Form 8-K TELEFLEX INC For: Jul 30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) | July 30, 2015 |
TELEFLEX INCORPORATED
(Exact name of Registrant as Specified in Its Charter)
Delaware | 1-5353 | 23-1147939 |
(State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (IRS Employer Identification No.) |
550 East Swedesford Road, Suite 400, Wayne, Pennsylvania | 19087 | |
(Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s Telephone Number, Including Area Code | (610) 225-6800 | |
Not applicable |
(Former Name or Former Address, If Changed Since Last Report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
Earnings Press Releases
On July 30, 2015, Teleflex Incorporated (the “Company”) issued a press release (the “Press Release”) announcing its financial results for the quarter ended June 28, 2015. A copy of the Press Release is furnished as Exhibit 99.1 to this Current Report.
In addition to the financial information included in the Press Release that has been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), the Press Release includes certain non-GAAP financial measures. These measures include adjusted diluted earnings per share and constant currency revenue growth. Adjusted diluted earnings per shares excludes, depending on the period presented, (i) the effect of charges associated with our restructuring programs; (ii) losses and other charges, including acquisition and integration costs, charges related to facility consolidations, charges related to contingent consideration liabilities and charges related to a litigation verdict against the Company with respect to a non-operating joint venture, net of specified reversals, including a reversal of liabilities related to certain contingent consideration arrangements; (iii) amortization of the debt discount on the Company’s convertible notes; (iv) intangible amortization expense; (v) loss on extinguishment of debt; and (vi) tax benefits resulting from the resolution of, or expiration of the statute of limitations with respect to, prior years’ tax matters. In addition, the calculation of diluted shares within adjusted earnings per share gives effect to the anti-dilutive impact of the Company’s convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of the Company’s senior subordinated convertible notes (under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares). Constant currency revenue and growth exclude the impact of translating the results of international subsidiaries at different currency exchange rates from period to period. The Press Release includes a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.
Management believes that these non-GAAP financial measures provide useful information to investors to facilitate the comparison of past and present operations, excluding items that the Company does not believe are indicative of our ongoing 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. However, such non-GAAP measures should be considered in addition to, not as a substitute for, or superior to other financial measures prepared in accordance with GAAP. Additionally, such non-GAAP financial measures as presented by the Company may not be comparable to similarly titled measures reported by other companies.
The information furnished pursuant to Item 2.02 of this Current Report, including Exhibit 99.1 hereto, shall not be considered “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of such section, nor shall it be incorporated by reference into future filings by the Company under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, unless the Company expressly sets forth in such future filing that such information is to be considered "filed" or incorporated by reference therein.
Supplemental Financial Information
The information set forth under Item 8.01 “Other Events” concerning the Supplemental Financial Information (as defined therein) is incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
In connection with the conference call to be held by the Company on July 30, 2015 to discuss its financial results for the quarter ended June 28, 2015, the Company plans to reference a slide presentation, which will be
made available in advance of the call through the Company’s website. A copy of the slide presentation is furnished as Exhibit 99.2 to this Current Report.
The information furnished pursuant to Item 7.01 of this Current Report, including Exhibit 99.3, shall not be considered “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of such section, nor shall it be incorporated by reference into future filings by the Company under the Securities Act of 1933, as amended or under the Securities Exchange Act of 1934, as amended, unless the Company expressly sets forth in such future filing that such information is to be considered “filed” or incorporated by reference therein.
Item 8.01 Other Events.
On July 30, 2015, the Company made certain historical segment financial information available through its website. Specifically, in order to facilitate comparability of current to prior period revenues, the Company made available supplemental information (the “Supplemental Financial Information”) regarding net revenues from external customers by reportable segment for the quarters ended March 30, 2014, June 29, 2014, September 28, 2014, December, 31, 2014, March 29, 2015 and June 28, 2015, for the six months ended June 28, 2015 and for the years ended December 31, 2012, 2013 and 2014 on a basis that was recast to reflect the Company’s current reportable segments, which were realigned effective April 1, 2015 in connection with the reorganization of certain of the Company's businesses. A copy of the Supplemental Financial Information is furnished as Exhibit 99.3 to this Current Report.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1 Earnings Press Release, dated July 30, 2015
99.2 Earnings Conference Call Slide Presentation
99.3 Schedule of Segment Net Revenues
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: July 30, 2015 | TELEFLEX INCORPORATED By: /s/ Thomas E. Powell Name: Thomas E. Powell Title: Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | Earnings Press Release, dated July 30, 2015 | |
99.2 | Earnings Conference Call Slide Presentation | |
99.3 | Schedule of Segment Net Revenues | |
Exhibit 99.1
Contact: Jake Elguicze
Treasurer and Vice President of Investor Relations
610-948-2836
FOR IMMEDIATE RELEASE | July 30, 2015 |
TELEFLEX REPORTS SECOND QUARTER 2015 RESULTS
Second Quarter Revenues of $452.1 million, down 3.4% over prior year period; up 4.7% on Constant Currency Basis
Second Quarter GAAP Diluted EPS of $0.93, down 10.6% over the prior year period
Second Quarter Adjusted Diluted EPS of $1.42, down 6.0%, reflecting unfavorable impact from foreign exchange of approximately 20%
2015 Constant Currency Revenue and Adjusted Diluted EPS Guidance Reaffirmed
Wayne, PA -- Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced financial results for the second quarter ended June 28, 2015.
Second quarter net revenues were $452.1 million, a decrease of 3.4% over the second quarter 2014. Excluding the impact of foreign currency fluctuations, second quarter net revenues increased 4.7% over the year ago quarter.
Second quarter GAAP diluted earnings per share from continuing operations decreased 10.6% to $0.93, as compared to $1.04 in the prior year period. Second quarter adjusted diluted earnings per share from continuing operations decreased 6.0% to $1.42, compared to $1.51 in the prior year period.
“During the second quarter of 2015, Teleflex continued its solid operating performance, building upon the results realized earlier this year,” said Benson Smith, Chairman, President and Chief Executive Officer. “Once again, we generated mid-single digit constant currency revenue growth and achieved adjusted earnings per share ahead of our previous expectations. In fact, adjusted earnings per share would have been higher during the second quarter of 2015 had it not been for foreign exchange, which impacted results negatively by approximately 20% as compared to the second quarter of 2014."
Added Smith, "In addition, during the second quarter, we continued to make progress in our strategic initiatives, including the acquisition of a distribution partner of Teleflex's Surgical products in Australia, the acquisition of exclusive North American distribution rights to the AutoFuser® range of disposable pain control pumps, and the receipt of FDA market clearance for its Arrow® Endurance™ Extended Dwell Peripheral Catheter System. Based on our results for the first half of 2015, Teleflex remains on target to achieve our previously provided constant currency revenue growth and adjusted diluted earnings per share guidance for 2015.”
SECOND QUARTER NET REVENUE BY SEGMENT AND GEOGRAPHY
Effective April 1, 2015, the Company reorganized certain of its businesses to better leverage the Company's resources. As a result, the Company realigned its operating segments. Specifically, the Company's Anesthesia/Respiratory North America operating segment was divided into two operating segments, Anesthesia North America and Respiratory North America. Additionally, the businesses comprising the Company's former Specialty operating segment (which was not a reportable segment and, therefore, was included in the "All other" category in the Company's presentation of segment information) were transferred to the Anesthesia North America, Vascular North America and Respiratory North America operating segments.
As a result of the operating segment changes described above, the Company has the following six reportable operating segments: Vascular North America, Anesthesia North America, Surgical North America, EMEA, Asia and
OEM. In connection with its presentation of segment information, the Company will continue to present certain operating segments, including, among others, the Respiratory North America operating segment, in the "All other" category. All prior comparative periods have been restated to reflect these changes.
Vascular North America second quarter net revenues were $81.2 million, an increase of 5.1% compared to the second quarter 2014. Excluding the impact of foreign currency fluctuations, second quarter net revenues increased 5.6% compared to the year ago quarter. The increase in constant currency revenue was largely due to higher sales volume of existing products, somewhat offset by a decrease in new product sales.
Surgical North America second quarter net revenues were $40.5 million, an increase of 6.7% compared to the second quarter 2014. Excluding the impact of foreign currency fluctuations, second quarter net revenues increased 7.8% compared to the year ago quarter. The increase in constant currency revenue was largely due to new product sales, MiniLap product sales and price increases.
Anesthesia North America second quarter net revenues were $45.6 million, a decrease of 0.3% compared to the second quarter 2014. Excluding the impact of foreign currency fluctuations, second quarter net revenues increased 0.2% compared to the year ago quarter. The increase in constant currency revenue was largely due to new product sales, somewhat offset by lower sales volume of existing products and price decreases.
EMEA second quarter net revenues were $129.1 million, a decrease of 16.5% compared to the second quarter 2014. Excluding the impact of foreign currency fluctuations, second quarter net revenues increased 1.7% compared to the year ago quarter. The increase in constant currency revenue was largely due to higher sales volume of existing products and an increase in new product sales, somewhat offset by price decreases.
Asia second quarter net revenues were $62.1 million, a decrease of 0.8% compared to the second quarter 2014. Excluding the impact of foreign currency fluctuations, second quarter net revenues increased 9.4% compared to the year ago quarter. The increase in constant currency revenue was largely due to price increases, increased sales volume of existing products, product sales resulting from the acquisition of Human Medics Co. Ltd., and an increase in new product sales.
OEM and Development Services (“OEM”) second quarter net revenues were $37.9 million, an increase of 3.6% compared to the second quarter 2014. Excluding the impact of foreign currency fluctuations, second quarter net revenues increased 7.5% compared to the year ago quarter. The increase in constant currency revenue was largely due to higher sales volume of existing products and an increase in new product sales.
Three Months Ended | % Increase/ (Decrease) | |||||||||||||
June 28, 2015 | June 29, 2014 | Constant Currency | Foreign Currency | Total Change | ||||||||||
(Dollars in millions) | ||||||||||||||
Vascular North America | $ | 81.2 | $ | 77.2 | 5.6 | % | (0.5%) | 5.1% | ||||||
Surgical North America | 40.5 | 38.0 | 7.8 | % | (1.1%) | 6.7% | ||||||||
Anesthesia North America | 45.6 | 45.7 | 0.2 | % | (0.5%) | (0.3%) | ||||||||
EMEA | 129.1 | 154.7 | 1.7 | % | (18.2%) | (16.5%) | ||||||||
Asia | 62.1 | 62.5 | 9.4 | % | (10.2%) | (0.8%) | ||||||||
OEM | 37.9 | 36.6 | 7.5 | % | (3.9%) | 3.6% | ||||||||
All Other | 55.7 | 53.4 | 6.0 | % | (1.7%) | 4.3% | ||||||||
Total | $ | 452.1 | $ | 468.1 | 4.7 | % | (8.1%) | (3.4%) | ||||||
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS
Depreciation expense, amortization of intangible assets and deferred financing costs for the first six months of 2015 aggregated $60.6 million compared to $63.8 million for the prior year period.
Cash and cash equivalents at June 28, 2015 were $325.0 million compared to $303.2 million at December 31, 2014.
Net accounts receivable at June 28, 2015 were $286.4 million compared to $273.7 million at December 31, 2014.
Net inventories at June 28, 2015 were $347.1 million compared to $335.6 million at December 31, 2014.
Net debt obligations at June 28, 2015 were $816.7 million compared to $801.4 million at December 31, 2014.
2015 OUTLOOK
The Company continues to estimate that constant currency revenue growth will be between 4% and 6%. On a GAAP basis, revenues are expected to be flat to down 2% versus the prior year due to the unfavorable impact of foreign currency fluctuations.
The Company also continues to estimate that adjusted diluted earnings per share from continuing operations will be between $6.10 and $6.35, representing an increase of 6.3% to 10.6% over the prior year. Consistent with our previous expectations, we anticipate that foreign currency fluctuations will negatively impact adjusted earnings per share in 2015 by approximately 15%. The Company has updated its full year 2015 GAAP diluted earnings per share from continuing operations range from $4.13 to $4.28 to a range of $4.23 to $4.38, reflecting an expected reduction in 2015 forecasted restructuring, impairment charges and special items, net of tax.
FORECASTED 2015 CONSTANT CURRENCY REVENUE GROWTH RECONCILIATION
Low | High | ||||
Forecasted 2015 GAAP revenue growth | (2%) | — | |||
Estimated impact of foreign currency fluctuations | 6% | 6% | |||
Forecasted 2015 constant currency revenue growth | 4% | 6% | |||
FORECASTED 2015 ADJUSTED EARNINGS PER SHARE RECONCILIATION
Low | High | |
Diluted earnings per share attributable to common shareholders | $4.23 | $4.38 |
Restructuring, impairment charges and special items, net of tax | $0.80 | $0.85 |
Intangible amortization expense, net of tax | $0.90 | $0.95 |
Amortization of debt discount on convertible notes, net of tax | $0.17 | $0.17 |
Adjusted diluted earnings per share | $6.10 | $6.35 |
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 6, 2015 at 11:59pm (ET), by calling 888-286-8010 (U.S./Canada) or 617-801-6888 (International), Passcode: 52181612.
ADDITIONAL NOTES
Constant currency revenue growth excludes the impact of translating the results of international subsidiaries at different currency exchange rates from period to period.
In the discussion of segment results, "new products" refers to products we have sold for 36 months or less, and "existing products" refers to products we have sold for more than 36 months.
Certain financial information is presented on a rounded basis, which may cause minor differences.
Segment results and commentary exclude the impact of discontinued operations.
NOTES ON NON-GAAP FINANCIAL MEASURES
This press release includes certain non-GAAP financial measures, which include:
Adjusted diluted earnings per share. This measure excludes, depending on the period presented (i) the effect of charges associated with our restructuring programs; (ii) losses and other charges, including acquisition and integration costs, charges related to facility consolidations, charges related to contingent consideration liabilities and charges related to a litigation verdict against the Company with respect to a non-operating joint venture, net of specified reversals, including a reversal of liabilities related to certain contingent consideration arrangements; (iii) amortization of the debt discount on the Company’s convertible notes; (iv) intangible amortization expense; (v) loss on extinguishment of debt; and (vi) tax benefits resulting from the resolution of, or expiration of the statute of limitations with respect to, prior years’ tax matters. In addition, the calculation of diluted shares within adjusted earnings per share gives effect to the anti-dilutive impact of the Company’s convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of the Company’s senior subordinated convertible notes (under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares).
Constant currency revenue growth. This measure excludes the impact of translating the results of international subsidiaries at different currency exchange rates from period to period.
Management believes these measures are useful to investors because they eliminate items that do not reflect Teleflex’s day-to-day operations. In addition, management believes that the calculation of non-GAAP diluted shares is useful to investors because it provides insight into the offsetting economic effect of the convertible note hedge against conversions of the convertible notes. Management uses these financial measures for internal managerial purposes, when publicly providing guidance on possible future results, and to assist in our evaluation of period-to-period comparisons. These financial measures are presented in addition to results presented in accordance with generally accepted accounting principles (“GAAP”) and should not be relied upon as a substitute for GAAP financial measures. Tables reconciling historical adjusted diluted earnings per share to historical GAAP earnings per share are set forth below. Tables reconciling constant currency net revenues to GAAP net revenues and reconciling forecasted non-GAAP measures to the most directly comparable forecasted GAAP measures are set forth above.
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
Quarter Ended - June 28, 2015 | ||||||||||||||||||||
Cost of goods sold | Selling, general and administrative expenses | Research and development expenses | Restructuring and other impairment charges | Interest expense, net | Loss on extinguishment of debt, 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 | $218.8 | $142.2 | $13.4 | $0.6 | $16.1 | $10.5 | $5.3 | $44.8 | $0.93 | 48,081 | ||||||||||
Adjustments | ||||||||||||||||||||
Restructuring and other impairment charges | — | — | — | 0.6 | — | — | 0.2 | 0.4 | $0.01 | — | ||||||||||
Losses and other charges (A) | 3.1 | (3.4) | — | — | — | — | 0.6 | (0.9) | ($0.03) | — | ||||||||||
Amortization of debt discount on convertible notes | — | — | — | — | 3.3 | — | 1.2 | 2.1 | $0.04 | — | ||||||||||
Intangible amortization expense | — | 15.1 | — | — | — | — | 4.1 | 10.9 | $0.23 | — | ||||||||||
Loss on extinguishment of debt, net | — | — | — | — | — | 10.5 | 3.8 | 6.6 | $0.14 | — | ||||||||||
Tax adjustment (B) | — | — | — | — | — | — | 0.3 | (0.3) | ($0.01) | — | ||||||||||
Shares due to Teleflex under note hedge (C) | — | — | — | — | — | — | — | — | $0.10 | (3,366) | ||||||||||
Adjusted basis | $215.7 | $130.6 | $13.4 | — | $12.8 | — | $15.5 | $63.5 | $1.42 | 44,715 | ||||||||||
Quarter Ended - June 29, 2014 | ||||||||||||||||||||
Cost of goods sold | Selling, general and administrative expenses | Research and development expenses | Restructuring and other impairment charges | Interest expense, net | Loss on extinguishment of debt, 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 | $224.0 | $146.8 | $14.9 | $7.6 | $15.9 | 0 | $10.0 | $48.4 | $1.04 | 46,392 | ||||||||||
Adjustments | ||||||||||||||||||||
Restructuring and other impairment charges | — | — | — | 7.6 | — | — | 3.5 | 4.2 | $0.09 | — | ||||||||||
Losses and other charges (A) | 0.9 | (1.1) | 0.1 | — | — | — | — | (0.2) | — | — | ||||||||||
Amortization of debt discount on convertible notes | — | — | — | — | 3.0 | — | 1.1 | 1.9 | $0.04 | — | ||||||||||
Intangible amortization expense | — | 16.1 | — | — | — | — | 4.4 | 11.7 | $0.25 | — | ||||||||||
Loss on extinguishment of debt, net | — | — | — | — | — | — | — | — | — | — | ||||||||||
Tax adjustment (B) | — | — | — | — | — | — | — | — | — | — | ||||||||||
Shares due to Teleflex under note hedge (C) | — | — | — | — | — | — | — | — | $0.09 | (2,714) | ||||||||||
Adjusted basis | $223.1 | $131.9 | $14.8 | — | $12.9 | — | $19.0 | $65.9 | $1.51 | 43,678 | ||||||||||
(A) In 2015, losses and other charges include approximately $2.0 million, net of tax, or $0.04 per share, related to acquisition and integration costs, and charges related to facility consolidations; reversals included approximately ($2.7) million, net of tax, or ($0.06) per share, related to contingent consideration liabilities; and approximately ($0.2) million, net of tax, or ($0.01) per share, related to a litigation verdict against the Company with respect to a non-operating joint venture. In 2014, losses and other charges include approximately $4.2 million, net of tax, or $0.09 per share, related to acquisition and integration costs; reversals included approximately ($4.4) million, net of tax, or ($0.09) per share, related to the reversal of contingent consideration liabilities.
(B) The tax adjustment represents a net benefit resulting from the resolution of, or the expiration of statute of limitations with respect to various prior years’ U.S. federal, state and foreign tax matters.
(C) Adjusted diluted shares are calculated by giving effect to the anti-dilutive impact of the Company’s convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of our senior subordinated convertible notes. Under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares.
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
Year-to-date Ended - June 28, 2015 | ||||||||||||||||||||
Cost of goods sold | Selling, general and administrative expenses | Research and development expenses | Restructuring and other impairment charges | Interest expense, net | Loss on extinguishment of debt, 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 | $425.6 | $281.9 | $26.3 | $5.0 | $33.1 | $10.5 | $14.6 | $83.8 | $1.76 | 47,688 | ||||||||||
Adjustments | ||||||||||||||||||||
Restructuring and other impairment charges | — | — | — | 5.0 | — | — | 1.8 | 3.2 | $0.07 | — | ||||||||||
Losses and other charges (A) | 5.2 | (2.5) | — | — | — | — | 1.4 | 1.3 | $0.02 | — | ||||||||||
Amortization of debt discount on convertible notes | — | — | — | — | 6.5 | — | 2.4 | 4.1 | $0.09 | — | ||||||||||
Intangible amortization expense | — | 29.8 | — | — | — | — | 7.9 | 21.9 | $0.46 | — | ||||||||||
Loss on extinguishment of debt, net | — | — | — | — | — | 10.5 | 3.8 | 6.6 | $0.14 | — | ||||||||||
Tax adjustment (B) | — | — | — | — | — | — | 0.2 | (0.2) | — | — | ||||||||||
Shares due to Teleflex under note hedge (C) | — | — | — | — | — | — | — | — | $0.19 | (3,211) | ||||||||||
Adjusted basis | $420.4 | $254.6 | $26.3 | — | $26.6 | — | $32.1 | $120.8 | $2.72 | 44,477 | ||||||||||
Year-to-date Ended - June 29, 2014 | ||||||||||||||||||||
Cost of goods sold | Selling, general and administrative expenses | Research and development expenses | Restructuring and other impairment charges | Interest expense, net | Loss on extinguishment of debt, 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 | $441.4 | $287.1 | $28.9 | $15.4 | $31.1 | 0 | $18.5 | $83.5 | $1.81 | 46,071 | ||||||||||
Adjustments | ||||||||||||||||||||
Restructuring and other impairment charges | — | — | — | 15.4 | — | — | 4.5 | 10.9 | $0.24 | — | ||||||||||
Losses and other charges (A) | 0.9 | (1.2) | 0.1 | — | — | — | 0.8 | (1.1) | ($0.03) | — | ||||||||||
Amortization of debt discount on convertible notes | — | — | — | — | 6.0 | — | 2.2 | 3.8 | $0.08 | — | ||||||||||
Intangible amortization expense | — | 32.1 | — | — | — | — | 9.9 | 22.2 | $0.48 | — | ||||||||||
Loss on extinguishment of debt, net | — | — | — | — | — | — | — | — | — | — | ||||||||||
Tax adjustment (B) | — | — | — | — | — | — | 0.2 | -0.2 | ($0.01) | — | ||||||||||
Shares due to Teleflex under note hedge (C) | — | — | — | — | — | — | — | — | $0.15 | (2,582) | ||||||||||
Adjusted basis | $440.5 | $256.3 | $28.9 | — | $25.1 | — | $36.3 | $118.9 | $2.73 | 43,489 | ||||||||||
(A) In 2015, losses and other charges include approximately $3.9 million, net of tax, or $0.08 per share, related to acquisition and integration costs, and charges related to facility consolidations; reversals included approximately ($2.4) million, net of tax, or ($0.05) per share, related to contingent consideration liabilities; and approximately ($0.2) million, net of tax, or ($0.01) per share, related to a litigation verdict against the Company with respect to a non-operating joint venture. In 2014, losses and other charges include approximately $5.6 million, net of tax, or $0.12 per share, related to acquisition and integration costs; reversals included approximately ($6.7) million, net of tax, or ($0.15) per share, related to the reversal of contingent consideration liabilities.
(B) The tax adjustment represents a net benefit resulting from the resolution of, or the expiration of statute of limitations with respect to various prior years’ U.S. federal, state and foreign tax matters.
(C) Adjusted diluted shares are calculated by giving effect to the anti-dilutive impact of the Company’s convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of our senior subordinated convertible notes. Under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares.
RECONCILIATION OF NET DEBT OBLIGATIONS
June 28, 2015 | December 31, 2014 | ||||
(Dollars in thousands) | |||||
Note payable and current portion of long term borrowings | $ | 415,991 | $ | 368,401 | |
Long term borrowings | 696,000 | 700,000 | |||
Unamortized debt discount | 29,726 | 36,197 | |||
Total debt obligations | 1,141,717 | 1,104,598 | |||
Less: cash and cash equivalents | 325,010 | 303,236 | |||
Net debt obligations | $ | 816,707 | $ | 801,362 | |
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 Wayne, PA, Teleflex employs approximately 12,400 people and serves healthcare providers worldwide. 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 2015 GAAP and constant currency revenue growth and GAAP and adjusted diluted earnings per share. Actual results could differ materially from those in the forward-looking statements due to, among other things, conditions in the end markets we serve, customer reaction to new products and programs, our ability to achieve sales growth, price increases or cost reductions; changes in the reimbursement practices of third party payors; our ability to realize efficiencies and to execute on our strategic initiatives; changes in material costs and surcharges; market acceptance and unanticipated difficulties in connection with the introduction of new products and product line extensions; product recalls; unanticipated difficulties in connection with the consolidation of manufacturing and administrative functions, including as a result of difficulties with various employees, labor representatives or regulators; the loss of skilled employees in connection with such initiatives; unanticipated difficulties, expenditures and delays in complying with government regulations applicable to our businesses; the impact of government healthcare reform legislation; our ability to meet our debt obligations; changes in general and international economic conditions, including fluctuations in foreign currency exchange rates; and other factors described or incorporated in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2014.
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||||
June 28, 2015 | June 29, 2014 | June 28, 2015 | June 29, 2014 | ||||||||||||
(Dollars and shares in thousands, except per share) | |||||||||||||||
Net revenues | $ | 452,045 | $ | 468,105 | $ | 881,475 | $ | 906,651 | |||||||
Cost of goods sold | 218,808 | 224,017 | 425,601 | 441,404 | |||||||||||
Gross profit | 233,237 | 244,088 | 455,874 | 465,247 | |||||||||||
Selling, general and administrative expenses | 142,228 | 146,843 | 281,925 | 287,140 | |||||||||||
Research and development expenses | 13,443 | 14,870 | 26,327 | 28,932 | |||||||||||
Restructuring and impairment charges | 580 | 7,623 | 5,028 | 15,403 | |||||||||||
Income from continuing operations before interest, extinguishment of debt and taxes | 76,986 | 74,752 | 142,594 | 133,772 | |||||||||||
Interest expense | 16,207 | 16,062 | 33,379 | 31,466 | |||||||||||
Interest income | (154) | (146 | ) | (323 | ) | (333 | ) | ||||||||
Loss on extinguishment of debt | 10,454 | — | 10,454 | — | |||||||||||
Income from continuing operations before taxes | 50,479 | 58,836 | 99,084 | 102,639 | |||||||||||
Taxes on income from continuing operations | 5,280 | 10,006 | 14,612 | 18,540 | |||||||||||
Income from continuing operations | 45,199 | 48,830 | 84,472 | 84,099 | |||||||||||
Operating loss from discontinued operations | (145 | ) | (1,594 | ) | (644 | ) | (1,619 | ) | |||||||
Taxes (benefit) on loss from discontinued operations | 45 | (469 | ) | 249 | (369 | ) | |||||||||
Loss from discontinued operations | (190 | ) | (1,125 | ) | (893 | ) | (1,250 | ) | |||||||
Net income | 45,009 | 47,705 | 83,579 | 82,849 | |||||||||||
Less: Income from continuing operations attributable to noncontrolling interest | 446 | 453 | 664 | 639 | |||||||||||
Net income attributable to common shareholders | $ | 44,563 | $ | 47,252 | $ | 82,915 | $ | 82,210 | |||||||
Earnings per share available to common shareholders: | |||||||||||||||
Basic: | |||||||||||||||
Income from continuing operations | $ | 1.08 | $ | 1.17 | $ | 2.02 | $ | 2.02 | |||||||
Loss from discontinued operations | (0.01 | ) | (0.03 | ) | (0.02 | ) | (0.03 | ) | |||||||
Net income | $ | 1.07 | $ | 1.14 | $ | 2.00 | $ | 1.99 | |||||||
Diluted: | |||||||||||||||
Income from continuing operations | $ | 0.93 | $ | 1.04 | $ | 1.76 | $ | 1.81 | |||||||
Loss from discontinued operations | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | ||||||||
Net income | $ | 0.93 | $ | 1.02 | $ | 1.74 | $ | 1.78 | |||||||
Dividends per share | $ | 0.34 | $ | 0.34 | $ | 0.68 | $ | 0.68 | |||||||
Weighted average common shares outstanding | |||||||||||||||
Basic | 41,560 | 41,380 | 41,514 | 41,321 | |||||||||||
Diluted | 48,081 | 46,392 | 47,688 | 46,071 | |||||||||||
Amounts attributable to common shareholders: | |||||||||||||||
Income from continuing operations, net of tax | $ | 44,753 | $ | 48,377 | $ | 83,808 | $ | 83,460 | |||||||
Loss from discontinued operations, net of tax | (190 | ) | (1,125 | ) | (893 | ) | (1,250 | ) | |||||||
Net income | $ | 44,563 | $ | 47,252 | $ | 82,915 | $ | 82,210 | |||||||
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 28, 2015 | December 31, 2014 | ||||
(Dollars in thousands) | |||||
ASSETS | |||||
Current assets | |||||
Cash and cash equivalents | $ | 325,010 | $ | 303,236 | |
Accounts receivable, net | 286,371 | 273,704 | |||
Inventories, net | 347,095 | 335,593 | |||
Prepaid expenses and other current assets | 34,659 | 35,697 | |||
Prepaid taxes | 46,008 | 40,256 | |||
Deferred tax assets | 56,294 | 57,301 | |||
Assets held for sale | 7,072 | 7,422 | |||
Total current assets | 1,102,509 | 1,053,209 | |||
Property, plant and equipment, net | 315,536 | 317,435 | |||
Goodwill | 1,317,874 | 1,323,553 | |||
Intangible assets, net | 1,185,517 | 1,216,720 | |||
Investments in affiliates | 401 | 1,150 | |||
Deferred tax assets | 1,134 | 1,178 | |||
Other assets | 61,191 | 64,010 | |||
Total assets | $ | 3,984,162 | $ | 3,977,255 | |
LIABILITIES AND EQUITY | |||||
Current liabilities | |||||
Current borrowings | $ | 415,991 | $ | 368,401 | |
Accounts payable | 74,364 | 64,100 | |||
Accrued expenses | 65,843 | 72,383 | |||
Current portion of contingent consideration | 5,802 | 11,276 | |||
Payroll and benefit-related liabilities | 69,564 | 85,442 | |||
Accrued interest | 7,991 | 9,169 | |||
Income taxes payable | 11,700 | 13,768 | |||
Other current liabilities | 10,631 | 10,360 | |||
Total current liabilities | 661,886 | 634,899 | |||
Long-term borrowings | 696,000 | 700,000 | |||
Deferred tax liabilities | 433,257 | 451,541 | |||
Pension and postretirement benefit liabilities | 161,036 | 167,241 | |||
Noncurrent liability for uncertain tax provisions | 50,547 | 50,884 | |||
Other liabilities | 61,429 | 58,991 | |||
Total liabilities | 2,064,155 | 2,063,556 | |||
Commitments and contingencies | |||||
Total common shareholders' equity | 1,917,779 | 1,911,309 | |||
Noncontrolling interest | 2,228 | 2,390 | |||
Total equity | 1,920,007 | 1,913,699 | |||
Total liabilities and equity | $ | 3,984,162 | $ | 3,977,255 | |
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended | |||||||
June 28, 2015 | June 29, 2014 | ||||||
(Dollars in thousands) | |||||||
Cash Flows from Operating Activities of Continuing Operations | |||||||
Net income | $ | 83,579 | $ | 82,849 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Loss from discontinued operations | 893 | 1,250 | |||||
Depreciation expense | 22,385 | 23,997 | |||||
Amortization expense of intangible assets | 29,826 | 32,102 | |||||
Amortization expense of deferred financing costs and debt discount | 8,421 | 7,716 | |||||
Loss on extinguishment of debt | 10,454 | — | |||||
Changes in contingent consideration | (2,293 | ) | (6,617 | ) | |||
Stock-based compensation | 7,126 | 5,726 | |||||
Deferred income taxes, net | 625 | 2,811 | |||||
Other | (6,301 | ) | (2,142 | ) | |||
Changes in operating assets and liabilities, net of effects of acquisitions and disposals: | |||||||
Accounts receivable | (17,984 | ) | 640 | ||||
Inventories | (16,895 | ) | (16,385 | ) | |||
Prepaid expenses and other current assets | 921 | 2,407 | |||||
Accounts payable and accrued expenses | (2,966 | ) | (1,731 | ) | |||
Income taxes receivable and payable, net | (8,203 | ) | (12,462 | ) | |||
Net cash provided by operating activities from continuing operations | 109,588 | 120,161 | |||||
Cash Flows from Investing Activities of Continuing Operations: | |||||||
Expenditures for property, plant and equipment | (31,321 | ) | (30,850 | ) | |||
Proceeds from sale of assets and investments | — | 4,139 | |||||
Payments for businesses and intangibles acquired, net of cash acquired | (37,559 | ) | (28,535 | ) | |||
Investment in affiliates | — | (60 | ) | ||||
Net cash used in investing activities from continuing operations | (68,880 | ) | (55,306 | ) | |||
Cash Flows from Financing Activities of Continuing Operations: | |||||||
Proceeds from new borrowings | 288,100 | 250,000 | |||||
Reduction in borrowings | (250,981 | ) | (480,000 | ) | |||
Debt extinguishment, issuance and amendment fees | (8,746 | ) | (3,275 | ) | |||
Net proceeds from share based compensation plans and the related tax impacts | 4,843 | 2,391 | |||||
Payments to noncontrolling interest shareholders | (832 | ) | (1,094 | ) | |||
Payments for contingent consideration | (3,989 | ) | — | ||||
Dividends | (28,234 | ) | (28,093 | ) | |||
Net cash provided by (used in) financing activities from continuing operations | 161 | (260,071 | ) | ||||
Cash Flows from Discontinued Operations: | |||||||
Net cash used in operating activities | (1,363 | ) | (1,531 | ) | |||
Net cash used in discontinued operations | (1,363 | ) | (1,531 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (17,732 | ) | 2,145 | ||||
Net increase (decrease) in cash and cash equivalents | 21,774 | (194,602 | ) | ||||
Cash and cash equivalents at the beginning of the period | 303,236 | 431,984 | |||||
Cash and cash equivalents at the end of the period | $ | 325,010 | $ | 237,382 | |||
1 TELEFLEX INCORPORATED SECOND QUARTER 2015 EARNINGS CONFERENCE CALL 1 Exhibit 99.2
Conference Call Logistics The release, accompanying slides, and replay webcast are available online at www.teleflex.com (click on “Investors”) Telephone replay available by dialing 888-286-8010 or for international calls, 617- 801-6888, pass code number 52181612 2
Introductions Benson Smith Chairman, President and CEO Liam Kelly Executive Vice President and COO 3 Jake Elguicze Treasurer and Vice President of Investor Relations Thomas Powell Executive Vice President and CFO
Forward-Looking Statements/Non-GAAP Financial Measures This presentation and our discussion contain forward-looking information and statements including, but not limited to, our the expected timing for product launches; forecasted 2015 constant currency revenue growth, adjusted gross and operating margins and adjusted earnings per share; and other matters which inherently involve risks and uncertainties which could cause actual results to differ from those projected or implied in the forward–looking statements. These risks and uncertainties are addressed in the Company’s SEC filings, including its most recent Form 10-K. This presentation includes the following non-GAAP financial measures: • Adjusted diluted earnings per share. This measure excludes, depending on the period presented (i) the effect of charges associated with our restructuring programs; (ii) losses and other charges, including acquisition and integration costs, charges related to facility consolidations, charges related to contingent consideration liabilities and charges related to a litigation verdict against the Company with respect to a non-operating joint venture, net of specified reversals, including a reversal of liabilities related to certain contingent consideration arrangements; (iii) amortization of the debt discount on the Company’s convertible notes; (iv) intangible amortization expense; (v) loss on extinguishment of debt; and (vi) tax benefits resulting from the resolution of, or expiration of the statute of limitations with respect to, prior years’ tax matters. In addition, the calculation of diluted shares within adjusted earnings per share gives effect to the anti-dilutive impact of the Company’s convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of the Company’s senior subordinated convertible notes (under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares). • Constant currency revenue growth. This measure excludes the impact of translating the results of international subsidiaries at different currency exchange rates from period to period. • Adjusted gross margin. This measure excludes, depending on the period presented, certain losses, other charges and charge reversals, primarily related to acquisition and integration costs and charges related to facility consolidations. • Adjusted operating margin. This measure excludes, depending on the period presented, (i) the impact of restructuring and other impairment charges; (ii) losses, other charges and charge reversals primarily related to acquisition and integration costs, facility consolidation charges, charges and reversals related to contingent consideration liabilities and a litigation verdict against the Company related to a non-operating joint venture; and (iii) intangible amortization expense. • Adjusted tax rate. This measure is the percentage of the Company’s adjusted taxes on income from continuing operations to its adjusted income from continuing operations before taxes. Adjusted taxes on income from continuing operations excludes, depending on the period presented, the impact of tax benefits or costs associated with (i) restructuring and impairment charges; (ii) amortization of the debt discount on the Company’s convertible notes; (iii) intangible amortization expense; (iv) loss on extinguishment of deb; (v) the resolution of, or expiration of statutes of limitations with respect to, various prior years’ tax matters; and (vi) losses, other charges and charge reversals primarily related to acquisition and integration costs, facility consolidation charges, charges and reversals related to contingent consideration liabilities and a litigation verdict against the Company with respect to a non-operating joint venture. Reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is contained within this presentation. Unless otherwise noted, the following slides reflect continuing operations. 4
5 EXECUTIVE SUMMARY 5
Executive Summary Second quarter revenue of $452.1 million • Down 3.4% vs. prior year period on an as-reported basis • Up 4.7% vs. prior year period on a constant currency basis Adjusted EPS of $1.42, down 6.0% vs. prior year period • Adjusted earnings per share reflects unfavorable impact from foreign exchange of approximately 20% Re-affirming 2015 financial guidance • Constant currency revenue growth of between 4% to 6% • Adjusted earnings per share of between $6.10 and $6.35 6
7 SECOND QUARTER PRODUCT LINE AND GEOGRAPHIC REVENUE REVIEW 7
Second Quarter Highlights Second quarter 2015 constant currency revenue growth of 4.7% • Sales volume of existing products contribute 215 bps of constant currency growth • Acquisitions and distributor conversions contribute 114 bps of constant currency revenue growth • Sales volume of new products contribute 89 bps of constant currency growth • Vidacare products contribute 47 bps of constant currency growth • Core product pricing flat versus prior year 8
Segment Revenue Review Q2’15 Vascular N.A.: $81.2 million, up 5.6% Anesthesia N.A.: $45.6 million, up 0.2% Surgical N.A.: $40.5 million, up 7.8% EMEA: $129.1 million, up 1.7% Asia: $62.1 million, up 9.4% OEM: $37.9 million, up 7.5% All Other: $55.7 million, up 6.0% Note: Increases and decreases in revenue referred to above are as compared to results for the second quarter of 2014. 9 Constant Currency Revenue Commentary Q2’14
Group Purchasing Organization and IDN Review Group Purchasing Organization Update • 2 new agreements • 4 renewed agreements IDN Update • 2 new agreements • 2 renewed agreements 10 Track record of expansion of contractual agreements continues in Q2’15
11 SECOND QUARTER – PRODUCT REGULATORY APPROVALS & PEER REVIEW STUDIES 11
ARROW Endurance™ Extended Dwell Peripheral Catheter System is a single use peripheral catheter system intended for short-term dwell use (up to 29 days) to permit delivery of infusion therapies, pressure monitoring, high pressure injection, and withdrawal of blood. The insertion device consists of an ergonomically designed handle with an integral echogenic needle that contains a passively-activated needle protection mechanism, guidewire with slider advancer, catheter release tab, and single-lumen catheter. The insertion device is designed as a closed system intended to contain blood throughout catheter insertion. FDA 510(K) clearance received and product launch expected in Q3 2015 PRODUCT DESCRIPTION 12 Product Regulatory Approvals and Peer Review Studies ARROW Endurance™ Extended Dwell Peripheral Catheter System
Peer-reviewed retrospective study further documented the ability of the Company’s ARROW® Central Venous Catheter with ARROWg+ard® Blue Technology to prevent catheter-related bloodstream infections, therefore reducing their occurrence and the direct costs associated with treating those infections, even when the infection risk is already low.1 PEER REVIEWED STUDY 13 ARROW® Central Venous Catheter with ARROWg+ard® Blue Technology Product Regulatory Approvals and Peer Review Studies 1. Lorente L, Lecuona M, Jimenez A, et al. Efficiency of chlorhexidine-silver sulfadiazine-impregnated venous catheters at subclavian sites. American Journal of Infection Control, 2015.
Second generation Laryngeal Mask Airway All parts with mucosal contact are made of silicone material for increased anatomical compliance, single use product Flexible, but fixed-curve, tube allows ease of insertion and anatomical conformity Patented dual gastric drainage channel and pharyngeal chamber designed to improve laryngeal seal during high volume regurgitation Integrated suction port to rapidly remove any gastric content during regurgitation Limited market release PRODUCT DESCRIPTION 14 Product Regulatory Approvals and Peer Review Studies LMA Protector™ Airway Note: New product introductions subject to obtaining required governmental approvals and authorizations.
Percuvance™ Percutaneous Surgical System is intended to manipulate tissue and includes components that introduce a variety of instrument configurations into the abdominal cavity and requires a smaller incision site than traditional laparoscopic surgery. It offers a reusable handle that is compatible with interchangeable instrument tips, which include graspers, scissors and dissectors. Unlike other laparoscopic devices, the Percuvance™ System affords a percutaneous insertion into the patient without the use of a trocar. It is indicated for the means to penetrate soft tissue to access certain areas of the abdomen and used to grasp, hold and manipulate tissue during laparoscopic surgery. Limited market release PRODUCT DESCRIPTION 15 Product Regulatory Approvals and Peer Review Studies Percuvance™ Percutaneous Surgical System
16 ACQUISITION UPDATE 16
Acquisition Update Acquired Assets of N. Stenning & Co. Pty. Ltd. • N. Stenning & Co. Pty. Ltd. was a distributor of Teleflex surgical products under the Pilling and Weck brands for nearly 35 years • Acquisition enables direct sales and distribution of additional Teleflex products in Australia and positions Teleflex to capture additional margin and better understand the needs of customers • Accretive, all-cash transaction completed in June 2015 17 N.Stenning & Co. PTY. LTD
Acquisition Update Acquired Distribution Rights to AutoFuser® Range of Disposable Pain Pump Products • Acquired exclusive North American distribution rights to the AutoFuser® and AutoFuser® with AutoSelector® range of disposable pain control pumps from Ace Medical US. In connection with this transaction, Teleflex entered into a 10 year exclusive distribution agreement with the manufacturer of these products, Ace Medical Corp., Ltd. • Strengthens Anesthesia business in the United States and supports margin expansion strategy • Accretive, all-cash transaction completed on first day of Q3 2015 18
19 SECOND QUARTER 2015 FINANCIAL REVIEW 19
Financial Results Revenue of $452.1 million • Down 3.4% vs. prior year period on an as-reported basis • Up 4.7% vs. prior year period on a constant currency basis Adjusted gross margin of 52.3%, flat vs. prior year period • Product recalls / quality issues and foreign exchange impact adjusted gross margin negatively by approximately 70 bps and 50 bps, respectively Adjusted operating margin of 20.4%, down 60 bps vs. prior year period • Product recalls / quality issues and foreign exchange impact adjusted operating margin negatively by approximately 80 bps and 190 bps, respectively Adjusted tax rate of 19.5%, down 280 bps vs. prior year period Adjusted EPS of $1.42, down 6.0% vs. prior year period • Adjusted earnings per share reflects unfavorable impact from foreign exchange of approximately 20% 20
21 2015 FINANCIAL OUTLOOK 21
22 Constant currency revenue growth expected to be between 4% and 6% Adjusted Gross margin anticipated to be 53.0% to 54.0%, an improvement of 150bps to 250bps vs. prior year Adjusted operating margin expected to be between 22.0% and 22.5% Adjusted earnings per share anticipated to be between $6.10 and $6.35 per share 2015 Financial Outlook
23 QUESTION & ANSWER 23
24 APPENDICES 24
Appendix A – Reconciliation of Constant Currency Revenue Growth Dollars in Millions 25 June 28, 2015 June 29, 2014 Constant Currency Currency Total Vascular North America 81.2$ 77.2$ 5.6% (0.5%) 5.1% Anesthesia North America 45.6 45.7 0.2% (0.5%) (0.3%) Surgical North America 40.5 38.0 7.8% (1.1%) 6.7% EMEA 129.1 154.7 1.7% (18.2%) (16.5%) Asia 62.1 62.5 9.4% (10.2%) (0.8%) OEM 37.9 36.6 7.5% (3.9%) 3.6% All Other 55.7 53.4 6.0% (1.7%) 4.3% Net Revenues 452.1$ 468.1$ 4.7% (8.1%) (3.4%) Three Months Ended % Increase / (Decrease)
Appendix B – Reconciliation of Revenue Growth Dollars in Millions 26 1: amount is comprised of incremental price on existing products and the sale of new products of $3.4 million and $1.9 million, respectively, both of which are a result of the businesses acquired. % Basis Points Three Months Ended June 29, 2014 Revenue As-Reported $468.1 Foreign Currency (37.9) -8.1% (809) Sales Volume Existing Products 10.1 2.1% 215 Vidacare 2.2 0.5% 47 New Product Sales 4.2 0.9% 89 Core Product Pricing 0.1 0.0% 1 Acquisitions and Distributor to Direct Conversions 1 5.3 1.1% 114 Three Months Ended June 28, 2015 Revenue As-Reported $452.1 -3.4% (343) Year-over-year growth
27 Appendix C – Reconciliation of Adjusted Gross Profit and Margin June 28, 2015 June 29, 2014 Teleflex gross profit as-reported 233,237$ 244,088$ Teleflex gross margin as-reported 51.6% 52.1% Losses, other charges and charge reversals (A) 3,103 880 Adjusted Teleflex gross profit 236,340$ 244,968$ Adjusted Teleflex gross margin 52.3% 52.3% Teleflex revenue as-reported 452,045$ 468,105$ $ thousands Three Months Ended A: In 2015 and 2014 losses, other charges and charge reversals primarily relate to acquisition and integration costs, and charges related to facility consolidations.
28 Appendix D – Reconciliation of Adjusted Operating Profit and Margin June 28, 2015 June 29, 2014 Teleflex income from continuing operations before interest and taxes 76,986$ 74,752$ Teleflex income from continuing operations before interest and taxes margin 17.0% 16.0% Restructuring and other impairment charges 580 7,623 Losses, other charges and charge reversals (A) (331) (178) Intangible amortization expense 15,086 16,083 Adjusted Teleflex income from continuing operations before interest, taxes and intangible amortization expense 92,321$ 98,280$ Adjusted Teleflex income from continuing operations before interest, taxes and intangible amortization expense margin 20.4% 21.0% Teleflex revenue as-reported 452,045$ 468,105$ $ thousands Three Months Ended A: In 2015, losses, other charges and charge reversals primarily relate to acquisition and integration costs; charges related to facility consolidations; reversals related to contingent consideration liabilities; and reversals related to a litigation verdict against the Company with respect to a non-operating joint venture. In 2014, losses, other charges and charge reversals primarily relate to acquisition and integration costs; and the reversal of contingent consideration liabilities.
Appendix E – Reconciliation of Adjusted EPS from Continuing Operations Quarter Ended – June 28, 2015 Dollars in millions, except per share data 29 Cost of goods sold Selling, general and administrative expenses Research and development expenses Restructuring and other impairment charges Interest expense, net Loss on extinguishment of debt, 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 $218.8 $142.2 $13.4 $0.6 $16.1 $10.5 $5.3 $44.8 $0.93 48,081 Adjustments Restructuring and other impairment charges — — — 0.6 — — 0.2 0.4 $0.01 — Losses and other charges (A) 3.1 (3.4) — — — — 0.6 (0.9) ($0.03) — Amortization of debt discount on convertible notes — — — — 3.3 — 1.2 2.1 $0.04 — Intangible amortization expense — 15.1 — — — — 4.1 10.9 $0.23 — Loss on extinguishment of debt, net — — — — — 10.5 3.8 6.6 $0.14 — Tax adjustment (B) — — — — — — 0.3 (0.3) ($0.01) — Shares due to Teleflex under note hedge (C) — — — — — — — — $0.10 (3,366) Adjusted basis $215.7 $130.6 $13.4 — $12.8 — $15.5 $63.5 $1.42 44,715 (A) In 2015, losses and other charges include approximately $2.0 million, net of tax, or $0.04 per share, related to acquisition and integration costs, and charges related to facility consolidations; reversals included approximately ($2.7) million, net of tax, or ($0.06) per share, related to contingent consideration liabilities; and approximately ($0.2) million, net of tax, or ($0.01) per share, related to a litigation verdict against the Company with respect to a non-operating joint venture. (B) The tax adjustment represents a net benefit resulting from the resolution of, or the expiration of statute of limitations with respect to various prior years’ U.S. federal, state and foreign tax matters. (C) Adjusted diluted shares are calculated by giving effect to the anti-dilutive impact of the Company’s convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of our senior subordinated convertible notes. Under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares.
Appendix F – Reconciliation of Adjusted EPS from Continuing Operations Quarter Ended – June 29, 2014 Dollars in millions, except per share data 30 Cost of goods sold Research and development expenses Restructuring and other impairment charges Interest expense, net Income taxes Net income (loss) attributable to common shareholders from continuing operations GAAP Basis $224.0 $14.9 $7.6 $15.9 $10.0 $48.4 $1.04 46,392 Adjustments Restructuring and other impairment charges Losses and other charges (A) Amortization of debt discount on convertible notes Intangible amortization expense — — — — 4.4 11.7 $0.25 — Tax adjustment (B) — — — — — — $0.00 — Shares due to Teleflex under note hedge (C) Adjusted basis $223.1 $14.8 — $12.9 $19.0 $65.9 $1.51 43,678 Diluted earnings per share available to common shareholders Shares used in calculation of GAAP and adjusted earnings per share $146.8 Selling, general and administrative expenses — — — 7.6 — 3.5 4.2 $0.09 — 0.9 (1.1) 0.1 — — — (0.2) $0.00 — — — — — 3.0 1.1 1.9 $0.04 — 16.1 — — — — — — — — (A) In 2014, losses and other charges include approximately ($4.4) million, net of tax, or ($0.09) per share, related to the reversal of contingent consideration liabilities; and approximately $4.2 million, net of tax, or $0.09 per share, related to acquisition and integration costs. (B) The tax adjustment represents a net benefit resulting from the resolution of, or the expiration of statute of limitations with respect to various prior years’ U.S. federal, state and foreign tax matters. (C) Adjusted diluted shares are calculated by giving effect to the anti-dilutive impact of the Company’s convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of our senior subordinated convertible notes. Under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares. $0.09 (2,714) $131.9
31 Appendix G – Reconciliation of Adjusted Tax Rate Dollars in Thousands Three Months Ended June 28, 2015 Income from continuing operations before taxes Taxes on income from continuing operations Tax rate GAAP basis $50,479 $5,280 10.5% Restructuring and impairment charges 580 209 Losses, other charges and charge reversals (A) (331) 586 Amortization of debt discount on convertible notes 3,252 1,186 Intangible amortization expense 15,086 4,141 Loss on extinguishment of debt 10,454 3,811 Tax adjustment (B) 0 323 Adjusted basis $79,520 $15,536 19.5% Three Months Ended June 29, 2014 GAAP basis $58,836 $10,006 17.0% Restructuring and impairment charges 7,623 3,467 Losses, other charges and charge reversals (A) (178) 5 Amortization of debt discount on convertible notes 3,012 1,100 Intangible amortization expense 16,083 4,410 Tax adjustment (B) 0 46 Adjusted basis $85,376 $19,034 22.3% (A) In 2015, losses, other charges and charge reversals primarily relate to acquisition and integration costs; charges related to facility consolidations; and reversals related to contingent consideration liabilities and a litigation verdict against the Company w ith respect to a non-operating joint venture. In 2014, losses, other charges and charge reversals primarily relate to acquisition and integration costs; and the reversal of contingent consideration liabilities. (B) The tax adjustment represents a net benefit resulting from the resolution of, or the expiration of statute of limitations w ith respect to various prior years’ U.S. federal, state and foreign tax matters.
Appendix H – Reconciliation of 2015 Constant Currency Revenue Growth Guidance 32 Low High Forecasted GAAP Revenue Growth (2%) ─ Estimated impact of foreign currency fluctuations 6% 6% Forecasted Constant Currency Revenue Growth 4% 6%
Appendix I – Reconciliation of 2015 Adjusted Gross Margin Guidance 33 Note: In 2015, losses, other charges and charge reversals relate to expenses associated with the Restructuring Plan approved by the Board of Directors on April 28, 2014. Low High GAAP Gross Margin 52.45% 53.35% Losses, other charges and charge reversals 0.55% 0.65% Adjusted Gross Margin 53.00% 54.00%
Appendix J – Reconciliation of 2015 Adjusted Operating Margin Guidance 34 Note: In 2015, losses, other charges and charge reversals include expenses associated with the Restructuring Plan approved by the Board of Directors on April 28, 2014; acquisition and integration costs, and charges related to facility consolidations; and the reversal of contingent consideration liabilities. Low High GAAP Operating Margin 18.40% 18.55% Losses, other charges and charge reversals 0.40% 0.65% Intangible amortization expense 3.20% 3.30% Adjusted Operating Margin 22.00% 22.50%
Appendix K – Reconciliation of 2015 Adjusted Earnings per Share Guidance 35 Low High Diluted earnings per share attributable to common shareholders $4.23 $4.38 Restructuring, impairment charges and special items, net of tax $0.80 $0.85 Intangible amortization expense, net of tax $0.90 $0.95 Amortization of debt discount on convertible notes, net of tax $0.17 $0.17 Adjusted diluted earnings per share $6.10 $6.35
Exhibit 99.3
Teleflex Incorporated
Segment Net Revenues
Three Months Ended | Six Months Ended | Three Months Ended | Year Ended | |||||||||||||||||||||||||||
March 29, 2015 | June 28, 2015 | June 28, 2015 | March 30, 2014 | June 29, 2014 | September 28, 2014 | December 31, 2014 | 2014 | 2013 | 2012 | |||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||
Vascular North America | 80,766 | 81,165 | 161,931 | 74,859 | 77,203 | 76,662 | 82,439 | 311,163 | 272,270 | 263,168 | ||||||||||||||||||||
Anesthesia North America | 45,449 | 45,579 | 91,028 | 43,252 | 45,730 | 47,203 | 47,724 | 183,909 | 155,844 | 100,333 | ||||||||||||||||||||
Surgical North America | 38,059 | 40,520 | 78,579 | 35,231 | 37,969 | 36,127 | 40,794 | 150,121 | 146,058 | 143,875 | ||||||||||||||||||||
EMEA | 129,282 | 129,132 | 258,414 | 150,245 | 154,670 | 141,146 | 147,004 | 593,065 | 557,427 | 510,248 | ||||||||||||||||||||
Asia | 48,529 | 62,042 | 110,571 | 49,602 | 62,539 | 62,035 | 63,520 | 237,696 | 207,207 | 173,721 | ||||||||||||||||||||
OEM | 34,715 | 37,918 | 72,633 | 33,182 | 36,610 | 39,174 | 35,000 | 143,966 | 131,173 | 140,230 | ||||||||||||||||||||
All Other | 52,630 | 55,689 | 108,319 | 52,175 | 53,384 | 54,826 | 59,527 | 219,912 | 226,292 | 219,434 | ||||||||||||||||||||
Consolidated Net Revenue | 429,430 | 452,045 | 881,475 | 438,546 | 468,105 | 457,173 | 476,008 | 1,839,832 | 1,696,271 | 1,551,009 | ||||||||||||||||||||