Colfax Reports Third Quarter 2012 Results

FULTON, Md., Oct. 25, 2012 /PRNewswire/ -- Colfax Corporation (NYSE: CFX) today announced its financial results for the third quarter of 2012. On a year-over-year basis, highlights for the third quarter and year-to-date period include: 

Third Quarter of 2012 (all comparisons versus the third quarter of 2011)

  • After $14.5 million of pre-tax year-one acquisition-related amortization expense, net income of $4.0 million (4 cents per share); adjusted net income (as defined below) of $40.7 million (33 cents per share), which includes a non-cash 3 cents per share gain related to a discrete deferred tax benefit recorded
  • Net sales of $954.4 million, organic sales increase (as defined below) of 5.1% from third quarter 2011 proforma net sales (includes the comparable period sales for the operations acquired in the Charter acquisition)
  • Operating income of $51.7 million; adjusted operating income (as defined below) of $85.3 million
  • Third quarter gas- and fluid-handling orders of $443.8 million, an organic order increase (as defined below) of 4.0%
  • Gas- and fluid-handling backlog of $1.4 billion at period end

Nine Months Ended September 28, 2012 (all comparisons versus the nine months ended September 30, 2011)

  • After pre-tax expenses of $62.6 million of year-one acquisition-related amortization expense and $43.6 million of Charter acquisition-related expense, a net loss of $98.0 million ($1.09 per share); adjusted net income (as defined below) of $109.3 million (92 cents per share)
  • Net sales of $2.9 billion, an increase of 3.5% from the nine months ended September 30, 2011 proforma net sales (includes the comparable period sales for the operations acquired in the Charter acquisition); organic sales increase (as defined below) of 8.2%
  • Operating income of $87.8 million; adjusted operating income (as defined below) of $245.9 million 
  • Gas- and fluid-handling orders of $1.5 billion, an increase of 3.5%; organic order increase (as defined below) of 3.1%

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, "We are very pleased with the strong growth in our long cycle gas- and fluid-handling business, which increased revenues by 14.6% organically in comparison to the proforma 2011 third quarter. Volumes in our shorter cycle fabrication technology business were negatively impacted by the challenging global economic environment. However, despite the volume declines, we achieved improvement in adjusted operating margins through improved product pricing, aggressive SG&A restructuring, global sourcing and plant consolidations."   

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 asbestos coverage litigation expense, restructuring and other related charges, charges related to the Charter acquisition and fair value adjustments related to the ESAB and Howden inventory and backlog amortization expense to the extent they impact the periods presented. The effective tax rates used to calculate adjusted net income and adjusted net income per share are 25.3% and 29.0% for the third quarter and nine months ended September 28, 2012, respectively, and 31% for both the third quarter and nine months ended September 30, 2011. Proforma organic sales growth and proforma organic order growth represent the proforma comparison of the change in existing businesses that includes the operations acquired in the Charter Acquisition for the comparable prior period (which excludes the results of operations acquired in the Charter Acquisition for the first 12 days of each year to date reporting period) excluding the impact due to acquisitions made by Colfax and Charter and foreign currency 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 coverage litigation, costs related to the Charter acquisition and foreign currency fluctuations outside the control of its operating management team.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of non-GAAP financial measures presented above to GAAP results has been provided in the financial tables included in this press release.

Conference Call and Webcast

Colfax will host a conference call to provide details about its results on Thursday, October 25, 2012 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 43963077, 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 2011 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.

 

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



Three Months Ended

Nine Months Ended


September 28, 2012

September 30,
2
011

September 28,
2012

September 30,
2011

Net sales

$    954,440

$   170,294

$  2,886,459

$ 515,601

Cost of sales

666,453

109,667

2,041,904

337,046

Gross profit

287,987

60,627

844,555

178,555

Selling, general and administrative expense

217,143

41,074

661,191

123,376

Charter acquisition-related expense

5,728

43,617

5,728

Restructuring and other related charges

15,865

5,299

43,066

7,518

Asbestos coverage litigation expense

3,313

3,086

8,840

8,454

Operating income

51,666

5,440

87,841

33,479

Interest expense

23,557

1,218

68,280

4,507

Income before income taxes

28,109

4,222

19,561

28,972

Provision for income taxes(1)(2)

13,610

532

86,891

8,337

Net income (loss)

14,499

3,690

(67,330)

20,635

Less: net income attributable to noncontrolling interest,

net of taxes

5,405

 

16,808

 

Net income (loss) attributable to Colfax Corporation

9,094

3,690

(84,138)

20,635

Dividends on preferred stock

5,072

13,879

Net income (loss) available to Colfax Corporation common

 shareholders

$        4,022

$        3,690

$     (98,017)

$     20,635

Net income (loss) per share—basic and diluted

$          0.04

$          0.08

$         (1.09)

$         0.47

(1) Provision for income taxes the nine months ended September 28, 2012 was significantly impacted by the reassessment of certain deferred tax assets as of the date of the Charter acquisition, which resulted in an increase in the Company's valuation allowance, and the Charter acquisition-related expenses that are either not deductible for tax purposes or were incurred in jurisdictions where no tax benefit can be recognized.

(2) Income tax provision for the three and nine months ended September 28, 2012 includes a $2.9 million gain from a discrete deferred tax benefit recorded to reflect lower tax rates enacted in the United Kingdom during the third quarter.

 

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



Three Months Ended

Nine Months Ended


September 28,

2012

September 30,

2011

September 28,

2012

September 30,

2011






Adjusted Operating Income





Operating income

$        51,666

$         5,440

$        87,841

$        33,479

Restructuring and other related charges

15,865

5,299

43,066

7,518

Charter acquisition-related expense

5,728

43,617

5,728

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

14,455

62,582

Asbestos coverage litigation expense

3,313

3,086

8,840

8,454

Adjusted operating income

$        85,299

$       19,553

$       245,946

$         55,179

Adjusted operating income margin

8.9%

11.5%

8.5%

10.7%

Adjusted Net Income and Adjusted Net Income Per Share





Net income (loss) attributable to Colfax Corporation

$          9,094

$        3,690

$   (84,138)

$     20,635

Restructuring and other related charges

15,865

5,299

43,066

7,518

Charter acquisition-related expense

5,728

43,617

5,728

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

14,455

62,582

Asbestos coverage litigation expense

3,313

3,086

8,840

8,454

Tax adjustment(1)

(2,025)

(4,575)

35,320

(7,118)

Adjusted net income

40,702

13,228

109,287

35,217

Adjusted net income margin

4.3%

7.8%

3.8%

6.8%

Dividends on preferred stock

5,072

13,879

Adjusted net income available to Colfax Corporation common shareholders

35,630

13,228

95,408

35,217

Less: net income attributable to participating securities(2)

4,582

12,256


$       31,048

$        13,228

$        83,152

$        35,217






Weighted-average shares outstanding—diluted

94,791,928

44,411,970

90,829,160

44,299,157

Adjusted net income per share

$           0.33

$           0.30

$           0.92

$           0.79






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

$           0.04

$           0.08

$          (1.09)

$           0.47

(1)     The effective tax rates used to calculate adjusted net income and adjusted net income per share are 25.3% and 29.0% for the third quarter and nine months ended September 28, 2012, respectively, and 31% for both the third quarter and nine months ended September 30, 2011. 

(2)     Adjusted net income per share was calculated consistently with the two-class method in accordance with GAAP as the Series A preferred stock are considered participating securities.  Losses are not allocated to the preferred stock.

 

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



Net Sales

Orders


$

%

$

%

Proforma for the three months ended September 30, 2011

$   971.7


$   451.2


Components of Change:





Existing businesses

49.5

5.1 %

18.0

4.0 %

Acquisitions

5.3

0.5 %

4.2

0.9 %

Foreign currency translation

(72.1)

(7.4)%

(29.6)

(6.5)%


(17.3)

(1.8)%

(7.4)

(1.6)%

For the three months ended September 28, 2012

$   954.4


$  443.8


 


Net Sales

Orders

 Backlog at
Period End


$

%

$

%

$

%

Proforma as of and for the nine months ended September 30, 2011

$ 2,789.3


$ 1,425.6


$ 1,348.2


Components of Change:







Existing businesses

228.7

8.2 %

44.4

3.1 %

70.0

5.2 %

Acquisitions

52.3

1.9 %

78.3

5.5  %

12.2

0.9 %

Foreign currency translation

(183.8)

(6.6)%

(72.6)

(5.1)%

(51.3)

(3.8)%


97.2

3.5 %

50.1

3.5 %

30.9

2.3 %

As of and for the nine months ended September 28, 2012

$ 2,886.5


$1,475.7


$1,379.1


 

SOURCE Colfax Corporation



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