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Colfax Reports Fourth Quarter 2019 Results


• Reported $0.24 EPS from continuing operations and achieved $0.61 of adjusted EPS

• Delivered 7.5% year-on-year sales growth in Medical Technology segment including 7.8% organic improvement

• Improved Fabrication Technology operating income and adjusted EBITA margins by over 300 basis points

• Reaffirming 2020 adjusted EPS guidance of $2.10 to $2.20


ANNAPOLIS JUNCTION, MD, Feb. 21, 2020 (GLOBE NEWSWIRE) -- Colfax Corporation (CFX), a leading diversified technology company, today announced its financial results for the fourth quarter of 2019.

The Company reported net income from continuing operations of $33 million or $0.24 per share in the quarter, and $83 million of adjusted net income or $0.61 per share. For the full year, Colfax reported $0.10 of net income from continuing operations per share and $2.01 per share of adjusted earnings. Adjustments to reported earnings are included in the reconciliation schedules provided.

For the fourth quarter, Colfax reported net sales of $888 million, 54.5% higher than the previous year’s quarter due to the acquisition of DJO. On an organic basis, Colfax sales increased 1.7%. Medical Technology segment sales grew 7.5% or 7.8% organically versus the prior year period, including an approximate 2% benefit from additional selling days in the quarter. Growth in the Medical Technology segment was driven by continued momentum in Reconstructive and sequential growth in Prevention & Rehabilitation product lines. Fabrication Technology segment sales declined 3.5% on a reported basis and 1.5% organically.

The Company also reported fourth quarter adjusted EBITA of $134 million or 15.1% of sales. Fabrication Technology segment improved its adjusted EBITA margins 320 basis points over the prior year fourth quarter to 15.6%, as a result of continued cost reduction, productivity, and pricing efforts. The Medical Technology segment achieved adjusted EBITA margins of 19.2%, up 70 basis points sequentially from the third quarter on higher revenues.

“We finished a successful and transformative 2019 with another quarter of strong financial performance,” said Matt Trerotola, Colfax President and CEO. “Operating improvements and innovation in our Med Tech platform are returning the business to healthy growth levels. Strong execution in our Fab Tech platform drove global share gain and margin improvement in dynamic market conditions.”

“Our strong organic growth performance demonstrates one of the benefits of our transformed portfolio of businesses. We are now positioned with higher margins, better and less cyclical growth prospects, and improved cash flow potential. We are excited by the many operating and strategic opportunities available to us to create shareholder value.”

The Company announced that it is reaffirming its 2020 adjusted EPS outlook of $2.10 to $2.20.

Conference Call and Webcast

Colfax will host a conference call to provide details about its results today at 8:00 a.m. EST. 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 5553506 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 and fabrication technology products and services to customers around the world, principally under the DJO 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’s common stock 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 accounting principles generally accepted in the United States of America (“non-GAAP”). These non-GAAP financial measures are adjusted net income, adjusted net income per share, adjusted EBITA (earnings before interest, taxes and amortization), adjusted EBITA margin, organic sales growth, and free cash flow. Colfax also provides adjusted EBITA and adjusted EBITA margin on a segment basis.

Adjusted net income represents net income (loss) from continuing operations excluding restructuring and other related charges, pension settlement loss, debt extinguishment charges, acquisition-related amortization and other non-cash charges, strategic transaction costs, and loss on short-term investments related to the 2017 divestiture of the Fluid Handling business.

Adjusted EBITA represents net income (loss) from continuing operations excluding restructuring and other related charges, acquisition-related amortization and other non-cash charges, and strategic transaction costs, as well as provision (benefit) for income taxes, loss on short-term investments, interest expense, net and pension settlement loss. Colfax presents adjusted EBITA margin, which is subject to the same adjustments as adjusted EBITA. Further, Colfax presents adjusted EBITA (and adjusted EBITA margin) on a segment basis, where we exclude the impact of strategic transaction costs and acquisition-related amortization and other non-cash charges from segment operating income.

Adjusted EBITDA represents Adjusted EBITA plus depreciation and other amortization.

Core or organic sales growth (decline) excludes the impact of acquisitions and foreign exchange rate fluctuations.

Free cash flow represents operating cash flow less purchases of property, plant and equipment (“PP&E”) plus proceeds from sales of PP&E.

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.

In this document, Colfax presents forward-looking adjusted EPS guidance. Colfax does not provide such outlook on a GAAP basis because changes in the items that Colfax excludes from GAAP to calculate the adjusted EPS measures can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of Colfax’s routine operating activities. Additionally, management does not forecast many of the excluded items for internal use and therefore cannot create or rely on outlook done on a GAAP basis.

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, the factors detailed in Colfax’s reports filed with the U.S. Securities and Exchange Commission including its most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q 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
Consolidated Statements of Operations
Dollars in thousands, except per share data
(Unaudited)

Three Months Ended

Year Ended

December 31, 2019

December 31, 2018

December 31, 2019

December 31, 2018

Net sales

$

888,373

$

574,931

$

3,327,458

$

2,193,083

Cost of sales

492,530

393,336

1,926,402

1,463,707

Gross profit

395,843

181,595

1,401,056

729,376

Selling, general and administrative expense

285,861

145,393

1,132,149

548,763

Restructuring and other related charges

18,098

9,434

65,295

29,077

Operating income

91,884

26,768

203,612

151,536

Pension settlement loss (gain)

(39

)

33,616

(39

)

Interest expense, net

32,683

15,628

119,503

49,083

Loss on short-term investments

10,128

Income from continuing operations before income taxes

59,201

11,179

50,493

92,364

Income tax expense (benefit)

24,790

(25,432

)

31,630

(29,508

)

Net income from continuing operations

34,411

36,611

18,863

121,872

Income (loss) from discontinued operations, net of taxes

(49,744

)

11,839

(536,009

)

32,601

Net income (loss)

(15,333

)

48,450

(517,146

)

154,473

Less: income attributable to noncontrolling interest, net of taxes

1,530

2,556

10,500

14,277

Net income (loss) attributable to Colfax Corporation

$

(16,863

)

$

45,894

(527,646

)

140,196

Net income (loss) per share - basic

Continuing operations

$

0.24

$

0.32

$

0.10

$

1.01

Discontinued operations

$

(0.36

)

$

0.07

$

(3.99

)

$

0.16

Consolidated operations

$

(0.12

)

$

0.39

$

(3.89

)

$

1.17

Net income (loss) per share - diluted

Continuing operations

$

0.24

$

0.32

$

0.10

$

1.00

Discontinued operations

$

(0.36

)

$

0.07

$

(3.99

)

$

0.16

Consolidated operations

$

(0.12

)

$

0.39

$

(3.89

)

$

1.16


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

Three Months Ended

December 31, 2019

December 31, 2018

Adjusted Net Income and Adjusted Net Income Per Share

Net income from continuing operations attributable to Colfax Corporation (1)

$

32.9

$

37.7

Restructuring and other related charges - pretax (2)

23.0

9.4

Acquisition-related amortization and other non-cash charges - pretax (3)

14.5

12.0

Strategic transaction costs - pretax (4)

4.4

6.6

Tax adjustment (5)

8.6

(15.8

)

Adjusted net income from continuing operations

$

83.4

$

49.8

Adjusted net income margin from continuing operations

9.4

%

8.7

%

Weighted-average shares outstanding - diluted (in millions)

137.6

117.9

Adjusted net income per share continuing operations

$

0.61

$

0.42

Net income per share - diluted from continuing operations (GAAP)

$

0.24

$

0.32

__________
(1) Net income from continuing operations attributable to Colfax Corporation for the respective periods is calculated using Net income from continuing operations less the continuing operations component of the income attributable to noncontrolling interest, net of taxes of $1.5 million for the three months ended December 31, 2019 and $(1.1) million for the three months ended December 31, 2018.
(2) Includes $4.9 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations for the three months ended December 31, 2019.
(3) Includes amortization of acquired intangibles and fair value charges on acquired inventory.
(4) Includes costs incurred for the acquisition of DJO.

(5) The effective tax rates used to calculate adjusted net income and adjusted net income per share were 16.0% for the three months ended December 31, 2019 and (24.6)% for the three months ended December 31, 2018.

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

Three Months Ended

December 31, 2019

December 31, 2018

Net income from continuing operations (GAAP)

$

34.4

$

36.6

Income tax expense (benefit)

24.8

(25.4)

Interest expense, net

32.7

15.6

Restructuring and other related charges(1)

23.0

9.4

Strategic transaction costs(2)

4.4

6.6

Acquisition-related amortization and other non-cash charges(3)

14.5

12.0

Adjusted EBITA (non-GAAP)

$

133.8

$

54.7

Net income margin from continuing operations (GAAP)

3.9

%

6.4

%

Adjusted EBITA margin (non-GAAP)

15.1

%

9.5

%

__________
(1) Restructuring and other related charges includes $4.9 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations for the three months ended December 31, 2019.
(2) Includes costs incurred for the acquisition of DJO.
(3) Includes amortization of acquired intangibles and fair value charges on acquired inventory.


Colfax Corporation
Reconciliation of GAAP to non-GAAP Financial Measures
Change in Sales
Dollars in millions
(Unaudited)

Net Sales

Fabrication Technology

Medical Technology(1)

Total Colfax

$

%

$

%

$

%

For the three months ended December 31, 2018

$

574.9

$

310.6

$

885.5

Components of Change:

Existing businesses(2)

(8.9)

(1.5

)%

24.1

7.8

%

15.2

1.7

%

Acquisitions(3)

0.1

%

1.1

0.4

%

1.2

0.1

%

Foreign currency translation(4)

(11.4)

(2.0

)%

(2.1

)

(0.7

)%

(13.5

)

(1.5

)%

(20.2)

(3.5

)%

23.1

7.5

%

2.9

0.3

%

For the three months ended December 31, 2019

$

554.7

$

333.7

$

888.4

(1) Medical Technology prior year net sales and components of change are based on or derived from Management’s internal reports. On the Company’s 2019 Form 10-K, Medical Technology net sales since the acquisition have been included in the acquisitions line item of the change in sales reconciliation.
(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 from our acquisitions.
(4) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.


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

December 31, 2019

December 31, 2018

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

109,632

$

77,153

Trade receivables, less allowance for doubtful accounts of $32,634 and $26,844

561,865

386,588

Inventories, net

571,558

359,655

Other current assets

161,190

137,801

Current portion of assets held for sale

997,244

Total current assets

1,404,245

1,958,441

Property, plant and equipment, net

491,241

327,155

Goodwill

3,202,517

1,497,832

Intangible assets, net

1,719,019

628,300

Lease asset - right of use

173,320

Other assets

396,490

463,525

Assets held for sale, less current portion

1,740,705

Total assets

$

7,386,832

$

6,615,958

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt

$

27,642

$

5,020

Accounts payable

359,782

291,233

Accrued liabilities

469,890

290,844

Current portion of liabilities held for sale

612,248

Total current liabilities

857,314

1,199,345

Long-term debt, less current portion

2,284,184

1,192,408

Non-current lease liability

136,399

Other liabilities

619,307

651,864

Liabilities held for sale, less current portion

95,395

Total liabilities

3,897,204

3,139,012

Equity:

Common stock, $0.001 par value; 400,000,000 shares authorized; 118,059,082 and 117,275,217 issued and outstanding as of December 31, 2019 and 2018, respectively

118

117

Additional paid-in capital

3,445,597

3,057,982

Retained earnings

479,560

991,838

Accumulated other comprehensive loss

(483,845

)

(780,177

)

Total Colfax Corporation equity

3,441,430

3,269,760

Noncontrolling interest

48,198

207,186

Total equity

3,489,628

3,476,946

Total liabilities and equity

$

7,386,832

$

6,615,958


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

Year Ended December 31,

2019

2018

2017

Cash flows from operating activities:

Net income (loss)

$

(517,146

)

$

154,473

169,507

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Divestiture impairment loss

449,000

Impairment of goodwill, intangibles and property, plant and equipment

7,086

183,751

Depreciation, amortization and other impairment charges

236,026

141,877

132,203

Stock-based compensation expense

21,960

25,103

21,548

Non-cash interest expense

9,937

4,415

4,519

Loss on short-term investments

10,128

Deferred income tax expense (benefit)

(590

)

(66,573

)

12,066

Loss (gain) on sale of property, plant and equipment

61

(21,108

)

(11,243

)

(Gain) loss on sale of business

(14,233

)

4,337

(308,388

)

Pension settlement loss (gain)

77,390

(39

)

46,933

Changes in operating assets and liabilities:

Trade receivables, net

49,924

(72,405

)

(44,345

)

Inventories, net

(44,887

)

(47,156

)

(34,023

)

Accounts payable

(119,325

)

70,085

10,266

Changes in other operating assets and liabilities

(17,169

)

16,144

35,976

Net cash provided by operating activities

130,948

226,367

218,770

Cash flows from investing activities:

Purchases of property, plant and equipment

(125,402

)

(69,646

)

(68,765

)

Proceeds from sale of property, plant and equipment

7,781

34,829

21,224

Acquisitions, net of cash received

(3,151,056

)

(290,918

)

(346,764

)

Proceeds from sale of business, net

1,635,920

18,404

490,308

Sale of short-term investments, net

139,480

Other, net

(6,127

)

Net cash (used in) provided by investing activities

(1,632,757

)

(167,851

)

89,876

Cash flows from financing activities:

Proceeds from borrowings on term credit facility

1,725,000

Payments under term credit facility

(1,387,500

)

(131,250

)

(65,628

)

Proceeds from borrowings on revolving credit facilities and other

2,045,083

1,271,051

1,046,457

Repayments of borrowings on revolving credit facilities and other

(2,273,802

)

(981,563

)

(1,632,658

)

Proceeds from borrowings on senior unsecured notes

1,000,000

374,450

Payment of debt issuance costs

(23,380

)

Proceeds from prepaid stock purchase contracts

377,814

Proceeds from issuance of common stock, net

11,879

4,699

6,944

Payment for noncontrolling interest share repurchase

(93,505

)

Payments for common stock repurchases

(200,000

)

Other

(12,095

)

(10,090

)

(10,012

)

Net cash provided by (used in) financing activities

1,369,494

(47,153

)

(280,447

)

Effect of foreign exchange rates on Cash and cash equivalents

(3,072

)

(28,363

)

12,090

(Decrease) increase in Cash and cash equivalents

(135,387

)

(17,000

)

40,289

Cash and cash equivalents, beginning of period

245,019

262,019

221,730

Cash and cash equivalents, end of period

$

109,632

$

245,019

$

262,019

Supplemental Disclosure of Cash Flow Information:

Non-cash consideration received from sale of business

$

$

$

206,415

Interest payments

$

139,268

$

50,389

$

43,496

Income tax payments, net

$

134,915

$

97,452

$

70,668

Mike Macek
Vice President, Finance
Colfax Corporation
+1-302-252-9129
investorrelations@colfaxcorp.com