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) | October 28, 2021 |
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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 October 28, 2021, Teleflex Incorporated (the “Company”) issued a press release (the “Press Release”) announcing its financial results for the quarter ended September 26, 2021. 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 October 28, 2021 to discuss its financial results for the quarter ended September 26, 2021, 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, datedOctober 28, 2021
99.2 Earnings Conference Call Slide Presentation
104 The Cover Page from this Current Report on Form 8-K, formatted 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: October 28, 2021 | 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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Document
Exhibit 99.1
| FOR IMMEDIATE RELEASE | October 28, 2021 |
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TELEFLEX REPORTS THIRD QUARTER 2021 RESULTS AND FULL YEAR OUTLOOK
Wayne, PA -- Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced financial results for the third quarter ended September 26, 2021.
Third quarter financial summary
•Reported revenues of $700.3 million, up 11.5% year-over-year; up 10.3% on a constant currency basis
•GAAP diluted EPS from continuing operations of $4.20 as compared to $2.46 in the prior year period
•Adjusted diluted EPS from continuing operations of $3.51, up 26.7% year-over-year
2021 guidance summary
•GAAP revenue growth decreased to 10.00% to 11.00% due to greater than anticipated headwinds from COVID-19
•Constant currency revenue growth reduced to 8.00% to 9.00% from 8.50% to 9.75% previously
•GAAP diluted EPS increased to $9.86 to $10.06 from $9.50 to $9.60 previously, and adjusted diluted EPS raised to $13.15 to $13.35 from $12.90 to $13.10 previously
Liam Kelly, Chairman, President and Chief Executive Officer, said, “Teleflex delivered solid third quarter results reflecting the benefits of our diversified product portfolio and disciplined operating execution, despite varying levels of headwinds associated with COVID-19 infections across our product lines and geographic segments. In the quarter, we generated double-digit constant currency revenue growth and a sequential improvement in operating margin, which led to $3.51 in adjusted EPS, up 27% year-over-year. UroLift witnessed a greater than expected impact from COVID-19 during the third quarter, including regional pauses in elective surgical procedures and business-related disruptions associated with the pandemic. For 2021, we are lowering our constant currency revenue guidance range and raising the full year adjusted earnings per share guidance range. Given our third quarter results and fourth quarter outlook, our 2021 revenue growth guidance for UroLift has been reduced to 15-17% year-over-year. Our revised outlook does not assume a full recovery in elective surgical procedures due to the ongoing impact of the COVID-19 pandemic."
NET REVENUE BY SEGMENT
The following tables provide information regarding net revenues in each of the Company's reportable operating segments for the three and nine months ended September 26, 2021 and September 27, 2020 on a GAAP and constant currency basis.
| Three Months Ended | % Increase / (Decrease) | ||||
|---|---|---|---|---|---|
| September 26, 2021 | September 27, 2020 | Reported Revenue Growth | Currency Impact | Constant Currency Revenue Growth | |
| Americas | $417.3 | $375.0 | 11.3% | 0.4% | 10.9% |
| EMEA | 143.9 | 135.7 | 6.1% | 2.5% | 3.6% |
| Asia | 75.0 | $68.2 | 9.9% | 3.6% | 6.3% |
| OEM | 64.1 | 49.4 | 29.7% | 0.3% | 29.4% |
| Total | $700.3 | $628.3 | 11.5% | 1.2% | 10.3% |
| Nine Months Ended | % Increase / (Decrease) | ||||
| --- | --- | --- | --- | --- | --- |
| September 26, 2021 | September 27, 2020 | Reported Revenue Growth | Currency Impact | Constant Currency Revenue Growth | |
| Americas | $1,207.6 | $1,045.6 | 15.5% | 0.5% | 15.0% |
| EMEA | 442.3 | 423.4 | 4.5% | 7.0% | (2.5)% |
| Asia | 219.2 | $188.4 | 16.4% | 7.5% | 8.9% |
| OEM | 178.5 | 168.6 | 5.9% | 1.6% | 4.3% |
| Total | $2,047.6 | $1,826.0 | 12.1% | 2.9% | 9.2% |
NET REVENUE BY GLOBAL PRODUCT CATEGORY
The following tables provide information regarding net revenues in each of the Company's global product categories for the three and nine months ended September 26, 2021 and September 27, 2020 on a GAAP and constant currency basis.
| Three Months Ended | % Increase / (Decrease) | ||||
|---|---|---|---|---|---|
| September 26, 2021 | September 27, 2020 | Reported Revenue Growth | Currency Impact | Constant Currency Revenue Growth | |
| Vascular Access | $175.5 | $160.0 | 9.7% | 1.2% | 8.5% |
| Interventional | 104.3 | 93.2 | 11.9% | 1.5% | 10.4% |
| Anesthesia | 97.1 | 75.7 | 28.3% | 1.7% | 26.6% |
| Surgical | 92.8 | 82.2 | 12.9% | 2.0% | 10.9% |
| Interventional Urology | 83.1 | 81.8 | 1.6% | 0.1% | 1.5% |
| OEM | 64.1 | 49.4 | 29.7% | 0.3% | 29.4% |
| Other | 83.4 | 86.0 | (3.1)% | 1.2% | (4.3)% |
| Total | $700.3 | $628.3 | 11.5% | 1.2% | 10.3% |
| Nine Months Ended | % Increase / (Decrease) | ||||
| --- | --- | --- | --- | --- | --- |
| September 26, 2021 | September 27, 2020 | Reported Revenue Growth | Currency Impact | Constant Currency Revenue Growth | |
| Vascular Access | $507.2 | $475.3 | 6.7% | 2.8% | 3.9% |
| Interventional | 312.6 | 275.7 | 13.4% | 2.9% | 10.5% |
| Anesthesia | 277.3 | 216.2 | 28.3% | 4.9% | 23.4% |
| Surgical | 271.4 | 224.9 | 20.7% | 4.2% | 16.5% |
| Interventional Urology | 248.7 | 196.1 | 26.8% | 0.2% | 26.6% |
| OEM | 178.5 | 168.6 | 5.9% | 1.6% | 4.3% |
| Other | 251.9 | 269.2 | (6.4)% | 3.6% | (10.0)% |
| Total | $2,047.6 | $1,826.0 | 12.1% | 2.9% | 9.2% |
OTHER FINANCIAL HIGHLIGHTS
•Depreciation expense, amortization of intangible assets and deferred financing charges for the nine months ended September 26, 2021 totaled $182.1 million compared to $173.2 million for the prior year period.
•Cash and cash equivalents at September 26, 2021 were $481.2 million compared to $375.9 million at December 31, 2020.
•Net accounts receivable at September 26, 2021 were $399.7 million compared to $395.1 million at December 31, 2020.
•Net inventories at September 26, 2021 were $484.3 million compared to $513.2 million at December 31, 2020.
2021 OUTLOOK
The Company reduced its 2021 GAAP revenue growth guidance to 10.00% to 11.00% year-over-year from 10.50% to 11.75% previously. On a constant currency basis, the Company reduced its 2021 revenue growth guidance range to 8.00% to 9.00% from 8.50% to 9.75% year-over year. Teleflex reduced its 2021 revenue growth guidance for the Interventional Urology business to 15% to 17% year-over-year.
The Company raised its 2021 GAAP diluted earnings per share from continuing operations to a range of $9.86 to $10.06 from $9.50 to $9.60 previously. The Company raised its 2021 adjusted diluted earnings per share from continuing operations to a range of $13.15 to $13.35 from $12.90 to $13.10 prior.
Forecasted 2021 Constant Currency Revenue Growth Reconciliation
| Low | High | |
|---|---|---|
| Forecasted 2021 GAAP revenue growth | 10.00% | 11.00% |
| Estimated impact of foreign currency exchange rate fluctuations | 2.00% | 2.00% |
| Forecasted 2021 constant currency revenue growth | 8.00% | 9.00% |
Forecasted 2021 Adjusted Diluted Earnings Per Share From Continuing Operations Reconciliation
| Low | High | |
|---|---|---|
| Forecasted GAAP diluted earnings per share from continuing operations | $9.86 | $10.06 |
| Restructuring, restructuring related and impairment items, net of tax | $1.00 | $1.00 |
| Acquisition, integration and divestiture related items, net of tax | $(1.17) | $(1.17) |
| Other items, net of tax | $0.12 | $0.12 |
| MDR | $0.43 | $0.43 |
| Intangible amortization expense, net of tax | $2.91 | $2.91 |
| Forecasted adjusted diluted earnings per share from continuing operations | $13.15 | $13.35 |
CONFERENCE CALL WEBCAST AND ADDITIONAL INFORMATION
A webcast of Teleflex's third quarter 2021 investor conference call can be accessed live from a link on the company's website at teleflex.com. The call will begin at 8:00 am ET on October 28, 2021.
An audio replay of the investor call will be available beginning at 11:00 am ET on October 28, 2021, either on the Teleflex website or by telephone. The call can be accessed by dialing (800) 585-8367 (U.S./Canada) or (416) 621-4642 (International). The confirmation code is 4079822.
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. 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 amounts
| Quarter Ended - September 26, 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Cost of goods sold | Selling, general and administrative expenses | Research and development expenses | Restructuring and impairment charges | Gain on sale of business and assets | Income taxes | Income (loss) from continuing operations | Diluted earnings per share from continuing operations | |
| GAAP Basis | $312.5 | $205.2 | $31.8 | $1.0 | ($91.2) | $29.7 | $199.5 | $4.20 |
| Adjustments | ||||||||
| Restructuring, restructuring related and impairment items (A) | 6.9 | 0.4 | — | 1.0 | — | 0.8 | 7.5 | $0.16 |
| Acquisition, integration and divestiture related items (B) | (0.1) | 2.1 | — | — | 91.2 | (15.9) | (73.3) | ($1.54) |
| Other items (C) | — | (6.4) | — | — | — | (0.2) | (6.2) | ($0.13) |
| MDR (D) | — | — | 4.9 | — | — | — | 4.9 | $0.10 |
| Intangible amortization expense | 22.2 | 18.7 | — | — | — | 6.8 | 34.2 | $0.72 |
| Tax adjustments | — | — | — | — | — | 0.1 | (0.1) | $— |
| Adjusted basis | $283.5 | $190.4 | $26.9 | $— | $— | $21.2 | $166.5 | $3.51 |
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
| Quarter Ended - September 27, 2020 | |||||||
|---|---|---|---|---|---|---|---|
| Cost of goods sold | Selling, general and administrative expenses | Research and development expenses | Restructuring and impairment charges | Income taxes | Income (loss) from continuing operations | Diluted earnings per share from continuing operations | |
| GAAP Basis | $299.0 | $171.7 | $29.2 | ($3.7) | ($1.0) | $116.6 | $2.46 |
| Adjustments | |||||||
| Restructuring, restructuring related and impairment items (A) | 7.5 | 0.2 | — | (3.7) | (0.5) | 4.6 | $0.10 |
| Acquisition, integration and divestiture related items (B) | 1.6 | (23.4) | — | — | 0.1 | (21.9) | ($0.46) |
| Other items (C) | — | 0.2 | — | — | — | 0.2 | $— |
| MDR (D) | — | — | 3.0 | — | — | 3.0 | $0.06 |
| Intangible amortization expense | 21.2 | 18.7 | 0.1 | — | 6.3 | 33.7 | $0.71 |
| Tax adjustments | — | — | — | — | 4.9 | (4.9) | ($0.10) |
| Adjusted basis | $268.7 | $175.9 | $26.1 | $— | $9.9 | $131.2 | $2.77 |
(A)Restructuring, restructuring related and impairment items - For the three months ended September 26, 2021, pre-tax restructuring charges were $1.0 million and pre-tax restructuring related charges were $7.4 million. For the three months ended September 27, 2020, pre-tax restructuring charges were $(3.7) million and pre-tax restructuring related charges were $7.7 million.
(B)Acquisition, integration and divestiture related items - For the three months ended September 26, 2021, these charges primarily related to contingent consideration liabilities and charges primarily related to our divestiture of certain respiratory assets. For the three months ended September 27, 2020, these items primarily related to contingent consideration liabilities, reversal of previously recognized income related to a distributor conversion in Japan, and charges primarily related to our acquisition of Z-Medica, LLC.
(C)Other items - For the three months ended September 26, 2021 other items were associated with expenses for tax matters and a benefit from the reversal of a contingent liability related to tariffs and for the three months ended September 27, 2020 other items included expenses associated with prior year tax matters.
(D)MDR - These costs were associated with our efforts to comply with the European Medical Device Regulation.
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
| Year to Date Ended - September 26, 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Cost of goods sold | Selling, general and administrative expenses | Research and development expenses | Restructuring and impairment charges | Gain on sale of business and assets | Income taxes | Income (loss) from continuing operations | Diluted earnings per share from continuing operations | |
| GAAP Basis | $917.8 | $632.5 | $95.0 | $20.5 | ($91.2) | $58.5 | $357.7 | $7.54 |
| Adjustments | ||||||||
| Restructuring, restructuring related and impairment items (A) | 20.6 | 1.3 | 0.1 | 20.5 | — | 4.4 | 38.1 | $0.80 |
| Acquisition, integration and divestiture related items (B) | 3.0 | 15.2 | 0.1 | — | 91.2 | (14.6) | (58.4) | ($1.23) |
| Other items (C) | — | (6.4) | — | — | — | 2.8 | 3.8 | $0.08 |
| MDR (D) | — | — | 14.3 | — | — | 14.3 | $0.30 | |
| Intangible amortization expense | 67.1 | 57.7 | — | — | — | 20.8 | 104.0 | $2.19 |
| Tax adjustments | — | — | — | — | — | (1.9) | 1.9 | $0.04 |
| Adjusted basis | $827.1 | $564.7 | $80.6 | $— | $— | $70.0 | $461.3 | $9.73 |
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
| Year to Date Ended - September 27, 2020 | |||||||
|---|---|---|---|---|---|---|---|
| Cost of goods sold | Selling, general and administrative expenses | Research and development expenses | Restructuring and impairment charges | Income taxes | Income (loss) from continuing operations | Diluted earnings per share from continuing operations | |
| GAAP Basis | $884.7 | $510.7 | $86.0 | $16.7 | $22.0 | $259.2 | $5.48 |
| Adjustments | |||||||
| Restructuring, restructuring related and impairment items (A) | 18.8 | 0.5 | — | 16.7 | 1.1 | 34.8 | $0.74 |
| Acquisition, integration and divestiture related items (B) | 3.3 | (50.8) | — | — | 0.7 | (48.2) | ($1.02) |
| Other items (C) | — | 0.5 | — | — | 0.1 | 0.4 | $0.01 |
| MDR (D) | — | — | 7.4 | — | — | 7.4 | $0.16 |
| Intangible amortization expense | 63.2 | 55.1 | 0.3 | — | 18.9 | 99.7 | $2.11 |
| Tax adjustments | — | — | — | — | 2.6 | (2.6) | ($0.05) |
| Adjusted basis | $799.4 | $505.3 | $78.2 | $— | $45.4 | $350.8 | $7.42 |
(A)Restructuring, restructuring related and impairment items - For the nine months ended September 26, 2021, pre-tax restructuring charges were $13.7 million, pre-tax restructuring related charges were $22.0 million, and pre-tax impairment charges were $6.7 million. For the nine months ended September 27, 2020, pre-tax restructuring charges were $16.7 million, pre-tax restructuring related charges were $19.2 million; and there were no pre-tax impairment charges.
(B)Acquisition, integration and divestiture related items - For the nine months ended September 26, 2021, these charges primarily related to our divestiture of certain respiratory assets, contingent consideration liabilities, and an inventory step up for Z-Medica. For the nine months ended September 27, 2020, these items related primarily to the reversal of contingent consideration liabilities, partially offset by charges primarily related to our acquisitions of HPC and Z-Medica, LLC and the reversal of previously recognized income related to a distributor conversion in Japan.
(C)Other items - For the nine months ended September 26, 2021 other items were associated with debt extinguishment and a benefit from the reversal of a contingent liability related to tariffs and expenses associated with tax matters and for the nine months ended September 27, 2020 other items included expenses associated with prior year tax matters.
(D)MDR - These costs were associated with our efforts to comply with the European Medical Device Regulation.
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®, LMA®, Pilling®, QuikClot®, 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, statements regarding forecasted 2021 GAAP and constant currency revenue growth and GAAP and adjusted diluted earnings per share; our estimates regarding the projected impact of foreign currency exchange rate fluctuations on our 2021 financial results; and our estimates with regard to the projected impacts of the divestiture of a significant portion of our respiratory business on our financial results. 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 | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 26, 2021 | September 27, 2020 | September 26, 2021 | September 27, 2020 | |||||
| (Dollars and shares in thousands, except per share) | ||||||||
| Net revenues | $ | 700,251 | $ | 628,301 | $ | 2,047,649 | $ | 1,825,977 |
| Cost of goods sold | 312,464 | 298,977 | 917,779 | 884,657 | ||||
| Gross profit | 387,787 | 329,324 | 1,129,870 | 941,320 | ||||
| Selling, general and administrative expenses | 205,194 | 171,673 | 632,501 | 510,662 | ||||
| Research and development expenses | 31,816 | 29,218 | 95,046 | 85,978 | ||||
| Restructuring and impairment charges (credits) | 959 | (3,659) | 20,451 | 16,692 | ||||
| Gain on sale of business | (91,157) | — | (91,157) | — | ||||
| Income from continuing operations before interest and taxes | 240,975 | 132,092 | 473,029 | 327,988 | ||||
| Interest expense | 11,989 | 16,652 | 44,958 | 47,773 | ||||
| Interest income | (215) | (214) | (1,106) | (956) | ||||
| Loss on extinguishment of debt | — | — | 12,986 | — | ||||
| Income from continuing operations before taxes | 229,201 | 115,654 | 416,191 | 281,171 | ||||
| Taxes (benefits) on income from continuing operations | 29,695 | (951) | 58,535 | 21,971 | ||||
| Income from continuing operations | 199,506 | 116,605 | 357,656 | 259,200 | ||||
| Operating loss from discontinued operations | (423) | (29) | (470) | (11) | ||||
| Tax benefit on operating loss from discontinued operations | (98) | (11) | (109) | (4) | ||||
| Loss from discontinued operations | (325) | (18) | (361) | (7) | ||||
| Net income | $ | 199,181 | $ | 116,587 | $ | 357,295 | $ | 259,193 |
| Earnings per share: | ||||||||
| Basic: | ||||||||
| Income from continuing operations | $ | 4.26 | $ | 2.51 | $ | 7.66 | $ | 5.58 |
| Loss from discontinued operations | — | — | (0.02) | — | ||||
| Net income | $ | 4.26 | $ | 2.51 | $ | 7.64 | $ | 5.58 |
| Diluted: | ||||||||
| Income from continuing operations | $ | 4.20 | $ | 2.46 | $ | 7.54 | $ | 5.48 |
| Loss from discontinued operations | — | — | (0.01) | — | ||||
| Net income | $ | 4.20 | $ | 2.46 | $ | 7.53 | $ | 5.48 |
| Weighted average common shares outstanding | ||||||||
| Basic | 46,810 | 46,530 | 46,749 | 46,451 | ||||
| Diluted | 47,452 | 47,333 | 47,431 | 47,269 |
TELEFLEX INCORPORATED
CONSOLIDATED BALANCE SHEETS
| September 26, 2021 | December 31, 2020 | |||
|---|---|---|---|---|
| (Dollars in thousands) | ||||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 481,167 | $ | 375,880 |
| Accounts receivable, net | 399,744 | 395,071 | ||
| Inventories | 484,345 | 513,196 | ||
| Prepaid expenses and other current assets | 123,776 | 115,436 | ||
| Prepaid taxes | 52,805 | 22,842 | ||
| Total current assets | 1,541,837 | 1,422,425 | ||
| Property, plant and equipment, net | 446,318 | 473,912 | ||
| Operating lease assets | 129,998 | 100,635 | ||
| Goodwill | 2,522,950 | 2,585,966 | ||
| Intangible assets, net | 2,337,249 | 2,519,746 | ||
| Deferred tax assets | 8,425 | 8,073 | ||
| Other assets | 53,185 | 41,802 | ||
| Total assets | $ | 7,039,962 | $ | 7,152,559 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities | ||||
| Current borrowings | $ | 101,250 | $ | 100,500 |
| Accounts payable | 104,139 | 102,520 | ||
| Accrued expenses | 127,116 | 136,276 | ||
| Payroll and benefit-related liabilities | 133,523 | 122,366 | ||
| Accrued interest | 15,757 | 7,135 | ||
| Income taxes payable | 17,185 | 17,361 | ||
| Other current liabilities | 63,240 | 53,869 | ||
| Total current liabilities | 562,210 | 540,027 | ||
| Long-term borrowings | 1,948,666 | 2,377,888 | ||
| Deferred tax liabilities | 479,105 | 484,678 | ||
| Pension and postretirement benefit liabilities | 49,843 | 74,499 | ||
| Noncurrent liability for uncertain tax positions | 10,078 | 10,127 | ||
| Noncurrent operating lease liabilities | 114,777 | 86,097 | ||
| Other liabilities | 217,411 | 242,786 | ||
| Total liabilities | 3,382,090 | 3,816,102 | ||
| Commitments and contingencies | ||||
| Total shareholders' equity | 3,657,872 | 3,336,457 | ||
| Total liabilities and shareholders' equity | $ | 7,039,962 | $ | 7,152,559 |
TELEFLEX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended | ||||
|---|---|---|---|---|
| September 26, 2021 | September 27, 2020 | |||
| (Dollars in thousands) | ||||
| Cash flows from operating activities of continuing operations: | ||||
| Net income | $ | 357,295 | $ | 259,193 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Loss from discontinued operations | 361 | 7 | ||
| Depreciation expense | 53,846 | 51,329 | ||
| Intangible asset amortization expense | 124,832 | 118,649 | ||
| Deferred financing costs and debt discount amortization expense | 3,438 | 3,191 | ||
| Loss on extinguishment of debt | 12,986 | — | ||
| Fair value step up of acquired inventory sold | 3,993 | 1,707 | ||
| Changes in contingent consideration | 12,728 | (54,585) | ||
| Impairment of long-lived assets | 6,739 | — | ||
| Stock-based compensation | 17,065 | 14,759 | ||
| Gain on sale of business | (91,157) | — | ||
| Deferred income taxes, net | (67) | 2,600 | ||
| Payments for contingent consideration | (170) | (79,771) | ||
| Interest benefit on swaps designated as net investment hedges | (13,882) | (14,488) | ||
| Other | (26,113) | (15,703) | ||
| Changes in assets and liabilities, net of effects of acquisitions and disposals: | ||||
| Accounts receivable | (13,829) | 35,546 | ||
| Inventories | (10,951) | (38,096) | ||
| Prepaid expenses and other assets | (31,223) | 9,393 | ||
| Accounts payable, accrued expenses and other liabilities | 84,179 | (4,243) | ||
| Income taxes receivable and payable, net | (39,610) | (48,000) | ||
| Net cash provided by operating activities from continuing operations | 450,460 | 241,488 | ||
| Cash flows from investing activities of continuing operations: | ||||
| Expenditures for property, plant and equipment | (52,090) | (62,369) | ||
| Proceeds from sale of business and assets | 225,900 | 400 | ||
| Payments for businesses and intangibles acquired, net of cash acquired | (4,254) | (266,843) | ||
| Net interest proceeds on swaps designated as net investment hedges | 9,288 | 9,986 | ||
| Proceeds from sales of investments | 7,300 | — | ||
| Purchase of investments | (18,418) | — | ||
| Net cash provided by (used in) investing activities from continuing operations | 167,726 | (318,826) | ||
| Cash flows from financing activities of continuing operations: | ||||
| Proceeds from new borrowings | 400,000 | 1,013,807 | ||
| Reduction in borrowings | (834,000) | (788,807) | ||
| Debt extinguishment, issuance and amendment fees | (9,774) | (8,440) | ||
| Net proceeds from share based compensation plans and the related tax impacts | 11,366 | 11,177 | ||
| Payments for contingent consideration | (31,388) | (64,135) | ||
| Dividends paid | (47,716) | (47,384) | ||
| Proceeds from sale of treasury stock | 11,097 | — | ||
| Net cash (used in) provided by financing activities from continuing operations | (500,415) | 116,218 | ||
| Cash flows from discontinued operations: | ||||
| Net cash used in operating activities | (519) | (540) | ||
| Net cash used in discontinued operations | (519) | (540) | ||
| Effect of exchange rate changes on cash and cash equivalents | (11,965) | 8,057 | ||
| Net increase in cash and cash equivalents | 105,287 | 46,397 | ||
| Cash and cash equivalents at the beginning of the period | 375,880 | 301,083 | ||
| Cash and cash equivalents at the end of the period | $ | 481,167 | $ | 347,480 |
Contacts:
Teleflex Incorporated:
Lawrence Keusch
Vice President, Investor Relations and Strategy Development
John Hsu, CFA
Vice President, Investor Relations
investors.teleflex.com
610-948-2836
14
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Third Quarter 2021 Earnings Conference Call Teleflex Incorporated
2 The release, accompanying slides, and replay webcast are available online at teleflex.com (click on “Investors”) An audio replay of the call will be available beginning at 11:00 am Eastern Time on October 28, 2021 either on the Teleflex website or by telephone. The call can be accessed by dialing (800) 585-8367 (U.S./Canada) or (416) 621-4642 (International). The confirmation code is 4079822. Conference Call Logistics
3 Today’s Speakers Liam Kelly Chairman, President and CEO Lawrence Keusch VP, Investor Relations and Strategy Development Thomas Powell Executive VP and CFO
4 This presentation contains forward-looking statements, including, but not limited to, our expectation that we will convert the majority of our Interventional Urology accounts to the UroLift® 2 System by the end of 2022; our intent to submit a 510(k) application for expanded use of QuikClot Control+ following the completion of the analysis of a patient study; our forecasted 2021 GAAP and constant currency revenue growth, GAAP and adjusted gross and operating margins and GAAP and adjusted earnings per share and, in each case, our estimates with respect to the items expected to impact those forecasted results; charges we expect to incur in connection with the restructuring program we commenced in the second quarter of 2021 related to our divestiture of a significant portion of our respiratory business (the “Respiratory divestiture plan”) and our other 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; our expectations as to when the Respiratory divestiture plan, our other ongoing restructuring programs and the OEM initiative will be substantially completed; our assumptions with respect to the euro to U.S. dollar exchange rate for 2021 and our adjusted weighted average shares for 2021; 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, adjusted tax rate and adjusted revenues reflecting the divestiture of our respiratory business. 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 third quarter 2021 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 September 26, 2021 located in the investor section of our website at teleflex.com and our Quarterly Report on Form 10-Q for the quarter ended September 26, 2021 to be filed with the Securities and Exchange Commission. Unless otherwise noted, the following slides reflect continuing operations. Note on Forward-Looking Statements
Liam Kelly - Chairman, President and CEO Executive Overview
6 Q3'21 Highlights • Q3'21 constant currency revenue grew double-digits • Q3'21 adjusted gross and operating margins expanded significantly year-over-year • Q3'21 adjusted earnings per share increased 26.7% year-over-year Q3 Performance Summary • Reducing 2021 GAAP and constant currency revenue ranges • Increasing 2021 adjusted operating margin outlook • Raising 2021 adjusted EPS guidance range Key Business Updates Note: See appendices for reconciliations of non-GAAP information
7 Q3'21 Financial Results • Adjusted gross margin was 59.5%, up 230 bps versus 57.2% in Q3'20 • Adjusted operating margin was 28.5%, up 340 bps versus 25.1% in Q3'20 • Adjusted EPS was $3.51, up 26.7% versus $2.77 in Q3'20 Adjusted Margin and Adjusted EPS Highlights Global Product Revenue Drivers1 • Q3'21 GAAP revenue increased 11.5% vs. Q3'20 • Q3'21 constant currency revenue increased 10.3% vs. Q3'20 • Vascular Access revenue of $175.5 million, up 8.5% vs. Q3'20 • Interventional revenue of $104.3 million, up 10.4% vs. Q3’20 • Anesthesia revenue of $97.1 million, up 26.6% vs. Q3'20 • Interventional Urology revenue of $83.1 million, up 1.5% vs. Q3'20 Revenue Highlights 1. All global product family revenue growth provided is on a constant currency basis Note: See appendices for reconciliations of non-GAAP information
8 Q3'21 Segment Revenue Review Dollars in Millions Q3'21 Revenue Q3'20 Revenue Reported Revenue Growth Currency Impact Constant Currency Growth Americas $417.3 $375.0 11.3% 0.4% 10.9% EMEA $143.9 $135.7 6.1% 2.5% 3.6% Asia $75.0 $68.2 9.9% 3.6% 6.3% OEM $64.1 $49.4 29.7% 0.3% 29.4% TOTAL $700.3 $628.3 11.5% 1.2% 10.3%
9 Q3'21 Global Product Category Revenue Review Dollars in Millions Q3'21 Revenue Q3'20 Revenue Reported Revenue Growth Currency Impact Constant Currency Growth Vascular Access $175.5 $160.0 9.7% 1.2% 8.5% Interventional $104.3 $93.2 11.9% 1.5% 10.4% Anesthesia $97.1 $75.7 28.3% 1.7% 26.6% Surgical $92.8 $82.2 12.9% 2.0% 10.9% Interventional Urology $83.1 $81.8 1.6% 0.1% 1.5% OEM $64.1 $49.4 29.7% 0.3% 29.4% Other1 $83.4 $86.0 (3.1)% 1.2% (4.3)% TOTAL $700.3 $628.3 11.5% 1.2% 10.3% • 1. Includes revenues generated from sales of the Company’s respiratory and urology products (other than interventional urology products).
10 Clinical and Commercial Updates Interventional Urology: 2021 National DTC Campaign Update ◦ Key performance metrics tracking as expected, targeting more than double the impressions of 2020 campaign ◦ Response to ads remains strong despite COVID barriers such as restrictions on elective procedures Interventional Urology: UroLift® 2 System Progress ◦ Remain on track for the majority of North American accounts to be converted by the end of 2022 Interventional Urology: Japan Commercial Progress ◦ Expert panel meeting slated for November 2021
11 Clinical and Commercial Updates Vascular: ErgoPack® Kit Launch ◦ Strong traction with commercial launch, expands our leading market position in CVCs ◦ New configuration evolves clinical practice and includes a kink-resistant nitinol guidewire Anesthesia: Hemostat Label Expansion ◦ Completed patient enrollment in a 231 patient IDE study evaluating the performance of QuikClot Control+® hemostatic devices for mild to moderate bleeding in cardiac procedures compared to standard gauze ◦ Intend to submit a 510(k) application for expanded use of QuikClot Control+ device following the completion of the study analysis QuikClot® CONTROL+ Hemostatic Dressing Arrow® ErgoPack
Thomas Powell - Executive VP and CFO Financial Overview
13 Q3'21 Financial Review • GAAP gross margin of 55.4%, up 300 bps vs. prior year period • Adjusted gross margin of 59.5%, up 230 bps vs. prior year period • GAAP operating margin of 34.4%, up 1,340 bps vs. prior year period • Adjusted operating margin of 28.5%, up 340 bps vs. prior year period Gross margin Operating margin Global revenue growth • GAAP tax rate of 13.0%, compared to (0.8)% in prior year period • Adjusted tax rate of 11.3%, up 430 bps vs. prior year periodEffective tax rate • GAAP EPS of $4.20 vs. $2.46 in prior year period • Adjusted EPS of $3.51, up 26.7% vs. prior year periodEarnings per share • Revenue increased 11.5% vs. prior year period a GAAP basis • Revenue increased 10.3% vs. prior year period on a constant currency basis Note: Tables reconciling non-GAAP financial measures to the most comparable GAAP financial measures are included within this presentation and the appendices to this presentation.
14 2021 Financial Guidance Summary Key Assumptions: • Euro to U.S. Dollar exchange rate assumed to be approximately 1.18 for Q4 2021 • Adjusted weighted average shares expected to be approximately 47.5 million for full year 2021 October Guidance July Guidance 2021 Guidance Low High Low High GAAP Revenue Growth 10.00% 11.00% 10.50% 11.75% Impact of Foreign Exchange Rate Fluctuations 2.00% 2.00 2.00% 2.00% Constant Currency Revenue Growth 8.00% 9.00% 8.50% 9.75% Adjusted Gross Margin 59.25% 59.50% 59.25% 59.75% Adjusted Operating Margin 27.50% 28.00% 26.75% 27.50% Adjusted EPS $13.15 $13.35 $12.90 $13.10 Adjusted EPS % Growth 23.2% 25.1% 20.9% 22.8% Note: See appendices for reconciliations of non-GAAP information
15 Key Takeaways Diversified product portfolio enabled Teleflex to deliver double-digit constant currency growth even with greater than expected disruption from Covid Continue to execute on our strategy to drive durable growth with investment in organic growth opportunities and margin expansion Increased 2021 EPS guidance for the third consecutive quarter, more than offsetting revenue headwind
16 16 Thank You Teleflex, the Teleflex logo, are trademarks or registered trademarks of Teleflex Incorporated or its affiliates, in the U.S. and/or other countries. © 2021 Teleflex Incorporated. All rights reserved. MCI-2021-0563.
17 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) “other items” identified in note (C) to the reconciliation table appearing in Appendix A. • 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) intangible amortization expense; and (v) certain costs associated with the registration of medical devices under the European Union Medical Device Regulation. • 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. • Adjusted Revenues. This measure excludes historical revenues associated with the respiratory business that we recently divested. We believe that this measure facilitates an understanding of our past operating performance exclusive of a business that will no longer impact our operating performance in future periods, and thus will enable more meaningful comparisons between past and future periods.
18 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 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 had 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).
19 Non-GAAP Adjustments 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.
20 Appendix A: Reconciliation of Adjusted Gross and Operating Margins, Income Tax and EPS (Dollars in millions, except per share data) Three Months Ended September 26, 2021 Three Months Ended September 27, 2020 Gross Margin Operating Margin Income Before Income Taxes Income Tax Expense Income Tax Rate Diluted Earnings Per Share Gross Margin Operating Margin Income Before Income Taxes Income Tax Expense Income Tax Rate Diluted Earnings Per Share GAAP Basis 55.4 % 34.4 % $ 229.2 $ 29.7 13.0 % $ 4.20 GAAP Basis 52.4 % 21.0 % $ 115.7 $ (1.0) (0.8)% $ 2.46 Adjustments Adjustments Restructuring, restructuring related and impairment items (A) 1.0 % 1.2% 8.3 0.8 0.16 Restructuring, restructuring related and impairment items (A) 1.2 % 0.6 % 4.1 (0.5) 0.10 Acquisition, integration and divestiture related items (B) — % (12.7)% (89.2) (15.9) (1.54) Acquisition, integration and divestiture related items (B) 0.3 % (3.5)% (21.8) 0.1 (0.46) Other items (C) — % (0.9)% (6.4) (0.2) (0.13) Other items (C) — % — % 0.2 — — MDR (D) — % 0.7 % 4.9 — 0.10 MDR (D) — % 0.5 % 3.0 — 0.06 Intangible amortization expense (E) 3.2 % 5.9 % 41.0 6.8 0.72 Intangible amortization expense (E) 3.4 % 6.4 % 40.0 6.3 0.71 Tax adjustments — % — % — 0.1 — Tax adjustments — % — % — 4.9 (0.10) Adjustments total 4.1 % (5.9)% (41.5) (8.5) (0.69) Adjustments total 4.8 % 4.1 % 25.5 10.9 0.31 Adjusted basis 59.5 % 28.5 % $ 187.7 $ 21.2 11.3 % $ 3.51 Adjusted basis 57.2 % 25.1 % $ 141.1 $ 9.9 7.0 % $ 2.77 Note: See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions. Totals may not sum due to rounding
21 Note: See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions. Totals may not sum due to rounding Appendix A: Reconciliation of Adjusted Gross and Operating Margins, Income Tax and EPS (Dollars in millions, except per share data) Nine Months Ended September 26, 2021 Nine Months Ended September 27, 2020 Gross Margin Operating Margin Income Before Income Taxes Income Tax Expense Income Tax Rate Diluted Earnings Per Share Gross Margin Operating Margin Income Before Income Taxes Income Tax Expense Income Tax Rate Diluted Earnings Per Share GAAP Basis 55.2 % 23.1 % $ 416.2 $ 58.5 14.1 % $ 7.54 GAAP Basis 51.6 % 18.0 % $ 281.2 $ 22.0 7.8% $ 5.48 Adjustments Adjustments Restructuring, restructuring related and impairment items (A) 1.0 % 2.1 % 42.4 4.4 0.80 Restructuring, restructuring related and impairment items (A) 1.0 % 2.0 % 35.9 1.1 0.74 Acquisition, integration and divestiture related items (B) 0.1 % (3.6)% (73.0) (14.6) (1.23) Acquisition, integration and divestiture related items (B) 0.2 % (2.6)% (47.5) 0.7 (1.02) Other items (C) — % (0.3)% 6.6 2.8 0.08 Other items (C) — % — % 0.5 0.1 0.01 MDR (D) — % 0.7 % 14.3 — 0.30 MDR (D) — % 0.4 % 7.4 — 0.16 Intangible amortization expense (E) 3.2 % 6.1 % 124.8 20.8 2.19 Intangible amortization expense (E) 3.5 % 6.5 % 118.6 18.9 2.11 Tax adjustments — % — % — (1.9) 0.04 Tax adjustments — % — % 2.6 (0.05) Adjustments total 4.4 % 5.0 % 115.1 11.5 2.18 Adjustments total 4.7 % 6.3 % 114.9 23.4 1.95 Adjusted basis 59.6 % 28.1 % $ 531.3 $ 70.0 13.2 % $ 9.73 Adjusted basis 56.2 % 24.3 % $ 396.2 $ 45.4 11.5 % $ 7.42
22 Appendix A: tickmarks A. Restructuring, restructuring related and impairment items – For the three months ended September 26, 2021, pre-tax restructuring charges were $1.0 million and pre-tax restructuring related charges were $7.4 million. For the three months ended September 27, 2020, pre-tax restructuring credits were $3.7 million and pre-tax restructuring related charges were $7.7 million. For the nine months ended September 26, 2021, pre-tax restructuring charges were $13.7 million; pre-tax restructuring related charges were $22.0 million; and pre-tax impairment charges were $6.7 million. For the nine months ended September 27, 2020, pre-tax restructuring charges were $16.7 million; pre-tax restructuring related charges were $19.2 million; and there were no pre-tax impairment charges. B. Acquisition, integration and divestiture related items – For the three months ended September 26, 2021, these charges primarily related to contingent consideration liabilities and charges primarily related to our divestiture of certain respiratory assets. For the three months ended September 27, 2020, these items primarily related to contingent consideration liabilities, reversal of previously recognized income related to a distributor conversion in Japan, and charges primarily related to our acquisition of Z-Medica, LLC. For the nine months ended September 26, 2021, these charges primarily related to our divestiture of certain respiratory assets, contingent consideration liabilities, and an inventory step up for Z-Medica. For the nine months ended September 27, 2020, these items related primarily to the reversal of contingent consideration liabilities, partially offset by charges primarily related to our acquisitions of HPC and Z-Medica, LLC and the reversal of previously recognized income related to a distributor conversion in Japan. C. Other items – For the three months ended September 26, 2021 other items were associated with expenses for tax matters and a benefit from the reversal of a contingent liability related to tariffs and for the three months ended September 27, 2020 other items included expenses associated with prior year tax matters. For the nine months ended September 26, 2021 other items were associated with debt extinguishment and a benefit from the reversal of a contingent liability related to tariffs and expenses associated with tax matters and for the nine months ended September 27, 2020 other items included expenses associated with prior year tax matters. D. MDR – These costs were associated with our efforts to comply with the European Medical Device Regulation (MDR).
23 Appendix B: Restructuring and Other Similar Cost Savings Initiatives Dollars in Millions Estimated Total Actual Results through December 31, 2020 Estimated remaining Restructuring charges - ongoing restructuring plans $102 - $118 $89 $13 - $29 Restructuring charges - Respiratory divestiture plan 5 - 8 — 5 - 8 Total restructuring charges 107 - $126 $89 18 - 37 Restructuring related charges - ongoing restructuring plans 119 - 146 74 45 - 72 Restructuring related charges - Respiratory divestiture plan 19 - 22 — 19 - 22 Total restructuring related charges (1) 138 - 168 $74 64 - 94 Total charges $245 - $294 $163 $82 - $131 OEM initiative annual pre-tax savings $6 - $7 $2 $4 - $5 Pre-tax savings - ongoing restructuring plans (2) 81 - 94 32 49 - 62 Total annual pre-tax savings $87 - $101 $34 $53 - $67 (1) Represents charges 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) Most of the pre-tax savings are expected to result in reductions to cost of goods sold.
24 Respiratory divestiture plan During the second quarter of 2021, in connection with the Respiratory business divestiture, we committed to a restructuring plan designed to separate the manufacturing operations that will be transferred to Medline from those that will remain with Teleflex, which includes related workforce reductions (the “Respiratory divestiture plan”). The plan includes expanding certain of our existing locations to accommodate the transfer of capacity from the sites that will be transferred to Medline and replicating the manufacturing processes at alternate existing locations. We expect this plan will be substantially completed by the end of 2023. We estimate that we will incur aggregate pre-tax restructuring and restructuring related charges in connection with the Respiratory divestiture plan of $24 million to $30 million, of which we expect $6 million to $7 million to be incurred in 2021 and the balance to be incurred in 2022 and 2023. We estimate that substantially all of these charges will result in cash outlays, the majority of which will be made in 2022 and 2023. Additionally, we expect to incur $22 million to $28 million in aggregate capital expenditures under the plan, which are expected to be incurred mostly in 2022 and 2023. Anticipated charges and pre-tax savings related to restructuring programs and other similar cost savings initiatives In addition to the Respiratory divestiture plan, described in detail above, we have ongoing restructuring programs that include the consolidation of our manufacturing operations (referred to as our 2019, 2018 and 2014 Footprint realignment plans) and the 2021 Restructuring plan. 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 the restructuring programs and the OEM initiative, the table in this appendix summarizes charges incurred or estimated to be incurred and estimated annual pre-tax savings to be realized: (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, 2020; and (c) the estimated charges to be incurred from January 1, 2021 through the last anticipated completion date of the restructuring programs and OEM initiative, 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, 2020; and (c) the estimated additional annual pre-tax savings to be realized from January 1, 2021 through the last anticipated completion date of the restructuring programs and the OEM initiative. 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, the effect of additional acquisitions or dispositions, 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. Appendix B: Disclosure
25 It is likely that estimates of charges and pre-tax savings will change from time to time, and the table in the prior slide may reflect changes from amounts previously estimated. In addition, the table in the prior slide reflects the estimated charges and pre-tax savings related to our ongoing programs. Additional details, including estimated charges expected to be incurred in connection with our restructuring programs and the anticipated completion dates, are described in Note 5 to the condensed consolidated financial statements included in our 10-Q filing. Pre-tax savings may be realized during, and subsequent to the completion of the restructuring program. Pre-tax savings can also be affected by increases or decreases in sales volumes generated by the businesses impacted by 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 impacted businesses, although likely to increase manufacturing costs, may generate additional savings with respect to costs that otherwise would have been incurred if the manufacturing operations were not consolidated. Appendix B: Disclosure
26 Appendix C: September 26, 2021 Year-to-Date GPO and IDN Review Group Purchasing Organization Update Q1’21 Q2'21 Q3'21 Renewed agreements 6 9 10 New agreements 1 0 3 Existing agreements lost 1 1 2 Q1’21 Q2'21 Q3'21 Renewed agreements 13 8 4 New agreements 7 13 5 Existing agreements lost 0 0 0 IDN Update
27 Appendix D: 2021 Adj. Gross Margin Guidance Reconciliation 2021 Guidance Low High Forecasted GAAP Gross Margin 54.85% 55.10% Estimated restructuring, restructuring related and impairment items 1.10% 1.10% Estimated acquisition, integration, and divestiture related items 0.10% 0.10% Estimated intangible amortization expense 3.20% 3.20% Forecasted Adjusted Gross Margin 59.25% 59.50% 2021 Guidance Low High Forecasted GAAP Operating Margin 21.70% 22.20% Estimated restructuring, restructuring related and impairment items 1.90% 1.90% Estimated acquisition, integration, and divestiture related items (2.70)% (2.70)% Estimated MDR 0.70% 0.70% Estimated intangible amortization expense 5.90% 5.90% Forecasted Adjusted Operating Margin 27.50% 28.00%
28 Appendix E: Reconciliation of 2021 Adjusted Earnings Per Share Guidance 2021 Guidance Low High Forecasted GAAP Diluted Earnings Per Share from continuing operations $9.86 $10.06 Estimated restructuring, restructuring related and impairment items, net of tax $1.00 $1.00 Estimated acquisition, integration, and divestiture related items, net of tax $(1.17) $(1.17) Estimated other items, net of tax $0.12 $0.12 Estimated MDR, net of tax $0.43 $0.43 Estimated intangible amortization expense, net of tax $2.91 $2.91 Forecasted Adjusted Diluted Earnings Per Share from continuing operations, net of tax $13.15 $13.35
29 Appendix F: Revenue Schedules for Divested Respiratory Assets ($000s) As Reported Divested respiratory business Adjusted 20 19 Q1 613.6 33.6 580.0 Q2 652.5 32.4 620.1 Q3 648.3 30.1 618.2 Q4 681.0 33.9 647.1 FY $2,595.4 $130.0 $2,465.4 20 20 Q1 630.6 36.7 593.9 Q2 567.0 35.8 531.2 Q3 628.3 29.8 598.5 Q4 711.2 36.1 675.1 FY $2,537.2 $138.5 $2,398.7 20 21 Q1 633.9 31.1 602.8 Q2 713.5 29.6 683.9 YTD $1,347.4 $60.7 $1,286.7