Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 6, 2018
 
Colfax Corporation
(Exact name of registrant as specified in its charter)
 
Delaware
001-34045
54-1887631
(State or other jurisdiction
(Commission
(I.R.S. Employer
of incorporation)
File Number)
Identification No.)


 420 National Business Parkway, 5th Floor
Annapolis Junction, MD 20701
(Address of Principal Executive Offices) (Zip Code)
 
(301) 323-9000
(Registrant's telephone number, including area code)

 Not applicable
(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02. Results of Operations and Financial Condition.

On February 6, 2018, Colfax Corporation issued a press release reporting financial results for the quarter and year ended December 31, 2017. A copy of Colfax Corporation's press release is attached to this report as Exhibit 99.1 and is incorporated in this report by reference. Colfax Corporation has scheduled a conference call for 9:00 a.m. Eastern on February 6, 2018 to discuss its financial results.



Item 9.01. Financial Statements and Exhibits.

(d)    Exhibits

99.1
Colfax Corporation press release dated February 6, 2018, reporting financial results for the quarter and year ended December 31, 2017.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date:
February 6, 2018
 
 
 Colfax Corporation

 
 
 
By:
 /s/ Christopher M. Hix
 
 
 
Name:
Christopher M. Hix
 
 
 
Title:
Senior Vice President, Finance,
 
 
 
 
Chief Financial Officer and Treasurer
 
                                                                                                          



EXHIBIT INDEX

99.1 Colfax Corporation press release dated February 6, 2018, reporting financial results for the quarter and year ended December 31, 2017.

Exhibit
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12025983&doc=3

Colfax Reports Fourth Quarter 2017 Results

Reported loss from continuing operations of $1.53 per diluted share and adjusted earnings per share of $0.45
Fabrication Technology achieved 7% organic sales growth; Air & Gas Handling reported 2% decline in orders
Completed divestiture of Fluid Handling business with $308 million pre-tax gain
Closed two acquisitions in the quarter

ANNAPOLIS JUNCTION, MD - February 6, 2018 - Colfax Corporation (NYSE: CFX), a leading diversified industrial technology company, today announced its financial results for the fourth quarter of 2017.

The Company reported fourth quarter 2017 net income of $13 million or $0.10 per diluted share. Income from discontinued operations of $202 million or $1.63 per diluted share includes a $308 million pre-tax gain resulting from the December 2017 sale of its Fluid Handling business to CIRCOR International, Inc. for $555 million of cash consideration, 3.3 million shares of CIRCOR common shares, and assumption of $168 million of net retirement liabilities. Net loss from continuing operations of $184 million or $1.53 per diluted share includes a $3 million estimated benefit relating to the recently-enacted U.S. tax legislation, and on a pre-tax basis, $153 million goodwill and intangible impairment charges in the Air & Gas Handling segment, a $47 million pension settlement charge, and $45 million of restructuring charges that included $27 million of asset impairments. Adjusted net income in the fourth quarter was $56 million, or $0.45 per share compared to $64 million or $0.52 per share for the same prior year period. These amounts reflect the previously-announced changes to Colfax’s definition of Adjusted net income to exclude intangibles amortization and other noncash acquisition-related charges.

Fourth quarter 2017 net sales of $874 million grew 7.6% versus the comparable period of 2016, including the impact of acquisitions and foreign currency translation effects (FX). Excluding acquisitions and FX, Fabrication Technology segment sales grew 6.9%, and Air & Gas Handling sales decreased 14.9%. Fourth quarter 2017 Air & Gas Handling orders increased 12.1% to $369 million compared to orders of $329 million for the fourth quarter of 2016. Excluding acquisitions and FX, orders decreased 2.3%. Air & Gas Handling finished the period with backlog of $893 million.

“Fabrication Technology sales growth accelerated again in the fourth quarter as we achieved growth in all regions,” said Matthew Trerotola, President and Chief Executive Officer. “The business benefited from improving market conditions in North America, as well as new products, higher customer service levels, and deeper application of CBS to improve operational execution. In our Air & Gas Handling business, orders reflect continued growth in General Industrial applications and project wins in Oil & Gas, but these benefits were more than offset by declines in the Power market. Recently-announced restructuring initiatives support the business’ strategic pivot to faster-growing regions and applications.”

During the fourth quarter, the Company completed its previously-announced acquisition of Siemens Turbomachinery Equipment (STE) into its Air & Gas Handling segment for cash consideration of $215 million. It also acquired EWAC Alloys Limited (EWAC), the India market leader in hard facing applications, for $75 million. As part of the Fabrication Technology segment, EWAC provides repair & maintenance products and services that maximize customers’ operating uptime, extend life cycles and reduce operating costs.

“Colfax is well-positioned for another year of earnings growth, and we expect $2.00 to $2.15 of adjusted earnings per share in 2018,” said Mr. Trerotola. “We expect overall organic growth supported by our faster-growing Fabrication Technology business and improving Air & Gas Handling market conditions later in the year. Restructuring actions should deliver at least $25 million of savings in 2018. Recently-completed acquisitions further strengthen our businesses and will contribute additional profit. The sale of the Fluid Handling business and strong cash flow generation in the fourth quarter increased our financial capacity, and we already closed another complementary acquisition in January. We will continue to strengthen our operating capabilities in 2018 and execute our strategic growth program.”




Conference Call and Webcast

Colfax will host a conference call to provide details about its results today at 9:00 a.m. Eastern. The call will be open to the public through 877-303-7908 (U.S. callers) or +1-678-373-0875 (international callers) and referencing the conference ID number 6555209 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, 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, Goodwill and intangible asset impairment charge, Pension settlement loss, acquisition-related intangibles amortization, and other non-cash acquisition related charges. Adjusted net income, adjusted net income per share, and adjusted operating income for the fourth quarter and full year ended December 31, 2016 also exclude the loss recorded on our deconsolidation of our Venezuelan operations. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 20.1% and 25.7% for the fourth quarter and full year ended December 31, 2017, respectively. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 24.3% and 26.3% for the fourth quarter and full year ended December 31, 2016. 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 2016 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the period ended September 29, 2017 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.





Contact:

Kevin Johnson, Vice President
Colfax Corporation
+1-302-483-7761
Kevin.Johnson@colfaxcorp.com



Colfax Corporation
Consolidated Statements of Income
Dollars in thousands, except per share data
(Unaudited)


 
Three Months Ended
 
Year Ended
 
December 31, 2017
 
December 31, 2016
 
December 31, 2017
 
December 31, 2016
 
 
 
 
 
 
 
 
Net sales
$
874,083

 
$
812,408

 
$
3,300,184

 
$
3,185,753

Cost of sales
606,400

 
562,418

 
2,270,709

 
2,193,371

Gross profit
267,683

 
249,990

 
1,029,475

 
992,382

Selling, general and administrative expense
198,790

 
169,932

 
732,340

 
696,800

Restructuring and other related charges
45,220

 
20,498

 
68,351

 
58,496

Goodwill and intangible asset impairment charge
152,700

 
134

 
152,700

 
238

Pension settlement loss
46,933

 
48

 
46,933

 
48

Operating (loss) income
(175,960
)
 
59,378

 
29,151

 
236,800

Interest expense
12,031

 
5,288

 
41,137

 
30,276

(Loss) income from continuing operations before income taxes
(187,991
)
 
54,090

 
(11,986
)
 
206,524

Provision for income taxes
(3,574
)
 
10,920

 
42,554

 
51,772

Net (loss) income from continuing operations
(184,417
)
 
43,170

 
(54,540
)
 
154,752

Income (loss) from discontinued operations, net of taxes
202,257

 
(351
)
 
224,047

 
(9,561
)
Net income
17,840

 
42,819

 
169,507

 
145,191

Less: income attributable to noncontrolling interest, net of taxes
4,550

 
5,047

 
18,417

 
17,080

Net income attributable to Colfax Corporation
13,290

 
37,772

 
151,090

 
128,111

Net (loss) income per share - basic
 
 
 
 
 
 
 
Continuing operations
$
(1.53
)
 
$
0.31

 
$
(0.59
)
 
$
1.12

Discontinued operations
$
1.64

 
$

 
$
1.82

 
$
(0.08
)
Consolidated operations
$
0.11

 
$
0.31

 
$
1.23

 
$
1.04

Net (loss) income per share - diluted
 
 
 
 
 
 
 
Continuing operations
$
(1.53
)
 
$
0.31

 
$
(0.59
)
 
$
1.12

Discontinued operations
$
1.63

 
$

 
$
1.81

 
$
(0.08
)
Consolidated operations
$
0.10

 
$
0.31

 
$
1.22

 
$
1.04




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

 
Three Months Ended
 
Year Ended
 
December 31, 2017
 
December 31, 2016
 
December 31, 2017
 
December 31, 2016
Adjusted Net Income and Adjusted Net Income Per Share

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

$
(188,967
)
 
$
38,123

 
$
(72,957
)
 
$
137,672

Restructuring and other related charges- pretax
45,220

 
20,498

 
68,351

 
58,496

Goodwill and intangible asset impairment charge-pretax
152,700

 
134

 
152,700

 
238

Pension settlement loss-pretax
46,933

 
48

 
46,933

 
48

Loss on deconsolidation of Venezuelan operations- pretax

 

 

 
495

Acquisition-related amortization- pretax
18,728

 
16,503

 
60,091

 
58,859

Tax adjustment (2)
(18,779
)
 
(11,205
)
 
(38,789
)
 
(33,601
)
Adjusted net income from continuing operations
$
55,835

 
$
64,101

 
$
216,329

 
$
222,207

Adjusted net income margin from continuing operations
6.4
%
 
7.9
%
 
6.6
%
 
7.0
%
Weighted-average shares outstanding - diluted
124,137

 
123,102

 
123,996

 
123,199

 
 
 
 
 
 
 
 
Adjusted net income per share continuing operations
$
0.45

 
$
0.52

 
$
1.74

 
$
1.80

 
 
 
 
 
 
 
 
Net (loss) income per share- diluted from continuing operations (GAAP)
$
(1.53
)
 
$
0.31

 
$
(0.59
)
 
$
1.12


__________ 
(1) Net (loss) income from continuing operations attributable to Colfax Corporation for the respective periods is calculated using Net (loss) income from continuing operations less the income attributable to noncontrolling interest, net of taxes.
(2) The effective tax rates used to calculate adjusted net income and adjusted net income per share are 20.1% and 25.7% for the fourth quarter and year ended December 31, 2017.

 
2018 Earnings Per Share Range
 
Low
 
High
2018 Guidance
 
 
 
Projected net income per share continuing operations (GAAP)- diluted
$
1.36

 
$
1.51

Restructuring and other related charges- pretax
0.28

 
0.28

Acquisition-related amortization and other non-cash charges- pretax(1)
0.56

 
0.56

Tax adjustment
(0.20
)
 
(0.20
)
Projected adjusted net income per share
$
2.00

 
$
2.15

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





Colfax Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
Dollars in thousands
(Unaudited)
 
Three Months Ended
 
Year Ended
 
December 31, 2017
 
December 31, 2016
 
December 31, 2017
 
December 31, 2016
Continuing Operations


 
 
 
 
 
 
 
Operating (loss) income
$
(175,960
)
 
$
59,378

 
$
29,151

 
$
236,800

Operating (loss) income margin
(20.1
)%
 
7.3
%
 
0.9
%
 
7.4
%
Restructuring and other related charges
45,220

 
20,498

 
68,351

 
58,496

Goodwill and intangible asset impairment charge
152,700

 
134

 
152,700

 
238

Pension settlement loss
46,933

 
48

 
46,933

 
48

     Loss on deconsolidation of Venezuelan operations- pretax

 

 

 
495

Adjusted operating income
$
68,893

 
$
80,058

 
$
297,135

 
$
296,077

Adjusted operating income margin
7.9
 %
 
9.9
%
 
9.0
%
 
9.3
%






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


 
 
 
 
 
Air and Gas Handling
 
 
 
 
 
Net Sales
 
Orders
 
 
 
 
 
$
 
%
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the three months ended December 31, 2016
$
812.4

 
 
 
$
328.8

 
 
 
 
 
 
Components of Change:
 
 
 
 
 
 
 
 
 
 
 
Existing businesses(1)
(25.3
)
 
(3.1
)%
 
(7.7
)
 
(2.3
)%
 
 
 
 
Acquisitions(2)
54.5

 
6.7
 %
 
34.6

 
10.5
 %
 
 
 
 
Foreign currency translation
32.5

 
4.0
 %
 
12.8

 
3.9
 %
 
 
 
 

61.7

 
7.6
 %
 
39.7

 
12.1
 %
 
 
 
 
For the three months ended December 31, 2017
$
874.1

 
 
 
$
368.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Air and Gas Handling
 
Net Sales
 
Orders
 
Backlog at Period End
 
$
 
%
 
$
 
%
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
As of and for the year ended December 31, 2016
$
3,185.8

 
 
 
$
1,305.0

 
 
 
$
796.1

 
 
Components of Change:
 
 
 
 
 
 
 
 
 
 
 
Existing businesses(1)
(15.7
)
 
(0.5
)%
 
(44.1
)
 
(3.4
)%
 
(57.0
)
 
(7.2
)%
Acquisitions(2)
85.2

 
2.7
 %
 
34.7

 
2.7
 %
 
105.3

 
13.2
 %
Foreign currency translation
44.9

 
1.4
 %
 
10.9

 
0.8
 %
 
49.0

 
6.2
 %

114.4

 
3.6
 %
 
1.5

 
0.1
 %
 
97.3

 
12.2
 %
As of and for the year ended December 31, 2017
$
3,300.2

 
 
 
$
1,306.5

 
 
 
$
893.4

 
 
__________ 
(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 as a result of the acquisition completed in our Air and Gas Handling segment, and incremental sales for acquisitions completed in our Fabrication Technology segment.





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

 
December 31,
 
2017
 
2016
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
262,019

 
$
208,814

Short term investments
149,608

 

Trade receivables, less allowance for doubtful accounts of $31,488 and $29,005
970,199

 
838,796

Inventories, net
429,627

 
364,972

Other current assets
258,379

 
175,721

Current portion of assets held for sale

 
150,275

Total current assets
2,069,832

 
1,738,578

Property, plant and equipment, net
552,802

 
505,431

Goodwill
2,538,544

 
2,350,996

Intangible assets, net
1,017,203

 
916,347

Other assets
543,267

 
520,031

Assets held for sale, less current portion

 
307,057

Total assets
$
6,721,648

 
$
6,338,440

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Current portion of long-term debt
$
5,766

 
$
5,406

Accounts payable
587,129

 
513,363

Customer advances and billings in excess of costs incurred
145,853

 
142,377

Accrued liabilities
358,632

 
311,326

Current portion of liabilities held for sale

 
87,183

Total current liabilities
1,097,380

 
1,059,655

Long-term debt, less current portion
1,055,305

 
1,286,738

Other liabilities
841,699

 
732,729

Liabilities held for sale, less current portion

 
165,974

Total liabilities
2,994,384

 
3,245,096

Equity:
 
 
 
Common stock, $0.001 par value; 400,000,000 shares authorized; 123,245,827 and 122,780,261 issued and outstanding
123

 
123

Additional paid-in capital
3,228,174

 
3,199,682

Retained earnings
846,490

 
685,411

Accumulated other comprehensive loss
(574,372
)
 
(988,345
)
Total Colfax Corporation equity
3,500,415

 
2,896,871

Noncontrolling interest
226,849

 
196,473

Total equity
3,727,264

 
3,093,344

Total liabilities and equity
$
6,721,648

 
$
6,338,440










Colfax Corporation
Consolidated Statements of Cashflows
Dollars in thousands
(Unaudited)
 
Year Ended December 31,
 
2017
 
2016
 
 
 
 
Cash flows from operating activities:
 
 
 
Net income
$
169,507

 
$
145,191

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Impairment of goodwill, intangibles and property, plant and equipment
181,200

 
6,082

Depreciation and amortization
134,754

 
137,176

Stock-based compensation expense
21,549

 
19,020

Non-cash interest expense
4,519

 
4,176

Deferred income tax expense (benefit)
12,066

 
(1,682
)
Gain on sale of facility
(11,243
)
 

Gain on sale of business
(308,388
)
 

Pension settlement loss
46,933

 

Changes in operating assets and liabilities:
 
 
 
Trade receivables, net
(44,345
)
 
(50,958
)
Inventories, net
(34,023
)
 
19,665

Accounts payable
10,266

 
37,083

Customer advances and billings in excess of costs incurred
(24,388
)
 
(37,210
)
Changes in other operating assets and liabilities
60,363

 
(31,569
)
Net cash provided by operating activities
218,770

 
246,974

Cash flows from investing activities:
 
 
 
Purchases of fixed assets, net
(68,765
)
 
(63,251
)
Acquisitions, net of cash received
(346,764
)
 
(25,992
)
Proceeds from sale of business, net
490,308

 

Other, net
15,097

 
7,249

Net cash provided by (used in) investing activities
89,876

 
(81,994
)
Cash flows from financing activities:
 
 
 
Payments under term credit facility
(65,628
)
 
(37,500
)
Proceeds from borrowings on revolving credit facilities and other
1,046,457

 
896,742

Repayments of borrowings on revolving credit facilities and other
(1,632,658
)
 
(978,024
)
Proceeds from borrowings on senior unsecured notes
374,450

 

Proceeds from issuance of common stock, net
6,944

 
2,206

Repurchases of common stock

 
(20,812
)
Other
(10,012
)
 
(7,830
)
Net cash used in financing activities
(280,447
)
 
(145,218
)
Effect of foreign exchange rates on Cash and cash equivalents
12,090

 
4,499

Increase in Cash and cash equivalents
40,289

 
24,261

Cash and cash equivalents, beginning of period
221,730

 
197,469

Cash and cash equivalents, end of period
$
262,019

 
$
221,730

 
 
 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
Non-cash consideration received from sale of business
$
206,415

 
$