EX-99.1 2 q42013earningspressrelease.htm EXHIBIT Q4 2013 Earnings Press Release



COLFAX REPORTS RECORD FOURTH QUARTER 2013 RESULTS

Fourth quarter net income per dilutive share of $0.31, adjusted net income per share of $0.61
Fourth quarter net sales increased 14.0% (10.2% organically) to $1.171 billion
Gas- and fluid-handling finished the period with record backlog of $1.577 billion

FULTON, MD - February 6, 2014 - Colfax Corporation (NYSE: CFX) today announced its financial results for the fourth quarter ended December 31, 2013.
For the fourth quarter, net income was $32.0 million, or $0.31 per dilutive share. Adjusted net income (as defined below) was $70.1 million, or $0.61 per share, which includes a 2 cent per share gain related to the reduction of an uncertain tax position.
Net sales were $1.171 billion in the fourth quarter, an increase of 14.0% from the prior year. Net sales increased 10.2% organically. Fourth quarter operating income was $119.6 million, with adjusted operating income (as defined below) of $124.4 million, an increase of 40%.
Fourth quarter gas- and fluid-handling orders were $547.8 million compared to orders of $520.3 million in the prior year, an increase of 5.3%. Gas- and fluid-handling finished the period with record backlog of $1.577 billion.
Full year net income was $158.2 million, or $1.54 per dilutive share, with adjusted net income (as defined below) of $229.8 million, or $2.04 per share. Net sales for 2013 were $4.207 billion, an increase of 7.5% compared to net sales for 2012; this reflects a 2.7% increase organically. Full year operating income was $406.4 million, with adjusted operating income (as defined below) of $431.4 million, an increase of 29%.
Full year gas- and fluid-handling orders were $2.061 billion, an increase of 3.3% over the prior year.
Adjusted net income, adjusted net income per share, adjusted operating income, organic sales growth and organic order growth (decline) 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.
Steve Simms, President and Chief Executive Officer, stated, “We are pleased to finish the year with another solid quarter of operating performance. Our fabrication technology group saw year-on-year organic growth this quarter, as well as continued strong operational performance. Gas- and fluid-handling also out performed our revenue expectations this quarter, but the dilutive impact of acquisitions in the quarter left overall segment margins relatively flat. Integration of these acquisitions is progressing well, and these businesses are expected to significantly increase our 2014 earnings. The deployment of CBS across this organization has reduced working capital, fundamentally changed our cost structure and is positioning us for future organic growth. We exit the year confident in our ability to deliver our previously stated 2014 guidance.”  




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, organic sales growth and organic order growth (decline). Adjusted net income, adjusted net income per share and adjusted operating income exclude asbestos coverage litigation expense, restructuring and other related charges, expenses related to the Charter acquisition, fair value adjustments related to the ESAB and Howden inventory and backlog amortization expense, write-off of certain deferred financing fees and original issue discount associated with the refinancing of Colfax’s credit agreement and gain recorded on acquisition of remaining ownership interest of a less than wholly owned subsidiary in which Colfax did not hold a controlling interest, to the extent they impact the periods presented. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 27.6% and 26.6% for the fourth quarter and full year ended December 31, 2013, respectively, and 15% and 25% for the fourth quarter and full year ended December 31, 2012, respectively. Organic sales growth and organic order decline 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 asbestos insurance coverage issues, expenses and significant year-one fair value adjustment amortization expense related to the Charter acquisition and major restructuring programs.
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.
Conference Call and Webcast
Colfax will host a conference call to provide details about its results on Thursday, February 6, 2014 at 8:00 a.m. EST. The call will be open to the public through 877-303-7908 (U.S. callers) or 678-373-0875 (international callers) and referencing the conference ID number 35304030, 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 diversified global manufacturing and engineering company that provides gas- and fluid-handling and fabrication technology products and services to commercial and governmental customers around the world under the Howden, Colfax Fluid Handling and ESAB brands. Colfax believes that its brands are among the most highly recognized in each of the markets that it serves. 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 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 2012 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 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:
Farand Pawlak, Director of Investor Relations
Colfax Corporation
301-323-9054
Farand.Pawlak@colfaxcorp.com




Colfax Corporation
Consolidated Statements of Operations
Dollars in thousands, except per share amounts
(Unaudited)



 
Three Months Ended
 
Year Ended
 
December 31, 2013
 
December 31, 2012
 
December 31, 2013
 
December 31, 2012
 
 
 
 
 
 
 
 
Net sales
$
1,171,378

 
$
1,027,397

 
$
4,207,209

 
$
3,913,856

Cost of sales
813,997

 
719,827

 
2,900,987

 
2,761,731

Gross profit
357,381

 
307,570

 
1,306,222

 
1,152,125

Selling, general and administrative expense
219,159

 
234,261

 
860,994

 
895,452

Charter acquisition-related expense

 

 

 
43,617

Restructuring and other related charges
18,074

 
16,994

 
35,502

 
60,060

Asbestos coverage litigation expense
533

 
4,147

 
3,334

 
12,987

Operating income
119,615

 
52,168

 
406,392

 
140,009

Interest expense(1)
44,718

 
23,290

 
103,597

 
91,570

Income before income taxes
74,897

 
28,878

 
302,795

 
48,439

Provision for income taxes(2)
30,704

 
3,812

 
93,652

 
90,703

Net income (loss)
44,193

 
25,066

 
209,143

 
(42,264
)
Less: income attributable to noncontrolling interest, net of taxes
7,067

 
5,330

 
30,515

 
22,138

Net income (loss) attributable to Colfax Corporation
37,126

 
19,736

 
178,628

 
(64,402
)
Dividends on preferred stock
5,142

 
5,072

 
20,396

 
18,951

Net income (loss) available to Colfax Corporation common shareholders
$
31,984

 
$
14,664

 
$
158,232

 
$
(83,353
)
Net income (loss) per share- basic
$
0.31

 
$
0.14

 
$
1.56

 
$
(0.92
)
Net income (loss) per share- diluted
$
0.31

 
$
0.13

 
$
1.54

 
$
(0.92
)
__________
(1) Includes noncash charges associated with the write-off of original issue discount and deferred costs in connection with the refinancings of our primary credit facility of $26.9 million and $29.4 million for the fourth quarter and full year ended December 31, 2013, respectively.

(2) Provision for income taxes for the year ended December 31, 2012 was significantly impacted by the reassessment of certain deferred tax assets as of the date of the Charter acquisition, which resulted in an increase in the Company's valuation allowance, and the Charter acquisition-related expenses that are either not deductible for tax purposes or were incurred in jurisdictions where no tax benefit can be recognized.




Colfax Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
Dollars in thousands, except per share amounts
(Unaudited)
 
Three Months Ended
 
Year Ended
 
December 31, 2013
 
December 31, 2012
 
December 31, 2013
 
December 31, 2012
Adjusted Operating Income
 
 
 
 
 
 
 
Operating income
$
119,615

 
$
52,168

 
$
406,392

 
$
140,009

Restructuring and other related charges
18,074

 
16,994

 
35,502

 
60,060

Charter acquisition-related expense

 

 

 
43,617

Fair value adjustments - ESAB/Howden backlog and inventory amortization expense

 
15,614

 

 
78,196

Asbestos coverage litigation expense
533

 
4,147

 
3,334

 
12,987

Gain on revaluation of Sicelub investment
(13,784
)
 

 
(13,784
)
 

Adjusted operating income
$
124,438

 
$
88,923

 
$
431,444

 
$
334,869

Adjusted operating income margin
10.6
%
 
8.7
%
 
10.3
%
 
8.6
%
Adjusted Net Income and Adjusted Net Income Per Share
 
 
 
 
 
 
 
Net income (loss) attributable to Colfax Corporation
37,126

 
$
19,736

 
$
178,628

 
$
(64,402
)
Restructuring and other related charges
18,074

 
16,994

 
35,502

 
60,060

Charter acquisition-related expense

 

 

 
43,617

Fair value adjustments - ESAB/Howden backlog and inventory amortization expense

 
15,614

 

 
78,196

Asbestos coverage litigation expense
533

 
4,147

 
3,334

 
12,987

Gain on revaluation of Sicelub investment
(13,784
)
 

 
(13,784
)
 

Debt extinguishment charges- Refinancing of credit agreement
26,860

 

 
26,860

 

Tax adjustment(1)
1,309

 
(6,022
)
 
(759
)
 
29,297

Adjusted net income
70,118

 
50,469

 
229,781

 
159,755

Adjusted net income margin
6.0
%
 
4.9
%
 
5.5
%
 
4.1
%
Dividends on preferred stock
5,142

 
5,072

 
20,396

 
18,951

Adjusted net income available to Colfax Corporation common shareholders
64,976

 
45,397

 
209,385

 
140,804

Less: adjusted net income attributable to participating securities(2)

 
5,831

 
4,571

 
18,087

 
$
64,976

 
$
39,566

 
$
204,814

 
$
122,717

Weighted-average shares outstanding - diluted
115,634,088

 
94,978,755

 
100,366,455

 
91,918,513

Adjusted net income per share
$
0.61

 
$
0.42

 
$
2.04

 
$
1.34

 
 
 
 
 
 
 
 
Net income (loss) per share— diluted (in accordance with GAAP)
$
0.31

 
$
0.13

 
$
1.54

 
$
(0.92
)
__________
(1) The effective tax rates used to calculate adjusted net income and adjusted net income per share are 27.6% and 26.6% for the fourth quarter and full year ended December 31, 2013, respectively, and 15% and 25% for the fourth quarter and full year ended December 31, 2012.
 
(2) Adjusted net income per share for periods prior to April 23, 2013 was calculated consistently with the two-class method in accordance with GAAP as the Series A preferred stock were considered participating securities. Subsequent to April 23, 2013, adjusted net income per share was calculated consistently with the if-converted method in accordance with GAAP as the Series A preferred stock were no longer participating securities. Adjusted net income per share for the full year ended December 31, 2013 excludes the impact of 12,173,291 common stock equivalent shares as their inclusion would be anti-dilutive.




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


 
Net Sales
 
Orders
 
 
 
$
 
%
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the three months ended December 31, 2012
$
1,027.4

 
 
 
$
520.3

 
 
 
 
 
 
Components of Change:
 
 
 
 
 
 
 
 
 
 
 
Existing Businesses
105.1

 
10.2
 %
 
(12.8
)
 
(2.5
)%
 
 
 
 
Acquisitions(1)
66.7

 
6.5
 %
 
50.2

 
9.6
 %
 
 
 
 
Foreign Currency Translation
(27.8
)
 
(2.7
)%
 
(9.9
)
 
(1.8
)%
 
 
 
 
Total
144.0

 
14.0
 %
 
27.5

 
5.3
 %
 
 
 
 
For the three months ended December 31, 2013
$
1,171.4

 
 
 
$
547.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
Orders
 
Backlog at Period End
 
$
 
%
 
$
 
%
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
As of and for the year ended December 31, 2012
$
3,913.9

 
 
 
$
1,996.0

 
 
 
$
1,431.5

 
 
Components of Change:
 
 
 
 
 
 
 
 
 
 
 
Existing Businesses
107.5

 
2.7
 %
 
(15.3
)
 
(0.8
)%
 
(58.6
)
 
(4.1
)%
Acquisitions(1)
246.9

 
6.3
 %
 
96.4

 
4.8
 %
 
231.2

 
16.2
 %
Foreign Currency Translation
(61.1
)
 
(1.5
)%
 
(15.7
)
 
(0.7
)%
 
(26.7
)
 
(1.9
)%
Total
293.3

 
7.5
 %
 
65.4

 
3.3
 %
 
145.9

 
10.2
 %
As of and for the year ended December 31, 2013
$
4,207.2

 
 
 
$
2,061.4

 
 
 
$
1,577.4

 
 

 
(1) Represents the incremental sales and orders as a result of our acquisitions of Charter, Soldex, Co-Vent, Clarus, CKD Kompressory, Flakt Woods, TLT-Babcock, Alphair, and Sicelub. The full year impact related to the Charter Acquisition represents 12 days of activity for ESAB and Howden as the acquisition closed on January 13, 2012. Represents the incremental order backlog as a result of our acquisitions of Clarus, CKD Kompressory, Flakt Woods, TLT-Babcock, Alphair and Sicelub.




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


 
December 31,
 
2013
 
2012
ASSETS
 
 
 
  CURRENT ASSETS:
 
 
 
     Cash and cash equivalents
$
311,301

 
$
482,449

     Trade receivables, less allowance for doubtful accounts of $31,282 and $16,464
1,030,892

 
873,382

     Inventories, net
445,752

 
493,649

     Other current assets
350,401

 
282,266

  Total current assets
2,138,346

 
2,131,746

  Property, plant and equipment, net
757,140

 
688,570

  Goodwill
2,384,522

 
2,098,836

  Intangible assets, net
832,553

 
779,049

  Other assets
470,292

 
450,086

Total assets
$
6,582,853

 
$
6,148,287

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
  CURRENT LIABILITIES:
 
 
 
     Current portion of long-term debt
$
29,449

 
$
34,799

     Accounts payable
860,380

 
699,626

     Accrued liabilities
485,261

 
447,220

  Total current liabilities
1,375,090

 
1,181,645

  Long-term debt, less current portion
1,457,642

 
1,693,512

  Other liabilities
1,009,006

 
1,116,844

Total liabilities
3,841,738

 
3,992,001

 Equity:
 
 
 
Preferred stock, $0.001 par value; 20,000,000 shares authorized; 13,877,552 issued and outstanding
14

 
14

Common stock, $0.001 par value; 400,000,000 shares authorized; 101,921,613 and 94,067,418 issued and outstanding
102

 
94

  Additional paid-in capital
2,541,005

 
2,197,694

  Retained earnings (accumulated deficit)
19,376

 
(138,856
)
  Accumulated other comprehensive loss
(46,608
)
 
(146,594
)
Total Colfax Corporation equity
2,513,889

 
1,912,352

Noncontrolling interest
227,226

 
243,934

Total equity
2,741,115

 
2,156,286

Total liabilities and equity
$
6,582,853

 
$
6,148,287





Colfax Corporation
Consolidated Statements of Cash Flows
Dollars in thousands
(Unaudited)


 
Year Ended December 31,
 
2013
 
2012
 
2011
 
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
Net income (loss)
$
209,143

 
$
(42,264
)
 
$
4,555

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
Depreciation, amortization and fixed asset impairment charges
119,258

 
183,403

 
22,598

Stock-based compensation expense
13,334

 
9,373

 
4,908

Non-cash interest expense
44,377

 
16,997

 
735

Gain on revaluation of Sicelub investment
(13,784
)
 

 

Unrealized loss on acquisition-related foreign currency derivative

 

 
21,146

Deferred income tax provision (benefit)
9,946

 
7,222

 
(1,722
)
Changes in operating assets and liabilities, net of acquisitions:
 
 
 
 
 
Trade receivables, net
(98,912
)
 
(37,338
)
 
(5,972
)
Inventories, net
79,987

 
26,694

 
10,844

Accounts payable
128,889

 
88,927

 
(7,298
)
Changes in other operating assets and liabilities
(130,069
)
 
(78,994
)
 
7,359

Net cash provided by operating activities
362,169

 
174,020

 
57,153

Cash flows from investing activities:
 
 
 
 
 
Purchases of fixed assets, net
(71,482
)
 
(83,187
)
 
(13,624
)
Acquisitions, net of cash received
(372,476
)
 
(1,859,645
)
 
(56,346
)
Loans to non-trade creditors
(31,012
)
 

 

Other, net

 
1,857

 

Net cash used in investing activities
(474,970
)
 
(1,940,975
)
 
(69,970
)
Cash flows from financing activities:
 
 
 
 
 
Borrowings under term credit facility
50,861

 
1,731,523

 

Payments under term credit facility
(679,755
)
 
(531,415
)
 
(10,000
)
Proceeds from borrowings on revolving credit facilities
648,000

 
13,149

 
141,203

Repayments of borrowings on revolving credit facilities
(328,133
)
 
(53,414
)
 
(102,180
)
Proceeds from issuance of common stock, net
324,153

 
756,762

 
3,719

Proceeds from issuance of preferred stock, net

 
332,969

 

Acquisition of shares held by noncontrolling interest
(14,913
)
 
(29,292
)
 

Payments of dividend on preferred stock
(20,396
)
 
(17,446
)
 

Other
(24,870
)
 
(19,608
)
 

Net cash (used in) provided by financing activities
(45,053
)
 
2,183,228

 
32,742

Effect of foreign exchange rates on Cash and cash equivalents
(13,294
)
 
(8,932
)
 
(5,359
)
(Decrease) increase in Cash and cash equivalents
(171,148
)
 
407,341

 
14,566

Cash and cash equivalents, beginning of period
482,449

 
75,108

 
60,542

Cash and cash equivalents, end of period
$
311,301

 
$
482,449

 
$
75,108

 
 
 
 
 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Interest payments
$
58,970

 
$
79,857

 
$
5,209

Income tax payments, net
93,856

 
70,677

 
16,731