Colfax Reports First Quarter 2018 Results

5/3/2018, 12:26 PM (Source: GlobeNewswire)

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ANNAPOLIS JUNCTION, MD, May 03, 2018 (GLOBE NEWSWIRE) --

  • Achieved net income per diluted share of $0.22 from continuing operations, and adjusted net income per share of $0.48 versus $0.39 in the prior year
  • Grew sales 20% or 5% excluding acquisitions and FX
  • Completed the acquisition of the Sandvik welding wire business
  • Improved full year adjusted net income per share outlook

Colfax Corporation (NYSE: CFX), a leading diversified industrial technology company, today announced its financial results for the first quarter of 2018.

The Company reported first quarter 2018 net income of $25 million or $0.20 per diluted share compared to $39 million, or $0.31 per diluted share in the prior year quarter. Income from continuing operations was $27 million or $0.22 per diluted share, including a $15 million loss on short term investments and $8 million of restructuring charges. Adjusted net income in the first quarter was $60 million, or $0.48 per share compared to $48 million or $0.39 per share for the same prior year period. Results include a $0.03 gain from a facility sale.

First quarter 2018 net sales of $881 million grew 20.1% versus the comparable period of 2017, including the impact of acquisitions and foreign currency translation effects (FX). Excluding acquisitions and FX, Fabrication Technology segment sales grew 6.4%, and Air & Gas Handling segment sales increased 2.4%. First quarter 2018 Air & Gas Handling orders decreased 2.5% to $327 million compared to the prior year period. Excluding acquisitions and FX, orders decreased 24.9%. Air & Gas Handling finished the quarter with backlog of $889.5 million compared to $867.2 million at the same time in 2017.

“We delivered another quarter of organic sales growth this quarter, led by solid performance in our Fabrication Technology business,” said Matthew Trerotola, President and Chief Executive Officer. “Market demand continues to strengthen in most of this segment’s global markets, and we are using CBS to drive further productivity improvements and advance a range of growth initiatives. This segment’s margins sequentially improved and were in-line with our expectations for full-year improvement. Our Air & Gas Handling business achieved another quarter of general industrial order growth while continuing to execute restructuring projects to address lower demand for power market applications.”

During the first quarter, the Company completed its acquisition of the welding wire operations of Sandvik Materials Technology into its Fabrication Technology segment. Sandvik is a leading provider of stainless steel and nickel alloy filler metal and extends Colfax’s portfolio in the faster-growing specialty filler metal segment.

“Colfax is well-positioned to achieve expectations for earnings growth of at least 18% in 2018,” said Mr. Trerotola. “We continue to expect overall organic sales growth supported by our faster-growing Fabrication Technology business and improving Air & Gas Handling market conditions later in the year. Restructuring actions are on target to deliver at least $25 million of savings in 2018, and we have a clear path to margin improvement. Recently-completed acquisitions are performing well and building momentum, and our pipeline of opportunities remains full.”

Reflecting first quarter performance, Colfax increased its adjusted earnings per share outlook for the year from $2.00-$2.15 to $2.05-$2.20.

Conference Call and Webcast

Colfax will host a conference call to provide details about its results today at 8:00 a.m. Eastern. The call will be open to the public through +1-877-303-7908 (U.S. callers) or +1-678-373-0875 (international callers) and referencing the conference ID number 6599567 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, gain or loss on short term investments, 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, gain or loss on short term investments, Goodwill and intangible asset impairment charge, Pension settlement loss, acquisition-related intangibles amortization, and other non-cash acquisition related charges. The effective tax rates used to calculate adjusted net income and adjusted net income per share was 21.1% for the first quarter ended March 30, 2018. The effective tax rates used to calculate adjusted net income and adjusted net income per share was 26.0% for the first quarter ended March 31, 2017. 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 2017 Annual Report on Form 10-K 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
Condensed Consolidated Statements of Income
Dollars in thousands, except per share data
(Unaudited)

 Three Months Ended
 March 30, 2018 March 31, 2017
    
Net sales$880,925  $733,630 
Cost of sales610,305  493,801 
Gross profit270,620  239,829 
Selling, general and administrative expense200,519  174,833 
Restructuring and other related charges7,929  4,773 
Operating income62,172  60,223 
Interest expense9,588  9,254 
Loss on short term investments14,719   
Income from continuing operations before income taxes37,865  50,969 
Provision for income taxes5,986  12,578 
Net income from continuing operations31,879  38,391 
(Loss) income from discontinued operations, net of taxes(2,837)  3,096 
Net income29,042  41,487 
Less: income attributable to noncontrolling interest, net of taxes4,507  2,945 
Net income attributable to Colfax Corporation24,535  38,542 
Net income (loss) per share - basic and diluted   
Continuing operations$0.22  $0.29 
Discontinued operations$(0.02)  $0.02 
Consolidated operations$0.20  $0.31 


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

  Three Months Ended
 March 30, 2018 March 31, 2017 
Adjusted Net Income and Adjusted Net Income Per Share  
Net income from continuing operations attributable to Colfax Corporation (1)
 

$27,372  $35,446  
Restructuring and other related charges- pretax7,929  4,773  
Acquisition-related amortization and other non-cash charges- pretax (2)20,681  13,394  
Loss on short term investments- pretax14,719    
Tax adjustment (3)(11,157)  (5,398)  
Adjusted net income from continuing operations$59,544  $48,215  
Adjusted net income margin from continuing operations6.8% 6.6% 
Weighted-average shares outstanding- diluted124,081  123,795  
     
Adjusted net income per share continuing operations$0.48  $0.39  
     
Net income per share- diluted from continuing operations (GAAP)$0.22  $0.29  


 Updated Guidance Previous Guidance
 Low High Low High
2018 Earnings Per Share       
Projected net income per share continuing operations (GAAP)- diluted$1.22  $1.37  $1.36  $1.51 
Restructuring and other related charges- pretax0.31  0.31  0.28  0.28 
Acquisition-related amortization and other non-cash charges- pretax (2)0.60  0.60  0.56  0.56 
Loss on short term investments- pretax0.12  0.12     
Tax adjustment (3)(0.20)  (0.20)  (0.20)  (0.20) 
Projected adjusted net income per share$2.05  $2.20  $2.00  $2.15 

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

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

(3) The effective tax rates used to calculate adjusted net income and adjusted net income per share for the three months ended March 30, 2018 and March 31, 2017, respectively, was 21.1% and 26.0%. The estimated effective tax rate for adjusted net   income and adjusted net income per share for the year ended December 31, 2018 is 23-24%.


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

 Three Months Ended
 March 30, 2018 March 31, 2017
Continuing Operations

 

 
   
Operating income$62,172  $60,223 
Operating income margin7.1% 8.2%
Restructuring and other related charges7,929  4,773 
Adjusted operating income$70,101  $64,996 
Adjusted operating income margin8.0% 8.9%


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

     Air and Gas Handling
 Net Sales Orders Backlog at Period End
 $ % $ % $ %
            
As of and for the three months ended March 31, 2017$733.6    $335.6    $867.2   
Components of Change:           
Existing businesses (1)36.1  4.9% (83.5)  (24.9)% (149.1)  (17.2)%
Acquisitions (2)68.8  9.4% 46.6  13.9% 101.9  11.8%
Foreign currency translation42.4  5.8% 28.4  8.5% 69.5  8.0%
 147.3  20.1% (8.5)  (2.5)% 22.3  2.6%
As of and for the three months ended March 30, 2018$880.9    $327.1    $889.5   

__________

(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 from the acquisition completed in our Air and Gas Handling segment, and incremental sales for acquisitions completed in our Fabrication Technology segment.


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

 March 30, 2018 December 31, 2017
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$268,346  $262,019 
Short term investments134,889  149,608 
Trade receivables, less allowance for doubtful accounts of $31,767 and $31,488993,068  970,199 
Inventories, net499,493  429,627 
Other current assets267,431  258,379 
Total current assets2,163,227  2,069,832 
Property, plant and equipment, net546,710  552,802 
Goodwill2,611,999  2,538,544 
Intangible assets, net1,016,368  1,017,203 
Other assets540,910  531,316 
Total assets$6,879,214  $6,709,697 
    
LIABILITIES AND EQUITY   
CURRENT LIABILITIES:   
Current portion of long-term debt$6,129  $5,766 
Accounts payable579,283  587,129 
Customer advances and billings in excess of costs incurred168,745  145,853 
Accrued liabilities341,321  358,632 
Total current liabilities1,095,478  1,097,380 
Long-term debt, less current portion1,122,077  1,055,305 
Other liabilities820,415  829,748 
Total liabilities3,037,970  2,982,433 
Equity:   
Common stock, $0.001 par value; 400,000,000 shares authorized; 123,477,735 and 123,245,827 issued and outstanding123  123 
Additional paid-in capital3,236,334  3,228,174 
Retained earnings876,177  846,490 
Accumulated other comprehensive loss(508,077)  (574,372) 
Total Colfax Corporation equity3,604,557  3,500,415 
Noncontrolling interest236,687  226,849 
Total equity3,841,244  3,727,264 
Total liabilities and equity$6,879,214  $6,709,697 


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

 Three Months Ended
 March 30, 2018 March 31, 2017
    
Cash flows from operating activities:   
Net income$29,042   $41,487 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:   
Depreciation, amortization and impairment charges36,987   31,972 
Stock-based compensation expense5,595   5,799 
Non-cash interest expense1,120   1,003 
Loss on short term investments14,719    
Deferred income tax benefit(591)   (1,833) 
Gain on sale of facility(7,148)    
Changes in operating assets and liabilities:   
Trade receivables, net(17,896)   (1,428) 
Inventories, net(42,436)   (17,961) 
Accounts payable(18,836)   (8,104) 
Customer advances and billings in excess of costs incurred27,391   (4,192) 
Changes in other operating assets and liabilities(30,604)   (6,338) 
Net cash (used in) provided by operating activities(2,657)   40,405 
Cash flows from investing activities:   
Purchases of fixed assets(11,097)   (11,709) 
Proceeds from sale of facility9,034    
Acquisitions, net of cash received(50,964)    
Sale of business, net(1,048)    
Net cash used in investing activities(54,075)   (11,709) 
Cash flows from financing activities:   
Payments under term credit facility(18,750)   (9,375) 
Proceeds from borrowings on revolving credit facilities and other173,886   219,489 
Repayments of borrowings on revolving credit facilities and other(99,600)   (257,153) 
Proceeds from issuance of common stock, net2,565   2,244 
Other(690)   (2,490) 
Net cash provided by (used in) financing activities57,411   (47,285) 
Effect of foreign exchange rates on Cash and cash equivalents5,648   4,699 
Increase (decrease) in Cash and cash equivalents6,327   (13,890) 
Cash and cash equivalents, beginning of period262,019   221,730 
Cash and cash equivalents, end of period$268,346   $207,840 
    

 

Contact:

Kevin Johnson, Vice President
Colfax Corporation
+1-301-323-9090
investorrelations@colfaxcorp.com

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