WAYNE, Pa., Oct. 29, 2020 (GLOBE NEWSWIRE) -- Teleflex Incorporated (NYSE: TFX) today announced financial results for the third quarter ended September 27, 2020.
Third quarter 2020 net revenues were $628.3 million, a decrease of 3.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues decreased 4.1% over the year ago period. The Company estimates that COVID-19 had a net negative impact to revenue of approximately $78 million, or 12%.
Third quarter 2020 GAAP earnings per share from continuing operations decreased 49.3% to $2.46, compared to $4.85 in the prior year period. Third quarter 2020 adjusted diluted earnings per share from continuing operations decreased 6.7% to $2.77, compared to $2.97 in the prior year period.
Liam Kelly, Chairman, President and Chief Executive Officer, said, “Our third quarter results reflect improving trends across many of our global product categories, led by a faster-than-expected recovery within our Interventional Urology business, and continued strength within our Vascular Access product sales. From a regional perspective, we saw particular strength within the Americas, as the pace of recovery in the United States during the third quarter was encouraging."
Mr. Kelly continued, "In addition to the significant sequential improvement in our constant currency revenue performance, we also saw a significant improvement within our adjusted gross and operating margins, as well as our adjusted earnings per share, as compared to the second quarter of the year. And while we are not reinstating full year 2020 financial guidance, we continue to believe that we will see continued sequential improvement during the fourth quarter of the year as compared to our third quarter 2020 results."
Mr. Kelly concluded, "Lastly, I am pleased to announce that during October we signed a definitive agreement to acquire Z-Medica, LLC, a market leader in hemostatic products. We are excited about this acquisition, given Z-Medica's revenue growth, gross and operating margin profile, all of which are above our average, and our expectation that the acquisition will be accretive to our adjusted earnings per share in 2021."
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 and nine months ended September 29, 2019 and September 27, 2020 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 September 27, 2020 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.
Americas third quarter 2020 net revenues were $375.0 million, an increase of 0.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues increased 0.4% compared to the prior year period. The increase in constant currency revenue was primarily attributable to price increases and an increase in new product sales, partially offset by a net decrease in sales volumes of existing products caused by the COVID-19 pandemic. We estimate that COVID-19 had a negative impact to revenue of approximately $34 million, or 9%.
EMEA third quarter 2020 net revenues were $135.7 million, a decrease of 3.5% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues decreased 7.0% 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. We estimate that COVID-19 had a negative impact to revenue of approximately $6 million, or 4%.
Asia third quarter 2020 net revenues were $68.2 million, a decrease of 12.4% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues decreased 14.2% 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. We estimate that COVID-19 had a negative impact to revenue of approximately $16 million, or 21%.
OEM third quarter 2020 net revenues were $49.4 million, a decrease of 10.9% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues decreased 11.8% 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. (HPC). We estimate that COVID-19 had a negative impact to revenue of approximately $22 million, or 40%.
Third quarter 2020 net revenues from sales of Vascular Access products were $160.0 million, an increase of 7.6% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues increased 6.8% compared to the prior year period. We estimate that COVID-19 had a net positive impact to revenue of approximately $2 million, or 1%.
Third quarter 2020 net revenues from sales of Interventional products were $93.2 million, a decrease of 12.8% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues decreased 13.5% compared to the prior year period. We estimate that COVID-19 had a negative impact to revenue of approximately $17 million, or 16%.
Third quarter 2020 net revenues from sales of Anesthesia products were $75.7 million, a decrease of 13.2% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues decreased 14.4% compared to the prior year period. We estimate that COVID-19 had a negative impact to revenue of approximately $9 million, or 10%.
Third quarter 2020 net revenues from sales of Surgical products were $82.2 million, a decrease of 11.2% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues decreased 12.3% compared to the prior year period. We estimate that COVID-19 had a negative impact to revenue of approximately $12 million, or 13%.
Third quarter 2020 net revenues from sales of Interventional Urology products were $81.8 million, an increase of 11.1% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues increased 11.0% compared to the prior year period. We estimate that COVID-19 had a negative impact to revenue of approximately $21 million, or 29%.
Third quarter 2020 net revenues from sales of OEM products were $49.4 million, a decrease of 10.9% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues decreased 11.8% compared to the prior year period. We estimate that COVID-19 had a negative impact to revenue of approximately $22 million , or 40%.
Third quarter 2020 net revenues from sales of other products were $86.0 million, an increase of 2.5% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, third quarter 2020 net revenues increased 0.5% compared to the prior year period. We estimate that COVID-19 had a positive impact to revenue of approximately $1 million, or 1%.
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS
Depreciation expense, amortization of intangible assets and deferred financing charges for the nine months ended September 27, 2020 totaled $173.2 million compared to $163.3 million for the nine months ended September 29, 2019.
Cash and cash equivalents at September 27, 2020 were $347.5 million compared to $301.1 million at December 31, 2019.
Net accounts receivable at September 27, 2020 were $390.5 million compared to $418.7 million at December 31, 2019.
Net inventories at September 27, 2020 were $526.1 million compared to $476.6 million at December 31, 2019.
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 2020 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.
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.
