Published: November 04, 2010
Colfax Reports Preliminary Third Quarter Results
RICHMOND, Va., Nov. 4, 2010 /PRNewswire-FirstCall/ -- Colfax Corporation (NYSE: CFX), a global leader in fluid-handling solutions for critical applications, today announced preliminary financial results for the third quarter ended October 1, 2010.
The preliminary results for the three and nine months ended October 1, 2010 and the preliminary restated results for the three and nine months ended October 2, 2009, included herein, reflect management's best estimate of corrections related to the overstatement of the Company's pension liability as described in the Form 8-K filed with the SEC on October 25, 2010. Final results for the current year periods and final restated results for the 2009 periods could change when the analysis of the pension matter is finalized, and these final results will be reflected in the Company's Third Quarter Report on Form 10-Q and amended prior reports, when filed. Please refer to the footnote to the financial tables included in this press release for further information.
On a year-over-year basis, highlights for the quarter and the first nine months of 2010 include:
Third quarter of 2010 (all comparisons versus the third quarter of 2009)
-- Net income of $5.8 million (13 cents per share -- basic and diluted);
adjusted net income (as defined below) of $9.5 million (22 cents per
share), a decrease of 6.2% including currency effects and one-time
acquisition costs of 3 cents per share
-- Net sales of $132.4 million, an increase of 3.0%; organic sales increase
(as defined below) of 5.9%
-- Operating income of $8.6 million; adjusted operating income (as defined
below) of $15.6 million, a decrease of 7.3%. Excluding currency effects
and one-time acquisition costs totaling $1.7 million, adjusted operating
income increased $0.5 million or 2.8%.
-- Third quarter orders of $124.1 million, an increase of 5.9%; organic
order growth (as defined below) of 8.1%
-- Backlog of $351.2 million at period end
Year-to-date 2010 (all comparisons versus the first nine months of 2009)
-- Net income of $7.6 million (17 cents per share -- basic and diluted);
adjusted net income (as defined below) of $23.3 million (53 cents per
share), a decrease of 20.9% including currency effects and one-time
acquisition costs of 2 cents per share
-- Net sales of $375.3 million, a decrease of 4.7%; organic sales decline
(as defined below) of 5.0%
-- Operating income of $14.8 million; adjusted operating income (as defined
below) of $39.3 million, a decrease of 19.4%. Excluding currency
effects and one-time acquisition costs totaling $1.2 million, adjusted
operating income decreased $8.3 million or 17.0%.
-- Orders for the nine month period of $399.2 million, an increase of
10.7%; organic order growth (as defined below) of 10.1%
Adjusted net income, adjusted net income per share, adjusted operating income, organic sales growth (decline) and organic order growth (decline) are not financial measures calculated in accordance with generally accepted accounting principles in the U.S. ("GAAP"). See below for a description of the measures' usefulness and a reconciliation of these measures to their most directly comparable preliminary GAAP financial measures.
"We're pleased to report stronger than expected results for the third quarter," said Clay Kiefaber, President and CEO of Colfax Corporation. "Both sales and orders on an organic basis were up for the first time since the third quarter of 2008. We're continuing to see broad based improvement in most end markets and regions. We expect to have a strong fourth quarter, seasonally our strongest, and are raising our guidance. We now expect organic sales to be flat to down 2% for the year versus our previous guidance of down 2% to 5% from 2009. We're expecting adjusted EPS to be in the range of $.83 to $.88 compared to our previous guidance of $.70 to $.77, including a currency benefit of 3 cents. Earnings will be driven by our oil and gas, general industrial and defense businesses as well as productivity improvements partially offset by lower margin commercial marine projects."
He added, "We're continuing to gain traction with our strategic improvement priorities, including CBS, the development of new VOC-aligned products, the alignment of the global functional organization, and the development of our Asian strategy. We're also continuing to build our team, and are delighted to welcome Scott Brannan as our Chief Financial Officer, Lynne Puckett as our General Counsel, and Clay Perfall as a Board Director and Chairman of the Audit Committee. These highly talented individuals are committed to living our values and driving best-of-class performance, and we look forward to their contributions in the pursuit of long-term value creation."
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 (decline), organic order growth (decline) and projected adjusted net income per share. Adjusted net income, adjusted net income per share and adjusted operating income exclude asbestos liability and defense costs (income) and asbestos coverage litigation expenses, and restructuring and other related charges to the extent they impact the periods presented. Adjusted net income, adjusted net income per share and projected adjusted net income per share present income taxes at an effective tax rate of 32%. Projected adjusted net income per share excludes actual and estimated restructuring and other related charges, asbestos coverage litigation expenses and asbestos liability and defense costs. 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 non-recurring items, legacy asbestos issues and items 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 preliminary results and outlook on Thursday, November 4 at 8:00 a.m. ET. The call will be open to the public through 877-303-7908 or 678-373-0875 and webcast via Colfax's website at www.colfaxcorp.com under the "Investor Relations" 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 global leader in critical fluid-handling products and technologies. Through its global operating subsidiaries, Colfax manufactures positive displacement industrial pumps and valves used in oil & gas, power generation, commercial marine, defense and general industrial markets. Colfax's operating subsidiaries supply products under the well-known brands Allweiler, Baric, Fairmount Automation, Houttuin, Imo, LSC, Portland Valve, Tushaco, Warren and Zenith. 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 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 as well as its 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 this date. 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
(Preliminary(1) and unaudited)
Three Months
Ended Nine Months Ended
------------ -----------------
October October October October
1, 2010 2, 2009 1, 2010 2, 2009
As As
Restated Restated
--------- ---------
Net sales $132,397 $128,545 $375,336 $394,053
Cost of sales 85,300 82,339 243,502 255,277
------ ------ ------- -------
Gross profit 47,097 46,206 131,834 138,776
Selling, general and
administrative
expenses 29,930 27,876 87,836 85,468
Research and
development
expenses 1,583 1,523 4,731 4,610
Restructuring and
other related
charges 2,441 9,608 9,515 10,755
Asbestos liability
and defense costs
(income) 2,202 (4,303) 4,179 (1,176)
Asbestos coverage
litigation expenses 2,339 1,845 10,763 8,838
----- ----- ------ -----
Operating income 8,602 9,657 14,810 30,281
Interest expense 1,544 1,834 5,075 5,466
----- ----- ----- -----
Income before income
taxes 7,058 7,823 9,735 24,815
Provision for income
taxes 1,222 2,294 2,176 7,750
----- ----- ----- -----
Net income $5,836 $5,529 $7,559 $17,065
====== ====== ====== =======
Net income per share
--basic and
diluted $0.13 $0.13 $0.17 $0.39
===== ===== ===== =====
(1) The preliminary results for the three and nine months ended
October 1, 2010 and the preliminary restated results for the three
and nine months ended October 2, 2009, included herein, reflect
management's best estimate of corrections related to the
overstatement of the Company's pension liability as described in the
Form 8-K filed with the SEC on October 25, 2010. Selling, general
and administrative expenses for the nine months ended October 1,
2010, include an estimated correction related to the first six
months of 2010, resulting in a reduction of $0.5 million compared to
the historical results reported in the Company's Quarterly Report on
Form 10-Q for the period ended July 2, 2010. The related net
income impact for nine months ended October 1, 2010 is an after-tax
benefit of $0.3 million ($.01 per share).
Selling, general and administrative expenses for the three and nine
months ended October 2, 2009, include estimated corrections
resulting in reductions of $0.3 million and $0.8 million,
respectively, compared to the historical results reported in the
Company's Quarterly Report on Form 10-Q for the period ended
October 2, 2009. The related net income impacts for the three and
nine months ended October 2, 2009, are after-tax benefits of $0.2
million (less than $.01 per share) and $0.5 million ($.01 per
share), respectively.
Final results for the current year periods and final restated results
for the 2009 periods could change when the analysis of the pension
matter is finalized, and these final results will be reflected in
the Company's Quarterly Report on Form 10-Q for the period ended
October 1, 2010 and amended prior reports, when filed. The Company
will amend and restate the consolidated financial statements
contained it its Annual Report on Form 10-K for the year ended
December 31, 2009 and Quarterly Reports on Form 10-Q for the periods
ended April 2, 2010 and July 2, 2010. The Company plans to file the
amended reports as soon as practicable in the fourth quarter of
2010.
Colfax Corporation
Reconciliation of GAAP to non-GAAP Financial Measures
Dollars in thousands, except per share data
(Preliminary(1) and unaudited)
Three Months Ended
------------------
October 1, October 2,
2010 2009
As Restated
-----------
Adjusted Net Income and Adjusted
Earnings per Share
Net income $5,836 $5,529
Restructuring and other related
charges 2,441 9,608
Asbestos liability and defense
costs (income) 2,202 (4,303)
Asbestos coverage litigation
expenses 2,339 1,845
Tax adjustment to effective rate of
32% (3,271) (2,497)
------ ------
Adjusted net income $9,547 $10,182
====== =======
Adjusted net income margin 7.2% 7.9%
Weighted average shares outstanding
-diluted 43,619,252 43,324,995
Adjusted net income per share $0.22 $0.24
===== =====
Net income per share --basic and
diluted in accordance with GAAP
$0.13 $0.13
===== =====
Adjusted Operating Income
Operating income $8,602 $9,657
Restructuring and other related
charges 2,441 9,608
Asbestos liability and defense
costs (income) 2,202 (4,303)
Asbestos coverage litigation
expenses 2,339 1,845
----- -----
Adjusted operating income $15,584 $16,807
======= =======
Adjusted operating income margin 11.8% 13.1%
Nine Months Ended
-----------------
October 1, October 2,
2010 2009
As Restated
-----------
Adjusted Net Income and Adjusted
Earnings per Share
Net income $7,559 $17,065
Restructuring and other related
charges 9,515 10,755
Asbestos liability and defense
costs (income) 4,179 (1,176)
Asbestos coverage litigation
expenses 10,763 8,838
Tax adjustment to effective rate of
32% (8,765) (6,084)
------ ------
Adjusted net income $23,251 $29,398
======= =======
Adjusted net income margin 6.2% 7.5%
Weighted average shares outstanding
-diluted 43,539,372 43,274,177
Adjusted net income per share $0.53 $0.68
===== =====
Net income per share --basic and
diluted in accordance with GAAP
$0.17 $0.39
===== =====
Adjusted Operating Income
Operating income $14,810 $30,281
Restructuring and other related
charges 9,515 10,755
Asbestos liability and defense
costs (income) 4,179 (1,176)
Asbestos coverage litigation
expenses 10,763 8,838
------ -----
Adjusted operating income $39,267 $48,698
======= =======
Adjusted operating income margin 10.5% 12.4%
(1) The preliminary results for the three and nine months ended
October 1, 2010 and the preliminary restated results for the three
and nine months ended October 2, 2009, included herein, reflect
management's best estimate of corrections related to the
overstatement of the Company's pension liability as described in the
Form 8-K filed with the SEC on October 25, 2010. Selling, general
and administrative expenses for the nine months ended October 1,
2010, include an estimated correction related to the first six
months of 2010, resulting in a reduction of $0.5 million compared to
the historical results reported in the Company's Quarterly Report on
Form 10-Q for the period ended July 2, 2010. The related net
income impact for nine months ended October 1, 2010 is an after-tax
benefit of $0.3 million ($.01 per share).
Selling, general and administrative expenses for the three and nine
months ended October 2, 2009, include estimated corrections
resulting in reductions of $0.3 million and $0.8 million,
respectively, compared to the historical results reported in the
Company's Quarterly Report on Form 10-Q for the period ended
October 2, 2009. The related net income impacts for the three and
nine months ended October 2, 2009, are after-tax benefits of $0.2
million (less than $.01 per share) and $0.5 million ($.01 per
share), respectively.
Final results for the current year periods and final restated results
for the 2009 periods could change when the analysis of the pension
matter is finalized, and these final results will be reflected in
the Company's Quarterly Report on Form 10-Q for the period ended
October 1, 2010 and amended prior reports, when filed. The Company
will amend and restate the consolidated financial statements
contained it its Annual Report on Form 10-K for the year ended
December 31, 2009 and Quarterly Reports on Form 10-Q for the periods
ended April 2, 2010 and July 2, 2010. The Company plans to file the
amended reports as soon as practicable in the fourth quarter of
2010.
Colfax Corporation
Change in Sales, Orders and Backlog
Dollars in millions
(Unaudited)
Sales Orders
----- ------
Three Months
Ended October 2,
2009 $128.5 $117.2
Components of
Change:
Existing
businesses 7.6 5.9 % 9.4 8.1 %
Acquisitions 3.0 2.3 % 3.0 2.5 %
Foreign currency
translation (6.7) (5.2)% (5.5) (4.7)%
Total 3.9 3.0 % 6.9 5.9 %
--- ---
Three Months
Ended October 1,
2010 $132.4 $124.1
====== ======
Backlog at
Sales Orders Period End
----- ------ ----------
Nine Months Ended
October 2, 2009 $394.1 $360.8 $325.3
Components of
Change:
Existing
businesses (20.0) (5.0)% 36.2 10.1 % (7.2) (2.2)%
Acquisitions 4.6 1.2 % 4.7 1.3 % 42.3 13.0 %
Foreign currency
translation (3.4) (0.9)% (2.5) (0.7)% (9.2) (2.8)%
Total (18.8) (4.7)% 38.4 10.7 % 25.9 8.0 %
----- ---- ----
Nine Months Ended
October 1, 2010 $375.3 $399.2 $351.2
====== ====== ======
Colfax Corporation
Reconciliation of Projected 2010 Net Income Per Share to Adjusted Net
Income Per Share
Amounts in Dollars
(Preliminary(1) and unaudited)
EPS Range
---------
Projected net income per share -fully
diluted $0.38 $0.43
Restructuring and other related charges
incurred year-to-date 0.15 0.15
Estimated restructuring and other related
charges (2) 0.02 0.02
Asbestos coverage litigation expenses 0.20 0.20
Asbestos liability and defense costs 0.08 0.08
---- ----
Projected adjusted net income per share -
fully diluted $0.83 $0.88
===== =====
(1) The preliminary projected net income per share for the year ended
December 31, 2010 reflects management's best estimate of corrections
related to the overstatement of the Company's pension liability as
described in the Form 8-K filed with the SEC on October 25, 2010.
Projected 2010 net income per share includes an after-tax benefit
of $.01 per share for the estimated correction related to the first
six months of 2010, compared to the historical results for that
period as reported in the Company's Quarterly Report on Form 10-Q
for the period ended July 2, 2010. Final results for the current
year periods could change when the analysis of the pension matter is
finalized.
(2) Represents estimated restructuring and other related charges for
actions implemented through November 4, 2010.
SOURCE Colfax Corporation
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