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Teleflex Reports Second Quarter 2018 Results

August 2, 2018

WAYNE, Pa.--(BUSINESS WIRE)--Aug 2, 2018--Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced financial results for the second quarter ended July 1, 2018.

Second quarter 2018 net revenues were $609.9 million, an increase of 15.4% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2018 net revenues increased 12.4% over the year ago period.

Second quarter 2018 GAAP loss per share from continuing operations was ($0.06), as compared to diluted earnings per share of $1.67 in the prior year period. The decrease in GAAP earnings per share from continuing operations is due to $57.8 million of restructuring, restructuring related and impairment charges, which primarily related to the Company’s 2018 footprint realignment plan, and $25.7 million of contingent consideration expense. Second quarter 2018 adjusted diluted earnings per share from continuing operations increased 21.1% to $2.47, compared to $2.04 in the prior year period.

Liam Kelly, President and Chief Executive Officer, said, “While Teleflex’s constant currency revenue growth during the second quarter fell short of our expectations, this was primarily due to the timing of orders received from distributors, as well as certain product constraints associated with key suppliers. However, we were still able to achieve adjusted earnings per share of $2.47, which is an increase of 21.1%. In addition, I am pleased to report that in the recent weeks, orders and revenue rebounded, and therefore, we continue to estimate that full year constant currency revenue growth will be between 12% and 13%.”

Added Mr. Kelly, “We continued to see strong performance from NeoTract, which generated approximately $48 million in revenue during the second quarter, representing growth of approximately 58%. Urolift continues to generate strong physician adoption, and its second quarter revenues, inclusion in the AUA Guidelines and continued expansion of published clinical evidence give us increased confidence in its short and long-term growth trajectory, and as such, we are raising our revenue expectations for NeoTract as we now believe it will grow approximately 50% over 2017 levels.”

In closing, Mr. Kelly stated, “Notwithstanding recent volatility in foreign currency exchange rates, I am pleased to report that we are maintaining our previously provided full year adjusted diluted earnings per share guidance range of between $9.70 and $9.90.”

SECOND QUARTER AND SIX MONTH NET REVENUE BY SEGMENT

The following tables provide information regarding net revenues in each of the Company’s reportable operating segments and all of its other operating segments for the three and six months ended July 1, 2018 and July 2, 2017 on both a GAAP and constant currency basis. The discussion below the table of the principal factors behind changes in net revenues for the three months ended July 1, 2018 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.

Vascular North America second quarter 2018 net revenues were $80.1 million, an increase of 1.6% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2018 net revenues increased 1.4% compared to the prior year period. The increase in constant currency revenue is primarily attributable to an increase in new product sales partially offset by a decrease in sales volumes of existing products, despite the favorable impact of one additional shipping day in the second quarter of 2018.

Interventional North America second quarter 2018 net revenues were $65.0 million, an increase of 11.3% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2018 net revenues increased 11.3% compared to the prior year period. The increase in constant currency revenue is primarily attributable to higher sales volumes of existing products and an increase in new product sales, reflecting, in part, the favorable impact of one additional shipping day in the second quarter of 2018.

Anesthesia North America second quarter 2018 net revenues were $50.5 million, an increase of 2.9% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2018 net revenues increased 2.7% compared to the prior year period. The increase in constant currency revenue is primarily attributable to an increase in new product sales and an increase in sales volumes of existing products, reflecting, in part, the favorable impact of one additional shipping day in the second quarter of 2018. The increase in constant currency revenue was partially offset by price decreases.

Surgical North America second quarter 2018 net revenues were $40.7 million, a decrease of 9.0% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2018 net revenues decreased 9.2% compared to the prior year period. The decrease in constant currency revenue is primarily attributable to a decline in sales volumes of existing products, despite the favorable impact of one additional shipping day in the second quarter of 2018.

EMEA second quarter 2018 net revenues were $153.4 million, an increase of 10.8% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2018 net revenues increased 2.8% compared to the prior year period. The increase in constant currency revenue is primarily attributable to net revenues generated by price increases. The increase in constant currency revenue was partially offset by a decline in sales volumes of existing products, despite the favorable impact of one additional shipping day in the second quarter of 2018.

Asia second quarter 2018 net revenues were $72.4 million, an increase of 9.7% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2018 net revenues increased 5.9%. The increase in constant currency revenue is primarily attributable to higher sales volumes of existing products and an increase in new product sales.

OEM second quarter 2018 net revenues were $52.6 million, an increase of 16.5% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2018 net revenues increased 14.9% compared to the prior year period. The increase in constant currency revenue is primarily attributable to higher sales volumes of existing products, reflecting, in part, the favorable impact of one additional shipping day in the second quarter of 2018.

All Other second quarter 2018 net revenues were $95.2 million, an increase of 98.0% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2018 net revenues increased 98.6% compared to the prior year period. The increase in constant currency revenue is primarily attributable to net revenues generated by NeoTract.

OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS

Depreciation expense, amortization of intangible assets and deferred financing charges for the first six months of 2018 totaled $106.9 million compared to $72.3 million for the prior year period.

Cash and cash equivalents at July 1, 2018 were $346.3 million compared to $333.6 million at December 31, 2017.

Net accounts receivable at July 1, 2018 were $359.1 million compared to $345.9 million at December 31, 2017.

Net inventories at July 1, 2018 were $405.4 million compared to $395.7 million at December 31, 2017.

2018 OUTLOOK

The Company lowered its full year 2018 GAAP revenue growth guidance range from a range of between 15% and 16% to a range of between 14% and 15%. The Company’s previous 2018 GAAP revenue growth guidance range reflected an anticipated 3% favorable impact of foreign currency exchange rate fluctuations, while the Company’s revised 2018 GAAP revenue growth guidance range reflects an anticipated 2% favorable impact of foreign currency exchange rate fluctuations. On a constant currency basis, the Company reaffirmed its full year 2018 guidance range of between 12% and 13% over the prior year.

The Company lowered its full year 2018 GAAP diluted earnings per share from continuing operations guidance from a range of between $5.45 and $5.55 to a range of between $4.60 and $4.70, reflecting the impact of additional restructuring and contingent consideration expenses. The Company reaffirmed its full year 2018 adjusted diluted earnings per share from continuing operations guidance range of between $9.70 and $9.90, reflecting our expectation of an approximately 5% positive impact from foreign currency exchange rate fluctuations.

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 and the accompanying presentation will be posted prior to the call. An audio replay will be available until August 7, 2018 at 11:00pm (ET), by calling 855-859-2056 (U.S./Canada) or 404-537-3406 (International), Passcode: 4890067.

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 we have sold commercially 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: adjusted diluted earnings per share and constant currency revenue growth. 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 historical adjusted diluted earnings per share to historical GAAP diluted earnings per share are set forth below. Tables reconciling changes in historical constant currency net revenues to historical GAAP net revenues are set forth above under “Second Quarter Net Revenue by Segment”. Tables reconciling forecasted 2018 constant currency revenue growth and forecasted 2018 adjusted earnings per share to their respective most directly comparable forecasted GAAP measures, forecasted 2018 revenue growth and forecasted 2018 diluted earnings per share available to common stockholders, are set forth above under “2018 Outlook.”

Adjusted diluted earnings per share: This non-GAAP measure 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 for quarters ended July 1, 2018 and July 2, 2017, and for the six months ended July 1, 2018 and July 2, 2017, respectively, set forth below; (iv) amortization of debt discount on convertible notes; (v) intangible amortization expense; (vi) loss on extinguishment of debt and (vii) tax adjustments. Management does not believe that any of the excluded items are indicative of our underlying core performance or business trends.

In addition, the calculation of the weighted average number of diluted shares within adjusted earnings per share for the 2017 period gives effect to the anti-dilutive impact of shares due to the Company under its previously outstanding convertible note hedge agreements. The convertible note hedge agreements reduced the potential economic dilution that otherwise would have occurred upon conversion of the Company’s senior subordinated convertible notes (under GAAP, the anti-dilutive impact of the convertible note hedge agreements was not reflected in the weighted average number of diluted shares). We believe that an adjustment to show the anti-dilutive effect of the convertible note hedge agreements provides supplemental information that can be useful to investors in assessing the computation of diluted earnings per share.

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.

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