8-K
TELEFLEX INC (TFX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| Date of Report (Date of Earliest Event Reported) | April 29, 2021 |
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TELEFLEX INCORPORATED
(Exact name of Registrant as Specified in Its Charter)
| Delaware | 1-5353 | 23-1147939 | ||||||
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| (State or Other Jurisdiction<br><br>of Incorporation or Organization) | (Commission File Number) | (IRS Employer<br><br>Identification No.) | 550 E. Swedesford Rd., Suite 400 | Wayne, | PA | 19087 | ||
| --- | --- | --- | --- | --- | ||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
| Registrant’s Telephone Number, Including Area Code | (610) | 225-6800 | Not applicable | |||||
| --- | ||||||||
| (Former Name or Former Address, If Changed Since Last Report) | Securities registered pursuant to Section 12(b) of the Act: | |||||||
| --- | --- | --- | --- | |||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, par value $1 per share | TFX | New York Stock Exchange |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
f an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On April 29, 2021, Teleflex Incorporated (the “Company”) issued a press release (the “Press Release”) announcing its financial results for the quarter ended March 28, 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 April 29, 2021 to discuss its financial results for the quarter ended March 28, 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 8.01 Other Events.
Redemption of 4.875% Senior Notes due 2026
On April 29, 2021, the Company issued a notice of redemption to holders of its outstanding $400,000,000 aggregate principal amount of 4.875% Senior Notes due 2026 (the “2026 Notes”). Pursuant to the notice of redemption, the 2026 Notes will be redeemed on June 1, 2021 (the “Redemption Date”) at a redemption price equal to 102.438% of the principal amount of the 2026 Notes plus accrued and unpaid interest up to, but not including, the Redemption Date (the “Redemption Price”). The notice of redemption provides that the redemption is subject to the condition that the Company is able to borrow funds under its revolving credit agreement on the Redemption Date in an amount sufficient to pay the aggregate Redemption Price on the Redemption Date.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1 Earnings Press Release, datedApril 29, 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: April 29, 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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EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | Earnings Press Release, dated April 29, 2021 |
| 99.2 | Earnings Conference Call Slide Presentation |
Document
Exhibit 99.1
| Contact: | Jake Elguicze<br><br>Treasurer and Vice President of Investor Relations<br><br>610-948-2836 |
|---|---|
| FOR IMMEDIATE RELEASE | April 29, 2021 |
| --- | --- |
TELEFLEX REPORTS FIRST QUARTER 2021 RESULTS
First quarter 2021 revenues of $633.9 million, up 0.5% versus prior year period on an as-reported basis; down 2.6% on a constant currency basis
First quarter 2021 GAAP diluted EPS from continuing operations of $1.58, compared to $2.78 in the prior year period
First quarter 2021 adjusted diluted EPS from continuing operations of $2.87, up 5.5% versus prior year period
Raises 2021 guidance range for GAAP revenue growth from a range of between 10.0% and 11.5% to a range of between 10.50% and 11.75%
Raises 2021 guidance range for constant currency revenue growth from a range of between 8.0% and 9.5% to a range of between 8.50% and 9.75%
Lowers 2021 guidance range for GAAP diluted EPS from continuing operations from a range of between $8.15 and $8.25 to a range of between $8.00 and $8.10
Raises 2021 guidance range for adjusted diluted EPS from continuing operations from a range of between $12.50 and $12.70 to a range of between $12.65 and $12.85
Announces 2021 Restructuring Plan
Wayne, PA -- Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced financial results for the first quarter ended March 28, 2021.
First quarter 2021 net revenues were $633.9 million, an increase of 0.5% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues decreased 2.6% over the year ago period.
First quarter 2021 GAAP earnings per share from continuing operations decreased 43.2% to $1.58, compared to $2.78 in the prior year period. First quarter 2021 adjusted diluted earnings per share from continuing operations increased 5.5% to $2.87, compared to $2.72 in the prior year period.
Liam Kelly, Chairman, President and Chief Executive Officer, said, “The first quarter of 2021 was a strong start to the year for Teleflex, one in which we exceeded our expectations for revenue, led by the performance of the Americas and Asia."
Mr. Kelly continued, "In addition to strong first quarter top-line performance, we generated the highest adjusted gross and operating margins since becoming a pure-play medical device company, resulting in an adjusted earnings per share amount of $2.87, which also exceeded expectations."
Mr. Kelly concluded, "Based on our results for the first quarter, as well as our outlook for the remainder of the year, we are raising our full year constant currency revenue guidance range and our full year adjusted earnings per share guidance range."
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 months ended March 28, 2021 on both a GAAP and constant currency basis. The discussion below the tables of the principal factors behind changes in net revenues for the three months ended March 28, 2021 as compared to the prior year period applies to both GAAP revenue and constant currency revenue, although GAAP revenue also was affected by foreign currency exchange rate fluctuations, as indicated in the "Currency Impact" column of the table.
| Three Months Ended | % Increase / (Decrease) | ||||||
|---|---|---|---|---|---|---|---|
| March 28, 2021 | March 29, 2020 | Total Sales Growth | Currency Impact | Constant Currency Revenue Growth | |||
| Americas | $ | 375.5 | $ | 358.0 | 4.9% | 0.2% | 4.7% |
| EMEA | 141.2 | 156.1 | (9.5)% | 7.4% | (16.9)% | ||
| Asia | 63.7 | 53.1 | 19.9% | 9.6% | 10.3% | ||
| OEM | 53.5 | 63.4 | (15.6)% | 1.5% | (17.1)% | ||
| Total | $ | 633.9 | $ | 630.6 | 0.5% | 3.1% | (2.6)% |
Americas first quarter 2021 net revenues were $375.5 million, an increase of 4.9% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues increased 4.7% compared to the prior year period. The increase in constant currency revenue was primarily attributable to revenue generated by the acquisition of Z-Medica, LLC and an increase in sales of new products, partially offset by a net decrease in sales volumes of existing products caused by the COVID-19 pandemic.
EMEA first quarter 2021 net revenues were $141.2 million, a decrease of 9.5% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues decreased 16.9% 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.
Asia first quarter 2021 net revenues were $63.7 million, an increase of 19.9% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues increased 10.3% compared to the prior year period. The increase in constant currency revenue was primarily attributable to increased sales of new products and increased sales volumes of existing products.
OEM first quarter 2021 net revenues were $53.5 million, a decrease of 15.6% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues decreased 17.1% 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 the acquisition of IWG High Performance Conductors, Inc.
NET REVENUE BY GLOBAL PRODUCT CATEGORY
The following tables and commentary provide information regarding net revenues in each of the Company's global product categories for the three months ended March 28, 2021 on both a GAAP and constant currency basis.
| Three Months Ended | % Increase / (Decrease) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| March 28, 2021 | March 29, 2020 | Total Revenue Growth | Currency Impact | Constant Currency Revenue Growth | ||||||
| Vascular Access | $ | 164.0 | $ | 150.3 | 9.1 | % | 3.3 | % | 5.8 | % |
| Interventional | 96.2 | 99.9 | (3.8) | % | 2.6 | % | (6.4) | % | ||
| Anesthesia | 84.9 | 75.7 | 12.1 | % | 5.1 | % | 7.0 | % | ||
| Surgical | 80.4 | 75.4 | 6.6 | % | 4.3 | % | 2.3 | % | ||
| Interventional Urology | 73.4 | 74.2 | (1.1) | % | 0.2 | % | (1.3) | % | ||
| OEM | 53.5 | 63.4 | (15.6) | % | 1.5 | % | (17.1) | % | ||
| Other | 81.7 | 91.7 | (11.0) | % | 4.3 | % | (15.3) | % | ||
| Total | $ | 633.9 | $ | 630.6 | 0.5 | % | 3.1 | % | (2.6) | % |
First quarter 2021 net revenues from sales of Vascular Access products were $164.0 million, an increase of 9.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues increased 5.8% compared to the prior year period.
First quarter 2021 net revenues from sales of Interventional products were $96.2 million, a decrease of 3.8% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues decreased 6.4% compared to the prior year period.
First quarter 2021 net revenues from sales of Anesthesia products were $84.9 million, an increase of 12.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues increased 7.0% compared to the prior year period.
First quarter 2021 net revenues from sales of Surgical products were $80.4 million, an increase of 6.6% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues increased 2.3% compared to the prior year period.
First quarter 2021 net revenues from sales of Interventional Urology products were $73.4 million, a decrease of 1.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues decreased 1.3% compared to the prior year period.
First quarter 2021 net revenues from sales of OEM products were $53.5 million, a decrease of 15.6% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues decreased 17.1% compared to the prior year period.
First quarter 2021 net revenues from sales of other products were $81.7 million, a decrease of 11.0% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, first quarter 2021 net revenues decreased 15.3% compared to the prior year period.
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS
Depreciation expense, amortization of intangible assets and deferred financing charges for the first quarter of 2021 totaled $60.6 million compared to $56.7 million for the prior year period.
Cash and cash equivalents at March 28, 2021 were $324.6 million compared to $375.9 million at December 31, 2020.
Net accounts receivable at March 28, 2021 were $401.1 million compared to $395.1 million at December 31, 2020.
Net inventories at March 28, 2021 were $512.3 million compared to $513.2 million at December 31, 2020.
2021 RESTRUCTURING PLAN
During the first quarter of 2021, we committed to a restructuring plan designed to streamline various business functions across our segments. We estimate that we will incur aggregate pre-tax restructuring charges of $7 million to $9 million, consisting primarily of termination benefits. In addition, we expect to incur $3 million to $4 million in restructuring related charges, most of which are expected to be recognized in cost of sales. We expect this program will be substantially completed by the end of 2021.
We expect to begin realizing plan-related savings in 2021 and expect to achieve annual pre-tax savings of $13 million to $16 million once the plan is fully implemented.
2021 OUTLOOK
The Company raised its full year 2021 GAAP revenue growth estimates from a range of between 10.0% and 11.5% over 2020, to a range of between 10.50% and 11.75% over 2020, reflecting our estimate of an approximately 2% favorable impact of foreign currency exchange rate fluctuations. On a constant currency basis, the Company raised its full year 2021 revenue growth estimates from a range of between 8.0% and 9.5% over 2020, to a range of between 8.50% and 9.75% over 2020. The Company reaffirmed its full year 2021 revenue growth estimate of 30% associated with its Interventional Urology business.
The Company lowered its full year 2021 GAAP diluted earnings per share from continuing operations from a range of between $8.15 and $8.25 to a range of between $8.00 and $8.10. The Company raised its full year 2021 adjusted diluted earnings per share from continuing operations from a range of between $12.50 and $12.70 to a range of between $12.65 and $12.85.
Forecasted 2021 Constant Currency Revenue Growth Reconciliation
| Low | High | |||
|---|---|---|---|---|
| Forecasted 2021 GAAP revenue growth | 10.50 | % | 11.75 | % |
| Estimated impact of foreign currency exchange rate fluctuations | 2.00 | % | 2.00 | % |
| Forecasted 2021 constant currency revenue growth | 8.50 | % | 9.75 | % |
Forecasted 2021 Adjusted Diluted Earnings Per Share From Continuing Operations Reconciliation
| Low | High | |||
|---|---|---|---|---|
| Forecasted GAAP diluted earnings per share from continuing operations | $ | 8.00 | $ | 8.10 |
| Restructuring, restructuring related and impairment items, net of tax | $ | 0.71 | $ | 0.72 |
| Acquisition, integration and divestiture related items, net of tax | $ | 0.30 | $ | 0.32 |
| Other items, net of tax | $ | 0.17 | $ | 0.19 |
| MDR | $ | 0.48 | $ | 0.50 |
| Intangible amortization expense, net of tax | $ | 2.99 | $ | 3.02 |
| Forecasted adjusted diluted earnings per share from continuing operations | $ | 12.65 | $ | 12.85 |
CONFERENCE CALL WEBCAST AND ADDITIONAL INFORMATION
As previously announced, Teleflex will comment on its financial results on a conference call to be held today at 8:00 a.m. (ET). The call will be available live and archived on the Company’s website at www.teleflex.com and the accompanying presentation will be posted prior to the call. An audio replay will be available until May 6, 2021 at 11:59pm (ET), by calling 800-585-8367 (U.S./Canada) or 416-621-4642 (International), Passcode: 6194708.
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 2021 to meet the MDR requirements, although certain devices that previously satisfied MDD requirements can continue to be marketed in the EU until May 2024, subject to certain limitations. Significantly, the MDR will require the re-registration of previously approved medical devices. As a result, Teleflex will incur expenditures in connection with the new registration of medical devices that previously had been registered under the MDD. Therefore, these expenditures are not considered to be ordinary course expenditures in connection with regulatory matters (in contrast, no adjustment has been made to exclude expenditures related to the registration of medical devices that were not registered previously under the MDD).
Intangible amortization expense - Certain intangible assets, including customer relationships, intellectual property, distribution rights, trade names and non-competition agreements, initially are recorded at historical cost and then amortized over their respective estimated useful lives. The amount of such amortization can vary from period to period as a result of, among other things, business or asset acquisitions or dispositions.
Tax adjustments - These adjustments represent the impact of the expiration of applicable statutes of limitations for prior year returns, the resolution of audits, the filing of amended returns with respect to prior tax years and/or tax law or certain other discrete changes affecting our deferred tax liability.
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
| Quarter Ended - March 28, 2021 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | $ | 289.4 | $ | 203.1 | $ | 29.9 | $ | 8.0 | $ | 12.4 | $ | 74.9 | $ | 1.58 |
| Adjustments | ||||||||||||||
| Restructuring, restructuring related and impairment items (A) | 6.3 | 0.3 | — | 8.0 | 2.1 | 12.5 | $ | 0.26 | ||||||
| Acquisition, integration and divestiture related items (B) | 3.3 | 6.8 | — | — | 1.1 | 9.0 | $ | 0.19 | ||||||
| Other items (C) | — | — | — | — | — | — | — | |||||||
| MDR (D) | — | — | 4.2 | — | — | 4.2 | $ | 0.09 | ||||||
| Intangible amortization expense | 22.5 | 19.5 | — | — | 7.0 | 34.9 | $ | 0.74 | ||||||
| Tax adjustments | — | — | — | — | (0.6) | 0.6 | $ | 0.01 | ||||||
| Adjusted basis | $ | 257.3 | $ | 176.6 | $ | 25.8 | $ | — | $ | 22.1 | $ | 136.1 | $ | 2.87 |
RECONCILIATION OF CONSOLIDATED STATEMENT OF INCOME ITEMS
Dollars in millions, except per share amounts
| Quarter Ended - March 29, 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 | $ | 297.0 | $ | 147.8 | $ | 27.4 | $ | 1.3 | $ | 11.1 | $ | 131.2 | $ | 2.78 |
| Adjustments | ||||||||||||||
| Restructuring, restructuring related and impairment items (A) | 4.9 | 0.2 | — | 1.3 | 0.8 | 5.7 | $ | 0.12 | ||||||
| Acquisition, integration and divestiture related items (B) | 1.7 | (44.3) | — | — | 0.4 | (43.0) | $ | (0.91) | ||||||
| Other items (C) | — | — | — | — | — | — | — | |||||||
| MDR (D) | — | — | 1.8 | — | — | 1.8 | $ | 0.04 | ||||||
| Intangible amortization expense | 20.9 | 17.9 | 0.1 | — | 6.2 | 32.7 | $ | 0.69 | ||||||
| Tax adjustments | — | — | — | — | (0.1) | 0.1 | $ | 0.00 | ||||||
| Adjusted basis | $ | 269.5 | $ | 174.0 | $ | 25.5 | $ | — | $ | 18.4 | $ | 128.4 | $ | 2.72 |
(A)Restructuring, restructuring related and impairment items - For the three months ended March 28, 2021, pre-tax restructuring charges were $8.0 million; pre-tax restructuring related charges were $6.6 million; and there were no pre-tax impairment charges. For the three months ended March 29, 2020, pre-tax restructuring charges were $1.3 million; pre-tax restructuring related charges were $5.1 million; and there were no pre-tax impairment charges.
(B)Acquisition, integration and divestiture related items - For the three months ended March 28, 2021, these charges 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 three months ended March 29, 2020, these items primarily related to the reversal of contingent consideration liabilities; and charges related to our acquisition of IWG High Performance Conductors, Inc. There were no divestiture related activities for the three months ended March 28, 2021 and March 29, 2020.
(C)Other items - There were no other items for the three months March 28, 2021 and March 29, 2020.
(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®, 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, statements regarding the restructuring plan we committed to in the first quarter of 2021, including with respect to the pre-tax restructuring and restructuring-related charges we expect to incur in connection with the plan, pre-tax savings we expect to achieve once the plan has been fully implemented and the expected timing for when the plan will be substantially completed; forecasted 2021 GAAP and constant currency revenue growth and GAAP and adjusted diluted earnings per share; and our estimates regarding the projected impact of foreign currency exchange rate fluctuations on our 2021 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 | ||||
|---|---|---|---|---|
| March 28, 2021 | March 29, 2020 | |||
| (Dollars and shares in thousands, except per share) | ||||
| Net revenues | $ | 633,925 | $ | 630,642 |
| Cost of goods sold | 289,398 | 297,018 | ||
| Gross profit | 344,527 | 333,624 | ||
| Selling, general and administrative expenses | 203,148 | 147,796 | ||
| Research and development expenses | 29,947 | 27,396 | ||
| Restructuring and impairment charges | 7,998 | 1,346 | ||
| Income from continuing operations before interest and taxes | 103,434 | 157,086 | ||
| Interest expense | 16,798 | 15,439 | ||
| Interest income | (659) | (579) | ||
| Income from continuing operations before taxes | 87,295 | 142,226 | ||
| Taxes on income from continuing operations | 12,428 | 11,074 | ||
| Income from continuing operations | 74,867 | 131,152 | ||
| Operating loss from discontinued operations | (1) | (4) | ||
| Tax benefit on operating loss from discontinued operations | — | (2) | ||
| Loss from discontinued operations | (1) | (2) | ||
| Net income | $ | 74,866 | $ | 131,150 |
| Earnings per share: | ||||
| Basic: | ||||
| Income from continuing operations | $ | 1.60 | $ | 2.83 |
| Loss from discontinued operations | — | — | ||
| Net income | $ | 1.60 | $ | 2.83 |
| Diluted: | ||||
| Income from continuing operations | $ | 1.58 | $ | 2.78 |
| Loss from discontinued operations | — | — | ||
| Net income | $ | 1.58 | $ | 2.78 |
| Weighted average common shares outstanding | ||||
| Basic | 46,698 | 46,382 | ||
| Diluted | 47,407 | 47,231 |
TELEFLEX INCORPORATED
CONSOLIDATED BALANCE SHEETS
| March 28, 2021 | December 31, 2020 | |||
|---|---|---|---|---|
| (Dollars in thousands) | ||||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 324,631 | $ | 375,880 |
| Accounts receivable, net | 401,112 | 395,071 | ||
| Inventories | 512,284 | 513,196 | ||
| Prepaid expenses and other current assets | 121,877 | 115,436 | ||
| Prepaid taxes | 18,879 | 22,842 | ||
| Total current assets | 1,378,783 | 1,422,425 | ||
| Property, plant and equipment, net | 467,648 | 473,912 | ||
| Operating lease assets | 94,554 | 100,635 | ||
| Goodwill | 2,565,874 | 2,585,966 | ||
| Intangible assets, net | 2,470,244 | 2,519,746 | ||
| Deferred tax assets | 8,045 | 8,073 | ||
| Other assets | 42,875 | 41,802 | ||
| Total assets | $ | 7,028,023 | $ | 7,152,559 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities | ||||
| Current borrowings | $ | 83,750 | $ | 100,500 |
| Accounts payable | 101,340 | 102,520 | ||
| Accrued expenses | 134,311 | 136,276 | ||
| Payroll and benefit-related liabilities | 100,380 | 122,366 | ||
| Accrued interest | 23,401 | 7,135 | ||
| Income taxes payable | 14,831 | 17,361 | ||
| Other current liabilities | 50,040 | 53,869 | ||
| Total current liabilities | 508,053 | 540,027 | ||
| Long-term borrowings | 2,295,436 | 2,377,888 | ||
| Deferred tax liabilities | 482,484 | 484,678 | ||
| Pension and postretirement benefit liabilities | 57,118 | 74,499 | ||
| Noncurrent liability for uncertain tax positions | 9,987 | 10,127 | ||
| Noncurrent operating lease liabilities | 79,403 | 86,097 | ||
| Other liabilities | 219,751 | 242,786 | ||
| Total liabilities | 3,652,232 | 3,816,102 | ||
| Commitments and contingencies | ||||
| Total shareholders' equity | 3,375,791 | 3,336,457 | ||
| Total liabilities and shareholders' equity | $ | 7,028,023 | $ | 7,152,559 |
TELEFLEX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended | ||||
|---|---|---|---|---|
| March 28, 2021 | March 29, 2020 | |||
| (Dollars in thousands) | ||||
| Cash flows from operating activities of continuing operations: | ||||
| Net income | $ | 74,866 | $ | 131,150 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Loss from discontinued operations | 1 | 2 | ||
| Depreciation expense | 17,513 | 16,842 | ||
| Intangible asset amortization expense | 41,922 | 38,911 | ||
| Deferred financing costs and debt discount amortization expense | 1,210 | 945 | ||
| Fair value step up of acquired inventory sold | 3,993 | 1,707 | ||
| Changes in contingent consideration | 6,354 | (46,502) | ||
| Stock-based compensation | 5,344 | 3,522 | ||
| Deferred income taxes, net | 425 | 679 | ||
| Payments for contingent consideration | — | (79,771) | ||
| Interest benefit on swaps designated as net investment hedges | (4,647) | (4,874) | ||
| Other | (14,384) | (18,143) | ||
| Changes in assets and liabilities, net of effects of acquisitions and disposals: | ||||
| Accounts receivable | (12,298) | (23,145) | ||
| Inventories | (10,074) | (12,346) | ||
| Prepaid expenses and other assets | 3,342 | 6,403 | ||
| Accounts payable, accrued expenses and other liabilities | (4,438) | (31,488) | ||
| Income taxes receivable and payable, net | 1,665 | 4,651 | ||
| Net cash provided by (used in) operating activities from continuing operations | 110,794 | (11,457) | ||
| Cash flows from investing activities of continuing operations: | ||||
| Expenditures for property, plant and equipment | (19,276) | (19,684) | ||
| Proceeds from sale of assets | 161 | 400 | ||
| Payments for businesses and intangibles acquired, net of cash acquired | (1,762) | (265,160) | ||
| Net cash used in investing activities from continuing operations | (20,877) | (284,444) | ||
| Cash flows from financing activities of continuing operations: | ||||
| Proceeds from new borrowings | — | 485,000 | ||
| Reduction in borrowings | (100,000) | — | ||
| Debt extinguishment, issuance and amendment fees | (22) | — | ||
| Net proceeds from share based compensation plans and the related tax impacts | (2,510) | (3,022) | ||
| Payments for contingent consideration | (13,071) | (60,881) | ||
| Dividends paid | (15,893) | (15,767) | ||
| Net cash (used in) provided by financing activities from continuing operations | (131,496) | 405,330 | ||
| Cash flows from discontinued operations: | ||||
| Net cash used in operating activities | (243) | (193) | ||
| Net cash used in discontinued operations | (243) | (193) | ||
| Effect of exchange rate changes on cash and cash equivalents | (9,427) | (3,842) | ||
| Net (decrease) increase in cash and cash equivalents | (51,249) | 105,394 | ||
| Cash and cash equivalents at the beginning of the period | 375,880 | 301,083 | ||
| Cash and cash equivalents at the end of the period | $ | 324,631 | $ | 406,477 |
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1 Teleflex Incorporated Q1 2021 Earnings Conference Call
2 The release, accompanying slides, and replay webcast are available online at www.teleflex.com (click on “Investors”) Telephone replay is available by dialing (800) 585-8367 or for international calls, (416) 621-4642, conference ID 6194708 Conference Call Logistics
3 Today’s Speakers Liam Kelly Chairman, President and CEO Jake Elguicze Treasurer and VP, Investor Relations Thomas Powell Executive VP and CFO
4 This presentation contains forward-looking statements, including, but not limited to, our expectations with respect to the 2021 national direct-to- consumer campaign related to the UroLift® System; our expectations with respect to the commercialization of, and a decision on reimbursement with respect to, the UroLift System in Japan; charges we expect to incur in connection with the restructuring program we commenced in the first quarter of 2021 (the “2021 restructuring program”) and our other ongoing restructuring programs; estimated annualized pre-tax savings we expect to realize in connection with the 2021 restructuring program and our other 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 2021 restructuring program, our other ongoing restructuring programs and the OEM initiative and when those programs will be substantially completed; our assumptions with respect to the euro to U.S. dollar exchange rate for 2021, our effective tax rate for 2021 and our adjusted weighted average shares for 2021; 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, the factors expected to impact those forecasted results; 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 Q1 2020 performance and developments and does not purport to be a complete summary thereof. Accordingly, we encourage you to read our Earnings Release for the quarter ended March 28, 2021 located in the investor section of our website at www.teleflex.com and our Quarterly Report on Form 10-Q for the quarter ended March 28, 2021 to be filed with the Securities and Exchange Commission. Unless otherwise noted, the following slides reflect continuing operations. Note on Forward-Looking Statements
5 Executive Overview Liam Kelly Chairman, President and CEO
6 Business Performance Estimated COVID-19 Impact Q4 Summary Business Performance • Q1'21 constant currency revenue growth showed continued sequential improvement on a day-sales adjusted basis • Q1'21 adjusted gross and operating margins expanded significantly year-over-year • Q1'21 adjusted earnings per share increased 5.5% as compared to the prior year period Q1 Performance Summary • Raising 2021 as reported and constant currency revenue guidance ranges • Raising 2021 adjusted EPS guidance range Financial Guidance Update Q1'21 Highlights
7 Q1'21 Financial Results • Adjusted gross margin of 59.4%, up 210 bps versus 57.3% in prior year period • Adjusted operating margin of 27.5%, up 190 bps versus 25.6% in prior year period • Adjusted EPS of $2.87, up 5.5% versus $2.72 in the prior year period Adjusted Margin and Adjusted EPS Highlights Revenue Highlights Global Product Revenue Drivers1 1. All global product family revenue growth provided is 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. • Q1'21 as reported revenue increased 0.5% versus Q1'20 • Q1'21 constant currency revenue declined 2.6% versus Q1'20 • Q1'21 constant currency growth adjusted for two-fewer selling days was modestly positive versus Q1’20 • Vascular Access revenue of $164.0 million, up 5.8% vs Q1'20, driven by sales of PICCs, CVCs and EZ-IO • Anesthesia revenue of $84.9 million, up 7.0% vs Q1'20, driven by Z-Medica acquisition • Interventional Urology revenue of $73.4 million, down 1.3% vs. Q1’20 • Two fewer selling days was approximately a 3% headwind versus Q1’20
8 Dollars in Millions Q1'21 Revenue Q1'20 Revenue Reported Revenue Growth Currency Impact Constant Currency Growth Americas $375.5 $358.0 4.9% 0.2% 4.7% EMEA $141.2 $156.1 (9.5)% 7.4% (16.9)% Asia $63.7 $53.1 19.9% 9.6% 10.3% OEM $53.5 $63.4 (15.6)% 1.5% (17.1)% TOTAL $633.9 $630.6 0.5% 3.1% (2.6)% Q1'21 Segment Revenue Review
9• 1. Includes revenues generated from sales of the Company’s respiratory and urology products (other than interventional urology products). Dollars in Millions Q1'21 Revenue Q1'20 Revenue Reported Revenue Growth Currency Impact Constant Currency Growth Vascular Access $164.0 $150.3 9.1% 3.3% 5.8% Interventional $96.2 $99.9 (3.8)% 2.6% (6.4)% Anesthesia $84.9 $75.7 12.1% 5.1% 7.0% Surgical $80.4 $75.4 6.6% 4.3% 2.3% Interventional Urology $73.4 $74.2 (1.1)% 0.2% (1.3)% OEM $53.5 $63.4 (15.6)% 1.5% (17.1)% Other1 $81.7 $91.7 (11.0)% 4.3% (15.3)% TOTAL $633.9 $630.6 0.5% 3.1% (2.6)% Q1'21 Global Product Category Revenue Review
10 Interventional Urology - UroLift® System KEY TAKEAWAYS Launched 2021 National DTC Campaign ◦ Investment expected to be slightly more than double the 2020 campaign amount ◦ Expect advertisements to be on air throughout most 2021 ◦ Builds upon successful 2020 campaign that doubled brand awareness for targeted men w/ BPH ◦ Optimized existing network selection, testing new networks and programming UroLift® 2 and UroLift® ATC Commercial Progress ◦ Controlled U.S. commercialization initiated, with positive clinician feedback ◦ Production capacity ramping to support demand Japan Progress ◦ Japan commercialization remains on track, with reimbursement still expected in 2H 2021 Clinical and Commercial Updates
11 Interventional - Manta® Vascular Closure Device KEY TAKEAWAYS Manta® Vascular Closure Device MARVEL Registry ◦ Prospective real-world study of 500 patients who underwent transfemoral large bore percutaneous procedures in 10 hospitals across Europe and Canada ◦ Primary performance endpoint: 50 seconds median time from deployment to hemostasis ◦ Primary endpoint: MANTA use associated with a 4% VARC-2 major vascular complication rate, which closely matches the 4.2% VARC-2 major vascular complication rate demonstrated in the SAFE MANTA IDE clinical trial ◦ The SAFE trial applied more stringent inclusion/exclusion criteria, with a ~50% smaller sample size (n=263) compared to MARVEL. MARVEL therefore appears to confirm MANTA safety in a broader patient population and its feasibility in real world clinical practice. Clinical and Commercial Updates Kroon, HG, Tonino, PAL, Savontaus, M, et al. Dedicated plug based closure for large bore access –The MARVEL prospective registry. Catheter Cardiovasc Interv. 2020; 1– 9. https://doi.org/10.1002/ccd.29439
12 Interventional - Manta® Vascular Closure Device KEY TAKEAWAYS Manta® Vascular Closure Device MANTA Meta-Analysis ◦ Patient-level pooled analysis including data from 2 medical device approval studies (CE mark, SAFE) and 1 post-approval registry (MARVEL), with large bore procedures performed by 71 operators at 28 investigational sites across North America and Europe from 2015 to 2019. ◦ Results: ▪ Technical success rate: 96.4% ▪ Hemostasis: 31 seconds median time from deployment to hemostasis ▪ Low complication rates*: 4.4% major access complications and 4.7% minor access complication rates Clinical and Commercial Updates *composite of MANTA related access site complications of which definitions were adapted from the derived from VARC-2 criteria Nuis R, Wood D, Kroon H, van Wiechen M, et al. Frequency, impact and predictors of access complications with plug-based large-bore arteriotomy closure - A patient level meta-analysis. Cardiovasc Revasc Med. 2021 Feb 15; https://doi.org/10.1016/j.carrev.2021.02.017
13 Financial Overview Thomas Powell Executive VP and CFO
14 Note: See appendices for reconciliations of non-GAAP information • GAAP gross margin of 54.3%, up 140 bps vs. prior year period • Adjusted gross margin of 59.4%, up 210 bps vs. prior year period • GAAP operating margin of 16.3%, down 860 bps vs. prior year period • Adjusted operating margin of 27.5%, up 190 bps vs. prior year period Gross margin performance Operating margin performance Global revenue generation of $633.9 million • GAAP tax rate of 14.2%, compared to 7.8% in prior year period • Adjusted tax rate of 13.9%, up 140 bps vs. prior year period Effective tax rate • GAAP EPS of $1.58 vs. $2.78 in prior year period • Adjusted EPS of $2.87, down 5.5% vs. prior year period Earnings per share Q1'21 Financial Review • Revenue increased 0.5% vs. prior year period on an as-reported basis • Revenue decreased 2.6% vs. prior year period on a constant currency basis
15 2021 Financial Guidance Summary Slide Low High Low High GAAP Revenue Growth 10.5% 11.75% 10.0% 11.5% Impact of Foreign Exchange Rate Fluctuations 2.0% 2.0% 2.0% 2.0% Constant Currency Revenue Growth 8.5% 9.75% 8.0% 9.5% Adjusted Gross Margin 58.25% 59.25% 58.0% 59.0% Adjusted Operating Margin 26.0% 27.0% 26.0% 27.0% Adjusted EPS $12.65 $12.85 $12.50 $12.70 Adjusted EPS % Growth 18.6% 20.4% 17.2% 19.0% Updated 2021 Guidance Initial 2021 Guidance
16 Key Takeaways ◦ Teleflex exceeded the externally provided first quarter 2021 revenue and adjusted earnings per share expectations provided in February ◦ Announced new restructuring program and remain on track to generate significant long term margin expansion ◦ Raised as reported and constant currency revenue guidance ranges, and adjusted EPS guidance range, given year-to-date performance and outlook for remainder of the year
17 THANK YOU
18 Appendices
19 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.
20 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. Non-GAAP Adjustments
21 See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions. Appendix A – Reconciliation of Adjusted Gross and Operating Margin, Income Tax and EPS (Dollars in millions, except per share data) Three Months Ended March 28, 2021 Three Months Ended March 29, 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 54.3 % 16.3 % $ 87.3 $ 12.4 14.2 % $ 1.58 GAAP Basis 52.9 % 24.9 % $ 142.2 $ 11.1 7.8 % $ 2.78 Adjustments Adjustments Restructuring, restructuring related and impairment items (A) 1.0 % 2.3 % 14.6 2.1 0.26 Restructuring, restructuring related and impairment items (A) 0.8 % 1.0 % 6.4 0.8 0.12 Acquisition, integration and divestiture related items (B) 0.5 % 1.6 % 10.1 1.1 0.19 Acquisition, integration and divestiture related items (B) 0.3 % (6.8)% (42.6) 0.4 (0.91) Other items (C) — % — % — — — Other items (C) — % — % — — MDR (D) — % 0.7 % 4.2 — 0.09 MDR (D) — % 0.3 % 1.8 — 0.04 Intangible amortization expense 3.5 % 6.6 % 41.9 7.0 0.74 Intangible amortization expense 3.3 % 6.2 % 38.9 6.2 0.69 Tax adjustments — % — % — (0.6) 0.01 Tax adjustments — % — % (0.1) — Adjustments total 5.1 % 11.2 % 70.8 9.6 1.29 Adjustments total 4.4 % 0.7 % 4.5 7.3 (0.06) Adjusted basis 59.4 % 27.5 % $ 158.1 $ 22.0 13.9 % $ 2.87 Adjusted basis 57.3 % 25.6 % $ 146.8 $ 18.4 12.5 % $ 2.72
22 Appendix A tickmarks See slide titled Non-GAAP Adjustments included at the beginning of the appendices to this presentation for Non-GAAP definitions. A. Restructuring, restructuring related and impairment items – For the three months ended March 28, 2021, pre-tax restructuring charges were $8.0 million, pre-tax restructuring related charges were $6.6 million, and pre-tax impairment charges were $0.0 million. For the three months ended March 29, 2020, pre-tax restructuring charges were $1.3 million, pre-tax restructuring related charges were $5.1 million, and pre-tax impairment charges were $0.0 million. B. Acquisition, integration and divestiture related items – For the three months ended March 28, 2021, these charges primarily related to contingent consideration liabilities; and the 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 three months ended March 29, 2020, these items primarily related to the reversal of contingent consideration liabilities; and changes related to our acquisition of IWG High Performance Conductors, Inc. There were no divestiture related activities for the three months ended March 28, 2021 and March 29, 2020. C. Other items – For the three months ended March 28, 2021 and March 29, 2020, there were no adjustments made for other items. D. MDR – These costs were associated with our efforts to comply with the European Medical Device Regulation (MDR).
23 Appendix B – Restructuring and Similar Cost Savings Initiatives Summary Dollars in Millions Estimated Total Actual results through December 31, 2020 Estimated Amount Remaining Restructuring charges $102 - $118 $89 $13 - $29 Restructuring related charges1 119 - 146 74 45 - 72 Total charges $221-$264 $163 $58 - $101 OEM initiative annual pre-tax savings $6 - $7 $2 $4 - $5 Pre-tax savings – ongoing restructuring plans2 81 - 94 32 49 - 62 Total annual pre-tax savings $87 - $101 $34 $53 - $67 2021 Restructuring plan During the first quarter of 2021, we committed to a restructuring plan designed to streamline various business functions and consolidate manufacturing operations. We estimate that we will incur aggregate pre-tax restructuring charges of $7 million to $9 million, consisting primarily of termination benefits, and $3 million to $4 million in restructuring related charges. Most of restructuring related charges are expected to be recognized in cost of sales and primarily consist of project management costs, costs to transfer of manufacturing operations to existing lower- cost locations and accelerated depreciation. We expect this program will be substantially completed by the end of 2021. As of March 28, 2021, we had a restructuring reserve of $6.4 million related to this plan, all of which related to termination benefits. We expect to begin realizing plan-related savings in 2021 and expect to achieve annual pre-tax savings of $13 million to $16 million once the plan is fully implemented. In addition to the 2021 Restructuring 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 do not meet the criteria for a restructuring program under applicable accounting guidance; nevertheless, the activities should result in cost savings (we expect only minimal costs to be incurred in connection with the OEM initiative). With respect to our currently ongoing restructuring programs (including the 2021 Restructuring plan) 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, 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. It is likely that estimates of charges and pre-tax savings will change from time to time, and the table below may reflect changes from amounts previously estimated. In addition, the table below 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 this report.
24 (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. Appendix B – Footnotes
25 Appendix C – March 28, 2021 Year-to-Date GPO and IDN Review Group Purchasing Organization Update IDN Update Q1’21 Renewed agreements 6 New agreements 1 Existing agreements lost 1 Q1’21 Renewed agreements 13 New agreements 7 Existing agreements lost 0
26 Appendix D - 2021 Adj. Gross and Operating Margin Guidance Reconciliations 2021 Guidance Low High Forecasted GAAP Gross Margin 53.95% 55.10% Estimated restructuring, restructuring related and impairment items 0.95% 0.90% Estimated acquisition, integration, and divestiture related items 0.15% 0.10% Estimated other items - - Estimated intangible amortization expense 3.20% 3.15% Forecasted Adjusted Gross Margin 58.25% 59.25% 2021 Guidance Low High Forecasted GAAP Operating Margin 17.00% 18.20% Estimated restructuring, restructuring related and impairment items 1.40% 1.35% Estimated acquisition, integration, and divestiture related items 0.65% 0.60% Estimated other items - - Estimated MDR 0.85% 0.80% Estimated intangible amortization expense 6.10% 6.05% Forecasted Adjusted Operating Margin 26.00% 27.00%
27 Appendix E – Reconciliation of 2021 Adjusted Earnings Per Share Guidance
28 Outlook Includes: • Due to COVID-19 resurgences globally, we continue to expect modest disruption to continue during 1H, and expect marked improvement moving throughout 2021 • Q2 growth should be partly driven by relatively easy year-over-year comparisons • Health care systems are better equipped to deal with surges, thus, we do not expect any major systemic shutdown of elective procedures • Euro to U.S. Dollar exchange rate assumed to be approximately 1.21 for full year 2021 • Adjusted weighted average shares expected to be approximately 47.7 million for full year 2021 Outlook Excludes: • Any potential benefit from a substantial surge in COVID-related buying • Material regulatory, healthcare, or U.S. tax reforms • Future M&A opportunities 2021 Shipping days differentials: • Q1’21 vs. Q1’20: 2 less days • Q4’21 vs. Q4’20: 1 additional day • FY’21 vs. FY’20: 1 less day • FY'21 vs. FY'19: same number of days Appendix F – Key Assumptions for 2021 Financial Guidance