Colfax Reports First Quarter 2019 Results

5/8, 12:30 PM (Source: GlobeNewswire)

Colfax+1.17%

26.83
Chart for: Colfax Corporation
  • Acquired DJO Global, Inc. in February, March performance in-line with expectations
  • Grew Fabrication Technology sales 5%, improved adjusted EBITA margins 20 bps
  • Achieved Air & Gas Handling order growth of 18% or 21% organically, improved adjusted EBITA margins 160 bps
  • Reported net loss from continuing operations per diluted share of $(0.36) versus net income of $0.22 in the prior year quarter; achieved adjusted net income per share of $0.53 versus $0.48 for 10% growth

ANNAPOLIS JUNCTION, MD, May 08, 2019 (GLOBE NEWSWIRE) -- Colfax Corporation (NYSE: CFX), a leading diversified technology company, today announced its financial results for the first quarter of 2019.

The Company reported a net loss from continuing operations of $(49) million or $(0.36) per diluted share, compared to net income of $0.22 per diluted share in the prior year quarter. Excluding strategic transaction costs, acquisition-related amortization costs, pension settlement losses and restructuring costs, adjusted earnings per share grew 10% to $0.53 despite over 6% reduction in reported sales from currency translation rates. In February 2019, Colfax completed its acquisition of DJO Global, Inc., the March results of which are reported as the Company’s new Medical Technology segment. DJO is a global leader in orthopedic solutions, providing orthopedic devices, software and services spanning the full continuum of patient care, from injury prevention to rehabilitation.

First quarter 2019 net sales of $1,008 million were 14% higher than the comparable period of 2018. Excluding acquisitions and foreign currency translation effects (FX), Fabrication Technology segment sales grew 5% from improved pricing, and Air & Gas Handling segment sales decreased 3% as expected. The new Medical Technology segment posted sales of $124 million in the month of March. First quarter 2019 Air & Gas Handling orders increased 18% to $384 million compared to the prior year period. Excluding acquisitions and FX, orders increased 21% on double digit growth across all end markets.

First quarter adjusted EBITA was $127 million as compared with $91 million in the prior year quarter, with $26 million of the increase from the Medical Technology segment. Adjusted EBITA margins expanded 230 basis points to 12.6%, reflecting operating improvements and the acquisition of the higher-margin DJO business. Air & Gas Handling adjusted EBITA margins grew 160 basis points to 11.3% as a result of restructuring actions and improved project margins. Fabrication Technology adjusted EBITA margins increased 20 basis points to 14.2% in the quarter as a result of improved pricing.

“We are pleased to start the year with solid results in each of our businesses,” said Matt Trerotola, Colfax President and CEO. “Our Air & Gas Handling business drove its third consecutive quarter of double-digit order growth, and the strategic review of the business is progressing as expected. The Fab Tech segment delivered core sales growth for the ninth consecutive quarter, and margins improved 180 basis points sequentially on strong price and productivity versus cost inflation.  Our new Med Tech segment contributed its first month of sales and profits since the acquisition, and both were in-line with expectations. The DJO integration is on track,  with initial focus on operational improvement, growth acceleration, and transitioning to a CBS culture of continuous improvement.” The Company re-affirmed its 2019 adjusted EPS guidance of $2.55 to $2.65.

Conference Call and Webcast

Colfax will host a conference call to provide details about its results today at 8:00 a.m. EDT. The call will be open to the public by calling +1-877-303-7908 (U.S. callers) or +1-678-373-0875 (international callers) and referencing the conference ID number 8166689 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 technology company that provides orthopedic, fabrication technology and air & gas handling products and services to customers around the world, principally under the DJO, ESAB and Howden 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.”

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, adjusted EBITA (earnings before interest, taxes and amortization), organic sales growth, and organic order growth. Adjusted EBITA excludes restructuring and other such charges, acquisition-related intangibles amortization, and other non-cash acquisition-related charges and strategic transaction costs. Adjusted net income and adjusted net income per share exclude restructuring and other such charges, pension settlement loss, debt extinguishment charges, acquisition-related intangibles amortization, and other non-cash acquisition-related charges, strategic transaction costs, and gain or loss on short term investments related to the 2017 divestiture of its Fluid Handling business. The effective tax rate used to calculate adjusted net income and adjusted net income per share was 24.1% for the first quarter ended March 29, 2019 and 21.1% for the first quarter ended March 30, 2018. Organic sales growth and organic order growth (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 2018 Annual Report on Form 10-K under the caption “Risk Factors.” In addition, these statements are based on 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 Operations
Dollars in thousands, except per share data
(Unaudited)

 Three Months Ended
 March 29, 2019 March 30, 2018
    
Net sales$1,007,668  $880,925 
Cost of sales649,378  610,305 
Gross profit358,290  270,620 
Selling, general and administrative expense318,144  200,519 
Restructuring and other related charges15,386  7,929 
Operating income24,760  62,172 
Pension settlement loss43,774   
Interest expense, net29,121  9,588 
Loss on short term investments  14,719 
(Loss) income from continuing operations before income taxes(48,135)  37,865 
(Benefit) provision for income taxes(3,578)  5,986 
Net (loss) income from continuing operations(44,557)  31,879 
Loss from discontinued operations, net of taxes(3,445)  (2,837) 
Net (loss) income(48,002)  29,042 
Less: income attributable to noncontrolling interest, net of taxes4,021  4,507 
Net (loss) income attributable to Colfax Corporation$(52,023)  $24,535 
Net (loss) income per share - basic and diluted   
Continuing operations$(0.36)  $0.22 
Discontinued operations$(0.03)  $(0.02) 
Consolidated operations$(0.39)  $0.20 


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

 Three Months Ended
 March 29, 2019 March 30, 2018
Adjusted Net Income and Adjusted Net Income Per Share 
Net (loss) income from continuing operations attributable to Colfax Corporation (1)$(48,578)  $27,372 
Restructuring and other related charges - pretax15,386  7,929 
Pension settlement loss - pretax43,774   
Debt extinguishment charges - pretax802   
Acquisition-related amortization and other non-cash charges - pretax(2)30,754  20,681 
Strategic transaction costs - pretax(3)

55,846   
Loss on short term investments - pretax  14,719 
Tax adjustment (4)(27,299)  (11,157) 
Adjusted net income from continuing operations$70,685  $59,544 
Adjusted net income margin from continuing operations7.0% 6.8%
Weighted-average shares outstanding - diluted134,408  124,081 
    
Adjusted net income per share continuing operations$0.53  $0.48 
    
Net (loss) income per share- diluted from continuing operations (GAAP)$(0.36)  $0.22 

__________
(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) Includes costs incurred for the acquisition of DJO and costs associated with the strategic review of the Air & Gas Handling business.

(4) The effective tax rates used to calculate adjusted net income and adjusted net income per share for the first quarter ended March 29, 2019 was 24.1% and 21.1% for the first quarter ended March 30, 2018.

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

 Three Months Ended
 March 29, 2019 March 30, 2018
Net (loss) income from continuing operations$(44,557)  $31,879 
(Benefit) provision for income taxes(3,578)  5,986 
Loss on short term investments  14,719 
Interest expense, net29,121  9,588 
Pension settlement loss43,774   
Restructuring and other related charges15,386  7,929 
Strategic transaction costs(1)55,846   
Acquisition-related amortization and other non-cash charges(2)30,754  20,681 
Adjusted EBITA$126,746  $90,782 
Adjusted EBITA margin12.6% 10.3%

__________
(1) Includes costs incurred for the acquisition of DJO and costs associated with the strategic review of the Air & Gas Handling business.
(2) Includes amortization of acquired intangibles and fair value charges on acquired inventory.




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 30, 2018$880.9    $327.1    $889.5   
Components of Change:           
Existing businesses(1)14.3  1.6% 68.7  21.0% 30.0  3.4%
Acquisitions(2)168.7  19.2% 7.8  2.4% 32.0  3.6%
Foreign currency translation(56.2)  (6.4)% (19.3)  (5.9)% (58.5)  (6.6)%
 126.8  14.4% 57.2  17.5% 3.5  0.4%
As of and for the three months ended March 29, 2019$1,007.7    $384.3    $893.0   

__________

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




COLFAX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollars in thousands, except share amounts
(Unaudited)

 March 29, 2019 December 31, 2018
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$242,418  $245,019 
Trade receivables, less allowance for doubtful accounts of $41,538 and $35,1521,153,056  989,418 
Inventories, net739,535  496,535 
Other current assets273,648  227,469 
Total current assets2,408,657  1,958,441 
Property, plant and equipment, net647,608  503,344 
Goodwill3,852,431  2,576,617 
Intangible assets, net2,871,424  1,012,913 
Lease asset - right of use197,607   
Other assets524,680  552,557 
Total assets$10,502,407  $6,603,872 
    
LIABILITIES AND EQUITY   
CURRENT LIABILITIES:   
Current portion of long-term debt$136,208  $6,334 
Accounts payable705,873  640,667 
Customer advances and billings in excess of costs incurred155,193  147,307 
Accrued liabilities574,354  405,037 
Total current liabilities1,571,628  1,199,345 
Long-term debt, less current portion4,037,146  1,192,408 
Non-current lease liability152,601   
Other liabilities999,316  735,173 
Total liabilities6,760,691  3,126,926 
Equity:   
Common stock, $0.001 par value; 400,000,000 shares authorized; 117,558,414 and 117,275,217 issued and outstanding118  117 
Additional paid-in capital3,421,063  3,057,982 
Retained earnings955,183  991,838 
Accumulated other comprehensive loss(798,864)  (780,177) 
Total Colfax Corporation equity3,577,500  3,269,760 
Noncontrolling interest164,216  207,186 
Total equity3,741,716  3,476,946 
Total liabilities and equity$10,502,407  $6,603,872 


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

 Three Months Ended
 March 29, 2019 March 30, 2018
    
Cash flows from operating activities:   
Net (loss) income$(48,002)  $29,042 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and impairment charges44,832  36,987 
Stock-based compensation expense5,238  5,595 
Non-cash interest expense1,821  1,120 
Loss on short term investments  14,719 
Deferred income tax benefit

(9,185)  (591) 
Loss (gain) on sale of property, plant and equipment218  (7,148) 
Pension settlement loss43,774   
Changes in operating assets and liabilities:   
Trade receivables, net1,876  (17,896) 
Inventories, net(36,131)  (42,436) 
Accounts payable(45,749)  (18,836) 
Customer advances and billings in excess of costs incurred7,238  27,391 
Changes in other operating assets and liabilities(38,218)  (30,604) 
Net cash used in operating activities(72,288)  (2,657) 
Cash flows from investing activities:   
Purchases of property, plant and equipment(24,356)  (11,097) 
Proceeds from sale of property, plant and equipment1,283  9,034 
Acquisitions, net of cash received(3,147,835)  (50,964) 
Proceeds from sale of business, net  (1,048) 
Net cash used in investing activities(3,170,908)  (54,075) 
Cash flows from financing activities:   
Proceeds from borrowings under notes and term credit facility2,725,000   
Payments under term credit facility(502,813)  (18,750) 
Proceeds from borrowings on revolving credit facilities and other1,233,735  173,886 
Repayments of borrowings on revolving credit facilities and other(477,045)  (99,600) 
Payment of deferred debt issuance costs(24,280)   
Proceeds from tangible equity units, net377,814   
Proceeds from issuance of common stock, net2,439  2,565 
Payment for noncontrolling interest share repurchase(92,721)   
Other(3,103)  (690) 
Net cash provided by financing activities3,239,026  57,411 
Effect of foreign exchange rates on Cash and cash equivalents1,569  5,648 
(Decrease) increase in Cash and cash equivalents(2,601)  6,327 
Cash and cash equivalents, beginning of period245,019  262,019 
Cash and cash equivalents, end of period$242,418  $268,346 

_________

(1) Net cash used in operating activities in the quarter ended March 29, 2019 includes $56 million to fund strategic transaction costs and $16 million related to reducing DJO’s factoring program participation and overdue supplier payables.

Investor Relations
Colfax Corporation
+1-301-323-9090
investorrelations@colfaxcorp.com

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