Unaudited Pro Forma Condensed Consolidated Financial Information
On December 11, 2017, Colfax Corporation (the “Company” or “Colfax”) completed the sale of its fluid handling business (“Fluid Handling”) to CIRCOR International, Inc., a Delaware corporation (“CIRCOR”). The initial consideration included cash consideration of $559.4 million, 3.3 million newly-issued shares of CIRCOR common stock with an estimated fair value of $134.9 million and the assumption of certain liabilities, including certain pension liabilities. The final purchase price will include post closing adjustments as defined in the purchase agreement.
The Company presented its operations for the Fluid Handling business as discontinued operations in its condensed consolidated financial statements included in the Form 10-Q for the three and nine months ended September 29, 2017. The accompanying unaudited pro forma condensed consolidated statements of income for the nine months ended September 29, 2017 and for years ended December 31, 2016, 2015 and 2014 give effect to this divestiture as if it had occurred on January 1, 2014. The following unaudited pro forma condensed consolidated balance sheet gives effect to this divestiture as if it had occurred on September 29, 2017, the date of the Company’s most recently filed balance sheet.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with (i) the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Colfax’s Form 10-K for the year ended December 31, 2016 filed with the SEC on February 14, 2017, and (ii) the unaudited condensed consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” included in Colfax’s Form 10-Q for the three and nine months ended September 29, 2017 filed with the SEC on November 6, 2017.
The unaudited pro forma condensed consolidated financial statements are presented based on currently available information and are intended for informational purposes only. These unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what Colfax’s results of operations or financial condition would have been had the divestiture been completed on the dates assumed. In addition, they are not necessarily indicative of Colfax’s future results of operations or financial condition.
COLFAX CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
September 29, 2017
(Dollars in thousands)
| | | | | | Pro Forma
Adjustments | | | | |
| | | As Reported | | | Divestiture of
Fluid Handling | | | Pro Forma | |
| ASSETS | | | | | | | | | |
| CURRENT ASSETS: | | | | | | | | | |
| Cash and cash equivalents | | $ | 260,414 | | | $ | 559,400 | (b) | | $ | 819,814 | |
| Short-term investments | | | — | | | | 134,850 | (b) | | | 134,850 | |
| Trade receivables, less allowance for doubtful accounts of $30,042 | | | 957,215 | | | | — | | | | 957,215 | |
| Inventories, net | | | 414,556 | | | | — | | | | 414,556 | |
| Other current assets | | | 188,221 | | | | 12,036 | (f) | | | 200,257 | |
| Current portion of assets held for sale | | | 494,463 | | | | (494,463 | )(a) | | | — | |
| Total current assets | | | 2,314,869 | | | | 211,823 | | | | 2,526,692 | |
| Property, plant and equipment, net | | | 512,561 | | | | — | | | | 512,561 | |
| Goodwill | | | 2,527,141 | | | | — | | | | 2,527,141 | |
| Intangible assets, net | | | 935,804 | | | | — | | | | 935,804 | |
| Other assets | | | 547,941 | | | | (74,206 | )(d) | | | 473,735 | |
| Total assets | | $ | 6,838,316 | | | $ | 137,617 | | | $ | 6,975,933 | |
| | | | | | | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | | | | | |
| Current portion of long-term debt | | $ | 5,861 | | | $ | — | | | $ | 5,861 | |
| Accounts payable | | | 543,725 | | | | 10,375 | | | | 554,100 | |
| Customer advances and billings in excess of costs incurred | | | 129,893 | | | | — | | | | 129,893 | |
| Accrued liabilities | | | 336,744 | | | | 37,275 | (d) | | | 374,019 | |
| Current portion of liabilities held for sale | | | 272,407 | | | | (272,407 | )(a) | | | — | |
| Total current liabilities | | | 1,288,630 | | | | (224,757 | ) | | | 1,063,873 | |
| Long-term debt, less current portion | | | 1,334,627 | | | | — | | | | 1,334,627 | |
| Other liabilities | | | 701,261 | | | | 10,922 | (d) | | | 712,183 | |
| Total liabilities | | | 3,324,518 | | | | (213,835 | ) | | | 3,110,683 | |
| Equity: | | | | | | | | | | | | |
| Common stock, $0.001 par value; 400,000,000 shares authorized; 123,115,844 issued and outstanding | | | 123 | | | | — | | | | 123 | |
| Additional paid-in capital | | | 3,220,073 | | | | — | | | | 3,220,073 | |
| Retained earnings | | | 833,200 | | | | 174,074 | (c) | | | 1,007,274 | |
| Accumulated other comprehensive loss | | | (753,772 | ) | | | 177,378 | (a) | | | (576,394 | ) |
| Total Colfax Corporation equity | | | 3,299,624 | | | | 351,452 | | | | 3,651,076 | |
| Noncontrolling interest | | | 214,174 | | | | — | | | | 214,174 | |
| Total equity | | | 3,513,798 | | | | 351,452 | | | | 3,865,250 | |
| Total liabilities and equity | | $ | 6,838,316 | | | $ | 137,617 | | | $ | 6,975,933 | |
COLFAX CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Nine Months Ended September 29, 2017
(Dollars in thousands, except share and per share amounts)
| | | | | | Pro Forma
Adjustments | | | | |
| | | As Reported | | | Divestiture of
Fluid Handling
(a) | | | Pro Forma | |
| Net sales | | $ | 2,426,101 | | | $ | — | | | $ | 2,426,101 | |
| Cost of sales | | | 1,664,309 | | | | — | | | | 1,664,309 | |
| Gross profit | | | 761,792 | | | | — | | | | 761,792 | |
| Selling, general and administrative expense | | | 533,550 | | | | — | | | | 533,550 | |
| Restructuring and other related charges | | | 23,131 | | | | — | | | | 23,131 | |
| Operating income | | | 205,111 | | | | — | | | | 205,111 | |
| Interest expense | | | 29,106 | | | | — | | | | 29,106 | |
| Income from continuing operations before income taxes | | | 176,005 | | | | — | | | | 176,005 | |
| Provision for income taxes | | | 46,128 | | | | 643 | | | | 46,771 | |
| Net income from continuing operations | | | 129,877 | | | | (643 | ) | | | 129,234 | |
| Discontinued Operations: | | | | | | | | | | | — | |
| Income from discontinued operations, net of taxes | | | 21,790 | | | | (26,508 | )(e) | | | (4,718 | ) |
| Net income | | | 151,667 | | | | (27,151 | ) | | | 124,516 | |
| Less: income attributable to noncontrolling interest, net of taxes | | | 13,867 | | | | — | | | | 13,867 | |
| Net income attributable to Colfax Corporation | | $ | 137,800 | | | $ | (27,151 | ) | | $ | 111,292 | |
| Net income per share - basic | | | | | | | | | | | | |
| Continuing operations | | $ | 0.94 | | | $ | — | | | $ | 0.94 | |
| Discontinued operations | | $ | 0.18 | | | $ | (0.22 | ) | | $ | (0.04 | ) |
| Consolidated operations | | $ | 1.12 | | | $ | (0.22 | ) | | $ | 0.90 | |
| Net income per share - diluted | | | | | | | | | | | | |
| Continuing operations | | $ | 0.94 | | | $ | — | | | $ | 0.94 | |
| Discontinued operations | | $ | 0.18 | | | $ | (0.21 | ) | | $ | (0.04 | )** |
| Consolidated operations | | $ | 1.11 | * | | $ | (0.21 | ) | | $ | 0.90 | |
| Weighted-average shares of common stock outstanding: | | | | | | | | | | | | |
| Basic | | | 123,187,447 | | | | 123,187,447 | | | | 123,187,447 | |
| Diluted | | | 123,947,762 | | | | 123,947,762 | | | | 123,947,762 | |
* | Net income per share does not add due to rounding. |
| |
** | Net income per share does not cross add due to rounding. |
See the accompanying Notes to the Unaudited Pro Forma Consolidated Condensed Financial Statements.
COLFAX CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 2016
(Dollars in thousands, except share and per share amounts)
| | | | | | Pro Forma
Adjustments | | | | |
| | | As Reported | | | Divestiture of
Fluid Handling
(a) | | | Pro Forma | |
| Net sales | | $ | 3,647,047 | | | $ | (461,294 | ) | | $ | 3,185,753 | |
| Cost of sales | | | 2,501,396 | | | | (308,025 | ) | | | 2,193,371 | |
| Gross profit | | | 1,145,651 | | | | (153,269 | ) | | | 992,382 | |
| Selling, general and administrative expense | | | 825,240 | | | | (115,516 | )(e) | | | 709,724 | |
| Asbestos coverage adjustment | | | 8,226 | | | | — | | | | 8,226 | |
| Restructuring and other related charges | | | 74,170 | | | | (15,674 | ) | | | 58,496 | |
| Operating income | | | 238,015 | | | | (22,079 | ) | | | 215,936 | |
| Interest expense, net | | | 30,016 | | | | 260 | | | | 30,276 | |
| Income before income taxes | | | 207,999 | | | | (22,339 | ) | | | 185,660 | |
| Provision for (benefit from) income taxes | | | 62,808 | | | | (20,666 | ) | | | 42,142 | |
| Net income | | | 145,191 | | | | (1,673 | ) | | | 143,518 | |
| Less: income attributable to noncontrolling interest, net of taxes | | | 17,080 | | | | — | | | | 17,080 | |
| Net income attributable to Colfax Corporation | | | 128,111 | | | | (1,673 | ) | | | 126,438 | |
| Net income per share: | | | | | | | | | | | | |
| Basic | | $ | 1.04 | | | $ | (0.01 | ) | | $ | 1.03 | |
| Diluted | | $ | 1.04 | | | $ | (0.01 | ) | | $ | 1.03 | |
| Weighted-average shares of common stock outstanding: | | | | | | | | | | | | |
| Basic | | | 122,911,581 | | | | 122,911,581 | | | | 122,911,581 | |
| Diluted | | | 123,198,726 | | | | 123,198,726 | | | | 123,198,726 | |
See the accompanying Notes to the Unaudited Pro Forma Consolidated Condensed Financial Statements.
COLFAX CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 2015
(Dollars in thousands, except share and per share amounts)
| | | | | | Pro Forma
Adjustments | | | | |
| | | As Reported | | | Divestiture of
Fluid Handling
(a) | | | Pro Forma | |
| Net sales | | $ | 3,967,053 | | | $ | (532,701 | ) | | $ | 3,434,352 | |
| Cost of sales | | | 2,715,279 | | | | (352,613 | ) | | | 2,362,666 | |
| Gross profit | | | 1,251,774 | | | | (180,088 | ) | | | 1,071,686 | |
| Selling, general and administrative expense | | | 905,952 | | | | (140,637 | )(e) | | | 765,315 | |
| Restructuring and other related charges | | | 61,177 | | | | (4,355 | ) | | | 56,822 | |
| Operating income | | | 284,645 | | | | (35,096 | ) | | | 249,549 | |
| Interest expense, net | | | 47,743 | | | | (241 | ) | | | 47,502 | |
| Income before income taxes | | | 236,902 | | | | (34,855 | ) | | | 202,047 | |
| Provision for (benefit from) income taxes | | | 49,724 | | | | (14,884 | ) | | | 34,840 | |
| Net income | | | 187,178 | | | | (19,971 | ) | | | 167,207 | |
| Less: income attributable to noncontrolling interest, net of taxes | | | 19,439 | | | | — | | | | 19,439 | |
| Net income attributable to Colfax Corporation | | $ | 167,739 | | | $ | (19,971 | ) | | $ | 147,768 | |
| Net income per share: | | | | | | | | | | | | |
| Basic | | $ | 1.35 | | | $ | (0.16 | ) | | $ | 1.19 | |
| Diluted | | $ | 1.34 | | | $ | (0.16 | ) | | $ | 1.18 | |
| Weighted-average shares of common stock outstanding: | | | | | | | | | | | | |
| Basic | | | 124,101,033 | | | | 124,101,033 | | | | 124,101,033 | |
| Diluted | | | 124,869,649 | | | | 124,869,649 | | | | 124,869,649 | |
See the accompanying Notes to the Unaudited Pro Forma Consolidated Condensed Financial Statements.
COLFAX CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 2014
(Dollars in thousands, except share and per share amounts)
| | | | | | Pro Forma
Adjustments | | | | |
| | | As Reported | | | Divestiture of
Fluid Handling
(a) | | | Pro Forma | |
| Net sales | | $ | 4,624,476 | | | $ | (653,417 | ) | | $ | 3,971,059 | |
| Cost of sales | | | 3,145,631 | | | | (436,024 | ) | | | 2,709,607 | |
| Gross profit | | | 1,478,845 | | | | (217,393 | ) | | | 1,261,452 | |
| Selling, general and administrative expense | | | 1,011,171 | | | | (163,446 | )(e) | | | 847,725 | |
| Restructuring and other related charges | | | 58,121 | | | | (6,988 | ) | | | 51,133 | |
| Operating income | | | 409,553 | | | | (46,959 | ) | | | 362,594 | |
| Interest expense, net | | | 51,305 | | | | 2,513 | | | | 53,818 | |
| Income before income taxes | | | 358,248 | | | | (49,472 | ) | | | 308,776 | |
| Provision for (benefit from) income taxes | | | (62,025 | ) | | | (20,310 | )(g) | | | (82,335 | ) |
| Net income | | | 420,273 | | | | (29,162 | ) | | | 391,111 | |
| Less: income attributable to noncontrolling interest, net of taxes | | | 28,175 | | | | — | | | | 28,175 | |
| Net income attributable to Colfax Corporation | | | 392,098 | | | | (29,162 | ) | | | 362,936 | |
| Dividends on preferred stock | | | 2,348 | | | | — | | | | 2,348 | |
| Preferred stock conversion inducement payment | | | 19,565 | | | | — | | | | 19,565 | |
| Net income attributable to Colfax Corporation common shareholders | | $ | 370,185 | | | $ | (29,162 | ) | | $ | 341,023 | |
| Net income per share: | | | | | | | | | | | | |
| Basic | | $ | 3.06 | | | $ | (0.24 | ) | | $ | 2.82 | |
| Diluted | | $ | 3.02 | | | $ | (0.24 | ) | | $ | 2.78 | |
| Weighted-average shares of common stock outstanding: | | | | | | | | | | | | |
| Basic | | | 121,143,790 | | | | 121,143,790 | | | | 121,143,790 | |
| Diluted | | | 122,666,292 | | | | 122,666,292 | | | | 122,666,292 | |
See the accompanying Notes to the Unaudited Pro Forma Consolidated Condensed Financial Statements.
COLFAX CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| (a) | Adjustment reflects the assets, liabilities, equity and operations of Fluid Handling. |
| | |
| (b) | Adjustment represents the receipt of cash consideration and CIRCOR common stock at closing. The CIRCOR common stock received is valued based on the CIRCOR share price as of the close of trading on December 8, 2017. |
| | |
| (c) | This adjustment reflects the gain arising from the sale net of tax effects. No adjustment has been made to the cash consideration to give effect to any potential post-closing adjustments under the terms of the purchase agreement. |
| | |
| (d) | Adjustment represents tax effects of the divestiture. |
| | |
| (e) | Adjustment does not include asbestos-related expense. Pursuant to the purchase agreement, Colfax will retain the Fluid Handling’s asbestos-related contingencies and insurance coverages. |
| | |
| (f) | Adjustment represent Cash and cash equivalents on Fluid Handling's books as of September 29, 2017. |
| | |
(g) | The income tax provision adjustment for any gain on the disposal of Fluid Handling does not consider any changes in judgment as to the realizability of deferred tax assets. |
