Teleflex Reports Second Quarter Financial Results And Full Year Outlook
07/28/2022 - 06:30 AM
WAYNE, Pa., July 28, 2022 (GLOBE NEWSWIRE) -- Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced financial results for the second quarter ended June 26, 2022.
Second quarter financial summary
Revenues of $704.5 million , down 1.3% year-over-year; up 2.3% on a constant currency basis GAAP diluted EPS from continuing operations of $2.23, compared to $1.76 in the prior year period Adjusted diluted EPS from continuing operations of $3.39, compared to $3.35 in the prior year period 2022 guidance summary
Reducing GAAP and constant currency revenue growth guidance to (0.45)% to 0.55% and 3.25% to 4.25% , respectively Lowering GAAP EPS from continuing operations guidance to $8.04 t o $8.44 from $8.85 t o $9.45 Lowering adjusted diluted EPS from continuing operations guidance to $13.00 t o $13.40 from $13.70 t o $14.30 "Our second quarter results showed the resilience of our diverse portfolio of growth drivers and medically-necessary products," said Liam Kelly, Teleflex's Chairman, President and Chief Executive Officer. "Nonetheless, we did not see the expected operating environment recovery in our Interventional Urology business during the second quarter. Despite the near-term challenges, we remain committed to our multi-year strategy to drive growth in our high-growth portfolio and durable core, enhance margins, and advance our ESG initiatives."
NET REVENUE BY SEGMENT
Three Months Ended % Increase / (Decrease) June 26, 2022 June 27, 2021 Reported Currency Constant Americas $ 412.7 $ 414.8 (0.5 )% (0.2 )% (0.3 )% EMEA 145.2 157.1 (7.6 )% (11.0 )% 3.4 % Asia 76.6 80.6 (5.0 )% (6.8 )% 1.8 % OEM 70.0 61.0 14.8 % (2.8 )% 17.6 % Total $ 704.5 $ 713.5 (1.3 )% (3.6 )% 2.3 %
Six Months Ended Six Months Ended June 26, 2022 June 27, 2021 Reported Currency Constant Americas $ 790.7 $ 790.3 0.1 % (0.1 )% 0.2 % EMEA 282.1 298.3 (5.5 )% (8.9 )% 3.4 % Asia 145.8 144.3 1.0 % (5.6 )% 6.6 % OEM 127.7 114.5 11.5 % (2.2 )% 13.7 % Total $ 1,346.3 $ 1,347.4 (0.1 )% (2.8 )% 2.7 %
NET REVENUE BY GLOBAL PRODUCT CATEGORY
Three Months Ended % Increase / (Decrease) June 26, 2022 June 27, 2021 Reported Currency Constant Vascular Access $ 163.9 $ 167.7 (2.3 )% (3.3 )% 1.0 % Interventional 114.4 112.1 2.0 % (3.3 )% 5.3 % Anesthesia 104.7 95.4 9.7 % (4.7 )% 14.4 % Surgical 99.6 98.2 1.5 % (4.4 )% 5.9 % Interventional Urology 79.8 92.2 (13.5 )% (0.3 )% (13.2 )% OEM 70.0 61.0 14.8 % (2.8 )% 17.6 % Other 72.1 86.9 (16.9 )% (6.0 )% (10.9 )% Total $ 704.5 $ 713.5 (1.3 )% (3.6 )% 2.3 %
Six Months Ended Six Months Ended June 26, 2022 June 27, 2021 Reported Currency Constant Vascular Access $ 330.1 $ 331.7 (0.5 )% (2.6 )% 2.1 % Interventional 211.3 208.3 1.4 % (2.5 )% 3.9 % Anesthesia 191.6 180.3 6.3 % (3.6 )% 9.9 % Surgical 189.3 178.6 6.0 % (3.8 )% 9.8 % Interventional Urology 154.7 165.6 (6.6 )% (0.2 )% (6.4 )% OEM 127.7 114.5 11.5 % (2.2 )% 13.7 % Other 141.6 168.5 (15.9 )% (4.6 )% (11.3 )% Total $ 1,346.3 $ 1,347.4 (0.1 )% (2.8 )% 2.7 %
OTHER FINANCIAL HIGHLIGHTS
Depreciation expense, amortization of intangible assets and deferred financing charges for the six months ended June 26, 2022 totaled $116.7 million compared to $122.2 million for the prior year period. Cash and cash equivalents at June 26, 2022 were $308.1 million compared to $445.1 million at December 31, 2021. Net accounts receivable at June 26, 2022 were $415.3 million compared to $383.6 million at December 31, 2021. Inventories at June 26, 2022 were $510.5 million compared to $477.6 million at December 31, 2021. 2022 OUTLOOK 0.55% , reflecting our estimate of an approximately 3.70% negative impact of foreign exchange rate fluctuations. On a constant currency basis, the Company revised its full year 2022 revenue growth guidance to 3.25% to 4.25% from 4.0% to 5.5% , inclusive of a year-over-year headwind from the initial phase of the respiratory divestiture completed on June 28, 2021, which is now expected to be approximately 1.10% .
The Company revised its full year 2022 GAAP diluted earnings per share from continuing operations outlook to $8.04 t o $8.44 from $8.90 t o $9.50. The Company lowered its 2022 adjusted diluted earnings per share from continuing operations guidance to $13.00 t o $13.40 from $13.70 t o $14.30, which includes a headwind from the respiratory divestiture now expected to be $0.16, representing a 2.5% decline to a 0.5% increase on a year-over-year basis.
Forecasted 2022 Constant Currency Revenue Growth Reconciliation
Low High Forecasted 2022 GAAP revenue growth (0.45)% 0.55% Estimated impact of foreign currency exchange rate fluctuations (3.70)% (3.70)% Forecasted 2022 constant currency revenue growth 3.25% 4.25%
Forecasted 2022 Adjusted Diluted Earnings Per Share From Continuing Operations Reconciliation
Low High Forecasted GAAP diluted earnings per share from continuing operations $8.04 $8.44 Restructuring, restructuring related and impairment items, net of tax $0.84 $0.84 Acquisition, integration and divestiture related items, net of tax $0.04 $0.04 Other -$0.02 -$0.02 MDR $0.79 $0.79 Intangible amortization expense, net of tax $3.31 $3.31 Forecasted adjusted diluted earnings per share from continuing operations $13.00 $13.40
CONFERENCE CALL WEBCAST AND ADDITIONAL INFORMATION teleflex.com
An audio replay of the investor call will be available beginning at 11:00 am ET on July 28, 2022, either on the Teleflex website or by telephone. The call can be accessed by dialing (866) 813-9403 (U.S.), 1 226 828 7578 (Canada), 0204 525 0658 (UK), 44 204 525 0658 (all other locations).
The confirmation code is 245144.
ADDITIONAL NOTES
In the discussion of segment results, "new products" refers to products for which we initiated commercial sales within the past 36 months and "existing products" refers to products we have sold commercially for more than 36 months.
NOTES ON NON-GAAP FINANCIAL MEASURES
Tables reconciling changes in historical constant currency net revenues to historical GAAP net revenues are set forth above under “Net Revenue by Segment" and "Net Revenue by Global Product Category". Tables reconciling historical adjusted diluted earnings per share from continuing operations to historical GAAP diluted earnings per share from continuing operations are set forth below.
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 such changes generally are outside of the control of our management. We believe that this measure facilitates a comparison of our operating performance exclusive of currency exchange rate fluctuations that do not reflect our underlying performance or business trends.
Adjusted diluted earnings per share: This non-GAAP measure is based upon diluted earnings per share from continuing operations, the most directly comparable GAAP measure, adjusted to exclude, depending on the period presented, the items described below. Management does not believe that any of the excluded items are indicative of our underlying core performance or business trends.
Restructuring, restructuring related and impairment items - Restructuring programs involve discrete initiatives designed to, among other things, consolidate or relocate manufacturing, administrative and other facilities, outsource distribution operations, improve operating efficiencies and integrate acquired businesses. Depending on the specific restructuring program involved, our restructuring charges may include employee termination, contract termination, facility closure, employee relocation, equipment relocation, outplacement and other exit costs associated with the 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. Impairment charges occur if, due to events or changes in circumstances, we determine that the carrying value of an asset exceeds its fair value. Impairment charges do not directly affect our liquidity, but could have a material adverse effect on our reported financial results.
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 liabilities; and bridge loan facility and backstop financing fees in connection with loan facilities that ultimately were not utilized. Divestiture related activities involve specific business or asset sales. Depending primarily on the terms of a 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.
European medical device regulation - The European Union (“EU”) has adopted the EU Medical Device Regulation (“MDR”), which replaces the existing Medical Devices Directive (“MDD”) and imposes more stringent requirements for the marketing and sale of medical devices in the EU, including requirements affecting clinical evaluations, quality systems and post-market surveillance. The MDR requirements became effective in May 2021, although certain devices that previously satisfied MDD requirements can continue to be marketed in the EU until May 2024, subject to certain limitations. Significantly, the MDR will require the re-registration of previously approved medical devices. As a result, Teleflex will incur expenditures in connection with the new registration of medical devices that previously had been registered under the MDD. Therefore, these expenditures are not considered to be ordinary course expenditures in connection with regulatory matters (in contrast, no adjustment has been made to exclude expenditures related to the registration of medical devices that were not registered previously under the MDD).
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.
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 or certain other discrete changes affecting our deferred tax liability.
Reconciliation of Consolidated Statement of Income Items (Dollars in millions, except per share data)
Three Months Ended June 26, 2022 Gross Selling, (1) Research and (1) Operating (2) Income before Income tax Effective Diluted GAAP Basis 55.2% 30.8% 5.2% 19.2% $124.0 $18.4 14.9% $2.23 Adjustments Restructuring, restructuring related and impairment items (A) 1.3 — — 1.3 9.0 0.8 0.17 Acquisition, integration and divestiture related items (B) — (0.1) — 0.1 0.5 0.1 0.01 Other items — — — — — — 0.00 MDR — — (1.2) 1.2 8.5 — 0.18 Intangible amortization expense 3.1 (2.6) — 5.7 40.5 1.5 0.82 Tax adjustments — — — — — 1.1 (0.02) Adjustments total 4.4 (2.7) (1.2) 8.3 58.5 3.5 1.16 Adjusted basis 59.6 % 28.1 % 4.0 % 27.5 % $ 182.5 $ 21.9 12.0 % $ 3.39
Notes: (1) Selling, general and administrative expenses and research and development expenses are shown as a percentage of net revenues.
Three Months Ended June 27, 2021 Gross Selling, (1) Research and (1) Operating (2) Income before Income tax Effective Diluted GAAP Basis 55.7% 31.4% 4.7% 18.0% $99.7 $16.4 16.5% $1.76 Adjustments Restructuring, restructuring related and impairment items (A) 1.0 (0.1) — 2.7 19.5 1.4 0.38 Acquisition, integration and divestiture related items (B) — (0.9) — 0.9 6.1 0.3 0.12 Other items (C) — — — 0.1 13.0 3.0 0.21 MDR — — (0.8) 0.7 5.2 — 0.11 Intangible amortization expense 3.1 (2.7) — 5.9 41.9 7.0 0.74 Tax adjustments — — — — — (1.4) 0.03 Adjustments total 4.1 (3.7) (0.8) 10.3 85.8 10.2 1.59 Adjusted basis 59.9 % 27.7 % 3.9 % 28.2 % $ 185.5 $ 26.5 14.4 % $ 3.35
Notes: (1) Selling, general and administrative expenses and research and development expenses are shown as a percentage of net revenues.
Six Months Ended June 26, 2022 Gross Selling, (1) Research and (1) Operating (2) Income before Income tax Effective Diluted GAAP Basis 54.6% 31.3% 5.4% 17.7% $217.3 $34.4 15.8% $3.86 Adjustments Restructuring, restructuring related and impairment items (A) 1.1 — — 1.3 17.8 1.9 0.34 Acquisition, integration and divestiture related items (B) — — — — 0.6 — 0.01 Other items — — — — — — 0.00 MDR — — (1.5) 1.6 20.6 — 0.43 Intangible amortization expense 3.3 (2.9) — 6.1 81.2 3.0 1.65 Tax adjustments — — — — — 1.1 (0.02) Adjustments total 4.4 (2.9) (1.5) 9.0 120.2 6.0 2.41 Adjusted basis 59.0 % 28.4 % 3.9 % 26.7 % $ 337.5 $ 40.4 12.0 % $ 6.27
Notes: (1) Selling, general and administrative expenses and research and development expenses are shown as a percentage of net revenues.
Six Months Ended June 27, 2021 Gross Selling, (1) Research and (1) Operating (2) Income before Income tax Effective Diluted GAAP Basis 55.1% 31.7% 4.7% 17.2% $187.0 $28.8 15.4% $3.34 Adjustments Restructuring, restructuring related and impairment items (A) 1.0 — — 2.5 34.1 3.5 0.64 Acquisition, integration and divestiture related items (B) 0.2 (1.0) — 1.2 16.3 1.4 0.31 Other items (C) — — — — 13.0 3.0 0.21 MDR — — (0.7) 0.7 9.4 — 0.20 Intangible amortization expense 3.3 (2.9) — 6.2 83.9 14.0 1.47 Tax adjustments — — — — — (2.0) 0.04 Adjustments total 4.6 (3.9) (0.7) 10.7 156.7 19.9 2.88 Adjusted basis 59.7 % 27.8 % 4.0 % 27.9 % $ 343.6 $ 48.8 14.2 % $ 6.23
Notes: (1) Selling, general and administrative expenses and research and development expenses are shown as a percentage of net revenues.
Tickmarks to Reconciliation Tables
(A) Restructuring, restructuring related and impairment items – For the three months ended June 26, 2022, pre-tax restructuring charges were $(0.1) million and restructuring related charges were $9.1 million . For the three months ended June 27, 2021, pre-tax restructuring charges were $4.8 million ; pre-tax restructuring related charges were $8.0 million ; and pre-tax impairment charges were $6.7 million . For the six months ended June 26, 2022, pre-tax restructuring charges were $0.8 million , restructuring related charges were $15.5 million , and impairment charges were $1.5 million . For the six months ended June 27, 2021, pre-tax restructuring charges were $12.8 million ; pre-tax restructuring related charges were $14.6 million ; and pre-tax impairment charges were $6.7 million .
(B) Acquisition, integration and divestiture related items – For the three months ended June 26, 2022, these charges related to the divestiture of respiratory assets. For the three months ended June 27, 2021, these charges primarily related to contingent consideration liabilities, charges primarily related to our divestiture of certain respiratory assets, and a reversal of previously recognized income related to a distributor conversion in Japan. For the six months ended June 26, 2022, these charges related to the divestiture of respiratory assets. For the six months ended June 27, 2021, these charges primarily related to contingent consideration liabilities, inventory step up for the Z-Medica LLC acquisition, and charges primarily related to our divestiture of certain respiratory assets.
(C) Other – For the three and six months ended June 27, 2021 other costs were associated with debt extinguishment.
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 access, interventional cardiology and radiology, anesthesia, emergency medicine, surgical, urology 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 .® , Deknatel® , LMA® , Pilling® , QuikClot® , Rusch® , UroLift® , and Weck® - trusted brands united
CAUTION CONCERNING FORWARD-LOOKING INFORMATION
TELEFLEX INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021 (Dollars and shares in thousands, except per share) Net revenues $ 704,542 $ 713,473 $ 1,346,257 $ 1,347,398 Cost of goods sold 315,709 315,917 611,191 605,315 Gross profit 388,833 397,556 735,066 742,083 Selling, general and administrative expenses 216,825 224,159 420,757 427,307 Research and development expenses 36,934 33,283 73,294 63,230 Restructuring and impairment (credits) charges (83 ) 11,494 2,322 19,492 Income from continuing operations before interest and taxes 135,157 128,620 238,693 232,054 Interest expense 11,419 16,171 21,837 32,969 Interest income (229 ) (232 ) (451 ) (891 ) Loss on extinguishment of debt — 12,986 — 12,986 Income from continuing operations before taxes 123,967 99,695 217,307 186,990 Taxes on income from continuing operations 18,412 16,412 34,385 28,840 Income from continuing operations 105,555 83,283 182,922 158,150 Operating loss from discontinued operations (54 ) (46 ) (348 ) (47 ) Tax benefit on operating loss from discontinued operations (13 ) (11 ) (81 ) (11 ) Loss from discontinued operations (41 ) (35 ) (267 ) (36 ) Net income $ 105,514 $ 83,248 $ 182,655 $ 158,114 Earnings per share: Basic: Income from continuing operations $ 2.25 $ 1.78 $ 3.90 $ 3.39 Loss from discontinued operations — — — (0.01 ) Net income $ 2.25 $ 1.78 $ 3.90 $ 3.38 Diluted: Income from continuing operations $ 2.23 $ 1.76 $ 3.86 $ 3.34 Loss from discontinued operations — — — (0.01 ) Net income $ 2.23 $ 1.76 $ 3.86 $ 3.33 Weighted average common shares outstanding Basic 46,901 46,741 46,889 46,719 Diluted 47,347 47,433 47,374 47,420
TELEFLEX INCORPORATED CONSOLIDATED BALANCE SHEETS (Unaudited)
June 26, 2022 December 31, 2021 (Dollars in thousands) ASSETS Current assets Cash and cash equivalents $ 308,121 $ 445,084 Accounts receivable, net 415,297 383,569 Inventories 510,531 477,643 Prepaid expenses and other current assets 112,595 117,277 Prepaid taxes 38,801 5,545 Total current assets 1,385,345 1,429,118 Property, plant and equipment, net 429,372 443,758 Operating lease assets 118,620 129,653 Goodwill 2,461,083 2,504,202 Intangible assets, net 2,226,875 2,289,067 Deferred tax assets 6,243 6,820 Other assets 104,308 69,104 Total assets $ 6,731,846 $ 6,871,722 LIABILITIES AND EQUITY Current liabilities Current borrowings $ 110,000 $ 110,000 Accounts payable 121,418 118,236 Accrued expenses 151,715 163,441 Payroll and benefit-related liabilities 114,384 143,657 Accrued interest 4,751 5,209 Income taxes payable 52,174 83,943 Other current liabilities 56,004 55,633 Total current liabilities 610,446 680,119 Long-term borrowings 1,605,954 1,740,102 Deferred tax liabilities 379,931 370,124 Pension and postretirement benefit liabilities 42,097 45,185 Noncurrent liability for uncertain tax positions 8,543 8,646 Noncurrent operating lease liabilities 104,702 116,033 Other liabilities 127,443 156,765 Total liabilities 2,879,116 3,116,974 Commitments and contingencies Total shareholders' equity 3,852,730 3,754,748 Total liabilities and shareholders' equity $ 6,731,846 $ 6,871,722
TELEFLEX INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 26, 2022 June 27, 2021 (Dollars in thousands) Cash flows from operating activities of continuing operations: Net income $ 182,655 $ 158,114 Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations 267 36 Depreciation expense 33,499 35,982 Intangible asset amortization expense 81,137 83,867 Deferred financing costs and debt discount amortization expense 2,103 2,388 Loss on extinguishment of debt — 12,986 Fair value step up of acquired inventory sold — 3,993 Changes in contingent consideration 145 11,428 Asset impairment charges 1,497 6,739 Stock-based compensation 12,801 11,693 Deferred income taxes, net 937 1,050 Payments for contingent consideration (2,722 ) — Interest benefit on swaps designated as net investment hedges (10,145 ) (9,126 ) Other (1,779 ) (16,679 ) Changes in assets and liabilities, net of effects of acquisitions and disposals: Accounts receivable (43,939 ) (23,159 ) Inventories (48,682 ) (13,648 ) Prepaid expenses and other assets 15,464 (16,551 ) Accounts payable, accrued expenses and other liabilities (38,722 ) 32,625 Income taxes receivable and payable, net (82,657 ) (16,663 ) Net cash provided by operating activities from continuing operations 101,859 265,075 Cash flows from investing activities of continuing operations: Expenditures for property, plant and equipment (32,445 ) (36,659 ) Proceeds from sale of business and assets 530 404 Payments for businesses and intangibles acquired, net of cash acquired (22,971 ) (3,539 ) Deposits — (1,250 ) Net interest proceeds on swaps designated as net investment hedges 10,314 9,288 Net cash used in investing activities from continuing operations (44,572 ) (31,756 ) Cash flows from financing activities of continuing operations: Proceeds from new borrowings — 400,000 Reduction in borrowings (135,500 ) (575,000 ) Debt extinguishment, issuance and amendment fees — (9,774 ) Net (payments) proceeds from share based compensation plans and related tax impacts (4,366 ) 6,339 Payments for contingent consideration (3,012 ) (30,489 ) Dividends paid (31,892 ) (31,793 ) Net cash used in financing activities from continuing operations (174,770 ) (240,717 ) Cash flows from discontinued operations: Net cash used in operating activities (280 ) (371 ) Net cash used in discontinued operations (280 ) (371 ) Effect of exchange rate changes on cash and cash equivalents (19,200 ) (6,330 ) Net decrease in cash and cash equivalents (136,963 ) (14,099 ) Cash and cash equivalents at the beginning of the period 445,084 375,880 Cash and cash equivalents at the end of the period $ 308,121 $ 361,781
Contacts:
John Hsu, CFA
investors.teleflex.com
