Press Release


Colfax Reports Fourth Quarter and Full Year 2010 Results and Announces Acquisition of Rosscor Holding B.V.

FULTON, Md., Feb. 15, 2011 /PRNewswire/ -- Colfax Corporation (NYSE: CFX), a global leader in fluid-handling solutions for critical applications, today announced financial results for the fourth quarter and year ended December 31, 2010. On a year-over-year basis, highlights for the fourth quarter and full year of 2010 include:  

Fourth quarter of 2010 (all comparisons versus the fourth quarter of 2009)

  • Net income of $8.7 million (20 cents per share — basic and diluted); adjusted net income (as defined below) of $16.9 million (39 cents per share), an increase of 47.1%
  • Net sales of $166.7 million, an increase of 27.2%; organic sales increase (as defined below) of 27.4%
  • Operating income of $19.6 million; adjusted operating income (as defined below) of $26.5 million, an increase of 42.0%.  
  • Fourth quarter orders of $133.6 million, an increase of 31.5%; organic order growth (as defined below) of 34.4%
  • Backlog of $313.5 million at period end

Full year 2010 (all comparisons versus full year 2009)

  • Net income of $16.2 million (37 cents per share — basic and diluted); adjusted net income (as defined below) of $40.2 million (92 cents per share), a decrease of 1.7%
  • Net sales of $542.0 million, an increase of 3.2%; organic sales increase (as defined below) of 3.1%
  • Operating income of $34.4 million; adjusted operating income (as defined below) of $65.8 million, a decrease of 2.3%.  
  • Orders for the year of $532.8 million, an increase of 15.2%; organic order growth (as defined below) of 15.4%
  • Net working capital was reduced by $18 million in 2010 and is now 19% of sales

Additionally, Colfax announced the acquisition of Rosscor Holding B.V., headquartered in Hengelo, The Netherlands. A premier supplier of multiphase pumping technology (MPP) and certain other highly-engineered fluid-handling systems, Rosscor strengthens Colfax's capabilities, particularly in the global oil & gas market.  Rosscor's sales for 2010 were approximately euro 23 million.  Colfax expects the transaction to be accretive over the next 12 months.

Adjusted net income, adjusted net income per share, adjusted operating income, organic sales growth and organic order growth are not financial measures calculated in accordance with generally accepted accounting principles in the U.S. ("GAAP"). See below for a description of the measures' usefulness and a reconciliation of these measures to their most directly comparable GAAP financial measures.

Clay Kiefaber, President and Chief Executive Officer, stated, "We are pleased to report stronger than expected results for the fourth quarter and full year 2010. Both sales and orders on an organic basis were up substantially from the 2009 fourth quarter.  We continue to benefit from strength in the oil and gas and general industrial end markets.  The commercial marine market also continued to exceed our expectations.  We are also pleased with the resulting profit associated with the better than expected sales and the significant cash flow provided by our improved working capital management.

"We are continuing to gain traction with our strategic priorities, including intensifying the application of the Colfax Business System, the development of new Voice of the Customer-aligned products and the realignment into a global market-facing organization.  We are also continuing to build our leadership team, and are delighted to welcome Daniel A. Pryor as our Senior Vice President of Strategy and Business Development."

Mr. Kiefaber also noted the importance of Rosscor's MPP expertise and experience to Colfax's portfolio of leading global brands. "Rosscor was one of the first to introduce MPP technology nearly twenty years ago, and has remained a technology leader since then," he said. "With more than 70 MPP installations world-wide, Rosscor brings us deep capabilities in MPP that we can leverage through our existing channels."

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 operating income, earnings before interest, taxes and depreciation (EBITDA), adjusted EBITDA, organic sales growth, organic order growth and projected adjusted net income per share. Adjusted net income, adjusted net income per share, adjusted EBITDA and adjusted operating income exclude asbestos liability and defense costs (income) and asbestos coverage litigation expenses, and restructuring and other related charges to the extent they impact the periods presented. Adjusted net income, adjusted net income per share and projected adjusted net income per share present income taxes at an effective tax rate of 32%. Projected adjusted net income per share excludes estimated restructuring and other related charges, asbestos coverage litigation expenses and asbestos liability and defense costs.  Organic sales growth and organic order growth exclude the impact of acquisitions and foreign exchange rate fluctuations.  These non-GAAP financial measures assist Colfax in comparing its operating performance on a consistent basis because, among other things, they remove the impact of legacy asbestos issues and items outside the control of its operating management team.

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

Colfax defines net working capital as trade receivables, less allowance for doubtful accounts, and inventories, net less accounts payable.

Conference Call and Webcast

Colfax will host a conference call to provide details about its results and outlook on Tuesday, February 15, 2011 at 8:00 a.m. ET. The call will be open to the public through 877-303-7908 or 678-373-0875 and webcast via Colfax's website at www.colfaxcorp.com under the "Investor Relations" 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 global leader in critical fluid-handling products and technologies. Through its global operating subsidiaries, Colfax manufactures positive displacement industrial pumps and valves used in oil & gas, power generation, commercial marine, defense and general industrial markets. Colfax's operating subsidiaries supply products under the well-known brands Allweiler, Baric, Fairmount Automation, Houttuin, Imo, LSC, Portland Valve, Tushaco, Warren and Zenith. Colfax is traded on the NYSE under the ticker "CFX." Additional information about Colfax is available at www.colfaxcorp.com.

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 facts. 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 as well as its Annual Report on Form 10-K 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 this date. 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

Condensed Consolidated Statements of Operations

Dollars in thousands, except per share data

(Unaudited)












Three Months Ended

December 31,


Year Ended

December 31,



2010


2009


2010


2009










Net sales


$166,651


$130,971


$541,987


$525,024

Cost of sales


107,077


83,960


350,579


339,237










Gross profit


59,574


47,011


191,408


185,787

Selling, general and administrative expenses


31,597


27,028


119,426


112,503

Research and development expenses


1,474


1,320


6,205


5,930

Restructuring and other related charges


808


7,420


10,323


18,175

Asbestos liability and defense costs (income)


3,697


(1,017)


7,876


(2,193)

Asbestos coverage litigation expenses


2,443


2,904


13,206


11,742










Operating income


19,555


9,356


34,372


39,630

Interest expense


1,609


1,746


6,684


7,212










Income before income taxes


17,946


7,610


27,688


32,418

Provision for income taxes


9,296


884


11,473


8,621










Net income


$    8,650


$    6,726


$  16,215


$  23,797










Net income per share—basic


$      0.20


$      0.16


$      0.37


$      0.55










Net income per share—diluted


$      0.20


$      0.15


$      0.37


$      0.55



Colfax Corporation

Condensed Consolidated Balance Sheets

Dollars in thousands

(Unaudited)










December 31,




2010


2009







ASSETS





CURRENT ASSETS:






Cash and cash equivalents


$      60,542


$      49,963


Trade receivables, less allowance for doubtful accounts


98,070


88,493


Inventories, net


57,941


71,150


Asbestos insurance asset


34,117


31,502


Asbestos insurance receivable


46,108


35,891


Other current assets


24,278


20,649







Total current assets


321,056


297,648

Deferred income taxes, net


52,385


51,838

Property, plant and equipment, net


89,246


92,090

Goodwill and intangible assets, net


200,636


175,370

Long-term asbestos insurance asset


340,234


357,947

Long-term asbestos insurance receivable


5,736


16,876

Deferred loan costs and other assets


12,784


14,532

Total assets


$ 1,022,077


$ 1,006,301







LIABILITIES AND SHAREHOLDERS' EQUITY





CURRENT LIABILITIES:






Current portion of long-term debt and capital leases


$      10,000


$        8,969


Accounts payable


50,896


36,579


Accrued asbestos liability


37,875


34,866


Other accrued liabilities


92,739


70,685







Total current liabilities


191,510


151,099

Long-term debt, less current portion


72,500


82,516

Long-term asbestos liability


391,776


408,903

Pension and accrued post-retirement benefits


112,257


105,230

Other liabilities


37,663


41,728

Total liabilities


805,706


789,476

Shareholder's equity


216,371


216,825

Total liabilities and shareholders' equity


$ 1,022,077


$ 1,006,301



Colfax Corporation

Condensed Consolidated Statement of Cash Flows

Dollars in thousands

(Unaudited)








Year ended December 31,



2010


2009

Cash flows from operating activities:





Net income


$ 16,215


$ 23,797

Adjustments to reconcile net income to cash provided by operating activities:





Depreciation, amortization and fixed asset impairment charges


16,130


15,074

Noncash stock-based compensation


3,137


2,593

Other adjustments for non-cash items


767


613

Deferred income taxes


(296)


2,689

Changes in working capital


27,297


6,144

Changes in other operating assets and liabilities


(1,285)


(12,206)

Net cash provided by operating activities


61,965


38,704






Cash flows from investing activities:





Purchases of fixed assets


(12,527)


(11,006)

Acquisitions, net of cash received


(27,960)


(1,678)

Proceeds from sale of fixed assets


74


219

Net cash used in investing activities


(40,413)


(12,465)






Cash flows from financing activities:





Payments under term credit facility


(8,750)


(5,000)

Proceeds from borrowings on revolving credit facilities


5,500


-

Repayments of borrowings on revolving credit facilities


(5,500)


-

Other


707


(417)

Net cash used in financing activities


(8,043)


(5,417)






Effect of exchange rates on cash


(2,930)


379






Increase in cash and cash equivalents


10,579


21,201

Cash and cash equivalents, beginning of year


49,963


28,762

Cash and cash equivalents, end of year


$ 60,542


$ 49,963



Colfax Corporation

Reconciliation of GAAP to non-GAAP Financial Measures

Dollars in thousands, except share data

(Unaudited)




Three Months Ended
December 31,


Year Ended
December 31,



2010


2009


2010


2009










EBITDA









Net income


$        8,650


$        6,726


$      16,215


$      23,797










Interest expense


1,609


1,746


6,684


7,212

Provision for income taxes


9,296


884


11,473


8,621

Depreciation and amortization


4,888


3,834


16,130


14,426










EBITDA


$      24,443


$      13,190


$      50,502


$      54,056

EBITDA margin


14.7%


10.1%


9.3%


10.3%










Adjusted EBITDA









Net income


$        8,650


$        6,726


$      16,215


$      23,797










Interest expense


1,609


1,746


6,684


7,212

Provision for income taxes


9,296


884


11,473


8,621

Depreciation and amortization


4,888


3,834


16,130


14,426

Restructuring and other related charges


808


7,420


10,323


18,175

Asbestos liability and defense costs (income)


3,697


(1,017)


7,876


(2,193)

Asbestos coverage litigation expenses


2,443


2,904


13,206


11,742










Adjusted EBITDA


$      31,391


$      22,497


$      81,907


$      81,780

Adjusted EBITDA margin


18.8%


17.2%


15.1%


15.6%










Adjusted Net Income and Adjusted Earnings per Share









Net income


$        8,650


$        6,726


$      16,215


$      23,797










Restructuring and other related charges


808


7,420


10,323


18,175

Asbestos liability and defense costs (income)


3,697


(1,017)


7,876


(2,193)

Asbestos coverage litigation expenses


2,443


2,904


13,206


11,742

Tax adjustment to effective rate of 32%


1,330


(4,529)


(7,437)


(10,624)










Adjusted net income


$      16,928


$      11,504


$      40,183


$      40,897

Adjusted net income margin


10.2%


8.8%


7.4%


7.8%










Weighted average shares outstanding - diluted


43,876,791


43,449,493


43,667,225


43,325,704

Adjusted net income per share


$          0.39


$          0.26


$          0.92


$          0.94










Net income per share—diluted









   in accordance with GAAP


$          0.20


$          0.15


$          0.37


$          0.55










Adjusted Operating Income









Operating income


$      19,555


$        9,356


$      34,372


$      39,630










Restructuring and other related charges


808


7,420


10,323


18,175

Asbestos liability and defense costs (income)


3,697


(1,017)


7,876


(2,193)

Asbestos coverage litigation expenses


2,443


2,904


13,206


11,742










Adjusted operating income


$      26,503


$      18,663


$      65,777


$      67,354

Adjusted operating income margin


15.9%


14.2%


12.1%


12.8%












Colfax Corporation

Change in Sales and Orders

Dollars in millions

(Unaudited)











Sales


Orders




$

%


$

%













Three Months Ended December 31, 2009

$ 131.0



$ 101.6














Components of Change:









Existing Businesses

36.0

27.4 %


35.0

34.4 %




Acquisitions

5.4

4.1 %


1.3

1.3 %




Foreign Currency Translation

(5.7)

(4.3)%


(4.3)

(4.2)%













Total

35.7

27.2 %


32.0

31.5 %













Three Months Ended December 31, 2010

$ 166.7



$     133.6










































Sales


Orders


Backlog at
Period End

$

%


$

%


$

%










Year ended December 31, 2009

$ 525.0



$     462.4



$ 290.9











Components of Change:









Existing Businesses

16.1

3.1 %


71.1

15.4 %


(6.6)

(2.3)%

Acquisitions

10.0

1.9 %


6.1

1.3 %


38.7

13.3 %

Foreign Currency Translation

(9.1)

(1.7)%


(6.8)

(1.5)%


(9.5)

(3.3)%










Total

17.0

3.2 %


70.4

15.2 %


22.6

7.8 %










Year ended December 31, 2010

$ 542.0



$     532.8



$ 313.5




SOURCE Colfax Corporation

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