UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 14, 2015
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 October 14, 2015, Colfax Corporation issued a press release reporting financial results for the third quarter ended September 25, 2015. A copy of Colfax Corporation's press release is attached to this report as Exhibit 99.1 and is incorporated in this report by reference. Colfax Corporation has scheduled a conference call for 8:00 a.m. EDT on October 14, 2015 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 October 14, 2015, reporting financial results for the third quarter ended September 25, 2015. |
99.2 | Colfax Corporation slides for October 14, 2015 conference call reporting financial results for the third quarter ended September 25, 2015. |
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: October 14, 2015 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 October 14, 2015, reporting financial results for the third quarter ended September 25, 2015. |
99.2 | Colfax Corporation slides for October 14, 2015 conference call reporting financial results for the third quarter ended September 25, 2015. |
COLFAX REPORTS THIRD QUARTER 2015 RESULTS
• | Third quarter net income per dilutive share of $0.15, adjusted net income per share of $0.24. |
• | $50.0 million of additional cost reduction actions announced. |
• | Board of Directors authorized a stock repurchase of up to $100 million. |
ANNAPOLIS JUNCTION, MD - October 14, 2015 - 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 third quarter ended September 25, 2015.
For the third quarter of 2015, net income was $18.4 million, or $0.15 per dilutive share. Adjusted net income (as defined below) was $29.5 million, or $0.24 per share, compared to $71.3 million for the third quarter of 2014, or $0.57 per share.
Net sales were $969.1 million in the third quarter, a decrease of 16.8% from the prior year. Net sales decreased 6.5% organically compared to the third quarter of 2014. Third quarter operating income was $45.6 million, with adjusted operating income (as defined below) of $58.6 million. Operating expenses included $20.0 million of charges for uncollectible accounts, impairments, and other adjustments. Adjusted operating income margin (as defined below) was 6.0% in the third quarter.
Third quarter gas- and fluid-handling orders decreased by 17.6% to $444.2 million compared to orders of $539.4 million for the third quarter of 2014, an organic order decrease of 12.5%. Gas- and fluid-handling finished the period with backlog of $1,313.8 million.
For the nine months ended September 25, 2015 net income was $123.5 million, or $0.99 per dilutive share. Adjusted net income (as defined below) was $137.1 million, or $1.10 per share. Net sales for the nine months ended September 25, 2015 were $2.906 billion, a decrease of 15.0% compared to net sales for the nine months ended September 26, 2014. Operating income for the nine months ended September 25, 2015 was $219.6 million, with adjusted operating income (as defined below) of $245.2 million. Adjusted operating income margin (as defined below) for the nine months ended September 25, 2015 was 8.4%.
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, “Third quarter performance fell short of expectations. Our Fabrication Technology segment continued to face weak end markets, and the declining volume and volatile market and currency movements in Latin America depressed margins. We are aggressively accelerating cost reduction programs in response to this cyclical downturn. By the end of 2016, we now expect to eliminate in excess of $100 million from our cost structure and reduce the workforce by approximately 1,500 compared to where we started 2015. In addition, the Board authorized a stock repurchase of up to $100 million, which speaks to our confidence in the outlook for long-term profitability. These actions should enable us to improve performance in the challenging market environment ahead while still investing in attractive growth opportunities.”
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 nine months ended September 25, 2015, and the preferred stock conversion inducement payment for the nine months ended September 26, 2014. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 27.5% and 28.5% for the three and nine months ended September 25, 2015, respectively. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 29.8% and 29.3% for the three and nine months ended September 26, 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 Wednesday, October 14, 2015 at 8:00 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 57937552, 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
Condensed Consolidated Statements of Income
Dollars in thousands, except per share data
(Unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 25, 2015 | September 26, 2014 | September 25, 2015 | September 26, 2014 | ||||||||||||
Net sales | $ | 969,144 | $ | 1,164,453 | $ | 2,905,589 | $ | 3,418,120 | |||||||
Cost of sales | 673,270 | 791,258 | 1,987,240 | 2,331,122 | |||||||||||
Gross profit | 295,874 | 373,195 | 918,349 | 1,086,998 | |||||||||||
Selling, general and administrative expense | 237,248 | 245,441 | 673,109 | 756,052 | |||||||||||
Restructuring and other related charges | 13,071 | 8,948 | 25,658 | 28,734 | |||||||||||
Operating income | 45,555 | 118,806 | 219,582 | 302,212 | |||||||||||
Interest expense (1) | 10,857 | 14,935 | 37,150 | 40,881 | |||||||||||
Income before income taxes | 34,698 | 103,871 | 182,432 | 261,331 | |||||||||||
Provision for (benefit from) income taxes | 11,153 | 22,568 | 43,783 | (73,153 | ) | ||||||||||
Net income | 23,545 | 81,303 | 138,649 | 334,484 | |||||||||||
Less: income attributable to noncontrolling interest, net of taxes | 5,186 | 7,914 | 15,107 | 22,520 | |||||||||||
Net income attributable to Colfax Corporation | 18,359 | 73,389 | 123,542 | 311,964 | |||||||||||
Dividends on preferred stock | — | — | — | 2,348 | |||||||||||
Preferred stock conversion inducement payment | — | — | — | 19,565 | |||||||||||
Net income available to Colfax Corporation common shareholders | $ | 18,359 | $ | 73,389 | $ | 123,542 | $ | 290,051 | |||||||
Net income per share - basic | $ | 0.15 | $ | 0.59 | $ | 0.99 | $ | 2.41 | |||||||
Net income per share - diluted | $ | 0.15 | $ | 0.59 | $ | 0.99 | $ | 2.38 | |||||||
__________
(1) Includes noncash charges associated with the write-off of original issue discount and deferred costs in connection with the refinancing of our primary credit facility of $4.7 million for the nine months ended September 25, 2015.
Colfax Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
In thousands, except per share data
(Unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 25, 2015 | September 26, 2014 | September 25, 2015 | September 26, 2014 | ||||||||||||
Adjusted Operating Income | |||||||||||||||
Operating income | $ | 45,555 | $ | 118,806 | $ | 219,582 | $ | 302,212 | |||||||
Restructuring and other related charges | 13,071 | 8,948 | 25,658 | 28,734 | |||||||||||
Adjusted operating income | $ | 58,626 | $ | 127,754 | $ | 245,240 | $ | 330,946 | |||||||
Adjusted operating income margin | 6.0 | % | 11.0 | % | 8.4 | % | 9.7 | % | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 25, 2015 | September 26, 2014 | September 25, 2015 | September 26, 2014 | ||||||||||||
Adjusted Net Income | |||||||||||||||
Net income attributable to Colfax Corporation | $ | 18,359 | $ | 73,389 | $ | 123,542 | $ | 311,964 | |||||||
Restructuring and other related charges | 13,071 | 8,948 | 25,658 | 28,734 | |||||||||||
Debt extinguishment charges - Refinancing of credit agreement | — | — | 4,731 | — | |||||||||||
Tax adjustment(1) | (1,966 | ) | (11,032 | ) | (16,871 | ) | (158,154 | ) | |||||||
Adjusted net income | $ | 29,464 | $ | 71,305 | $ | 137,060 | $ | 182,544 | |||||||
Adjusted net income margin | 3.0 | % | 6.1 | % | 4.7 | % | 5.3 | % | |||||||
Adjusted Net Income Per Share | |||||||||||||||
Net income available to Colfax Corporation common shareholders | $ | 18,359 | $ | 73,389 | $ | 123,542 | $ | 290,051 | |||||||
Restructuring and other related charges | 13,071 | 8,948 | 25,658 | 28,734 | |||||||||||
Debt extinguishment charges - Refinancing of credit agreement | — | — | 4,731 | — | |||||||||||
Preferred stock conversion inducement payment(2) | — | — | — | 19,565 | |||||||||||
Tax adjustment(1) | (1,966 | ) | (11,032 | ) | (16,871 | ) | (158,154 | ) | |||||||
Adjusted net income available to Colfax Corporation common shareholders | 29,464 | 71,305 | 137,060 | 180,196 | |||||||||||
Dividends on preferred stock(2) | — | — | — | 2,348 | |||||||||||
$ | 29,464 | $ | 71,305 | $ | 137,060 | $ | 182,544 | ||||||||
Weighted-average shares outstanding - diluted | 125,032,267 | 125,380,566 | 125,133,606 | 123,624,735 | |||||||||||
Adjusted net income per share | $ | 0.24 | $ | 0.57 | $ | 1.10 | $ | 1.48 | |||||||
Net income per share — diluted (in accordance with GAAP) | $ | 0.15 | $ | 0.59 | $ | 0.99 | $ | 2.38 | |||||||
__________
(1) The effective tax rates used to calculate adjusted net income and adjusted net income per share are 27.5% and 28.5% for the three and nine months ended September 25, 2015, respectively, and 29.8% and 29.3% for the three and nine months ended September 26, 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 September 26, 2014 | $ | 1,164.5 | $ | 539.4 | ||||||||||||||||
Components of Change: | ||||||||||||||||||||
Existing Businesses | (76.0 | ) | (6.5 | )% | (67.3 | ) | (12.5 | )% | ||||||||||||
Acquisitions (1) | 24.3 | 2.1 | % | 25.6 | 4.7 | % | ||||||||||||||
Foreign Currency Translation | (143.7 | ) | (12.4 | )% | (53.5 | ) | (9.8 | )% | ||||||||||||
Total | (195.4 | ) | (16.8 | )% | (95.2 | ) | (17.6 | )% | ||||||||||||
For the three months ended September 25, 2015 | $ | 969.1 | $ | 444.2 | ||||||||||||||||
Net Sales | Orders | Backlog at Period End | ||||||||||||||||||
$ | % | $ | % | $ | % | |||||||||||||||
As of and for the nine months ended September 26, 2014 | $ | 3,418.1 | $ | 1,716.6 | $ | 1,506.5 | ||||||||||||||
Components of Change: | ||||||||||||||||||||
Existing Businesses | (259.2 | ) | (7.6 | )% | (180.1 | ) | (10.5 | )% | (67.5 | ) | (4.5 | )% | ||||||||
Acquisitions (2) | 147.6 | 4.3 | % | 25.6 | 1.5 | % | 35.2 | 2.3 | % | |||||||||||
Foreign Currency Translation | (400.9 | ) | (11.7 | )% | (168.7 | ) | (9.8 | )% | (160.4 | ) | (10.6 | )% | ||||||||
Total | (512.5 | ) | (15.0 | )% | (323.2 | ) | (18.8 | )% | (192.7 | ) | (12.8 | )% | ||||||||
As of and for the nine months ended September 25, 2015 | $ | 2,905.6 | $ | 1,393.4 | $ | 1,313.8 | ||||||||||||||
(1) Represents the incremental sales and orders as a result of our acquisition of Roots blowers and compressors.
(2) Represents the incremental sales, orders and order backlog as a result of our acquisition of Roots blowers and compressors, and incremental sales as a result of our acquisition of Victor Technologies Holdings Inc.
Colfax Corporation
Condensed Consolidated Balance Sheets
Dollars in thousands, except share amounts
(Unaudited)
September 25, 2015 | December 31, 2014 | ||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 221,247 | $ | 305,448 | |||
Trade receivables, less allowance for doubtful accounts of $36,905 and $27,256 | 990,452 | 1,029,150 | |||||
Inventories, net | 449,891 | 442,732 | |||||
Other current assets | 337,502 | 323,148 | |||||
Total current assets | 1,999,092 | 2,100,478 | |||||
Property, plant and equipment, net | 664,200 | 727,435 | |||||
Goodwill | 2,876,011 | 2,873,023 | |||||
Intangible assets, net | 1,004,232 | 1,043,583 | |||||
Other assets | 496,361 | 491,842 | |||||
Total assets | $ | 7,039,896 | $ | 7,236,361 | |||
LIABILITIES AND EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Current portion of long-term debt | $ | 16,517 | $ | 9,855 | |||
Accounts payable | 735,310 | 780,287 | |||||
Accrued liabilities | 453,599 | 496,207 | |||||
Total current liabilities | 1,205,426 | 1,286,349 | |||||
Long-term debt, less current portion | 1,532,267 | 1,526,955 | |||||
Other liabilities | 998,172 | 1,070,613 | |||||
Total liabilities | 3,735,865 | 3,883,917 | |||||
Equity: | |||||||
Common stock, $0.001 par value; 400,000,000 shares authorized; 124,232,426 and 123,730,578 issued and outstanding | 124 | 124 | |||||
Additional paid-in capital | 3,219,262 | 3,200,832 | |||||
Retained earnings | 513,103 | 389,561 | |||||
Accumulated other comprehensive loss | (629,435 | ) | (443,691 | ) | |||
Total Colfax Corporation equity | 3,103,054 | 3,146,826 | |||||
Noncontrolling interest | 200,977 | 205,618 | |||||
Total equity | 3,304,031 | 3,352,444 | |||||
Total liabilities and equity | $ | 7,039,896 | $ | 7,236,361 | |||
Colfax Corporation
Condensed Consolidated Statements of Cash Flows
Dollars in thousands
(Unaudited)
Nine Months Ended | |||||||
September 25, 2015 | September 26, 2014 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 138,649 | $ | 334,484 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, amortization and impairment charges | 110,776 | 129,448 | |||||
Stock-based compensation expense | 11,886 | 13,081 | |||||
Non-cash interest expense | 10,099 | 6,990 | |||||
Deferred income tax provision (benefit) | 15 | (151,788 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Trade receivables, net | (38,972 | ) | (38,666 | ) | |||
Inventories, net | (20,967 | ) | 5,200 | ||||
Accounts payable | 3,710 | (82,874 | ) | ||||
Changes in other operating assets and liabilities | (63,058 | ) | (14,353 | ) | |||
Net cash provided by operating activities | 152,138 | 201,522 | |||||
Cash flows from investing activities: | |||||||
Purchases of fixed assets, net | (32,729 | ) | (59,050 | ) | |||
Acquisitions, net of cash acquired | (184,500 | ) | (948,800 | ) | |||
Net cash used in investing activities | (217,229 | ) | (1,007,850 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings under term credit facility | 750,000 | 150,000 | |||||
Payments under term credit facility | (1,223,497 | ) | — | ||||
Proceeds from borrowings on revolving credit facilities and other | 1,328,332 | 1,093,151 | |||||
Repayments of borrowings on revolving credit facilities and other | (835,232 | ) | (1,023,565 | ) | |||
Proceeds from issuance of common stock, net | 3,116 | 612,982 | |||||
Preferred stock conversion inducement payment | — | (19,565 | ) | ||||
Payments of dividend on preferred stock | — | (3,853 | ) | ||||
Other | (9,796 | ) | (22,250 | ) | |||
Net cash provided by financing activities | 12,923 | 786,900 | |||||
Effect of foreign exchange rates on Cash and cash equivalents | (32,033 | ) | (5,253 | ) | |||
Decrease in Cash and cash equivalents | (84,201 | ) | (24,681 | ) | |||
Cash and cash equivalents, beginning of period | 305,448 | 311,301 | |||||
Cash and cash equivalents, end of period | $ | 221,247 | $ | 286,620 | |||
THIRD QUARTER 2015 | 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 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 presentation speaks only as of this date. Colfax disclaims any duty to update the information herein.
Q3 2015 RESULTS
4 Q3 2015 HIGHLIGHTS • Adjusted net income of $29.5 million ($0.24 per share) compared to $71.3 million ($0.57 per share) in Q3 2014 • Net sales of $969.1 million, a decrease of 16.8% from Q3 2014 net sales of $1.164 billion (an organic decline of 6.5%) • Adjusted operating income of $58.6 million and adjusted operating income margin of 6.0% • Third quarter gas- and fluid-handling orders of $444.2 million compared to orders of $539.4 million in Q3 2014, a decrease of 17.6% (an organic decline of 12.5%) • Gas- and fluid-handling backlog of $1.314 billion at period end
5 YEAR TO DATE 2015 HIGHLIGHTS • Adjusted net income of $137.1 million ($1.10 per share) compared to $182.5 million ($1.48 per share) in the nine months ended September 26, 2014 • Net sales of $2.906 billion, a decrease of 15.0% from the nine months ended September 26, 2014 net sales of $3.418 billion (an organic decline of 7.6%) • Adjusted operating income of $245.2 million and adjusted operating income margin of 8.4% • Gas- and fluid-handling orders of $1.393 billion compared to orders of $1.717 billion in the nine months ended September 26, 2014, a decrease of 18.8% (an organic decline of 10.5%)
GAS AND FLUID HANDLING
7 GAS AND FLUID HANDLING Q3 2015 HIGHLIGHTS • Net sales of $481.9 million compared to net sales of $564.7 million in Q3 2014, a decrease of 14.7% (an organic decline of 8.8%) • Adjusted segment operating income of $26.6 million and adjusted segment operating income margin of 5.5% • Third quarter orders of $444.2 million compared to orders of $539.4 million in Q3 2014, a decrease of 17.6% (an organic decline of 12.5%) • Backlog of $1.314 billion at period end
8 GAS AND FLUID HANDLING YTD 2015 HIGHLIGHTS • Net sales of $1.409 billion compared to net sales of $1.708 billion in the nine months ended September 26, 2014, a decrease of 17.5% (an organic decline of 9.0%) • Adjusted segment operating income of $127.1 million and adjusted segment operating income margin of 9.0% • Orders of $1.393 billion compared to orders of $1.717 billion in the nine months ended September 26, 2014, a decrease of 18.8% (an organic decline of 10.5%)
9 ORDERS AND BACKLOG ORDERS BACKLOG Note: Dollars in millions (unaudited). $1.51B QTD YTD Existing Businesses (12.5)% (10.5)% Acquisitions 4.7% 1.5% FX Translation (9.8)% (9.8)% Total Decline (17.6)% (18.8)% $1.36B $1.31B
10 GEOGRAPHIC EXPOSURE YTD 2015 REVENUE REVENUE AFTERMARKET REVENUE YTD 2015 Note: Dollars in millions (unaudited). QTD YTD Existing Businesses (8.8)% (9.0)% Acquisitions 4.3% 1.4% FX Translation (10.2)% (9.9)% Total Decline (14.7)% (17.5)% ▪ Foremarket ▪ Aftermarket ▪ Developed Economies ▪ Emerging Markets 35% 65% 43% 57%
11 Q3 2015 SALES AND ORDERS BY END MARKET SALES: $481.9 million Total (Decline) Growth Organic (Decline) Growth Power Generation (16.1)% (9.0)% Oil, Gas & Petrochemical 6.1% 1.7% Marine (21.4)% (8.1)% Mining (53.6)% (35.8)% General Industrial & Other (15.9)% (10.1)% Total (14.7)% (8.8)% ORDERS: $444.2 million Total Decline Organic Growth (Decline) Power Generation (2.0)% 6.4% Oil, Gas & Petrochemical (17.1)% (14.2)% Marine (41.7)% (31.1)% Mining (36.9)% (17.4)% General Industrial & Other (21.6)% (22.5)% Total (17.6)% (12.5)%
12 YTD 2015 SALES AND ORDERS BY END MARKET SALES: $1,409.0 million Total Decline Organic Decline Power Generation (20.0)% (13.6)% Oil, Gas & Petrochemical (12.2)% (4.8)% Marine (15.0)% (0.9)% Mining (23.4)% (8.6)% General Industrial & Other (17.8)% (9.1)% Total (17.5)% (9.0)% ORDERS: $1,393.4 million Total (Decline) Growth Organic (Decline) Growth Power Generation (16.2)% (9.3)% Oil, Gas & Petrochemical 2.1% 11.2% Marine (43.2)% (31.6)% Mining (31.1)% (16.1)% General Industrial & Other (21.1)% (14.3)% Total (18.8)% (10.5)%
13 POWER GENERATION MARKET PERSPECTIVE SALES & ORDERS (DECLINE) GROWTH • Served by both Howden and Colfax Fluid Handling • Sales decline primarily due to SCR projects in China completed in 2014 • Outlook for new power construction and aftermarket products remains stable YTD 2015 SALES SPLIT YTD 2015 ORDERS SPLIT HIGHLIGHTS Q3 2015 vs. Q3 2014 YTD 2015 vs. YTD 2014 Total Organic Total Organic Sales (16.1)% (9.0)% (20.0)% (13.6)% Orders (2.0)% 6.4% (16.2)% (9.3)% 35% 35%
14 OIL, GAS & PETROCHEMICAL MARKET PERSPECTIVE SALES & ORDERS GROWTH (DECLINE) • Served by both Howden and Colfax Fluid Handling • Period over period comparisons are difficult due to the timing of large projects • Orders year to date remain up in a down end market YTD 2015 SALES SPLIT YTD 2015 ORDERS SPLIT HIGHLIGHTS Q3 2015 vs. Q3 2014 YTD 2015 vs. YTD 2014 Total Organic Total Organic Sales 6.1% 1.7% (12.2)% (4.8)% Orders (17.1)% (14.2)% 2.1% 11.2% 21% 23%
15 MARINE MARKET PERSPECTIVE SALES & ORDERS DECLINE • Primarily served by Colfax Fluid Handling • Year over year comparisons affected by $18 million Defense contract awarded in Q3 2014 • Commercial ship building down • Continued focus on aftermarket growth and expansion of product line YTD 2015 SALES SPLIT YTD 2015 ORDERS SPLIT HIGHLIGHTS Note: Marine market comprised of commercial marine and government, or defense, customers Q3 2015 vs. Q3 2014 YTD 2015 vs. YTD 2014 Total Organic Total Organic Sales (21.4)% (8.1)% (15.0)% (0.9)% Orders (41.7)% (31.1)% (43.2)% (31.6)% 11% 10%
16 MINING MARKET PERSPECTIVE SALES & ORDERS DECLINE • Primarily served by Howden • Remains a depressed market; focused on winning targeted projects YTD 2015 SALES SPLIT YTD 2015 ORDERS SPLIT HIGHLIGHTS Q3 2015 vs. Q3 2014 YTD 2015 vs. YTD 2014 Total Organic Total Organic Sales (53.6)% (35.8)% (23.4)% (8.6)% Orders (36.9)% (17.4)% (31.1)% (16.1)% 5% 4%
17 GENERAL INDUSTRIAL & OTHER MARKET PERSPECTIVE SALES & ORDERS DECLINE • Includes both Howden and Colfax Fluid Handling • China air pollution reduction targets present opportunity, but expect delayed investment by end users YTD 2015 SALES SPLIT YTD 2015 ORDERS SPLIT HIGHLIGHTS Q3 2015 vs. Q3 2014 YTD 2015 vs. YTD 2014 Total Organic Total Organic Sales (15.9)% (10.1)% (17.8)% (9.1)% Orders (21.6)% (22.5)% (21.1)% (14.3)% 28% 28%
FABRICATION TECHNOLOGY
19 FABRICATION TECHNOLOGY Q3 2015 HIGHLIGHTS • Net sales of $487.2 million compared to net sales of $599.8 million in Q3 2014, a decrease of 18.8% (an organic decline of 4.4%) ◦ Welding intensive industries down sharply, particularly oil and gas • Adjusted segment operating income of $42.4 million and adjusted segment operating income margin of 8.7%
20 FABRICATION TECHNOLOGY YTD 2015 HIGHLIGHTS • Net sales of $1.497 billion compared to net sales of $1.711 billion in the nine months ended September 26, 2014, a decrease of 12.5% (an organic decline of 6.2%) • Adjusted segment operating income of $153.6 million and adjusted segment operating income margin of 10.3%
21 GEOGRAPHIC EXPOSURE YTD 2015 REVENUE REVENUE REVENUE YTD 2015 Note: Dollars in millions (unaudited). ▪ Consumables ▪ Equipment 75% 25% ▪ Developed Economies ▪ Emerging Markets 47% 53% QTD YTD Volume (0.4)% (2.7)% Price/ Mix (4.0)% (3.5)% Acquisitions —% 7.2% FX Translation (14.4)% (13.5)% Total Decline (18.8)% (12.5)%
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. Three Months Ended Nine Months Ended September 25, 2015 September 26, 2014 September 25, 2015 September 26, 2014 Net sales $ 969.1 $ 1,164.5 $ 2,905.6 $ 3,418.1 Gross profit $ 295.9 $ 373.2 $ 918.3 $ 1,087.0 % of sales 30.5 % 32.0 % 31.6 % 31.8 % SG&A expense $ 237.2 $ 245.4 $ 673.1 $ 756.1 % of sales 24.5 % 21.1 % 23.2 % 22.1 % Adjusted operating income $ 58.6 $ 127.8 $ 245.2 $ 330.9 % of sales 6.0 % 11.0 % 8.4 % 9.7 % Adjusted net income $ 29.5 $ 71.3 $ 137.1 $ 182.5 % of sales 3.0 % 6.1 % 4.7 % 5.3 % Adjusted net income per share $ 0.24 $ 0.57 $ 1.10 $ 1.48
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, adjusted operating income margin, 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, adjusted operating income and adjusted operating income margin exclude the impact of restructuring and other related charges. Projected adjusted net income, projected adjusted net income per share, adjusted net income, and adjusted net income per share for the nine months ended September 25, 2015 exclude the impact of the write-off of certain deferred financing fees and original issue discount associated with the refinancing of Colfax's credit agreement. Adjusted net income and adjusted net income per share for the nine months ended September 26, 2014 exclude the impact of the preferred stock conversion inducement payment. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 27.5% and 28.5% for the three and nine months ended September 25, 2015, respectively, and 29.8% and 29.3% for the three and nine months ended September 26, 2014, respectively. 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 restructuring and other related charges, write-off of certain deferred financing fees and original issue discount and the 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. Nine Months Ended September 25, 2015 Nine Months Ended September 26, 2014 Gas and Fluid Handling Fabrication Technology Corporate and Other Total Colfax Corporation Gas and Fluid Handling Fabrication Technology Corporate and Other Total Colfax Corporation Net sales $ 1,408,992 $ 1,496,597 $ — $ 2,905,589 $ 1,707,539 $ 1,710,581 $ — $ 3,418,120 Operating income (loss) 115,535 8.2 % 139,539 9.3 % (35,492 ) 219,582 7.6 % 157,332 9.2 % 185,986 10.9 % (41,106 ) 302,212 8.8 % Restructuring and other related charges 11,562 14,096 — 25,658 11,617 17,117 — 28,734 Adjusted operating income (loss) $ 127,097 9.0 % $ 153,635 10.3 % $ (35,492 ) $ 245,240 8.4 % $ 168,949 9.9 % $ 203,103 11.9 % $ (41,106 ) $ 330,946 9.7 % Three Months Ended September 25, 2015 Three Months Ended September 26, 2014 Gas and Fluid Handling Fabrication Technology Corporate and Other Total Colfax Corporation Gas and Fluid Handling Fabrication Technology Corporate and Other Total Colfax Corporation Net sales $ 481,908 $ 487,236 $ — $ 969,144 $ 564,650 $ 599,803 $ — $ 1,164,453 Operating income (loss) 20,376 4.2 % 35,602 7.3 % (10,423 ) 45,555 4.7 % 65,182 11.5 % 65,283 10.9 % (11,659 ) 118,806 10.2 % Restructuring and other related charges 6,258 6,813 — 13,071 2,079 6,869 — 8,948 Adjusted operating income (loss) $ 26,634 5.5 % $ 42,415 8.7 % $ (10,423 ) $ 58,626 6.0 % $ 67,261 11.9 % $ 72,152 12.0 % $ (11,659 ) $ 127,754 11.0 %
27 NON-GAAP RECONCILIATION (unaudited) (1) The effective tax rates used to calculate adjusted net income and adjusted net income per share are 27.5% and 28.5% for the three and nine months ended September 25, 2015, respectively, and 29.8% and 29.3% for the three and nine months ended September 26, 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. _____________________ Note: Dollars in thousands, except per share amounts. Three Months Ended Nine Months Ended September 25, 2015 September 26, 2014 September 25, 2015 September 26, 2014 Adjusted Net Income Net income attributable to Colfax Corporation $ 18,359 $ 73,389 $ 123,542 $ 311,964 Restructuring and other related charges 13,071 8,948 25,658 28,734 Debt extinguishment charges - Refinancing of credit agreement — — 4,731 — Tax adjustment(1) (1,966 ) (11,032 ) (16,871 ) (158,154 ) Adjusted net income $ 29,464 $ 71,305 $ 137,060 $ 182,544 Adjusted net income margin 3.0 % 6.1 % 4.7 % 5.3 % Adjusted Net Income Per Share Net income available to Colfax Corporation common shareholders $ 18,359 $ 73,389 $ 123,542 $ 290,051 Restructuring and other related charges 13,071 8,948 25,658 28,734 Debt extinguishment charges - Refinancing of credit agreement — — 4,731 — Preferred stock conversion inducement payment(2) — — — 19,565 Tax adjustment(1) (1,966 ) (11,032 ) (16,871 ) (158,154 ) Adjusted net income available to Colfax Corporation common shareholders 29,464 71,305 137,060 180,196 Dividends on preferred stock(2) — — — 2,348 $ 29,464 $ 71,305 $ 137,060 $ 182,544 Weighted-average shares outstanding - diluted 125,032,267 125,380,566 125,133,606 123,624,735 Adjusted net income per share $ 0.24 $ 0.57 $ 1.10 $ 1.48 Net income per share — diluted (in accordance with GAAP) $ 0.15 $ 0.59 $ 0.99 $ 2.38
28 CHANGE IN SALES, ORDERS AND BACKLOG (unaudited) _____________________ Note: Dollars in millions. (1) Represents the incremental sales and orders as a result of our acquisition of Roots blowers and compressors. (2) Represents the incremental sales, orders and order backlog as a result of our acquisition of Roots blowers and compressors, and incremental sales as a result of our acquisition of Victor Technologies Holdings Inc. Net Sales Orders Backlog at Period End $ % $ % $ % As of and for the nine months ended September 26, 2014 $ 3,418.1 $ 1,716.6 $ 1,506.5 Components of Change: Existing Businesses (259.2 ) (7.6 )% (180.1 ) (10.5 )% (67.5 ) (4.5 )% Acquisitions(2) 147.6 4.3 % 25.6 1.5 % 35.2 2.3 % Foreign Currency Translation (400.9 ) (11.7 )% (168.7 ) (9.8 )% (160.4 ) (10.6 )% Total (512.5 ) (15.0 )% (323.2 ) (18.8 )% (192.7 ) (12.8 )% As of and for the nine months ended September 25, 2015 $ 2,905.6 $ 1,393.4 $ 1,313.8 Net Sales Orders $ % $ % For the three months ended September 26, 2014 $ 1,164.5 $ 539.4 Components of Change: Existing Businesses (76.0 ) (6.5 )% (67.3 ) (12.5 )% Acquisitions(1) 24.3 2.1 % 25.6 4.7 % Foreign Currency Translation (143.7 ) (12.4 )% (53.5 ) (9.8 )% Total (195.4 ) (16.8 )% (95.2 ) (17.6 )% For the three months ended September 25, 2015 $ 969.1 $ 444.2
29 BALANCE SHEETS (unaudited) _____________________ Note: Dollars in thousands. September 25, 2015 December 31, 2014 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 221,247 $ 305,448 Trade receivables, less allowance for doubtful accounts of $36,905 and $27,256 990,452 1,029,150 Inventories, net 449,891 442,732 Other current assets 337,502 323,148 Total current assets 1,999,092 2,100,478 Property, plant and equipment, net 664,200 727,435 Goodwill 2,876,011 2,873,023 Intangible assets, net 1,004,232 1,043,583 Other assets 496,361 491,842 Total assets $ 7,039,896 $ 7,236,361 LIABILITIES AND EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 16,517 $ 9,855 Accounts payable 735,310 780,287 Accrued liabilities 453,599 496,207 Total current liabilities 1,205,426 1,286,349 Long-term debt, less current portion 1,532,267 1,526,955 Other liabilities 998,172 1,070,613 Total liabilities 3,735,865 3,883,917 Equity: Common stock, $0.001 par value; 400,000,000 shares authorized; 124,232,426 and 123,730,578 issued and outstanding 124 124 Additional paid-in capital 3,219,262 3,200,832 Retained earnings 513,103 389,561 Accumulated other comprehensive loss (629,435 ) (443,691 ) Total Colfax Corporation equity 3,103,054 3,146,826 Noncontrolling interest 200,977 205,618 Total equity 3,304,031 3,352,444 Total liabilities and equity $ 7,039,896 $ 7,236,361
30 STATEMENTS OF CASH FLOWS (unaudited) _____________________ Note: Dollars in thousands. Nine Months Ended September 25, 2015 September 26, 2014 Cash flows from operating activities: Net income $ 138,649 $ 334,484 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and impairment charges 110,776 129,448 Stock-based compensation expense 11,886 13,081 Non-cash interest expense 10,099 6,990 Deferred income tax provision (benefit) 15 (151,788 ) Changes in operating assets and liabilities: Trade receivables, net (38,972 ) (38,666 ) Inventories, net (20,967 ) 5,200 Accounts payable 3,710 (82,874 ) Changes in other operating assets and liabilities (63,058 ) (14,353 ) Net cash provided by operating activities 152,138 201,522 Cash flows from investing activities: Purchases of fixed assets, net (32,729 ) (59,050 ) Acquisitions, net of cash acquired (184,500 ) (948,800 ) Net cash used in investing activities (217,229 ) (1,007,850 ) Cash flows from financing activities: Borrowings under term credit facility 750,000 150,000 Payments under term credit facility (1,223,497 ) — Proceeds from borrowings on revolving credit facilities and other 1,328,332 1,093,151 Repayments of borrowings on revolving credit facilities and other (835,232 ) (1,023,565 ) Proceeds from issuance of common stock, net 3,116 612,982 Preferred stock conversion inducement payment — (19,565 ) Payments of dividend on preferred stock — (3,853 ) Other (9,796 ) (22,250 ) Net cash provided by financing activities 12,923 786,900 Effect of foreign exchange rates on Cash and cash equivalents (32,033 ) (5,253 ) Decrease in Cash and cash equivalents (84,201 ) (24,681 ) Cash and cash equivalents, beginning of period 305,448 311,301 Cash and cash equivalents, end of period $ 221,247 $ 286,620
31 2015 OUTLOOK SUMMARY (October Update) _____________________ Note: Guidance as of October 14, 2015. (1) Excludes impact of restructuring charges. (2) Excludes impact of restructuring charges, gain on reversal of tax accruals and non-cash charges on debt refinancing. REVENUE RANGE 2015 Total $3.90 billion To $3.95 billion EPS AND ADJUSTED NET INCOME RANGE 2015 Net income per share $1.20 To $1.24 Adjusted operating income (1) $345 million To $352 million Adjusted net income - Colfax (2) $190 million To $195 million 2015 Adjusted net income per share (2) $1.52 To $1.56 ASSUMPTIONS Restructuring costs $66 million Euro (average for year) $1.12 Tax rate - adjusted basis (GAAP) 29% (25%) Outstanding shares 125 million Depreciation $84 million Amortization, including impairments $75 million Interest expense, excluding refinancing charge $44 million
32 2015 OUTLOOK SUMMARY (October Update) _____________________ Note: Guidance as of October 14, 2015. In thousands, except per share data 2015 Low High Revenue $ 3,900,000 $ 3,950,000 Adjusted Operating Profit (1) 345,000 352,000 Interest (2) (44,000 ) (44,000 ) Taxes (88,000 ) (90,000 ) Noncontrolling interest (23,000 ) (23,000 ) Adjusted Net Income - Colfax $ 190,000 $ 195,000 Adjust EPS $ 1.52 $ 1.56 (1) Includes transaction costs and year-one fair value adjustments from the Roots Acquisition of $6 million. (2) Excludes non-cash charges associated with the June 2015 refinancing of the principal credit facility.
33 NON-GAAP RECONCILIATION (October Update) _____________________ Note: Guidance as of October 14, 2015. 2015 EPS Range Low High Projected net income per share - diluted $ 1.20 $ 1.24 Restructuring costs 0.53 0.53 Non-cash charge on debt refinancing (1) 0.04 0.04 Tax adjustment (2) (0.25 ) (0.25 ) Projected adjusted net income per share - diluted $ 1.52 $ 1.56 (1) Reflects the non-cash charge associated with the June 2015 refinancing of the principal credit facility. (2) Excludes gain on tax accrual reversals and tax implication of adjustments above.