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) | July 30, 2020 |
|---|
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 July 30, 2020, Teleflex Incorporated (the “Company”) issued a press release (the “Press Release”) announcing its financial results for the quarter ended June 28, 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 July 30, 2020 to discuss its financial results for the quarter ended June 28, 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 July 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: July 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 |
|---|
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | Earnings Press Release, dated July 30, 2020 |
| 99.2 | Earnings Conference Call Slide Presentation |
Exhibit
Exhibit 99.1
| Jake Elguicze<br><br>Treasurer and Vice President of Investor Relations<br><br>610-948-2836 | | --- || FOR IMMEDIATE RELEASE | July 30, 2020 | | --- | --- |
TELEFLEX REPORTS SECOND QUARTER 2020 RESULTS
Second Quarter Revenues of $567.0 million, down 13.1% versus Prior Year Period; down 12.0% on a Constant Currency Basis
Second Quarter GAAP Diluted EPS from Continuing Operations of $0.24, Compared to $1.77 in the Prior Year Period
Second Quarter Adjusted Diluted EPS from Continuing Operations of $1.93, down 27.4% Versus Prior Year Period
New Workforce Reduction Plan to Further Improve Company Cost Structure Announced
Not Reinstating 2020 Financial Guidance due to COVID-19 Pandemic
Wayne, PA -- Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced financial results for the second quarter ended June 28, 2020.
Second quarter 2020 net revenues were $567.0 million, a decrease of 13.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 12.0% over the year ago period. The Company estimates that COVID-19 had a net negative impact to revenue of approximately $130 million, or 20%.
Second quarter 2020 GAAP earnings per share from continuing operations decreased 86.4% to $0.24, compared to $1.77 in the prior year period. Second quarter 2020 adjusted diluted earnings per share from continuing operations decreased 27.4% to $1.93, compared to $2.66 in the prior year period.
Liam Kelly, President and Chief Executive Officer, said, “We were pleased with our second quarter 2020 performance, which significantly exceeded our internal expectations and reflected improvements in underlying monthly revenue trends for the product categories most impacted by the postponement of non-emergent procedures because of COVID-19, particularly Interventional Urology, Interventional Access, and Surgical. Like our revenue performance, our second quarter 2020 adjusted EPS of $1.93 also significantly exceeded our expectations, reflecting the recovery we saw in procedures, as well as prudent operating expense management."
Mr. Kelly continued, "Despite the challenges caused by the global pandemic, Teleflex remains in a strong financial position, supported by a healthy balance sheet, which includes more than $550 million of cash on hand, and access to additional liquidity under our revolving credit facility. We remain confident in our core business fundamentals, including robust demand for our innovative and critical care products. That said, due to the rapidly evolving environment, continued uncertainties from the impact of the COVID-19 global pandemic, and recent regional outbreaks that are impacting the recovery, we are not reinstating 2020 financial guidance at this time.”
Mr. Kelly concluded, "We remain confident that we will weather the storm given our diversified business model and our continued belief in our ability to generate significant constant currency revenue growth, margin expansion, adjusted earnings per share and free cash flow growth over the long term."
NET REVENUE BY SEGMENT
The following tables and commentary provide information regarding net revenues in each of the Company's reportable operating segments for the three and six months ended June 30, 2019 and June 28, 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 June 28, 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) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 28, 2020 | June 30, 2019 | Total Sales Growth | Currency Impact | Constant Currency Revenue Growth | |||||||||
| Americas | $ | 312.5 | $ | 373.8 | (16.4 | ) | % | (0.4 | ) | % | (16.0 | ) | % |
| EMEA | 131.6 | 147.1 | (10.5 | ) | % | (2.5 | ) | % | (8.0 | ) | % | ||
| Asia | 67.1 | 75.2 | (10.8 | ) | % | (3.0 | ) | % | (7.8 | ) | % | ||
| OEM | 55.8 | 56.4 | (1.1 | ) | % | (0.4 | ) | % | (0.7 | ) | % | ||
| Total | $ | 567.0 | $ | 652.5 | (13.1 | ) | % | (1.1 | ) | % | (12.0 | ) | % |
| Six Months Ended | % Increase / (Decrease) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 28, 2020 | June 30, 2019 | Total Sales Growth | Currency Impact | Constant Currency Revenue Growth | |||||||||
| Americas | $ | 670.5 | $ | 717.8 | (6.6 | ) | % | (0.3 | ) | % | (6.3 | ) | % |
| EMEA | 287.8 | 301.6 | (4.6 | ) | % | (2.7 | ) | % | (1.9 | ) | % | ||
| Asia | 120.2 | 136.0 | (11.6 | ) | % | (3.2 | ) | % | (8.4 | ) | % | ||
| OEM | 119.2 | 110.7 | 7.7 | % | (0.6 | ) | % | 8.3 | % | ||||
| Total | $ | 1,197.7 | $ | 1,266.1 | (5.4 | ) | % | (1.2 | ) | % | (4.2 | ) | % |
Americas second quarter 2020 net revenues were $312.5 million, a decrease of 16.4% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 16.0% compared to the prior year period. The decrease in constant currency revenue was primarily attributable to a net decrease in sales volumes of existing products caused by the COVID-19 pandemic. We estimate that COVID-19 had a negative impact to revenue of approximately $89 million, or 24%.
EMEA second quarter 2020 net revenues were $131.6 million, a decrease of 10.5% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 8.0% compared to the prior year period. The decrease in constant currency revenue was primarily attributable to a net decrease in sales volumes of existing products caused by the COVID-19 pandemic. We estimate that COVID-19 had a negative impact to revenue of approximately $13 million, or 9%.
Asia second quarter 2020 net revenues were $67.1 million, a decrease of 10.8% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 7.8% compared to the prior year period. The decrease in constant currency revenue was primarily attributable to a net decrease in sales volumes of existing products caused by the COVID-19 pandemic. We estimate that COVID-19 had a negative impact to revenue of approximately $13 million, or 18%.
OEM second quarter 2020 net revenues were $55.8 million, a decrease of 1.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 0.7% compared to the prior year period. The decrease in constant currency revenue was primarily attributable to a decrease in sales volumes of existing products caused by the COVID-19 pandemic, partially offset by net revenues generated by IWG High Performance Conductors, Inc. (HPC). We estimate that COVID-19 had a negative impact to revenue of approximately $15 million, or 26%.
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 June 28, 2020 on both a GAAP and constant currency basis.
| Three Months Ended | % Increase / (Decrease) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 28, 2020 | June 30, 2019 | Total Revenue Growth | Currency Impact | Constant Currency Revenue Growth | |||||||||
| Vascular Access | $ | 164.9 | $ | 153.6 | 7.4 | % | (1.4 | ) | % | 8.8 | % | ||
| Interventional | 82.6 | 104.8 | (21.2 | ) | % | (0.9 | ) | % | (20.3 | ) | % | ||
| Anesthesia | 64.9 | 85.7 | (24.3 | ) | % | (1.3 | ) | % | (23.0 | ) | % | ||
| Surgical | 67.3 | 95.6 | (29.6 | ) | % | (1.2 | ) | % | (28.4 | ) | % | ||
| Interventional Urology | 40.1 | 68.0 | (40.9 | ) | % | (0.0 | ) | % | (40.9 | ) | % | ||
| OEM | 55.8 | 56.4 | (1.1 | ) | % | (0.4 | ) | % | (0.7 | ) | % | ||
| Other | 91.4 | 88.4 | 3.4 | % | (2.0 | ) | % | 5.4 | % | ||||
| Total | $ | 567.0 | $ | 652.5 | (13.1 | ) | % | (1.1 | ) | % | (12.0 | ) | % |
| Six Months Ended | % Increase / (Decrease) | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| June 28, 2020 | June 30, 2019 | Total Revenue Growth | Currency Impact | Constant Currency Revenue Growth | |||||||||
| Vascular Access | $ | 315.2 | $ | 297.5 | 5.9 | % | (1.4 | ) | % | 7.3 | % | ||
| Interventional | 182.5 | 208.0 | (12.2 | ) | % | (0.9 | ) | % | (11.3 | ) | % | ||
| Anesthesia | 140.6 | 166.0 | (15.3 | ) | % | (1.6 | ) | % | (13.7 | ) | % | ||
| Surgical | 142.7 | 182.3 | (21.7 | ) | % | (1.3 | ) | % | (20.4 | ) | % | ||
| Interventional Urology | 114.3 | 127.7 | (10.4 | ) | % | (0.0 | ) | % | (10.4 | ) | % | ||
| OEM | 119.2 | 110.7 | 7.7 | % | (0.6 | ) | % | 8.3 | % | ||||
| Other | 183.2 | 174.0 | 5.3 | % | (2.0 | ) | % | 7.3 | % | ||||
| Total | $ | 1,197.7 | $ | 1,266.1 | (5.4 | ) | % | (1.2 | ) | % | (4.2 | ) | % |
Second quarter 2020 net revenues from sales of Vascular Access products were $164.9 million, an increase of 7.4% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues increased 8.8% compared to the prior year period. We estimate that COVID-19 had a net positive impact to revenue of approximately $8 million, or 5%.
Second quarter 2020 net revenues from sales of Interventional products were $82.6 million, a decrease of 21.2% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 20.3% compared to the prior year period. We estimate that COVID-19 had a negative impact to revenue of approximately $25 million, or 24%.
Second quarter 2020 net revenues from sales of Anesthesia products were $64.9 million, a decrease of 24.3% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 23.0% compared to the prior year period. We estimate that COVID-19 had a negative impact to revenue of approximately $18 million, or 22%.
Second quarter 2020 net revenues from sales of Surgical products were $67.3 million, a decrease of 29.6% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 28.4% compared to the prior year period. We estimate that COVID-19 had a negative impact to revenue of approximately $28 million, or 30%.
Second quarter 2020 net revenues from sales of Interventional Urology products were $40.1 million, a decrease of 40.9% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 40.9% compared to the prior year period. We estimate that COVID-19 had a negative impact to revenue of approximately $58 million, or 85%.
Second quarter 2020 net revenues from sales of OEM products were $55.8 million, a decrease of 1.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 0.7% compared to the prior year period. We estimate that COVID-19 had a negative impact to revenue of approximately $15 million, or 26%.
Second quarter 2020 net revenues from sales of other products were $91.4 million, an increase of 3.4% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues increased 5.4% compared to the prior year period. We estimate that COVID-19 had a positive impact to revenue of approximately $6 million, or 6%.
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS
Depreciation expense, amortization of intangible assets and deferred financing charges for the six months ended June 28, 2020 totaled $115.1 million compared to $109.5 million for the six months ended June 30, 2019.
Cash and cash equivalents at June 28, 2020 were $553.5 million compared to $301.1 million at December 31, 2019.
Net accounts receivable at June 28, 2020 were $374.9 million compared to $418.7 million at December 31, 2019.
Net inventories at June 28, 2020 were $514.8 million compared to $476.6 million at December 31, 2019.
2020 WORKFORCE REDUCTION PLAN
During the second quarter of 2020, we committed to a workforce reduction designed to improve profitability and reduce cost primarily by streamlining certain sales and marketing functions in our EMEA segment and certain manufacturing operations in our OEM segment. The workforce reduction was initiated to further align the business with our high growth strategic objectives. We estimate that we will incur aggregate pre-tax restructuring charges of $10 million to $13 million, consisting primarily of termination benefits, and will result in future cash outlays. This plan will be substantially complete during 2020 and as a result most of these charges are expected to be incurred prior to the end of 2020. We expect to begin realizing plan-related savings in 2020 and expect to achieve annual pre-tax savings of $11 million to $13 million once the plans are fully implemented.
CONFERENCE CALL WEBCAST AND ADDITIONAL INFORMATION
As previously announced, Teleflex will comment on its financial results on a conference call to be held today at 8:00 a.m. (ET). The call will be available live and archived on the Company’s website at www.teleflex.com and the accompanying presentation will be posted prior to the call. An audio replay will be available until August 4, 2020 at 11:00am (ET), by calling 855-859-2056 (U.S./Canada) or 404-537-3406 (International), Passcode: 1778009.
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 - June 28, 2020 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cost of goods sold, excluding intangible asset amortization | 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 | $ | 288.7 | $ | 191.2 | $ | 29.4 | $19.0 | $ | 11.8 | $ | 11.4 | ||
| Adjustments | |||||||||||||
| Restructuring, restructuring related and impairment items (A) | 6.3 | 0.1 | — | 19.0 | 0.9 | 24.6 | |||||||
| Acquisition, integration and divestiture related items (B) | — | 16.9 | — | — | 0.2 | 16.7 | 0.35 | ||||||
| Other items (C) | — | 0.3 | — | — | 0.1 | 0.2 | — | ||||||
| MDR (D) | — | — | 2.7 | — | 0.0 | 2.7 | 0.06 | ||||||
| Intangible amortization expense (E) | 21.1 | 18.5 | 0.1 | — | 6.4 | 33.3 | |||||||
| Tax adjustments | — | — | — | — | (2.3 | ) | 2.3 | 0.05 | |||||
| Adjusted basis | $ | 261.2 | $ | 155.4 | $ | 26.6 | — | $ | 17.1 | $ | 91.3 |
All values are in US Dollars.
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
| Quarter Ended - June 30, 2019 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cost of goods sold, excluding intangible asset amortization | 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 | $ | 300.3 | $ | 215.5 | $ | 27.6 | $1.7 | $ | 3.8 | $ | 83.3 | |
| Adjustments | ||||||||||||
| Restructuring, restructuring related and impairment items (A) | 3.6 | 0.0 | 0.0 | 1.7 | 1.5 | 3.9 | ||||||
| Acquisition, integration and divestiture related items (B) | — | 12.6 | — | — | 0.0 | 12.6 | ||||||
| Other items (C) | — | 1.4 | — | — | 0.3 | 1.0 | ||||||
| MDR (D) | — | — | 0.3 | — | — | 0.3 | ||||||
| Intangible amortization expense (E) | 20.7 | 16.7 | 0.1 | — | 7.7 | 29.8 | ||||||
| Tax adjustments | — | — | — | — | 6.0 | (6.0) | (0.13) | |||||
| Adjusted basis | $ | 275.9 | $ | 184.8 | $ | 27.1 | — | $ | 19.3 | $ | 125.0 |
All values are in US Dollars.
| (A) | Restructuring, restructuring related and impairment items - For the three months ended June 28, 2020, pre-tax restructuring charges were $19.0 million, pre-tax restructuring related charges were $6.4 million; and there were no pre-tax impairment charges. For the three months ended June 30, 2019, pre-tax restructuring income was $2.2 million, pre-tax restructuring related charges were $3.7 million, and pre-tax impairment charges were $3.9 million. |
|---|---|
| (B) | Acquisition, integration and divestiture related items - For the three months ended June 28, 2020, these items primarily related to contingent consideration liabilities, and charges primarily related to our acquisition of IWG High Performance Conductors, Inc. For the three months ended June 30, 2019, these charges primarily related to contingent consideration liabilities and our acquisition of Essential Medical, Inc. There were no divestiture related activities for the three months ended June 28, 2020 or June 30, 2019. |
| --- | --- |
| (C) | Other items - For the three months ended June 28, 2020, other items included expenses associated with prior year tax matters. For the three months ended June 30, 2019, other items included debt modification costs and product relabeling costs. |
| --- | --- |
| (D) | MDR - These costs were associated with our efforts to comply with the European Medical Device Regulation. |
| --- | --- |
| (E) | Intangible amortization expense - For the three months ended June 28, 2020 and June 30, 2019, we reclassified intangible asset amortization expense of $21.1 million and $20.7 million, respectively, from selling, general and administrative expenses to cost of goods sold. |
| --- | --- |
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
| Year to Date Ended - June 28, 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 | Income taxes | Income (loss) from continuing operations | Diluted earnings per share from continuing operations | ||||||||
| GAAP Basis | $ | 585.7 | $ | 339.0 | $ | 56.8 | $20.4 | — | $ | 22.9 | $ | 142.6 | |||
| Adjustments | |||||||||||||||
| Restructuring, restructuring related and impairment items (A) | 11.2 | 0.3 | — | 20.4 | — | 1.6 | 30.2 | ||||||||
| Acquisition, integration and divestiture related items (B) | 1.7 | (27.4) | — | — | — | 0.6 | (26.3 | ) | ) | ||||||
| Other items (C) | — | 0.3 | — | — | — | 0.1 | 0.2 | 0.00 | |||||||
| MDR (D) | — | — | 4.5 | — | — | 0.0 | 4.5 | ||||||||
| Intangible amortization expense (E) | 42.0 | 36.4 | 0.2 | — | — | 12.6 | 66.0 | ||||||||
| Tax adjustments | — | — | — | — | — | (2.4) | 2.4 | 0.05 | |||||||
| Adjusted basis | $ | 530.7 | $ | 329.4 | $ | 52.1 | — | — | $ | 35.5 | $ | 219.6 |
All values are in US Dollars.
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
| Year to Date Ended - June 30, 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 | $ | 589.9 | $ | 422.4 | $ | 54.7 | $19.1 | ($2.7) | $ | 14.8 | $ | 125.2 | ||
| Adjustments | ||||||||||||||
| Restructuring, restructuring related and impairment items (A) | 6.7 | 0.0 | 0.0 | 19.1 | — | 3.4 | 22.4 | |||||||
| Acquisition, integration and divestiture related items (B) | — | 26.2 | — | — | (2.7) | (1.9) | 25.3 | |||||||
| Other items (C) | — | 2.4 | — | — | — | 0.6 | 1.8 | |||||||
| MDR (D) | — | — | 0.6 | — | — | — | 0.6 | |||||||
| Intangible amortization expense (E) | 41.5 | 33.6 | 0.2 | — | — | 15.4 | 59.9 | |||||||
| Tax adjustments | — | — | — | — | — | 5.3 | (5.3 | ) | (0.11) | |||||
| Adjusted basis | $ | 541.8 | $ | 360.2 | $ | 53.9 | — | — | $ | 37.6 | $ | 230.0 |
All values are in US Dollars.
| (A) | Restructuring, restructuring related and impairment items - For the six months ended June 28, 2020, pre-tax restructuring charges were $20.4 million, pre-tax restructuring related charges were $11.5 million; |
|---|
and there were no pre-tax impairment charges. For the six months ended June 30, 2019, pre-tax restructuring charges $12.2 million, pre-tax restructuring related charges were $6.7 million, and pre-tax impairment charges were $6.9 million.
| (B) | Acquisition, integration and divestiture related items - For the six months ended June 28, 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 six months ended June 30, 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 six months ended June 28, 2020 or June 30, 2019. |
|---|---|
| (C) | Other items - For the six months ended June 28, 2020, other items included expenses associated with prior year tax matters. For the six months ended June 30, 2019, other items included debt modification costs, expenses associated with a franchise tax audit, and product relabeling costs. |
| --- | --- |
| (D) | MDR - These costs were associated with our efforts to comply with the European Medical Device Regulation. |
| --- | --- |
| (E) | Intangible amortization expense - For the six months ended June 28, 2020 and June 30, 2019, we reclassified intangible asset amortization expense of $42.0 million and $41.5 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 diversified business model and in our ability to generate significant constant currency revenue growth, margin expansion, adjusted earnings per share and free cash flow growth over the long-term; estimated pre-tax restructuring charges we expect to incur, and estimated savings we expect to realize, in connection with our 2020 workforce reduction plan; and our expectations with respect to when we will incur the pre-tax restructuring charges and begin realizing savings associated with the 2020 workforce reduction plan and when the plan will be completed. 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 | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 28, 2020 | June 30, 2019 | June 28, 2020 | June 30, 2019 | |||||||||
| (Dollars and shares in thousands, except per share) | ||||||||||||
| Net revenues | $ | 567,034 | $ | 652,507 | $ | 1,197,676 | $ | 1,266,091 | ||||
| Cost of goods sold | 288,662 | 300,269 | 585,680 | 589,883 | ||||||||
| Gross profit | 278,372 | 352,238 | 611,996 | 676,208 | ||||||||
| Selling, general and administrative expenses | 191,193 | 215,500 | 338,989 | 422,421 | ||||||||
| Research and development expenses | 29,364 | 27,595 | 56,760 | 54,745 | ||||||||
| Restructuring and impairment charges | 19,005 | 1,685 | 20,351 | 19,080 | ||||||||
| Gain on sale of assets | — | — | — | (2,739 | ) | |||||||
| Income from continuing operations before interest and taxes | 38,810 | 107,458 | 195,896 | 182,701 | ||||||||
| Interest expense | 15,682 | 20,758 | 31,121 | 43,450 | ||||||||
| Interest income | (163 | ) | (472 | ) | (742 | ) | (811 | ) | ||||
| Income from continuing operations before taxes | 23,291 | 87,172 | 165,517 | 140,062 | ||||||||
| Taxes on income from continuing operations | 11,848 | 3,844 | 22,922 | 14,816 | ||||||||
| Income from continuing operations | 11,443 | 83,328 | 142,595 | 125,246 | ||||||||
| Operating income (loss) from discontinued operations | 22 | 61 | 18 | (1,282 | ) | |||||||
| Tax benefit (expense) on operating loss from discontinued operations | 9 | 14 | 7 | (308 | ) | |||||||
| Income (loss) from discontinued operations | 13 | 47 | 11 | (974 | ) | |||||||
| Net income | $ | 11,456 | $ | 83,375 | $ | 142,606 | $ | 124,272 | ||||
| Earnings per share: | ||||||||||||
| Basic: | ||||||||||||
| Income from continuing operations | $ | 0.25 | $ | 1.80 | $ | 3.07 | $ | 2.72 | ||||
| Income (loss) from discontinued operations | — | 0.01 | — | (0.02 | ) | |||||||
| Net income | $ | 0.25 | $ | 1.81 | $ | 3.07 | $ | 2.70 | ||||
| Diluted: | ||||||||||||
| Income from continuing operations | $ | 0.24 | $ | 1.77 | $ | 3.02 | $ | 2.67 | ||||
| Loss from discontinued operations | — | — | — | (0.03 | ) | |||||||
| Net income | $ | 0.24 | $ | 1.77 | $ | 3.02 | $ | 2.64 | ||||
| Weighted average common shares outstanding | ||||||||||||
| Basic | 46,442 | 46,172 | 46,412 | 46,111 | ||||||||
| Diluted | 47,242 | 47,036 | 47,237 | 46,989 |
TELEFLEX INCORPORATED
CONSOLIDATED BALANCE SHEETS
| June 28, 2020 | December 31, 2019 | |||
|---|---|---|---|---|
| (Dollars in thousands) | ||||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 553,535 | $ | 301,083 |
| Accounts receivable, net | 374,886 | 418,673 | ||
| Inventories | 514,755 | 476,557 | ||
| Prepaid expenses and other current assets | 94,381 | 97,943 | ||
| Prepaid taxes | 7,060 | 12,076 | ||
| Total current assets | 1,544,617 | 1,306,332 | ||
| Property, plant and equipment, net | 432,401 | 430,719 | ||
| Operating lease assets | 101,982 | 113,160 | ||
| Goodwill | 2,343,561 | 2,245,305 | ||
| Intangible assets, net | 2,260,863 | 2,156,285 | ||
| Deferred tax assets | 5,589 | 5,572 | ||
| Other assets | 76,117 | 52,447 | ||
| Total assets | $ | 6,765,130 | $ | 6,309,820 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities | ||||
| Current borrowings | $ | 83,000 | $ | 50,000 |
| Accounts payable | 107,140 | 102,916 | ||
| Accrued expenses | 103,557 | 100,466 | ||
| Current portion of contingent consideration | 25,243 | 148,090 | ||
| Payroll and benefit-related liabilities | 80,602 | 115,981 | ||
| Accrued interest | 6,887 | 5,514 | ||
| Income taxes payable | 18,340 | 6,692 | ||
| Other current liabilities | 31,846 | 33,396 | ||
| Total current liabilities | 456,615 | 563,055 | ||
| Long-term borrowings | 2,328,791 | 1,858,943 | ||
| Deferred tax liabilities | 488,968 | 439,558 | ||
| Pension and postretirement benefit liabilities | 60,866 | 82,719 | ||
| Noncurrent liability for uncertain tax positions | 12,381 | 10,294 | ||
| Noncurrent contingent consideration | 24,036 | 71,818 | ||
| Noncurrent operating lease liabilities | 91,917 | 101,372 | ||
| Other liabilities | 204,154 | 202,741 | ||
| Total liabilities | 3,667,728 | 3,330,500 | ||
| Commitments and contingencies | ||||
| Total shareholders' equity | 3,097,402 | 2,979,320 | ||
| Total liabilities and shareholders' equity | $ | 6,765,130 | $ | 6,309,820 |
TELEFLEX INCORPORATED
| CONSOLIDATED STATEMENTS OF CASH FLOWS | Six Months Ended | ||||||
|---|---|---|---|---|---|---|---|
| June 28, 2020 | June 30, 2019 | ||||||
| (Dollars in thousands) | |||||||
| Cash flows from operating activities of continuing operations: | |||||||
| Net income | $ | 142,606 | $ | 124,272 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| (Income) loss from discontinued operations | (11 | ) | 974 | ||||
| Depreciation expense | 34,461 | 31,966 | |||||
| Intangible asset amortization expense | 78,638 | 75,285 | |||||
| Deferred financing costs and debt discount amortization expense | 1,984 | 2,249 | |||||
| Gain on sale of assets | — | (2,739 | ) | ||||
| Fair value step up of acquired inventory sold | 1,707 | — | |||||
| Changes in contingent consideration | (29,951 | ) | 25,456 | ||||
| Stock-based compensation | 8,482 | 12,700 | |||||
| Impairment of long-lived assets | — | 6,911 | |||||
| Deferred income taxes, net | 1,055 | (5,495 | ) | ||||
| Payments for contingent consideration | (79,771 | ) | (26,092 | ) | |||
| Interest benefit on swaps designated as net investment hedges | (9,805 | ) | (8,799 | ) | |||
| Other | (18,981 | ) | 4,272 | ||||
| Changes in assets and liabilities, net of effects of acquisitions and disposals: | |||||||
| Accounts receivable | 45,843 | (19,747 | ) | ||||
| Inventories | (34,875 | ) | (33,970 | ) | |||
| Prepaid expenses and other assets | 11,819 | (6,381 | ) | ||||
| Accounts payable, accrued expenses and other liabilities | (26,449 | ) | (6,231 | ) | |||
| Income taxes receivable and payable, net | 7,257 | (17,347 | ) | ||||
| Net cash provided by operating activities from continuing operations | 134,009 | 157,284 | |||||
| Cash flows from investing activities of continuing operations: | |||||||
| Expenditures for property, plant and equipment | (39,052 | ) | (56,107 | ) | |||
| Proceeds from sale of assets | 400 | 1,178 | |||||
| Payments for businesses and intangibles acquired, net of cash acquired | (265,895 | ) | (1,025 | ) | |||
| Net interest proceeds on swaps designated as net investment hedges | 9,986 | 8,330 | |||||
| Net cash used in investing activities from continuing operations | (294,561 | ) | (47,624 | ) | |||
| Cash flows from financing activities of continuing operations: | |||||||
| Proceeds from new borrowings | 1,010,000 | 25,000 | |||||
| Reduction in borrowings | (500,000 | ) | (52,500 | ) | |||
| Debt extinguishment, issuance and amendment fees | (7,727 | ) | (4,703 | ) | |||
| Net proceeds from share based compensation plans and the related tax impacts | 2,668 | 7,829 | |||||
| Payments for contingent consideration | (60,947 | ) | (111,928 | ) | |||
| Dividends paid | (31,558 | ) | (31,347 | ) | |||
| Net cash provided by (used in) financing activities from continuing operations | 412,436 | (167,649 | ) | ||||
| Cash flows from discontinued operations: | |||||||
| Net cash (used in) provided by operating activities | (317 | ) | 2,799 | ||||
| Net cash (used in) provided by discontinued operations | (317 | ) | 2,799 | ||||
| Effect of exchange rate changes on cash and cash equivalents | 885 | 1,925 | |||||
| Net increase (decrease) in cash and cash equivalents | 252,452 | (53,265 | ) | ||||
| Cash and cash equivalents at the beginning of the period | 301,083 | 357,161 | |||||
| Cash and cash equivalents at the end of the period | $ | 553,535 | $ | 303,896 |
ex992to73020208kreq22020
Exhibit 99.2 Teleflex Incorporated Second 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 1778009 2
Today’s Speakers Liam Kelly Chairman, 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, estimated pre-tax charges we expect to incur in connection with the workforce reduction plan we commenced in the second quarter of 2020 (the “2020 workforce reduction plan”) and our ongoing restructuring programs; estimated annualized pre-tax savings we expect to realize in connection with the 2020 workforce reduction plan, 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 the 2020 workforce reduction plan, our ongoing restructuring programs and the OEM initiative and when those plans and programs will be substantially completed; our assumptions with respect to the euro to U.S. dollar exchange rate for 2020 and our adjusted weighted average shares for 2020; 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 second 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 June 28, 2020 located in the investor section of our website at www.teleflex.com and our Quarterly Report on Form 10-Q for the quarter ended June 28, 2020 to be filed with the Securities and Exchange Commission. Unless otherwise noted, the following slides reflect continuing operations. 4
Executive Overview Liam Kelly Chairman, President and CEO 5
2Q 2020 Highlights • Q2 revenue and adjusted earnings per share significantly better than internal expectations Q2 Summary • New workforce reduction plan announced to further improve long-term profitability • Management estimates that COVID-19 had a net Business Performance negative impact to revenue of approximately $130 million, or 20% • Adverse revenue impact of approximately $144 million across several global product categories, somewhat offset by increased demand of COVID-19 Impact approximately $14 million within Vascular Access and All Other product categories • Improving monthly revenue trends for Interventional Urology, Interventional Access and Surgical product categories as quarter progressed 6
2Q 2020 Financial Results Revenue Highlights • 2Q20 as reported revenue decreased 13.1% versus 2Q19 • 2Q20 constant currency revenue decreased 12.0% versus 2Q19 • Management estimates that COVID-19 had a net negative impact of approximately $130 million, or 20% Global Product Revenue Drivers1 • Vascular Access revenue of $164.9 million, up 8.8% vs 2Q19, driven by sales of CVCs and EZ-IO; includes estimated positive impact from COVID-19 of approximately 5% • Other2 revenue of $91.4 million, up 5.4% vs 2Q19, led by higher respiratory product volumes; includes estimated positive impact from COVID-19 of approximately 6% • Interventional Urology revenue of $40.1 million, down 40.9% vs 2Q 19; includes estimated negative impact from COVID-19 of approximately 85% Adjusted Margin and Adjusted EPS Highlights • Adjusted gross margin of 53.9%, down 380 bps versus 2Q19 • Adjusted operating margin of 21.8%, down 340 bps versus 2Q19 • Adjusted EPS of $1.93, down 27.4% as compared to prior year period 1. All global product family revenue growth provided is on a constant currency basis 2. Includes revenues generated from sales of the Company’s respiratory and urology products (other than interventional urology products) 7 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.
COVID-19 Update • Estimated 2Q COVID-19 net revenue headwind of ~ $130 million, or ~20% • Vascular Access: + ~ $8 million • Interventional Access: - ~ $25 million • Anesthesia: - ~ $18 million • Surgical: - ~ $28 million • Interventional Urology: - ~ $58 million • OEM: -~ $15 million • Other: + ~ $6 million • Improving monthly revenue trends for businesses most impacted by COVID-19 as quarter progressed • Year-over-year Interventional Urology revenue down ~79% in April; ~30% in May; ~8% in June • Year-over-year Interventional Access revenue down ~30% in April; ~28% in May; ~2% in June • Year-over-year Surgical revenue down ~34% in April; ~31% in May; ~21% in June • Due to uncertainty of the scope and duration of COVID-19 pandemic, not reinstating 2020 financial guidance 8
2Q20 Segment Revenue Review As- Constant Estimated Dollars Q2’20 Q2’19 Reported Currency Currency COVID-19 in Millions Revenue Revenue Revenue Impact Growth Impact Growth Americas $312.5 $373.8 (16.4%) (0.4%) (16.0%) (~24%) EMEA $131.6 $147.1 (10.5%) (2.5%) (8.0%) (~9%) Asia $67.1 $75.2 (10.8%) (3.0%) (7.8%) (~18%) OEM $55.8 $56.4 (1.1%) (0.4%) (0.7%) (~26%) TOTAL $567.0 $652.5 (13.1%) (1.1%) (12.0%) (~20%) 9
2Q20 Global Product Category Revenue Review As- Constant Estimated Dollars Q2’20 Q2’19 Reported Currency Currency COVID-19 in Millions Revenue Revenue Revenue Impact Growth Impact Growth Vascular Access $164.9 $153.6 7.4% (1.4%) 8.8% ~5% Interventional $82.6 $104.8 (21.2%) (0.9%) (20.3%) (~24%) Anesthesia $64.9 $85.7 (24.3%) (1.3%) (23.0%) (~22%) Surgical $67.3 $95.6 (29.6%) (1.2%) (28.4%) (~30%) Interventional $40.1 $68.0 (40.9%) (0.0%) (40.9%) (~85%) Urology OEM $55.8 $56.4 (1.1%) (0.4%) (0.7%) (~26%) Other $91.4 $88.4 3.4% (2.0%) 5.4% ~6% TOTAL $567.0 $652.5 (13.1%) (1.1%) (12.0%) (~20%) 10 1. Includes revenues generated from sales of the Company’s respiratory and urology products (other than interventional urology products).
Clinical and Commercial Updates Int. Urology: UroLift® System KEY TAKEAWAYS • Two studies presented at AUA 2020 Virtual Science Event o 1) Results from a meta-analysis of patients’ sexual function following treatment with the UroLift System versus medical therapy 1 o 2) Analysis compared patient outcomes from the large Real World Retrospective study to those found in the L.I.F.T. pivotal trial and P.U.L.S.A.R. urinary retention trial 2 • Study comparing patient experience of those treated with the UroLift System to those who received the Rezum steam UroLift® System UroLift® System injection were published in the Canadian Journal of Urology 3 Permanent Implant Delivery Device o Compared 53 non-retention patients from two U.S. sites who received treatment with either the UroLift System or tissue ablation with the Rezum steam injection o Early post-operative results showed positive differences for patients treated with the UroLift System compared to Rezum, including better sexual function outcomes, less interference in daily activities and higher patient satisfaction 11 1. Roehrborn C.G. & Rukstalis D.M., Virtual AUA 2020 2. Eure et al. Virtual AUA 2020 3. Tutrone R. & Schiff W. CJU 2020
Clinical and Commercial Updates Int. Urology: UroLift® System KEY TAKEAWAYS • FDA 510(k) clearance for UroLift® ATC™ System o An enhanced delivery device that facilitates advanced tissue control for challenging anatomies such as an obstructive median lobe and large lateral lobes before implant deployment o Market Acceptance Test scheduled for late 2020 • National DTC Campaign Commenced o Began in early July and is expected to run through early 4Q 2020 UroLift® ATC System o Initial results encouraging • Significant milestone reached o To date, clinicians have used the UroLift System to treat more than 200,000 patients globally for BPH* 12 * = Management estimate based on product sales and average units per procedure.
Clinical and Commercial Updates Interventional: CTO-PCI IDE Study KEY TAKEAWAYS • CTO-PCI IDE Study o Prospective, single-arm IDE study targeting 150 patients across ~15 US sites, to evaluate the performance of Teleflex coronary guidewires and specialty catheters in Chronic Total Occlusion (CTO) percutaneous coronary intervention (PCI) procedures o Study devices include GuideLiner® V3 catheter, TrapLiner® catheter, Turnpike® catheter, and a series of five coronary guidewires (Spectre™ Guidewire, R350™ Guidewire, Raider™ Guidewire, Warrior™ Guidewire and Bandit™ Guidewire) 1 o 6 sites currently open and 14 patients have been enrolled to date 1 = Each study device is currently commercially available in the US under a more general indication. These products are 13 investigational devices for clinical evaluation as used in the CTO-PCI study.
Financial Overview Thomas Powell Executive VP and CFO 14
2Q20 Financial Review Global revenue of $567.0 million • Decreased 13.1% vs. prior year period on an as-reported basis • Decreased 12.0% vs. prior year period on a constant currency basis Gross margin • GAAP gross margin of 49.1%, down 490 bps vs. prior year period • Adjusted gross margin of 53.9%, down 380 bps vs. prior year period Operating margin • GAAP operating margin of 6.8%, down 970 bps vs. prior year period • Adjusted operating margin of 21.8%, down 340 bps vs. prior year period Effective tax rate • GAAP tax rate of 50.9%, compared to 4.4% in prior year period • Adjusted tax rate of 15.8%, up 240 bps vs. prior year period Earnings per share • GAAP EPS of $0.24 vs. $1.77 in prior year period • Adjusted EPS of $1.93, down 27.4% vs. prior year period 15 Note: See appendices for reconciliations of non-GAAP information
2020 Workforce Reduction Plan Announced • During the second quarter of 2020, we committed to a workforce reduction designed to improve profitability and reduce cost primarily by streamlining certain sales and marketing functions in our EMEA segment and certain manufacturing operations in our OEM segment. The workforce reduction was initiated to further align the business with our high growth strategic objectives. • We estimate that we will incur aggregate pre-tax restructuring charges of $10 million to $13 million, consisting primarily of termination benefits, and will result in future cash outlays. This plan will be substantially complete during 2020 and as a result most of these charges are expected to be incurred prior to the end of 2020. • We expect to begin realizing plan-related savings in 2020 and expect to achieve annual pre-tax savings of $11 million to $13 million once the plans are fully implemented. 16
Key Takeaways • Teleflex delivered solid performance in the second quarter of 2020 on an underlying basis • Remain committed to managing business resources prudently during the COVID-19 global pandemic • Poised to accelerate growth as interventional urology, interventional access, and surgical procedures continue to recover 17
Question and Answer Section 18
THANK YOU 19
Appendices 20
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. 21
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 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. 22
Appendix A – Reconciliation of Adjusted Gross and Operating Margin, Income Tax and EPS (Dollars in millions, except per share data) Three Months Ended June 28, 2020 Quarter Ended - June 30, 2019 Income Income Gross Operating Income Tax Diluted Earnings Gross Operating Income Tax Diluted Earnings Before Before Margin Margin Expense Per Share Margin Margin Expense Per Share Income Taxes Income Taxes GAAP Basis 49.1% 6.8% $23.3 $11.8 $0.24 GAAP Basis 54.0% 16.5% $87.2 $3.8 $1.77 Adjustments Adjustments Restructuring, restructuring related Restructuring, restructuring related 1.1% 4.5% 25.4 0.9 $0.52 0.6% 0.8% 5.3 1.5 $0.08 and impairment items (A) and impairment items (A) Acquisition, integration and Acquisition, integration and — 3.0% 16.9 0.2 $0.35 — 1.9% 12.6 0.0 $0.27 divestiture related items (B) divestiture related items (B) Other items (C) — 0.1% 0.3 0.1 — Other items (C) — 0.2% 1.4 0.3 $0.02 MDR (D) — 0.5% 2.7 — $0.06 MDR (D) — 0.1% 0.3 0.0 $0.01 Intangible amortization expense (E) 3.7% 7.0% 39.7 6.4 $0.71 Intangible amortization expense (E) 3.2% 5.8% 37.5 7.7 $0.63 Tax adjustments — — - -2.3 $0.05 Tax adjustments — 0.0% - 6.0 -$0.13 Adjustments total 4.8% 15.0% 85.0 5.3 $1.69 Adjustments total 3.7% 8.7% 57.2 15.5 $0.88 Adjusted basis 53.9% 21.8% 17.1 $1.93 Adjusted basis 57.7% 25.2% 19.3 $2.66 Year to date Ending June 28, 2020 Year to Date Ended - June 30, 2019 Income Income Gross Operating Income Tax Diluted Earnings Gross Operating Income Tax Diluted Earnings Before Before Margin Margin Expense Per Share Margin Margin Expense Per Share Income Taxes Income Taxes GAAP Basis 51.1% 16.4% $165.5 $22.9 $ 3.02 GAAP Basis 53.4% 14.4% $140.1 $14.8 $2.67 Adjustments Adjustments Restructuring, restructuring related Restructuring, restructuring related 0.9% 2.7% 31.9 1.6 $ 0.64 0.5% 2.0% 25.8 3.4 $0.48 and impairment items (A) and impairment items (A) Acquisition, integration and Acquisition, integration and 0.1% -2.1% (25.7) 0.6 $ (0.56) — 1.9% 23.4 (1.9) $0.54 divestiture related items (B) divestiture related items (B) Other items (C) — — 0.3 0.1 $ - Other items (C) — 0.2% 2.4 0.6 $0.04 MDR (D) — 0.4% 4.5 — $ 0.09 MDR (D) — — 0.6 — $0.01 Intangible amortization expense (E) 3.5% 6.6% 78.6 12.6 $ 1.40 Intangible amortization expense (E) 3.3% 5.9% 75.3 15.4 $1.27 Tax adjustments — — (0.0) (2.4) $ 0.05 Tax adjustments — — - 5.3 -$0.11 Adjustments total 4.6% 7.4% 89.6 12.5 $ 1.62 Adjustments total 3.8% 10.1% 127.6 22.8 $2.23 Adjusted basis 55.7% 23.8% 35.5 $4.65 Adjusted basis 57.2% 24.5% 37.6 $4.90 23 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 EPS from Continuing Operations Three Months Ended June 28, 2020 (Dollars in Millions, except per share data) Diluted earnings per Cost of goods sold, Selling, general and Research and Income (loss) from Restructuring and share from excluding intangible administrative development Income taxes continuing impairment charges continuing asset amortization expenses expenses operations operations GAAP Basis $288.7 $191.2 $29.4 $19.0 $11.8 $11.4 $0.24 Adjustments Restructuring, restructuring related 6.3 0.1 — 19.0 0.9 24.6 $0.52 and impairment items (A) Acquisition, integration and — 16.9 — — 0.2 16.7 $0.35 divestiture related items (B) Other items (C) — 0.3 — — 0.1 0.2 — MDR Costs (D) — — 2.7 — 0.0 2.7 $0.06 Intangible amortization expense (E) 21.1 18.5 0.1 — 6.4 33.3 $0.71 Tax adjustments — — — — (2.3) 2.3 $0.05 Total Adjustments 27.4 35.8 2.8 19.0 5.3 79.8 $1.69 Adjusted basis $1.93 24 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 EPS from Continuing Operations Three Months Ended June 30, 2019 (Dollars in Millions, except per share data) Cost of goods sold, Selling, general and Research and Income (loss) from Diluted earnings per Restructuring and excluding intangible administrative development Income taxes continuing share from continuing impairment charges asset amortization expenses expenses operations operations GAAP Basis $300.3 $215.5 $27.6 $1.7 $3.8 $83.3 $1.77 Adjustments Restructuring, restructuring related 3.6 0.0 0.0 1.7 1.5 3.9 $0.08 and impairment items (A) Acquisition, integration and — 12.6 — — 0.0 12.6 $0.27 divestiture related items (B) Other items (C) — 1.4 — — 0.3 1.0 $0.02 MDR Costs (D) — — 0.3 — — 0.3 $0.01 Intangible amortization expense (E) 20.7 16.7 0.1 — 7.7 29.8 $0.63 Tax adjustments — — — — 6.0 (6.0) ($0.13) Total Adjustments 24.3 30.7 0.5 1.7 15.5 41.7 $0.88 Adjusted basis $2.66 25 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 YTD Period Ended June 28, 2020 (Dollars in Millions, except per share data) Diluted earnings per Cost of goods sold, Selling, general and Research and Income (loss) from Restructuring and share from excluding intangible administrative development Income taxes continuing impairment charges continuing asset amortization expenses expenses operations operations GAAP Basis $585.7 $339.0 $56.8 $20.4 $22.9 $142.6 $3.02 Adjustments Restructuring, restructuring related 11.2 0.3 — 20.4 1.6 30.2 $0.64 and impairment items (A) Acquisition, integration and 1.7 (27.4) — — 0.6 (26.3) ($0.56) divestiture related items (B) Other items (C) — 0.3 — — 0.1 0.2 — MDR (D) — — 4.5 — 0.0 4.5 $0.09 Intangible amortization expense (E) 42.0 36.4 0.2 — 12.6 66.0 $1.40 Tax adjustments — — — — (2.4) 2.4 $0.05 Total Adjustments 54.9 9.6 4.7 20.4 12.5 77.0 $1.62 Adjusted basis $4.65 26 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 YTD Period Ended– June 30, 2019 (Dollars in Millions, except per share data) Diluted earnings per Cost of goods sold, Selling, general and Research and (Gain) loss on sale Income (loss) from Restructuring and share from excluding intangible administrative development of business and Income taxes continuing impairment charges continuing asset amortization expenses expenses assets operations operations GAAP Basis $589.9 $422.4 $54.7 $19.1 (2.7) $14.8 $125.2 $2.67 Adjustments Restructuring, restructuring related 6.7 0.0 0.0 19.1 — 3.4 22.4 $0.48 and impairment items (A) Acquisition, integration and — 26.2 — — (2.7) (1.9) 25.3 $0.54 divestiture related items (B) Other items (C) — 2.4 — — — 0.6 1.8 $0.04 MDR Costs (D) — — 0.6 — — — 0.6 $0.01 Intangible amortization expense (E) 41.5 33.6 0.2 — — 15.4 59.9 $1.27 Tax adjustments — — — — — 5.3 (5.3) ($0.11) Total Adjustments 48.1 62.2 0.9 19.1 (2.7) 22.8 104.8 $2.23 Adjusted basis $4.90 27 See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions.
Appendix A, B, C, D, E tickmarks (A) Restructuring, restructuring related and impairment items – For the three months ended June 28, 2020, pre-tax restructuring charges were $19.0 million, pre-tax restructuring related charges were $6.4 million; there were no pre-tax impairment charges. For the three months ended June 30, 2019, pre-tax restructuring income was $2.2 million, pre-tax restructuring related charges were $3.7 million, and pre-tax impairment charges were $3.9 million. For the six months ended June 28, 2020, pre-tax restructuring charges were $20.4 million and pre-tax restructuring related charges were $11.5 million. For the six months ended June 30, 2019, pre-tax restructuring charges were $12.2 million, pre-tax restructuring related charges were $6.7 million, and pre-tax impairment charges were $6.9 million. (B) Acquisition, integration and divestiture related items – For the three months ended June 28, 2020, these items primarily related to contingent consideration liabilities, and charges primarily related to our acquisition of IWG High Performance Conductors, Inc. For the three months ended June 30, 2019, these charges primarily related to contingent consideration liabilities and our acquisition of Essential Medical, Inc. There were no divestiture related activities for the three months ended June 28, 2020 and June 30, 2019. For the six months ended June 28, 2020, these charges primarily related to contingent consideration liabilities related to NeoTract and Essential Medical. For the six months ended June 30, 2019, these charges primarily related to contingent consideration liabilities and our acquisition of Essential Medical, somewhat offset by the gain on sale of a divested business. (C) Other items – For the three months ended June 28, 2020, other items included expenses associated with prior year tax matters. For the three months ended June 30, 2019, other items included debt modification costs and product relabeling costs. For the six months ended June 28, 2020, other items included expenses associated with prior year tax matters. For the six months ended June 30, 2019, other items primarily included debt modification costs, expenses associated with a franchise tax audit, and product relabeling costs. (D) MDR – These costs were associated with our efforts to comply with the European Medical Device Regulation (MDR). (E) Intangible amortization expense – For the three months ended June 28, 2020 and June 30, 2019, we reclassified intangible asset amortization expense of $21.1 million and $20.7 million, respectively, from selling, general and administrative expenses to cost of goods sold. For the six months ended June 28, 2020 and June 30, 2019, we reclassified intangible asset amortization expense of $42.0 million and $41.5 million, respectively, from selling, general and administrative expenses to cost of goods sold. 28 See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions.
Appendix F – 2020 Financial Outlook Assumptions • Foreign Exchange: Euro to U.S. Dollar exchange rate assumed to be approximately 1.10 for full year 2020 (1.11 as of the 1Q 2020 earnings) • Share count: Adjusted weighted average shares expected to be approximately 47.3 million for full year 2020 (47.5 million as of 1Q 2020 earnings) • 2020 calendar of shipping days: • Q1’20 vs. Q1’19: 1 less day • Q2’20 vs. Q2’19: no difference • Q3’20 vs. Q3’19: no difference • Q4’20 vs. Q4’19: 2 additional days 29
Appendix G – Restructuring and Similar Cost Savings Initiatives Summary During the second quarter of 2020, we committed to workforce reduction designed to improve profitability and reduce cost primarily by streamlining certain sales and marketing functions in our EMEA segment and certain manufacturing operations in our OEM segment. The workforce reduction was initiated to further align the business with our high growth strategic objective. We estimate that we will incur aggregate pre-tax restructuring charges of $10 million to $13 million, consisting primarily of termination benefits, and will result in future cash outlays. This plan will be substantially complete during 2020 and as a result most of these charges are expected to be incurred prior to the end of 2020. We expect to begin realizing plan-related savings in 2020 and expect to achieve annual pre-tax savings of $11 million to $13 million once the plans are fully implemented In addition to the 2020 workforce reduction plan, 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 was initiated in 2018 and does 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, 2024 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, 2024. 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 associated with the development and qualification of a component included in certain kits sold by our anesthesia business in North America 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. Actual results Estimated remaining from January 1, 2020 through Dollars in Millions Estimated Total through December 31, 2024 December 31, 2019 Restructuring charges1 $103 -$124 $83 $20 -$41 Restructuring related charges2 $118 -$144 $46 $72 -$98 Total charges3 $221 -$268 $129 $92 -$139 OEM initiative annual pre-tax savings $6 -$7 $1 $5 -$6 Pre-tax savings – 2020 Workforce reduction plan 4 $11 -$13 – $11 -$13 Pre-tax savings – ongoing restructuring plans 5,6 $68 -$78 $25 $43 -$53 Total annual pre-tax savings $85 -$98 $26 $59 -$72 30
Appendix G Footnotes (1) Includes estimated charges associated with the 2020 Workforce reduction plan of $10 million to $13 million. (2) 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. (3) In addition to the impacts of the 2020 Workforce reduction plan initiated during the second quarter of 2020, the estimated ranges for restructuring, restructuring related and total charges have been adjusted to reflect changes in estimates related primarily to termination benefits and transfer validation associated with the ongoing restructuring programs. The prior range of total charges for the ongoing restructuring plans was $205 million to $255 million as compared to the current range of $211 million to $255 million. (4) Most all of the pre-tax savings are expected to result in reductions to selling, general and administrative expenses. (5) Substantially all of the pre-tax savings are expected to result in reductions to cost of goods sold. (6) We estimate the annual pre-tax savings associated with our 2019 and 2014 realignment plans will be $15 million to $17 million and $28 million to $31 million, respectively, compared to our prior estimates of $12 million to $14 million and $26 million to $29 million, respectively. The increases in the savings ranges are the result of additional cost reduction measures and changes in assumptions identified as the programs progressed. 31
Appendix H – June 2020 Year-to-Date GPO and IDN Review Group Purchasing Organization Update 1Q20 2Q20 Renewed agreements 2 8 New agreements 1 0 Existing agreements lost 0 0 IDN Update 1Q20 2Q20 Renewed agreements 6 2 New agreements 7 6 Existing agreements lost 1 0 32