Document
false0001420800Colfax CORP 0001420800 2019-10-31 2019-10-31 0001420800 cfx:TangibleEquityUnitsMember 2019-10-31 2019-10-31 0001420800 us-gaap:CommonStockMember 2019-10-31 2019-10-31
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 31, 2019
 
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)

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))

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.
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per share
CFX
New York Stock Exchange
5.75% Tangible Equity Units
CFXA
New York Stock Exchange




Item 2.02. Results of Operations and Financial Condition.

On October 31, 2019, Colfax Corporation issued a press release reporting financial results for the third quarter ended September 27, 2019. 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 8:00 a.m. Eastern on October 31, 2019 to discuss its financial results.



Item 9.01. Financial Statements and Exhibits.

(d)    Exhibits

99.1 Colfax Corporation press release dated October 31, 2019, reporting financial results for the third quarter ended September 27, 2019.



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 31, 2019
 
 
 Colfax Corporation
 
 
 
By:
 /s/ Christopher M. Hix
 
 
 
Name:
Christopher M. Hix
 
 
 
Title:
Senior Vice President, Finance,
 
 
 
 
Chief Financial Officer
 
 
 
 
(Principal Financial Officer)
 
                                                                                                          



EXHIBIT INDEX

99.1 Colfax Corporation press release dated October 31, 2019, reporting financial results for the third quarter ended September 27, 2019.


Exhibit
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13172092&doc=8

Colfax Reports Third Quarter 2019 Results

Achieved results at the upper end of expectations
Delivered 3.9% year-on-year sales growth in Medical Technology segment including 4.5% organic improvement
Improved Fabrication Technology operating income and adjusted EBITA margins by 290 basis points
Recently completed divestiture of Air & Gas Handling business, used proceeds to repay $1.6 billion of debt

ANNAPOLIS JUNCTION, MD - October 31, 2019 - 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 Ross
Colfax Corporation
+1-301-323-9090
investorrelations@colfaxcorp.com






Colfax Corporation
Condensed Consolidated Statements of Operations
Dollars 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 Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
Amounts 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 Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
Dollars 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 Corporation
Change in Sales
Dollars 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 Corporation
Condensed Consolidated Balance Sheets
Dollars 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 Corporation
Condensed Consolidated Statements of Cash Flows
Dollars 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

Cash and cash equivalents, end of period
$
166,760

 
$
285,900