Press Release Details

Colfax Reports Fourth Quarter 2015 Results

February 4, 2016

Annapolis Junction, MD, Feb. 04, 2016 (GLOBE NEWSWIRE) --

COLFAX REPORTS FOURTH QUARTER 2015 RESULTS

•          Fourth quarter net income per dilutive share of $0.36, adjusted net income per share of $0.51.

•          Fourth quarter sales and operating profit in line with our expectations.

•          Cost reduction programs on schedule for 2016.

ANNAPOLIS JUNCTION, MD - February 4, 2016 - Colfax Corporation (NYSE: CFX), a leading global manufacturer of gas- and fluid-handling and fabrication technology products and services, today announced its financial results for the fourth quarter and year ended December 31, 2015.

For the fourth quarter of 2015, net income was $44.2 million, or $0.36 per dilutive share. Adjusted net income (as defined below) was $63.0 million, or $0.51 per share, compared to $89.7 million for the fourth quarter of 2014, or $0.72 per share.

Net sales were $1.061 billion in the fourth quarter, a decrease of 12.0% from the prior year. Net sales decreased 3.8% organically compared to the fourth quarter of 2014. Fourth quarter operating income was $65.1 million, with adjusted operating income (as defined below) of $100.6 million.  Adjusted operating income margin (as defined below) was 9.5% in the fourth quarter.

Fourth quarter gas- and fluid-handling orders decreased by 22.3% to $443.0 million compared to orders of $570.1 million for the fourth quarter of 2014, an organic order decline of 18.8%. Gas- and fluid-handling finished the period with backlog of $1,140.9 million.

For the year ended December 31, 2015 net income was $167.7 million, or $1.34 per dilutive share. Adjusted net income (as defined below) was $200.1 million, or $1.60 per share. Net sales for the year ended December 31, 2015 were $3.967 billion, a decrease of 14.2% compared to net sales for the year ended December 31, 2014. Operating income for the year ended December 31, 2015 was $284.6 million, with adjusted operating income (as defined below) of $345.8 million. Adjusted operating income margin (as defined below) for the year ended December 31, 2015 was 8.7%.

Adjusted net income, adjusted net income per share, adjusted operating income, adjusted operating income margin, organic sales decrease and organic order decrease 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.

Matthew Trerotola, President and Chief Executive Officer, stated, "We are pleased to deliver fourth quarter sales and operating profit in line with our expectations. While the demand environment remains weak in both business segments, we are on track to deliver the $100 million in cost reductions from our 2014 cost base by the end of 2016. Execution of cash conversion management was outstanding in the quarter as we closed out 2015 with a strong balance sheet and $131 million less debt than we began the quarter. We are confident we will continue to deliver on the performance goals we outlined at our recent Investor Day."

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, adjusted operating income margin, organic sales decrease and organic order decrease. Adjusted net income, adjusted net income per share, adjusted operating income and adjusted operating income margin exclude Restructuring and other related charges. Adjusted net income and adjusted net income per share exclude the write-off of certain deferred financing fees and original issue discount associated with the refinancing of Colfax's credit agreement for the year ended December 31, 2015, and the preferred stock conversion inducement payment for the year ended December 31, 2014. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 25.1% and 27.5% for the three months and year ended December 31, 2015, respectively. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 24.5% and 27.8% for the three months and year ended December 31, 2014, respectively. Organic sales decrease and organic order decrease 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 restructuring and other related charges, write-off of certain deferred financing fees and original issue discount, and the preferred stock conversion inducement payment.

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 4, 2016 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 37611950, 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 2014 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:

Terry Ross, Vice President of Investor Relations
Colfax Corporation
301-323-9054
Terry.Ross@colfaxcorp.com


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

 Three Months Ended Year Ended
 December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
         
Net sales$1,061,464  $1,206,356  $3,967,053  $4,624,476 
Cost of sales728,039  814,509  2,715,279  3,145,631 
Gross profit333,425  391,847  1,251,774  1,478,845 
Selling, general and administrative expense232,843  255,119  905,952  1,011,171  
Restructuring and other related charges35,519  29,387  61,177  58,121 
Operating income65,063  107,341  284,645  409,553 
Interest expense(1)10,593  10,424  47,743  51,305 
Income before income taxes54,470  96,917  236,902  358,248 
Provision for (benefit from) income taxes(2)5,941  11,128  49,724  (62,025)
Net income48,529  85,789  187,178  420,273 
Less: income attributable to noncontrolling interest, net of taxes4,332  5,655  19,439  28,175 
Net income attributable to Colfax Corporation44,197   80,134  167,739  392,098 
Dividends on preferred stock—  —  —  2,348 
Preferred stock conversion inducement payment—  —  —  19,565 
Net income available to Colfax Corporation common shareholders$44,197  $80,134  $167,739  $370,185 
Net income per share- basic$0.36  $0.65  $1.35  $3.06 
Net income per share- diluted$0.36  $0.64  $1.34  $3.02 

__________
(1) Includes noncash charges of $4.7 million, associated with the write-off of original issue discount and deferred costs in connection with the refinancing of our primary credit facility on June 5, 2015.

(2)  Provision for income taxes for the three months ended December 31, 2015 and 2014, was favorably impacted by the enactment of the U.S. tax extenders packages related to the exemption from taxation of certain foreign income in the United States. Benefit from income taxes for the year ended December 31, 2014 was significantly impacted by the reassessment of the realizability of certain deferred tax assets as a result of the effect of the Victor Acquisition on expected future income which resulted in a decrease in the Company's valuation allowance against U.S. deferred tax assets.


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

 Three Months Ended Year Ended
 December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Adjusted Operating Income       
Operating income$65,063  $107,341   $284,645  $409,553 
Restructuring and other related charges35,519  29,387  61,177  58,121 
Adjusted operating income$100,582  $136,728  $345,822  $467,674 
Adjusted operating income margin9.5% 11.3% 8.7% 10.1%


 Three Months Ended Year Ended
 December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Adjusted Net Income       
Net income attributable to Colfax Corporation$44,197  $80,134  $167,739  $392,098 
Restructuring and other related charges35,519  29,387  61,177  58,121 
Debt extinguishment charges- Refinancing of credit agreement—  —  4,731  — 
Tax adjustment(1)(16,678) (19,790) (33,549) (177,944)
Adjusted net income$63,038  $89,731  $200,098  $272,275 
Adjusted net income margin5.9% 7.4% 5.0% 5.9%
        
Adjusted Net Income Per Share       
Net income available to Colfax Corporation common shareholders$44,197  $80,134  $167,739  $370,185 
Restructuring and other related charges35,519  29,387  61,177   58,121 
Debt extinguishment charges- Refinancing of credit agreement—  —  4,731  — 
Preferred stock conversion inducement payment(2)—  —  —  19,565 
Tax adjustment(1)(16,678) (19,790) (33,549) (177,944)
Adjusted net income available to Colfax Corporation common shareholders63,038  89,731  200,098  269,927 
Dividends on preferred stock(2)—  —  —  2,348 
 $63,038  $89,731  $200,098  $272,275 
Weighted-average shares outstanding - diluted124,102,455  125,156,755  124,869,649  124,033,702 
 $0.51  $0.72  $1.60  $2.20 
        
Net income per share— diluted (in accordance with GAAP)$0.36  $0.64  $1.34  $3.02 

__________
(1) The effective tax rates used to calculate adjusted net income and adjusted net income per share are 25.1% and 27.5% for the fourth quarter and full year ended December 31, 2015, respectively, and 24.5% and 27.8% for the fourth quarter and full year ended December 31, 2014, respectively.

(2) Adjusted net income per share for the period prior to February 12, 2014 was calculated under the if-converted method in accordance with GAAP. On February 12, 2014, the Series A Perpetual Convertible Preferred Stock were converted to Common stock and the Company paid a $19.6 million conversion inducement to the holders of the Series A Perpetual Convertible Preferred Stock.


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

 Net Sales Orders  
 $ % $ %    
             
For the three months ended December 31, 2014$1,206.4    $570.1       
Components of Change:           
Existing Businesses(45.3) (3.8)% (107.0) (18.8)%    
Acquisitions(1)23.7  2.0% 32.3  5.7%    
Foreign Currency Translation(123.3) (10.2 )% (52.4) (9.2)%    
Total(144.9) (12.0)% (127.1) (22.3)%     
For the three months ended December 31, 2015$1,061.5    $443.0       
            
 Net Sales Orders Backlog at Period End
  $ % $ % $ %
            
As of and for the year ended December 31, 2014$4,624.5    $2,286.7    $1,402.3    
Components of Change:           
Existing Businesses(304.5) (6.6)% (287.1) (12.6)% (145.4) (10.4)%
Acquisitions(2)171.2  3.7% 57.9  2.5% 43.3  3.1%
Foreign Currency Translation(524.1) (11.3)% (221.1) (9.6)% (159.3) (11.3)%
Total(657.4) (14.2)% (450.3) (19.7)% (261.4) (18.6)%
As of and for the year ended December 31, 2015$3,967.1    $1,836.4    $1,140.9   

 (1)  Represents the incremental sales and orders as a result of our acquisitions of RootsTM blowers and compressors and Simsmart Technologies.

 (2)  Represents the incremental sales, orders and order backlog as a result of our acquisitions of RootsTM blowers and compressors and Simsmart Technologies, and incremental sales as a result of our acquisition of Victor Technologies Holdings Inc.


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

 December 31,
 2015 2014
ASSETS    
  CURRENT ASSETS:   
  Cash and cash equivalents$197,469  $305,448 
  Trade receivables, less allowance for doubtful accounts of $39,505 and $27,256888,166  1,029,150 
  Inventories, net420,386  442,732 
  Other current assets253,744  296,948 
  Total current assets1,759,765  2,074,278 
  Property, plant and equipment, net 644,536  727,435 
  Goodwill2,817,687  2,873,023 
  Intangible assets, net995,712   1,043,583 
  Other assets515,219  493,198 
Total assets$6,732,919  $7,211,517 
    
LIABILITIES AND EQUITY   
  CURRENT LIABILITIES:   
  Current portion of long-term debt$5,792  $9,855 
  Accounts payable718,893  780,287 
  Accrued liabilities391,659  489,983 
  Total current liabilities1,116,344  1,280,125 
  Long-term debt, less current portion1,411,755  1,526,955 
  Other liabilities948,264  1,051,993 
Total liabilities3,476,363  3,859,073 
 Equity:   
Common stock, $0.001 par value; 400,000,000 shares authorized; 123,486,425 and 123,730,578 issued and outstanding123  124 
  Additional paid-in capital3,199,267  3,200,832 
  Retained earnings557,300  389,561 
  Accumulated other comprehensive loss(686,715) (443,691)
Total Colfax Corporation equity3,069,975  3,146,826 
Noncontrolling interest186,581  205,618 
Total equity3,256,556  3,352,444 
Total liabilities and equity$6,732,919  $7,211,517 


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

 Year Ended December 31,
 2015 2014
    
Cash flows from operating activities:   
Net income$187,178  $420,273 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and impairment charges154,542  174,724 
Stock-based compensation expense16,321  17,580 
Non-cash interest expense10,101  9,094 
Deferred income tax (benefit) provision(22,717) (139,488)
Changes in operating assets and liabilities, net of acquisitions:   
Trade receivables, net64,048  (19,916)
Inventories, net(390) 57,847 
Accounts payable(11,184) (54,666)
Changes in other operating assets and liabilities(94,086) (79,690)
Net cash provided by operating activities303,813  385,758 
Cash flows from investing activities:   
Purchases of fixed assets(69,877) (84,458)
Acquisitions, net of cash received(196,007) (948,800)
Other, net18,927  3,115 
Net cash used in investing activities(246,957) (1,030,143)
Cash flows from financing activities:   
Borrowings under term credit facility750,000  150,000 
Payments under term credit facility(1,232,872) (15,542)
Proceeds from borrowings on revolving credit facilities and other1,498,039  1,370,626 
Repayments of borrowings on revolving credit facilities and other(1,104,055) (1,414,146)
Proceeds from issuance of common stock, net6,052  613,927 
Repurchases of common stock(27,367) — 
Acquisition of shares held by noncontrolling interest—  (10,338)
Preferred stock conversion inducement payment—  (19,565)
Payments of dividend on preferred stock—  (3,853)
Other(21,066) (21,060)
Net cash (used in) provided by financing activities(131,269 ) 650,049 
Effect of foreign exchange rates on Cash and cash equivalents(33,566) (11,517)
Decrease in Cash and cash equivalents(107,979) (5,853)
Cash and cash equivalents, beginning of period305,448  311,301 
Cash and cash equivalents, end of period$197,469  $305,448 
    
Supplemental Disclosure of Cash Flow Information:   
Interest payments$36,363  $42,041 
Income tax payments, net$79,540  $82,694 

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Source: Colfax Corporation

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