Third Quarter Revenues of $534.7 million, up
17.4% Versus Prior Year Period; up 15.4% on Constant Currency
Basis
Third Quarter GAAP Diluted EPS of $1.70, up
21.4% Over Prior Year Period
Third Quarter Adjusted Diluted EPS of $2.12,
up 17.8% Versus Prior Year Period
Raised 2017 Guidance Range for GAAP Revenue
Growth from a Range of 11.5% to 13.0% to a Range of 15.0% to
15.5%
Raised 2017 Guidance Range for Constant
Currency Revenue Growth from a Range of 12.5% to 14.0% to a Range
of 14.25% to 14.75%
Lowered 2017 Guidance for GAAP Diluted EPS
from a Range of $5.91 to $5.98 to a Range of $5.61 to $5.66
Raised 2017 Guidance for Adjusted Diluted
EPS from a Range of $8.20 to $8.35 to a Range of $8.30 to
$8.40
Teleflex Incorporated (NYSE: TFX) (the “Company”) today
announced financial results for the third quarter ended October 1,
2017.
Third quarter 2017 net revenues were $534.7 million, an increase
of 17.4% compared to the prior year period. Excluding the impact of
foreign currency exchange rate fluctuations, third quarter 2017 net
revenues increased 15.4% over the year ago period.
Third quarter 2017 GAAP diluted earnings per share from
continuing operations increased 21.4% to $1.70, as compared to
$1.40 in the prior year period. Third quarter 2017 adjusted diluted
earnings per share from continuing operations increased 17.8% to
$2.12, compared to $1.80 in the prior year period.
“Building upon our performance in the first half of the year,
during the third quarter of 2017 Teleflex executed well, delivering
17.4% GAAP and 15.4% constant currency revenue growth, significant
operating margin expansion, and GAAP and adjusted earnings per
share that respectively increased 21.4% and 17.8% over the prior
year period,” said Benson Smith, Chairman and Chief Executive
Officer. “In addition, despite having to deal with certain
weather-related delays during the third quarter, Teleflex saw an
acceleration in its organic revenue growth rate from the levels
achieved earlier this year, thanks in part to progress made in our
distributor to direct conversion in Asia."
Added Mr. Smith, "Finally, on the first day of the fourth
quarter we completed the acquisition of NeoTract. This acquisition,
coupled with revenue and non-revenue dependent opportunities within
our base business, positions Teleflex to succeed for several years
in the future."
THIRD QUARTER NET REVENUE BY SEGMENT
The following table provides information regarding net revenues
in each of the Company's reportable operating segments and all of
its other operating segments for the three months ended October 1,
2017 and September 25, 2016 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 October
1, 2017 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 "Foreign Currency" column of the table.
Three Months Ended % Increase/
(Decrease) October 1, 2017 September 25,
2016
ConstantCurrency
ForeignCurrency
TotalChange
(Dollars in millions) Vascular North America $ 91.0 $ 85.1
6.7 % 0.2 % 6.9 % Anesthesia North America 50.8 48.7 4.3 %
0.1 % 4.4 % Surgical North America 40.8 41.9 (2.7 ) % 0.3 % (2.4 )
% EMEA 131.5 121.4 3.3 % 5.0 % 8.3 % Asia 72.4 64.0 11.7 % 1.3 %
13.0 % OEM 48.6 41.4 16.1 % 1.2 % 17.3 % All Other 99.6
53.1 86.5 % 1.0 % 87.5 %
Total $ 534.7 $ 455.6 15.4 % 2.0 % 17.4
%
Vascular North America third quarter 2017 net revenues were
$91.0 million, an increase of 6.9% compared to the prior year
period. Excluding the impact of foreign currency exchange rate
fluctuations, third quarter 2017 net revenues increased 6.7%
compared to the prior year period. The increase in constant
currency revenue is primarily attributable to an increase in sales
volumes of existing products, an increase in new product sales, and
price increases.
Anesthesia North America third quarter 2017 net revenues were
$50.8 million, an increase of 4.4% compared to the prior year
period. Excluding the impact of foreign currency exchange rate
fluctuations, third quarter 2017 net revenues increased 4.3%
compared to the prior year period. The increase in constant
currency revenue is primarily attributable to net revenues
generated by an acquired business.
Surgical North America third quarter 2017 net revenues were
$40.8 million, a decrease of 2.4% compared to the prior year
period. Excluding the impact of foreign currency exchange rate
fluctuations, third quarter 2017 net revenues decreased 2.7%
compared to the prior year period. The decrease in constant
currency revenue is primarily attributable to a decrease in sales
volumes of existing products, partially offset by price increases
and an increase in new product sales.
EMEA third quarter 2017 net revenues were $131.5 million, an
increase of 8.3% compared to the prior year period. Excluding the
impact of foreign currency exchange rate fluctuations, third
quarter 2017 net revenues increased 3.3% compared to the prior year
period. The increase in constant currency revenue is primarily
attributable to an increase in sales volumes of existing
products.
Asia third quarter 2017 net revenues were $72.4 million, an
increase of 13.0% compared to the prior year period. Excluding the
impact of foreign currency exchange rate fluctuations, third
quarter 2017 net revenues increased 11.7%. The increase in constant
currency revenue is primarily attributable to an increase in sales
volumes of existing products and an increase in new product
sales.
OEM and Development Services (“OEM”) third quarter 2017 net
revenues were $48.6 million, an increase of 17.3% compared to the
prior year period. Excluding the impact of foreign currency
exchange rate fluctuations, third quarter 2017 net revenues
increased 16.1% compared to the prior year period. The increase in
constant currency revenue is primarily attributable to an increase
in sales volumes of existing products, net revenues generated by an
acquired business and an increase in new product sales.
All Other third quarter 2017 net revenues were $99.6 million, an
increase of 87.5% compared to the prior year period. Excluding the
impact of foreign currency exchange rate fluctuations, third
quarter 2017 net revenues increased 86.5% compared to the prior
year period. The increase in constant currency revenue is primarily
attributable to net revenues generated by Vascular Solutions.
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE
METRICS
Depreciation expense, amortization of intangible assets and
deferred financing charges for the first nine months of 2017
totaled $110.3 million compared to $96.3 million for the prior year
period.
Cash and cash equivalents at October 1, 2017 were $1.0 billion
compared to $543.8 million at December 31, 2016.
Net accounts receivable at October 1, 2017 were $306.5 million
compared to $272.0 million at December 31, 2016.
Net inventories at October 1, 2017 were $382.4 million compared
to $316.2 million at December 31, 2016.
2017 OUTLOOK
The Company raised its full year 2017 GAAP revenue growth
guidance range from 11.5% to 13.0% to a range of 15.0% to 15.5%
over the prior year. The Company's previous 2017 GAAP revenue
growth guidance range reflected an anticipated 1.0% unfavorable
impact of foreign currency exchange rate fluctuations, while the
Company's revised 2017 GAAP revenue growth guidance range reflects
an anticipated 0.75% favorable impact of foreign currency exchange
rate fluctuations. On a constant currency basis, the Company raised
its full year 2017 guidance range from 12.5% to 14.0% to a range of
14.25% to 14.75% over the prior year. The forecasted GAAP and
constant currency revenue growth guidance reflect the impact of
Vascular Solutions' product sales, which are expected to contribute
approximately 8.5%, as compared to our prior expectations of 8.5%
to 9%, and the impact of NeoTract's product sales, which are
expected to contribute approximately 1.5% to 1.7%.
The Company lowered its full year 2017 GAAP diluted earnings per
share from continuing operations guidance from a range of $5.91 to
$5.98 to a range of $5.61 to $5.66. The decrease in expected full
year 2017 GAAP diluted earnings per share from continuing
operations guidance from prior expectations is primarily due to
anticipated costs associated with the acquisition of NeoTract. The
Company raised its full year 2017 adjusted diluted earnings per
share from continuing operations guidance from a range of $8.20 to
$8.35 to a range of $8.30 to $8.40.
Forecasted 2017 Constant Currency Revenue
Growth Reconciliation
Low High 2017 GAAP revenue
growth 15.00
%
15.50
%
Estimated impact of foreign currency exchange rate
fluctuations (0.75
)
%
(0.75
)
%
2017 constant currency revenue growth 14.25
%
14.75
%
Forecasted 2017 Adjusted Earnings Per
Share Reconciliation
Low High Diluted earnings per
share attributable to common shareholders $5.61 $5.66
Restructuring, restructuring related and impairment items, net of
tax $0.50 $0.52 Acquisition, integration and divestiture
related items, net of tax $0.72 $0.74 Other items, net of
tax ($0.04 ) ($0.04 ) Loss on extinguishment of debt, net of
tax $0.08 $0.08 Tax adjustments ($0.10 ) ($0.10 )
Shares due to Teleflex under note hedge $0.05 $0.05
Intangible amortization expense, net of tax $1.47 $1.48
Amortization of debt discount on convertible notes, net of tax
$0.01 $0.01 Adjusted
diluted earnings per share $8.30 $8.40
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 8, 2017 at 11:59pm
(ET), by calling 855-859-2056 (U.S./Canada) or 404-537-3406
(International), Passcode: 3479079.
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 we have sold commercially 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: adjusted diluted earnings per share and
constant currency revenue growth. 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 historical GAAP diluted earnings per share to
historical adjusted diluted earnings per share are set forth below.
A table reconciling changes in historical GAAP net revenues to
changes in historical constant currency net revenues is set forth
above under “Third Quarter Net Revenue by Segment”. Tables
reconciling forecasted 2017 constant currency revenue growth and
forecasted 2017 adjusted earnings per share to their respective
most directly comparable forecasted GAAP measures, forecasted 2017
revenue growth and forecasted 2017 diluted earnings per share
available to common stockholders, are set forth above under “2017
Outlook”.
Adjusted diluted earnings per share: This non-GAAP
measure is based upon diluted earnings per share available to
common stockholders, the most directly comparable GAAP measure,
adjusted to exclude, depending on the period presented, the impact
(net of tax) of (i) restructuring, restructuring related and
impairment items; (ii) acquisition, integration and divestiture
related items; (iii) other items identified in note (C) to the
reconciliation tables set forth below; (iv) amortization of debt
discount on convertible notes; (v) intangible amortization expense;
(vi) loss on extinguishment of debt and (vii) tax adjustments.
Management does not believe that any of the excluded items are
indicative of our underlying core performance or business
trends.
In addition, the calculation of the weighted average number of
diluted shares within adjusted earnings per share gives effect to
the anti-dilutive impact of shares due to the Company under its
previously outstanding convertible note hedge agreements. The
convertible note hedge agreements reduced the potential economic
dilution that otherwise would have occurred upon conversion of the
Company’s senior subordinated convertible notes (under GAAP, the
anti-dilutive impact of the convertible note hedge agreements was
not reflected in the weighted average number of diluted shares). We
believe that an adjustment to show the anti-dilutive effect of the
convertible note hedge agreements provides supplemental information
that can be useful to investors in assessing the computation of
diluted earnings per share.
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 fluctuations that do not reflect
our underlying performance or business trends.
RECONCILIATION OF CONSOLIDATED
STATEMENT OF INCOME ITEMS
Dollars in millions, except per share
amounts
The following reconciliation tables reflect a change in the
classification of certain adjustment items from those presented in
reconciliation tables included in our previous earnings releases.
Specifically, we created a new line item titled “acquisition,
integration and divestiture related items.” The components of this
new line item were formerly included in “losses and other charges,
net.” Additionally, we have included a new line item titled
“restructuring, restructuring related and impairment items,” which
combines restructuring related items, which previously were
included in “losses and other charges, net,” with restructuring
charges and other impairment items, which previously were included
in “restructuring and other impairment charges.” The prior periods
presented in the following reconciliation tables and related
materials were reclassified to conform to the current presentation.
Quarter
Ended - October 1, 2017
Cost ofgoods sold
Selling,
generalandadministrativeexpenses
Research
anddevelopmentexpenses
Restructuringand
otherimpairmentcharges
(Gain) loss onsale
ofbusiness andassets
Interestexpense, net
Income taxes
Net income (loss)attributable
tocommonshareholders
fromcontinuingoperations
Diluted earningsper share
availableto commonshareholders
Shares usedin
calculationof GAAP andadjustedearnings
pershare
GAAP Basis $239.5 $163.8 $21.2 ($0.1 ) —
$21.0
$10.0
$79.4
$1.70 46,587 Adjustments Restructuring, restructuring related and
impairment items (A) 2.8 0.1 0.2 (0.1 ) — — 1.1 1.9 $0.04 —
Acquisition, integration and divestiture related items (B) — 2.6 —
— — — (0.3 ) 2.8 $0.06 — Other items (C) — 2.3 — — — — 0.6 1.7
$0.04 — Amortization of debt discount on convertible notes (D) — —
— — — 0.1 0.0 0.1 $0.00 — Intangible amortization expense (E) —
22.5 0.1 — — — 6.0 16.6 $0.36 — Loss on extinguishment of debt (F)
— — — — — — — — — — Tax adjustments (G) — — — — — — 4.1 (4.1 )
($0.09 ) — Shares due to Teleflex under note hedge (H) — — — — — —
— — $0.01 (141 ) Adjusted basis $236.7 $136.3 $20.9 — — $20.9 $21.7
$98.3 $2.12 46,446
Quarter Ended -
September 25, 2016
Cost ofgoods sold
Selling,
generalandadministrativeexpenses
Research
anddevelopmentexpenses
Restructuringand
otherimpairmentcharges
(Gain) loss onsale
ofbusiness andassets
Interestexpense, net
Income taxes
Net income (loss)attributable
tocommonshareholdersfrom
continuingoperations
Diluted earningsper
shareavailable tocommonshareholders
Shares used incalculation
ofGAAP andadjustedearnings
pershare
GAAP Basis $214.0 $139.8 $15.1 $3.0
($2.8
)
$12.8
$7.5 $66.2 $1.40 47,446 Adjustments Restructuring, restructuring
related and impairment items (A) 4.2 0.1 0.0 3.0 —
— 2.5 4.9 $0.10 — Acquisition, integration and divestiture related
items (B) — 0.6 — —
(2.8
)
—
(0.8
)
(1.4 ) ($0.03 ) — Other items (C) — 0.1 — — — — 0.0 0.1 $0.00 —
Amortization of debt discount on convertible notes (D) — — — — —
1.1
0.4
0.7 $0.02 — Intangible amortization expense (E) — 16.0 0.1 — — —
3.7 12.4 $0.26 — Loss on extinguishment of debt (F) — — — — — — 0.0
0.0 $0.00 — Tax adjustments (G) — — — — — — 0.3 (0.3 ) ($0.01 ) —
Shares due to Teleflex under note hedge (H) — — — — — — — — $0.06
(1,463 ) Adjusted basis $209.8 $123.0 $14.9 — — $11.7 $13.7 $82.6
$1.80 45,983
(A) Restructuring, restructuring related and impairment items -
Restructuring programs involve discrete initiatives designed to,
among other things, consolidate or relocate manufacturing,
administrative and other facilities, improve operating efficiencies
and integrate acquired businesses. Our restructuring charges
consist of termination benefits, contract termination costs,
facility closure costs and other exit costs associated with a
specific 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. For
the three months ended October 1, 2017 and September 25, 2016,
pre-tax restructuring related charges were $3.1 million and $4.4
million, respectively.
(B) Acquisition, integration and divestiture related items -
Acquisition and integration expenses are incremental costs, other
than restructuring or restructuring related expenses, that are
directly related to specific business or asset acquisition
transactions. These costs 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; and bridge loan facility and backstop financing fees
in connection with facilities that ultimately were not utilized.
For the three months ended October 1, 2017, the majority of these
costs were related to our acquisition of Vascular Solutions.
Divestiture related activities involve specific business or asset
sales. Depending primarily on the terms of the 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.
(C) Other items - These are discrete items that occur
sporadically and can affect period-to-period comparisons. For the
three months ended October 1, 2017, these items included both gains
and losses associated with litigation settlements.
(D) Amortization of debt discount on convertible notes - When we
sold $400 million principal amount of our 3.875% convertible notes
(the “convertible notes”) in 2010, we allocated the proceeds
between the liability and equity components of the debt, in
accordance with GAAP. As a result, the $83.7 million
difference between the proceeds of the sale of the convertible
notes and the liability component of the debt constituted a debt
discount that was to be amortized to interest expense over the
approximately seven year term of the convertible notes, which
significantly increased the amount we recorded as interest expense
attributable to the convertible notes. The amount of the
amortization of the debt discount was reduced as a result of our
repurchases of convertible notes in 2016 and 2017 and redemptions
of the convertible notes by holders of the notes, although we
continued to amortize the remaining portion of the debt discount to
interest expense until August 2017, when all remaining convertible
notes were either converted or matured.
(E) Intangible amortization expense - Certain intangible assets,
including customer lists, 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.
(F) Loss on extinguishment of debt - In connection with debt
refinancings, debt repayments, repurchases of convertible notes and
redemptions of convertible notes, outstanding indebtedness is
extinguished. These events, which have occurred from time to time
on an irregular basis, have resulted in losses reflecting, among
other things, unamortized debt issuance costs, as well as debt
prepayment fees and premiums (including conversion premiums
resulting from conversion of convertible securities).
(G) 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 changes affecting
our deferred tax liability.
(H) Adjusted diluted shares are calculated by giving effect to
the anti-dilutive impact of the Company’s convertible note hedge
agreements, which reduced the potential economic dilution that
otherwise would have occurred upon conversion of the Company's
convertible notes. Under GAAP, the anti-dilutive impact of the
convertible note hedge agreements is not reflected in the weighted
average number of diluted shares.
RECONCILIATION OF CONSOLIDATED
STATEMENT OF INCOME ITEMS
Dollars in millions, except per share
amounts
The following reconciliation tables reflect a change in the
classification of certain adjustment items from those presented in
reconciliation tables included in our previous earnings releases.
Specifically, we created a new line item titled “acquisition,
integration and divestiture related items.” The components of this
new line item were formerly included in “losses and other charges,
net.” Additionally, we have included a new line item titled
“restructuring, restructuring related and impairment items,” which
combines restructuring related items, which previously were
included in “losses and other charges, net,” with restructuring
charges and other impairment items, which previously were included
in “restructuring and other impairment charges.” The prior periods
presented in the following reconciliation tables and related
materials were reclassified to conform to the current presentation.
Year-to-date Ended - October 1, 2017
Cost ofgoods sold
Selling,
generalandadministrativeexpenses
Research
anddevelopmentexpenses
Restructuringand
otherimpairmentcharges
(Gain) loss onsale
ofbusiness andassets
Interestexpense,net
Loss onextinguishmentof
debt, net
Income taxes
Net
income(loss)attributable
tocommonshareholdersfromcontinuingoperations
Dilutedearnings
pershareavailable
tocommonshareholders
Shares
usedincalculationof GAAPand
adjustedearnings pershare
GAAP Basis $710.1 $486.7 $59.3 $13.7 — $58.3 $5.6 $19.4 $198.1
$4.24 46,673 Adjustments Restructuring, restructuring related and
impairment items (A) 8.9 0.5 0.8 13.7 — — — 7.2 16.7 $0.36 —
Acquisition, integration and divestiture related items (B) 10.4
11.6 — — — 2.1 — 6.8 17.3 $0.37 — Other items (C) — (3.8 ) — — — —
— (1.7 ) (2.1 ) ($0.04 ) — Amortization of debt discount on
convertible notes (D) — — — — — 0.9 — 0.3 0.6 $0.01 — Intangible
amortization expense (E) — 63.7 0.3 — — — — 17.7 46.3 $0.99 — Loss
on extinguishment of debt (F) — — — — — — 5.6 2.0 3.5 $0.08 — Tax
Adjustments (G) — — — — — — — 4.6 (4.6 ) ($0.10 ) — Shares due to
Teleflex under note hedge (H) — — — — — — — — — $0.05 (373 )
Adjusted basis $690.8 $414.7 $58.2 — — $55.3 — $56.4 $275.8 $5.96
46,300
Year-to-date Ended - September 25,
2016
Cost ofgoods sold
Selling,
generalandadministrativeexpenses
Research
anddevelopmentexpenses
Restructuringand
otherimpairmentcharges
(Gain) loss onsale
ofbusiness andassets
Interestexpense,net
Loss onextinguishmentof
debt, net
Income taxes
Net
income(loss)attributable
tocommonshareholdersfromcontinuingoperations
Dilutedearnings
pershareavailable
tocommonshareholders
Shares
usedincalculationof
GAAPandadjustedearningsper
share
GAAP Basis $630.9 $419.1 $42.9 $12.9 ($4.2 ) $38.3 $19.3 $18.1
$176.3 $3.69 47,824 Adjustments Restructuring, restructuring
related and impairment items (A) 10.9 0.2 0.0 12.9 — — — 7.4 16.6
$0.35 — Acquisition, integration and divestiture related items (B)
— 2.0 — — (4.2 ) — — (0.6 ) (1.5 ) ($0.03 ) — Other items (C) — 0.4
0.0 — — — — 0.2 0.3 $0.01 — Amortization of debt discount on
convertible notes (D) — — — — — 6.0 — 2.2 3.8 $0.08 — Intangible
amortization expense (E) — 47.2 0.3 — — — — 12.1 35.4 $0.74 — Loss
on extinguishment of debt (F) — — — — — — 19.3 7.0 12.2 $0.26 — Tax
adjustments (G) — — — — — — — 5.8 (5.8 ) ($0.12 ) — Shares due to
Teleflex under note hedge (H) — — — — — — — — — $0.25 (2,253 )
Adjusted basis $620.1 $369.3 $42.5 — — $32.2 — $52.2 $237.3 $5.21
45,571
(A) Restructuring, restructuring related and impairment items -
Restructuring programs involve discrete initiatives designed to,
among other things, consolidate or relocate manufacturing,
administrative and other facilities, improve operating efficiencies
and integrate acquired businesses. Our restructuring charges
consist of termination benefits, contract termination costs,
facility closure costs and other exit costs associated with a
specific 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. For
the nine months ended October 1, 2017 and September 25, 2016,
pre-tax restructuring related charges were $10.1 million and $11.1
million.
(B) Acquisition, integration and divestiture related items -
Acquisition and integration expenses are incremental costs, other
than restructuring or restructuring related expenses, that are
directly related to specific business or asset acquisition
transactions. These costs 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; and bridge loan facility and backstop financing fees
in connection with facilities that ultimately were not utilized.
For the nine months ended October 1, 2017, the majority of these
costs were related to our acquisition of Vascular Solutions.
Divestiture related activities involve specific business or asset
sales. Depending primarily on the terms of the 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.
(C) Other items - These are discrete items that occur
sporadically and can affect period-to-period comparisons. For the
nine months ended October 1, 2017, these items included both gains
and losses associated with litigation settlements.
(D) Amortization of debt discount on convertible notes - When we
sold $400 million principal amount of our 3.875% convertible notes
(the “convertible notes”) in 2010, we allocated the proceeds
between the liability and equity components of the debt, in
accordance with GAAP. As a result, the $83.7 million
difference between the proceeds of the sale of the convertible
notes and the liability component of the debt constituted a debt
discount that was to be amortized to interest expense over the
approximately seven year term of the convertible notes, which
significantly increased the amount we recorded as interest expense
attributable to the convertible notes. The amount of the
amortization of the debt discount was reduced as a result of our
repurchases of convertible notes in 2016 and 2017 and redemptions
of the convertible notes by holders of the notes, although we
continued to amortize the remaining portion of the debt discount to
interest expense until August 2017, when all remaining convertible
notes were either converted or matured.
(E) Intangible amortization expense - Certain intangible assets,
including customer lists, 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.
(F) Loss on extinguishment of debt - In connection with debt
refinancings, debt repayments, repurchases of convertible notes and
redemptions of convertible notes, outstanding indebtedness is
extinguished. These events, which have occurred from time to time
on an irregular basis, have resulted in losses reflecting, among
other things, unamortized debt issuance costs, as well as debt
prepayment fees and premiums (including conversion premiums
resulting from conversion of convertible securities).
(G) 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 changes affecting
our deferred tax liability.
(H) Adjusted diluted shares are calculated by giving effect to
the anti-dilutive impact of the Company’s convertible note hedge
agreements, which reduced the potential economic dilution that
otherwise would have occurred upon conversion of the Company's
convertible notes. Under GAAP, the anti-dilutive impact of the
convertible note hedge agreements is not reflected in the weighted
average number of diluted shares.
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, the impact of the NeoTract
acquisition and revenue and non-revenue dependent opportunities,
forecasted 2017 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, 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 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 programs; our inability to
realize anticipated savings from restructuring plans and programs;
the impact of healthcare reform legislation and proposals to amend
the legislation; changes in Medicare, Medicaid and third party
coverage and reimbursements; 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, sovereign debt issues and the impact of the United Kingdom's
vote to leave the European Union; 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.
TELEFLEX INCORPORATED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended
October 1,2017
September 25,2016
October 1,2017
September 25,2016
(Dollars and shares in thousands, except per share) Net
revenues $ 534,703 $ 455,648 $ 1,551,197 $ 1,354,094 Cost of goods
sold 239,476 214,046 710,126 630,946
Gross profit 295,227 241,602 841,071 723,148 Selling, general and
administrative expenses 163,771 139,797 486,674 419,128 Research
and development expenses 21,194 15,067 59,299 42,892 Restructuring
(credits) charges (92 ) 3,027 13,723 12,876 Gain on sale of assets
— (2,776 ) — (4,173 ) Income from continuing
operations before interest, loss on extinguishment of debt and
taxes 110,354 86,487 281,375 252,425 Interest expense 21,264 12,888
58,884 38,579 Interest income (286 ) (115 ) (616 ) (324 ) Loss on
extinguishment of debt — — 5,593 19,261
Income from continuing operations before taxes 89,376 73,714
217,514 194,909 Taxes on income from continuing operations 9,978
7,514 19,404 18,134 Income from
continuing operations 79,398 66,200 198,110
176,775 Operating (loss) income from discontinued operations
(3,749 ) 260 (4,597 ) (116 ) (Benefit) taxes on income (loss) from
discontinued operations (1,366 ) 138 (1,675 ) (119 ) (Loss)
income from discontinued operations (2,383 ) 122 (2,922 ) 3
Net income 77,015 66,322 195,188 176,778 Less: Income from
continuing operations attributable to noncontrolling interest —
— — 464 Net income attributable to
common shareholders $ 77,015 $ 66,322 $ 195,188
$ 176,314 Earnings per share available to common
shareholders: Basic: Income from continuing operations $ 1.76 $
1.50 $ 4.40 $ 4.09 Income (loss) from discontinued operations (0.05
) 0.01 (0.06 ) — Net income $ 1.71 $ 1.51
$ 4.34 $ 4.09 Diluted: Income from continuing
operations $ 1.70 $ 1.40 $ 4.24 $ 3.69 Loss from discontinued
operations (0.05 ) — (0.06 ) — Net income $ 1.65
$ 1.40 $ 4.18 $ 3.69 Dividends per
share $ 0.34 $ 0.34 $ 1.02 $ 1.02 Weighted average common shares
outstanding Basic 45,035 44,045 44,975 43,081 Diluted 46,587 47,446
46,673 47,824 Amounts attributable to common shareholders: Income
from continuing operations, net of tax $ 79,398 $ 66,200 $ 198,110
$ 176,311 (Loss) income from discontinued operations, net of tax
(2,383 ) 122 (2,922 ) 3 Net income $ 77,015 $
66,322 $ 195,188 $ 176,314
TELEFLEX INCORPORATED CONDENSED CONSOLIDATED
BALANCE SHEETS (Unaudited) October 1, 2017
December 31, 2016 (Dollars in thousands)
ASSETS Current assets Cash and cash equivalents $ 1,017,573
$ 543,789 Accounts receivable, net 306,472 271,993 Inventories, net
382,417 316,171 Prepaid expenses and other current assets 51,599
40,382 Prepaid taxes 8,690 8,179 Assets held for sale —
2,879 Total current assets 1,766,751 1,183,393 Property, plant and
equipment, net 374,461 302,899 Goodwill 1,886,157 1,276,720
Intangible assets, net 1,606,943 1,091,663 Deferred tax assets
2,020 1,712 Other assets 44,401 34,826 Total assets $
5,680,733 $ 3,891,213
LIABILITIES AND EQUITY Current
liabilities Current borrowings $ 77,250 $ 183,071 Accounts payable
85,419 69,400 Accrued expenses 88,095 65,149 Current portion of
contingent consideration 591 587 Payroll and benefit-related
liabilities 88,091 82,679 Accrued interest 13,430 10,450 Income
taxes payable 12,857 7,908 Other current liabilities 8,912
8,402 Total current liabilities 374,645 427,646 Long-term
borrowings 2,172,805 850,252 Deferred tax liabilities 471,667
271,377 Pension and postretirement benefit liabilities 116,441
133,062 Noncurrent liability for uncertain tax positions 14,238
17,520 Other liabilities 58,460 52,015 Total liabilities
3,208,256 1,751,872 Commitments and contingencies Convertible notes
- redeemable equity component — 1,824 Mezzanine equity —
1,824 Total shareholders' equity 2,472,477 2,137,517 Total
liabilities and shareholders' equity $ 5,680,733 $ 3,891,213
TELEFLEX INCORPORATED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended October 1, 2017 September
25, 2016 (Dollars in thousands) Cash flows from
operating activities of continuing operations: Net income $ 195,188
$ 176,778 Adjustments to reconcile net income to net cash provided
by operating activities: Loss (income) from discontinued operations
2,922 (3 ) Depreciation expense 42,390 40,272 Amortization expense
of intangible assets 63,976 47,486 Amortization expense of deferred
financing costs and debt discount 3,940 8,506 Loss on
extinguishment of debt 5,593 19,261 Gain on sale of assets — (4,173
) Fair value step up of acquired inventory sold 10,442 — Changes in
contingent consideration (109 ) 1,672 Stock-based compensation
14,519 12,540 Deferred income taxes, net (15,682 ) (8,699 ) Other
(13,559 ) (15,132 ) Changes in operating assets and liabilities,
net of effects of acquisitions and disposals: Accounts receivable
6,428 4,316 Inventories (20,257 ) (5,617 ) Prepaid expenses and
other current assets (4,009 ) 1,184 Accounts payable and accrued
expenses 24,128 17,390 Income taxes receivable and payable, net
3,798 5,817 Net cash provided by operating activities
from continuing operations 319,708 301,598 Cash flows
from investing activities of continuing operations: Expenditures
for property, plant and equipment (53,977 ) (35,912 ) Proceeds from
sale of assets 6,332 9,792 Payments for businesses and intangibles
acquired, net of cash acquired (1,010,711 ) (14,040 ) Net cash used
in investing activities from continuing operations (1,058,356 )
(40,160 ) Cash flows from financing activities of continuing
operations: Proceeds from new borrowings 1,963,500 671,700
Reduction in borrowings (747,576 ) (714,487 ) Debt extinguishment,
issuance and amendment fees (19,114 ) (8,958 ) Net proceeds from
share based compensation plans and the related tax impacts 4,739
7,647 Payments to noncontrolling interest shareholders — (464 )
Payments for contingent consideration (245 ) (133 ) Payments for
acquisition of noncontrolling interest — (9,231 ) Dividends paid
(45,905 ) (43,980 ) Net cash provided by (used in) financing
activities from continuing operations 1,155,399 (97,906 )
Cash flows from discontinued operations: Net cash used in operating
activities (1,140 ) (1,451 ) Net cash used in discontinued
operations (1,140 ) (1,451 ) Effect of exchange rate changes on
cash and cash equivalents 58,173 (988 ) Net increase in cash
and cash equivalents 473,784 161,093 Cash and cash equivalents at
the beginning of the period 543,789 338,366 Cash and
cash equivalents at the end of the period $ 1,017,573 $
499,459 Non cash financing activities of continuing
operations: Settlement and exchange of convertible notes with
common or treasury stock $ 53,207 $ 35,205 Acquisition of treasury
stock associated with settlement and exchange of convertible note
hedge and warrant agreements $ 127,158 $ 85,909
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version on businesswire.com: http://www.businesswire.com/news/home/20171102005067/en/
Teleflex IncorporatedJake ElguiczeTreasurer and Vice President
of Investor Relations610-948-2836
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