Full Press Release Details
TELEFLEX REPORTS SECOND QUARTER 2013 RESULTS
Revenues Rise 9.6% to $420.1 million; up 9.6% on Constant Currency Basis
GAAP Diluted EPS of $0.99; Adjusted Diluted EPS of $1.27
Change in Methodology of Calculating Adjusted Diluted Earnings per Share Announced
2013 Constant Currency Revenue Growth Expectations adjusted from 11% to 13% to 10% to 12%
2013 Adjusted Diluted Earnings per Share Range of $4.70 to $4.90 Reaffirmed
Limerick, PA Teleflex Incorporated (NYSE: TFX) today announced financial results for the second quarter ended June 30, 2013.
Second quarter 2013 net revenues were $420.1 million, an increase of 9.6% over the prior year period. Excluding the impact of foreign
currency fluctuations, second quarter 2013 net revenues also increased 9.6% over the prior year period.
Second quarter 2013 GAAP diluted
earnings per share from continuing operations were $0.99, as compared to $1.14 in the prior year period. Second quarter 2013 adjusted diluted earnings per share from continuing operations, incorporating the change in methodology discussed below,
were $1.27, as compared to $1.23 in the prior year period, an increase of 3.3%.
In addition, the Company announced a change in methodology
when calculating adjusted diluted earnings per share. Specifically, in calculating adjusted diluted earnings per share the Company will give effect to the anti-dilutive impact of its convertible note hedge agreements, which reduce the potential
economic dilution that otherwise would occur upon conversion of its senior subordinated convertible notes. Under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares. The Company believes that
reflecting the anti-dilutive impact of the convertible note hedge agreements in calculating adjusted diluted earnings per share is reflective of the economic substance of the hedge and provides a more accurate representation of what will happen upon
conversion, rather than the separation of the hedge agreements from the dilutive shares required by GAAP. The change in methodology increased the reported adjusted diluted earnings per share for the second quarter and first six months of 2013 by
$0.04 and $0.07, respectively. The change in methodology had no impact on the reported adjusted diluted earnings per share for the second quarter and first six months of 2012.
During the second quarter, Teleflex continued to make progress on its operating initiatives despite declining utilization rates, said Benson Smith, Chairman, President and CEO. Aided by
the impact from our 2012 acquisition of LMA International, an improvement in the average selling prices of products, and the continued introduction of new products to the marketplace, the Company delivered second quarter constant currency revenue
growth of 9.6% and year-over-year gross margin
expansion. In addition, we acquired Ultimate Medical and Eon Surgical which will strengthen our anesthesia and surgical strategic business unit franchises. However, because of persisting negative
utilization and physician visit trends, we are lowering the top and bottom end of our full year 2013 constant currency revenue growth expectations to now be between 10% to 12%. Despite the slight reduction in revenue growth expectations, I am
pleased to announce that through cost reduction efforts and favorable product mix, we are reaffirming our previously provided adjusted earnings per share range of between $4.70 to $4.90 per share.
SECOND QUARTER NET REVENUE BY PRODUCT GROUP AND SEGMENT
Product Group Revenues
Critical Care second quarter 2013 net revenues were $289.3
million, an increase of 13.9% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues increased 14.0% compared to the prior year period. The increase in constant currency revenue was
due to higher sales of anesthesia, urology and interventional access products. The growth in sales of anesthesia products was primarily due to the contribution from the LMA International business ( LMA ), which we acquired in October of
2012. Constant currency sales growth was partially offset by a decline in sales of respiratory products as compared to the second quarter of 2012.
Surgical Care second quarter 2013 net revenues were $78.1 million, an increase of 7.1% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net
revenues increased 6.6% compared to the prior year period. The increase in constant currency revenue was due to higher sales of ligation and access products, partially offset by a decline in sales of chest drainage and general surgical instrument
products as compared to the second quarter of 2012.
Cardiac Care second quarter 2013 net revenues were $20.2 million, a decrease of 1.6%
compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues decreased 1.0% compared to the prior year period. The decrease in constant currency revenue was due to a decline in sales of
intra-aortic balloon pumps as compared to the second quarter of 2012.
OEM and Development Services ( OEM ) second quarter 2013 net
revenues were $32.1 million, a decrease of 10.8% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues decreased 11.0% compared to the prior year period. The decrease in constant
currency revenue was primarily due to a decline in sales of catheter and performance fiber products as compared to the second quarter of 2012.
| Three Months Ended | % Increase/ (Decrease) | |||||||||||||||||||
| June 30, 2013 | July 1, 2012 | Constant Currency | Foreign Currency | Total Change | ||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||
| Critical Care | $ | 289.3 | $ | 253.9 | 14.0 | % | (0.1 | %) | 13.9 | % | ||||||||||
| Surgical Care | 78.1 | 72.9 | 6.6 | % | 0.5 | % | 7.1 | % | ||||||||||||
| Cardiac Care | 20.2 | 20.5 | (1.0 | %) | (0.6 | %) | (1.6 | %) | ||||||||||||
| OEM | 32.1 | 36.0 | (11.0 | %) | 0.2 | % | (10.8 | %) | ||||||||||||
| Other | 0.4 | |||||||||||||||||||
| Total | $ | 420.1 | $ | 383.3 | 9.6 | % | 9.6 | % |
Americas second quarter 2013 net revenues were $199.8 million, an increase of 13.0% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net
revenues increased 12.9% compared to the prior year period. The increase in constant currency revenue was largely due to LMA product sales, new product introductions and price increases. Constant currency sales growth was partially offset by lower
sales volume of existing products as compared to the second quarter of 2012.
EMEA second quarter 2013 net revenues were $137.8 million, an
increase of 8.6% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues increased 8.1% compared to the prior year period. The increase in constant currency revenue was due to LMA
product sales, higher sales volume of existing products, new product introductions, and price increases as compared to the second quarter of 2012.
Asia second quarter 2013 net revenues were $50.4 million, an increase of 15.5% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues
increased 17.3% compared to the prior year period. The increase in constant currency revenue was due to LMA product sales and higher sales volume of existing products.
| Three Months Ended | % Increase/ (Decrease) | |||||||||||||||||||
| June 30, 2013 | July 1, 2012 | Constant Currency | Foreign Currency | Total Change | ||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||
| Americas | $ | 199.8 | $ | 176.8 | 12.9 | % | 0.1 | % | 13.0 | % | ||||||||||
| EMEA | 137.8 | 126.9 | 8.1 | % | 0.5 | % | 8.6 | % | ||||||||||||
| Asia | 50.4 | 43.6 | 17.3 | % | (1.8 | %) | 15.5 | % | ||||||||||||
| OEM | 32.1 | 36.0 | (11.0 | %) | 0.2 | % | (10.8 | %) | ||||||||||||
| Total | $ | 420.1 | $ | 383.3 | 9.6 | % | 9.6 | % |
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS
Depreciation expense and amortization of intangible assets and deferred financing costs for the first six months of 2013 were $52.0 million compared to $45.4 million for the prior year period.
Cash and cash equivalents at June 30, 2013 were $281.4 million compared to $337.0 million at December 31, 2012.
Net accounts receivable at June 30, 2013 were $311.9 million compared to $298.0 million at December 31, 2012.
Net inventories at June 30, 2013 were $348.6 million compared to $323.3 million at December 31, 2012.
Net debt obligations at June 30, 2013 were $748.3 million compared to $692.7 million at December 31, 2012.
On July 16, 2013, the Company replaced its $775 million senior credit facility comprised of a $375 million term loan and a $400 million revolving
credit facility with a new $850 million senior credit facility consisting of a revolving credit facility.
The Company s financial estimates for full year 2013 are as follows:
revenue growth between 10% and 12%. This compares to the previously provided constant currency revenue growth range of between 11% and 13%.
Adjusted diluted earnings per share in the range of $4.70 to $4.90.
2013 OUTLOOK EARNINGS PER SHARE RECONCILIATION
| Low | High | |||||||
| Diluted earnings per share | $ | 3.30 | $ | 3.50 | ||||
| Restructuring and impairment charges, net of tax | $ | 0.50 | $ | 0.50 | ||||
| Intangible amortization expense, net of tax | $ | 0.75 | $ | 0.75 | ||||
| Amortization of debt discount on convertible notes, net of tax | $ | 0.15 | $ | 0.15 | ||||
| Adjusted diluted earnings per share | $ | 4.70 | $ | 4.90 |
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 August 7, 2013, 11:59pm (ET), by calling 888-286-8010 (U.S./Canada) or 617-801-6888 (International),
Constant currency revenue and growth exclude the impact of translating the results of international subsidiaries at different currency exchange rates from period to period.
Certain financial information is presented on a rounded basis, which may cause minor differences.
Product group results and commentary exclude the impact of discontinued operations, items included in restructuring and impairment charges, and losses
and other charges set forth in the condensed consolidated statements of income and in the Reconciliation of Consolidated Statement of Income Items set forth below.
NOTES ON NON-GAAP FINANCIAL MEASURES
This press release includes certain non-GAAP
financial measures, which include:
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 these non-GAAP measures to the most directly comparable GAAP measures are set forth below. This press release also includes forecasted constant currency revenue growth, which is also a non-GAAP measure. A reconciliation of forecasted
constant currency revenue growth to GAAP forecasted growth has not been provided as management is unable to forecast trends in foreign currency exchange rates.
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
Quarter Ended June 30, 2013
| Cost of goods sold | Selling, general and administrative expenses | Restructuring and other impairment charges | Gain/ (loss) on sales of businesses and assets | Interest expense, net | Income taxes | Net income (loss) attributable to common shareholders from continuing operations | Diluted earnings per share available to common shareholders | Shares used in calculation of GAAP and adjusted earnings per share | ||||||||||||||||||||||||||||
| GAAP Basis | $ | 210.6 | $ | 116.3 | $ | 13.0 | $ | 14.3 | $ | 6.1 | $ | 43.2 | $ | 0.99 | 43,429 | |||||||||||||||||||||
| Adjustments | ||||||||||||||||||||||||||||||||||||
| Restructuring and other impairment charges | 13.0 | 2.0 | 11.0 | $ | 0.25 | |||||||||||||||||||||||||||||||
| Gain/(loss) on sales of businesses and assets | ||||||||||||||||||||||||||||||||||||
| Losses and other charges (A) | (0.3 | ) | (4.9 | ) | 0.8 | (6.0 | ) | ($ | 0.13 | ) | ||||||||||||||||||||||||||
| Amortization of debt discount on convertible notes | 2.8 | 1.0 | 1.8 | $ | 0.04 | |||||||||||||||||||||||||||||||
| Intangible amortization expense | 12.1 | 4.2 | 7.9 | $ | 0.18 | |||||||||||||||||||||||||||||||
| Tax Adjustment (C) | 4.7 | (4.7 | ) | ($ | 0.11 | ) | ||||||||||||||||||||||||||||||
| Shares due to Teleflex under note hedge (D) | $ | 0.04 | (1,514 | ) | ||||||||||||||||||||||||||||||||
| Adjusted basis | $ | 210.9 | $ | 109.0 | $ | 11.5 | $ | 18.7 | $ | 53.2 | $ | 1.27 | 41,915 |
Quarter Ended July 1, 2012
| Cost of goods sold | Selling, general and administrative expenses | Restructuring and other impairment charges | Gain/ (loss) on sales of businesses and assets | Interest expense, net | Income taxes | Net income (loss) attributable to common shareholders from continuing operations | Diluted earnings per share available to common shareholders | Shares used in calculation of GAAP and adjusted earnings per share | ||||||||||||||||||||||||||||
| GAAP Basis | $ | 199.0 | $ | 106.0 | $ | 0.3 | $ | 0.3 | $ | 17.7 | ($ | 0.3 | ) | $ | 47.0 | $ | 1.14 | 41,076 | ||||||||||||||||||
| Adjustments | ||||||||||||||||||||||||||||||||||||
| Restructuring and other impairment charges | 0.3 | 0.1 | 0.2 | $ | 0.00 | |||||||||||||||||||||||||||||||
| Gain/(loss) on sales of businesses and assets | (0.3 | ) | (0.3 | ) | ($ | 0.01 | ) | |||||||||||||||||||||||||||||
| Losses and other charges (A) | 0.6 | 0.2 | 0.4 | $ | 0.01 | |||||||||||||||||||||||||||||||
| Early termination of interest rate swap (B) | 3.6 | 1.3 | 2.3 | $ | 0.06 | |||||||||||||||||||||||||||||||
| Amortization of debt discount on convertible notes | 2.6 | 0.9 | 1.6 | $ | 0.04 | |||||||||||||||||||||||||||||||
| Intangible amortization expense | 10.7 | 3.9 | 6.8 | $ | 0.17 | |||||||||||||||||||||||||||||||
| Tax adjustment (C) | 7.7 | (7.7 | ) | ($ | 0.19 | ) | ||||||||||||||||||||||||||||||
| Shares due to Teleflex under note hedge (D) | (21 | ) | ||||||||||||||||||||||||||||||||||
| Adjusted basis | $ | 199.0 | $ | 94.6 | $ | 11.5 | $ | 13.9 | $ | 50.4 | $ | 1.23 | 41,055 |
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
Six Months Ended June 30, 2013
| Cost of goods sold | Selling, general and administrative expenses | Goodwill impairment | Restructuring and other impairment charges | Gain/ (loss) on sales of businesses and assets | Interest expense, net | Income taxes | Net income (loss) attributable to common shareholders from continuing operations | Diluted earnings per share available to common shareholders | Shares used in calculation of GAAP and adjusted earnings per share | |||||||||||||||||||||||||||||||
| GAAP Basis | $ | 421.9 | $ | 243.2 | $ | 22.1 | $ | 28.3 | $ | 13.7 | $ | 70.7 | $ | 1.64 | 43,238 | |||||||||||||||||||||||||
| Adjustments | ||||||||||||||||||||||||||||||||||||||||
| Restructuring and other impairment charges | 22.1 | 4.6 | 17.5 | $ | 0.41 | |||||||||||||||||||||||||||||||||||
| Gain/(loss) on sales of businesses and assets | ||||||||||||||||||||||||||||||||||||||||
| Losses and other charges (A) | 0.2 | (3.4 | ) | 1.6 | (4.7 | ) | ($ | 0.11 | ) | |||||||||||||||||||||||||||||||
| Amortization of debt discount on convertible notes | 5.5 | 2.0 | 3.5 | $ | 0.08 | |||||||||||||||||||||||||||||||||||
| Intangible amortization expense | 24.6 | 8.5 | 16.1 | $ | 0.37 | |||||||||||||||||||||||||||||||||||
| Tax Adjustment (D) | 5.6 | (5.6 | ) | ($ | 0.13 | ) | ||||||||||||||||||||||||||||||||||
| Shares due to Teleflex under note hedge (E) | $ | 0.07 | (1,443 | ) | ||||||||||||||||||||||||||||||||||||
| Adjusted basis | $ | 421.7 | $ | 222.0 | $ | 22.8 | $ | 36.0 | $ | 97.5 | $ | 2.33 | 41,795 |
Six Months Ended July 1, 2012
| Cost of goods sold | Selling, general and administrative expenses | Goodwill impairment | Restructuring and other impairment charges | Gain/ (loss) on sales of businesses and assets | Interest expense, net | Income taxes | Net income (loss) attributable to common shareholders from continuing operations | Diluted earnings per share available to common shareholders | Shares used in calculation of GAAP and adjusted earnings per share | |||||||||||||||||||||||||||||||
| GAAP Basis | $ | 395.4 | $ | 218.1 | $ | 332.1 | ($ | 1.0 | ) | $ | 0.3 | $ | 35.5 | ($ | 4.3 | ) | ($ | 237.4 | ) | ($ | 5.82 | ) | 41,044 | |||||||||||||||||
| Adjustments | ||||||||||||||||||||||||||||||||||||||||
| Goodwill impairment | 332.1 | 17.0 | 315.1 | $ | 7.72 | |||||||||||||||||||||||||||||||||||
| Restructuring and other impairment charges | (1.0 | ) | (0.5 | ) | (0.5 | ) | ($ | 0.01 | ) | |||||||||||||||||||||||||||||||
| Gain/(loss) on sales of businesses and assets | (0.3 | ) | (0.3 | ) | ($ | 0.01 | ) | |||||||||||||||||||||||||||||||||
| Losses and other charges (A) | 1.3 | 0.4 | 0.9 | $ | 0.02 | |||||||||||||||||||||||||||||||||||
| Early termination of interest rate swap (B) | 7.4 | 2.7 | 4.7 | $ | 0.12 | |||||||||||||||||||||||||||||||||||
| Amortization of debt discount on convertible notes | 5.1 | 1.9 | 3.3 | $ | 0.08 | |||||||||||||||||||||||||||||||||||
| Intangible amortization expense | 21.2 | 7.7 | 13.5 | $ | 0.33 | |||||||||||||||||||||||||||||||||||
| Anti-dilutive effect on EPS (C) | ($ | 0.01 | ) | |||||||||||||||||||||||||||||||||||||
| Tax adjustment (D) | 7.7 | (7.7 | ) | ($ | 0.19 | ) | ||||||||||||||||||||||||||||||||||
| Shares due to Teleflex under note hedge (E) | (11 | ) | ||||||||||||||||||||||||||||||||||||||
| Adjusted basis | $ | 395.4 | $ | 195.6 | $ | 22.9 | $ | 32.6 | $ | 91.6 | $ | 2.23 | 41,033 |
RECONCILIATION OF NET DEBT OBLIGATIONS
| June 30, 2013 | December 31, 2012 | |||||||
| (Dollars in thousands) | ||||||||
| Note payable and current portion of long-term borrowings | $ | 4,700 | $ | 4,700 | ||||
| Long term borrowings | 970,825 | 965,280 | ||||||
| Unamortized debt discount | 54,175 | 59,720 | ||||||
| Total debt obligations | 1,029,700 | 1,029,700 | ||||||
| Less: cash and cash equivalents | 281,418 | 337,039 | ||||||
| Net debt obligations | $ | 748,282 | $ | 692,661 |
ABOUT TELEFLEX INCORPORATED
Teleflex is a leading global provider of specialty medical devices for a range of procedures in critical care and surgery. Our mission is to provide solutions that enable healthcare providers to improve
outcomes and enhance patient and provider safety. Headquartered in Limerick, PA, Teleflex employs approximately 11,500 people worldwide and serves healthcare providers in more than 140 countries. For additional information about Teleflex please
refer to www.teleflex.com.
CAUTION CONCERNING FORWARD-LOOKING INFORMATION
This press release contains forward-looking statements, including, but not limited to, forecasted 2013 constant currency revenue growth and adjusted
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