Colfax Corporation (NYSE: CFX), a leading diversified technology
company, today announced its financial results for the third
quarter of 2019.
The Company reported net income from continuing
operations of $4 million or $0.02 per share in the quarter,
compared to $0.14 per share in the prior year quarter. Excluding
strategic transaction costs, acquisition-related amortization
costs, pension settlement losses, and restructuring costs, the
Company reported adjusted net income of $0.50 per share versus
$0.22 in the third quarter of 2018.
On a continuing operations basis, Colfax
reported third quarter net sales of $847 million up 61.5% from the
previous year’s quarter including the acquisition of DJO. The
Medical Technology segment expanded 4.5% organically versus the
prior year period. Growth in the Medical Technology segment was
driven by continued momentum in Reconstructive and a return to
growth in Prevention & Rehabilitation. The Fabrication
Technology segment grew 2.9% but declined organically by 0.6%.
Third quarter adjusted EBITA was $126 million
with adjusted EBITA margin of 14.9% including strong operating
execution in the Fabrication Technology segment. Fabrication
Technology adjusted EBITA margins increased 290 basis points to
15.2% through a combination of cost reductions, productivity
improvements, and pricing benefits. The Medical Technology segment
achieved adjusted EBITA margins of 18.5%, up 200 basis points
sequentially from the second quarter.
“Our third quarter results reflect the strong
performance of our new Colfax portfolio,” said Matt Trerotola,
Colfax President and CEO. “The successful divestiture of our Air
& Gas Handling business marks the completion of our pivot to
the new Colfax, and we have reshaped the Company to be more
profitable and less cyclical. Our new portfolio also generates
higher and more consistent cash flow, and we remain confident in
our ability to generate substantial free cash flow next year.
“We exceeded our operational performance
expectations despite softer Fabrication Technology end markets, and
we expect a strong finish to the year. We also made additional
progress in Medical Technology, returning Prevention and
Rehabilitation to solid growth.”
The Company announced that it is reaffirming its
2019 adjusted EPS outlook from continuing operations of $1.90 to
$2.00. Colfax will provide additional information in its call
with investors scheduled for later today.
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 7646778 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
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 organic order growth. 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.
- Core or 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.
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 2018 Annual Report on Form 10-K and Quarterly Reports
on Form 10-Q for the period ended June 28, 2019 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.
Contact:
Terry RossColfax
Corporation+1-301-323-9090investorrelations@colfaxcorp.com
Colfax
CorporationCondensed Consolidated Statements of
OperationsDollars in thousands, except per share
data(Unaudited)
|
Three Months Ended |
|
Nine Months Ended |
|
September 27, 2019 |
|
September 28, 2018 |
|
September 27, 2019 |
|
September 28, 2018 |
|
|
|
|
|
|
|
|
Net sales |
$ |
846,519 |
|
|
$ |
524,022 |
|
|
$ |
2,439,085 |
|
|
$ |
1,618,152 |
|
Cost of sales |
478,377 |
|
|
352,749 |
|
|
1,433,872 |
|
|
1,070,371 |
|
Gross profit |
368,142 |
|
|
171,273 |
|
|
1,005,213 |
|
|
547,781 |
|
Selling, general and
administrative expense |
290,500 |
|
|
129,558 |
|
|
846,288 |
|
|
403,370 |
|
Restructuring and other
related charges |
9,781 |
|
|
6,659 |
|
|
47,197 |
|
|
19,643 |
|
Operating income |
67,861 |
|
|
35,056 |
|
|
111,728 |
|
|
124,768 |
|
Pension settlement loss |
33,616 |
|
|
— |
|
|
33,616 |
|
|
— |
|
Interest expense, net |
31,828 |
|
|
11,611 |
|
|
86,820 |
|
|
33,455 |
|
Loss on short-term
investments |
— |
|
|
— |
|
|
— |
|
|
10,128 |
|
Income (loss) from continuing
operations before income taxes |
2,417 |
|
|
23,445 |
|
|
(8,708 |
) |
|
81,185 |
|
Provision (benefit) for income
taxes |
(1,353 |
) |
|
6,787 |
|
|
6,840 |
|
|
(4,076 |
) |
Net income (loss) from
continuing operations |
3,770 |
|
|
16,658 |
|
|
(15,548 |
) |
|
85,261 |
|
Loss from discontinued
operations, net of taxes |
9,024 |
|
|
18,544 |
|
|
(486,265 |
) |
|
20,762 |
|
Net income (loss) |
12,794 |
|
|
35,202 |
|
|
(501,813 |
) |
|
106,023 |
|
Less: income attributable to
noncontrolling interest, net of taxes |
2,320 |
|
|
3,892 |
|
|
8,970 |
|
|
11,721 |
|
Net income (loss) attributable
to Colfax Corporation |
$ |
10,474 |
|
|
$ |
31,310 |
|
|
(510,783 |
) |
|
94,302 |
|
Net income (loss) per share -
basic |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.02 |
|
|
$ |
0.14 |
|
|
$ |
(0.14 |
) |
|
$ |
0.69 |
|
Discontinued operations |
$ |
0.06 |
|
|
$ |
0.13 |
|
|
$ |
(3.63 |
) |
|
$ |
0.09 |
|
Consolidated operations |
$ |
0.08 |
|
|
$ |
0.27 |
|
|
$ |
(3.77 |
) |
|
$ |
0.78 |
|
Net income (loss) per share -
diluted |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.02 |
|
|
$ |
0.14 |
|
|
$ |
(0.14 |
) |
|
$ |
0.69 |
|
Discontinued operations |
$ |
0.06 |
|
|
$ |
0.13 |
|
|
$ |
(3.63 |
) |
|
$ |
0.09 |
|
Consolidated operations |
$ |
0.08 |
|
|
$ |
0.26 |
|
|
$ |
(3.77 |
) |
|
$ |
0.77 |
|
Colfax
CorporationReconciliation of GAAP to Non-GAAP
Financial MeasuresAmounts in millions, except per
share data(Unaudited)
|
Three Months Ended |
|
Nine Months Ended |
|
September 27, 2019 |
|
September 28, 2018 |
|
September 27, 2019 |
|
September 28, 2018 |
Adjusted Net Income
and Adjusted Net Income Per Share |
(Dollars in millions) |
Net income (loss) from
continuing operations attributable to Colfax Corporation (1) |
$ |
2.9 |
|
|
$ |
16.2 |
|
|
$ |
(18.6 |
) |
|
$ |
83.5 |
|
Restructuring and other
related charges - pretax (2) |
13.3 |
|
|
6.7 |
|
|
50.7 |
|
|
19.6 |
|
Pension settlement loss -
pretax |
33.6 |
|
|
— |
|
|
33.6 |
|
|
— |
|
Debt extinguishment charges -
pretax |
— |
|
|
— |
|
|
0.8 |
|
|
— |
|
Acquisition-related
amortization and other non-cash charges - pretax (3) |
43.7 |
|
|
8.7 |
|
|
124.1 |
|
|
28.1 |
|
Strategic transaction costs - pretax (4) |
0.9 |
|
|
— |
|
|
56.7 |
|
|
— |
|
Loss on short-term investments
- pretax |
— |
|
|
— |
|
|
— |
|
|
10.1 |
|
Tax adjustment (5) |
(26.0 |
) |
|
(5.8 |
) |
|
(55.4 |
) |
|
(29.6 |
) |
Adjusted net income from
continuing operations |
$ |
68.5 |
|
|
$ |
25.7 |
|
|
$ |
191.9 |
|
|
$ |
111.8 |
|
Adjusted net income margin
from continuing operations |
8.1 |
% |
|
4.9 |
% |
|
7.9 |
% |
|
6.9 |
% |
Weighted-average shares
outstanding - diluted (in millions) |
137.1 |
|
|
118.5 |
|
|
136.3 |
|
|
121.8 |
|
|
|
|
|
|
|
|
|
Adjusted net income per share
continuing operations |
$ |
0.50 |
|
|
$ |
0.22 |
|
|
$ |
1.41 |
|
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
Net income (loss) per share -
diluted from continuing operations (GAAP) |
$ |
0.02 |
|
|
$ |
0.14 |
|
|
$ |
(0.14 |
) |
|
$ |
0.69 |
|
__________(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 $0.9 million and $3.1
million for the three and nine months ended September 27, 2019 and
$0.4 million and $1.7 million for the three and nine months ended
September 28, 2018, respectively.(2) Includes $3.5 million of
expense classified as Cost of sales on the Company’s Condensed
Consolidated Statements of Operations for the three months ended
September 27, 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 26.2%
and 24.2% for the three and nine months ended September 27, 2019
and 32.5% and 18.3% for the three and nine months ended September
28, 2018, respectively.
Colfax
CorporationReconciliation of GAAP to Non-GAAP
Financial MeasuresDollars in
millions(Unaudited)
|
Three Months Ended |
|
Nine Months Ended |
|
September 27, 2019 |
|
September 28, 2018 |
|
September 27, 2019 |
|
September 28, 2018 |
|
(Dollars in millions) |
Net income (loss) from
continuing operations (GAAP) |
$ |
3.8 |
|
|
$ |
16.7 |
|
|
$ |
(15.5 |
) |
|
$ |
85.3 |
|
Provision (benefit) for income
taxes |
(1.4 |
) |
|
6.8 |
|
|
6.8 |
|
|
(4.1 |
) |
Loss on short-term
investments(1) |
— |
|
|
— |
|
|
— |
|
|
10.1 |
|
Interest expense, net(2) |
31.8 |
|
|
11.6 |
|
|
86.8 |
|
|
33.5 |
|
Pension settlement loss |
33.6 |
|
|
— |
|
|
33.6 |
|
|
— |
|
Restructuring and other
related charges(3) |
13.3 |
|
|
6.7 |
|
|
50.7 |
|
|
19.6 |
|
Strategic transaction
costs(4) |
0.9 |
|
|
— |
|
|
56.7 |
|
|
— |
|
Acquisition-related
amortization and other non-cash charges(5) |
43.7 |
|
|
8.7 |
|
|
124.1 |
|
|
28.1 |
|
Adjusted EBITA (non-GAAP) |
$ |
125.8 |
|
|
$ |
50.4 |
|
|
$ |
343.2 |
|
|
$ |
172.5 |
|
Net income (loss) margin from
continuing operations (GAAP) |
0.4 |
% |
|
3.2 |
% |
|
(0.6 |
)% |
|
5.3 |
% |
Adjusted EBITA margin
(non-GAAP) |
14.9 |
% |
|
9.6 |
% |
|
14.1 |
% |
|
10.7 |
% |
__________(1) Includes the gain on disposal and
the change in fair value of the CIRCOR shares received as partial
consideration for the Fluid Handling business sale.(2) The nine
months ended September 27, 2019 includes $0.8 million of debt
extinguishment charges related to the first quarter of 2019.(3)
Restructuring and other related charges includes $3.5 million of
expense classified as Cost of sales on the Company’s Condensed
Consolidated Statements of Operations for the three and nine months
ended September 27, 2019.(4) Includes costs incurred for the
acquisition of DJO.(5) Includes amortization of acquired
intangibles and fair value charges on acquired inventory.
Colfax CorporationChange
in SalesDollars in
millions(Unaudited)
|
Three Months Ended |
|
Nine Months Ended |
|
Net Sales |
|
% |
|
Net Sales |
|
% |
|
(Dollars in millions) |
For the three and nine months
ended September 28, 2018 |
$ |
524.0 |
|
|
|
|
$ |
1,618.2 |
|
|
|
Components of Change: |
|
|
|
|
|
|
|
Existing Businesses(1) |
(3.2 |
) |
|
(0.6 |
)% |
|
41.0 |
|
|
2.5 |
% |
Acquisitions(2) |
340.4 |
|
|
65.0 |
% |
|
856.0 |
|
|
52.9 |
% |
Foreign Currency Translation(3) |
(14.7 |
) |
|
(2.8 |
)% |
|
(76.1 |
) |
|
(4.7 |
)% |
|
322.5 |
|
|
61.5 |
% |
|
820.9 |
|
|
50.7 |
% |
For the three and nine months
ended September 27, 2019 |
$ |
846.5 |
|
|
|
|
$ |
2,439.1 |
|
|
|
__________
(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 as a result of our acquisitions discussed
previously.(3) 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
CorporationCondensed Consolidated Balance
SheetsDollars in thousands, except share
amounts(Unaudited)
|
September 27, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
127,065 |
|
|
$ |
77,153 |
|
Trade receivables, less allowance for doubtful accounts of $40,864
and $26,844 |
576,139 |
|
|
386,588 |
|
Inventories, net |
584,351 |
|
|
359,655 |
|
Other current assets |
198,232 |
|
|
137,801 |
|
Current portion of assets held for sale |
2,013,345 |
|
|
997,244 |
|
Total current assets |
3,499,132 |
|
|
1,958,441 |
|
Property, plant and equipment, net |
478,806 |
|
|
327,155 |
|
Goodwill |
2,784,249 |
|
|
1,497,832 |
|
Intangible assets, net |
2,262,377 |
|
|
628,300 |
|
Lease asset - right of use |
159,999 |
|
|
— |
|
Other assets |
406,709 |
|
|
463,525 |
|
Assets held for sale, less current portion |
— |
|
|
1,740,705 |
|
Total assets |
$ |
9,591,272 |
|
|
$ |
6,615,958 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Current portion of long-term debt |
$ |
29,654 |
|
|
$ |
5,020 |
|
Accounts payable |
376,406 |
|
|
291,233 |
|
Customer advances and billings in excess of costs incurred |
16,566 |
|
|
16,827 |
|
Accrued liabilities |
431,333 |
|
|
274,017 |
|
Current portion of liabilities held for sale |
651,718 |
|
|
612,248 |
|
Total current liabilities |
1,505,677 |
|
|
1,199,345 |
|
Long-term debt, less current portion |
4,002,365 |
|
|
1,192,408 |
|
Non-current lease liability |
123,238 |
|
|
— |
|
Other liabilities |
827,054 |
|
|
651,864 |
|
Liabilities held for sale, less current portion |
— |
|
|
95,395 |
|
Total liabilities |
6,458,334 |
|
|
3,139,012 |
|
Equity: |
|
|
|
Common stock, $0.001 par value; 400,000,000 shares authorized;
117,756,730 and 117,275,217 issued and outstanding |
118 |
|
|
117 |
|
Additional paid-in capital |
3,434,617 |
|
|
3,057,982 |
|
Retained earnings |
496,423 |
|
|
991,838 |
|
Accumulated other comprehensive loss |
(949,150 |
) |
|
(780,177 |
) |
Total Colfax Corporation
equity |
2,982,008 |
|
|
3,269,760 |
|
Noncontrolling interest |
150,930 |
|
|
207,186 |
|
Total equity |
3,132,938 |
|
|
3,476,946 |
|
Total liabilities and
equity |
$ |
9,591,272 |
|
|
$ |
6,615,958 |
|
Colfax
CorporationCondensed Consolidated Statements of
Cash FlowsDollars
in thousands(Unaudited)
|
Nine Months Ended |
|
September 27, 2019 |
|
September 28, 2018 |
Cash flows from
operating activities: |
|
|
|
Net (loss) income |
$ |
(501,813 |
) |
|
$ |
106,023 |
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
|
|
|
Held for sale impairment loss |
481,000 |
|
|
— |
|
Depreciation, amortization and other impairment charges |
190,577 |
|
|
110,597 |
|
Stock-based compensation expense |
17,005 |
|
|
18,867 |
|
Non-cash interest expense |
5,674 |
|
|
3,332 |
|
Loss on short-term investments |
— |
|
|
10,128 |
|
Deferred income tax benefit |
(18,673 |
) |
|
(21,730 |
) |
Gain on sale of property, plant and equipment |
(140 |
) |
|
(8,211 |
) |
Loss on sale of business |
— |
|
|
4,337 |
|
Pension settlement loss |
77,390 |
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
Trade receivables, net |
29,071 |
|
|
(51,722 |
) |
Inventories, net |
(54,256 |
) |
|
(56,951 |
) |
Accounts payable |
(98,920 |
) |
|
6,486 |
|
Income taxes |
(39,909 |
) |
|
(12,019 |
) |
Customer advances and billings in excess of costs incurred |
33,149 |
|
|
18,970 |
|
Changes in other operating assets and liabilities |
(54,406 |
) |
|
(27,299 |
) |
Net cash provided by
operating activities |
65,749 |
|
|
100,808 |
|
Cash flows from
investing activities: |
|
|
|
Purchases of property, plant and equipment |
(100,383 |
) |
|
(40,247 |
) |
Proceeds from sale of property, plant and equipment |
7,474 |
|
|
17,758 |
|
Acquisitions, net of cash received |
(3,136,777 |
) |
|
(83,846 |
) |
Sale of short-term investments, net |
— |
|
|
139,480 |
|
Proceeds from sale of business, net |
— |
|
|
18,626 |
|
Net cash (used in)
provided by investing activities |
(3,229,686 |
) |
|
51,771 |
|
Cash flows from
financing activities: |
|
|
|
Payments under term credit facility |
(533,437 |
) |
|
(93,750 |
) |
Proceeds from borrowings under notes and term credit facility |
2,725,000 |
|
|
— |
|
Proceeds from borrowings on revolving credit facilities and
other |
1,780,085 |
|
|
911,772 |
|
Repayments of borrowings on revolving credit facilities and
other |
(1,136,186 |
) |
|
(722,573 |
) |
Payment of debt issuance costs |
(24,402 |
) |
|
— |
|
Proceeds from tangible equity units, net |
377,814 |
|
|
— |
|
Proceeds from issuance of common stock, net |
4,787 |
|
|
4,648 |
|
Payment for noncontrolling interest share repurchase |
(93,087 |
) |
|
— |
|
Payments for common stock repurchases |
— |
|
|
(200,000 |
) |
Other |
(9,680 |
) |
|
(1,038 |
) |
Net cash provided by
(used in) financing activities |
3,090,894 |
|
|
(100,941 |
) |
Effect of foreign
exchange rates on Cash and cash equivalents |
(5,216 |
) |
|
(27,757 |
) |
(Decrease) increase in Cash
and cash equivalents |
(78,259 |
) |
|
23,881 |
|
Cash and cash equivalents,
beginning of period |
245,019 |
|
|
262,019 |
|
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