Teleflex Reports Third Quarter 2012 Results

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Teleflex Reports Third Quarter 2012 Results

Revenues Rise 1.5% to $368.1 million; up 6.2% on Constant Currency Basis

GAAP Diluted EPS of $0.58


Adjusted Diluted EPS of $1.04

2012 Guidance Ranges Updated for Constant Currency Revenue Growth and Adjusted EPS

LIMERICK, Pa.--(BUSINESS WIRE)-- Teleflex Incorporated (NYS: TFX) today announced financial results for the third quarter ended September 30, 2012.

Third quarter 2012 net revenues were $368.1 million, an increase of 1.5% over the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2012 net revenues increased 6.2% over the prior year period.

Third quarter 2012 GAAP diluted earnings per share from continuing operations were $0.58, as compared to $0.80 in the prior year period. Third quarter 2012 adjusted diluted earnings per share from continuing operations were $1.04, an increase of 4.0% over the prior year period.

"Teleflex's strong 6.2% constant currency revenue growth reflects increased volumes on a global basis, the positive contribution from recently introduced products to the marketplace, and our ability to raise the average selling price of our products by over one percent," said Benson Smith, Chairman, President and CEO. "In addition, our gross margin expanded seventy basis points from the year ago quarter, exceeding forty-nine percent. At the same time, we continued to invest in research and development and gained marketing clearance for new vascular and anesthesia products during the quarter. Finally, we recently completed the acquisition of LMA International N.V., a global market leader in laryngeal masks."

Added Smith, "With nine months of 2012, and the completion of the LMA acquisition behind us, we are updating our guidance ranges for constant currency revenue growth and adjusted earnings per share. We now expect to generate constant currency revenue growth of between 6% and 7%, and adjusted earnings per share of between $4.35 and $4.40. We believe we are building momentum for a solid finish to 2012 and into 2013 and beyond."

THIRD QUARTER NET REVENUE BY PRODUCT GROUP AND SEGMENT

Critical Care third quarter 2012 net revenues were $244.1 million, a decrease of 0.4% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2012 net revenues increased 4.5% compared to the prior year period. The increase in revenue was due to higher sales of respiratory, urology, anesthesia and vascular access products.

Surgical Care third quarter 2012 net revenues were $69.6 million, an increase of 5.4% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2012 net revenues increased 10.1% compared to the prior year period. The increase in revenue was due to higher sales of ligation, closure and general surgical instrument products, partially offset by a decline in sales of chest drainage products.

Cardiac Care third quarter 2012 net revenues were $17.2 million, a decrease of 4.8% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2012 net revenues increased 1.6% compared to the prior year period. The increase in revenue was due to higher sales of intra-aortic balloon pumps, partially offset by a decline in sales of intra-aortic balloon catheters.

OEM and Development Services ("OEM") third quarter 2012 net revenues were $36.9 million, an increase of 11.0% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2012 net revenues increased 13.0% compared to the prior year period. The increase in revenue was due to higher volume, higher capacity as a result of plant expansions, new products and price increases.

Three Months Ended % Increase/ (Decrease)

September 30,
2012

 

September 25,
2011

Constant
Currency

 

Foreign
Currency

 

Total
Change

(Dollars in millions)
Critical Care$244.1$245.24.5%(4.9%)(0.4%)
Surgical Care69.666.010.1%(4.7%)5.4%
Cardiac Care17.218.11.6%(6.4%)(4.8%)
OEM36.933.213.0%(2.0%)11.0%
Other 0.3 0.29.2%(11.0%)(1.8%)
Total$368.1$362.76.2%(4.7%)1.5%

During the third quarter of 2012, due to changes in the Company's management and internal reporting structure, the Company's Latin American operations were moved from the Asia and Latin American Segment ("AJLA") into the North American Segment. As a result of this change, the North American Segment is now referred to as the Americas Segment and AJLA Segment is now referred to as the Asia Segment.

Americas third quarter 2012 net revenues were $169.7 million, an increase of 1.4% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2012 net revenues increased 1.7% compared to the prior year period. The increase in revenue was due to new product sales and price increases.

EMEA third quarter 2012 net revenues were $116.0 million, a decrease of 8.7% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2012 net revenues increased 3.1% compared to the prior year period. The increase in revenue was due to higher volume, new product sales, and price increases.

Asia third quarter 2012 net revenues were $45.5 million, an increase of 29.8% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2012 net revenues increased 32.1% compared to the prior year period. The increase in revenue was due to higher volume and price increases.

OEM third quarter 2012 net revenues were $36.9 million, an increase of 11.0% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2012 net revenues increased 13.0% compared to the prior year period. The increase in revenue was due to higher volume, higher capacity as a result of plant expansions, new products and price increases.

Three Months Ended % Increase/ (Decrease)

September 30,
2012

 

September 25,
2011

Constant
Currency

 

Foreign
Currency

 

Total
Change

(Dollars in millions)
Americas$169.7$167.41.7%(0.3%)1.4%
EMEA116.0127.03.1%(11.8%)(8.7%)
Asia45.535.132.1%(2.3%)29.8%
OEM 36.9 33.213.0%(2.0%)11.0%
Total$368.1$362.76.2%(4.7%)1.5%

NINE MONTH RESULTS

Net revenues for the first nine months of 2012 were $1.132 billion, an increase of 3.9% compared to the prior year period. Excluding the impact of foreign currency fluctuations, net revenues for the first nine months of 2012 increased 7.4% compared to the prior year period.

GAAP loss per share from continuing operations was ($5.22) for the first nine months of 2012, as compared to diluted earnings per share of $1.88 in the prior year period. The financial results for the first nine months of 2012 reflect a goodwill impairment charge of $315.1 million, net of tax, or $7.72 per share, incurred in the first quarter of 2012.

Adjusted diluted earnings per share from continuing operations for the first nine months of 2012 was $3.26, an increase of 17.3% over the prior year period. This increase reflects additional sales volume and the introduction of new products to the marketplace, improved pricing, gross profit expansion, and reduced tax expense. The improvement in profitability was partially offset by continuing investment in sales, marketing and research and development, and increased interest expense.

OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS

Depreciation and amortization of intangible assets, deferred financing costs and debt discount for the first nine months of 2012 were $69.2 million compared to $72.5 million for the prior year period.

Cash and cash equivalents at September 30, 2012 were $634.8 million compared to $584.1 million at December 31, 2011.

On October 23, 2012, the Company acquired substantially all of the assets of LMA, a global provider of laryngeal masks with a portfolio of innovative products used extensively in anesthesia and emergency care. The Company paid $292.2 million in cash as initial consideration for the business. On October 23, 2012, in a separate transaction, the Company also acquired the LMA branded laryngeal mask supraglottic airway business and certain other products in the United Kingdom, Ireland and Channel Islands from the shareholders of Intravent Direct Limited and affiliates for $19.9 million in cash. These acquisitions complement the anesthesia product portfolio in the Company's Critical Care division.

Net accounts receivable at September 30, 2012 were $266.9 million compared to $286.2 million at December 31, 2011.

Net inventories at September 30, 2012 were $295.6 million compared to $298.8 million at December 31, 2011.

Net debt obligations at September 30, 2012 were $394.9 million compared to $445.9 million at December 31, 2011.

2012 OUTLOOK

Including the recently completed acquisitions of LMA International N.V. and affiliates, the Company's financial estimates for 2012 are as follows:

Constant currency revenue growth between 6% and 7% for full year 2012. This compares to the Company's prior expectation of constant currency revenue growth between 4% and 6% for full year 2012.

Adjusted diluted earnings per share in the range of $4.35 to $4.40. This compares to the Company's prior expectation of adjusted diluted earnings per share in the range of $4.25 to $4.45.

2012 OUTLOOK EARNINGS PER SHARE RECONCILIATION

   Low    High
    
Loss per share attributable to common shareholders($4.58)($4.53)
 
Goodwill impairment, net of tax$7.72$7.72
 
Special items, net of tax$0.35$0.35
 
Intangible amortization expense, net of tax$0.70$0.70
 
Amortization of debt discount on convertible notes, net of tax$0.16    $0.16
 
Adjusted diluted earnings per share$4.35    $4.40

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.comand the accompanying presentation will be posted prior to the call. An audio replay will be available until November 7, 2012, 11:59 p.m. (ET) by calling 888-286-8010 (U.S./Canada) or 617-801-6888 (International), Passcode: 77519595.

ADDITIONAL NOTES

Constant currency revenue and growth exclude the impact of translating the results of international subsidiaries at different currency exchange rates from period to period.

Certain financial information is presented on a rounded basis, which may cause minor differences.

Product group results and commentary exclude the impact of discontinued operations, items included in restructuring and impairment charges, and losses and other charges set forth in the condensed consolidated statements of income.

NOTES ON NON-GAAP FINANCIAL MEASURES

This press release includes certain non-GAAP financial measures. These measures include (i) adjusted diluted earnings per share, which excludes, depending on the period presented, the effect of charges associated with a goodwill impairment, our restructuring programs and asset impairments, losses and other charges related to acquisition costs, gain on sale of businesses and assets, refinancing transactions and costs associated with severance payments and benefits to be provided to our former chief executive officer, charges associated with the amortization of additional interest expense related to an interest rate swap terminated in 2011, intangible amortization expense, the amortization of debt discount on convertible notes and certain tax adjustments relating to the resolution of various tax matters relating to prior years; and (ii) constant currency revenue and growth, which exclude the impact of translating the results of international subsidiaries at different currency exchange rates from period to period. Consistent with past practice, adjusted diluted earnings per share has not been adjusted to exclude the benefit resulting from the forfeiture of equity awards. Management believes these measures are useful to investors because they eliminate items that do not reflect Teleflex's day-to-day operations. In addition, management uses these financial measures for internal managerial purposes, when publicly providing guidance on possible future results, and to assist in our evaluation of period-to-period comparisons. These 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. Tables reconciling these non-GAAP measures to the most directly comparable GAAP measures are set forth below. This press release also includes forecasted constant currency revenue growth, which is also a non-GAAP measure. A reconciliation of forecasted constant currency revenue growth to GAAP forecasted growth has not been provided as management is unable to forecast trends in foreign currency exchange rates.

RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS

  Three Months EndedThree Months Ended
September 30, 2012September 25, 2011 
(Dollars in thousands, except per share)
Income and diluted earnings per share attributable to common$24,263$32,632
shareholders$0.58$0.80
 
Restructuring and impairment charges1,087
Tax benefit(412)
Restructuring and impairment charges, net of tax675
$0.02
 
Losses and other charges (A)9,862

Tax benefit

(1,503

)

Losses and other charges, net of tax8,359
$0.20

 

Early termination of interest rate swap (B)3,662
Tax benefit(1,347)
Early termination of interest rate swap, net of tax2,315
$0.06
 
Amortization of debt discount on convertible notes2,6512,455
Tax benefit(965)(892)
Amortization of debt discount on convertible notes, net of tax1,6861,563
$0.04$0.04
 
Intangible amortization expense11,06110,712
Tax benefit(4,029)(3,914)
Intangible amortization expense, net of tax7,0326,798
$0.17$0.17
 
Tax adjustments (C)(1,303)
($0.03)
 
Adjusted income and diluted earnings per share$43,027$40,993
$1.04$1.00

(A) In 2012, losses and other charges include approximately $8.4 million, net of tax, or $0.20 per share,
related to acquisition costs.

 

(B) In 2011, the Company terminated an interest rate swap that, at the date of termination, had a
notional amount of $350 million. The interest rate swap was designated as a cash flow hedge against
the term loan under our senior credit facility. At the date of termination, the interest rate swap
was in a liability position resulting in a cash payment by the Company of approximately $14.8 million,
which included $3.1 million of accrued interest. In accordance with GAAP, the Company amortized this
amount as additional interest expense over the remainder of the original term of the interest rate swap,
which expired in September 2012. In the third quarter of 2012, the non-cash, net of tax impact was
approximately $2.3 million, or $0.06 per share.

 

(C) The tax adjustment represents a net benefit resulting from the filing of amended prior years'
tax returns.

RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS

   
Nine Months EndedNine Months Ended
September 30, 2012 2012September 25, 2011
(Dollars in thousands, except per share)

(Loss)/income and (basic)/diluted earnings per share attributable
to shareholders

 

($213,097

)$76,749

 

($5.22)$1.88
 
Goodwill impairment332,128
Tax benefit(16,983)
Goodwill impairment, net of tax315,145
$7.72
 
Restructuring and impairment charges84710
Tax charge / (benefit)61(250)
Restructuring and impairment charges, net of tax145460
$0.00$0.01
 
Losses and other charges (A)10,14220,913

Tax benefit

(1,726

)

(7,601

)

Losses and other charges, net of tax8,41613,312
$0.21$0.33

 

Early termination of interest rate swap (B)11,056
Tax benefit(4,024)
Early termination of interest rate swap, net of tax7,032
$0.17
 
Amortization of debt discount on convertible notes7,7877,212
Tax benefit(2,835)(2,621)
Amortization of debt discount on convertible notes, net of tax4,9524,591
$0.12$0.11
 
Intangible amortization expense32,26332,087
Tax benefit(11,766)(11,697)
Intangible amortization expense, net of tax20,49720,390
$0.50$0.50
 
Tax adjustments (C)(8,957)(2,165)
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