Colfax Announces First Quarter 2021 Results
April 29, 2021
- Reported $0.19 EPS from continuing operations and achieved $0.44 of adjusted EPS
- Grew sales 8% including organic sales-per-day growth of 9%
- Recently announced expanded fast-growing foot & ankle business with April acquisition of MedShape
- Raising low-end of adjusted 2021 EPS guidance range to $2.05-$2.15
ANNAPOLIS JUNCTION, MD, April 29, 2021 (GLOBE NEWSWIRE) — Colfax Corporation (NYSE: CFX), a leading diversified technology company, today announced its financial results for the first quarter of 2021.
The Company reported first quarter net income from continuing operations of $27 million, or $0.19 per share, compared to $0.06 per share in the prior year period. Adjusted earnings of $0.44 per share rose 16% from $0.38 per share in the prior year period and exceeded the Company’s previous guidance of $0.35 to $0.40 per share. Adjustments to reported earnings are included in this release.
In the first quarter, net sales of $879 million increased 8% on a reported basis, or 6% on a constant currency basis. Organic sales-per-day increased 9%. The Company also posted first quarter adjusted EBITA growth of 12% to $107 million. Adjusted EBITA margin was 12.2% in the quarter, a 50 basis points increase over the prior year period. The Company generated operating cash flow of $84 million and free cash flow of $60 million.
“Our results and momentum strengthened throughout the quarter,” said Matt Trerotola, Colfax President and CEO. “At ESAB, increased demand and our successful execution of margin expansion activities resulted in our highest-ever EBITA margin. In MedTech, market conditions improved and our Reconstructive segment delivered 8% organic sales-per-day growth and continues to gain share. We drove strong free cash flow in the quarter and are well on our way to generating more than $250 million in 2021. We are well-capitalized and positioned to execute our strategic growth program.”
During the quarter, the Company announced its intention to separate its fabrication technology and specialty medical technology businesses into two differentiated, independent, and publicly-traded companies, with a target completion date of the first quarter 2022. The Company strengthened its balance sheet in March with a registered public offering of 16.1 million shares of its common stock for net cash proceeds of $711 million. In April, Colfax completed the redemption of $700 million of its outstanding senior notes. As a result, the Company finished the first quarter with net leverage of 2.9 times and expects to end the year approaching 2.0 times before taking into account the potential impact from additional M&A investments.
Colfax also recently announced that it completed the acquisition of MedShape, Inc. in April. MedShape provides innovative surgical solutions for foot and ankle surgeons using its patented superelastic nickel titanium (NiTiNOL) and shape memory polymer technologies. The acquisition of MedShape® expands the Company’s foot & ankle platform that was formed from the recent Trilliant Surgical® and Scandinavian Total Ankle Replacement (STAR®) system acquisitions. With a total investment of approximately $225 million, the Company has created a high gross margin and fast-growing foot and ankle business with initial expected annualized revenues of approximately $65 million.
In the first quarter, Colfax’s Fabrication Technology segment sales increased 11% on an organic sales-per-day basis versus the prior year quarter and 8% overall, including a 1% positive impact from currency trends. The segment reported adjusted EBITA margins of 16.1%, compared to 14.8% in the prior year. Medical Technology segment sales in the quarter increased 5% on an organic sales-per-day basis compared to the prior year and 7% overall, including a 2% benefit from positive currency trends. The segment reported adjusted EBITA margins of 10.2%, compared to 10.6% in the prior year. Excluding the impact from recent acquisitions, Medical Technology segment adjusted EBITA margins increased 10 basis points compared to the prior year.
Updated 2021 Financial Outlook
Due to the strength of first quarter results, the Company announced that it is raising the low-end of its 2021 adjusted EPS outlook from $2.00-$2.15 to $2.05-$2.15. For the second quarter of 2021, Colfax expects adjusted earnings of $0.48 to $0.53 per diluted share. This guidance range reflects the recent equity issuance and senior note redemptions.
Conference Call and Webcast
The Company will hold a conference call to discuss its first quarter 2021 results beginning at 8:00 a.m. Eastern today, which will be open to the public by calling +1-877-303-7908 (U.S. callers) and +1-678-373-0875 (International callers) and referencing the conference ID number 1986324 and through webcast via Colfax’s website 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 (NYSE: CFX) is a leading diversified technology company that provides orthopedic and fabrication technology products and services to customers around the world, principally under the DJO and ESAB brands. The Company uses its Colfax Business System (“CBS”), a comprehensive set of tools and processes, to create superior value for customers, shareholders and associates. In March of 2021, Colfax announced its intention to separate into two independent and public companies, which is targeted to be completed in the first quarter of 2022 to accelerate strategic momentum and unlock additional value creation potential; one business will focus on specialty medical technologies and the other on fabrication technologies. For more information about Colfax and our separation activities, please visit www.colfaxcorp.com.
Non-GAAP Financial Measures and Other Adjustments
Colfax has provided in this press release financial information that has not been prepared in accordance with accounting principles generally accepted in the United States of America (“non-GAAP”). These non-GAAP financial measures may include one or more of the following: adjusted net income from continuing operations, adjusted net income margin from continuing operations, adjusted net income per diluted share from continuing operations, adjusted EBITA (earnings before interest, taxes and amortization), adjusted EBITA margin, organic sales growth, and free cash flow. Colfax also provides adjusted EBITA and adjusted EBITA margin on a segment basis.
Adjusted net income from continuing operations represents net income (loss) from continuing operations excluding restructuring and other related charges, European Union Medical Device Regulation (“MDR”) and other costs, debt extinguishment charges, acquisition-related amortization and other non-cash charges, and strategic transaction costs. Colfax also presents adjusted net income margin from continuing operations, which is subject to the same adjustments as adjusted net income from continuing operations.
Adjusted net income per diluted share from continuing operations represents adjusted net income from continuing operations divided by the number of adjusted diluted weighted average shares. Both GAAP and non-GAAP diluted net income per share data are computed based on weighted average shares outstanding and, if there is net income from continuing operations (rather than net loss) during the period, the dilutive impact of share equivalents outstanding during the period. Diluted weighted average shares outstanding and adjusted diluted weighted average shares outstanding are calculated on the same basis except for the net income or loss figure used in determining whether to include such dilutive impact.
Adjusted EBITA represents net income (loss) from continuing operations excluding restructuring and other related charges, MDR and other costs, acquisition-related amortization and other non-cash charges, and strategic transaction costs, as well as income tax expense (benefit) and interest expense, net. Colfax presents adjusted EBITA margin, which is subject to the same adjustments as adjusted EBITA. Further, Colfax presents adjusted EBITA (and adjusted EBITA margin) on a segment basis, which excludes the impact of strategic transaction costs and acquisition-related amortization and other non-cash charges from segment operating income.
Organic sales growth (decline) excludes the impact of acquisitions and foreign exchange rate fluctuations.
Free cash flow represents cash flow from operating activities less purchases of property, plant and equipment.
These non-GAAP financial measures assist Colfax management in comparing its operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans that are fundamentally different from the ongoing productivity improvements of the Company. Colfax management also believes that presenting these measures allows investors to view its performance using the same measures that the Company uses in evaluating its financial and business performance and trends.
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.
In this press release, Colfax presents forward-looking adjusted EPS and free cash flow guidance. Colfax does not provide such outlook on a GAAP basis because changes in the items that Colfax excludes from GAAP to calculate these measures can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of Colfax’s routine operating activities. Additionally, management does not forecast many of the excluded items for internal use and therefore cannot create or rely on outlook done on a GAAP basis. These excluded items could have a significant impact on the Company’s GAAP financial results.
CAUTIONARY NOTE CONCERNING FORWARD LOOKING STATEMENTS
This press release includes 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, including the intended separation of Colfax’s fabrication technology and specialty medical technology businesses (the “Separation”), and the timing, method and anticipated benefits of the Separation, 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, risks related to the impact of the COVID-19 global pandemic, including actions by governments, businesses and individuals in response to the situation, such as the scope and duration of the outbreak, the nature and effectiveness of government actions and restrictive measures implemented in response, material delays and cancellations of medical procedures, supply chain disruptions, the impact on creditworthiness and financial viability of customers; risks relating to the Separation, including the final approval of the Separation by Colfax’s board of directors, the uncertainty of obtaining regulatory approvals, including rulings from the Internal Revenue Service, if sought, Colfax’s ability to satisfactorily complete steps necessary for the Separation and related transactions to be generally tax-free for U.S. federal income tax purposes, the ability to satisfy the necessary conditions to complete the Separation on a timely basis, or at all, the ability to realize the anticipated benefits of the Separation, developments related to the impact of the COVID-19 pandemic on the Separation, and the financial and operating performance of each company following the Separation; other impacts on Colfax’s business and ability to execute business continuity plans; and the other factors detailed in Colfax’s reports filed with the U.S. Securities and Exchange Commission (the “SEC”), including its most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q under the caption “Risk Factors,” as well as the other risks discussed in Colfax’s filings with the SEC. In addition, these statements are based on 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.
Vice President, Finance