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): July 17, 2014
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)
(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))
Item 2.02. Results of Operations and Financial Condition.
On July 17, 2014, Colfax Corporation issued a press release reporting financial results for the second quarter ended June 27, 2014.
As reflected in the press release, for the three and six months ended June 27, 2014, reported Net income available to Colfax Corporation common shareholders was $191.8 million and $216.7 million, or $1.53 and $1.81 per dilutive share, respectively. This reflects a Benefit from income taxes for the second quarter and six months ended June 27, 2014 based on our current estimate, which is subject to change. Final data will be reflected in the Company's Form 10-Q for the quarterly period ended June 27, 2014.
Adjusted net income for the three and six months ended June 27, 2014, was $59.6 million and $111.2 million, or $0.48 and $0.91 per share, respectively. A description of the company’s use of adjusted net income, a non-GAAP financial measure, and a reconciliation of the measure to Net income attributable to Colfax Corporation is set forth in Colfax Corporation's press release, a copy of which 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 9:00 a.m. EDT on July 17, 2014 to discuss its financial results, and slides for that call are attached to this report as Exhibit 99.2 and are incorporated in this report by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 | Colfax Corporation press release dated July 17, 2014, reporting financial results for the second quarter ended June 27, 2014. |
99.2 | Colfax Corporation slides for July 17, 2014 conference call reporting financial results for the second quarter ended June 27, 2014. |
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.
Colfax Corporation Date: July 17, 2014 By: /s/ C. Scott Brannan
Name: C. Scott Brannan
Title: Senior Vice President, Finance,
Chief Financial Officer and Treasurer
EXHIBIT INDEX
99.1 | Colfax Corporation press release dated July 17, 2014, reporting financial results for the second quarter ended June 27, 2014. |
99.2 | Colfax Corporation slides for July 17, 2014 conference call reporting financial results for the second quarter ended June 27, 2014. |
COLFAX REPORTS SECOND QUARTER 2014 RESULTS
• | Second quarter adjusted net income per share of $0.48 |
• | Second quarter net sales increased 11.7% (a decrease of 5.0% organically) to $1.199 billion |
• | Gas- and fluid-handling finished the period with backlog of $1.585 billion |
ANNAPOLIS JUNCTION, MD - July 17, 2014 - Colfax Corporation (NYSE: CFX) today announced its financial results for the second quarter ended June 27, 2014. The Company has not yet finalized the second quarter tax provision.
For the second quarter of 2014, adjusted net income (as defined below) was $59.6 million, or $0.48 per share, which includes approximately $22 million of pretax non-cash expenses related to an impairment, a business disposition and a Venezuelan currency devaluation.
Net sales were $1.199 billion, in the second quarter, an increase of 11.7% from the prior year. Net sales decreased 5.0% organically compared to the second quarter of 2013. Second quarter operating income was $95.7 million, with adjusted operating income (as defined below) of $109.1 million, a decrease of 6%.
Second quarter gas- and fluid-handling orders were $593.8 million compared to orders of $478.2 million in Q2 2013, an increase of 24.2% and an organic increase of 4.6%. Gas- and fluid-handling finished the period with backlog of $1.585 billion.
For the six months ended June 27, 2014, adjusted net income (as defined below) was $111.2 million, or $0.91 per share. Net sales for the six months ended June 27, 2014 were $2.254 billion, an increase of 11.5% compared to net sales for the six months ended June 28, 2013. Operating income for the six months ended June 27, 2014 was $183.4 million, with adjusted operating income (as defined below) of $203.2 million, an increase of 4%.
The financial results discussed herein are presented on a preliminary basis; final data will be included in Colfax's Quarterly Report on Form 10-Q for the quarterly period ended June 27, 2014.
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.
Steve Simms, President and Chief Executive Officer, stated, “Second quarter performance fell short of expectations. Our fabrication technology sector continued to face weak end markets. Despite lower sales, the fabrication technology sector delivered solid margin performance. The newly acquired Victor Technologies operations performed in line with expectations. Gas handling operations performed well with strong margin contribution despite the anticipated lower revenue. Our fluid handling operations experienced sluggish demand and operational issues in the quarter, generating most of the shortfall. We are aggressively taking steps to address the weak end markets and operational issues and still expect solid profit improvement in the second half of 2014, but based on the second quarter performance, and demand outlook for the year, we have decreased our sales and earnings 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. Adjusted net income, adjusted net income per share and adjusted operating income exclude restructuring and other related charges and, for the 2013 periods presented, asbestos coverage litigation expense. Adjusted net income and adjusted net income per share for the six months ended June 27, 2014 exclude the preferred stock conversion inducement payment. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 30.7% and 29.0% for the three and six months ended June 27, 2014, respectively. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 28.2% and 29.0% for the second quarter and six months ended June 28, 2013, respectively. 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 asbestos insurance coverage issues, restructuring and other related charges, and 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, July 17, 2014 at 9:00 a.m. EDT. 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 73886940, 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 2013 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
Selected Consolidated Statement of Operations Data
Dollars in thousands, except per share data
(Preliminary, Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||||
June 27, 2014 | June 28, 2013 | June 27, 2014 | June 28, 2013 | ||||||||||||
Net sales | $ | 1,199,336 | $ | 1,074,118 | $ | 2,253,667 | $ | 2,021,261 | |||||||
Cost of sales | 811,165 | 736,296 | 1,539,864 | 1,392,714 | |||||||||||
Gross profit | 388,171 | 337,822 | 713,803 | 628,547 | |||||||||||
Selling, general and administrative expense | 279,029 | 221,693 | 510,611 | 435,877 | |||||||||||
Restructuring and other related charges | 13,474 | 4,477 | 19,786 | 8,691 | |||||||||||
Operating income | 95,668 | 111,652 | 183,406 | 183,979 | |||||||||||
Interest expense | 13,624 | 18,054 | 25,946 | 41,343 | |||||||||||
Income before income taxes | 82,044 | 93,598 | 157,460 | 142,636 | |||||||||||
(Benefit from) provision for income taxes(1) | (116,300 | ) | 26,398 | (95,721 | ) | 43,161 | |||||||||
Net income(1) | 198,344 | 67,200 | 253,181 | 99,475 | |||||||||||
Income attributable to noncontrolling interest, net of taxes | 6,559 | 8,808 | 14,606 | 13,448 | |||||||||||
Net income attributable to Colfax Corporation(1) | 191,785 | 58,392 | 238,575 | 86,027 | |||||||||||
Dividends on preferred stock | — | 5,086 | 2,348 | 10,168 | |||||||||||
Preferred stock conversion inducement payment | — | — | 19,565 | — | |||||||||||
Net income available to Colfax Corporation common shareholders(1) | $ | 191,785 | $ | 53,306 | $ | 216,662 | $ | 75,859 | |||||||
Net income per share- basic(1) | $ | 1.55 | $ | 0.53 | $ | 1.83 | $ | 0.75 | |||||||
Net income per share- diluted(1) | $ | 1.53 | $ | 0.52 | $ | 1.81 | $ | 0.74 | |||||||
(1) The (Benefit from) provision for income taxes for the second quarter and six months ended June 27, 2014 reflects our current estimate, which is subject to change. The final amount for the second quarter and six months ended June 27, 2014 will be reflected in the Company's Form 10-Q for the quarterly period ended June 27, 2014.
Colfax Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
Dollars in thousands, except per share data
(Preliminary, Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||||
June 27, 2014 | June 28, 2013 | June 27, 2014 | June 28, 2013 | ||||||||||||
Adjusted Operating Income | |||||||||||||||
Operating income | $ | 95,668 | $ | 111,652 | $ | 183,406 | $ | 183,979 | |||||||
Restructuring and other related charges | 13,474 | 4,477 | 19,786 | 8,691 | |||||||||||
Asbestos coverage litigation expense | — | 468 | — | 2,174 | |||||||||||
Adjusted operating income | $ | 109,142 | $ | 116,597 | $ | 203,192 | $ | 194,844 | |||||||
Adjusted operating income margin | 9.1 | % | 10.9 | % | 9.0 | % | 9.6 | % | |||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 27, 2014 | June 28, 2013 | June 27, 2014 | June 28, 2013 | ||||||||||||
Adjusted Net Income | |||||||||||||||
Net income attributable to Colfax Corporation(1) | $ | 191,785 | $ | 58,392 | $ | 238,575 | $ | 86,027 | |||||||
Restructuring and other related charges | 13,474 | 4,477 | 19,786 | 8,691 | |||||||||||
Asbestos coverage litigation expense | — | 468 | — | 2,174 | |||||||||||
Tax adjustment(2) | (145,634 | ) | (1,354 | ) | (147,122 | ) | (1,354 | ) | |||||||
Adjusted net income | $ | 59,625 | $ | 61,983 | $ | 111,239 | $ | 95,538 | |||||||
Adjusted net income margin | 5.0 | % | 5.8 | % | 4.9 | % | 4.7 | % | |||||||
Adjusted Net Income Per Share | |||||||||||||||
Net income available to Colfax Corporation common shareholders | $ | 191,785 | $ | 53,306 | $ | 216,662 | $ | 75,859 | |||||||
Restructuring and other related charges | 13,474 | 4,477 | 19,786 | 8,691 | |||||||||||
Asbestos coverage litigation expense | — | 468 | — | 2,174 | |||||||||||
Preferred stock conversion inducement payment | — | — | 19,565 | — | |||||||||||
Tax adjustment(2) | (145,634 | ) | (1,354 | ) | (147,122 | ) | (1,354 | ) | |||||||
Adjusted net income available to Colfax Corporation common shareholders | 59,625 | 56,897 | 108,891 | 85,370 | |||||||||||
Dividends on preferred stock | — | — | 2,348 | — | |||||||||||
Less: adjusted net income attributable to participating securities(3) | — | 916 | — | 4,571 | |||||||||||
$ | 59,625 | $ | 55,981 | $ | 111,239 | $ | 80,799 | ||||||||
Weighted-average shares outstanding - diluted | 125,485,480 | 111,522,958 | 122,721,700 | 97,285,037 | |||||||||||
Adjusted net income per share | $ | 0.48 | $ | 0.56 | $ | 0.91 | $ | 0.83 | |||||||
Net income per share — diluted (in accordance with GAAP) | $ | 1.53 | $ | 0.52 | $ | 1.81 | $ | 0.74 | |||||||
_________
(1) The (Benefit from) provision for income taxes for the second quarter and six months ended June 27, 2014 reflects our current estimate, which is subject to change. The final amount for the second quarter and six months ended June 27, 2014 will be reflected in the Company's Form 10-Q for the quarterly period ended June 27, 2014.
(2) The effective tax rates used to calculate adjusted net income and adjusted net income per share are 30.7% and 29.0% for the second quarter and six months ended June 27, 2014, respectively, and 28.2% and 29.0% for the second quarter and six months ended June 28, 2013, respectively.
(3) 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 Perpetual Convertible Preferred Stock were considered participating securities. Subsequent to April 23, 2013 and prior to February 12, 2014, adjusted net income per share was calculated consistently with the if-converted method in accordance with GAAP until the Series A Perpetual Convertible Preferred Stock were no longer participating securities. Adjusted net income per share for the six months ended June 28, 2013 excludes the impact of 12,173,291 common stock equivalent shares as their inclusion would be anti-dilutive. 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 June 28, 2013 | $ | 1,074.1 | $ | 478.2 | ||||||||||||||||
Components of Change: | ||||||||||||||||||||
Existing Businesses | (53.5 | ) | (5.0 | )% | 22.2 | 4.6 | % | |||||||||||||
Acquisitions(1) | 192.3 | 17.9 | % | 89.5 | 18.7 | % | ||||||||||||||
Foreign Currency Translation | (13.6 | ) | (1.2 | )% | 3.9 | 0.9 | % | |||||||||||||
Total | 125.2 | 11.7 | % | 115.6 | 24.2 | % | ||||||||||||||
For the three months ended June 27, 2014 | $ | 1,199.3 | $ | 593.8 | ||||||||||||||||
Net Sales | Orders | Backlog at Period End | ||||||||||||||||||
$ | % | $ | % | $ | % | |||||||||||||||
As of and for the six months ended June 28, 2013 | $ | 2,021.3 | $ | 980.3 | $ | 1,388.4 | ||||||||||||||
Components of Change: | ||||||||||||||||||||
Existing Businesses | — | — | % | 33.3 | 3.4 | % | (39.9 | ) | (2.9 | )% | ||||||||||
Acquisitions(1) | 277.4 | 13.7 | % | 161.6 | 16.5 | % | 232.9 | 16.8 | % | |||||||||||
Foreign Currency Translation | (45.0 | ) | (2.2 | )% | 2.0 | 0.2 | % | 3.4 | 0.2 | % | ||||||||||
Total | 232.4 | 11.5 | % | 196.9 | 20.1 | % | 196.4 | 14.1 | % | |||||||||||
As of and for the six months ended June 27, 2014 | $ | 2,253.7 | $ | 1,177.2 | $ | 1,584.8 | ||||||||||||||
(1) Represents the incremental sales, orders and order backlog as a result of our acquisitions of Clarus Fluid Intelligence, LLC, CKD Kompressory a.s., the global industrial and industry division of Flakt Woods Group, TLT-Babcock Inc., Alphair Ventilating Systems Inc., and Sistemas Centrales de Lubrication S.A. de C.V. ("Sicelub"), and incremental sales as a result of our acquisition of Victor Technologies Holdings, Inc.
SECOND QUARTER 2014 | EARNINGS CONFERENCE CALL
2 FORWARD-LOOKING STATEMENTS The following information contains forward-looking statements, including forward-looking statements within the meaning of the 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 including its 2013 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 presentation speaks only as of this date. Colfax disclaims any duty to update the information herein.
Q2 2014 RESULTS
4 Q2 2014 HIGHLIGHTS • Adjusted net income of $59.6 million ($0.48 per share) compared to $62.0 million ($0.56 per share) in Q2 2013 – Q2 2014 includes approximately $22 million of pretax non-cash expenses related to an impairment, a business disposition and a Venezuelan currency devaluation • Net sales of $1.20 billion, an increase of 11.7% from Q2 2013 net sales of $1.07 billion (an organic decrease of 5.0%) • Adjusted operating income of $109.1 million compared to $116.6 million in Q2 2013 • Second quarter gas- and fluid-handling orders of $593.8 million compared to orders of $478.2 million in Q2 2013, an increase of 24.2% (an organic increase of 4.6%) • Gas- and fluid-handling backlog of $1.6 billion at period end
5 YEAR TO DATE 2014 HIGHLIGHTS • Adjusted net income of $111.2 million ($0.91 per share) compared to $95.5 million ($0.83 per share) in the six months ended June 28, 2013 • Net sales of $2.25 billion, an increase of 11.5% from the six months ended June 28, 2013 net sales of $2.02 billion (flat organically) • Adjusted operating income of $203.2 million compared to $194.8 million in the six months ended June 28, 2013 • Gas- and fluid-handling orders of $1.18 billion compared to orders of $980.3 million in the six months ended June 28, 2013, an increase of 20.1% (an organic increase of 3.4%)
GAS AND FLUID HANDLING
7 GAS AND FLUID HANDLING Q2 2014 HIGHLIGHTS • Net sales of $568.9 million compared to net sales of $516.8 million in Q2 2013, an increase of 10.1% (an organic decrease of 7.0%) • Adjusted segment operating income of $45.7 million and adjusted segment operating income margin of 8.0% • Second quarter orders of $593.8 million compared to orders of $478.2 million in Q2 2013, an increase of 24.2% (an organic increase of 4.6%) • Backlog of $1.6 billion at period end
8 GAS AND FLUID HANDLING YTD 2014 HIGHLIGHTS • Net sales of $1.14 billion compared to net sales of $941.9 million in the six months ended June 28, 2013, an increase of 21.3% (an organic increase of 3.2%) • Adjusted segment operating income of $101.7 million and adjusted segment operating income margin of 8.9% • Orders of $1.18 billion compared to orders of $980.3 million in the six months ended June 28, 2013, an increase of 20.1% (an organic increase of 3.4%)
9 ORDERS AND BACKLOG $478.2 $593.8 $980.3 $1,177.2 $0.0 $150.0 $300.0 $450.0 $600.0 $750.0 $900.0 $1,050.0 $1,200.0 Q2 2013 Q2 2014 YTD 2013 YTD 2014 - 200.0 400.0 600.0 800.0 1,000.0 1,200.0 1,400.0 1,600.0 1,800.0 ORDERS BACKLOG(1) (1) Backlog data for the periods prior to Q1 2012 are presented on a proforma basis. Note: Dollars in millions (unaudited). $1.39B QTD YTD Existing Businesses 4.6% 3.4% Acquisitions 18.7% 16.5% FX Translation 0.9% 0.2% Total Growth 24.2% 20.1% $1.59B $1.58B
10 GEOGRAPHIC EXPOSURE YTD 2014 REVENUE $516.8 $568.9 $941.9 $1,142.9 $0.0 $150.0 $300.0 $450.0 $600.0 $750.0 $900.0 $1,050.0 $1,200.0 Q2 2013 Q2 2014 YTD 2013 YTD 2014 66% 34% Foremarket Aftermarket REVENUE AFTERMARKET REVENUE YTD 2014 57% 43% Developed Economies Emerging Markets Note: Dollars in millions (unaudited). QTD YTD Existing Businesses (7.0)% 3.2% Acquisitions 16.3% 18.0% FX Translation 0.8% 0.1% Total Growth 10.1% 21.3%
11 Q2 2014 SALES AND ORDERS BY END MARKET Power Generation 32% Oil, Gas & Petro-chemical 20% Marine 11% Mining 6% General Industrial and Other 31% SALES: $568.9 Million Total (Decline) Growth Organic (Decline) Growth Power Generation (10.8)% (14.9)% Oil, Gas & Petrochemical 0.6% (16.8)% Marine 6.5% 2.1% Mining 34.0% 11.9% General Industrial & Other 52.6% 8.1% Total 10.1% (7.0)% Power Generation 30% Oil, Gas & Petro-chemical 18% Marine 18% Mining 6% General Industrial and Other 28% ORDERS: $593.8 Million Total (Decline) Growth Organic (Decline) Growth Power Generation (1.5)% (10.6)% Oil, Gas & Petrochemical (4.9)% (26.4)% Marine 95.0% 85.4% Mining 21.6% 3.7% General Industrial & Other 61.4% 20.9% Total 24.2% 4.6%
12 YTD 2014 SALES AND ORDERS BY END MARKET Power Generation 36% Oil, Gas & Petro-chemical 20% Marine 10% Mining 5% General Industrial and Other 29% SALES: $1.14 Billion Total Growth Organic Growth (Decline) Power Generation 14.4% 5.9% Oil, Gas & Petrochemical 11.8% (5.0)% Marine 5.8% 2.7% Mining 5.5% (16.6)% General Industrial & Other 54.2% 11.8% Total 21.3% 3.2% Power Generation 35% Oil, Gas & Petro-chemical 17% Marine 14% Mining 6% General Industrial and Other 28% ORDERS: $1.18 Billion Total Growth (Decline) Organic Growth (Decline) Power Generation 7.8% 0.3% Oil, Gas & Petrochemical (16.5)% (34.9)% Marine 50.7% 45.1% Mining 43.5% 24.2% General Industrial & Other 64.6% 26.6% Total 20.1% 3.4%
13 POWER GENERATION MARKET PERSPECTIVE SALES & ORDERS (DECLINE) GROWTH 35% • Served by both Howden and Colfax Fluid Handling • Lower sales due to new-build project timing in China and slow aftermarket sales in the U.S. • Fluid Handling orders impacted by downturn in demand for combined cycle power stations • Howden saw declines in China SCR orders, partially offset by increases in new-build components, particularly air heaters YTD 2014 SALES SPLIT YTD 2014 ORDERS SPLIT 36% HIGHLIGHTS Q2 2014 vs. Q2 2013 YTD 2014 vs. YTD 2013 Total Organic Total Organic Sales (10.8)% (14.9)% 14.4% 5.9% Orders (1.5)% (10.6)% 7.8% 0.3%
14 OIL, GAS & PETROCHEMICAL MARKET PERSPECTIVE SALES & ORDERS GROWTH (DECLINE) 17% • Served by both Howden and Colfax Fluid Handling • Period over period comparisons are difficult due to the timing of large projects • Continue to see deferrals of major projects across core geographies, particularly Asia and Latin America • Revenue declines due to softening order book; saw strong orders for new dry-seal compressor and in CKD acquisition YTD 2014 SALES SPLIT YTD 2014 ORDERS SPLIT 20% HIGHLIGHTS Q2 2014 vs. Q2 2013 YTD 2014 vs. YTD 2013 Total Organic Total Organic Sales 0.6% (16.8)% 11.8% (5.0)% Orders (4.9)% (26.4)% (16.5)% (34.9)%
15 MARINE MARKET PERSPECTIVE SALES & ORDERS GROWTH 14% • Primarily served by Colfax Fluid Handling • Continued strength in offshore supply vessel (OSV), with continued pricing pressure in commercial marine • Excellent quarter for bookings, led by defense, strong OSV and continued success of CM-1000 product • Received $30M order for defense and nine additional CM- 1000 retrofit orders in the quarter YTD 2014 SALES SPLIT YTD 2014 ORDERS SPLIT 10% HIGHLIGHTS Note: Marine market comprised of commercial marine and government, or defense, customers Q2 2014 vs. Q2 2013 YTD 2014 vs. YTD 2013 Total Organic Total Organic Sales 6.5% 2.1% 5.8% 2.7% Orders 95.0% 85.4% 50.7% 45.1%
16 MINING MARKET PERSPECTIVE SALES & ORDERS GROWTH (DECLINE) 6% • Primarily served by Howden • Remains a depressed market; faced subdued spending for the past year and a half • Some bright spots; received a large Australian order for a tin and zinc mine and some additional copper projects in Chile • Order declines partially offset by our 2013 Alphair acquisition YTD 2014 SALES SPLIT YTD 2014 ORDERS SPLIT 5% HIGHLIGHTS Q2 2014 vs. Q2 2013 YTD 2014 vs. YTD 2013 Total Organic Total Organic Sales 34.0% 11.9% 5.5% (16.6)% Orders 21.6% 3.7% 43.5% 24.2%
17 GENERAL INDUSTRIAL & OTHER MARKET PERSPECTIVE SALES & ORDERS GROWTH 28% • Includes both Howden and Colfax Fluid Handling • Volatile quarter to quarter due to large orders • Howden had significant activity in steel and cement; steel plant desulfurization being the most active • Fluid Handling benefited from strength in diesel engines and non-residential construction, primarily low-rise elevator pumps YTD 2014 SALES SPLIT YTD 2014 ORDERS SPLIT 29% HIGHLIGHTS Q2 2014 vs. Q2 2013 YTD 2014 vs. YTD 2013 Total Organic Total Organic Sales 52.6% 8.1% 54.2% 11.8% Orders 61.4% 20.9% 64.6% 26.6%
FABRICATION TECHNOLOGY
19 FABRICATION TECHNOLOGY Q2 2014 HIGHLIGHTS • Net sales of $630.4 million compared to net sales of $557.3 million in Q2 2013, an increase of 13.1% (an organic decline of 3.1%) • Adjusted segment operating income of $77.1 million and adjusted segment operating income margin of 12.2% – Sequential margin improvement of 100 basis points – Improvement over Q2 2013 of 150 basis points
20 FABRICATION TECHNOLOGY YTD 2014 HIGHLIGHTS • Net sales of $1.11 billion compared to net sales of $1.08 billion in the six months ended June 28, 2013, an increase of 2.9% (an organic decline of 2.8%) • Adjusted segment operating income of $131.0 million and adjusted segment operating income margin of 11.8% – Improvement over the six months ended June 28, 2013 of 220 basis points
21 GEOGRAPHIC EXPOSURE YTD 2014 REVENUE $557.3 $630.4 $1,079.4 $1,110.8 $0.0 $150.0 $300.0 $450.0 $600.0 $750.0 $900.0 $1,050.0 $1,200.0 Q2 2013 Q2 2014 YTD 2013 YTD 2014 74% 26% Consumables Equipment REVENUE REVENUE YTD 2014 46% 54% Developed Economies Emerging Markets Note: Dollars in millions (unaudited). QTD YTD Volume (5.0)% (4.0)% Price/ Mix 1.9 % 1.2 % Acquisitions 19.4% 10.0% FX Translation (3.2)% (4.3)% Total Growth 13.1 % 2.9 %
RESULTS OF OPERATIONS
23 INCOME STATEMENT SUMMARY (unaudited) Refer to Appendix for Non-GAAP reconciliation and footnotes. Note: Dollars in millions, except per share amounts. June 27, 2014 June 28, 2013 June 27, 2014 June 28, 2013 Net sales 1,199.3$ 1,074.1$ 2,253.7$ 2,021.3$ Gross profit 388.2$ 337.8$ 713.8$ 628.5$ % of sales 32.4 % 31.4 % 31.7 % 31.1 % SG&A expense 279.0$ 221.7$ 510.6$ 435.9$ % of sales 23.3 % 20.6 % 22.7 % 21.6 % Adjusted operating income 109.1$ 116.6$ 203.2$ 194.8$ % of sales 9.1 % 10.9 % 9.0 % 9.6 % Adjusted net income 59.6$ 62.0$ 111.2$ 95.5$ % of sales 5.0 % 5.8 % 4.9 % 4.7 % Adjusted net income per share 0.48$ 0.56$ 0.91$ 0.83$ Three Months Ended Six Months Ended
APPENDIX
25 DISCLAIMER Colfax has provided financial information that has not been prepared in accordance with GAAP. These non-GAAP financial measures are projected adjusted net income, projected adjusted net income per share, adjusted net income, adjusted net income per share, adjusted operating income, organic sales growth (decline) and organic order growth (decline). Projected adjusted net income, projected adjusted net income per share, adjusted net income, adjusted net income per share and adjusted operating income exclude restructuring and other related charges and, for the 2013 periods presented, asbestos coverage litigation expense. Projected adjusted net income, projected adjusted net income per share, adjusted net income and adjusted net income per share for the six months ended June 27, 2014, exclude the preferred stock conversion inducement payment. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 30.7% and 29.0% for the second quarter and six months ended June 27, 2014, respectively, and 28.2% and 29.0% for the second quarter and six months ended June 28, 2013. Organic sales growth (decline) and organic order growth (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, restructuring and other related charges and preferred stock conversion inducement payment. Sales and order information by end market are estimates. We periodically update our customer groupings order to refine these estimates.
26 NON-GAAP RECONCILIATION (unaudited) _____________________ Note: Dollars in thousands. Corporate and Other Corporate and Other Net sales —$ Victor net sales Operating income (loss) 39,052 6.9 % 70,252 11.1 % (13,636) 95,668 8.0 % 69,247 13.4 % 55,143 9.9 % (12,738) 111,652 10.4 % Restructuring and other related charges 6,638 6,836 - 13,474 193 4,284 - 4,477 Asbestos coverage litigation expense - - - - 468 - - 468 Adjusted operating income (loss) 45,690$ 8.0 % 77,088$ 12.2 % (13,636)$ 109,142$ 9.1 % 69,908$ 13.5 % 59,427$ 10.7 % (12,738)$ 116,597$ 10.9 % Less: Victor adjusted operating income 11,336 Adjusted operating income excluding Victor 65,752$ 12.6 % 557,355$ 1,074,118$ 108,070 522,326$ 568,940$ 630,396$ —$ 1,199,336$ 516,763$ Q2 2014 Q2 2013 Gas and Fluid Handling Fabrication Technology Total Colfax Corporation Gas and Fluid Handling Fabrication Technology Total Colfax Corporation Corporate and Other Corporate and Other Net sales —$ —$ Operating income (loss) 92,150 8.1 % 120,703 10.9 % (29,447) 183,406 8.1 % 110,462 11.7 % 96,670 9.0 % (23,153) 183,979 9.1 % Restructuring and other related charges 9,538 10,248 - 19,786 1,466 7,225 - 8,691 Asbestos coverage litigation expense - - - - 2,174 - - 2,174 Adjusted operating income (loss) 101,688$ 8.9 % 130,951$ 11.8 % (29,447)$ 203,192$ 9.0 % 114,102$ 12.1 % 103,895$ 9.6 % (23,153)$ 194,844$ 9.6 % 2,021,261$ 1,142,889$ 1,110,778$ 2,253,667$ 941,868$ 1,079,393$ Gas and Fluid Handling Fabrication Technology Total Colfax Corporation Gas and Fluid Handling Fabrication Technology Total Colfax Corporation Six Months Ended June 27, 2014 Six Months Ended June 28, 2013
27 NON-GAAP RECONCILIATION (preliminary, unaudited) (1) The (Benefit from) provision for income taxes for the second quarter and six months ended June 27, 2014 reflects our current estimate, which is subject to change. The final amount for the second quarter and six months ended June 27, 2014 will be reflected in the Company's Form 10-Q for the quarterly period ended June 27, 2014. (2) The effective tax rates used to calculate adjusted net income and adjusted net income per share are 30.7% and 29.0% for the second quarter and six months ended June 27, 2014, respectively, and 28.2% and 29.0% for the second quarter and six months ended June 28, 2013, respectively. (3) Adjusted net income per share for periods prior to April 23, 2013 were 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 six months ended June 28, 2013 excludes the impact of 12,173,291 common stock equivalent shares as their inclusion would be anti-dilutive. On February 12, 2014, the Series A Perpetual Convertible Preferred Stock were converted to common stock and the Company paid an $19.6 million conversion inducement to the holders of the Series A Perpetual Convertible Preferred Stock. _____________________ Note: Dollars in thousands, except per share amounts. June 27, 2014 June 28, 2013 June 27, 2014 June 28, 2013 Adjusted Net Income Net income attributable to Colfax Corporation (1) 191,785$ 58,392$ 238,575$ 86,027$ Restructuring and other related charges 13,474 4,477 19,786 8,691 Asbestos coverage litigation expense - 468 - 2,174 Tax adjustment(2) (145,634) (1,354) (147,122) (1,354) Adjusted net income 59,625$ 61,983$ 111,239$ 95,538$ Adjusted net income margin 5.0 % 5.8 % 4.9 % 4.7 % Adjusted Net Income Per Share Net income available to Colfax Corporation common shareholders 191,785$ 53,306$ 216,662$ 75,859$ Restructuring and other related charges 13,474 4,477 19,786 8,691 Asbestos coverage litigation expense - 468 - 2,174 Preferred stock conversion inducement payment - - 19,565 - Tax adjustment(2) (145,634) (1,354) (147,122) (1,354) Adjusted net income available to Colfax Corporation common shareholders 59,625 56,897 108,891 85,370 Dividends on preferred stock - - 2,348 - Less: adjusted net income attributable to participating securities (3) - 916 - 4,571 59,625$ 55,981$ 111,239$ 80,799$ Weighted-average shares outstanding - diluted 125,485,480$ 111,522,958$ 122,721,700$ 97,285,037$ Adjusted net income per share 0.48$ 0.56$ 0.91$ 0.83$ Net income per share — diluted (in accordance with GAAP) 1.53$ 0.52$ 1.81$ 0.74$ Three Months Ended Six Months Ended
28 SALES & ORDERS GROWTH (unaudited) _____________________ Note: Dollars in millions. (1) Represents the incremental sales, orders and order backlog as a result of our acquisitions of Clarus Fluid Intelligence, LLC, CKD Kompressory a.s., the global industrial and industry division of Flakt Woods Group, TLT-Babcock Inc., Alphair Ventilating Systems Inc., and Sistemas Centrales de Lubrication S.A. de C.V. ("Sicelub"), and incremental sales as a result of our acquisition of Victor Technologies Holdings, Inc. $ % $ % For the three months ended June 28, 2013 1,074.1$ 478.2$ Components of Change: Existing Businesses (53.5) (5.0)% 22.2 4.6 % Acquisitions (1) 192.3 17.9 % 89.5 18.7 % Foreign Currency Translation (13.6) (1.2)% 3.9 0.9 % Total 125.2 11.7 % 115.6 24.2 % For the three months ended June 27, 2014 1,199.3$ 593.8$ $ % $ % $ % As of and for the six months ended June 28, 2013 2,021.3$ 980.3$ 1,388.4$ Components of Change: Existing Businesses — —% 33.3 3.4 % (39.9) (2.9)% Acquisitions (1) 277.4 13.7 % 161.6 16.5 % 232.9 16.8 % Foreign Currency Translation (45.0) (2.2)% 2.0 0.2 % 3.4 0.2 % Total 232.4 11.5 % 196.9 20.1 % 196.4 14.1 % As of and for the six months ended June 27, 2014 2,253.7$ 1,177.2$ 1,584.8$ Net Sales Orders Backlog at Period End Net Sales Orders
29 2014 OUTLOOK SUMMARY (July Update) _____________________ Note: Guidance as of July 17, 2014. Revenue Range 2014 Total $4.70 billion To $4.80 billion EPS and Adjusted Net Income Range 2014 Net income per share (1) $2.31 To $2.57 Adjusted net income $273 million To $291 million 2014 Adjusted net income per share (2) $2.20 To $2.35 Assumptions Restructuring costs $60 million Euro $1.35 Tax rate - adjusted basis/GAAP 29-30% Outstanding shares (if converted) – full year/Q2-Q4 124 million/125 million Depreciation $89 million Amortization $77 million Interest expense (based on LIBOR and EURIBOR = 25 bps) $56 million (1) A substantial gain on tax valuation allowances will increase GAAP earnings. Amount has not yet been finalized. (2) Excludes impact of restructuring charges, preferred stock conversion and gain on reversal of tax valuation allowances, which has not yet been quantified. (See Non-GAAP Reconciliation included in this slide deck)
30 2014 OUTLOOK SUMMARY (July Update) _____________________ Note: Guidance as of July 17, 2014. (1) Includes $10 million of transaction costs and year-one fair value adjustments. In thousands, except per share data LOW HIGH Revenue 4,700,000$ 4,800,000$ Adjusted Operating Profit (1) 485,000 510,000 Interest (56,000) (56,000) Taxes (126,000) (133,000) Noncontrolling interest (30,000) (30,000) Adjusted Net Income- Colfax 273,000 291,000 Adjusted EPS 2.20$ 2.35$ 2014
31 NON-GAAP RECONCILIATION (July Update) _____________________ Note: Guidance as of July 17, 2014. (1) Reflects the impact of the preferred stock conversion for GAAP EPS due to the anti-dilution of the if-converted method. (2) A substantial gain on tax valuation allowances will increase GAAP earnings. Amount has not yet been finalized. LOW HIGH Projected net income per share - diluted 2.31$ 2.57$ Restructuring costs 0.49 0.49 Preferred stock conversion(1) 0.18 0.18 Tax adjustment(2) (0.78) (0.89) - Projected adjusted net income per share - diluted 2.20$ 2.35$