•         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 (NYSE: 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  $2,193,083 
Cost of sales492,530  393,336  1,926,402  1,463,707 
Gross profit395,843  181,595  1,401,056  729,376 
Selling, general and administrative expense285,861  145,393  1,132,149  548,763 
Restructuring and other related charges18,098  9,434  65,295  29,077 
Operating income91,884  26,768  203,612  151,536 
Pension settlement loss (gain)—  (39) 33,616  (39)
Interest expense, net32,683  15,628  119,503  49,083 
Loss on short-term investments—  —  —  10,128 
Income from continuing operations before income taxes59,201  11,179  50,493  92,364 
Income tax expense (benefit)24,790  (25,432) 31,630  (29,508)
Net income from continuing operations34,411  36,611  18,863  121,872 
Income (loss) from discontinued operations, net of taxes(49,744) 11,839  (536,009) 32,601 
Net income (loss)(15,333) 48,450  (517,146) 154,473 
Less: income attributable to noncontrolling interest, net of taxes1,530  2,556  10,500  14,277 
Net income (loss) attributable to Colfax Corporation$(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 operations9.4% 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, net32.7  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 $26,844561,865  386,588 
Inventories, net571,558  359,655 
Other current assets161,190  137,801 
Current portion of assets held for sale—  997,244 
Total current assets1,404,245  1,958,441 
Property, plant and equipment, net491,241  327,155 
Goodwill3,202,517  1,497,832 
Intangible assets, net1,719,019  628,300 
Lease asset - right of use173,320  — 
Other assets396,490  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 payable359,782  291,233 
Accrued liabilities469,890  290,844 
Current portion of liabilities held for sale—  612,248 
Total current liabilities857,314  1,199,345 
Long-term debt, less current portion2,284,184  1,192,408 
Non-current lease liability136,399  — 
Other liabilities619,307  651,864 
Liabilities held for sale, less current portion—  95,395 
Total liabilities3,897,204  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, respectively118  117 
Additional paid-in capital3,445,597  3,057,982 
Retained earnings479,560  991,838 
Accumulated other comprehensive loss(483,845) (780,177)
Total Colfax Corporation equity3,441,430  3,269,760 
Noncontrolling interest48,198  207,186 
Total equity3,489,628  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 loss449,000  —  — 
Impairment of goodwill, intangibles and property, plant and equipment—  7,086  183,751 
Depreciation, amortization and other impairment charges236,026  141,877  132,203 
Stock-based compensation expense21,960  25,103  21,548 
Non-cash interest expense9,937  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 equipment61  (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, net49,924  (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 activities130,948  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 equipment7,781  34,829  21,224 
Acquisitions, net of cash received(3,151,056) (290,918) (346,764)
Proceeds from sale of business, net1,635,920  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 facility1,725,000  —  — 
Payments under term credit facility(1,387,500) (131,250) (65,628)
Proceeds from borrowings on revolving credit facilities and other2,045,083  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 notes1,000,000  —  374,450 
Payment of debt issuance costs(23,380) —  — 
Proceeds from prepaid stock purchase contracts377,814  —  — 
Proceeds from issuance of common stock, net11,879  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 activities1,369,494  (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 period245,019  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

Primary Logo