Teleflex Reports Second Quarter 2013 Results

Teleflex Reports Second Quarter 2013 Results

Revenues Rise 9.6% to $420.1 million; up 9.6% on Constant Currency Basis

GAAP Diluted EPS of $0.99; Adjusted Diluted EPS of $1.27

Change in Methodology of Calculating Adjusted Diluted Earnings per Share Announced

2013 Constant Currency Revenue Growth Expectations adjusted from 11% to 13% to 10% to 12%

2013 Adjusted Diluted Earnings per Share Range of $4.70 to $4.90 Reaffirmed

LIMERICK, Pa.--(BUSINESS WIRE)-- Teleflex Incorporated (NYS: TFX) today announced financial results for the second quarter ended June 30, 2013.

Second quarter 2013 net revenues were $420.1 million, an increase of 9.6% over the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues also increased 9.6% over the prior year period.

Second quarter 2013 GAAP diluted earnings per share from continuing operations were $0.99, as compared to $1.14 in the prior year period. Second quarter 2013 adjusted diluted earnings per share from continuing operations, incorporating the change in methodology discussed below, were $1.27, as compared to $1.23 in the prior year period, an increase of 3.3%.

In addition, the Company announced a change in methodology when calculating adjusted diluted earnings per share. Specifically, in calculating adjusted diluted earnings per share the Company will give effect to the anti-dilutive impact of its convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of its senior subordinated convertible notes. Under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares. The Company believes that reflecting the anti-dilutive impact of the convertible note hedge agreements in calculating adjusted diluted earnings per share is reflective of the economic substance of the hedge and provides a more accurate representation of what will happen upon conversion, rather than the separation of the hedge agreements from the dilutive shares required by GAAP. The change in methodology increased the reported adjusted diluted earnings per share for the second quarter and first six months of 2013 by $0.04 and $0.07, respectively. The change in methodology had no impact on the reported adjusted diluted earnings per share for the second quarter and first six months of 2012.

"During the second quarter, Teleflex continued to make progress on its operating initiatives despite declining utilization rates," said Benson Smith, Chairman, President and CEO. "Aided by the impact from our 2012 acquisition of LMA International, an improvement in the average selling prices of products, and the continued introduction of new products to the marketplace, the Company delivered second quarter constant currency revenue growth of 9.6% and year-over-year gross margin expansion. In addition, we acquired Ultimate Medical and Eon Surgical which will strengthen our anesthesia and surgical strategic business unit franchises. However, because of persisting negative utilization and physician visit trends, we are lowering the top and bottom end of our full year 2013 constant currency revenue growth expectations to now be between 10% to 12%. Despite the slight reduction in revenue growth expectations, I am pleased to announce that through cost reduction efforts and favorable product mix, we are reaffirming our previously provided adjusted earnings per share range of between $4.70 to $4.90 per share."

SECOND QUARTER NET REVENUE BY PRODUCT GROUP AND SEGMENT

Product Group Revenues

Critical Care second quarter 2013 net revenues were $289.3 million, an increase of 13.9% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues increased 14.0% compared to the prior year period. The increase in constant currency revenue was due to higher sales of anesthesia, urology and interventional access products. The growth in sales of anesthesia products was primarily due to the contribution from the LMA International business ("LMA"), which we acquired in October of 2012. Constant currency sales growth was partially offset by a decline in sales of respiratory products as compared to the second quarter of 2012.

Surgical Care second quarter 2013 net revenues were $78.1 million, an increase of 7.1% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues increased 6.6% compared to the prior year period. The increase in constant currency revenue was due to higher sales of ligation and access products, partially offset by a decline in sales of chest drainage and general surgical instrument products as compared to the second quarter of 2012.

Cardiac Care second quarter 2013 net revenues were $20.2 million, a decrease of 1.6% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues decreased 1.0% compared to the prior year period. The decrease in constant currency revenue was due to a decline in sales of intra-aortic balloon pumps as compared to the second quarter of 2012.

OEM and Development Services ("OEM") second quarter 2013 net revenues were $32.1 million, a decrease of 10.8% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues decreased 11.0% compared to the prior year period. The decrease in constant currency revenue was primarily due to a decline in sales of catheter and performance fiber products as compared to the second quarter of 2012.

Segment Revenues

Americas second quarter 2013 net revenues were $199.8 million, an increase of 13.0% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues increased 12.9% compared to the prior year period. The increase in constant currency revenue was largely due to LMA product sales, new product introductions and price increases. Constant currency sales growth was partially offset by lower sales volume of existing products as compared to the second quarter of 2012.

EMEA second quarter 2013 net revenues were $137.8 million, an increase of 8.6% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues increased 8.1% compared to the prior year period. The increase in constant currency revenue was due to LMA product sales, higher sales volume of existing products, new product introductions, and price increases as compared to the second quarter of 2012.

Asia second quarter 2013 net revenues were $50.4 million, an increase of 15.5% compared to the prior year period. Excluding the impact of foreign currency fluctuations, second quarter 2013 net revenues increased 17.3% compared to the prior year period. The increase in constant currency revenue was due to LMA product sales and higher sales volume of existing products.

OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS

Depreciation expense and amortization of intangible assets and deferred financing costs for the first six months of 2013 were $52.0 million compared to $45.4 million for the prior year period.

Cash and cash equivalents at June 30, 2013 were $281.4 million compared to $337.0 million at December 31, 2012.

Net accounts receivable at June 30, 2013 were $311.9 million compared to $298.0 million at December 31, 2012.

Net inventories at June 30, 2013 were $348.6 million compared to $323.3 million at December 31, 2012.

Net debt obligations at June 30, 2013 were $748.3 million compared to $692.7 million at December 31, 2012.

On July 16, 2013, the Company replaced its $775 million senior credit facility comprised of a $375 million term loan and a $400 million revolving credit facility with a new $850 million senior credit facility consisting of a revolving credit facility.

2013 OUTLOOK

The Company's financial estimates for full year 2013 are as follows:

Constant currency revenue growth between 10% and 12%. This compares to the previously provided constant currency revenue growth range of between 11% and 13%.

Adjusted diluted earnings per share in the range of $4.70 to $4.90.

2013 OUTLOOK EARNINGS PER SHARE RECONCILIATION

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 August 7, 2013, 11:59pm (ET), by calling 888-286-8010 (U.S./Canada) or 617-801-6888 (International), Passcode: 88095129.

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 and in the Reconciliation of Consolidated Statement of Income Items set forth below.

NOTES ON NON-GAAP FINANCIAL MEASURES

This press release includes certain non-GAAP financial measures, which include:

• Adjusted diluted earnings per share. This measure excludes, depending on the period presented (i) the effect of charges associated with our restructuring program, as well as goodwill and other asset impairment charges; (ii) the gain or loss on sales of businesses and assets; (iii) losses and other charges related to acquisition costs, the reversal of a reserve associated with a previously announced stock keeping unit reduction program, and a litigation verdict against the Company with respect to a non-operating joint venture; (iv) the amortization of the debt discount on the Company's convertible notes; (v) charges associated with the amortization of additional interest expense related to an interest rate swap terminated in 2011; (vi) intangible amortization expense; and (vii) tax benefits resulting from the resolution of prior years' tax matters and the filing of prior years' amended tax returns. In addition, the calculation of diluted shares within adjusted earnings per share gives effect to the anti-dilutive impact of the Company's convertible note hedge agreements, which reduce the potential economic dilution that otherwise would occur upon conversion of the Company's senior subordinated convertible notes (under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares). The Company had decided to include the anti-dilutive impact of the convertible note hedge agreements because it believes it is useful for investors to understand their economic effects. Consistent with past practice, adjusted diluted earnings per share has not been adjusted to exclude the benefit resulting from the forfeiture of equity awards.

• Constant currency revenue. This measure excludes the impact of translating the results of international subsidiaries at different currency exchange rates from period to period.

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 believes that the calculation of non-GAAP diluted shares is useful to investors because it provides insight into the offsetting economic effect of the convertible note hedge against conversions of the convertible notes. 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 generally accepted accounting principles ("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.