Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced
financial results for the third quarter ended September 29, 2019.
Third quarter 2019 net revenues were $648.3 million, an increase
of 6.3% compared to the prior year period. Excluding the
impact of foreign currency exchange rate fluctuations, third
quarter 2019 net revenues increased 8.0% over the year ago
period.
Third quarter 2019 GAAP earnings per share from continuing
operations were $4.85, compared to GAAP earnings per share of $1.21
in the prior year period. Third quarter 2019 adjusted diluted
earnings per share from continuing operations increased 17.9% to
$2.97, compared to $2.52 in the prior year period.
Liam Kelly, President and Chief Executive Officer, said, “The
third quarter of 2019 was another excellent one for the Company, as
we generated upper-single digit constant currency revenue growth,
while also achieving significant year-over-year, and sequential,
gross and operating margin expansion."
Mr. Kelly continued, "Similar to our first half of 2019 results,
during the third quarter we continued to see strength across nearly
every global product category and geographic region. Based on
the strong performance during the first nine months of the year, as
well as our expectations for the fourth quarter, we are once again
increasing our full year constant currency revenue growth guidance
from a range of between 7.5% and 8%, to a range of between 8% and
8.25%."
Mr. Kelly concluded, "In addition to strong third quarter
top-line performance, we were also able to increase our adjusted
earnings per share by 17.9%, despite a greater negative impact from
foreign currency exchange rate volatility than we had previously
expected. Based on our financial performance during the first
nine months of the year, coupled with our projections for the
fourth quarter, we are narrowing our full year adjusted earnings
per share guidance from a range of between $10.90 and $11.10, to a
range of between $11.05 and $11.10. In summary, Teleflex
continues to perform at a high level, which gives me even more
confidence in the Company's ability to achieve our previously
provided long-term financial objectives, and in doing so, deliver
on our commitments to our shareholders, our customers, and our
employees."
NET REVENUE BY SEGMENT
The following table provides information regarding net revenues
in each of the Company's reportable operating segments for the
three and nine months ended September 29, 2019 and September 30,
2018 on both a GAAP and constant currency basis. The discussion
below the table of the principal factors behind changes in net
revenues for the three months ended September 29, 2019 as compared
to the prior year period applies to both GAAP revenue and constant
currency revenue, although GAAP revenue also was affected by
foreign currency exchange rate fluctuations, as indicated in the
"Currency Impact" column of the table.
|
|
|
|
|
Three Months Ended |
|
% Increase / (Decrease) |
|
September 29, 2019 |
September 30, 2018 |
|
Total SalesGrowth |
CurrencyImpact |
ConstantCurrencyRevenueGrowth |
Americas |
$ |
374.5 |
$ |
338.7 |
|
10.6 |
% |
(0.1 |
)% |
10.7 |
% |
EMEA |
|
140.5 |
|
139.6 |
|
0.7 |
% |
(4.4 |
)% |
5.1 |
% |
Asia |
|
77.9 |
|
76.5 |
|
1.7 |
% |
(3.3 |
)% |
5.0 |
% |
OEM |
|
55.4 |
|
54.9 |
|
1.1 |
% |
(0.8 |
)% |
1.9 |
% |
Total |
$ |
648.3 |
$ |
609.7 |
|
6.3 |
% |
(1.7 |
)% |
8.0 |
% |
|
Nine Months
Ended |
|
% Increase /
(Decrease) |
|
September 29, 2019 |
September 30, 2018 |
|
Total SalesGrowth |
CurrencyImpact |
ConstantCurrencyRevenueGrowth |
Americas |
$ |
1,092.3 |
$ |
993.5 |
|
10.0 |
% |
(0.2 |
)% |
10.2 |
% |
EMEA |
|
442.1 |
|
452.9 |
|
(2.4 |
)% |
(6.2 |
)% |
3.8 |
% |
Asia |
|
213.9 |
|
207.1 |
|
3.2 |
% |
(5.2 |
)% |
8.4 |
% |
OEM |
|
166.1 |
|
153.3 |
|
8.4 |
% |
(1.2 |
)% |
9.6 |
% |
Total |
$ |
1,914.4 |
$ |
1,806.8 |
|
6.0 |
% |
(2.4 |
)% |
8.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Americas third quarter 2019 net revenues were $374.5 million, an
increase of 10.6% compared to the prior year period.
Excluding the impact of foreign currency exchange rate
fluctuations, third quarter 2019 net revenues increased 10.7%
compared to the prior year period. The increase in constant
currency revenue was primarily attributable to increases in sales
volumes of existing products and an increase in new product
sales.
EMEA third quarter 2019 net revenues were $140.5 million, an
increase of 0.7% compared to the prior year period. Excluding the
impact of foreign currency exchange rate fluctuations, third
quarter 2019 net revenues increased 5.1% compared to the prior year
period. The increase in constant currency revenue was primarily
attributable to an increase in sales volumes of existing products,
an increase in new product sales, and net revenues generated by
acquired businesses.
Asia third quarter 2019 net revenues were $77.9 million, an
increase of 1.7% compared to the prior year period. Excluding
the impact of foreign currency exchange rate fluctuations, third
quarter 2019 net revenues increased 5.0% compared to the prior year
period. The increase in constant currency revenue was
primarily attributable to price increases and an increase in sales
volumes of existing products.
OEM third quarter 2019 net revenues were $55.4 million, an
increase of 1.1% compared to the prior year period. Excluding
the impact of foreign currency exchange rate fluctuations, third
quarter 2019 net revenues increased 1.9% compared to the prior year
period. The increase in constant currency revenue was
primarily attributable to an increase in sales volumes of existing
products.
NET REVENUE BY GLOBAL PRODUCT CATEGORY
The following table and commentary provides information
regarding net revenues in each of the Company's global product
categories for the three and nine months ended September 29, 2019
and September 30, 2018 on both a GAAP and constant currency
basis.
|
|
|
|
|
Three Months
Ended |
|
% Increase /
(Decrease) |
|
September 29, 2019 |
September 30, 2018 |
|
TotalRevenueGrowth |
CurrencyImpact |
ConstantCurrencyRevenueGrowth |
Vascular Access |
$ |
148.7 |
$ |
142.1 |
|
4.6 |
% |
(1.5 |
)% |
6.1 |
% |
Interventional |
|
106.9 |
|
100.0 |
|
6.9 |
% |
(1.3 |
)% |
8.2 |
% |
Anesthesia |
|
87.1 |
|
87.5 |
|
(0.5 |
)% |
(2.0 |
)% |
1.5 |
% |
Surgical |
|
92.6 |
|
89.9 |
|
3.0 |
% |
(2.0 |
)% |
5.0 |
% |
Interventional Urology |
|
73.6 |
|
49.0 |
|
50.3 |
% |
(0.1 |
)% |
50.4 |
% |
OEM |
|
55.4 |
|
54.9 |
|
1.1 |
% |
(0.8 |
)% |
1.9 |
% |
Other |
|
83.9 |
|
86.3 |
|
(2.8 |
)% |
(2.4 |
)% |
(0.4 |
)% |
Total |
$ |
648.3 |
$ |
609.7 |
|
6.3 |
% |
(1.7 |
)% |
8.0 |
% |
|
Nine Months
Ended |
|
% Increase /
(Decrease) |
|
September 29, 2019 |
September 30, 2018 |
|
TotalRevenueGrowth |
CurrencyImpact |
ConstantCurrencyRevenueGrowth |
Vascular Access |
$ |
446.2 |
$ |
426.3 |
|
4.7 |
% |
(2.2 |
)% |
6.9 |
% |
Interventional |
|
314.9 |
|
288.3 |
|
9.2 |
% |
(2.0 |
)% |
11.2 |
% |
Anesthesia |
|
253.1 |
|
261.8 |
|
(3.3 |
)% |
(3.0 |
)% |
(0.3 |
)% |
Surgical |
|
274.9 |
|
266.0 |
|
3.3 |
% |
(3.0 |
)% |
6.3 |
% |
Interventional Urology |
|
201.3 |
|
139.0 |
|
44.9 |
% |
(0.2 |
)% |
45.1 |
% |
OEM |
|
166.1 |
|
153.3 |
|
8.4 |
% |
(1.2 |
)% |
9.6 |
% |
Other |
|
257.9 |
|
272.1 |
|
(5.2 |
)% |
(3.4 |
)% |
(1.8 |
)% |
Total |
$ |
1,914.4 |
$ |
1,806.8 |
|
6.0 |
% |
(2.4 |
)% |
8.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Third quarter 2019 net revenues from sales of Vascular Access
products were $148.7 million, an increase of 4.6% compared to the
prior year period. Excluding the impact of foreign currency
exchange rate fluctuations, third quarter 2019 net revenues
increased 6.1% compared to the prior year period.
Third quarter 2019 net revenues from sales of Interventional
products were $106.9 million, an increase of 6.9% compared to the
prior year period. Excluding the impact of foreign currency
exchange rate fluctuations, third quarter 2019 net revenues
increased 8.2% compared to the prior year period.
Third quarter 2019 net revenues from sales of Anesthesia
products were $87.1 million, a decrease of 0.5% compared to the
prior year period. Excluding the impact of foreign currency
exchange rate fluctuations, third quarter 2019 net revenues
increased 1.5% compared to the prior year period.
Third quarter 2019 net revenues from sales of Surgical products
were $92.6 million, an increase of 3.0% compared to the prior year
period. Excluding the impact of foreign currency exchange
rate fluctuations, third quarter 2019 net revenues increased 5.0%
compared to the prior year period.
Third quarter 2019 net revenues from sales of Interventional
Urology products were $73.6 million, an increase of 50.3% compared
to the prior year period. Excluding the impact of foreign currency
exchange rate fluctuations, third quarter 2019 net revenues
increased 50.4% compared to the prior year period.
Third quarter 2019 net revenues from sales of OEM products were
$55.4 million, an increase of 1.1% compared to the prior year
period. Excluding the impact of foreign currency exchange
rate fluctuations, third quarter 2019 net revenues increased 1.9%
compared to the prior year period.
Third quarter 2019 net revenues from sales of other products
were $83.9 million, a decrease of 2.8% compared to the prior year
period. Excluding the impact of foreign currency exchange
rate fluctuations, third quarter 2019 net revenues decreased 0.4%
compared to the prior year period.
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE
METRICS
Depreciation expense, amortization of intangible assets and
deferred financing charges for the first nine months of 2019
totaled $163.3 million compared to $160.0 million for the prior
year period.
Cash and cash equivalents at September 29, 2019 were $257.5
million compared to $357.2 million at December 31, 2018.
Net accounts receivable at September 29, 2019 were $396.7
million compared to $366.3 million at December 31, 2018.
Net inventories at September 29, 2019 were $472.6 million
compared to $427.8 million at December 31, 2018.
2019 OUTLOOK
The Company lowered its full year 2019 revenue guidance range
from an increase of between 6% and 6.5% over the prior year on a
GAAP basis to a range of between 5.75% and 6.0% over the prior year
on a GAAP basis. The Company increased its estimate of the
unfavorable impact of foreign currency exchange rate fluctuations
on full year 2019 revenues from approximately 1.5% to approximately
2.25%. The Company raised its full year 2019 revenue guidance on a
constant currency basis from a range of between 7.5% and 8% to a
range of between 8.0% and 8.25%.
The Company raised its full year 2019 GAAP diluted earnings per
share from continuing operations guidance from a range of between
$6.82 and $6.94 to a range of between $9.85 and $9.90. The increase
in the full year 2019 GAAP diluted earnings per share range is
primarily due to a discrete tax benefit, recognized in the third
quarter, resulting from a non-U.S. legal entity restructuring that
eliminated the need to provide for foreign withholding taxes on the
future repatriations of earnings of non-U.S. affiliates. The
Company narrowed its adjusted diluted earnings per share from
continuing operations from a range of between $10.90 and $11.10 to
a range of between $11.05 and $11.10 for full year 2019,
representing an increase of between 11.6% and 12.1% over 2018, and
reflecting our estimate of an approximately 4.25% negative impact
from foreign currency exchange rate fluctuations.
Forecasted 2019 Constant Currency Revenue Growth
Reconciliation
|
Low |
High |
|
|
|
Forecasted 2019 GAAP revenue growth |
5.75 |
% |
6.0 |
% |
|
|
|
Estimated impact of foreign
currency exchange rate fluctuations |
(2.25) |
% |
(2.25) |
% |
|
|
|
Forecasted 2019 constant
currency revenue growth |
8.0 |
% |
8.25 |
% |
|
|
|
|
|
Forecasted 2019 Adjusted Diluted Earnings Per Share From
Continuing Operations Reconciliation
|
Low |
High |
|
|
|
Forecasted GAAP diluted earnings per share from continuing
operations |
$9.85 |
|
$9.90 |
|
|
|
|
Restructuring, restructuring
related and impairment items, net of tax |
$0.75 |
|
$0.76 |
|
|
|
|
Acquisition, integration and
divestiture related items, net of tax |
$0.93 |
|
$0.94 |
|
|
|
|
Other items, net of tax |
$0.23 |
|
$0.24 |
|
|
|
|
Intangible amortization
expense, net of tax |
$2.55 |
|
$2.56 |
|
|
|
|
Tax adjustments |
($3.26 |
) |
($3.30 |
) |
|
|
|
Forecasted adjusted diluted
earnings per share from continuing operations |
$11.05 |
|
$11.10 |
|
|
|
|
|
|
CONFERENCE CALL WEBCAST AND ADDITIONAL
INFORMATION
As previously announced, Teleflex will comment on its financial
results on a conference call to be held today at 8:00 a.m.
(ET). The call will be available live and archived on the
Company’s website at www.teleflex.com and the
accompanying presentation will be posted prior to the call.
An audio replay will be available until November 5, 2019 at 10:00am
(ET), by calling 855-859-2056 (U.S./Canada) or 404-537-3406
(International), Passcode: 1185417.
ADDITIONAL NOTES
References in this release to the impact of foreign currency
exchange rate fluctuations on adjusted diluted earnings per share
include both the impact of translating foreign currencies into U.S.
dollars and the impact of foreign currency exchange rate
fluctuations on foreign currency denominated transactions.
In the discussion of segment results, "new products" refers to
products for which we initiated commercial sales within the past 36
months and "existing products" refers to products we have sold
commercially for more than 36 months.
Certain financial information is presented on a rounded basis,
which may cause minor differences.
Segment results and commentary exclude the impact of
discontinued operations.
NOTES ON NON-GAAP FINANCIAL MEASURES
We report our financial results in accordance with accounting
principles generally accepted in the United States, commonly
referred to as “GAAP.” In this press release, we provide
supplemental information, consisting of the following non-GAAP
financial measures: constant currency revenue growth and adjusted
diluted earnings per share. These non-GAAP measures are described
in more detail below. Management uses these financial
measures to assess Teleflex’s financial performance, make operating
decisions, allocate financial resources, provide guidance on
possible future results, and assist in its evaluation of
period-to-period and peer comparisons. The non-GAAP measures may be
useful to investors because they provide insight into management’s
assessment of our business, and provide supplemental information
pertinent to a comparison of period-to-period results of our
ongoing operations. The non-GAAP financial measures are
presented in addition to results presented in accordance with GAAP
and should not be relied upon as a substitute for GAAP financial
measures. Moreover, our non-GAAP financial measures may not be
comparable to similarly titled measures used by other
companies.
Tables reconciling changes in historical constant currency net
revenues to historical GAAP net revenues are set forth above under
“Net Revenue by Segment." Tables reconciling historical
adjusted diluted earnings per share from continuing operations to
historical GAAP diluted earnings per share from continuing
operations are set forth below. Tables reconciling forecasted
2019 constant currency revenue growth and forecasted 2019 adjusted
earnings per share from continuing operations to their respective
most directly comparable forecasted GAAP measures, which are
forecasted 2019 GAAP revenue growth and forecasted 2019 GAAP
diluted earnings per share from continuing operations,
respectively, are set forth above under “2019 Outlook.”
Constant currency revenue growth: This non-GAAP
measure is based upon net revenues, adjusted to eliminate the
impact of translating the results of international subsidiaries at
different currency exchange rates from period to period. The impact
of changes in foreign currency may vary significantly from period
to period, and generally are outside of the control of our
management. We believe that this measure facilitates a comparison
of our operating performance exclusive of currency exchange rate
fluctuations that do not reflect our underlying performance or
business trends.
Adjusted diluted earnings per share: This
non-GAAP measure is based upon diluted earnings per share from
continuing operations, the most directly comparable GAAP measure,
adjusted to exclude, depending on the period presented, the items
described below. Management does not believe that any of the
excluded items are indicative of our underlying core performance or
business trends.
Restructuring, restructuring related and impairment items -
Restructuring programs involve discrete initiatives designed to,
among other things, consolidate or relocate manufacturing,
administrative and other facilities, outsource distribution
operations, improve operating efficiencies and integrate acquired
businesses. Depending on the specific restructuring program
involved, our restructuring charges may include employee
termination, contract termination, facility closure, employee
relocation, equipment relocation, outplacement and other exit costs
associated with the restructuring program. Restructuring
related charges are directly related to our restructuring programs
and consist of facility consolidation costs, including accelerated
depreciation expense related to facility closures, costs to
transfer manufacturing operations between locations, and retention
bonuses offered to certain employees as an incentive for them to
remain with our company after completion of the restructuring
program. Impairment charges occur if, due to events or changes in
circumstances, we determine that the carrying value of an asset
exceeds its fair value. Impairment charges do not directly affect
our liquidity, but could have a material adverse effect on our
reported financial results.
Acquisition, integration and divestiture related items -
Acquisition and integration expenses are incremental charges, other
than restructuring or restructuring related expenses, that are
directly related to specific business or asset acquisition
transactions. These charges may include, among other things,
professional, consulting and other fees; systems integration costs;
legal entity restructuring expense; inventory step-up amortization
(amortization, through cost of goods sold, of the increase in fair
value of inventory resulting from a fair value calculation as of
the acquisition date); fair value adjustments to contingent
consideration liabilities; and bridge loan facility and backstop
financing fees in connection with loan facilities that ultimately
were not utilized. Divestiture related activities involve specific
business or asset sales. Depending primarily on the terms of
a divestiture transaction, the carrying value of the divested
business or assets on our financial statements and other costs we
incur as a direct result of the divestiture transaction, we may
recognize a gain or loss in connection with the divestiture related
activities.
Other items - These are discrete items that occur sporadically
and can affect period-to-period comparisons. See footnote C to the
reconciliation tables set forth below.
European medical device regulation - The European Union (“EU”)
has adopted the EU Medical Device Regulation (“MDR”), which
replaces the existing Medical Devices Directive (“MDD”) and imposes
more stringent requirements for the marketing and sale of medical
devices in the EU, including requirements affecting clinical
evaluations, quality systems and post-market surveillance.
Manufacturers of currently marketed medical devices will have until
May 2020 to meet the MDR requirements, although certain devices
that previously satisfied MDD requirements can continue to be
marketed in the EU until May 2024, subject to certain
limitations. Significantly, the MDR will require the
re-registration of previously approved medical devices. As a
result, Teleflex will incur expenditures in connection with the new
registration of medical devices that previously had been registered
under the MDD. Therefore, these expenditures are not considered to
be ordinary course expenditures in connection with regulatory
matters (in contrast, no adjustment has been made to exclude
expenditures related to the registration of medical devices that
were not registered previously under the MDD).
Intangible amortization expense - Certain intangible assets,
including customer relationships, intellectual property,
distribution rights, trade names and non-competition agreements,
initially are recorded at historical cost and then amortized over
their respective estimated useful lives. The amount of such
amortization can vary from period to period as a result of, among
other things, business or asset acquisitions or dispositions.
Tax adjustments - These adjustments represent the impact of the
expiration of applicable statutes of limitations for prior year
returns, the resolution of audits, the filing of amended returns
with respect to prior tax years and/or tax law or certain other
discrete changes affecting our deferred tax liability.
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME
ITEMSDollars in millions, except per share
amounts
Quarter Ended - September 29, 2019 |
|
Cost ofgoods sold |
Selling, general andadministrativeexpenses |
Research and development expenses |
Restructuringandimpairmentcharges |
(Gain) Losson sale ofbusiness andassets |
Income taxes |
Income (loss) fromcontinuing operations |
Diluted earningsper share
fromcontinuingoperations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Basis |
$272.6 |
$229.9 |
|
$28.0 |
$1.3 |
($1.1 |
) |
($130.4 |
) |
$228.9 |
|
$4.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring, restructuring
related and impairment items (A) |
4.3 |
0.0 |
|
0.0 |
1.3 |
— |
|
0.7 |
|
4.9 |
|
$0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, integration and
divestiture related items (B) |
0.1 |
15.6 |
|
— |
— |
(1.1 |
) |
(0.0 |
) |
14.7 |
|
$0.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items (C) |
— |
(0.9 |
) |
— |
— |
— |
|
(0.2 |
) |
(0.7 |
) |
($0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MDR (D) |
— |
— |
|
1.0 |
— |
— |
|
— |
|
1.0 |
|
$0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible amortization
expense |
— |
37.3 |
|
0.1 |
— |
— |
|
7.6 |
|
29.8 |
|
$0.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax adjustments |
— |
— |
|
— |
— |
— |
|
138.4 |
|
(138.4 |
) |
($2.93 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted basis |
$268.3 |
$177.9 |
|
$26.8 |
— |
— |
|
$16.0 |
|
$140.2 |
|
$2.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME
ITEMSDollars in millions, except per share
amounts
Quarter Ended - September 30, 2018 |
|
Cost ofgoods sold |
Selling, generalandadministrativeexpenses |
Research and developmentexpenses |
Restructuringandimpairmentcharges |
Income taxes |
Income (loss)from continuingoperations |
Diluted earningsper share
fromcontinuingoperations |
|
|
|
|
|
|
|
|
|
|
|
GAAP Basis |
$267.1 |
$214.9 |
$26.4 |
$19.2 |
($1.3 |
) |
$56.5 |
|
$1.21 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring, restructuring
related and impairment items (A) |
4.4 |
0.2 |
0.1 |
19.2 |
8.7 |
|
15.1 |
|
$0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, integration and
divestiture related items (B) |
0.4 |
15.0 |
0.2 |
— |
0.7 |
|
14.9 |
|
$0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
Other items (C) |
— |
0.3 |
— |
— |
0.1 |
|
0.2 |
|
$0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
Intangible amortization
expense |
— |
36.9 |
0.1 |
— |
5.8 |
|
31.1 |
|
$0.66 |
|
|
|
|
|
|
|
|
|
|
|
|
Tax adjustments |
— |
— |
— |
— |
0.0 |
|
(0.0 |
) |
($0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
Adjusted basis |
$262.3 |
$162.6 |
$26.0 |
— |
$14.1 |
|
$117.8 |
|
$2.52 |
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
Restructuring, restructuring related and impairment
items - For the three months ended September 29, 2019,
pre-tax restructuring charges were $1.3 million, and pre-tax
restructuring related charges were $4.3 million; there were no
pre-tax impairment charges. For the three months ended September
30, 2018, pre-tax restructuring charges were $2.0 million, pre-tax
restructuring related charges were $4.6 million, and pre-tax
impairment charges were $17.2 million. |
(B) |
Acquisition, integration and divestiture related
items - For the three months ended September 29, 2019,
these charges primarily related to contingent consideration
liabilities and our acquisition of Essential Medical, Inc.,
partially offset by the gain on sale of an asset. For the
three months ended September 30, 2018, these charges primarily
related to contingent consideration liabilities and our acquisition
of NeoTract, Inc. There were no divestiture related
activities for the three months ended September 30, 2018. |
(C) |
Other items - For the three months ended September
29, 2019, other items included debt modification expenses and
product relabeling costs, offset by a credit associated with an
insurance settlement. For the three months ended September
30, 2018, these items included product relabeling costs. |
(D) |
MDR - For the three months ended September 29,
2019, these costs were associated with our efforts to comply with
the European Medical Device Regulation. |
|
|
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME
ITEMSDollars in millions, except per share
amounts
Nine
Months Ended - September 29, 2019 |
|
Cost ofgoods sold |
Selling, generalandadministrativeexpenses |
Research anddevelopmentexpenses |
Restructuringandimpairment charges |
(Gain)/Loss onsale ofbusinesses andassets |
Income taxes |
Income (loss) fromcontinuingoperations |
Diluted earningsper share
fromcontinuingoperations |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Basis |
$821.1 |
$693.8 |
$82.7 |
$20.3 |
($3.8 |
) |
($115.6 |
) |
$354.2 |
|
$7.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring, restructuring
related and impairment items (A) |
10.9 |
0.0 |
0.0 |
20.3 |
— |
|
4.1 |
|
27.3 |
|
$0.58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, integration and
divestiture related items (B) |
0.1 |
41.8 |
— |
— |
(3.8 |
) |
(1.9 |
) |
40.0 |
|
$0.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items (C) |
— |
1.5 |
— |
— |
— |
|
0.4 |
|
1.2 |
|
$0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MDR (D) |
— |
— |
1.6 |
— |
— |
|
— |
|
1.6 |
|
$0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible amortization
expense |
— |
112.3 |
0.3 |
— |
— |
|
23.0 |
|
89.6 |
|
$1.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax adjustments |
— |
— |
— |
— |
— |
|
143.6 |
|
(143.6 |
) |
($3.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted basis |
$810.1 |
$538.0 |
$80.7 |
— |
— |
|
$53.6 |
|
$370.3 |
|
$7.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME
ITEMSDollars in millions, except per share
amounts
Nine
Months Ended - September 30, 2018 |
|
Cost ofgoods sold |
Selling, generalandadministrativeexpenses |
Research anddevelopmentexpenses |
Restructuringandimpairmentcharges |
Income taxes |
Income (loss)from continuingoperations |
Diluted earningsper share
fromcontinuingoperations |
|
|
|
|
|
|
|
|
|
|
GAAP Basis |
$788.1 |
|
$660.1 |
$78.4 |
$77.6 |
$14.5 |
|
$108.9 |
$2.33 |
|
|
|
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring, restructuring
related and impairment items (A) |
9.9 |
|
0.2 |
0.2 |
77.6 |
10.6 |
|
77.4 |
$1.65 |
|
|
|
|
|
|
|
|
|
|
Acquisition, integration and
divestiture related items (B) |
1.1 |
|
53.4 |
0.5 |
— |
1.0 |
|
53.9 |
$1.15 |
|
|
|
|
|
|
|
|
|
|
Other items (C) |
(1.3 |
) |
2.5 |
— |
— |
(0.1 |
) |
1.2 |
$0.03 |
|
|
|
|
|
|
|
|
|
|
Intangible amortization
expense |
— |
|
111.6 |
0.3 |
— |
20.0 |
|
91.9 |
$1.96 |
|
|
|
|
|
|
|
|
|
|
Tax adjustments |
— |
|
— |
— |
— |
(0.5 |
) |
0.5 |
$0.01 |
|
|
|
|
|
|
|
|
|
|
Adjusted basis |
$778.5 |
|
$492.4 |
$77.4 |
— |
$45.6 |
|
$333.9 |
$7.14 |
|
|
|
|
|
|
|
|
|
|
(A) |
Restructuring, restructuring related and impairment
items - For the nine months ended September 29, 2019
pre-tax restructuring charges were $13.4 million, pre-tax
restructuring related charges were $11.0 million, and pre-tax
impairment charges were $6.9 million. For the nine months
ended September 30, 2018, pre-tax restructuring charges were $58.5
million, pre-tax restructuring related charges were $10.3 million,
and pre-tax impairment charges were $19.1 million. |
(B) |
Acquisition, integration and divestiture related
items - For the nine months ended September 29, 2019,
these charges primarily related to contingent consideration
liabilities and our acquisition of Essential Medical, Inc.,
partially offset by the gain on sale of a business and another
asset. For the nine months ended September 30, 2018, these charges
primarily related to contingent consideration liabilities and our
acquisition of NeoTract, Inc. There were no divestiture
related activities during the nine months ended September 30,
2018. |
(C) |
Other items - For the nine months ended September
29, 2019, other items included debt modification expenses, expenses
associated with a franchise tax audit, and product relabeling
costs, somewhat offset by a credit associated with an insurance
settlement. Other items for the nine months ended September 30,
2018 included the reversal of previously recognized income due to
distributor acquisitions related to Vascular Solutions and
relabeling costs. In addition, these items included a charge we
incurred as a result of our continuing evaluation of the impact of
the Tax Cuts and Jobs Act ("TCJA") on our consolidated
operations. During the second quarter of 2018, we identified
provisions of the TCJA that could have adverse consequences due to
our organization structure. We implemented certain changes in
our organization structure (pursuant to applicable tax law, these
changes retroactively affected the 2017 tax year), and as a result,
we incurred a $1.9 million net worth tax in a foreign jurisdiction
with respect to the 2017 tax year. Because the decision to
make the change resulting in the net worth tax occurred in the
second quarter of 2018, and as permitted under GAAP, we recorded
the net worth tax charge in 2018; the adjustment eliminating the
charge is included in the table above among "Other Items" for the
2018 period. |
(D) |
MDR - For the nine months ended September 29,
2019, these costs were associated with our efforts to comply with
the European Medical Device Regulation. The costs associated with
the European Medical Device Regulation initiative include $0.3
million that were a component of the "Other items" line item in the
reconciliation table for the three months ended March 31, 2019
included in our first quarter 2019 earnings release. |
|
|
ABOUT TELEFLEX INCORPORATED
Teleflex is a global provider of medical technologies designed
to improve the health and quality of people’s lives. We apply
purpose driven innovation - a relentless pursuit of identifying
unmet clinical needs - to benefit patients and healthcare
providers. Our portfolio is diverse, with solutions in the fields
of vascular access, interventional cardiology and radiology,
anesthesia, emergency medicine, surgical, urology and respiratory
care. Teleflex employees worldwide are united in the understanding
that what we do every day makes a difference. For more information,
please visit teleflex.com.
Teleflex is the home of Arrow®, Deknatel®, Hudson RCI®, LMA®,
Pilling®, Rusch®, UroLift®, and Weck® - trusted brands united by a
common sense of purpose.
CAUTION CONCERNING FORWARD-LOOKING
INFORMATION
This press release contains forward-looking statements,
including, but not limited to, forecasted 2019 GAAP and constant
currency revenue growth and GAAP and adjusted diluted earnings per
share; our estimates regarding the projected impact of foreign
currency exchange rate fluctuations on our 2019 financial results;
and confidence in our ability to achieve our previously stated
long-term financial objectives. Actual results could differ
materially from those in the forward-looking statements due to,
among other things, changes in business relationships with and
purchases by or from major customers or suppliers; delays or
cancellations in shipments; demand for and market acceptance of new
and existing products; our inability to provide products to our
customers, which may be due to, among other things, events that
impact key distributors, suppliers and third-party vendors that
sterilize our products; our inability to integrate acquired
businesses into our operations, realize planned synergies and
operate such businesses profitably in accordance with our
expectations; the inability of acquired businesses to generate
revenues in accordance with our expectations; our inability to
effectively execute our restructuring plans and programs; our
inability to realize anticipated savings from restructuring plans
and programs; the impact of healthcare reform legislation and
proposals to amend, replace or repeal the legislation; changes in
Medicare, Medicaid and third party coverage and reimbursements; the
impact of enacted tax legislation and related regulations;
competitive market conditions and resulting effects on revenues and
pricing; increases in raw material costs that cannot be recovered
in product pricing; global economic factors, including currency
exchange rates, interest rates, trade disputes, sovereign debt
issues and the impact of the United Kingdom's pending departure
from the European Union, commonly known as "Brexit"; difficulties
in entering new markets; general economic conditions; and other
factors described or incorporated in our filings with the
Securities and Exchange Commission, including our most recently
filed Annual Report on Form 10-K. We expressly disclaim any
obligation to update forward-looking statements, except as
otherwise specifically stated by us or as required by law or
regulation.
TELEFLEX
INCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF
INCOME(Unaudited)
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
September 29,2019 |
|
September 30,2018 |
|
September 29,2019 |
|
September 30,2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars and
shares in thousands, except per share) |
Net revenues |
$ |
648,319 |
|
|
$ |
609,672 |
|
|
$ |
1,914,410 |
|
|
$ |
1,806,768 |
|
Cost of goods sold |
272,639 |
|
|
267,099 |
|
|
821,064 |
|
|
788,147 |
|
Gross profit |
375,680 |
|
|
342,573 |
|
|
1,093,346 |
|
|
1,018,621 |
|
Selling, general and
administrative expenses |
229,896 |
|
|
214,894 |
|
|
693,775 |
|
|
660,148 |
|
Research and development
expenses |
27,984 |
|
|
26,365 |
|
|
82,729 |
|
|
78,410 |
|
Restructuring and impairment
charges |
1,268 |
|
|
19,209 |
|
|
20,348 |
|
|
77,625 |
|
(Gain) on sale of assets |
(1,089 |
) |
|
— |
|
|
(3,828 |
) |
|
— |
|
Income from continuing operations before interest and taxes |
117,621 |
|
|
82,105 |
|
|
300,322 |
|
|
202,438 |
|
Interest expense |
19,545 |
|
|
27,171 |
|
|
62,995 |
|
|
79,763 |
|
Interest income |
(470 |
) |
|
(320 |
) |
|
(1,281 |
) |
|
(776 |
) |
Loss on extinguishment of
debt |
— |
|
|
— |
|
|
— |
|
|
— |
|
Income from continuing operations before taxes |
98,546 |
|
|
55,254 |
|
|
238,608 |
|
|
123,451 |
|
(Benefit) taxes on income from
continuing operations |
(130,383 |
) |
|
(1,286 |
) |
|
(115,567 |
) |
|
14,532 |
|
Income from continuing operations |
228,929 |
|
|
56,540 |
|
|
354,175 |
|
|
108,919 |
|
Operating (loss) income from
discontinued operations |
(9 |
) |
|
(83 |
) |
|
(1,291 |
) |
|
1,246 |
|
Tax benefit on operating
income (loss) from discontinued operations |
(9 |
) |
|
(67 |
) |
|
(317 |
) |
|
(47 |
) |
Loss from discontinued operations |
— |
|
|
(16 |
) |
|
(974 |
) |
|
1,293 |
|
Net income |
$ |
228,929 |
|
|
$ |
56,524 |
|
|
$ |
353,201 |
|
|
$ |
110,212 |
|
Earnings per share: |
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
Income from continuing operations |
$ |
4.95 |
|
|
$ |
1.23 |
|
|
$ |
7.67 |
|
|
$ |
2.39 |
|
(Loss) Income from discontinued operations |
— |
|
|
— |
|
|
(0.02 |
) |
|
0.03 |
|
Net income |
$ |
4.95 |
|
|
$ |
1.23 |
|
|
$ |
7.65 |
|
|
$ |
2.42 |
|
Diluted: |
|
|
|
|
|
|
|
Income from continuing operations |
$ |
4.85 |
|
|
$ |
1.21 |
|
|
$ |
7.53 |
|
|
$ |
2.33 |
|
Income (loss) from discontinued operations |
— |
|
|
— |
|
|
(0.02 |
) |
|
0.03 |
|
Net income |
$ |
4.85 |
|
|
$ |
1.21 |
|
|
$ |
7.51 |
|
|
$ |
2.36 |
|
Weighted average common shares
outstanding |
|
|
|
|
|
|
|
Basic |
46,248 |
|
|
45,851 |
|
|
46,156 |
|
|
45,587 |
|
Diluted |
47,176 |
|
|
46,815 |
|
|
47,051 |
|
|
46,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
TELEFLEX
INCORPORATEDCONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited)
|
September 29, 2019 |
|
December 31, 2018 |
|
(Dollars in
thousands) |
ASSETS |
|
|
|
|
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
257,544 |
|
|
$ |
357,161 |
|
Accounts receivable, net |
396,663 |
|
|
366,286 |
|
Inventories, net |
472,594 |
|
|
427,778 |
|
Prepaid expenses and other current assets |
81,531 |
|
|
72,481 |
|
Prepaid taxes |
29,278 |
|
|
12,463 |
|
Total current assets |
1,237,610 |
|
|
1,236,169 |
|
Property, plant and equipment,
net |
429,568 |
|
|
432,766 |
|
Operating lease assets |
115,193 |
|
|
— |
|
Goodwill |
2,231,330 |
|
|
2,246,579 |
|
Intangible assets, net |
2,175,673 |
|
|
2,325,052 |
|
Deferred tax assets |
2,952 |
|
|
2,446 |
|
Other assets |
64,856 |
|
|
34,979 |
|
Total assets |
$ |
6,257,182 |
|
|
$ |
6,277,991 |
|
LIABILITIES AND
EQUITY |
|
|
|
Current liabilities |
|
|
|
Current borrowings |
$ |
50,000 |
|
|
$ |
86,625 |
|
Accounts payable |
100,630 |
|
|
106,709 |
|
Accrued expenses |
91,569 |
|
|
97,551 |
|
Current portion of contingent consideration |
135,168 |
|
|
136,877 |
|
Payroll and benefit-related liabilities |
99,831 |
|
|
104,670 |
|
Accrued interest |
19,686 |
|
|
6,031 |
|
Income taxes payable |
3,299 |
|
|
5,943 |
|
Other current liabilities |
30,180 |
|
|
38,050 |
|
Total current liabilities |
530,363 |
|
|
582,456 |
|
Long-term borrowings |
1,949,068 |
|
|
2,072,200 |
|
Deferred tax liabilities |
468,945 |
|
|
608,221 |
|
Pension and postretirement
benefit liabilities |
72,016 |
|
|
92,914 |
|
Noncurrent liability for
uncertain tax positions |
11,084 |
|
|
10,718 |
|
Noncurrent contingent
consideration |
71,712 |
|
|
167,370 |
|
Noncurrent operating lease
liabilities |
104,136 |
|
|
— |
|
Other liabilities |
196,882 |
|
|
204,134 |
|
Total liabilities |
3,404,206 |
|
|
3,738,013 |
|
Commitments and
contingencies |
|
|
|
Total shareholders'
equity |
2,852,976 |
|
|
2,539,978 |
|
Total liabilities and shareholders' equity |
$ |
6,257,182 |
|
|
$ |
6,277,991 |
|
|
|
|
|
|
|
|
|
TELEFLEX
INCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)
|
Nine Months Ended |
|
September 29, 2019 |
|
September 30, 2018 |
|
(Dollars in
thousands) |
Cash flows
from operating activities of continuing operations: |
|
|
|
|
|
|
|
Net income |
$ |
353,201 |
|
|
$ |
110,212 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Loss (income) from discontinued operations |
974 |
|
|
(1,293 |
) |
Depreciation expense |
47,286 |
|
|
44,517 |
|
Amortization expense of intangible assets |
112,661 |
|
|
111,974 |
|
Amortization expense of deferred financing costs and debt
discount |
3,313 |
|
|
3,548 |
|
Gain on sale of assets |
(3,828 |
) |
|
— |
|
Changes in contingent consideration |
40,894 |
|
|
47,344 |
|
Stock-based compensation |
20,037 |
|
|
16,469 |
|
Impairment of long-lived assets |
6,911 |
|
|
19,110 |
|
Deferred income taxes, net |
(140,963 |
) |
|
8,664 |
|
Payments for contingent consideration |
(26,092 |
) |
|
(2,100 |
) |
Interest benefit on swaps designated as net investment hedges |
(13,820 |
) |
|
— |
|
Other |
(7,142 |
) |
|
(10,928 |
) |
Changes in assets and liabilities, net of effects of acquisitions
and disposals: |
|
|
|
Accounts receivable |
(41,221 |
) |
|
(29,830 |
) |
Inventories |
(53,259 |
) |
|
(19,665 |
) |
Prepaid expenses and other assets |
(13,184 |
) |
|
(6,468 |
) |
Accounts payable, accrued expenses and other liabilities |
31,631 |
|
|
54,581 |
|
Income taxes receivable and payable, net |
(28,232 |
) |
|
(43,191 |
) |
Net cash provided by operating activities from continuing
operations |
289,167 |
|
|
302,944 |
|
Cash flows from investing activities of continuing operations: |
|
|
|
Expenditures for property, plant and equipment |
(83,797 |
) |
|
(55,751 |
) |
Proceeds from sale of assets |
3,135 |
|
|
— |
|
Payments for businesses and intangibles acquired, net of cash
acquired |
(1,265 |
) |
|
(22,550 |
) |
Net interest proceeds on swaps designated as net investment
hedges |
8,330 |
|
|
— |
|
Net cash used in investing activities from continuing
operations |
(73,597 |
) |
|
(78,301 |
) |
Cash flows from financing
activities of continuing operations: |
|
|
|
Proceeds from new borrowings |
25,000 |
|
|
— |
|
Reduction in borrowings |
(185,500 |
) |
|
(98,500 |
) |
Debt extinguishment, issuance and amendment fees |
(4,964 |
) |
|
(188 |
) |
Net proceeds from share based compensation plans and the related
tax impacts |
14,014 |
|
|
18,666 |
|
Payments for contingent consideration |
(112,006 |
) |
|
(73,152 |
) |
Dividends paid |
(47,071 |
) |
|
(46,526 |
) |
Net cash used in financing activities from continuing
operations |
(310,527 |
) |
|
(199,700 |
) |
Cash flows from discontinued
operations: |
|
|
|
Net cash provided by (used in) operating activities |
2,651 |
|
|
(701 |
) |
Net cash provided by (used in) discontinued operations |
2,651 |
|
|
(701 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
(7,311 |
) |
|
(1,524 |
) |
Net (decrease) increase in
cash and cash equivalents |
(99,617 |
) |
|
22,718 |
|
Cash and cash equivalents at
the beginning of the period |
357,161 |
|
|
333,558 |
|
Cash and cash equivalents at
the end of the period |
$ |
257,544 |
|
|
$ |
356,276 |
|
|
|
|
|
Non cash investing activities of continuing operations: |
|
|
|
Property, plant and equipment additions due to build-to-suit lease
transaction |
$ |
— |
|
|
$ |
28,147 |
|
|
|
|
|
Non cash financing activities of continuing operations: |
|
|
|
Acquisition of treasury stock associated with settlement and
exchange of convertible note hedge and warrant agreements |
$ |
— |
|
|
$ |
56,075 |
|
|
|
|
|
|
|
|
|
Contact:Jake ElguiczeTreasurer and Vice President of Investor
Relations610-948-2836
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