Fourth Quarter 2017 Revenues of $595.1
million, up 15.8% Versus Prior Year Period; up 12.6% on Constant
Currency Basis
Fourth Quarter 2017 GAAP Diluted EPS of
($0.92), down 171.3% Versus Prior Year Period
Fourth Quarter 2017 Adjusted Diluted EPS of
$2.44, up 14.6% Versus Prior Year Period
Full Year 2017 Revenues of $2,146.3 million,
up 14.9% Versus Prior Year; up 14.1% on Constant Currency
Basis
Full Year 2017 GAAP Diluted EPS of $3.33,
down 33.1% Versus Prior Year
Full Year 2017 Adjusted Diluted EPS of
$8.40, up 14.4% Versus Prior Year
2018 Guidance Range for GAAP Revenue Growth
of 14% to 15%
2018 Guidance Range for Constant Currency
Revenue Growth of 12% to 13%
2018 Guidance Range for GAAP Diluted EPS of
$7.10 to $7.20
2018 Guidance Range for Adjusted Diluted EPS
of $9.55 to $9.75
Teleflex Incorporated (NYSE: TFX) (the “Company”) today
announced financial results for the fourth quarter and full year
ended December 31, 2017.
Fourth quarter 2017 net revenues were $595.1 million, an
increase of 15.8% compared to the prior year period. Excluding the
impact of foreign currency exchange rate fluctuations, fourth
quarter 2017 net revenues increased 12.6% over the year ago
period.
Fourth quarter 2017 GAAP diluted earnings per share from
continuing operations decreased 171.3% to ($0.92), as compared to
$1.29 in the prior year period. The decrease in GAAP diluted
earnings per share from continuing operations is due to $107.9
million of tax expense reflecting the impact of the Tax Cuts and
Jobs Act ("TCJA"), which was enacted on December 22, 2017. Fourth
quarter 2017 adjusted diluted earnings per share from continuing
operations increased 14.6% to $2.44, compared to $2.13 in the prior
year period.
Full year 2017 net revenues were $2,146.3 million, an increase
of 14.9% compared to the prior year period. Excluding the impact of
foreign currency exchange rate fluctuations, full year 2017 net
revenues increased 14.1% over the year ago period.
Full year 2017 GAAP diluted earnings per share from continuing
operations decreased 33.1% to $3.33, as compared to $4.98 in the
prior year period. The decrease in GAAP diluted earnings per share
from continuing operations is due to $107.9 million of tax expense
reflecting the impact of the TCJA, which was enacted on December
22, 2017. Full year 2017 adjusted diluted earnings per share from
continuing operations increased 14.4% to $8.40, compared to $7.34
in the prior year period.
Liam Kelly, President and Chief Executive Officer, said,
“Despite modestly softer than expected sales in the fourth quarter,
due in part to Vascular Solutions distributor go-directs within
EMEA, we reported solid gross and operating margin performance in
the period and delivered full year adjusted earnings per share
results at the high-end of our guidance range. Following our
acquisition of NeoTract, the business continues to perform at a
high level, with UroLift experiencing deeper penetration of the BPH
market. UroLift delivered $39 million in revenues for the fourth
quarter, which represented growth of 121% year-over-year, and we
remain excited about the long-term contributions the business will
make to our revenue growth and margin profile.”
Added Mr. Kelly, “As we look into 2018, our new product
launches, our acquisitions of Vascular Solutions and NeoTract, and
gross and operating margin expansion programs give us confidence we
can deliver double digit constant currency revenue growth and
significant adjusted earnings per share expansion.”
FOURTH QUARTER AND FULL YEAR NET REVENUE BY SEGMENT
Following the Company's acquisition of Vascular Solutions, the
Company commenced an integration program under which it is
combining the Vascular Solutions business with some of its legacy
businesses. Specifically, the Company is combining the Vascular
Solutions North American business with the Company's interventional
access business, which formerly was part of the Vascular North
America operating segment, and the Company's cardiac business,
which formerly was a separate operating segment included in the
"all other" category for purposes of segment reporting. These
businesses are now in the Company's Interventional North America
operating segment. Additionally, the Company is combining the
Vascular Solutions businesses in Europe, Asia and Latin America
with the Company's legacy businesses in the respective locations,
and these Vascular Solutions businesses are now part of the EMEA
(Europe, Middle East and Africa), Asia and Latin America operating
segments, respectively. The changes in the Company’s operating
segments, which became effective in the fourth quarter 2017, also
reflect the manner in which the Company’s new chief operating
decision maker assesses business performance and allocation of
resources.
As a result of the operating segment changes described above,
the Company has the following seven reportable segments: Vascular
North America, Interventional North America, Anesthesia North
America, Surgical North America, Europe, Middle East and Africa
("EMEA"), Asia and Original Equipment and Development Services
("OEM"). In connection with the presentation of segment
information, we will continue to present certain operating
segments, which now include Interventional Urology North America
and Respiratory North America as well as Latin America, in the “all
other” category because they are not material. All prior
comparative periods presented in this release have been restated to
reflect these changes.
The following tables provide information regarding net revenues
in each of the Company's reportable operating segments and all of
its other operating segments for the three and twelve months ended
December 31, 2017 and December 31, 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
December 31, 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) December 31, 2017 December 31,
2016
ConstantCurrency
ForeignCurrency
TotalChange
(Dollars in millions) Vascular North America $ 80.7 $ 80.3
0.3 % 0.2 % 0.5 % Interventional North America 61.7 22.2
177.2 % 0.4 % 177.6 % Anesthesia North America 49.9 54.9 (9.4 ) %
0.2 % (9.2 ) % Surgical North America 43.7 48.3 (9.8 ) % 0.4 % (9.4
) % EMEA 143.6 135.7 (2.0 ) % 7.8 % 5.8 % Asia 78.8 73.0 4.5 % 3.5
% 8.0 % OEM 46.0 45.3 (0.1 ) % 1.4 % 1.3 % All Other 90.7
54.2 67.0 % 0.6 % 67.6 %
Total $ 595.1 $ 513.9 12.6 % 3.2 % 15.8
%
Twelve Months Ended %
Increase/ (Decrease) December 31, 2017
December 31, 2016
ConstantCurrency
ForeignCurrency
TotalChange
(Dollars in millions) Vascular North America $ 313.6 $ 295.2
6.1 % 0.1 % 6.2 % Interventional North America 220.6 82.4
167.5 % 0.1 % 167.6 % Anesthesia North America 198.0 198.8 (0.5 ) %
0.1 % (0.4 ) % Surgical North America 175.2 172.2 1.6 % 0.1 % 1.7 %
EMEA 552.7 510.9 6.3 % 1.9 % 8.2 % Asia 269.2 249.4 7.0 % 0.9 % 7.9
% OEM 183.0 161.0 13.2 % 0.5 % 13.7 % All Other 234.0
198.1 18.0 % 0.1 % 18.1 % Total
$ 2,146.3 $ 1,868.0 14.1 % 0.8 % 14.9
%
Vascular North America fourth quarter 2017 net revenues were
$80.7 million, an increase of 0.5% compared to the prior year
period. Excluding the impact of foreign currency exchange rate
fluctuations, fourth quarter 2017 net revenues increased 0.3%
compared to the prior year period. The increase in constant
currency revenue is primarily attributable to higher sales volumes
of existing products, despite the unfavorable impact of five fewer
shipping days in the fourth quarter of 2017, and an increase in new
product sales and price increases.
Interventional North America fourth quarter 2017 net revenues
were $61.7 million, an increase of 177.6% compared to the prior
year period. Excluding the impact of foreign currency exchange rate
fluctuations, fourth quarter 2017 net revenues increased 177.2%
compared to the prior year period. The increase in constant
currency revenue is primarily attributable to net revenues
generated by sales of Vascular Solutions' products. We acquired
Vascular Solutions in February 2017.
Anesthesia North America fourth quarter 2017 net revenues were
$49.9 million, a decrease of 9.2% compared to the prior year
period. Excluding the impact of foreign currency exchange rate
fluctuations, fourth quarter 2017 net revenues decreased 9.4%
compared to the prior year period. The decrease in constant
currency revenue is primarily attributable to a decline in sales
volumes of existing products, due in part to five fewer shipping
days in the fourth quarter of 2017, partially offset by an increase
in net revenues generated by an acquired business and an increase
in new product sales.
Surgical North America fourth quarter 2017 net revenues were
$43.7 million, a decrease of 9.4% compared to the prior year
period. Excluding the impact of foreign currency exchange rate
fluctuations, fourth quarter 2017 net revenues decreased 9.8%
compared to the prior year period. The decrease in constant
currency revenue is primarily attributable to a decline in sales
volumes of existing products, due in part to five fewer shipping
days in the fourth quarter of 2017, partially offset by an increase
in new product sales and price increases.
EMEA fourth quarter 2017 net revenues were $143.6 million, an
increase of 5.8% compared to the prior year period. Excluding the
impact of foreign currency exchange rate fluctuations, fourth
quarter 2017 net revenues decreased 2.0% compared to the prior year
period. The decrease in constant currency revenue is primarily
attributable to a decline in sales volumes of existing products,
due in part to five fewer shipping days in the fourth quarter of
2017, partially offset by net revenues generated by acquired
businesses and an increase in new product sales.
Asia fourth quarter 2017 net revenues were $78.8 million, an
increase of 8.0% compared to the prior year period. Excluding the
impact of foreign currency exchange rate fluctuations, fourth
quarter 2017 net revenues increased 4.5%. The increase in constant
currency revenue is primarily attributable to net revenues
generated by acquired businesses and price increases.
OEM fourth quarter 2017 net revenues were $46.0 million, an
increase of 1.3% compared to the prior year period. Excluding the
impact of foreign currency exchange rate fluctuations, fourth
quarter 2017 net revenues decreased 0.1% compared to the prior year
period. The decrease in constant currency revenue is primarily
attributable to a decline in sales volumes of existing products,
due in part to five fewer shipping days in the fourth quarter of
2017, partially offset by an increase in new product sales.
All Other fourth quarter 2017 net revenues were $90.7 million,
an increase of 67.6% compared to the prior year period. Excluding
the impact of foreign currency exchange rate fluctuations, fourth
quarter 2017 net revenues increased 67.0% compared to the prior
year period. The increase in constant currency revenue is primarily
attributable to net revenues generated by NeoTract.
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE
METRICS
Depreciation expense, amortization of intangible assets and
deferred financing charges for 2017 totaled $160.3 million compared
to $128.3 million for the prior year period.
Cash and cash equivalents at December 31, 2017 were $333.6
million compared to $543.8 million at December 31, 2016.
Net accounts receivable at December 31, 2017 were $345.9 million
compared to $272.0 million at December 31, 2016.
Net inventories at December 31, 2017 were $395.7 million
compared to $316.2 million at December 31, 2016.
2018 OUTLOOK
On a GAAP basis, revenues in 2018 are expected to increase 14%
to 15% over the prior year, reflecting the anticipated 2.0%
favorable impact of foreign currency exchange rate fluctuations. On
a constant currency basis, the Company estimates that revenues for
full year 2018 will increase 12% to 13%.
The Company expects full year 2018 GAAP diluted earnings per
share from continuing operations to be between $7.10 and $7.20. The
Company expects adjusted diluted earnings per share from continuing
operations to be between $9.55 and $9.75 for full year 2018,
representing an increase of 13.7% to 16.1% over 2017, reflecting
our expectation of an approximately 3% positive impact from foreign
currency exchange rate fluctuations.
Forecasted 2018 Constant Currency Revenue Growth
Reconciliation
Low High
2018 GAAP revenue growth 14 % 15 % Estimated
impact of foreign currency exchange rate fluctuations
(2 ) % (2 ) % 2018
constant currency revenue growth 12 %
13 %
Forecasted 2018 Adjusted Earnings Per Share Reconciliation
Low
High
Diluted earnings per share attributable to common
shareholders $7.10 $7.20 Restructuring, restructuring
related and impairment items, net of tax $0.17 $0.20
Acquisition, integration and divestiture related items, net of tax
$0.27 $0.30 Other items, net of tax $0.01 $0.02
Intangible amortization expense, net of tax $2.00
$2.03
Adjusted diluted earnings per share $9.55
$9.75
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 February 27, 2018 at 11:59pm
(ET), by calling 855-859-2056 (U.S./Canada) or 404-537-3406
(International), Passcode: 6373419.
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 adjusted diluted earnings per
share to historical GAAP diluted earnings per share are set forth
below. Tables reconciling changes in historical constant currency
net revenues to historical GAAP net revenues are set forth above
under “Fourth Quarter and Full Year Net Revenue by Segment”. Tables
reconciling forecasted 2018 constant currency revenue growth and
forecasted 2018 adjusted earnings per share to their respective
most directly comparable forecasted GAAP measures, forecasted 2018
revenue growth and forecasted 2018 diluted earnings per share
available to common stockholders, are set forth above under “2018
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
Quarter Ended -
December 31, 2017
Cost ofgoods sold
Selling,
generalandadministrativeexpenses
Research
anddevelopmentexpenses
Restructuringandimpairmentcharges
(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 $264.4 $213.3 $25.5 $1.1 — $23.5 $110.2 ($42.8 )
($0.92 ) 46,636 Adjustments
Restructuring,restructuringrelated
andimpairmentitems (A)
3.9 0.3 0.3 1.1 — — 1.8 3.7 $0.08 —
Acquisition,integration
anddivestiturerelated items(B)
0.4 16.2 0.2 — — — (2.8 ) 19.5 $0.42 — Other items (C) 1.3
1.9 — — — — 0.6 2.7 $0.06 —
Amortization ofdebt discounton
convertiblenotes (D)
— — — — — — — — — —
Intangibleamortizationexpense (E)
— 34.7 0.1 — — — 10.0 24.8 $0.53 —
Loss onextinguishmentof debt (F)
— — — — — — — — — —
Taxadjustments (G)
— — — — — — (106.0 ) 106.0 $2.27 —
Shares due toTeleflex undernote hedge
(H)
— — — — — — — — — — Adjusted basis $258.8 $160.2 $24.9 — —
$23.5 $13.9 $113.7 $2.44 46,636
Quarter Ended - December 31,
2016
Cost ofgoods sold
Selling,
generalandadministrativeexpenses
Research
anddevelopmentexpenses
Restructuringandimpairmentcharges
(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 $240.9 $144.2 $15.7 $46.4 ($0.2 ) $16.2 ($10.1 )
$60.9 $1.29 47,112 Adjustments
Restructuring,restructuringrelated
andimpairmentitems (A)
3.7 0.5 0.0 46.4 — — 18.0 32.5 $0.69 —
Acquisition,integration
anddivestiturerelated items(B)
— (5.1 ) — — (0.2 ) 3.4 1.9 (3.7 ) ($0.08 ) — Other items
(C) — 0.2 — — — — 0.1 0.1 $0.00 —
Amortization ofdebt discount
onconvertiblenotes (D)
— — — — — 1.1 0.4 0.7 $0.02 —
Intangibleamortizationexpense (E)
— 15.9 0.1 — — — 4.0 12.0 $0.26 —
Loss onextinguishmentof debt (F)
— — — — — — 0.0 0.0 $0.00 —
Tax adjustments(G)
— — — — — — 4.9 (4.9 ) ($0.10 ) —
Shares due toTeleflex undernote hedge
(H)
— — — — — — — — $0.06 (1,343 ) Adjusted basis $237.2 $132.7
$15.6 — — $11.7 $19.3 $97.5 $2.13 45,769
(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 December 31, 2017 and December 31, 2016,
pre-tax restructuring related charges were $4.4 million and $4.2
million, respectively. There were no impairment items during the
three months ended December 31, 2017. In the three months ended
December 31, 2016, impairment items included (i) a pre-tax,
non-cash $41.0 million impairment charge and a $14.9 million
reduction in related deferred tax liabilities in connection with
discontinuation of an in-process research and development project;
(ii) $2.4 million in pre-tax, non-cash impairment charges related
to two properties, one of which was classified as an asset held for
sale; and (iii) a $0.7 million reduction in related deferred tax
liabilities.
(B) 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; and bridge loan facility and backstop financing fees
in connection with facilities that ultimately were not utilized.
For the three months ended December 31, 2017, the majority of these
charges were related to our acquisitions of Vascular Solutions and
NeoTract. For the three months ended December 31, 2016, amounts
attributable to these activities reflect reversals related to
contingent consideration liabilities, including $8.3 million
related to the discontinuation of an in-process research and
development project, somewhat offset by acquisition costs.
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 December 31, 2017, these items included both
gains and losses associated with litigation settlements, the
reversal of previously recognized income due to distributor
acquisitions related to Vascular Solutions, the reversal of
previously recognized income due to our distributor conversion in
China, and relabeling costs. For the three months ended December
31, 2016, these items included relabeling costs.
(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 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.
(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. In addition, for the three months ended
December 31, 2017, these items include tax expense associated with
the TCJA, which was enacted on December 22, 2017.
(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
Year Ended - December 31, 2017
Cost ofgoods sold
Selling,
generalandadministrativeexpenses
Research
anddevelopmentexpenses
Restructuringandimpairmentcharges
(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 $974.5 $700.0 $84.8 $14.8 — $81.8 $5.6 $129.6
$155.3 $3.33 46,664 Adjustments
Restructuring,restructuringrelated
andimpairmentitems (A)
12.7 0.8 1.0 14.8 — — — 9.1 20.3 $0.44 —
Acquisition,integration
anddivestiturerelated items(B)
10.8 27.8 0.2 — — 2.1 — 4.1 36.8 $0.79 — Other items (C) 1.3
(1.9 ) — — — — — (1.1 ) 0.6 $0.01 —
Amortization ofdebt discounton
convertiblenotes (D)
— — — — — 0.9 — 0.3 0.6 $0.01 —
Intangibleamortizationexpense (E)
— 98.3 0.4 — — — — 27.7 71.1 $1.52 —
Loss onextinguishmentof debt (F)
— — — — — — 5.6 2.0 3.5 $0.08 —
TaxAdjustments(G)
— — — — — — — (101.4 ) 101.4 $2.17 —
Shares due toTeleflex undernote hedge
(H)
— — — — — — — — — $0.05 (280 ) Adjusted basis $949.6 $574.9
$83.1 — — $78.8 — $70.3 $389.5 $8.40 46,384
Year Ended - December 31,
2016
Cost ofgoods sold
Selling,
generalandadministrativeexpenses
Research
anddevelopmentexpenses
Restructuringandimpairmentcharges
(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 $871.8 $563.3 $58.6 $59.2 ($4.4 ) $54.5 $19.3
$8.1 $237.2 $4.98 47,646 Adjustments
Restructuringrestructuringrelated
andimpairmentitems (A)
14.6 0.7 0.0 59.2 — — — 25.5 49.1 $1.03 —
Acquisition,integration
anddivestiturerelated items(B)
— (3.0 ) — — (4.4 ) 3.4 — 1.2 (5.2 ) ($0.11 ) — Other items
(C) — 0.5 0.0 — — — — 0.2 0.4 $0.01 —
Amortization ofdebt discount
onconvertiblenotes (D)
— — — — — 7.2 — 2.6 4.5 $0.10 —
Intangibleamortizationexpense (E)
— 63.1 0.4 — — — — 16.1 47.4 $0.99 —
Loss onextinguishmentof debt (F)
— — — — — — 19.3 7.0 12.2 $0.26 —
Tax adjustments(G)
— — — — — — — 10.7 (10.7 ) ($0.23 ) —
Shares due toTeleflex undernote hedge
(H)
— — — — — — — — — $0.31 (2,025 ) Adjusted basis $857.3
$502.0 $58.1 — — $43.9 — $71.5 $334.8 $7.34 45,621
(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 twelve months ended December 31, 2017 and December 31, 2016,
pre-tax restructuring related charges were $14.6 million and $15.3
million. There were no impairment items during the twelve months
ended December 31, 2017. In the twelve months ended December 31,
2016, impairment items included (i) a pre-tax, non-cash $41.0
million impairment charge and a $14.9 million reduction in related
deferred tax liabilities in connection with discontinuation of an
in-process research and development project; (ii) $2.4 million in
pre-tax, non-cash impairment charges related to two properties, one
of which was classified as an asset held for sale and (iii) a $0.7
million reduction in related deferred tax liabilities.
(B) 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; and bridge loan facility and backstop financing fees
in connection with facilities that ultimately were not utilized.
For the twelve months ended December 31, 2017, the majority of
these charges were related to our acquisitions of Vascular
Solutions and NeoTract. For the twelve months ended December 31,
2016, amounts attributable to these activities reflect reversals
related to contingent consideration liabilities, including $8.3
million related to the discontinuation of an in-process research
and development project, and the gain on a sale of assets, somewhat
offset by acquisition costs. 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
twelve months ended December 31, 2017, these items included both
gains and losses associated with litigation settlements, the
reversal of previously recognized income due to distributor
acquisitions related to Vascular Solutions, the reversal of
previously recognized income due to our distributor conversion in
China, and relabeling costs. For the twelve months ended December
31, 2016, these items included relabeling costs and costs
associated with a facility that was exited.
(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 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.
(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. In addition, for the twelve months
ended December 31, 2017, these items include tax expense associated
with the TCJA, which was enacted on December 22, 2017.
(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 long-term contributions the
NeoTract business is expected to make to the Company's revenue
growth and margin profile, forecasted 2018 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
CONSOLIDATED STATEMENTS OF INCOME Three Months
Ended December 31, Twelve Months Ended December 31,
2017 2016 2017 2016
(Dollars and shares in thousands, except per share) Net revenues $
595,106 $ 513,933 $ 2,146,303 $ 1,868,027 Cost of goods sold
264,375 240,881 974,501 871,827 Gross
profit 330,731 273,052 1,171,802 996,200 Selling, general and
administrative expenses 213,289 144,180 699,963 563,308 Research
and development expenses 25,471 15,687 84,770 58,579 Restructuring
and impairment charges 1,067 46,351 14,790 59,227 Gain on sale of
assets — (194 ) — (4,367 ) Income from continuing
operations before interest, loss on extinguishment of debt and
taxes 90,904 67,028 372,279 319,453 Interest expense 23,662 16,362
82,546 54,941 Interest income (155 ) (150 ) (771 ) (474 ) Loss on
extinguishment of debt — — 5,593 19,261
Income from continuing operations before taxes 67,397 50,816
284,911 245,725 Taxes on income from continuing operations 110,244
(10,060 ) 129,648 8,074 Income from continuing
operations (42,847 ) 60,876 155,263 237,651
Operating loss from discontinued operations 63 (806 ) (4,534 ) (922
) Tax benefit on loss from discontinued operations (126 ) (993 )
(1,801 ) (1,112 ) (Loss) income on discontinued operations 189
187 (2,733 ) 190 Net income (42,658 ) 61,063
152,530 237,841 Less: Income from continuing operations
attributable to noncontrolling interest — — — 464 Net income
attributable to common shareholders $ (42,658 ) $ 61,063 $
152,530 $ 237,377 Earnings per share available to
common shareholders: Basic: Income from continuing operations $
(0.95 ) $ 1.38 $ 3.45 $ 5.47 (Loss) income on discontinued
operations — 0.01 (0.06 ) 0.01 Net income $
(0.95 ) $ 1.39 $ 3.39 $ 5.48 Diluted: Income
from continuing operations $ (0.92 ) $ 1.29 $ 3.33 $ 4.98 (Loss)
income on discontinued operations 0.01 0.01 (0.06 ) —
Net income $ (0.91 ) $ 1.30 $ 3.27 $ 4.98
Dividends per share $ 0.34 $ 0.34 $ 1.36 $ 1.36 Weighted
average common shares outstanding: Basic 45,093 44,058 45,004
43,325 Diluted 46,636 47,112 46,664 47,646 Amounts attributable to
common shareholders: Income from continuing operations, net of tax
$ (42,847 ) $ 60,876 $ 155,263 $ 237,187 (Loss) income from
discontinued operations, net of tax 189 187 (2,733 )
190 Net income $ (42,658 ) $ 61,063 $ 152,530
$ 237,377
TELEFLEX INCORPORATED
CONSOLIDATED BALANCE SHEETS December 31,
2017 2016
(Dollars and shares in
thousands,except per share)
ASSETS Current assets Cash and cash equivalents $ 333,558 $
543,789 Accounts receivable, net 345,875 271,993 Inventories, net
395,744 316,171 Prepaid expenses and other current assets 47,882
40,382 Prepaid taxes 5,748 8,179 Assets held for sale —
2,879 Total current assets 1,128,807 1,183,393 Property,
plant and equipment, net 382,999 302,899 Goodwill 2,235,592
1,276,720 Intangibles assets, net 2,383,748 1,091,663 Deferred tax
assets 3,810 1,712 Other assets 46,536 34,826 Total
assets $ 6,181,492 $ 3,891,213
LIABILITIES AND
EQUITY Current liabilities Current borrowings $ 86,625 $
183,071 Accounts payable 92,027 69,400 Accrued expenses 96,853
65,149 Current portion of contingent consideration 74,224 587
Payroll and benefit-related liabilities 107,415 82,679 Accrued
interest 6,165 10,450 Income taxes payable 11,514 7,908 Other
current liabilities 9,053 8,402 Total current
liabilities 483,876 427,646 Long-term borrowings 2,162,927 850,252
Deferred tax liabilities 603,676 271,377 Pension and postretirement
benefit liabilities 121,410 133,062 Noncurrent liability for
uncertain tax positions 12,296 17,520 Noncurrent contingent
consideration 197,912 6,516 Other liabilities 168,864 45,499
Total liabilities 3,750,961 1,751,872 Commitments and
contingencies Convertible notes - redeemable equity component —
1,824 Mezzanine equity — 1,824 Shareholders’ equity
Common shares, $1 par value Issued: 2017 — 46,871 shares; 2016 —
45,814 shares 46,871 45,814 Additional paid-in capital 591,721
506,800 Retained earnings 2,285,886 2,194,593 Accumulated other
comprehensive loss (265,091 ) (438,717 ) 2,659,387 2,308,490 Less:
Treasury stock, at cost 228,856 170,973 Total
shareholders' equity 2,430,531 2,137,517 Total
liabilities and shareholders' equity $ 6,181,492 $ 3,891,213
TELEFLEX INCORPORATED CONSOLIDATED
STATEMENTS OF CASH FLOWS Year Ended December 31,
2017 2016 (Dollars in thousands) Cash
flows from operating activities of continuing operations: Net
income $ 152,530 $ 237,841 Adjustments to reconcile net income to
net cash provided by operating activities: Loss (income) from
discontinued operations 2,733 (190 ) Depreciation expense 56,497
54,415 Amortization expense of intangible assets 98,766 63,491
Amortization expense of deferred financing costs and debt discount
5,075 10,440 Loss on extinguishment of debt 5,593 19,261 Fair value
step up of acquired inventory sold 10,442 — Changes in contingent
consideration 3,575 (6,445 ) Impairment of long-lived assets —
2,356 In-process research and development impairment charge —
41,000 Stock-based compensation 19,407 16,871 Net gain on sales of
businesses and assets — (4,367 ) Deferred income taxes, net (41,822
) (29,346 ) Other (18,469 ) (13,311 ) Changes in operating assets
and liabilities, net of effects of acquisitions and disposals:
Accounts receivable (11,039 ) (11,029 ) Inventories (22,363 ) 6,408
Prepaid expenses and other current assets 547 (3,613 ) Accounts
payable and accrued expenses 39,001 15,422 Income taxes receivable
and payable, net 125,828 11,386 Net cash provided by
operating activities from continuing operations 426,301
410,590 Cash flows from investing activities of continuing
operations: Expenditures for property, plant and equipment (70,903
) (53,135 ) Payments for businesses and intangibles acquired, net
of cash acquired (1,768,284 ) (14,040 ) Proceeds from sales of
businesses and assets 6,332 10,201 Net cash used in
investing activities from continuing operations (1,832,855 )
(56,974 ) Cash flows from financing activities of continuing
operations: Proceeds from new borrowings 2,463,500 671,700
Reduction in borrowings (1,239,576 ) (714,565 ) Debt
extinguishment, issuance and amendment fees (26,664 ) (8,958 )
Proceeds from share based compensation plans and the related tax
impacts 5,571 9,068 Payments to noncontrolling interest
shareholders — (464 ) Payments for acquisition of noncontrolling
interest — (9,231 ) Payments for contingent consideration (335 )
(7,282 ) Dividends (61,237 ) (58,960 ) Net cash provided by (used
in) financing activities from continuing operations 1,141,259
(118,692 ) Cash flows from discontinued operations: Net cash
used in operating activities (6,416 ) (2,110 ) Net cash used in
discontinued operations (6,416 ) (2,110 ) Effect of exchange rate
changes on cash and cash equivalents 61,480 (27,391 ) Net
increase (decrease) in cash and cash equivalents (210,231 ) 205,423
Cash and cash equivalents at the beginning of the year 543,789
338,366 Cash and cash equivalents at the end of the
year $ 333,558 $ 543,789 Supplemental cash flow
information: Cash interest paid $ 74,256 $ 44,203 Income taxes
paid, net of refunds $ 49,144 $ 23,955 Non cash investing and
financing activities of continuing operations: Purchases of
businesses and related costs $ 261,733 $ — Settlement and exchange
of convertible notes with common or treasury stock $ 53,207 $
35,286 Acquisition of treasury stock from settlement and exchange
of convertible note hedge and warrants $ 141,405 $ 86,046
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version on businesswire.com: http://www.businesswire.com/news/home/20180222005161/en/
Teleflex IncorporatedJake ElguiczeTreasurer and Vice President
of Investor Relations610-948-2836
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