QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2019
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 1-5353
TELEFLEX INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
23-1147939
(State or other jurisdiction of incorporation or organization)
(I.R.S. employer identification no.)
550 E. Swedesford Rd., Suite 400
Wayne,
PA
19087
(Address of principal executive offices)
(Zip Code)
(610) 225-6800
(Registrant’s telephone number, including area code)
(None)
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $1.00 per share
TFX
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The registrant had 46,295,915 shares of common stock, par value $1.00 per share, outstanding as of October 29, 2019.
(Dollars and shares in thousands, except per share)
Net revenues
$
648,319
$
609,672
$
1,914,410
$
1,806,768
Cost of goods sold
272,639
267,099
821,064
788,147
Gross profit
375,680
342,573
1,093,346
1,018,621
Selling, general and administrative expenses
229,896
214,894
693,775
660,148
Research and development expenses
27,984
26,365
82,729
78,410
Restructuring and impairment charges
1,268
19,209
20,348
77,625
(Gain) on sale of assets
(1,089)
—
(3,828)
—
Income from continuing operations before interest and taxes
117,621
82,105
300,322
202,438
Interest expense
19,545
27,171
62,995
79,763
Interest income
(470)
(320)
(1,281)
(776)
Income from continuing operations before taxes
98,546
55,254
238,608
123,451
(Benefit) taxes on income from continuing operations
(130,383)
(1,286)
(115,567)
14,532
Income from continuing operations
228,929
56,540
354,175
108,919
Operating (loss) income from discontinued operations
(9)
(83)
(1,291)
1,246
Tax benefit on operating income (loss) from discontinued operations
(9)
(67)
(317)
(47)
Loss from discontinued operations
—
(16)
(974)
1,293
Net income
$
228,929
$
56,524
$
353,201
$
110,212
Earnings per share:
Basic:
Income from continuing operations
$
4.95
$
1.23
$
7.67
$
2.39
(Loss) Income from discontinued operations
—
—
(0.02)
0.03
Net income
$
4.95
$
1.23
$
7.65
$
2.42
Diluted:
Income from continuing operations
$
4.85
$
1.21
$
7.53
$
2.33
Income (loss) from discontinued operations
—
—
(0.02)
0.03
Net income
$
4.85
$
1.21
$
7.51
$
2.36
Weighted average common shares outstanding
Basic
46,248
45,851
46,156
45,587
Diluted
47,176
46,815
47,051
46,785
The accompanying notes are an integral part of the condensed consolidated financial statements.
2
TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
Nine Months Ended
September 29, 2019
September 30, 2018
September 29, 2019
September 30, 2018
(Dollars in thousands)
Net income
$
228,929
$
56,524
$
353,201
$
110,212
Other comprehensive income (loss), net of tax:
Foreign currency translation, net of tax of $(7,045), $(3,505), $(8,804), and $—, for the three and nine months periods, respectively
(39,894)
14,387
(27,562)
(30,130)
Pension and other postretirement benefit plans adjustment, net of tax of $(494), $(363), $(1,330), and $(1,253) for the three and nine months periods, respectively
1,560
1,215
4,248
4,111
Derivatives qualifying as hedges, net of tax of $64, $(308), $146, and $(419) for the three and nine months periods, respectively
(260)
1,651
(102)
1,943
Other comprehensive (loss) income, net of tax:
(38,594)
17,253
(23,416)
(24,076)
Comprehensive income
$
190,335
$
73,777
$
329,785
$
86,136
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 29, 2019
December 31, 2018
(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents
$
257,544
$
357,161
Accounts receivable, net
396,663
366,286
Inventories, net
472,594
427,778
Prepaid expenses and other current assets
81,531
72,481
Prepaid taxes
29,278
12,463
Total current assets
1,237,610
1,236,169
Property, plant and equipment, net
429,568
432,766
Operating lease assets
115,193
—
Goodwill
2,231,330
2,246,579
Intangible assets, net
2,175,673
2,325,052
Deferred tax assets
2,952
2,446
Other assets
64,856
34,979
Total assets
$
6,257,182
$
6,277,991
LIABILITIES AND EQUITY
Current liabilities
Current borrowings
$
50,000
$
86,625
Accounts payable
100,630
106,709
Accrued expenses
91,569
97,551
Current portion of contingent consideration
135,168
136,877
Payroll and benefit-related liabilities
99,831
104,670
Accrued interest
19,686
6,031
Income taxes payable
3,299
5,943
Other current liabilities
30,180
38,050
Total current liabilities
530,363
582,456
Long-term borrowings
1,949,068
2,072,200
Deferred tax liabilities
468,945
608,221
Pension and postretirement benefit liabilities
72,016
92,914
Noncurrent liability for uncertain tax positions
11,084
10,718
Noncurrent contingent consideration
71,712
167,370
Noncurrent operating lease liabilities
104,136
—
Other liabilities
196,882
204,134
Total liabilities
3,404,206
3,738,013
Commitments and contingencies
Total shareholders' equity
2,852,976
2,539,978
Total liabilities and shareholders' equity
$
6,257,182
$
6,277,991
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 29, 2019
September 30, 2018
(Dollars in thousands)
Cash flows from operating activities of continuing operations:
Net income
$
353,201
$
110,212
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (income) from discontinued operations
974
(1,293)
Depreciation expense
47,286
44,517
Amortization expense of intangible assets
112,661
111,974
Amortization expense of deferred financing costs and debt discount
3,313
3,548
Gain on sale of assets
(3,828)
—
Changes in contingent consideration
40,894
47,344
Impairment of long-lived assets
6,911
19,110
Stock-based compensation
20,037
16,469
Deferred income taxes, net
(140,963)
8,664
Payments for contingent consideration
(26,092)
(2,100)
Interest benefit on swaps designated as net investment hedges
(13,820)
—
Other
(7,142)
(10,928)
Changes in assets and liabilities, net of effects of acquisitions and disposals:
Accounts receivable
(41,221)
(29,830)
Inventories
(53,259)
(19,665)
Prepaid expenses and other assets
(13,184)
(6,468)
Accounts payable, accrued expenses and other liabilities
31,631
54,581
Income taxes receivable and payable, net
(28,232)
(43,191)
Net cash provided by operating activities from continuing operations
289,167
302,944
Cash flows from investing activities of continuing operations:
Expenditures for property, plant and equipment
(83,797)
(55,751)
Proceeds from sale of assets
3,135
—
Payments for businesses and intangibles acquired, net of cash acquired
(1,265)
(22,550)
Net interest proceeds on swaps designated as net investment hedges
8,330
—
Net cash used in investing activities from continuing operations
(73,597)
(78,301)
Cash flows from financing activities of continuing operations:
Proceeds from new borrowings
25,000
—
Reduction in borrowings
(185,500)
(98,500)
Debt extinguishment, issuance and amendment fees
(4,964)
(188)
Net proceeds from share based compensation plans and the related tax impacts
14,014
18,666
Payments for contingent consideration
(112,006)
(73,152)
Dividends paid
(47,071)
(46,526)
Net cash used in financing activities from continuing operations
(310,527)
(199,700)
Cash flows from discontinued operations:
Net cash provided by (used in) operating activities
2,651
(701)
Net cash provided by (used in) discontinued operations
2,651
(701)
Effect of exchange rate changes on cash and cash equivalents
(7,311)
(1,524)
Net (decrease) increase in cash and cash equivalents
(99,617)
22,718
Cash and cash equivalents at the beginning of the period
357,161
333,558
Cash and cash equivalents at the end of the period
$
257,544
$
356,276
Non cash investing activities of continuing operations:
Property, plant and equipment additions due to build-to-suit lease transaction
$
—
$
28,147
Non cash financing activities of continuing operations:
Acquisition of treasury stock associated with settlement and exchange of convertible note hedge and warrant agreements
$
—
$
56,075
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
Common Stock
Additional Paid In Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Treasury Stock
Total
Shares
Dollars
Shares
Dollars
(Dollars and shares in thousands, except per share)
Balance at December 31, 2018
47,248
$
47,248
$
574,761
$
2,427,599
$
(341,085)
1,232
$
(168,545)
$
2,539,978
Cumulative effect adjustment resulting from the adoption of new accounting standards
(1,321)
(1,321)
Net income
40,897
40,897
Cash dividends ($0.34 per share)
(15,650)
(15,650)
Other comprehensive income
396
396
Shares issued under compensation plans
75
75
3,094
(40)
2,029
5,198
Deferred compensation
127
(4)
253
380
Balance at March 31, 2019
47,323
47,323
577,982
2,451,525
(340,689)
1,188
(166,263)
2,569,878
Net income
83,375
83,375
Cash dividends ($0.34 per share)
(15,697)
(15,697)
Other comprehensive income
14,782
14,782
Shares issued under compensation plans
77
77
12,252
(2)
177
12,506
Balance as of June 30, 2019
47,400
47,400
590,234
2,519,203
(325,907)
1,186
(166,086)
2,664,844
Net income
228,929
228,929
Cash dividends ($0.34 per share)
(15,724)
(15,724)
Other comprehensive income
(38,594)
(38,594)
Shares issued under compensation plans
63
63
13,400
(2)
58
13,521
Balance as of September 29, 2019
47,463
$
47,463
$
603,634
$
2,732,408
$
(364,501)
1,184
$
(166,028)
$
2,852,976
Common Stock
Additional Paid In Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Treasury Stock
Total
Shares
Dollars
Shares
Dollars
(Dollars and shares in thousands, except per share)
Balance at December 31, 2017
46,871
$
46,871
$
591,721
$
2,285,886
$
(265,091)
1,704
$
(228,856)
$
2,430,531
Cumulative effect adjustment resulting from the adoption of new accounting standards