides repair & maintenance products and services that maximize customers’ operating uptime, extend life cycles and reduce operating costs.

“Colfax is well-positioned for another year of earnings growth, and we expect $2.00 to $2.15 of adjusted earnings per share in 2018,” said Mr. Trerotola. “We expect overall organic growth supported by our faster-growing Fabrication Technology business and improving Air & Gas Handling market conditions later in the year. Restructuring actions should deliver at least $25 million of savings in 2018. Recently-completed acquisitions further strengthen our businesses and will contribute additional profit. The sale of the Fluid Handling business and strong cash flow generation in the fourth quarter increased our financial capacity, and we already closed another complementary acquisition in January. We will continue to strengthen our operating capabilities in 2018 and execute our strategic growth program.”

Conference Call and Webcast

Colfax will host a conference call to provide details about its results today at 9:00 a.m. Eastern. The call will be open to the public through 877-303-7908 (U.S. callers) or +1-678-373-0875 (international callers) and referencing the conference ID number 6555209 or through webcast via Colfax’s website at www.colfaxcorp.com under the “Investors” section. Access to a supplemental slide presentation can also be found at the Colfax website under the same heading. Both the audio of this call and the slide presentation will be archived on the website later today and will be available until the next quarterly call.

About Colfax Corporation

Colfax Corporation is a leading diversified industrial technology company that provides air & gas handling and fabrication technology products and services to customers around the world principally under the Howden and ESAB brands. Colfax believes that its brands are among the most highly recognized in each of the markets that it serves. The Company uses its Colfax Business System (CBS), a comprehensive set of tools, processes and values, to create superior value for customers, shareholders and associates. Colfax is traded on the NYSE under the ticker “CFX.” Additional information about Colfax is available at www.colfaxcorp.com.

Non-GAAP Financial Measures and Other Adjustments

Colfax has provided in this press release financial information that has not been prepared in accordance with GAAP. These non-GAAP financial measures are adjusted net income, adjusted net income per share, projected adjusted net income per share, adjusted operating income, organic sales growth, and organic order decline. Adjusted operating income excludes Restructuring and other related items, Goodwill and intangible asset impairment charge and Pension settlement loss. Adjusted net income, adjusted net income per share and projected adjusted net income per share exclude Restructuring and other related charges, Goodwill and intangible asset impairment charge, Pension settlement loss, acquisition-related intangibles amortization, and other non-cash acquisition related charges. Adjusted net income, adjusted net income per share, and adjusted operating income for the fourth quarter and full year ended December 31, 2016 also exclude the loss recorded on our deconsolidation of our Venezuelan operations. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 20.1% and 25.7% for the fourth quarter and full year ended December 31, 2017, respectively. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 24.3% and 26.3% for the fourth quarter and full year ended December 31, 2016. Organic sales growth and organic order decline exclude the impact of acquisitions and foreign exchange rate fluctuations. These non-GAAP financial measures assist Colfax management in comparing its operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans that are fundamentally different from the ongoing productivity improvements of the Company. Colfax management also believes that presenting these measures allows investors to view its performance using the same measures that the Company uses in evaluating its financial and business performance and trends.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of non-GAAP financial measures presented above to GAAP results has been provided in the financial tables included in this press release.

CAUTIONARY NOTE CONCERNING FORWARD LOOKING STATEMENTS

This press release may contain forward-looking statements, including forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning Colfax’s plans, objectives, expectations and intentions and other statements that are not historical or current fact. Forward-looking statements are based on Colfax’s current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Factors that could cause Colfax’s results to differ materially from current expectations include, but are not limited to factors detailed in Colfax’s reports filed with the U.S. Securities and Exchange Commission including its 2016 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the period ended September 29, 2017 under the caption “Risk Factors.” In addition, these statements are based on a number of assumptions that are subject to change. This press release speaks only as of the date hereof. Colfax disclaims any duty to update the information herein.

The term “Colfax” in reference to the activities described in this press release may mean one or more of Colfax’s global operating subsidiaries and/or their internal business divisions and does not necessarily indicate activities engaged in by Colfax Corporation.



Colfax Corporation
Consolidated Statements of Income
Dollars in thousands, except per share data
(Unaudited)

 Three Months Ended Year Ended
 December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
        
Net sales$874,083  $812,408  $3,300,184  $3,185,753 
Cost of sales606,400  562,418  2,270,709  2,193,371 
Gross profit267,683  249,990  1,029,475  992,382 
Selling, general and administrative expense198,790  169,932  732,340  696,800 
Restructuring and other related charges45,220  20,498  68,351  58,496 
Goodwill and intangible asset impairment charge152,700  134  152,700  238 
Pension settlement loss46,933  48  46,933  48 
Operating (loss) income(175,960) 59,378  29,151  236,800 
Interest expense12,031  5,288  41,137  30,276 
(Loss) income from continuing operations before income taxes(187,991) 54,090  (11,986) 206,524 
Provision for income taxes(3,574) 10,920  42,554  51,772 
Net (loss) income from continuing operations(184,417) 43,170  (54,540) 154,752 
Income (loss) from discontinued operations, net of taxes202,257  (351) 224,047  (9,561)
Net income17,840  42,819  169,507  145,191 
Less: income attributable to noncontrolling interest, net of taxes4,550  5,047  18,417  17,080 
Net income attributable to Colfax Corporation13,290  37,772  151,090  128,111 
Net (loss) income per share - basic       
Continuing operations$(1.53) $0.31  $(0.59) $1.12 
Discontinued operations$1.64  $  $1.82  $(0.08)
Consolidated operations$0.11  $0.31  $1.23  $1.04 
Net (loss) income per share - diluted       
Continuing operations$(1.53) $0.31  $(0.59) $1.12 
Discontinued operations$1.63  $  $1.81  $(0.08)
Consolidated operations$0.10  $0.31  $1.22  $1.04 


Colfax Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
Amounts in thousands, except per share data
(Unaudited)

 Three Months Ended Year Ended
 December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Adjusted Net Income and Adjusted Net Income Per Share 
Net (loss) income from continuing operations attributable to Colfax Corporation (1)
 

$(188,967) $38,123  $(72,957) $137,672 
Restructuring and other related charges- pretax45,220  20,498  68,351  58,496 
Goodwill and intangible asset impairment charge-pretax152,700  134  152,700  238 
Pension settlement loss-pretax46,933  48  46,933  48 
Loss on deconsolidation of Venezuelan operations- pretax      495 
Acquisition-related amortization- pretax18,728  16,503  60,091  58,859 
Tax adjustment (2)(18,779) (11,205) (38,789) (33,601)
Adjusted net income from continuing operations$55,835  $64,101  $216,329  $222,207 
Adjusted net income margin from continuing operations6.4% 7.9% 6.6% 7.0%
Weighted-average shares outstanding - diluted124,137  123,102  123,996  123,199 
        
Adjusted net income per share continuing operations$0.45  $0.52  $1.74  $1.80 
        
Net (loss) income per share- diluted from continuing operations (GAAP)$(1.53) $0.31  $(0.59) $1.12 

__________
(1)  Net (loss) income from continuing operations attributable to Colfax Corporation for the respective periods is calculated using Net (loss) income from continuing operations less the income attributable to noncontrolling interest, net of taxes.

(2) The effective tax rates used to calculate adjusted net income and adjusted net income per share are 20.1%and 25.7% for the fourth quarter and year ended December 31, 2017.

 2018 Earnings Per Share Range
 Low High
2018 Guidance   
Projected net income per share continuing operations (GAAP)- diluted$1.36  $1.51 
Restructuring and other related charges- pretax0.28  0.28 
Acquisition-related amortization and other non-cash charges- pretax(1)0.56  0.56 
Tax adjustment(0.20) (0.20)
Projected adjusted net income per share$2.00  $2.15 

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

Colfax Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
Dollars in thousands
(Unaudited)

 Three Months Ended Year Ended
 December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Continuing Operations

 

 
       
Operating (loss) income$(175,960) $59,378  $29,151  $236,800 
Operating (loss) income margin(20.1)% 7.3% 0.9% 7.4%
Restructuring and other related charges45,220  20,498  68,351  58,496 
Goodwill and intangible asset impairment charge152,700  134  152,700  238 
Pension settlement loss46,933  48  46,933  48 
  Loss on deconsolidation of Venezuelan operations- pretax      495 
Adjusted operating income$68,893  $80,058  $297,135  $296,077 
Adjusted operating income margin7.9% 9.9% 9.0% 9.3%


Colfax Corporation
Change in Sales, Orders and Backlog
Dollars in millions
(Unaudited)

     Air and Gas Handling    
 Net Sales Orders    
 $ % $ %    
            
For the three months ended December 31, 2016$812.4    $328.8       
Components of Change:           
Existing businesses(1)(25.3) (3.1)% (7.7) (2.3)%    
Acquisitions(2)54.5  6.7% 34.6  10.5%    
Foreign currency translation32.5  4.0% 12.8  3.9%    
 61.7  7.6% 39.7  12.1%    
For the three months ended December 31, 2017$874.1    $368.5       
            
            
     Air and Gas Handling
 Net Sales Orders Backlog at Period End
 $ % $ % $ %
            
As of and for the year ended December 31, 2016$3,185.8    $1,305.0    $796.1   
Components of Change:           
Existing businesses(1)(15.7) (0.5)% (44.1) (3.4)% (57.0) (7.2)%
Acquisitions(2)85.2  2.7% 34.7  2.7% 105.3  13.2%
Foreign currency translation44.9  1.4% 10.9  0.8% 49.0  6.2%
 114.4  3.6% 1.5  0.1% 97.3  12.2%
As of and for the year ended December 31, 2017$3,300.2    $1,306.5    $893.4   

__________

(1) 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.
(2)  Represents the incremental sales, orders and order backlog as a result of the acquisition completed in our Air and Gas Handling segment, and incremental sales for acquisitions completed in our Fabrication Technology segment.


Colfax Corporation
Consolidated Balance Sheets
Dollars in thousands, except share amounts
(Unaudited)

 December 31,
 2017 2016
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$262,019  $208,814 
Short term investments149,608   
Trade receivables, less allowance for doubtful accounts of $31,488 and $29,005970,199  838,796 
Inventories, net429,627  364,972 
Other current assets258,379  175,721 
Current portion of assets held for sale  150,275 
Total current assets2,069,832  1,738,578 
Property, plant and equipment, net552,802  505,431 
Goodwill2,538,544  2,350,996 
Intangible assets, net1,017,203  916,347 
Other assets543,267  520,031 
Assets held for sale, less current portion  307,057 
Total assets$6,721,648  $6,338,440 
    
LIABILITIES AND EQUITY   
CURRENT LIABILITIES:   
Current portion of long-term debt$5,766  $5,406 
Accounts payable587,129  513,363 
Customer advances and billings in excess of costs incurred145,853  142,377 
Accrued liabilities358,632  311,326 
Current portion of liabilities held for sale  87,183 
Total current liabilities1,097,380  1,059,655 
Long-term debt, less current portion1,055,305  1,286,738 
Other liabilities841,699  732,729 
Liabilities held for sale, less current portion  165,974 
Total liabilities2,994,384  3,245,096 
Equity:   
Common stock, $0.001 par value; 400,000,000 shares authorized; 123,245,827 and 122,780,261 issued and outstanding123  123 
Additional paid-in capital3,228,174  3,199,682 
Retained earnings846,490  685,411 
Accumulated other comprehensive loss(574,372) (988,345)
Total Colfax Corporation equity3,500,415  2,896,871 
Noncontrolling interest226,849  196,473 
Total equity3,727,264  3,093,344 
Total liabilities and equity$6,721,648  $6,338,440 
      


Colfax Corporation
 Consolidated Statements of Cashflows
Dollars in thousands
(Unaudited)

 Year Ended December 31,
 2017 2016
    
Cash flows from operating activities:   
Net income$169,507  $145,191 
Adjustments to reconcile net income to net cash provided by operating activities:   
Impairment of goodwill, intangibles and property, plant and equipment181,200  6,082 
Depreciation and amortization134,754  137,176 
Stock-based compensation expense21,549  19,020 
Non-cash interest expense4,519  4,176 
Deferred income tax expense (benefit)12,066  (1,682)
Gain on sale of facility(11,243)  
Gain on sale of business(308,388)  
Pension settlement loss46,933   
Changes in operating assets and liabilities:   
Trade receivables, net(44,345) (50,958)
Inventories, net(34,023) 19,665 
Accounts payable10,266  37,083 
Customer advances and billings in excess of costs incurred(24,388) (37,210)
Changes in other operating assets and liabilities60,363  (31,569)
Net cash provided by operating activities218,770  246,974 
Cash flows from investing activities:   
Purchases of fixed assets, net(68,765) (63,251)
Acquisitions, net of cash received(346,764) (25,992)
Proceeds from sale of business, net490,308   
Other, net15,097  7,249 
Net cash provided by (used in) investing activities89,876  (81,994)
Cash flows from financing activities:   
      
Payments under term credit facility(65,628) (37,500)
Proceeds from borrowings on revolving credit facilities and other1,046,457  896,742 
Repayments of borrowings on revolving credit facilities and other(1,632,658) (978,024)
Proceeds from borrowings on senior unsecured notes374,450   
Proceeds from issuance of common stock, net6,944  2,206 
Repurchases of common stock  (20,812)
Other(10,012) (7,830)
Net cash used in financing activities(280,447) (145,218)
Effect of foreign exchange rates on Cash and cash equivalents12,090  4,499 
Increase in Cash and cash equivalents40,289  24,261 
Cash and cash equivalents, beginning of period221,730  197,469 
Cash and cash equivalents, end of period$262,019  $221,730 
    
Supplemental Disclosure of Cash Flow Information:   
Non-cash consideration received from sale of business$206,415  $ 

Contact:

Kevin Johnson, Vice President Finance
Colfax Corporation
+1-302-483-7761
Kevin.Johnson@colfaxcorp.com

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