8-K
TELEFLEX INC (TFX)
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) | April 30, 2020 |
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TELEFLEX INCORPORATED
(Exact name of Registrant as Specified in Its Charter)
| Delaware | 1-5353 | 23-1147939 | ||
|---|---|---|---|---|
| (State or Other Jurisdiction<br><br>of Incorporation or Organization) | (Commission File Number) | (IRS Employer<br><br>Identification No.) | ||
| 550 E. Swedesford Rd., Suite 400 | Wayne, | PA | 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) | ||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||
| --- | --- | --- | --- | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, par value $1 per share | TFX | New York Stock Exchange |
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
f an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On April 30, 2020, Teleflex Incorporated (the “Company”) issued a press release (the “Press Release”) announcing its financial results for the quarter ended March 29, 2020. 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 constant currency revenue growth and adjusted diluted earnings per share. Constant currency revenue growth is based upon net revenues, adjusted to eliminate the impact of translating the results of international subsidiaries at different currency exchange rates from period to period. The impact of changes in foreign currency may vary significantly from period to period, and generally are outside of the control of our management. We believe that this measure facilitates a comparison of our operating performance exclusive of fluctuations that do not reflect our underlying performance or business trends. Adjusted diluted earnings per share is based upon diluted earnings per share available to common stockholders, the most directly comparable GAAP measure, adjusted to exclude, depending on the period presented, the impact (net of tax) of (i) restructuring, restructuring related and impairment items; (ii) acquisition, integration and divestiture related items; (iii) other items identified in note (C) to each of the reconciliation tables set forth in the Press Release; (iv) certain expenditures associated with the registration of medical devices under the European Union Medical Device Regulation; (v) intangible amortization expense; and (vi) tax adjustments. Management does not believe that any of the excluded items are indicative of our underlying core performance or business trends.
Management uses these non-GAAP financial measures to assess the Company's financial performance, make operating decisions, allocate financial resources, provide guidance on possible future results, and assist in its evaluation of period-to-period and peer comparisons. The non-GAAP measures may be useful to investors because they provide insight into management’s assessment of our business, and provide supplemental information pertinent to a comparison of period-to-period results of our ongoing operations. The non-GAAP financial measures are presented in addition to results presented in accordance with GAAP and should not be relied upon as a substitute for GAAP financial measures. Moreover, our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies.
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.
Item 7.01. Regulation FD Disclosure.
In connection with the conference call to be held by the Company on April 30, 2020 to discuss its financial results for the quarter ended March 29, 2020, 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 99.2, 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 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1
Earnings Press Release, dated April 30, 2020
99.2
Earnings Conference Call Slide Presentation
104 The Cover Page from this Current Report on Form 8-K, formated in Inline XBRL
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: April 30, 2020 | TELEFLEX INCORPORATED<br><br><br><br><br><br>By: /s/ Thomas E. Powell<br><br>Name: Thomas E. Powell<br><br>Title: Executive Vice President and<br><br>Chief Financial Officer |
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EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | Earnings Press Release, dated April 30, 2020 |
| 99.2 | Earnings Conference Call Slide Presentation |
Exhibit
Exhibit 99.1
| Contact: | Jake Elguicze<br><br>Treasurer and Vice President of Investor Relations<br><br>610-948-2836 | | --- | --- || FOR IMMEDIATE RELEASE | April 30, 2020 | | --- | --- |
TELEFLEX REPORTS FIRST QUARTER 2020 RESULTS
First Quarter 2020 Revenues of $630.6 million, up 2.8% Versus Prior Year Period; up 4.0% on a Constant Currency Basis
First Quarter 2020 GAAP Diluted EPS from Continuing Operations of $2.78, up 212.4% Versus Prior Year Period
First Quarter 2020 Adjusted Diluted EPS from Continuing Operations of $2.72, up 21.4% Versus Prior Year Period
Withdraws Previously Provided 2020 Financial Guidance due to COVID-19 Pandemic
Wayne, PA -- Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced financial results for the first quarter ended March 29, 2020.
First quarter 2020 net revenues were $630.6 million, an increase of 2.8% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues increased 4.0% over the year ago period.
First quarter 2020 GAAP earnings per share from continuing operations increased 212.4% to $2.78, compared to $0.89 in the prior year period. First quarter 2020 adjusted diluted earnings per share from continuing operations increased 21.4% to $2.72, compared to $2.24 in the prior year period.
Liam Kelly, President and Chief Executive Officer, said, “We were pleased with the first quarter 2020 performance for Teleflex, with results that included 4% constant currency revenue growth and $2.72 in adjusted EPS, a 21.4% year-over-year increase. These results occurred despite a worse than expected global impact from COVID-19, including a slow-down in the performance of non-emergent procedures during the last two weeks of March within the United States, and are a testament to the diverse product portfolio that we have created during the past decade. By geography, during the first quarter we saw a negative impact from COVID-19 in the Americas and Asia, while EMEA saw a benefit due to elevated ordering for certain anesthesia, respiratory, and vascular access products.”
Mr. Kelly continued, ”As we enter the second year of our three-year long-range plan, and despite the challenges caused by the global pandemic, Teleflex remains in a strong financial position, supported by a healthy balance sheet, which includes over $400 million of cash on hand, and access to additional liquidity under our revolving credit
facility. We continue to remain confident in underlying business fundamentals, including robust demand for our innovative and critical care products. That said, due to the rapidly evolving environment and continued uncertainties from the impact of the COVID-19 global pandemic, we are withdrawing our previously announced 2020 financial guidance, as at this time, Teleflex cannot accurately predict the specific extent or duration of the impact of the COVID-19 outbreak on its financial and operating results.”
Mr. Kelly concluded, "While we are disappointed in the necessity of retracting our prior 2020 financial guidance, we remain confident in our ability to generate significant constant currency revenue growth, margin expansion, and adjusted earnings per share and free-cash flow growth over the long term."
NET REVENUE BY SEGMENT
The following table and commentary provide information regarding net revenues in each of the Company's reportable operating segments for the three months ended March 29, 2020 on both a GAAP and constant currency basis. The discussion below the tables of the principal factors behind changes in net revenues for the three months ended March 29, 2020 as compared to the prior year period applies to both GAAP revenue and constant currency revenue, although GAAP revenue also was affected by foreign currency exchange rate fluctuations, as indicated in the "Currency Impact" column of the table.
| Three Months Ended | % Increase / (Decrease) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 29, 2020 | March 31, 2019 | Total Sales Growth | Currency Impact | Constant Currency Revenue Growth | |||||||||
| Americas | $ | 358.0 | $ | 344.0 | 4.1 | % | (0.2 | ) | % | 4.3 | % | ||
| EMEA | 156.1 | 154.6 | 1.0 | % | (2.8 | ) | % | 3.8 | % | ||||
| Asia | 53.1 | 60.8 | (12.6 | ) | % | (3.4 | ) | % | (9.2 | ) | % | ||
| OEM | 63.4 | 54.2 | 16.9 | % | (0.6 | ) | % | 17.5 | % | ||||
| Total | $ | 630.6 | $ | 613.6 | 2.8 | % | (1.2 | ) | % | 4.0 | % |
Americas first quarter 2020 net revenues were $358.0 million, an increase of 4.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues increased 4.3% compared to the prior year period. The increase in constant currency revenue was primarily attributable to increases in sales volumes of existing products, mostly in interventional urology, as well as an increase in new product sales, which were partially offset by a decrease in revenues caused by the COVID-19 pandemic.
EMEA first quarter 2020 net revenues were $156.1 million, an increase of 1.0% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues increased 3.8%
compared to the prior year period. The increase in constant currency revenue was primarily attributable to an increase in sales volumes of existing products, inclusive of a benefit from the COVID-19 pandemic.
Asia first quarter 2020 net revenues were $53.1 million, a decrease of 12.6% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues decreased 9.2% compared to the prior year period. The decrease in constant currency revenue was primarily attributable to a decrease in sales volumes of existing products, inclusive of the negative impact from the COVID-19 pandemic.
OEM first quarter 2020 net revenues were $63.4 million, an increase of 16.9% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues increased 17.5% compared to the prior year period. The increase in constant currency revenue was primarily attributable to the acquisition of IWG High Performance Conductors, Inc., and an increase in sales volumes of existing products.
NET REVENUE BY GLOBAL PRODUCT CATEGORY
The following table and commentary provide information regarding net revenues in each of the Company's global product categories for the three months ended March 29, 2020 on both a GAAP and constant currency basis.
| Three Months Ended | % Increase / (Decrease) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 29, 2020 | March 31, 2019 | Total Revenue Growth | Currency Impact | Constant Currency Revenue Growth | |||||||||
| Vascular Access | $ | 150.3 | $ | 143.9 | 4.4 | % | (1.2 | ) | % | 5.6 | % | ||
| Interventional | 99.9 | 103.2 | (3.2 | ) | % | (0.9 | ) | % | (2.3 | ) | % | ||
| Anesthesia | 75.7 | 80.3 | (5.7 | ) | % | (1.8 | ) | % | (3.9 | ) | % | ||
| Surgical | 75.4 | 86.7 | (13.0 | ) | % | (1.5 | ) | % | (11.5 | ) | % | ||
| Interventional Urology | 74.2 | 59.7 | 24.2 | % | (0.1 | ) | % | 24.3 | % | ||||
| OEM | 63.4 | 54.2 | 16.9 | % | (0.6 | ) | % | 17.5 | % | ||||
| Other | 91.7 | 85.6 | 7.2 | % | (2.0 | ) | % | 9.2 | % | ||||
| Total | $ | 630.6 | $ | 613.6 | 2.8 | % | (1.2 | ) | % | 4.0 | % |
First quarter 2020 net revenues from sales of Vascular Access products were $150.3 million, an increase of 4.4% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues increased 5.6% compared to the prior year period.
First quarter 2020 net revenues from sales of Interventional products were $99.9 million, a decrease of 3.2% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues decreased 2.3% compared to the prior year period.
First quarter 2020 net revenues from sales of Anesthesia products were $75.7 million, a decrease of 5.7% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues decreased 3.9% compared to the prior year period.
First quarter 2020 net revenues from sales of Surgical products were $75.4 million, a decrease of 13.0% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues decreased 11.5% compared to the prior year period.
First quarter 2020 net revenues from sales of Interventional Urology products were $74.2 million, an increase of 24.2% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues increased 24.3% compared to the prior year period.
First quarter 2020 net revenues from sales of OEM products were $63.4 million, an increase of 16.9% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues increased 17.5% compared to the prior year period.
First quarter 2020 net revenues from sales of other products were $91.7 million, an increase of 7.2% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2020 net revenues increased 9.2% compared to the prior year period.
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS
Depreciation expense, amortization of intangible assets and deferred financing charges for the first quarter of 2020 totaled $56.7 million compared to $54.6 million for the prior year period.
Cash and cash equivalents at March 29, 2020 were $406.5 million compared to $301.1 million at December 31, 2019.
Net accounts receivable at March 29, 2020 were $441.7 million compared to $418.7 million at December 31, 2019.
Net inventories at March 29, 2020 were $488.9 million compared to $476.6 million at December 31, 2019.
WITHDRAWING 2020 OUTLOOK
As a result of the ongoing uncertainty regarding both the scope and duration of the COVID-19 global pandemic, Teleflex is withdrawing its previously issued 2020 financial guidance (on February 20). Since February 20, the impact of COVID-19 has rapidly expanded globally across Asia, Europe and the United States. Due to the anticipation for a surge in demand for capacity to treat those affected with COVID-19, medical authorities globally (including the U.S. Surgeon General, the American College of Surgeons, the American Hospital Association, the Center for Medicaid and Medicare Services, and the U.K. National Health Service) have advised the deferral of
elective medical procedures. As a result, the Company anticipates material disruption caused by the evolving COVID-19 pandemic and macroeconomic environment. In addition, given the ongoing uncertainty of the scope and duration of the pandemic, the Company is currently unable to estimate the magnitude or duration of specific impacts on its business. Given a high-degree of uncertainty around the potential negative financial impact from COVID-19, Teleflex will not update 2020 guidance until the impact of COVID-19 becomes sufficiently clear.
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 May 5, 2020 at 11:00am (ET), by calling 855-859-2056 (U.S./Canada) or 404-537-3406 (International), Passcode: 7545905.
ADDITIONAL NOTES
References in this release to the impact of foreign currency exchange rate fluctuations on adjusted diluted earnings per share include both the impact of translating foreign currencies into U.S. dollars and the impact of foreign currency exchange rate fluctuations on foreign currency denominated transactions.
In the discussion of segment results, "new products" refers to products 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.
Certain financial information is presented on a rounded basis, which may cause minor differences.
Segment results and commentary exclude the impact of discontinued operations.
NOTES ON NON-GAAP FINANCIAL MEASURES
We report our financial results in accordance with accounting principles generally accepted in the United States, commonly referred to as “GAAP.” In this press release, we provide supplemental information, consisting of the following non-GAAP financial measures: constant currency revenue growth and adjusted diluted earnings per share. These non-GAAP measures are described in more detail below. Management uses these financial measures to assess Teleflex’s financial performance, make operating decisions, allocate financial resources, provide guidance on possible future results, and assist in its evaluation of period-to-period and peer comparisons. The non-GAAP measures may be useful to investors because they provide insight into management’s assessment of our business, and provide supplemental information pertinent to a comparison of period-to-period results of our ongoing operations. The non-GAAP financial measures are presented in addition to results presented in accordance with GAAP and should not be relied upon as a substitute for GAAP financial measures. Moreover, our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies.
Tables reconciling 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.
Other items - These are discrete items that occur sporadically and can affect period-to-period comparisons. See footnote C to the reconciliation tables set forth below.
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. Manufacturers of currently marketed medical devices will have until May 2020 to meet the MDR requirements, 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 amounts
| Quarter Ended - March 29, 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Cost of goods sold, excluding intangible asset amortization | Selling, general and administrative expenses | Research and development expenses | Restructuring and impairment charges | (Gain) Loss on sale of business and assets | Loss on extinguishment of debt | Income taxes | Income (loss) from continuing operations | Diluted earnings per share from continuing operations | |
| GAAP Basis | $297.0 | $147.8 | $27.4 | $1.3 | — | — | $11.1 | $131.2 | $2.78 |
| Adjustments | |||||||||
| Restructuring, restructuring related and impairment items (A) | 4.9 | 0.2 | — | 1.3 | — | — | 0.8 | 5.7 | $0.12 |
| Acquisition, integration and divestiture related items (B) | 1.7 | (44.3) | — | — | — | — | 0.4 | (43.0) | ($0.91) |
| Other items (C) | — | — | — | — | — | — | — | — | — |
| MDR (D) | — | — | 1.8 | — | — | — | — | 1.8 | $0.04 |
| Intangible amortization expense (E) | 20.9 | 17.9 | 0.1 | — | — | — | 6.2 | 32.7 | $0.69 |
| Tax adjustments | — | — | — | — | — | — | (0.1) | 0.1 | — |
| Adjusted basis | $269.5 | $174.0 | $25.5 | — | — | — | $18.4 | $128.4 | $2.72 |
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
| Quarter Ended - March 31, 2019 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Cost of goods sold, excluding intangible asset amortization | Selling, general and administrative expenses | Research and development expenses | Restructuring and impairment charges | (Gain)/Loss on sale of business and assets | Income taxes | Income (loss) from continuing operations | Diluted earnings per share from continuing operations | |
| GAAP Basis | $289.6 | $206.9 | $27.2 | $17.4 | ($2.7) | $11.0 | $41.9 | $0.89 |
| Adjustments | ||||||||
| Restructuring, restructuring related and impairment items (A) | 3.0 | 0.0 | 0.0 | 17.4 | — | 1.9 | 18.5 | $0.39 |
| Acquisition, integration and divestiture related items (B) | — | 13.6 | — | — | (2.7) | (1.9) | 12.7 | $0.27 |
| Other items (C) | — | 1.3 | — | — | — | 0.3 | 1.0 | $0.02 |
| Intangible amortization expense (E) | 20.8 | 16.9 | 0.1 | — | — | 7.7 | 30.0 | $0.64 |
| Tax adjustments | — | — | — | — | — | (0.7) | 0.7 | $0.01 |
| Adjusted basis | $265.8 | $175.2 | $27.0 | — | — | $18.3 | $105.0 | $2.24 |
| (A) | Restructuring, restructuring related and impairment items - For the three months ended March 29, 2020, pre-tax restructuring charges were $1.3 million, pre-tax restructuring related charges were $5.1 million; there were no pre-tax impairment charges. For the three months ended March 31, 2019, pre-tax | |||||||
| --- | --- |
restructuring charges $14.4 million, pre-tax restructuring related charges were $3.1 million, and pre-tax impairment charges were $3.0 million.
| (B) | Acquisition, integration and divestiture related items - For the three months ended March 29, 2020, these items primarily related to the reversal of contingent consideration liabilities, partially offset by charges primarily related to our acquisition of IWG High Performance Conductors, Inc. For the three months ended March 31, 2019, these charges primarily related to contingent consideration liabilities and our acquisition of Essential Medical, Inc., partially offset by the gain on sale of an asset. There were no divestiture related activities for the three months ended March 29, 2020 and March 31, 2019. |
|---|---|
| (C) | Other items - For the three months ended March 31, 2019, other items included expenses associated with a franchise tax audit, product relabeling costs, and costs associated with our efforts to comply with the European Medical Device Regulation. |
| --- | --- |
| (D) | MDR - For the three months ended March 29, 2020, these costs were associated with our efforts to comply with the European Medical Device Regulation. For the three months ended March 31, 2019, these costs were included in Other items. |
| --- | --- |
| (E) | Intangible amortization expense - For the three months ended March 29, 2020 and March 31, 2019, we reclassified intangible asset amortization expense of $20.9 million and $20.8 million, respectively, from selling, general and administrative expenses to cost of goods sold. |
| --- | --- |
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.
Teleflex is the home of Arrow^®^, Deknatel^®^, Hudson RCI^®^, LMA^®^, Pilling^®^, Rusch^®^, UroLift^®^, and Weck^®^ - trusted brands united by a common sense of purpose.
CAUTION CONCERNING FORWARD-LOOKING INFORMATION
This press release contains forward-looking statements, including, but not limited to, confidence in our ability to achieve our previously stated long-term financial objectives. Actual results could differ materially from those in the forward-looking statements due to, among other things, the adverse economic conditions associated with the COVID-19 global health pandemic and the associated financial crisis, stay-at-home and other orders, which may significantly reduce customer spending and which may have a negative impact on the Company’s business,
changes in business relationships with and purchases by or from major customers or suppliers; delays or cancellations in shipments; demand for and market acceptance of new and existing products; our inability to provide products to our customers, which may be due to, among other things, events that impact key distributors, suppliers and third-party vendors that sterilize our products; our inability to integrate acquired businesses into our operations,
realize planned synergies and operate such businesses profitably in accordance with our expectations; the inability of acquired businesses to generate revenues in accordance with our expectations; our inability to effectively execute our restructuring plans and programs; our inability to realize anticipated savings from restructuring plans and programs; the impact of healthcare reform legislation and proposals to amend, replace or repeal the legislation; changes in Medicare, Medicaid and third party coverage and reimbursements; the impact of enacted tax legislation and related regulations; competitive market conditions and resulting effects on revenues and pricing; increases in raw material costs that cannot be recovered in product pricing; global economic factors, including currency exchange rates, interest rates, trade disputes, sovereign debt issues and the impact of the United Kingdom's departure from the European Union, commonly known as "Brexit"; public health epidemics; difficulties in entering new markets; general economic conditions; and other factors described or incorporated in our filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K. We expressly disclaim any obligation to update forward-looking statements, except as otherwise specifically stated by us or as required by law or regulation.
TELEFLEX INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 29, 2020 | March 31, 2019 | |||||
| (Dollars and shares in thousands, except per share) | ||||||
| Net revenues | $ | 630,642 | $ | 613,584 | ||
| Cost of goods sold | 297,018 | 289,614 | ||||
| Gross profit | 333,624 | 323,970 | ||||
| Selling, general and administrative expenses | 147,796 | 206,921 | ||||
| Research and development expenses | 27,396 | 27,150 | ||||
| Restructuring and impairment charges | 1,346 | 17,395 | ||||
| (Gain) on sale of assets | — | (2,739 | ) | |||
| Income from continuing operations before interest and taxes | 157,086 | 75,243 | ||||
| Interest expense | 15,439 | 22,692 | ||||
| Interest income | (579 | ) | (339 | ) | ||
| Income from continuing operations before taxes | 142,226 | 52,890 | ||||
| Taxes on income from continuing operations | 11,074 | 10,972 | ||||
| Income from continuing operations | 131,152 | 41,918 | ||||
| Operating loss from discontinued operations | (4 | ) | (1,343 | ) | ||
| Tax benefit on operating loss from discontinued operations | (2 | ) | (322 | ) | ||
| Loss from discontinued operations | (2 | ) | (1,021 | ) | ||
| Net income | $ | 131,150 | $ | 40,897 | ||
| Earnings per share: | ||||||
| Basic: | ||||||
| Income from continuing operations | $ | 2.83 | $ | 0.91 | ||
| Loss from discontinued operations | — | (0.02 | ) | |||
| Net income | $ | 2.83 | $ | 0.89 | ||
| Diluted: | ||||||
| Income from continuing operations | $ | 2.78 | $ | 0.89 | ||
| Loss from discontinued operations | — | (0.02 | ) | |||
| Net income | $ | 2.78 | $ | 0.87 | ||
| Weighted average common shares outstanding | ||||||
| Basic | 46,382 | 46,050 | ||||
| Diluted | 47,231 | 46,942 |
TELEFLEX INCORPORATED
CONSOLIDATED BALANCE SHEETS
| March 29, 2020 | December 31, 2019 | |||
|---|---|---|---|---|
| (Dollars in thousands) | ||||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 406,477 | $ | 301,083 |
| Accounts receivable, net | 441,714 | 418,673 | ||
| Inventories | 488,856 | 476,557 | ||
| Prepaid expenses and other current assets | 101,606 | 97,943 | ||
| Prepaid taxes | 8,133 | 12,076 | ||
| Total current assets | 1,446,786 | 1,306,332 | ||
| Property, plant and equipment, net | 427,452 | 430,719 | ||
| Operating lease assets | 107,290 | 113,160 | ||
| Goodwill | 2,332,414 | 2,245,305 | ||
| Intangible assets, net | 2,297,178 | 2,156,285 | ||
| Deferred tax assets | 5,519 | 5,572 | ||
| Other assets | 84,925 | 52,447 | ||
| Total assets | $ | 6,701,564 | $ | 6,309,820 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities | ||||
| Current borrowings | $ | 53,625 | $ | 50,000 |
| Accounts payable | 104,348 | 102,916 | ||
| Accrued expenses | 99,804 | 100,466 | ||
| Current portion of contingent consideration | 9,463 | 148,090 | ||
| Payroll and benefit-related liabilities | 73,632 | 115,981 | ||
| Accrued interest | 16,153 | 5,514 | ||
| Income taxes payable | 6,989 | 6,692 | ||
| Other current liabilities | 38,286 | 33,396 | ||
| Total current liabilities | 402,300 | 563,055 | ||
| Long-term borrowings | 2,340,892 | 1,858,943 | ||
| Deferred tax liabilities | 489,677 | 439,558 | ||
| Pension and postretirement benefit liabilities | 66,380 | 82,719 | ||
| Noncurrent liability for uncertain tax positions | 12,139 | 10,294 | ||
| Noncurrent contingent consideration | 23,274 | 71,818 | ||
| Noncurrent operating lease liabilities | 96,333 | 101,372 | ||
| Other liabilities | 197,545 | 202,741 | ||
| Total liabilities | 3,628,540 | 3,330,500 | ||
| Commitments and contingencies | ||||
| Total shareholders' equity | 3,073,024 | 2,979,320 | ||
| Total liabilities and shareholders' equity | $ | 6,701,564 | $ | 6,309,820 |
TELEFLEX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 29, 2020 | March 31, 2019 | |||||
| (Dollars in thousands) | ||||||
| Cash flows from operating activities of continuing operations: | ||||||
| Net income | $ | 131,150 | $ | 40,897 | ||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||
| Loss from discontinued operations | 2 | 1,021 | ||||
| Depreciation expense | 16,842 | 15,645 | ||||
| Intangible asset amortization expense | 38,911 | 37,751 | ||||
| Deferred financing costs and debt discount amortization expense | 945 | 1,179 | ||||
| Gain on sale of assets | — | (2,739 | ) | |||
| Impairment of long-lived assets | — | 3,030 | ||||
| Fair value step up of acquired inventory sold | 1,707 | — | ||||
| Changes in contingent consideration | (46,502 | ) | 13,057 | |||
| Stock-based compensation | 3,522 | 5,781 | ||||
| Deferred income taxes, net | 679 | 2,603 | ||||
| Payments for contingent consideration | (79,771 | ) | (25,935 | ) | ||
| Interest benefit on swaps designated as net investment hedges | (4,874 | ) | (3,882 | ) | ||
| Other | (18,143 | ) | 4,536 | |||
| Changes in assets and liabilities, net of effects of acquisitions and disposals: | ||||||
| Accounts receivable | (23,145 | ) | (14,102 | ) | ||
| Inventories | (12,346 | ) | (19,200 | ) | ||
| Prepaid expenses and other assets | 6,403 | (11,524 | ) | |||
| Accounts payable, accrued expenses and other liabilities | (31,488 | ) | 8,856 | |||
| Income taxes receivable and payable, net | 4,651 | 3,192 | ||||
| Net cash (used in) provided by operating activities from continuing operations | (11,457 | ) | 60,166 | |||
| Cash flows from investing activities of continuing operations: | ||||||
| Expenditures for property, plant and equipment | (19,684 | ) | (23,494 | ) | ||
| Proceeds from sale of assets | 400 | 991 | ||||
| Payments for businesses and intangibles acquired, net of cash acquired | (265,160 | ) | (1,025 | ) | ||
| Net cash used in investing activities from continuing operations | (284,444 | ) | (23,528 | ) | ||
| Cash flows from financing activities of continuing operations: | ||||||
| Proceeds from new borrowings | 485,000 | — | ||||
| Net proceeds from share based compensation plans and the related tax impacts | (3,022 | ) | 2,242 | |||
| Payments for contingent consideration | (60,881 | ) | (110,953 | ) | ||
| Dividends paid | (15,767 | ) | (15,650 | ) | ||
| Net cash provided by (used in) financing activities from continuing operations | 405,330 | (124,361 | ) | |||
| Cash flows from discontinued operations: | ||||||
| Net cash (used in) provided by operating activities | (193 | ) | 3,610 | |||
| Net cash (used in) provided by discontinued operations | (193 | ) | 3,610 | |||
| Effect of exchange rate changes on cash and cash equivalents | (3,842 | ) | (1,836 | ) | ||
| Net increase (decrease) in cash and cash equivalents | 105,394 | (85,949 | ) | |||
| Cash and cash equivalents at the beginning of the period | 301,083 | 357,161 | ||||
| Cash and cash equivalents at the end of the period | $ | 406,477 | $ | 271,212 |
ex992to43020208kreq12020
Teleflex Incorporated First Quarter 2020 Earnings Conference Call 1
Conference Call Logistics The release, accompanying slides, and replay webcast are available online at www.teleflex.com (click on “Investors”) Telephone replay is available by dialing (855) 859-2056 or for international calls, (404) 537-3406, pass code number 7545905 2
Today’s Speakers Liam Kelly President and CEO Thomas Powell Executive VP and CFO Jake Elguicze Treasurer and VP, Investor Relations 3
Note on Forward-Looking Statements This presentation contains forward-looking statements, including, but not limited to, statements with respect to which of our primary product categories we expect to be adversely impacted due to non-emergent/elective procedure deferrals; estimated pre-tax charges we expect to incur in connection with our ongoing restructuring programs; estimated annualized pre-tax savings we expect to realize in connection with our ongoing restructuring programs and a similar initiative within our OEM segment (the “OEM initiative”); our expectations with respect to when we will begin to realize savings from our ongoing restructuring programs and the OEM initiative and when those programs will be substantially completed; 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 our SEC filings, including our most recent Form 10-K. We expressly disclaim any obligation to update forward-looking statements, except as otherwise specifically stated by us or as required by law or regulation. Note on Non-GAAP Financial Measures This presentation refers to certain non-GAAP financial measures, including, but not limited to, constant currency revenue growth, adjusted diluted earnings per share, adjusted gross and operating margins and adjusted tax rate. These non-GAAP financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. Tables reconciling these non-GAAP financial measures to the most comparable GAAP financial measures are contained within this presentation and the appendices at the end of this presentation. Additional Notes This document contains certain highlights with respect to our first quarter 2020 performance and developments and does not purport to be a complete summary thereof. Accordingly, we encourage you to read our Earnings Release for the quarter ended March 29, 2020 located in the investor section of our website at www.teleflex.com and our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission. Unless otherwise noted, the following slides reflect continuing operations. 4
Executive Overview Liam Kelly President and CEO 5
1Q 2020 Highlights • 1Q as-reported and constant currency revenue growth of 2.8% and 4.0%, respectively Q1 Summary • Adjusted gross and operating margins of 57.3% and 25.6%, respectively • Adjusted EPS of $2.72, up 21.4% versus prior year period • Strong start to 2020, with results ahead of initial expectations despite worse than anticipated global COVID-19 headwinds Business Performance • 1Q revenue growth driven by Americas, EMEA, and OEM; partially offset by decline in Asia due to COVID-19 headwinds • Adverse financial impact across some product categories within the Americas and Asia COVID-19 Impact • Reduction in the performance of non-emergent / elective procedures during the last two weeks of March negatively impacts 1Q 2020 results 6
COVID-19 Update • No significant disruptions in global supply chain for products in high demand, but delivery times lengthened • Significant demand for certain products across Respiratory, Airway Management, and Vascular Access portfolios • Primary product categories that are expected to be adversely impacted due to non-emergent / elective procedure deferrals include Interventional Urology, Surgical, and Interventional Access • Implemented best practice health and safety guidelines in accordance WHO, CDC, and local health authorities • Withdrawing 2020 financial guidance due to uncertainty of the scope and duration of COVID-19 Pandemic 7
1Q20 Segment Revenue Review As-Reported Constant Dollars 1Q’20 1Q’19 Currency Revenue Currency in Millions Revenue Revenue Impact Growth Growth Americas $358.0 $344.0 4.1% (0.2%) 4.3% EMEA $156.1 $154.6 1.0% (2.8%) 3.8% Asia $53.1 $60.8 (12.6%) (3.4%) (9.2%) OEM $63.4 $54.2 16.9% (0.6%) 17.5% TOTAL $630.6 $613.6 2.8% (1.2%) 4.0% 8
1Q20 Global Product Category Revenue Review As-Reported Constant Dollars 1Q’20 1Q’19 Currency Revenue Currency in Millions Revenue Revenue Impact Growth Growth Vascular Access $150.3 $143.9 4.4% (1.2%) 5.6% Interventional $99.9 $103.2 (3.2%) (0.9%) (2.3%) Anesthesia $75.7 $80.3 (5.7%) (1.8%) (3.9%) Surgical $75.4 $86.7 (13.0%) (1.5%) (11.5%) Interventional Urology $74.2 $59.7 24.2% (0.1%) 24.3% OEM $63.4 $54.2 16.9% (0.6%) 17.5% Other1 $91.7 $85.6 7.2% (2.0%) 9.2% TOTAL $630.6 $613.6 2.8% (1.2%) 4.0% 9 1. Includes revenues generated from sales of the Company’s respiratory and urology products (other than interventional urology products).
Financial Overview Tom Powell Executive VP and CFO 10
1Q20 Financial Review Revenue of $630.6 million • Increased 2.8% vs. prior year period on an as-reported basis • Increased 4.0% vs. prior year period on a constant currency basis Gross Margin • GAAP gross margin of 52.9%, up 10 bps vs. prior year period • Adjusted gross margin of 57.3%, up 60 bps vs. prior year period Operating Margin • GAAP operating margin of 24.9%, up 1,260 bps vs. prior year period • Adjusted operating margin of 25.6%, up 190 bps vs. prior year period Tax Rate • GAAP tax rate of 7.8%, compared to 20.7% in prior year period • Adjusted tax rate of 12.5%, down 230 bps vs. prior year period Earnings per Share • GAAP EPS of $2.78, up 212.4% vs. prior year period • Adjusted EPS of $2.72, up 21.4% vs. prior year period 11 Note: See appendices for reconciliations of non-GAAP information
1Q20 Liquidity and Covenant Review 1Q’20 1Q’19 B/(W) Cash Flow from Operations ($11.5) $60.2 ($71.7) Explanatory items included in cash flow from operations: Contingent consideration payments $79.8 $25.9 ($53.9) Pension Contribution $10.0 − ($10.0) Leverage 1 2.63x 2.75x 0.12x 12 1 = calculated in accordance with the terms set forth in Teleflex’s Revolving Credit Facility.
Key Takeaways • Teleflex delivered solid performance during the first quarter of 2020 • Committed to managing business resources prudently during COVID-19 global pandemic • Strong underlying fundamentals and global leadership in growing, high-margin markets remain intact 13
Question and Answer Section 14
THANK YOU 15
Appendices 16
Non-GAAP Financial Measures The presentation to which these appendices are attached and the following appendices include, among other things, tables reconciling the following applicable non-GAAP financial measures to the most comparable GAAP financial measure: • Constant currency revenue growth. This non-GAAP measure is based upon net revenues, adjusted to eliminate the impact of translating the results of international subsidiaries at different currency exchange rates from period to period. The impact of changes in foreign currency may vary significantly from period to period, and generally are outside of the control of our management. We believe that this measure facilitates a comparison of our operating performance exclusive of 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 impact of (i) restructuring, restructuring related and impairment items; (ii) acquisition, integration and divestiture related items; (iii) “other items” identified in note (C) to the reconciliation tables appearing in Appendices D and E; (iv) certain costs associated with the registration of medical devices under the European Union Medical Device Regulation; (v) intangible amortization expense; and (vi) tax adjustments. Management does not believe that any of the excluded items are indicative of our underlying core performance or business trends. • Adjusted gross profit and margin. These measures exclude, depending on the period presented, the impact of (i) restructuring, restructuring related and impairment items, (ii) acquisition, integration and divestiture related items and (iii) intangible amortization expense. • Adjusted operating profit and margin. These measures exclude, depending on the period presented, the impact of (i) restructuring, restructuring related and impairment items; (ii) acquisitions, integration and divestiture related items; (iii) “other items” identified in note (C) to the reconciliation table appearing in Appendix B; (iv) certain costs associated with the registration of medical devices under the European Union Medical Device Regulation; and (v) 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, restructuring related and impairment items; (ii) acquisition, integration and divestiture related items; (iii) “other items” identified in note (A) to the reconciliation table appearing in Appendix C; (iv) certain costs associated with the registration of medical devices under the European Union Medical Device Regulation; (v) intangible amortization expense; and (vi) tax adjustments. 17
Non-GAAP Adjustments The following is an explanation of certain of the adjustments that are applied with respect to one or more of the non-GAAP financial measures that appear in the presentation to which these appendices are attached: 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. Other items - These are discrete items that occur sporadically and can affect period-to-period comparisons. See the footnotes to the reconciliation tables included in these appendices for additional information. 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. Manufacturers of currently marketed medical devices will have until May 2020 to meet the MDR requirements, although certain devices that previously satisfied MDD requirements can continue to be placed on the EU market 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. 18
Appendix A – Reconciliation of Adjusted Gross Profit and Margin (Dollars in Thousands) Three Months Ended March 29, 2020 March 31, 2019 Teleflex gross profit as-reported $333,624 $323,970 Teleflex gross margin as-reported 52.9% 52.8% Restructuring, restructuring related and impairment items (A) 4,867 3,013 Acquisition, integration and divestiture related items (B) 1,707 - Intangible amortization expense (C) 20,933 20,772 Adjusted Teleflex gross profit $361,131 $347,755 Adjusted Teleflex gross margin 57.3% 56.7% Teleflex revenue as-reported $630,642 $613,584 (A) Restructuring, restructuring related and impairment items – The charges for all periods presented are for restructuring-related activities. (B) Acquisition, integration and divestiture related items – For the three months ended March 29, 2020, these charges primarily related to our acquisition of HPC. (C) Intangible amortization expense – For the three months ended March 29, 2020 and March 31, 2019, we reclassified intangible asset amortization expense of $20.9 million and $20.8 million, respectively, from selling, general and administrative expenses to cost of goods sold. 19 See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions.
Appendix B – Reconciliation of Adjusted Operating Profit and Margin (Dollars in Thousands) Three Months Ended March 29, 2020 March 31, 2019 Teleflex income from continuing operations before interest and taxes $157,086 $75,243 Teleflex income from continuing operations before interest and taxes margin 24.9% 12.3% Restructuring, restructuring related and impairment items (A) 6,449 20,475 Acquisition, integration and divestiture related items (B) (42,602) 10,834 Other items (C) - 1,294 Medical Device Regulation (MDR) Costs (D) 1,766 - Intangible amortization expense 38,911 37,751 Adjusted Teleflex income from continuing operations before interest and taxes $161,610 $145,597 Adjusted Teleflex income from continuing operations before interest and taxes margin 25.6% 23.7% Teleflex revenue as-reported $630,642 $613,584 (A) Restructuring, restructuring related and impairment items – For the three months ended March 29, 2020 pre-tax restructuring charges were $1.3 million, pre-tax restructuring related charges were $5.1 million, and there were no pre-tax impairment charges. For the three months ended March 31, 2019, pre-tax restructuring charges were $14.4 million, pre- tax restructuring related charges were $3.1 million, and pre-tax impairment charges were $3.0 million. (B) Acquisition, integration and divestiture related items – For the three months ended March 29, 2020, these items primarily related to the reversal of contingent consideration liabilities, partially offset by charges primarily related to our acquisition of IWG High Performance Conductors, Inc. For the three months ended March 31, 2019, these charges primarily related to contingent consideration liabilities and our acquisition of Essential Medical, Inc., partially offset by the gain on sale of an asset. (C) Other items – For the three months ended March 29, 2020, there were no pre-tax charges for other items. For the three months ended March 31, 2019, other items included expenses associated with a franchise tax audit, and product relabeling costs, and costs associated with our efforts to comply with the European Medical Device Regulation. (D) MDR – For the three months ended March 29, 2020, these costs are associated with our efforts to comply with the European Medical Device Regulation. For the three months ended March 31, 2019, these costs were included in other items. 20 See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions.
Appendix C – Reconciliation of Adjusted Tax Rate (Dollars in Thousands) Three Months Ended Income from Taxes on continuing income from operations continuing Tax before taxes operations rate March 29, 2020 GAAP basis $142,226 $11,074 7.8% Restructuring, restructuring related and impairment charges $6,449 $788 Acquisition, integration and divestiture related items ($42,602) $410 Medical Device Regulation (MDR) Costs (B) $1,766 $0 Intangible amortization expense $38,911 $6,210 Tax adjustment $0 ($87) March 29, 2020 Adjusted basis $146,750 $18,395 12.5% March 31, 2019 GAAP basis $52,890 $10,972 20.7% Restructuring, restructuring related and impairment charges $20,475 $1,933 Acquisition, integration and divestiture related items $10,834 ($1,907) Other items (A) $1,294 $250 Intangible amortization expense $37,751 $7,707 Tax adjustment $0 ($701) March 31, 2019 Adjusted basis $123,244 $18,254 14.8% (A) Other items– For the three months ended March 31, 2019, other items included expenses associated with a franchise tax audit, product relabeling costs, and costs associated with our efforts to comply with the European Medical Device Regulation. (B) Medical Device Regulation– For the three months ended March 29, 2020, these costs were associated with our efforts to comply with the European Medical Device Regulation. For the three months ended March 31, 2019, these costs were included in other items. 21 See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions.
Appendix D – Reconciliation of Adjusted EPS from Continuing Operations Three Months Ended– March 29, 2020 (Dollars in Millions, except per share data) Cost of goods sold, Selling, general and Research and Restructuring (Gain) loss on Diluted earnings per Income Income (loss) from excluding intangible administrative development and impairment sale of business share from continuing taxes continuing operations asset amortization expenses expenses charges and assets operations GAAP Basis $297.0 $147.8 $27.4 $1.3 — $11.1 $131.2 $2.78 Adjustments Restructuring, restructuring related and 4.9 0.2 — 1.3 — 0.8 5.7 $0.12 impairment items (A) Acquisition, integration and divestiture related 1.7 (44.3) — — — 0.4 (43.0) ($0.91) items (B) Other items (C) — — — — — — — — MDR (D) — — 1.8 — — — 1.8 $0.04 Intangible amortization 20.9 17.9 0.1 — — 6.2 32.7 $0.69 expense (E) Tax adjustments — — — — — (0.1) 0.1 — Adjusted basis $269.5 $174.0 $25.5 — — $18.4 $128.4 $2.72 22 See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions.
Appendix E – Reconciliation of Adjusted EPS from Continuing Operations Three Months Ended– March 31, 2019 (Dollars in Millions, except per share data) Selling, general Restructuring Cost of goods sold, Research and (Gain) loss on Diluted earnings per and and Income Income (loss) from excluding intangible development sale of business share from continuing administrative impairment taxes continuing operations asset amortization expenses and assets operations expenses charges GAAP Basis $289.6 $206.9 $27.2 $17.4 ($2.7) $11.0 $41.9 $0.89 Adjustments Restructuring, restructuring related and 3.0 0.0 0.0 17.4 — 1.9 18.5 $0.39 impairment items (A) Acquisition, integration and divestiture related — 13.6 — — (2.7) (1.9) 12.7 $0.27 items (B) Other items (C) — 1.3 — — — 0.3 1.0 $0.02 Intangible amortization 20.8 16.9 0.1 — — 7.7 30.0 $0.64 expense (E) Tax adjustments — — — — — (0.7) 0.7 $0.01 Adjusted basis $265.8 $175.2 $27.0 — — $18.3 $105.0 $2.24 23 See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions.
Appendices D and E– tickmarks (A) Restructuring, restructuring related and impairment items - For the three months ended March 29, 2020, pre-tax restructuring charges were $1.3 million, pre-tax restructuring related charges were $5.1 million; there were no pre-tax impairment charges. For the three months ended March 31, 2019, pre-tax restructuring charges $14.4 million, pre-tax restructuring related charges were $3.1 million, and pre-tax impairment charges were $3.0 million. (B) Acquisition, integration and divestiture related items - For the three months ended March 29, 2020, these items primarily related to the reversal of contingent consideration liabilities, partially offset by charges primarily related to our acquisition of IWG High Performance Conductors, Inc. For the three months ended March 31, 2019, these charges primarily related to contingent consideration liabilities and our acquisition of Essential Medical, Inc., partially offset by the gain on sale of an asset. There were no divestiture related activities for the three months ended March 29, 2020 and March 31, 2019. (C) Other items - For the three months ended March 31, 2019, other items included expenses associated with a franchise tax audit, product relabeling costs, and costs associated with our efforts to comply with the European Medical Device Regulation. (D) MDR - For the three months ended March 29, 2020, these costs were associated with our efforts to comply with the European Medical Device Regulation. For the three months ended March 31, 2019, these costs were included in Other items. (E) Intangible amortization expense - For the three months ended March 29, 2020 and March 31, 2019, we reclassified intangible asset amortization expense of $20.9 million and $20.8 million, respectively, from selling, general and administrative expenses to cost of goods sold. 24 See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions.
Appendix F – Teleflex Restructuring and Similar Cost Savings Initiatives Summary We have ongoing restructuring programs primarily related to the consolidation of our manufacturing operations (referred to as our 2019, 2018 and 2014 Footprint realignment plans). We also have similar ongoing activities to relocate certain manufacturing operations within our OEM segment (the "OEM initiative") that do not meet the criteria for a restructuring program under applicable accounting guidance; nevertheless, the activities should result in cost savings (we expect only minimal costs to be incurred in connection with the OEM initiative). With respect to our currently ongoing restructuring programs and the OEM initiative, the table below summarizes charges incurred or estimated to be incurred and estimated annual pre-tax savings to be realized as follows: (1) with respect to charges (a) the estimated total charges that will have been incurred once the restructuring programs and OEM initiative are completed; (b) the charges incurred through December 31, 2019; and (c) the estimated charges to be incurred from January 1, 2020 through the last anticipated completion date of the restructuring programs and OEM initiative, December 31, 2026 and (2) with respect to estimated annual pre-tax savings, (a) the estimated total annual pre-tax savings to be realized once the restructuring programs and OEM initiative are completed; (b) the estimated annual pre-tax savings realized based on the progress of the restructuring programs and OEM initiative through December 31, 2019; and (c) the estimated additional annual pre-tax savings to be realized from January 1, 2020 through the last anticipated completion date of the restructuring programs and the OEM initiative, December 31, 2026. Estimated charges and pre-tax savings are subject to change based on, among other things, the nature and timing of restructuring activities and similar activities, changes in the scope of restructuring programs and the OEM initiative, unanticipated expenditures and other developments including the uncertainties created by the COVID-19 pandemic, the effect of additional acquisitions or dispositions, the failure to realize anticipated savings from a supply contract related to a component included in certain kits sold by our Americas segment and other factors that were not reflected in the assumptions made by management in previously estimating restructuring and restructuring related charges and estimated pre-tax savings. Moreover, estimated pre-tax savings constituting efficiencies with respect to increased costs that otherwise would have resulted from business acquisitions involve, among other things, assumptions regarding the cost structure and integration of businesses that previously were not administered by our management, which are subject to a particularly high degree of risk and uncertainty. It is likely that estimates of charges and pre-tax savings will change from time to time, and the table below reflects changes from amounts previously estimated. In addition, the table below does not include estimated charges and pre-tax savings related to substantially completed programs. Additional details, including estimated charges expected to be incurred in connection with our restructuring programs, are described in Note 5 to the condensed consolidated financial statements included in our form 10-Q. Pre-tax savings also can be affected by increases or decreases in sales volumes generated by the businesses subject to the consolidation of manufacturing operations; such variations in revenues can increase or decrease pre-tax savings generated by the consolidation of manufacturing operations. For example, an increase in sales volumes generated by the affected businesses, although likely increasing manufacturing costs, may generate additional savings with respect to costs that otherwise would have been incurred if the manufacturing operations were not consolidated. Through Estimated remaining from January 1, 2020 through Dollars in Millions Estimated Total December 31, 2019 December 31, 2026 Restructuring charges $95 to $114 $83 $12 to $31 Restructuring related charges 1 $110 to $141 $46 $64 to $95 Total charges $205 to $255 $129 $76 to $126 OEM initiative annual pre-tax savings $6 to $7 $1 $5 to $6 Pre-tax savings 2 $63 to $73 $25 $38 to $48 Total annual pre-tax savings $69 to $80 $26 $43 to $54 1. Restructuring related charges represent costs that are directly related to restructuring programs and principally constitute costs to transfer manufacturing operations to existing lower-cost locations, project management costs and accelerated depreciation, as well as a charge that is expected to be imposed by a taxing authority as a result of our exit from facilities in the authority's jurisdiction. Most of these charges (other than the tax charge) are expected to be recognized as cost of goods sold. 2. Substantially all of the pre-tax savings are expected to result in reductions to cost of goods sold. 25
Appendix G – 1Q 2020 GPO and IDN Review Group Purchasing Organization Update 1Q20 Renewed agreements 2 New agreements 1 Existing agreements lost 0 IDN Update 1Q20 Renewed agreements 6 New agreements 7 Existing agreements lost 1 26