Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced
financial results for the third quarter ended September 27,
2020.
Third quarter 2020 net revenues were $628.3 million, a
decrease of 3.1% compared to the prior year period. Excluding
the impact of foreign currency exchange rate fluctuations, third
quarter 2020 net revenues decreased 4.1% over the year ago
period. The Company estimates that COVID-19 had a net
negative impact to revenue of approximately $78 million, or
12%.
Third quarter 2020 GAAP earnings per share from continuing
operations decreased 49.3% to $2.46, compared to $4.85 in the prior
year period. Third quarter 2020 adjusted diluted earnings per share
from continuing operations decreased 6.7% to $2.77, compared to
$2.97 in the prior year period.
Liam Kelly, Chairman, President and Chief Executive Officer,
said, “Our third quarter results reflect improving trends across
many of our global product categories, led by a
faster-than-expected recovery within our Interventional Urology
business, and continued strength within our Vascular Access product
sales. From a regional perspective, we saw particular
strength within the Americas, as the pace of recovery in the United
States during the third quarter was encouraging."
Mr. Kelly continued, "In addition to the significant sequential
improvement in our constant currency revenue performance, we also
saw a significant improvement within our adjusted gross and
operating margins, as well as our adjusted earnings per share, as
compared to the second quarter of the year. And while we are
not reinstating full year 2020 financial guidance, we continue to
believe that we will see continued sequential improvement during
the fourth quarter of the year as compared to our third quarter
2020 results."
Mr. Kelly concluded, "Lastly, I am pleased to announce that
during October we signed a definitive agreement to acquire
Z-Medica, LLC, a market leader in hemostatic products. We are
excited about this acquisition, given Z-Medica's revenue growth,
gross and operating margin profile, all of which are above our
average, and our expectation that the acquisition will be accretive
to our adjusted earnings per share in 2021."
NET REVENUE BY SEGMENT
The following tables and commentary provide 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 27, 2020 on both a GAAP
and constant currency basis. The discussion below the tables of the
principal factors behind changes in net revenues for the three
months ended September 27, 2020 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 27, 2020 |
|
|
September 29, 2019 |
|
|
Total Sales Growth |
|
Currency Impact |
|
Constant Currency Revenue Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
$ |
375.0 |
|
|
$ |
374.5 |
|
|
0.1 |
% |
|
(0.3 |
)% |
|
0.4 |
% |
EMEA |
|
135.7 |
|
|
|
140.5 |
|
|
(3.5 |
)% |
|
3.5 |
% |
|
(7.0 |
)% |
Asia |
|
68.2 |
|
|
|
77.9 |
|
|
(12.4 |
)% |
|
1.8 |
% |
|
(14.2 |
)% |
OEM |
|
49.4 |
|
|
|
55.4 |
|
|
(10.9 |
)% |
|
0.9 |
% |
|
(11.8 |
)% |
Total |
$ |
628.3 |
|
|
$ |
648.3 |
|
|
(3.1 |
)% |
|
1.0 |
% |
|
(4.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
% Increase / (Decrease) |
|
September 27, 2020 |
|
|
September 29, 2019 |
|
|
Total Sales Growth |
|
Currency Impact |
|
Constant Currency Revenue Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
$ |
1,045.6 |
|
|
$ |
1,092.3 |
|
|
(4.3 |
)% |
|
(0.3 |
)% |
|
(4.0 |
)% |
EMEA |
|
423.4 |
|
|
|
442.1 |
|
|
(4.2 |
)% |
|
(0.6 |
)% |
|
(3.6 |
)% |
Asia |
|
188.4 |
|
|
|
213.9 |
|
|
(11.9 |
)% |
|
(1.3 |
)% |
|
(10.6 |
)% |
OEM |
|
168.6 |
|
|
|
166.1 |
|
|
1.5 |
% |
|
— |
% |
|
1.5 |
% |
Total |
$ |
1,826.0 |
|
|
$ |
1,914.4 |
|
|
(4.6 |
)% |
|
(0.4 |
)% |
|
(4.2 |
)% |
Americas third quarter 2020 net revenues were
$375.0 million, an increase of 0.1% compared to the prior year
period. Excluding the impact of foreign currency exchange
rate fluctuations, third quarter 2020 net revenues increased 0.4%
compared to the prior year period. The increase in constant
currency revenue was primarily attributable to price increases and
an increase in new product sales, partially offset by a net
decrease in sales volumes of existing products caused by the
COVID-19 pandemic. We estimate that COVID-19 had a negative
impact to revenue of approximately $34 million, or 9%.
EMEA third quarter 2020 net revenues were $135.7 million, a
decrease of 3.5% compared to the prior year period. Excluding the
impact of foreign currency exchange rate fluctuations, third
quarter 2020 net revenues decreased 7.0% compared to the prior year
period. The decrease in constant currency revenue was primarily
attributable to a net decrease in sales volumes of existing
products caused by the COVID-19 pandemic. We estimate that
COVID-19 had a negative impact to revenue of approximately
$6 million, or 4%.
Asia third quarter 2020 net revenues were $68.2 million, a
decrease of 12.4% compared to the prior year period.
Excluding the impact of foreign currency exchange rate
fluctuations, third quarter 2020 net revenues decreased 14.2%
compared to the prior year period. The decrease in constant
currency revenue was primarily attributable to a net decrease in
sales volumes of existing products caused by the COVID-19
pandemic. We estimate that COVID-19 had a negative impact to
revenue of approximately $16 million, or 21%.
OEM third quarter 2020 net revenues were $49.4 million, a
decrease of 10.9% compared to the prior year period.
Excluding the impact of foreign currency exchange rate
fluctuations, third quarter 2020 net revenues decreased 11.8%
compared to the prior year period. The decrease in constant
currency revenue was primarily attributable to a decrease in sales
volumes of existing products caused by the COVID-19 pandemic,
partially offset by net revenues generated by the acquisition of
IWG High Performance Conductors, Inc. (HPC). We estimate that
COVID-19 had a negative impact to revenue of approximately
$22 million, or 40%.
NET REVENUE BY GLOBAL PRODUCT CATEGORY
The following tables and commentary provide information
regarding net revenues in each of the Company's global product
categories for the three months and nine months ended
September 29, 2019 and September 27, 2020 on both a GAAP
and constant currency basis.
|
Three Months Ended |
|
% Increase / (Decrease) |
|
September 27, 2020 |
September 29, 2019 |
|
Total Revenue Growth |
|
Currency Impact |
|
Constant Currency Revenue Growth |
|
|
|
|
|
|
|
|
|
Vascular Access |
$ |
160.0 |
$ |
148.7 |
|
7.6 |
% |
|
0.8 |
% |
|
6.8 |
% |
Interventional |
|
93.2 |
|
106.9 |
|
(12.8 |
)% |
|
0.7 |
% |
|
(13.5 |
)% |
Anesthesia |
|
75.7 |
|
87.1 |
|
(13.2 |
)% |
|
1.2 |
% |
|
(14.4 |
)% |
Surgical |
|
82.2 |
|
92.6 |
|
(11.2 |
)% |
|
1.1 |
% |
|
(12.3 |
)% |
Interventional Urology |
|
81.8 |
|
73.6 |
|
11.1 |
% |
|
0.1 |
% |
|
11.0 |
% |
OEM |
|
49.4 |
|
55.4 |
|
(10.9 |
)% |
|
0.9 |
% |
|
(11.8 |
)% |
Other |
|
86.0 |
|
83.9 |
|
2.5 |
% |
|
2.0 |
% |
|
0.5 |
% |
Total |
$ |
628.3 |
$ |
648.3 |
|
(3.1 |
)% |
|
1.0 |
% |
|
(4.1 |
)% |
|
Nine Months Ended |
|
% Increase / (Decrease) |
|
September 27, 2020 |
September 29, 2019 |
|
Total Revenue Growth |
|
Currency Impact |
|
Constant Currency Revenue
Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vascular Access |
$ |
475.3 |
$ |
446.2 |
|
6.5 |
% |
|
(0.6 |
)% |
|
7.1 |
% |
Interventional |
|
275.7 |
|
314.9 |
|
(12.4 |
)% |
|
(0.3 |
)% |
|
(12.1 |
)% |
Anesthesia |
|
216.2 |
|
253.1 |
|
(14.6 |
)% |
|
(0.6 |
)% |
|
(14.0 |
)% |
Surgical |
|
224.9 |
|
274.9 |
|
(18.2 |
)% |
|
(0.6 |
)% |
|
(17.6 |
)% |
Interventional Urology |
|
196.1 |
|
201.3 |
|
(2.6 |
)% |
|
— |
% |
|
(2.6 |
)% |
OEM |
|
168.6 |
|
166.1 |
|
1.5 |
% |
|
— |
% |
|
1.5 |
% |
Other |
|
269.2 |
|
257.9 |
|
4.4 |
% |
|
(0.6 |
)% |
|
5.0 |
% |
Total |
$ |
1,826.0 |
$ |
1,914.4 |
|
(4.6 |
)% |
|
(0.4 |
)% |
|
(4.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third quarter 2020 net revenues from sales of Vascular Access
products were $160.0 million, an increase of 7.6% compared to the
prior year period. Excluding the impact of foreign currency
exchange rate fluctuations, third quarter 2020 net revenues
increased 6.8% compared to the prior year period. We estimate
that COVID-19 had a net positive impact to revenue of approximately
$2 million, or 1%.
Third quarter 2020 net revenues from sales of Interventional
products were $93.2 million, a decrease of 12.8% compared to the
prior year period. Excluding the impact of foreign currency
exchange rate fluctuations, third quarter 2020 net revenues
decreased 13.5% compared to the prior year period. We estimate that
COVID-19 had a negative impact to revenue of approximately
$17 million, or 16%.
Third quarter 2020 net revenues from sales of Anesthesia
products were $75.7 million, a decrease of 13.2% compared to the
prior year period. Excluding the impact of foreign currency
exchange rate fluctuations, third quarter 2020 net revenues
decreased 14.4% compared to the prior year period. We estimate that
COVID-19 had a negative impact to revenue of approximately
$9 million, or 10%.
Third quarter 2020 net revenues from sales of Surgical products
were $82.2 million, a decrease of 11.2% compared to the prior year
period. Excluding the impact of foreign currency exchange
rate fluctuations, third quarter 2020 net revenues decreased 12.3%
compared to the prior year period. We estimate that COVID-19 had a
negative impact to revenue of approximately $12 million, or
13%.
Third quarter 2020 net revenues from sales of Interventional
Urology products were $81.8 million, an increase of 11.1% compared
to the prior year period. Excluding the impact of foreign currency
exchange rate fluctuations, third quarter 2020 net revenues
increased 11.0% compared to the prior year period. We estimate that
COVID-19 had a negative impact to revenue of approximately
$21 million, or 29%.
Third quarter 2020 net revenues from sales of OEM products were
$49.4 million, a decrease of 10.9% compared to the prior year
period. Excluding the impact of foreign currency exchange
rate fluctuations, third quarter 2020 net revenues decreased 11.8%
compared to the prior year period. We estimate that COVID-19
had a negative impact to revenue of approximately $22 million
, or 40%.
Third quarter 2020 net revenues from sales of other products
were $86.0 million, an increase of 2.5% compared to the prior
year period. Excluding the impact of foreign currency
exchange rate fluctuations, third quarter 2020 net revenues
increased 0.5% compared to the prior year period. We estimate
that COVID-19 had a positive impact to revenue of approximately
$1 million, or 1%.
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE
METRICS
Depreciation expense, amortization of intangible assets and
deferred financing charges for the nine months ended
September 27, 2020 totaled $173.2 million compared to
$163.3 million for the nine months ended September 29,
2019.
Cash and cash equivalents at September 27, 2020 were $347.5
million compared to $301.1 million at December 31,
2019.
Net accounts receivable at September 27, 2020 were
$390.5 million compared to $418.7 million at
December 31, 2019.
Net inventories at September 27, 2020 were
$526.1 million compared to $476.6 million at
December 31, 2019.
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 3, 2020 at 11:00am
(ET), by calling 855-859-2056 (U.S./Canada) or 404-537-3406
(International), Passcode: 4987865.
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" and "Net Revenue by Global Product
Category". 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.
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 such changes 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 27, 2020 |
|
|
Cost of goods sold |
|
Selling, general and administrative expenses |
|
Research and development expenses |
|
Restructuring and impairment charges |
|
(Gain)/Loss on sale of business and assets |
|
Income taxes |
|
Income (loss) from continuing operations |
|
Diluted earnings per share from continuing
operations |
GAAP Basis |
$ |
299.0 |
|
|
$ |
171.7 |
|
|
$ |
29.2 |
|
|
$ |
(3.7 |
) |
|
$ |
— |
|
|
$ |
(1.0 |
) |
|
$ |
116.6 |
|
|
$ |
2.46 |
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring, restructuring
related and impairment items (A) |
7.5 |
|
|
0.2 |
|
|
— |
|
|
(3.7 |
) |
|
— |
|
|
(0.5 |
) |
|
4.6 |
|
|
$ |
0.10 |
|
Acquisition, integration and
divestiture related items (B) |
1.6 |
|
|
(23.4 |
) |
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
(21.9 |
) |
|
$ |
(0.46 |
) |
Other items (C) |
— |
|
|
0.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
0.0 |
|
|
0.2 |
|
|
$ |
0.00 |
|
MDR (D) |
— |
|
|
— |
|
|
3.0 |
|
|
— |
|
|
— |
|
|
0.0 |
|
|
3.0 |
|
|
$ |
0.06 |
|
Intangible amortization
expense (E) |
21.2 |
|
|
18.7 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
6.3 |
|
|
33.7 |
|
|
$ |
0.71 |
|
Tax adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4.9 |
|
|
(4.9 |
) |
|
$ |
(0.10 |
) |
Adjusted basis |
$ |
268.7 |
|
|
$ |
175.9 |
|
|
$ |
26.1 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9.9 |
|
|
$ |
131.2 |
|
|
$ |
2.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME
ITEMSDollars in millions, except per share amounts |
|
Quarter
Ended - September 29, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
Selling, general and administrative expenses |
|
Research and development expenses |
|
Restructuring and impairment charges |
|
(Gain)/Loss on sale of business and assets |
|
Incometaxes |
|
Income (loss) from continuing operations |
|
Diluted earnings per share from continuing
operations |
GAAP Basis |
$ |
293.2 |
|
$ |
209.3 |
|
|
$ |
28.0 |
|
$ |
1.3 |
|
$ |
(1.1 |
) |
|
$ |
(130.4 |
) |
|
$ |
228.9 |
|
|
$ |
4.85 |
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring, restructuring
related and impairment items (A) |
4.3 |
|
— |
|
|
— |
|
1.3 |
|
— |
|
|
0.7 |
|
|
4.9 |
|
|
$ |
0.10 |
|
Acquisition, integration and
divestiture related items (B) |
0.1 |
|
15.6 |
|
|
— |
|
— |
|
(1.1 |
) |
|
— |
|
|
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 (E) |
20.6 |
|
16.7 |
|
|
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 |
|
- Restructuring, restructuring related and impairment
items - For the three months ended September 27,
2020, pre-tax restructuring credits were $3.7million, pre-tax
restructuring related charges were $7.7 million; and there were no
pre-tax impairment charges. For the three months ended
September 29, 2019, pre-tax restructuring charges were $1.3
million, pre-tax restructuring related charges were $4.3 million;
and there were no pre-tax impairment charges.
- Acquisition, integration and divestiture related
items - For the three months ended September 27,
2020, these items primarily related to contingent consideration
liabilities; reversal of previously recognized income related to a
distributor conversion in Japan; and charges primarily related to
our acquisition of Z-Medica, LLC. 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. There were no divestiture related activities for the
three months ended September 27, 2020 or September 29, 2019.
- Other items - For the three months ended
September 27, 2020, other items included expenses associated
with prior year tax matters. For the three months ended
September 29, 2019, other items included debt modification
costs and product relabeling costs, offset by a credit associated
with an insurance settlement.
- MDR - These costs were associated with our
efforts to comply with the European Medical Device Regulation.
- Intangible amortization expense - For the
three months ended September 27, 2020 and September 29,
2019, we reclassified intangible asset amortization expense of
$21.2 million and $20.6 million, respectively, from selling,
general and administrative expenses to cost of goods sold.
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME
ITEMSDollars in millions, except per share amounts |
|
Year to
Date Ended - September 27, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
Selling, general and administrative expenses |
|
Research and development expenses |
|
Restructuring and impairment charges |
|
(Gain)/Loss on sale of business and assets |
|
Income taxes |
|
Income (loss) from continuing operations |
|
Diluted earnings per share from continuing
operations |
GAAP Basis |
884.7 |
|
510.7 |
|
|
86.0 |
|
16.7 |
|
— |
|
22.0 |
|
|
259.2 |
|
|
$ |
5.48 |
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring, restructuring
related and impairment items (A) |
18.8 |
|
0.5 |
|
|
— |
|
16.7 |
|
— |
|
1.1 |
|
|
34.8 |
|
|
$ |
0.74 |
|
Acquisition, integration and
divestiture related items (B) |
3.3 |
|
(50.8 |
) |
|
— |
|
— |
|
— |
|
0.7 |
|
|
(48.2 |
) |
|
$ |
(1.02 |
) |
Other items (C) |
— |
|
0.5 |
|
|
— |
|
— |
|
— |
|
0.1 |
|
|
0.4 |
|
|
$ |
0.01 |
|
MDR (D) |
— |
|
— |
|
|
7.4 |
|
— |
|
— |
|
0.0 |
|
|
7.4 |
|
|
$ |
0.16 |
|
Intangible amortization
expense (E) |
63.2 |
|
55.1 |
|
|
0.3 |
|
— |
|
— |
|
18.9 |
|
|
99.7 |
|
|
$ |
2.11 |
|
Tax adjustments |
— |
|
— |
|
|
— |
|
— |
|
— |
|
2.6 |
|
|
(2.6 |
) |
|
$ |
(0.05 |
) |
Adjusted basis |
$ |
799.4 |
|
$ |
505.3 |
|
|
$ |
78.2 |
|
$ |
— |
|
$ |
— |
|
$ |
45.4 |
|
|
$ |
350.8 |
|
|
$ |
7.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME
ITEMSDollars in millions, except per share amounts |
|
Year to
Date Ended - September 29, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
Selling, general and administrative expenses |
|
Research and development expenses |
|
Restructuring and impairment charges |
|
(Gain)/Loss on sale of business and assets |
|
Income taxes |
|
Income (loss) from continuing operations |
|
Diluted earningsper sharefrom continuing
operations |
GAAP Basis |
883.1 |
|
631.7 |
|
82.7 |
|
20.3 |
|
(3.8 |
) |
|
(115.6 |
) |
|
354.2 |
|
|
$ |
7.53 |
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring, restructuring
related and impairment items (A) |
10.9 |
|
— |
|
— |
|
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 (E) |
62.1 |
|
50.3 |
|
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 |
|
- Restructuring, restructuring related and impairment
items - For the nine months ended September 27, 2020,
pre-tax restructuring charges were $16.7 million, pre-tax
restructuring related charges were $19.2 million; and there were no
pre-tax impairment charges. For the nine months ended September 29,
2019, pre-tax restructuring charges $13.4 million, pre-tax
restructuring related charges were $11.0 million, and pre-tax
impairment charges were $6.9 million.
- Acquisition, integration and divestiture related
items - For the nine months ended September 27, 2020,
these items primarily related to the reversal of contingent
consideration liabilities, partially offset by charges primarily
related to our acquisitions of HPC and Z-Medica, LLC and the
reversal of previously recognized income related to a distributor
conversion in Japan. 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. There were no divestiture related activities for the
nine months ended September 27, 2020 or September 29,
2019.
- Other items - For the nine months ended
September 27, 2020, other items included expenses associated with
prior year tax matters. For the nine months ended
September 29, 2019, other items included debt modification
costs, expenses associated with a franchise tax audit, and product
relabeling costs, somewhat offset by a credit associated with an
insurance settlement.
- MDR - These costs were associated with our
efforts to comply with the European Medical Device Regulation.
- Intangible amortization expense - For the nine
months ended September 27, 2020 and September 29, 2019,
we reclassified intangible asset amortization expense of $63.2
million and $62.1 million, respectively, from selling, general and
administrative expenses to cost of goods sold.
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, our belief that we will
see sequential improvement in our financial results during the
fourth quarter of 2020 as compared to our results for the third
quarter of 2020; and our expectation that our acquisition of
Z-Medica will be accretive to our adjusted earnings per share in
2021. Actual results could differ materially from those in
the forward-looking statements due to, among other things, the
adverse economic conditions associated with the COVID-19 global
health pandemic and the associated financial crisis, stay-at-home
and other orders, which may significantly reduce customer spending
and which may have a negative impact on the Company’s business,
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; risks
related to our acquisition of Z-Medica, including among other
items, the possibility the acquisition does not close,
unanticipated costs and length of time required to comply with
legal requirements and regulatory approvals applicable to the
transaction, unanticipated difficulties and expenditures in
connection with integration programs, customer and shareholder
reaction to the transaction, unknown liabilities and the risk of
regulatory actions related to the proposed acquisition; 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 departure from the European Union, commonly known
as "Brexit"; public health epidemics; 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 INCORPORATEDCONSOLIDATED
STATEMENTS OF INCOME |
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 27, 2020 |
|
September 29, 2019 |
|
September 27, 2020 |
|
September 29, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars and shares in thousands, except per
share) |
Net revenues |
|
$ |
628,301 |
|
|
$ |
648,319 |
|
|
$ |
1,825,977 |
|
|
$ |
1,914,410 |
|
Cost of goods sold |
|
298,977 |
|
|
293,244 |
|
|
884,657 |
|
|
883,127 |
|
Gross profit |
|
329,324 |
|
|
355,075 |
|
|
941,320 |
|
|
1,031,283 |
|
Selling, general and
administrative expenses |
|
171,673 |
|
|
209,291 |
|
|
510,662 |
|
|
631,712 |
|
Research and development
expenses |
|
29,218 |
|
|
27,984 |
|
|
85,978 |
|
|
82,729 |
|
Restructuring and impairment
(credits) charges |
|
(3,659 |
) |
|
1,268 |
|
|
16,692 |
|
|
20,348 |
|
Gain on sale of assets |
|
— |
|
|
(1,089 |
) |
|
— |
|
|
(3,828 |
) |
Income from continuing operations before interest and taxes |
|
132,092 |
|
|
117,621 |
|
|
327,988 |
|
|
300,322 |
|
Interest expense |
|
16,652 |
|
|
19,545 |
|
|
47,773 |
|
|
62,995 |
|
Interest income |
|
(214 |
) |
|
(470 |
) |
|
(956 |
) |
|
(1,281 |
) |
Income from continuing operations before taxes |
|
115,654 |
|
|
98,546 |
|
|
281,171 |
|
|
238,608 |
|
(Benefit) taxes on income from
continuing operations |
|
(951 |
) |
|
(130,383 |
) |
|
21,971 |
|
|
(115,567 |
) |
Income from continuing operations |
|
116,605 |
|
|
228,929 |
|
|
259,200 |
|
|
354,175 |
|
Operating loss from
discontinued operations |
|
(29 |
) |
|
(9 |
) |
|
(11 |
) |
|
(1,291 |
) |
Tax benefit on operating loss
from discontinued operations |
|
(11 |
) |
|
(9 |
) |
|
(4 |
) |
|
(317 |
) |
Loss from discontinued operations |
|
(18 |
) |
|
— |
|
|
(7 |
) |
|
(974 |
) |
Net income |
|
$ |
116,587 |
|
|
$ |
228,929 |
|
|
$ |
259,193 |
|
|
$ |
353,201 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
2.51 |
|
|
$ |
4.95 |
|
|
$ |
5.58 |
|
|
$ |
7.67 |
|
Loss from discontinued operations |
|
— |
|
|
— |
|
|
— |
|
|
(0.02 |
) |
Net income |
|
$ |
2.51 |
|
|
$ |
4.95 |
|
|
$ |
5.58 |
|
|
$ |
7.65 |
|
Diluted: |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
2.46 |
|
|
$ |
4.85 |
|
|
$ |
5.48 |
|
|
$ |
7.53 |
|
Loss from discontinued operations |
|
— |
|
|
— |
|
|
— |
|
|
(0.02 |
) |
Net income |
|
$ |
2.46 |
|
|
$ |
4.85 |
|
|
$ |
5.48 |
|
|
$ |
7.51 |
|
Weighted average common shares
outstanding |
|
|
|
|
|
|
|
|
Basic |
|
46,530 |
|
|
46,248 |
|
|
46,451 |
|
|
46,156 |
|
Diluted |
|
47,333 |
|
|
47,176 |
|
|
47,269 |
|
|
47,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TELEFLEX INCORPORATEDCONSOLIDATED BALANCE
SHEETS |
|
|
September 27, 2020 |
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
347,480 |
|
|
$ |
301,083 |
|
Accounts receivable, net |
390,476 |
|
|
418,673 |
|
Inventories |
526,125 |
|
|
476,557 |
|
Prepaid expenses and other current assets |
101,452 |
|
|
97,943 |
|
Prepaid taxes |
55,028 |
|
|
12,076 |
|
Total current assets |
1,420,561 |
|
|
1,306,332 |
|
Property, plant and equipment,
net |
445,242 |
|
|
430,719 |
|
Operating lease assets |
102,924 |
|
|
113,160 |
|
Goodwill |
2,363,837 |
|
|
2,245,305 |
|
Intangible assets, net |
2,228,930 |
|
|
2,156,285 |
|
Deferred tax assets |
4,915 |
|
|
5,572 |
|
Other assets |
46,879 |
|
|
52,447 |
|
Total assets |
$ |
6,613,288 |
|
|
$ |
6,309,820 |
|
LIABILITIES AND
EQUITY |
|
|
|
Current liabilities |
|
|
|
Current borrowings |
$ |
91,750 |
|
|
$ |
50,000 |
|
Accounts payable |
96,917 |
|
|
102,916 |
|
Accrued expenses |
117,493 |
|
|
100,466 |
|
Current portion of contingent consideration |
4,744 |
|
|
148,090 |
|
Payroll and benefit-related liabilities |
98,828 |
|
|
115,981 |
|
Accrued interest |
22,547 |
|
|
5,514 |
|
Income taxes payable |
10,873 |
|
|
6,692 |
|
Other current liabilities |
32,095 |
|
|
33,396 |
|
Total current liabilities |
475,247 |
|
|
563,055 |
|
Long-term borrowings |
2,035,823 |
|
|
1,858,943 |
|
Deferred tax liabilities |
486,350 |
|
|
439,558 |
|
Pension and postretirement
benefit liabilities |
55,795 |
|
|
82,719 |
|
Noncurrent liability for
uncertain tax positions |
12,562 |
|
|
10,294 |
|
Noncurrent contingent
consideration |
16,872 |
|
|
71,818 |
|
Noncurrent operating lease
liabilities |
91,379 |
|
|
101,372 |
|
Other liabilities |
203,057 |
|
|
202,741 |
|
Total liabilities |
3,377,085 |
|
|
3,330,500 |
|
Commitments and
contingencies |
|
|
|
Total shareholders'
equity |
3,236,203 |
|
|
2,979,320 |
|
Total liabilities and shareholders' equity |
$ |
6,613,288 |
|
|
$ |
6,309,820 |
|
|
|
|
|
|
|
|
|
TELEFLEX INCORPORATEDCONSOLIDATED
STATEMENTS OF CASH FLOWS |
|
|
Nine Months Ended |
|
September 27, 2020 |
|
September 29, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
Cash flows from operating
activities of continuing operations: |
|
|
|
Net income |
$ |
259,193 |
|
|
$ |
353,201 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Loss from discontinued operations |
7 |
|
|
974 |
|
Depreciation expense |
51,329 |
|
|
47,286 |
|
Intangible asset amortization expense |
118,649 |
|
|
112,661 |
|
Deferred financing costs and debt discount amortization
expense |
3,191 |
|
|
3,313 |
|
Gain on sale of assets |
— |
|
|
(3,828 |
) |
Fair value step up of acquired inventory sold |
1,707 |
|
|
— |
|
Changes in contingent consideration |
(54,585 |
) |
|
40,894 |
|
Impairment of long-lived assets |
— |
|
|
6,911 |
|
Stock-based compensation |
14,759 |
|
|
20,037 |
|
Deferred income taxes, net |
2,600 |
|
|
(140,963 |
) |
Payments for contingent consideration |
(79,771 |
) |
|
(26,092 |
) |
Interest benefit on swaps designated as net investment hedges |
(14,488 |
) |
|
(13,820 |
) |
Other |
(15,703 |
) |
|
(7,142 |
) |
Changes in assets and liabilities, net of effects of acquisitions
and disposals: |
|
|
|
Accounts receivable |
35,546 |
|
|
(41,221 |
) |
Inventories |
(38,096 |
) |
|
(53,259 |
) |
Prepaid expenses and other assets |
9,393 |
|
|
(13,184 |
) |
Accounts payable, accrued expenses and other liabilities |
(4,243 |
) |
|
31,631 |
|
Income taxes receivable and payable, net |
(48,000 |
) |
|
(28,232 |
) |
Net cash provided by operating activities from
continuing operations |
241,488 |
|
|
289,167 |
|
Cash flows from investing
activities of continuing operations: |
|
|
|
Expenditures for property, plant and equipment |
(62,369 |
) |
|
(83,797 |
) |
Proceeds from sale of assets |
400 |
|
|
3,135 |
|
Payments for businesses and intangibles acquired, net of cash
acquired |
(266,843 |
) |
|
(1,265 |
) |
Net interest proceeds on swaps designated as net investment
hedges |
9,986 |
|
|
8,330 |
|
Net cash used in investing activities from continuing
operations |
(318,826 |
) |
|
(73,597 |
) |
Cash flows from financing
activities of continuing operations: |
|
|
|
Proceeds from new borrowings |
1,013,807 |
|
|
25,000 |
|
Reduction in borrowings |
(788,807 |
) |
|
(185,500 |
) |
Debt extinguishment, issuance and amendment fees |
(8,440 |
) |
|
(4,964 |
) |
Net proceeds from share based compensation plans and the related
tax impacts |
11,177 |
|
|
14,014 |
|
Payments for contingent consideration |
(64,135 |
) |
|
(112,006 |
) |
Dividends paid |
(47,384 |
) |
|
(47,071 |
) |
Net cash provided by (used in) financing activities
from continuing operations |
116,218 |
|
|
(310,527 |
) |
Cash flows from discontinued
operations: |
|
|
|
Net cash (used in) provided by operating activities |
(540 |
) |
|
2,651 |
|
Net cash (used in) provided by discontinued
operations |
(540 |
) |
|
2,651 |
|
Effect of exchange rate
changes on cash and cash equivalents |
8,057 |
|
|
(7,311 |
) |
Net increase (decrease) in
cash and cash equivalents |
46,397 |
|
|
(99,617 |
) |
Cash and cash equivalents at
the beginning of the period |
301,083 |
|
|
357,161 |
|
Cash and cash equivalents at
the end of the period |
$ |
347,480 |
|
|
$ |
257,544 |
|
Contact: |
Jake ElguiczeTreasurer and Vice President of Investor
Relations610-948-2836 |
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