TFX Teleflex Inc

First Quarter Revenues of $424.9 million, Down 1.1% Versus Prior Year Period; Up 1.1% on Constant Currency Basis

First Quarter GAAP Diluted EPS of $1.05, Up 26.5% Over the Prior Year Period

First Quarter Adjusted Diluted EPS of $1.52, up 16.9%

Reaffirmed 2016 Guidance Range for Constant Currency Revenue Growth of 5.0% to 6.0%

Raised 2016 Guidance Range for Adjusted Diluted EPS from $7.00 to $7.15 to $7.10 to $7.25

Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced financial results for the first quarter ended March 27, 2016.

First quarter 2016 net revenues were $424.9 million, a decrease of 1.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2016 net revenues increased 1.1% over the year ago period.

First quarter 2016 GAAP diluted earnings per share from continuing operations increased 26.5% to $1.05, as compared to $0.83 in the prior year period. First quarter 2016 adjusted diluted earnings per share from continuing operations increased 16.9% to $1.52, compared to $1.30 in the prior year period.

“On the heels of an extremely strong fourth quarter to end 2015, the Company delivered a solid start to 2016, with revenue that was in-line with, and adjusted earnings per share that exceeded, our expectations,” said Benson Smith, Chairman and Chief Executive Officer. “Despite the headwind of two fewer selling days in the quarter, Teleflex was able to expand our adjusted gross and operating margins from the year-ago period and drive double-digit adjusted earnings per share growth.”

Added Smith, "Based on the Company's performance during the first quarter of 2016, and our outlook for the remainder of the year, we are reaffirming our full year constant currency revenue growth guidance range of 5% to 6%, and increasing our full year adjusted diluted earnings per share guidance range from $7.00 to $7.15 to $7.10 to $7.25. Finally, I am pleased to announce the promotion of Liam Kelly to President and Chief Operating Officer. Liam has been instrumental in the Company's success since we transitioned to a pure-play medical device company, and I am confident in his ability to continue to drive Teleflex forward in the future.”

FIRST QUARTER NET REVENUE BY SEGMENT

Vascular North America first quarter 2016 net revenues were $81.5 million, an increase of 1.0% compared to the prior year period. Excluding the impact of foreign currency fluctuations, first quarter 2016 net revenues increased 1.5% compared to the prior year period. The increase in constant currency revenue was largely due to price increases.

Surgical North America first quarter 2016 net revenues were $38.9 million, an increase of 2.3% compared to the prior year period. Excluding the impact of foreign currency fluctuations, first quarter 2016 net revenues increased 3.1% compared to the prior year period. The increase in constant currency revenue was largely due to an increase in new product sales and price increases, somewhat offset by lower sales volume of existing products.

Anesthesia North America first quarter 2016 net revenues were $46.0 million, an increase of 1.1% compared to the prior year period. Excluding the impact of foreign currency fluctuations, first quarter 2016 net revenues increased 1.6% compared to the prior year period. The increase in constant currency revenue was largely due to an increase in new product sales.

EMEA first quarter 2016 net revenues were $122.1 million, a decrease of 5.6% compared to the prior year period. Excluding the impact of foreign currency fluctuations, first quarter 2016 net revenues decreased 1.9% compared to the prior year period. The decrease in constant currency revenue was largely due to lower sales volume of existing products and price decreases, somewhat offset by an increase in new product sales.

Asia first quarter 2016 net revenues were $49.2 million, an increase of 1.3% compared to the prior year period. Excluding the impact of foreign currency fluctuations, first quarter 2016 net revenues increased 6.4% compared to the prior year period. The increase in constant currency revenue was largely due to product sales resulting from acquisitions and higher sales volume of existing products.

OEM and Development Services (“OEM”) first quarter 2016 net revenues were $34.0 million, a decrease of 2.1% compared to the prior year period. Excluding the impact of foreign currency fluctuations, first quarter 2016 net revenues decreased 1.6% compared to the prior year period. The decrease in constant currency revenue was largely due to lower sales volume of existing products, somewhat offset by an increase in new product sales.

    Three Months Ended % Increase/ (Decrease) March 27, 2016   March 29, 2015

ConstantCurrency

 

ForeignCurrency

 

TotalChange

(Dollars in millions) Vascular North America $ 81.5 $ 80.8 1.5 % (0.5) % 1.0 % Surgical North America 38.9 38.1 3.1 % (0.8) % 2.3 % Anesthesia North America 46.0 45.4 1.6 % (0.5) % 1.1 % EMEA 122.1 129.3 (1.9) % (3.7) % (5.6) % Asia 49.2 48.5 6.4 % (5.1) % 1.3 % OEM 34.0 34.7 (1.6) % (0.5) % (2.1) % All Other   53.2   52.6 2.6 % (1.6) % 1.0 % Total $ 424.9 $ 429.4 1.1 % (2.2) % (1.1) %  

OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS

Depreciation expense, amortization of intangible assets and deferred financing for the first three months of 2016 aggregated to $32.3 million compared to $29.9 million for the prior year period.

Cash and cash equivalents at March 27, 2016 were $392.6 million compared to $338.4 million at December 31, 2015.

Net accounts receivable at March 27, 2016 were $274.7 million compared to $262.4 million at December 31, 2015.

Net inventories at March 27, 2016 were $338.9 million compared to $330.3 million at December 31, 2015.

Net debt obligations at March 27, 2016 were $690.1 million compared to $743.8 million at December 31, 2015.

2016 OUTLOOK

The Company reaffirmed its estimate that revenues for full year 2016 will increase 5.0% to 6.0% on a constant currency basis. On a GAAP basis, revenues are expected to increase 3.0% to 4.0% over prior year, reflecting the anticipated unfavorable impact of foreign currency.

The Company increased its full year 2016 adjusted diluted earnings per share from continuing operations guidance from a range of $7.00 to $7.15 to a range of $7.10 to $7.25. This new range represents an increase of 12.2% to 14.5% over 2015, which reflects our expectation of a negative foreign currency headwind of approximately 1%. The Company expects full year 2016 GAAP diluted earnings per share from continuing operations to be between $5.32 and $5.37.

 

FORECASTED 2016 CONSTANT CURRENCY REVENUE GROWTH RECONCILIATION

    Low   High   Forecasted 2016 GAAP revenue growth 3.0 % 4.0 %   Estimated impact of foreign currency fluctuations   2.0 %     2.0 %   Forecasted 2016 constant currency revenue growth   5.0 %     6.0 %    

FORECASTED 2016 ADJUSTED EARNINGS PER SHARE RECONCILIATION

 

Low

 

High

Diluted earnings per share attributable to common shareholders $ 5.32 $ 5.37   Restructuring, impairment charges and special items, net of tax $ 0.80 $ 0.85   Intangible amortization expense, net of tax $ 0.90 $ 0.95   Amortization of debt discount on convertible notes, net of tax $ 0.08     $ 0.08     Adjusted diluted earnings per share $ 7.10     $ 7.25    

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 May 3, 2016 at 11:59pm (ET), by calling 855-859-2056 (U.S./Canada) or 404-537-3406 (International), Passcode: 90662973.

ADDITIONAL NOTES

References in this release to the unfavorable impact of foreign currency 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 we have sold for 36 months or less, and "existing products" refers to products we have sold 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

This press release includes certain non-GAAP financial measures, which include:

Adjusted diluted earnings per share. This measure excludes, depending on the period presented (i) restructuring and other impairment charges; (ii) certain losses and other charges, including charges related to facility consolidations, net of the gain on sale of an asset; (iii) amortization of the debt discount on the Company’s convertible notes; (iv) intangible amortization expense; and (v) tax benefits resulting primarily from the resolution of audits of prior year returns and tax law changes affecting the Company's deferred tax liability. In addition, the calculation of diluted shares within adjusted earnings per share gives effect to the anti-dilutive impact of the Company’s convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of the Company’s senior subordinated convertible notes (under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares).

Constant currency revenue growth. This measure excludes the impact of translating the results of international subsidiaries at different currency exchange rates from period to period.

Management believes these measures are useful to investors because they eliminate items that do not reflect Teleflex’s day-to-day operations. In addition, management believes that the calculation of non-GAAP diluted shares is useful to investors because it provides insight into the offsetting economic effect of the convertible note hedge against conversions of the convertible notes. Management uses these financial measures for internal managerial purposes, when publicly providing guidance on possible future results, and to assist in our evaluation of period-to-period comparisons. These financial measures are presented in addition to results presented in accordance with generally accepted accounting principles (“GAAP”) and should not be relied upon as a substitute for GAAP financial measures. Tables reconciling historical adjusted diluted earnings per share to historical GAAP earnings per share are set forth below. Tables reconciling constant currency net revenues to GAAP net revenues and reconciling forecasted non-GAAP measures to the most directly comparable forecasted GAAP measures are set forth above.

  RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS Dollars in millions, except per share amounts               Quarter Ended – March 27, 2016  

Cost ofgoodssold

 

Selling,general andadministrativeexpenses

 

Research anddevelopmentexpenses

Restructuringand otherimpairmentcharges

(Gain) losson sale ofbusinessand assets

Interestexpense,net

Incometaxes

Net income(loss)attributable tocommonshareholdersfrom continuingoperations

Dilutedearnings pershareavailable tocommonshareholders

Shares usedin calculationof GAAP andadjustedearnings pershare

GAAP Basis $ 199.7 $ 136.3 $ 12.4 $ 10.0 ($1.0 ) $ 13.7 $ 2.6 $ 51.0 $ 1.05 48,782 Adjustments Restructuring and other impairment charges — — — 10.0 — — 2.3 7.6 $ 0.16 — Losses and other charges, net (A) 2.7 0.6 0.0 — (1.0 ) — 0.9 1.4 $ 0.03 — Amortization of debt discount on convertible notes — — — — — 3.5 1.3 2.2 $ 0.05 — Intangible amortization expense — 15.4 — — — — 4.1 11.2 $ 0.23 — Tax adjustment (B) — — — — — — 5.0 (5.0 ) ($0.10 ) — Shares due to Teleflex under note hedge (C) — — — — — — — — $ 0.12 (3,621 ) Adjusted basis $ 197.1 $ 120.4 $ 12.4 — — $ 10.2 $ 16.2 $ 68.5 $ 1.52 45,161   Quarter Ended – March 29, 2015

Cost ofgoodssold

Selling,general andadministrativeexpenses

Research anddevelopmentexpenses

Restructuringand otherimpairmentcharges

(Gain) losson sale ofbusinessand assets

Interestexpense,net

Incometaxes

Net income(loss)attributable tocommonshareholdersfrom continuingoperations

Dilutedearnings pershareavailable tocommonshareholders

Shares usedin calculationof GAAP andadjustedearnings pershare

GAAP Basis $ 206.8 $ 139.7 $ 12.9 $ 4.4 — $ 17.0 $ 9.3 $ 39.1 $ 0.83 47,295 Adjustments Restructuring and other impairment charges — — — 4.4 — — 1.6 2.8 $ 0.06 — Losses and other charges, net (A) 2.1 0.9 — — — — 0.8 2.2 $ 0.05 — Amortization of debt discount on convertible notes — — — — — 3.2 1.2 2.0 $ 0.04 — Intangible amortization expense — 14.7 — — — — 3.8 11.0 $ 0.23 — Tax adjustment (B) — — — — — — (0.2 ) 0.2 $ 0.00 — Shares due to Teleflex under note hedge (C) — — — — — — — — $ 0.09 (3,056 ) Adjusted basis $ 204.7 $ 124.0 $ 12.9 — — $ 13.8 $ 16.5 $ 57.3 $ 1.30 44,239  

(A) In 2016 losses and other charges, net related primarily to facility consolidations and the gain on sale of an asset. In 2015, losses and other charges, net related primarily to facility consolidations.

(B) The tax adjustment represents a net benefit resulting primarily from (1) the resolution of audits of prior year returns and (2) tax law changes affecting our deferred tax liability.

(C) Adjusted diluted shares are calculated by giving effect to the anti-dilutive impact of the Company’s convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of our senior subordinated convertible notes. Under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares.

 

RECONCILIATION OF NET DEBT OBLIGATIONS

  March 27, 2016   December 31, 2015 (Dollars in thousands) Note payable and current portion of long term borrowings $ 421,198 $ 417,350   Long term borrowings 641,973 641,850   Unamortized debt discount   19,531   22,999   Total debt obligations 1,082,702 1,082,199   Less: cash and cash equivalents   392,558   338,366   Net debt obligations $ 690,144 $ 743,833  

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 and interventional access, surgical, anesthesia, cardiac care, urology, emergency medicine 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® 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 2016 GAAP and constant currency revenue growth and GAAP and adjusted diluted earnings per share. Actual results could differ materially from those in the forward-looking statements due to, among other things, conditions in the end markets we serve, customer reaction to new products and programs, our ability to achieve sales growth, price increases or cost reductions; changes in the reimbursement practices of third party payors; our ability to realize efficiencies and to execute on our strategic initiatives; changes in material costs and surcharges; market acceptance and unanticipated difficulties in connection with the introduction of new products and product line extensions; product recalls; unanticipated difficulties in connection with the consolidation of manufacturing and administrative functions, including as a result of difficulties with various employees, labor representatives or regulators; the loss of skilled employees in connection with such initiatives; unanticipated difficulties, expenditures and delays in complying with government regulations applicable to our businesses; the impact of government healthcare reform legislation; our ability to meet our debt obligations; changes in general and international economic conditions, including fluctuations in foreign currency exchange rates; and other factors described or incorporated in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2015.

  TELEFLEX INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)   Three Months Ended March 27, 2016   March 29, 2015 (Dollars and shares in thousands, except per share) Net revenues $ 424,893   $ 429,430 Cost of goods sold   199,746     206,793   Gross profit 225,147 222,637 Selling, general and administrative expenses 136,348 139,697 Research and development expenses 12,353 12,884 Restructuring charges 9,968 4,448 Gain on sale of assets   (1,019 )   —   Income from continuing operations before interest and taxes 67,497 65,608 Interest expense 13,784 17,172 Interest income   (80 )   (169 ) Income from continuing operations before taxes 53,793 48,605 Taxes on income from continuing operations   2,613     9,332   Income from continuing operations   51,180     39,273   Operating loss from discontinued operations (382 ) (499 ) (Benefit) taxes on loss from discontinued operations   (70 )   204   Loss from discontinued operations     (312 )     (703 ) Net income 50,868 38,570

Less: Income from continuing operations attributable to noncontrolling interest

  179     218   Net income attributable to common shareholders $ 50,689   $ 38,352   Earnings per share available to common shareholders: Basic: Income from continuing operations $ 1.22 $ 0.94 Loss from discontinued operations   —     (0.02 ) Net income $ 1.22   $ 0.92   Diluted: Income from continuing operations $ 1.05 $ 0.83 Loss from discontinued operations   (0.01 )   (0.02 ) Net income $ 1.04   $ 0.81   Dividends per share $ 0.34 $ 0.34 Weighted average common shares outstanding Basic 41,647 41,469 Diluted 48,782 47,295 Amounts attributable to common shareholders: Income from continuing operations, net of tax $ 51,001 $ 39,055 Loss from discontinued operations, net of tax   (312 )   (703 ) Net income $ 50,689   $ 38,352       TELEFLEX INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)     March 27, 2016 December 31, 2015 (Dollars in thousands) ASSETS Current assets Cash and cash equivalents $ 392,558 $ 338,366 Accounts receivable, net 274,660 262,416 Inventories, net 338,906 330,275 Prepaid expenses and other current assets 40,733 34,915 Prepaid taxes 31,098 30,895 Assets held for sale 7,054   6,972 Total current assets 1,085,009 1,003,839 Property, plant and equipment, net 318,183 316,123 Goodwill 1,303,456 1,295,852 Intangible assets, net 1,188,853 1,199,975 Investments in affiliates 196 152 Deferred tax assets 2,358 2,341 Other assets 45,411   53,492 Total assets $ 3,943,466   $ 3,871,774 LIABILITIES AND EQUITY Current liabilities Current borrowings $ 421,198 $ 417,350 Accounts payable 73,313 66,305 Accrued expenses 68,797 64,017 Current portion of contingent consideration 7,397 7,291 Payroll and benefit-related liabilities 72,031 84,658 Accrued interest 6,635 7,480 Income taxes payable 12,700 8,059 Other current liabilities 12,604   8,960 Total current liabilities 674,675 664,120 Long-term borrowings 641,973 641,850 Deferred tax liabilities 322,043 315,983 Pension and postretirement benefit liabilities 146,804 149,441 Noncurrent liability for uncertain tax provisions 26,168 40,400 Other liabilities 57,728   48,887 Total liabilities 1,869,391 1,860,681 Commitments and contingencies Convertible notes - redeemable equity component (Note 15) 12,877   — Mezzanine equity 12,877 — Total common shareholders' equity 2,059,219 2,009,272 Noncontrolling interest 1,979   1,821 Total equity 2,061,198   2,011,093 Total liabilities and equity $ 3,943,466   $ 3,871,774     TELEFLEX INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)   Three Months Ended March 27, 2016   March 29, 2015 (Dollars in thousands) Cash flows from operating activities of continuing operations Net income $ 50,868 $ 38,570 Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations 312 703 Depreciation expense 12,602 10,915 Amortization expense of intangible assets 15,357 14,740 Amortization expense of deferred financing costs and debt discount 4,377 4,195 Gain on sale of assets (1,019 ) — Changes in contingent consideration 377 382 Stock-based compensation 3,437 3,832 Deferred income taxes, net 756 1,085 Other (3,114 ) (4,294 ) Changes in operating assets and liabilities, net of effects of acquisitions and disposals: Accounts receivable (10,568 ) (21,906 ) Inventories (5,104 ) (14,578 ) Prepaid expenses and other current assets (3,749 ) (4,756 ) Accounts payable and accrued expenses 4,502 3,819 Income taxes receivable and payable, net (2,202 ) 9,651   Net cash provided by operating activities from continuing operations 66,832   42,358   Cash flows from investing activities of continuing operations: Expenditures for property, plant and equipment (7,822 ) (14,445 ) Proceeds from sale of assets 1,251 — Payments for businesses and intangibles acquired, net of cash acquired —   (7,375 ) Net cash used in investing activities from continuing operations (6,571 ) (21,820 ) Cash flows from financing activities of continuing operations: Proceeds from new borrowings — 30,000 Reduction in borrowings (9 ) (52 ) Net proceeds from share based compensation plans and the related tax impacts 3,180 (289 ) Payments for contingent consideration (61 ) (3,989 ) Dividends paid (14,179 ) (14,118 ) Net cash used in financing activities from continuing operations (11,069 ) 11,552   Cash flows from discontinued operations: Net cash used in operating activities (126 ) (1,126 ) Net cash used in discontinued operations (126 ) (1,126 ) Effect of exchange rate changes on cash and cash equivalents 5,126   (25,441 ) Net increase in cash and cash equivalents 54,192 5,523 Cash and cash equivalents at the beginning of the period 338,366   303,236   Cash and cash equivalents at the end of the period $ 392,558   $ 308,759    

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Teleflex IncorporatedJake ElguiczeTreasurer and Vice President of Investor Relations610-948-2836