Teleflex Reports Fourth Quarter and Full Year 2015 Results; Provides 2016 Guidance

WAYNE, Pa.--(BUSINESS WIRE)--Teleflex Incorporated (NYSE: TFX) (the “Company”) today announced financial results for the fourth quarter and year ended December 31, 2015.

Fourth quarter 2015 net revenues were $484.5 million, an increase of 1.8% over the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, fourth quarter 2015 net revenues increased 7.4% over the year ago period.

Fourth quarter 2015 GAAP diluted earnings per share from continuing operations increased 70.9% to $1.88, as compared to $1.10 in the prior year period. Fourth quarter 2015 adjusted diluted earnings per share from continuing operations increased 40.6% to $2.01, compared to $1.43 in the prior year period.

Full year 2015 net revenues were $1,809.7 million, a decrease of 1.6% from the prior year. Excluding the impact of foreign currency exchange rate fluctuations, full year 2015 net revenues increased 5.4% over the prior year.

Full year 2015 GAAP diluted earnings per share from continuing operations increased 19.8% to $4.91, as compared to $4.10 in the prior year. Full year 2015 adjusted diluted earnings per share from continuing operations increased 10.3% to $6.33, compared to $5.74 in the prior year. We estimate that foreign currency exchange rates unfavorably impacted full year 2015 adjusted diluted earnings per share from continuing operations by approximately 15.2%.

“2015 was a tremendous year for Teleflex, capped off by a very strong fourth quarter,” said Benson Smith, Chairman, President and Chief Executive Officer. “During the fourth quarter we delivered constant currency revenue growth of 7.4%, and Teleflex's highest adjusted gross and operating margins since transitioning to a pure-play medical device company, reaching 54.1% and 23.7%, respectively.”

Added Smith, "Following a successful 2015, one in which we overcame significant foreign currency headwinds, we are well positioned for 2016. Thanks in part to a robust product pipeline and the benefits of our previously announced restructuring initiatives, we expect to deliver between 5% to 6% constant currency revenue growth and between 10.6% to 13.0% adjusted earnings per share growth. Finally, the Company announced a new restructuring plan that is intended to enhance our competitive position and improve our longer-term profitability. This new plan will focus on the consolidation of certain facilities and relocation of manufacturing operations and will allow the Company to invest in higher growth opportunities.”

FOURTH QUARTER NET REVENUE BY SEGMENT

Vascular North America fourth quarter 2015 net revenues were $90.3 million, an increase of 9.6% compared to the prior year period. Excluding the impact of foreign currency fluctuations, fourth quarter 2015 net revenues increased 10.3% compared to the prior year period. The increase in constant currency revenue was largely due to higher sales volume of existing products, price increases and new product sales.

Surgical North America fourth quarter 2015 net revenues were $43.1 million, an increase of 5.6% compared to the prior year period. Excluding the impact of foreign currency fluctuations, fourth quarter 2015 net revenues increased 6.9% compared to the prior year period. The increase in constant currency revenue was largely due to product sales resulting from acquisitions, an increase in new product sales and price increases.

Anesthesia North America fourth quarter 2015 net revenues were $50.6 million, an increase of 6.1% compared to the prior year period. Excluding the impact of foreign currency fluctuations, fourth quarter 2015 net revenues increased 6.8% compared to the prior year period. The increase in constant currency revenue was largely due to higher sales volume of existing products, an increase in new product sales and price increases.

EMEA fourth quarter 2015 net revenues were $135.2 million, a decrease of 8.0% compared to the prior year period. Excluding the impact of foreign currency fluctuations, fourth quarter 2015 net revenues increased 3.6% compared to the prior year period. The increase in constant currency revenue was largely due to higher sales volume of existing products.

Asia fourth quarter 2015 net revenues were $69.2 million, an increase of 9.0% compared to the prior year period. Excluding the impact of foreign currency fluctuations, fourth quarter 2015 net revenues increased 18.0% compared to the prior year period. The increase in constant currency revenue was largely due to higher sales volume of existing products, product sales resulting from acquisitions and new product sales.

OEM and Development Services (“OEM”) fourth quarter 2015 net revenues were $37.8 million, an increase of 8.0% compared to the prior year period. Excluding the impact of foreign currency fluctuations, fourth quarter 2015 net revenues increased 10.3% compared to the prior year period. The increase in constant currency revenue was largely due to higher sales volume of existing products and an increase in new product sales.

OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS

Depreciation expense, amortization of intangible assets and deferred financing costs for 2015 aggregated to $125.3 million compared to $127.0 million for the prior year.

Cash and cash equivalents at December 31, 2015 were $338.4 million compared to $303.2 million at December 31, 2014.

Net accounts receivable at December 31, 2015 were $262.4 million compared to $273.7 million at December 31, 2014.

Net inventories at December 31, 2015 were $330.3 million compared to $335.6 million at December 31, 2014.

Net debt obligations at December 31, 2015 were $750.6 million compared to $801.4 million at December 31, 2014.

2016 RESTRUCTURING PLAN

On February 23, 2016, the Board of Directors of the Company approved a restructuring plan (the “Plan”) designed to reduce costs, improve operating efficiencies and enhance the Company’s long term competitive position. The Plan, which was developed in response to continuing cost pressures in the healthcare industry, involves the consolidation of operations and a related reduction in workforce at certain of the Company’s facilities, and primarily will include the relocation of certain manufacturing locations and the relocation and outsourcing of certain distribution operations. These actions will commence in the second quarter 2016 and are expected to be substantially completed by the end of 2018.

The Company estimates that it will incur aggregate pre-tax charges in connection with the Plan of between $34 million to $44 million, of which the Company expects approximately $21 million to $23 million will be incurred in 2016 and most of the balance will be incurred prior to the end of 2018. Generally, the Company expects that it will exclude these charges from its adjusted diluted earnings per share results. The Company estimates that $27 million to $31 million of the aggregate pre-tax charges will result in future cash outlays, of which the Company expects approximately $6 million to $8 million of the cash outlays will be made in 2016 and most of the balance will be made prior to the end of 2018. Additionally, the Company expects to make capital expenditures of $13 million to $17 million in connection with the Plan, of which, the Company expects approximately $3 million to $5 million will be made in 2016.

The following table provides a summary of the Company’s current cost estimates by major type of expense associated with the Plan:

The Company currently expects to achieve annualized savings of $12 million to $16 million once the Plan is fully implemented, and currently expects to realize Plan-related savings beginning in 2017.

As the Plan is implemented, management will reevaluate the estimated expenses and charges set forth above, and may revise its estimates as appropriate, consistent with generally accepted accounting principles.

2016 OUTLOOK

The Company estimates that revenues for full year 2016 will increase 5.0% to 6.0% on a constant currency basis. On a GAAP basis, revenues are expected to increase 3.0% to 4.0% over prior year, reflecting the anticipated unfavorable impact of foreign currency.

The Company expects adjusted diluted earnings per share from continuing operations to be between $7.00 and $7.15 for full year 2016, representing an increase of 10.6% to 13.0% over 2015, which reflects our expectation of a negative foreign currency headwind of approximately 2%. The Company expects full year 2016 GAAP diluted earnings per share from continuing operations to be between $4.92 and $4.99.

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 March 3, 2016 at 11:59pm (ET), by calling 888-286-8010 (U.S./Canada) or 617-801-6888 (International), Passcode: 70373672.

ADDITIONAL NOTES

References in this release to the unfavorable impact of foreign currency 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 for 36 months or less, and "existing products" refers to products we have sold 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

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) restructuring and other impairment charges; (ii) certain losses and other charges, including charges related to facility consolidations; (iii) amortization of the debt discount on the Company’s convertible notes; (iv) intangible amortization expense; (v) loss on extinguishment of debt; and (vi) tax benefits resulting primarily from adjustments to prior years’ tax returns and tax law changes. 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).

Constant currency revenue growth. 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 historical adjusted diluted earnings per share to historical GAAP earnings per share are set forth below. Tables reconciling constant currency net revenues to GAAP net revenues and reconciling forecasted non-GAAP measures to the most directly comparable forecasted GAAP measures are set forth above.

(A) In 2015 losses and other charges, net related primarily to facility consolidations and reflect reversals of previously recorded charges. In 2014, losses and other charges, net related primarily to facility consolidations.

(B) The tax adjustment represents a net benefit resulting primarily from (1) adjustments to prior year returns as a result of amended returns, the resolution of audits of prior year returns and/or the expiration of applicable statutes of limitations for prior year returns, and (2) tax law changes affecting our deferred tax liability.

(C) Adjusted diluted shares are calculated by giving 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 our senior subordinated convertible notes. Under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares.

(D) In 2015, losses and other charges, net related primarily to facility consolidations and reflect reversals of previously recorded charges.

(E) In 2015 losses and other charges, net primarily related to facility consolidations and reflect reversals of previously recorded charges. In 2014, losses and other charges, net primarily related to facility consolidations.

(F) The tax adjustment represents a net benefit resulting primarily from (1) adjustments to prior year returns as a result of amended returns, the resolution of audits of prior year returns and/or the expiration of applicable statutes of limitations for the prior year returns, and (2) tax law changes affecting our deferred tax liability.

(G) Adjusted diluted shares are calculated by giving 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 our senior subordinated convertible notes. Under GAAP, the anti-dilutive impact of the convertible note hedge agreements is not reflected in diluted shares.

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 and interventional access, surgical, anesthesia, cardiac care, urology, emergency medicine 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^® 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, forecasted 2016 GAAP and constant currency revenue growth and GAAP and adjusted diluted earnings per share; the timing of commencement and completion of the restructuring plan approved by the Board of Directors on February 23, 2016 (the "2016 Restructuring Plan"); estimated pre-tax charges and future cash outlays under the 2016 Restructuring Plan; anticipated annualized savings under the 2016 Restructuring Plan; and the expected general exclusion of charges in connection with the 2016 Restructuring Plan from our adjusted earnings per share results. Actual results could differ materially from those in the forward-looking statements due to, among other things, conditions in the end markets we serve, customer reaction to new products and programs, our ability to achieve sales growth, price increases or cost reductions; changes in the reimbursement practices of third party payors; our ability to realize efficiencies and to execute on our strategic initiatives; changes in material costs and surcharges; market acceptance and unanticipated difficulties in connection with the introduction of new products and product line extensions; product recalls; unanticipated difficulties in connection with the consolidation of manufacturing and administrative functions, including as a result of difficulties with various employees, labor representatives or regulators; the loss of skilled employees in connection with such initiatives; unanticipated difficulties, expenditures and delays in complying with government regulations applicable to our businesses; the impact of government healthcare reform legislation; our ability to meet our debt obligations; changes in general and international economic conditions, including fluctuations in foreign currency exchange rates; and other factors described or incorporated in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2015.