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): October 25, 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 October 25, 2018, Colfax Corporation issued a press release reporting financial results for the third quarter ended September 28, 2018. 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 8:30 a.m. EDT on October 25, 2018 to discuss its financial results.



Item 9.01. Financial Statements and Exhibits.

(d)    Exhibits

99.1 Colfax Corporation press release dated October 25, 2018, reporting financial results for the third quarter ended September 28, 2018.



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:
October 25, 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 October 25, 2018, reporting financial results for the third quarter ended September 28, 2018.


Exhibit
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12511018&doc=3

Colfax Reports Third Quarter 2018 Results

Reported net income from continuing operations per diluted share of $0.29 versus $0.35 in the prior year quarter, and achieved adjusted net income per share of $0.54 versus $0.46
Posted 10% organic growth in Fabrication Technology business
Sequentially strengthened adjusted operating margins by 250 bps in Air & Gas Handling business
Recently completed three complementary acquisitions

ANNAPOLIS JUNCTION, MD - October 25, 2018 - Colfax Corporation (NYSE: CFX), a leading diversified industrial technology company, today announced its financial results for the third quarter of 2018.

The Company reported net income from continuing operations of $38 million or $0.29 per diluted share, compared to $0.35 in the prior year quarter. Colfax also reported third quarter 2018 adjusted net income of $63 million or $0.54 per share compared to $0.46 per share for the same prior year period.

Third quarter 2018 net sales of $875 million were 4% higher than the comparable period of 2017. Excluding acquisitions and foreign currency translation effects (FX), Fabrication Technology segment sales grew 10%, and Air & Gas Handling segment sales decreased 12%. Third quarter 2018 Air & Gas Handling orders increased 29% to $338 million compared to the prior year period. Excluding acquisitions and FX, orders increased 16%.

Third quarter operating income was $60 million versus $75 million in the prior year comparable quarter. Excluding restructuring, adjusted operating income was $76 million as compared with $82 million. Fabrication Technology segment adjusted operating income of $56 million and margins of 10.6% were affected this quarter by the short-term impact of inflation, currency, and tariffs beyond in-quarter pricing. Air & Gas Handling adjusted operating income was $34.4 million, and margins increased sequentially to 9.8% as a result of restructuring actions and improved project margins.

“Third quarter financial performance was in-line with our expectations,” said Matt Trerotola, Colfax President and CEO. “Fabrication Technology organic sales growth accelerated for the seventh quarter in a row, and we are driving additional price actions to cover inflation. Air & Gas Handling orders returned to organic growth in the quarter, and its operating margins expanded sequentially from the second quarter as expected due to cost actions and improved project pricing.”

During the third quarter the Company acquired Advanced Combustion Inc. (ACI), a leading global provider of heaters for cold-weather mines and ACH Equipos Ltda. (ACH) the leading servicer of ventilation systems in the Chilean mining industry. These businesses are included within the Company’s Air & Gas Handling segment. The ACI and ACH acquisitions are expected to contribute annual revenues in excess of $30 million. In early October, the Company completed its previously-announced acquisition of Gas Control Equipment (GCE) for its Fabrication Technology business.

“The ACI and ACH acquisitions expand our technology and service offering for mining ventilation where we have a clearly differentiated offering for customers,” said Mr. Trerotola. “GCE expands our presence in specialty gas applications and combining GCE with Fabrication Technology’s global presence and continuous improvement culture will drive both businesses to achieve new heights of success. We welcome the new associates to the Colfax team and look forward to their contributions to our growth.”


Following its third quarter performance, Colfax revised its adjusted earnings per share outlook for the year from $2.15-$2.30 to $2.20-$2.30.

“Colfax is expected to end the year with adjusted earnings per share growth of 26% or more,” said Mr. Trerotola. “We expect a strong performance in the fourth quarter, led by continued Fabrication Technology business growth and sequential margin improvement, expanded Air & Gas Handling margins, and further benefits from our restructuring actions.”






Conference Call and Webcast

Colfax will host a conference call to provide details about its results today at 8:30 a.m. EDT. The call will be open to the public through +1-877-303-7908 (U.S. callers) or +1-678-373-0875 (international callers) and referencing the conference ID number 2599568 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 growth(decline). Adjusted operating income excludes Restructuring and other related items, gain or loss on short term investments, 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, gain or loss on short term investments, Goodwill and intangible asset impairment charge, Pension settlement loss, acquisition-related intangibles amortization, and other non-cash acquisition related charges. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 20.6% and 18.8% for the third quarter and nine months ended September 28, 2018, respectively. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 26.6% and 27.5% for the third quarter and nine months ended September 29, 2017, respectively. 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 2017 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.





Contact:

Kevin Johnson, Vice President
Colfax Corporation
+1-301-323-9090
investorrelations@colfaxcorp.com




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


 
Three Months Ended
 
Nine Months Ended
 
September 28, 2018
 
September 29, 2017
 
September 28, 2018
 
September 29, 2017
 
 
 
 
 
 
 
 
Net sales
$
875,373

 
$
844,509

 
$
2,681,586

 
$
2,426,101

Cost of sales
604,444

 
580,610

 
1,852,603

 
1,664,309

Gross profit
270,929

 
263,899

 
828,983

 
761,792

Selling, general and administrative expense
194,833

 
181,835

 
600,136

 
533,550

Restructuring and other related charges
15,916

 
7,298

 
40,791

 
23,131

Operating income
60,180

 
74,766

 
188,056

 
205,111

Interest expense, net
9,885

 
11,328

 
29,153

 
29,106

Loss on short term investments

 

 
10,128

 

Income from continuing operations before income taxes
50,295

 
63,438

 
148,775

 
176,005

Provision for income taxes
12,397

 
13,816

 
11,490

 
46,128

Net income from continuing operations
37,898

 
49,622

 
137,285

 
129,877

(Loss) income from discontinued operations, net of taxes
(2,696
)
 
2,082

 
(31,262
)
 
21,790

Net income
35,202

 
51,704

 
106,023

 
151,667

Less: income attributable to noncontrolling interest, net of taxes
3,892

 
5,841

 
11,721

 
13,867

Net income attributable to Colfax Corporation
31,310

 
45,863

 
94,302

 
137,800

Net income (loss) per share - basic
 
 
 
 
 
 
 
Continuing operations
$
0.29

 
$
0.36

 
$
1.04

 
$
0.94

Discontinued operations
$
(0.02
)
 
$
0.01

 
$
(0.26
)
 
$
0.18

Consolidated operations
$
0.27

 
$
0.37

 
$
0.78

 
$
1.12

Net income (loss) per share - diluted
 
 
 
 
 
 
 
Continuing operations
$
0.29

 
$
0.35

 
$
1.03

 
$
0.94

Discontinued operations
$
(0.03
)
 
$
0.02

 
$
(0.26
)
 
$
0.17

Consolidated operations
$
0.26

 
$
0.37

 
$
0.77

 
$
1.11





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

 
Three Months Ended
 
Nine Months Ended
 
September 28, 2018
 
September 29, 2017
 
September 28, 2018
 
September 29, 2017
Adjusted Net Income and Adjusted Net Income Per Share

Net income from continuing operations attributable to Colfax Corporation (1) 
$
34,006

 
$
43,781

 
$
125,564

 
$
116,010

Restructuring and other related charges- pretax
15,916

 
7,298

 
40,791

 
23,131

Acquisition-related amortization and other non-cash charges- pretax (2)
18,661

 
14,286

 
58,723

 
41,364

Loss on short term investments-pretax

 

 
10,128

 

Tax adjustment (3)
(5,113
)
 
(8,788
)
 
(37,010
)
 
(20,010
)
Adjusted net income from continuing operations
$
63,470

 
$
56,577

 
$
198,196

 
$
160,495

Adjusted net income margin from continuing operations
7.3
%
 
6.7
%
 
7.4
%
 
6.6
%
Weighted-average shares outstanding - diluted
118,457

 
124,081

 
121,802

 
123,948

 
 
 
 
 
 
 
 
Adjusted net income per share continuing operations
$
0.54

 
$
0.46

 
$
1.63

 
$
1.29

 
 
 
 
 
 
 
 
Net income per share- diluted from continuing operations (GAAP)
$
0.29

 
$
0.35

 
$
1.03

 
$
0.94


 
Updated Guidance
 
Previous Guidance
 
Low
 
High
 
Low
 
High
2018 Earnings Per Share
 
 
 
 
 
 
 
Projected net income per share from continuing operations (GAAP)- diluted
$
1.28

 
$
1.39

 
$
1.19

 
$
1.35

Restructuring and other related charges- pretax
0.56

 
0.56

 
0.58

 
0.58

Acquisition-related amortization and other non-cash charges- pretax(2)
0.68

 
0.68

 
0.61

 
0.61

Loss on short term investments- pretax
0.08

 
0.08

 
0.08

 
0.08

Tax adjustment (3)
(0.40
)
 
(0.41
)
 
(0.31
)
 
(0.32
)
Projected adjusted net income per share
$
2.20

 
$
2.30

 
$
2.15

 
$
2.30

__________ 
(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) The effective tax rates used to calculate adjusted net income and adjusted net income per share for the third quarter and nine months ended September 28, 2018 are 20.6% and 18.8%, respectively. These rates exclude the benefit of a $12.5 million deferred tax asset valuation allowance reversal. The effective tax rates used to calculate adjusted net income and adjusted net income per share for the third quarter and nine months ended September 29, 2017 are 26.6% and 27.5%, respectively. The estimated effective tax rate for adjusted net income and adjusted net income per share for the year ended December 31, 2018 is 20-21%.





Colfax Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
Dollars in thousands
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 28, 2018
 
September 29, 2017
 
September 28, 2018
 
September 29, 2017
Continuing Operations
 
 
 
 
 
 
 
Operating income
$
60,180

 
$
74,766

 
$
188,056

 
$
205,111

Operating income margin
6.9
%
 
8.9
%
 
7.0
%
 
8.5
%
Restructuring and other related charges
15,916

 
7,298

 
40,791

 
23,131

Adjusted operating income
$
76,096

 
$
82,064

 
$
228,847

 
$
228,242

Adjusted operating income margin
8.7
%
 
9.7
%
 
8.5
%
 
9.4
%






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

 
 
 
 
 
Air and Gas Handling
 
Net Sales
 
Orders
 
$
 
%
 
$
 
%
 
 
For the three months ended September 29, 2017
$
844.5

 
 
 
$
262.6

 
 
Components of Change:
 
 
 
 
 
 
 
Existing businesses(1)
4.8

 
0.6
 %
 
41.0

 
15.6
 %
Acquisitions(2)
61.4

 
7.3
 %
 
40.5

 
15.4
 %
Foreign currency translation
(35.3
)
 
(4.2
)%
 
(6.2
)
 
(2.3
)%
 
30.9

 
3.7
 %
 
75.3

 
28.7
 %
For the three months ended September 28, 2018
$
875.4

 
 
 
$
337.9

 
 

 
 
 
 
 
Air and Gas Handling
 
Net Sales
 
Orders
 
Backlog at Period End
 
$
 
%
 
$
 
%
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
As of and for the nine months ended September 29, 2017
$
2,426.1

 
 
 
$
938.0

 
 
 
$
782.8

 
 
Components of Change:
 
 
 
 
 
 
 
 
 
 
 
Existing businesses(1)
34.7

 
1.4
%
 
(78.9
)
 
(8.4
)%
 
(30.5
)
 
(3.9
)%
Acquisitions(2)
200.3

 
8.3
%
 
130.7

 
13.9
 %
 
108.4

 
13.8
 %
Foreign currency translation
20.5

 
0.8
%
 
34.8

 
3.7
 %
 
(25.1
)
 
(3.2
)%

255.5

 
10.5
%
 
86.6

 
9.2
 %
 
52.8

 
6.7
 %
As of and for the nine months ended September 28, 2018
$
2,681.6

 
 
 
$
1,024.6

 
 
 
$
835.6

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





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

 
September 28, 2018
 
December 31, 2017
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
285,900

 
$
262,019

Short term investments

 
149,608

Trade receivables, less allowance for doubtful accounts of $28,805 and $31,488
953,881

 
970,199

Inventories, net
484,242

 
429,627

Other current assets
227,249

 
258,379

Total current assets
1,951,272

 
2,069,832

Property, plant and equipment, net
494,377

 
552,802

Goodwill
2,524,134

 
2,538,544

Intangible assets, net
941,246

 
1,017,203

Other assets
535,200

 
531,316

Total assets
$
6,446,229

 
$
6,709,697

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Current portion of long-term debt
$
6,385

 
$
5,766

Accounts payable
563,730

 
587,129

Customer advances and billings in excess of costs incurred
148,635

 
145,853

Accrued liabilities
350,130

 
358,632

Total current liabilities
1,068,880

 
1,097,380

Long-term debt, less current portion
1,135,624

 
1,055,305

Other liabilities
763,403

 
829,748

Total liabilities
2,967,907

 
2,982,433

Equity:
 
 
 
Common stock, $0.001 par value; 400,000,000 shares authorized; 117,199,449 and 123,245,827 issued and outstanding
117

 
123

Additional paid-in capital
3,051,695

 
3,228,174

Retained earnings
945,944

 
846,490

Accumulated other comprehensive loss
(735,894
)
 
(574,372
)
Total Colfax Corporation equity
3,261,862

 
3,500,415

Noncontrolling interest
216,460

 
226,849

Total equity
3,478,322

 
3,727,264

Total liabilities and equity
$
6,446,229

 
$
6,709,697










Colfax Corporation
Condensed Consolidated Statements of Cashflows
Dollars in thousands
(Unaudited)
 
Nine Months Ended
 
September 28, 2018
 
September 29, 2017
 
 
 
 
Cash flows from operating activities:
 
 
 
Net income
$
106,023

 
$
151,667

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and impairment charges
110,597

 
101,843

Stock-based compensation expense
18,867

 
15,633

Non-cash interest expense
3,332

 
3,340

Loss on short term investments
10,128

 

Deferred income tax benefit
(21,730
)
 
(6,046
)
Gain on sale of property, plant and equipment
(8,211
)
 
(10,557
)
Loss on sale of business
4,337

 

Changes in operating assets and liabilities:
 
 
 
Trade receivables, net
(51,722
)
 
(96,472
)
Inventories, net
(56,951
)
 
(38,493
)
Accounts payable
6,486

 
(3,308
)
Customer advances and billings in excess of costs incurred
18,970

 
(18,405
)
Changes in other operating assets and liabilities
(39,318
)
 
15,489

Net cash provided by operating activities
100,808

 
114,691

Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(40,247
)
 
(36,756
)
Proceeds from sale of property, plant and equipment
17,758

 
16,106

Acquisitions, net of cash received
(83,846
)
 
(56,931
)
Sale of business, net
18,626

 

Sale of short term investments, net
139,480

 

Net cash provided by (used in) investing activities
51,771

 
(77,581
)
Cash flows from financing activities:
 
 
 
Payments under term credit facility
(93,750
)
 
(46,878
)
Proceeds from borrowings on revolving credit facilities and other
911,772

 
594,159

Repayments of borrowings on revolving credit facilities and other
(722,573
)
 
(911,462
)
Proceeds from borrowings on senior unsecured notes

 
374,450

Proceeds from issuance of common stock, net
4,648

 
4,758

Common stock repurchases
(200,000
)
 

Other
(1,038
)
 
(8,851
)
Net cash (used in) provided by financing activities
(100,941
)
 
6,176

Effect of foreign exchange rates on Cash and cash equivalents
(27,757
)
 
7,434

Increase in Cash and cash equivalents
23,881

 
50,720

Cash and cash equivalents, beginning of period
262,019

 
221,730

Cash and cash equivalents, end of period
$
285,900

 
$
272,450