GlobeNewswire Inc | Oct 29, 2020 06:00AM EDT

October 29, 2020

-- Reported $0.12 EPS from continuing operations and achieved $0.41 of adjusted EPS -- Improved sales momentum with Medical Technology segment achieving 2% reported growth, and 1% organic growth -- Fabrication Technology segment 21% decremental margin contributed to solid Company profit and cash flow performance -- Signed definitive agreement to acquire extremity product lines with annual revenue of $20 million

ANNAPOLIS JUNCTION, MD, Oct. 29, 2020 (GLOBE NEWSWIRE) -- Colfax Corporation (NYSE: CFX), a leading diversified technology company, today announced its financial results for the third quarter of 2020.

The Company reported net income from continuing operations of $16.0 million, or $0.12 per share, in the quarter, compared to $0.02 in the prior year quarter. On an adjusted basis, the Company reported earnings of $0.41 per diluted share, compared to $0.50 in the third quarter of 2019. Adjustments to reported earnings are included in this release.

Colfax reported third quarter net sales of $806 million, 30% sequentially higher than second quarter 2020 net sales. Compared to the prior year quarter, sales declined 5% due to the current year impact on demand from COVID-19. Excluding the impact from currency translation adjustments, organic sales decreased 3% year-over-year. The Company also reported third quarter adjusted EBITA of $108 million, or 13.4% of sales, as compared with $126 million, or 14.9% of sales, in the prior year quarter. During the quarter, the Company generated operating cash flow of $80 million and free cash flow of $49 million.

We are pleased to report significantly stronger sequential results across both of our segments, said Matt Trerotola, Colfax President and CEO. Customer demand has returned to healthier levels and our teams are accelerating our recovery momentum. MedTechs rapid return to growth and FabTechs strong decrementals contributed to solid earnings and cash flow this quarter, and we expect further sequential improvement in the fourth quarter. We are confident that our transformed portfolio, proven business management system, and innovation path will compound value through sales, profit and cash flow expansion.

The Company also announced the signing of an agreement to acquire certain extremity product lines from Stryker Corporation for cash consideration of $15 million. Sales are expected to be approximately $20 million in the first full year following the close of the transaction, which is expected to occur in the fourth quarter of 2020, subject to customary closing conditions.

Our strategic growth program is active, and this acquisition is a great example of one of the many exciting opportunities we have in our pipeline to expand and strengthen our existing businesses, said Mr. Trerotola. By acquiring these core technologies, we will broaden our successful Reconstructive product line and gain entry into the adjacent high-growth foot and ankle market.

Colfaxs Fabrication Technology segment sales decreased 9% in the quarter on a reported basis and decreased 6% organically versus the prior year period, and reported adjusted EBITA margins of 14.7%, compared to 15.2% in the prior year. Medical Technology segment sales increased 2% in the quarter on a reported basis and 1% organically versus the prior year period, including a 2% benefit from nonrecurring sales of personal protective equipment. The segment also reported adjusted EBITA margins of 15.9%, compared to 18.5% in the prior year. Medical Technology segment adjusted EBITA margins included higher supply chain costs related to COVID-19.

The Company expects continued sequential improvement in the fourth quarter of 2020, with adjusted earnings from continuing operations of$0.45to$0.50per diluted share.

Conference Call and Webcast

The Company will hold a conference call to discuss these 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 1045229 and through webcast via Colfaxs 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 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. Colfax believes that its brands are among the most highly recognized in each of the markets that it serves. The Company uses its Colfax Business System (CBS), a comprehensive set of tools, processes and values, to create superior value for customers, shareholders and associates. Colfaxs common stock is traded on the NYSE under the ticker CFX.

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 sharefrom continuing operations represents adjusted income from continuing operations divided by the number of adjusted diluted weighted average shares. Both GAAP and non-GAAP dilutednet income per sharedata is 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, where we exclude the impact of strategic transaction costs and acquisition-related amortization and other non-cash charges from segment operating income.

Core or 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.

Decremental margin represents the change in Adjusted EBITA divided by the change in Net sales.

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 document, Colfax presents forward-looking adjusted EPS guidance. Colfax does not provide such outlook on a GAAP basis because changes in the items that Colfax excludes from GAAP to calculate the adjusted EPS measures can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of Colfaxs 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.

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 Colfaxs plans, objectives, expectations and intentions and other statements that are not historical or current fact. Forward-looking statements are based on Colfaxs 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 Colfaxs 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, and other impacts on Colfaxs business and ability to execute business continuity plans, and the other factors detailed in Colfaxs reports filed with the U.S. Securities and Exchange Commission (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 Colfaxs 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 Colfaxs global operating subsidiaries and/or their internal business divisions and does not necessarily indicate activities engaged in by Colfax Corporation.

Colfax CorporationCondensed Consolidated Statements of OperationsDollars in thousands, except per share data(Unaudited)

Three Months Ended Nine Months Ended October 2, September 27, October 2, 2020 September 27, 2020 2019 2019 Net sales $ 805,931 $ 846,519 $ 2,242,647 $ 2,439,085 Cost of sales 461,811 478,377 1,309,227 1,433,872 Gross profit 344,120 368,142 933,420 1,005,213 Selling,general and 278,060 290,500 805,984 846,288 administrativeexpenseRestructuringand other 4,129 9,781 23,589 47,197 relatedchargesOperating 61,931 67,861 103,847 111,728 incomePensionsettlement ? 33,616 ? 33,616 lossInterest 25,567 31,828 78,647 86,820 expense, netIncome (loss)fromcontinuing 36,364 2,417 25,200 (8,708) operationsbefore incometaxesIncome taxexpense 19,528 (1,353) 2,638 6,840 (benefit)Net income(loss) from 16,836 3,770 22,562 (15,548) continuingoperationsIncome (loss)fromdiscontinued (2,641) 9,024 (10,906) (486,265) operations,net of taxesNet income 14,195 12,794 11,656 (501,813) (loss)Less: incomeattributableto 789 2,320 2,243 8,970 noncontrollinginterest, netof taxesNet income(loss)attributable $ 13,406 $ 10,474 $ 9,413 $ (510,783) to ColfaxCorporationNet income(loss) per share - basic& dilutedContinuing $ 0.12 $ 0.02 $ 0.15 $ (0.14) operationsDiscontinued $ (0.02) $ 0.06 $ (0.08) $ (3.63) operationsConsolidated $ 0.10 $ 0.08 $ 0.07 $ (3.77) operations

Colfax CorporationReconciliation of GAAP to Non-GAAP Financial MeasuresDollars in millions, except per share data(Unaudited)

Three Months Ended Nine Months Ended October 2, September October 2, September 2020 27, 2019 2020 27, 2019Adjusted Net Income andAdjusted Net Income Per ShareNet income (loss) fromcontinuing operations $ 16.0 $ 2.9 $ 20.3 $ (18.6) attributable to ColfaxCorporation^ (1)Restructuring and otherrelated charges - 6.3 13.3 28.5 50.7 pretax^ (2)MDR and other - pretax^ 2.6 ? 4.5 ? (3)Debt extinguishment ? ? ? 0.8 charges - pretaxAcquisition-relatedamortization and other 36.2 43.7 108.1 124.1 non-cash charges -pretax ^(4)Strategic transaction 0.6 0.9 3.2 56.7 costs - pretax ^(5)Pension settlement loss ? 33.6 ? 33.6 - pretaxTax adjustment^ (6) (5.2) (26.0) (41.5) (55.4) Adjusted net incomefrom continuing $ 56.6 $ 68.5 $ 123.2 $ 191.9 operationsAdjusted net incomemargin from continuing 7.0 % 8.1 % 5.5 % 7.9 %operationsWeighted-average sharesoutstanding - diluted 138.1 137.1 139.1 136.3 (in millions) Adjusted net income pershare - diluted from $ 0.41 $ 0.50 $ 0.89 $ 1.41 continuing operations Net income per share -diluted from continuing $ 0.12 $ 0.02 $ 0.15 $ (0.14) operations (GAAP)

__________(1) Net income (loss) from continuing operations attributable to Colfax Corporation for the respective periods is calculated using Net income (loss) from continuing operations less the continuing operations component of the income attributable to noncontrolling interest, net of taxes, of $0.8 million and $2.2 million for the three and nine months ended October 2, 2020 and $0.9 million and $3.1 million for the three and nine months ended September 27, 2019, respectively. Net income (loss) from continuing operations attributable to Colfax Corporation for the nine months ended October 2, 2020 includes a $6.8million discrete tax benefit associated with the filing of timely elected changes to U.S. Federal tax returns to credit rather than to deduct foreign taxes. The discrete benefit has been excluded from the effective tax rates used to calculate adjusted net income and adjusted net income per share.(2) Includes $2.2 million and $4.9 million of expense classified as Cost of sales on the Companys Condensed Consolidated Statements of Operations for the three and nine months ended October 2, 2020, respectively, and $3.5 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the three and nine months ended September 27, 2019(3) Primarily related to costs specific to compliance with medical device reporting regulations and other requirements of the European Union Medical Device Regulation of 2017.(4) Includes amortization of acquired intangibles and fair value charges on acquired inventory.(5) Includes costs incurred for the acquisition of DJO.(6) The effective tax rates used to calculate adjusted net income and adjusted net income per share were 30.1% and 26.0% for the three and nine months ended October 2, 2020 and 26.2% and 24.2% for the three and nine months ended September 27, 2019, respectively.

Colfax CorporationReconciliation of GAAP to Non-GAAP Financial MeasuresDollars in millions(Unaudited)

Three Months Ended Nine Months Ended October 2, September October 2, September 2020 27, 2019 2020 27, 2019 (Dollars in millions) Net income (loss) from $ 16.8 $ 3.8 $ 22.6 $ (15.5) continuing operations (GAAP)Income tax expense (benefit) 19.5 (1.4) 2.6 6.8 Interest expense, net^(1) 25.6 31.8 78.6 86.8 Pension settlement loss ? 33.6 ? 33.6 Restructuring and other related 6.3 13.3 28.5 50.7 charges^(2)MDR and other^(3) 2.6 ? 4.5 ? Strategic transaction costs^(4) 0.6 0.9 3.2 56.7 Acquisition-related amortization 36.2 43.7 108.1 124.1 and other non-cash charges^(5)Adjusted EBITA (non-GAAP) $ 107.7 $ 125.8 $ 248.2 $ 343.2 Net income (loss) margin from 2.1 % 0.4 % 1.0 % (0.6) %continuing operations (GAAP)Adjusted EBITA margin (non-GAAP) 13.4 % 14.9 % 11.1 % 14.1 %

__________(1) The nine months ended September 27, 2019 includes $0.8 million of debt extinguishment charges in the first quarter of 2019.(2) Restructuring and other related charges includes $2.2 million and $4.9 million of expense classified as Cost of sales on the Companys Condensed Consolidated Statements of Operations for the three and nine months ended October 2, 2020, respectively, and $3.5 million of expense classified as Cost of sales on the Companys Condensed Consolidated Statements of Operations for the three and nine months ended September 27, 2019.(3) Primarily related to costs specific to compliance with medical device reporting regulations and other requirements of the European Union Medical Device Regulation of 2017.(4) Includes costs incurred for the acquisition of DJO.(5) Includes amortization of acquired intangibles and fair value charges on acquired inventory.

Colfax CorporationReconciliation of GAAP to non-GAAP Financial MeasuresChange in SalesDollars in millions(Unaudited)

Net Sales Fabrication Technology Medical Technology Total Colfax $ % $ % $ % For thethree monthsended $ 539.2 $ 307.3 $ 846.5 September27, 2019Components of Change:Existingbusinesses^ (31.6) (5.9) % 4.2 1.4 % (27.4) (3.2) %(1)Acquisitions ? ? % ? ? % ? ? %^(2)Foreigncurrency (16.1) (3.0) % 2.9 0.9 % (13.2) (1.6) %translation^(3) (47.7) (8.9) % 7.1 2.3 % (40.6) (4.8) %For thethree monthsended $ 491.5 $ 314.4 $ 805.9 October 2,2020

(1) Excludes the impact of foreign exchange rate fluctuations and acquisitions, thus providing a measure of change due to factors such as price, product mix and volume.(2) Represents the incremental sales from our acquisitions.(3) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

Net Sales Fabrication Technology Medical Technology^(1) Total Colfax $ % $ % $ % For the ninemonths ended $ 1,692.3 $ 915.9 $ 2,608.2 September27, 2019Components of Change:Existingbusinesses^ (189.4) (11.2) % (102.3) (11.2) % (291.7) (11.2) %(2)Acquisitions ? ? % ? ? % ? ? %^(3)Foreigncurrency (71.5) (4.2) % (2.4) (0.3) % (73.9) (2.8) %translation^(4) (260.9) (15.4) % (104.7) (11.5) % (365.6) (14.0) %For the ninemonths ended $ 1,431.4 $ 811.2 $ 2,242.6 October 2,2020

(1) Medical Technology prior year Net sales and components of change are based on or derived from Managements internal reports. On the Companys form 10-Q for the third quarter of 2020, Medical Technology prior year Net sales include only sales subsequent to February 22, 2019, the date of the DJO acquisition, and sales prior to February 22, 2020 are included in the Acquisitions line item of the change in sales reconciliation.(2) Excludes the impact of foreign exchange rate fluctuations and acquisitions, thus providing a measure of change due to factors such as price, product mix and volume.(3) Represents the incremental sales from our acquisitions.(4) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

Colfax CorporationCondensed Consolidated Balance SheetsDollars inthousands, except share amounts(Unaudited)

October 2, 2020 December 31, 2019ASSETS CURRENT ASSETS: Cash and cash equivalents $ 66,423 $ 109,632 Trade receivables, less allowancefor credit losses of $34,975 and 498,357 561,865 $32,634Inventories, net 536,052 571,558 Other current assets 186,680 161,190 Total current assets 1,287,512 1,404,245 Property, plant and equipment, net 463,775 491,241 Goodwill 3,245,042 3,202,517 Intangible assets, net 1,635,706 1,719,019 Lease asset - right of use 170,580 173,320 Other assets 351,619 396,490 Total assets $ 7,154,234 $ 7,386,832 LIABILITIES AND EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 26,954 $ 27,642 Accounts payable 306,314 359,782 Accrued liabilities 451,265 469,890 Total current liabilities 784,533 857,314 Long-term debt, less current portion 2,191,725 2,284,184 Non-current lease liability 130,947 136,399 Other liabilities 589,560 619,307 Total liabilities 3,696,765 3,897,204 Equity: Common stock, $0.001 par value;400,000,000 shares authorized;118,457,179 and 118,059,082 issued 118 118 and outstanding as of October 2,2020 and December 31, 2019,respectivelyAdditional paid-in capital 3,470,169 3,445,597 Retained earnings 484,155 479,560 Accumulated other comprehensive loss (541,996) (483,845) Total Colfax Corporation equity 3,412,446 3,441,430 Noncontrolling interest 45,023 48,198 Total equity 3,457,469 3,489,628 Total liabilities and equity $ 7,154,234 $ 7,386,832

Colfax CorporationCondensed Consolidated Statements of Cash FlowsDollars inthousands(Unaudited)

Nine Months Ended October 2, September 27, 2020 2019Cash flows from operating activities: Net income (loss) $ 11,656 $ (501,813) Adjustments to reconcile net income (loss) to net cash provided by operating activities:Divestiture impairment loss ? 481,000 Depreciation, amortization and other impairment 181,114 190,577 chargesStock-based compensation expense 21,642 17,005 Non-cash interest expense 4,253 5,674 Deferred income tax benefit (30,946) (18,673) (Gain) loss on sale of property, plant and 523 (140) equipmentPension settlement loss ? 77,390 Changes in operating assets and liabilities: Trade receivables, net 44,592 29,071 Inventories, net 28,556 (54,256) Accounts payable (42,869) (98,920) Income taxes (9,722) (39,909) Other operating assets and liabilities (35,666) (21,257) Net cash provided by operating activities 173,133 65,749 Cash flows from investing activities: Purchases of property, plant and equipment (81,583) (100,383) Proceeds from sale of property, plant and 4,929 7,474 equipmentAcquisitions, net of cash received (7,477) (3,136,777) Net cash used in investing activities (84,131) (3,229,686) Cash flows from financing activities: Proceeds from borrowings on term credit ? 2,725,000 facilityPayments under term credit facility (40,000) (533,437) Proceeds from borrowings on revolving credit 794,678 1,780,085 facilities and otherRepayments of borrowings on revolving credit (866,215) (1,136,186) facilities and otherPayment of debt issuance costs (4,560) (24,402) Proceeds from prepaid stock purchase contracts ? 377,814 Proceeds from issuance of common stock, net 2,930 4,787 Payment for noncontrolling interest share ? (93,087) repurchaseDeferred consideration payments and other (12,411) (9,680) Net cash provided by (used in) financing (125,578) 3,090,894 activitiesEffect of foreign exchange rates on Cash and (6,633) (5,216) cash equivalentsDecrease in Cash and cash equivalents (43,209) (78,259) Cash and cash equivalents, beginning of period 109,632 245,019 Cash and cash equivalents, end of period $ 66,423 $ 166,760

Mike MacekVice President, FinanceColfax Corporation+1-302-252-9129investorrelations@colfaxcorp.com