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Teleflex Reports Fourth Quarter and Full Year 2010 Results
Dépèche transmise le 24 février 2011 par Business Wire
Teleflex Reports Fourth Quarter and Full Year 2010 Results
LIMERICK, Pa.--(BUSINESS WIRE)--Teleflex Incorporated (NYSE: TFX), a global provider of medical technology products that enable healthcare providers to improve patient outcomes, reduce infections and support patient and provider safety, today announced financial results for the fourth quarter and year ended December 31, 2010.
“During the fourth quarter and the first weeks of 2011, we have continued to transition Teleflex into a global pure-play medical technology leader”
Fourth Quarter Financial Highlights and Business Segment Commentary
Fourth quarter 2010 net revenues were $493.2 million, a 1% increase over fourth quarter revenues of 2009. Revenues for the quarter increased 3% on a constant currency basis, offset by foreign currency fluctuations that negatively impacted sales by 1%, and the deconsolidation of an entity that negatively impacted sales 1%.
Fourth quarter 2010 GAAP income from continuing operations attributable to common shareholders was $28.5 million, or $0.71 per diluted share, a decrease of 38% from the prior year quarter. On an adjusted basis, as detailed in the reconciliation tables below, fourth quarter 2010 income from continuing operations was $40.3 million, or $1.00 per diluted share, a 6% increase over the same period in the prior year.
Fourth quarter 2010 GAAP net income attributable to common shareholders was $81.1 million compared to $42.7 million in the prior year quarter. These results include income from discontinued operations of $52.6 million in the fourth quarter of 2010, and a loss from discontinued operations of $3.2 million in the prior year quarter.
“During the fourth quarter and the first weeks of 2011, we have continued to transition Teleflex into a global pure-play medical technology leader,” said Benson Smith, Chairman, President & CEO. “Throughout the year we completed several transactions enabling us to exit non-medical segments and redeploy resources to our core medical business while reducing debt.”
Added Mr. Smith, “A key objective of our future growth and profitability strategy is to bring to market products that address infection control and prevention. During the quarter, we launched our anti-microbial ArrowEVOLUTION™ PICC with Chlorag+ard™ technology and were awarded four group purchasing organization contract extensions for a combination of vascular access and surgical products.”
“As we look ahead, our Board, management and employees are dedicated to further driving and accelerating execution of our strategy. One key goal in 2011 is to increase our medical product revenue growth rate for the full year, as compared to 2010. We will continue to pursue opportunities to maximize the value to our shareholders of our non-core assets, and will heighten our new product development focus. Through the recent acquisition of VasoNova we will be incorporating a unique central venous catheter navigation technology into the Teleflex product line as the year progresses. In addition, we’ll be fine tuning our strategies in order to increase returns and capitalize on our strengths in the marketplace,” concluded Mr. Smith.
Medical Segment
Medical Segment revenues in the fourth quarter of 2010 were $386.3 million as compared to $391.2 million in the prior year period. Revenue growth of 1% on a constant currency basis was offset by an unfavorable currency impact of 1% and impact of the deconsolidation of an entity of 1%. Constant currency revenue increases in urology, anesthesia, surgical, and specialty products sold to medical OEM’s were offset by a decline in cardiac care sales. The decline in cardiac care sales was due to the voluntary recall of the 5800 Series Intra-Aortic balloon catheters that was announced in December of 2010.
Medical Segment sales by product group were comprised of the following:
| Three Months Ended | % Increase/ (Decrease) | ||||||||||||||
|
December 31, 2010 |
December 31, 2009 |
Core Growth |
Currency/ Other* |
Total Change |
|||||||||||
| (Dollars in millions) | |||||||||||||||
| Critical Care | $ | 257.7 | $ | 258.8 | 2 | % | (2 | %) | 0 | % | |||||
| Surgical | 71.7 | 68.5 | 7 | % | (2 | %) | 5 | % | |||||||
| Cardiac Care | 16.1 | 19.2 | (15 | %) | (1 | %) | (16 | %) | |||||||
| OEM | 40.4 | 40.4 | 1 | % | (1 | %) | 0 | % | |||||||
| Other* | 0.4 | 4.3 | (73 | %) | (18 | %) | (91 | %) | |||||||
| Total net sales | $ | 386.3 | $ | 391.2 | 1 | % | (2 | %) | (1 | %) | |||||
* “Other” represents the impact of the deconsolidation of a variable interest entity as a result of the adoption of Accounting Standards Codification topic 810 “Consolidations.”
Segment operating profit and margins in the fourth quarter of 2010 were $63.1 million, or 16.3%, compared to $82.2 million, or 21.0%, in the prior year quarter. Fourth quarter 2010 operating profit was impacted negatively by non-recurring costs associated with the recall of our custom IV tubing product and certain intra-aortic balloon catheters and a factory shut down associated with the custom IV tubing product.
In addition to the medical technology business, Teleflex also has niche businesses that serve segments of the aerospace and commercial markets with specialty engineered products.
Aerospace Segment
Aerospace Segment revenues in the fourth quarter of 2010 increased 15% to $59.1 million from $51.6 million in the prior year period. Increases in sales of narrow-body cargo handling systems, cargo containers and cargo spares and repair sales more than offset lower sales of wide-body cargo handling systems, resulting in a 16% increase in core revenue during the quarter. This increase was partly offset by an unfavorable currency impact of 1%.
Segment operating profit and margins in the fourth quarter of 2010 were $11.4 million, or 19.2%, compared to $4.5 million, or 8.8%, in the prior year quarter.
Commercial Segment
Commercial Segment revenues in the fourth quarter of 2010 increased 10% to $47.7 million from $43.3 million in the same period last year. Core revenue growth of 10% was the result of increased Marine OEM and aftermarket sales.
Segment operating profit and margins in the fourth quarter of 2010 were $2.3 million, or 4.9%, compared to $3.0 million, or 7.0%, in the prior year quarter.
Balance Sheet Highlights
Cash and cash equivalents on hand at December 31, 2010 were $208.5 million compared to $188.3 million at December 31, 2009, up 11%.
Net accounts receivable at December 31, 2010 were $294.2 million compared to $265.3 million at December 31, 2009, up 11%. Excluding the $39.7 million impact of the adoption of the amendment to Accounting Standards Codification topic 860 “Transfers and Servicing” (“ASC 860”), net accounts receivable declined 4%.
Net inventory at December 31, 2010 was $338.6 million compared to $360.8 million at December 31, 2009, a decline of 6%.
Net debt at December 31, 2010 was $708.7 million compared to $1,008.2 million at December 31, 2009, a decline of 30%. Excluding the $29.7 million impact of ASC 860, net debt declined 33%.
“During the fourth quarter of 2010 we continued to improve our overall capital structure through the prepayment of our 2004 senior notes,” stated Richard A. Meier, Executive Vice President and Chief Financial Officer. “As a result of the capital markets transactions we completed during 2010, we have improved our ability to access additional capital to grow our core medical business while keeping the company’s cost of capital relatively unchanged.”
2010 Financial Highlights
Net revenues for 2010 increased 2% to $1,801.7 million from $1,766.3 million in 2009. Revenues increased 3% on a constant currency basis, while the deconsolidation of an entity accounted for a 1% decline in revenues.
GAAP income from continuing operations attributable to common shareholders for 2010 was $124.5 million, or $3.09 per diluted share, a decrease of 7% from 2009. On an adjusted basis, as detailed in the reconciliation tables below, income from continuing operations for 2010 was $158.3 million, or $3.93 per diluted share, an increase of 15% from 2009.
GAAP net income attributable to common shareholders for 2010 was $201.1 million compared to $303.0 million in 2009. These results included income from discontinued operations, net of tax of $76.5 million in 2010, and income from discontinued operations, net of tax of $169.3 million in 2009.
GAAP cash flow from continuing operations for 2010 was $206.6 million as compared to $172.2 million in 2009. On an adjusted basis, as detailed in the reconciliation tables below, cash flow from continuing operations for 2010 was $186.8 million as compared to $269.7 million in 2009. Cash flow for 2010 was impacted by a $30 million pension contribution which the company elected to make in the third quarter to further improve the quality of the balance sheet.
Prepayment of 2004 Senior Notes
On February 14, 2011, the company issued notice to the holders of the 2004 senior notes of its election to prepay all of the $165.8 million in aggregate outstanding principal amount of the 2004 senior notes.
In connection with this prepayment election, on February 23, 2011, the company prepaid $101.8 million in aggregate principal amount of the 2004 senior notes. This consisted of $45.8 million of 6.66% senior notes due in 2011, $26.5 million of 7.14% senior notes due in 2014, and $29.5 million of 7.46% senior notes due in 2016. The company used available cash and borrowings under its revolving credit facility to prepay the notes, which included $9.1 million in accrued interest and make whole premiums.
The remaining $64.0 million in aggregate principal amount will be prepaid on March 16, 2011, together with the applicable accrued interest and make whole premiums. The company expects to use further borrowings under its revolving credit facility and available cash to fund the prepayment of the 2004 senior notes that remain outstanding.
Business Outlook for 2011
The company’s financial estimates for 2011 are as follows:
- Revenue between $1.81 billion and $1.84 billion
- Adjusted cash earnings per share in the range of $4.95 to $5.15
| Low | High | |||||
| Diluted earnings per share attributable to common shareholders | $3.65 | $3.85 | ||||
| Special items, net of tax | $0.45 | $0.45 | ||||
| Diluted earnings per share excluding special items | $4.10 | $4.30 | ||||
| Intangible amortization expense, net of tax | $0.70 | $0.70 | ||||
|
Amortization of debt discount on convertible notes, net of tax |
$0.15 | $0.15 | ||||
| Adjusted cash earnings per share | $4.95 | $5.15 | ||||
Longer-Term Growth and Profitability Objectives
With the portfolio transition to healthcare largely complete, we have increased our focus on delivering long-term growth and profitability. As such, we are targeting the achievement of the following objectives within the next five years:
- Consolidated annual organic revenue growth of approximately 5%
- Consolidated gross margins of approximately 55%
- Consolidated research and development expense of approximately 5%
- Consolidated operating margins of approximately 25%
We believe revenue growth will be achieved through the introduction of new products and product line extensions, expansion of our geographic reach, leveraging our existing distribution channels, further investment in our global sales and marketing groups and select acquisitions that enhance or expedite our development initiatives and our ability to increase our market share. We anticipate that margin expansion will be achieved through various initiatives which may include: consolidation of distribution facilities; efficiencies gained from the reduction of third-party vendors; consolidation and productivity improvements of manufacturing locations and customer service; and further initiatives to realize increased efficiencies with respect to general and administrative expenses. We expect that some of these benefits to be offset by increases in spending in research and development.
Conference Call Webcast and Additional Information
As previously announced, Teleflex will comment on its fourth quarter and year-end 2010 results and its 2011 Outlook on a conference call to be held today at 5:00 p.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 1, 2011, 12:00pm (ET), by calling 888-286-8010 (U.S./Canada) or 617-801-6888 (International), Passcode: 84161006.
Additional Notes
Core revenue and growth include activity of a purchased company beyond the initial twelve months after the date of acquisition. Core revenue and growth exclude the impact of translating the results of international subsidiaries at different currency exchange rates from period to period, and the activity of companies that have been divested within the most recent twelve month period.
Certain financial information is presented on a rounded basis, which may cause minor differences.
Segment operating profit includes a segment’s net revenues reduced by its materials, labor and other product costs along with the segment’s research and development, selling, general and administrative expenses and non-controlling interest. Unallocated corporate expenses, gains or losses on sales of assets, restructuring and impairment charges, interest income and expense and taxes on income are excluded from the measure.
Segment 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.
Notes on Non-GAAP Financial Measures
This press release includes financial measures which exclude the effect of charges associated with our restructuring programs and asset impairments, losses and other charges related to refinancing transactions, factory shut down costs, charges related to the Arrow acquisition, certain tax adjustments, (gain)/loss on sale of assets and other charges, the impact of changes in accounting rules, an income tax refund related to gains on a business divestiture, and intangible amortization expense. Adjusted cash earnings per share from continuing operations is defined as adjusted earnings per share from continuing operations plus intangible amortization expense and the amortization of debt discount on convertible notes. 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 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 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.
|
Fourth Quarter and Full Year Reconciliation of Income from Continuing Operations |
||||||||||||||||
| Three Months | Three Months | Twelve Months | Twelve Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| Dec. 31, 2010 | Dec. 31, 2009 | Dec. 31, 2010 | Dec. 31, 2009 | |||||||||||||
| (Dollars in thousands, except per share) | ||||||||||||||||
|
|
||||||||||||||||
|
Income and diluted earnings per share attributable to common shareholders |
$ | 28,513 | $ | 45,885 | $ | 124,545 | $ | 133,692 | ||||||||
| $0.71 | $1.15 | $3.09 | $3.35 | |||||||||||||
| Restructuring and impairment charges | 1,196 | 1,644 | 2,875 | 18,472 | ||||||||||||
| Tax benefit | (360 | ) | (349 | ) | (1,012 | ) | (3,266 | ) | ||||||||
| Restructuring and impairment charges, net of tax | 836 | 1,295 | 1,863 | 15,206 | ||||||||||||
| $0.02 | $0.03 | $0.05 | $0.38 | |||||||||||||
| Losses and other charges (A) | 22,048 | 703 | 54,790 | 5,052 | ||||||||||||
| Tax benefit | (8,126 | ) | (261 | ) | (19,992 | ) | (1,871 | ) | ||||||||
| Losses and other charges net of tax | 13,922 | 442 | 34,798 | 3,181 | ||||||||||||
| $0.35 | $0.01 | $0.86 | $0.08 | |||||||||||||
| Tax adjustments (B) | (2,939 | ) | (9,404 | ) | (2,939 | ) | (14,802 | ) | ||||||||
| ($0.07 | ) | ($0.24 | ) | ($0.07 | ) | ($0.37 | ) | |||||||||
| Income and diluted earnings per share excluding restructuring and impairment charges, losses and other charges, and tax adjustments | $ | 40,332 | $ | 38,218 | $ | 158,267 | $ | 137,277 | ||||||||
| $1.00 | $0.96 | $3.93 | $3.44 | |||||||||||||
| Amortization of debt discount on convertible notes, net | 1,465 | — | 2,444 | — | ||||||||||||
| $0.04 | — | $0.06 | — | |||||||||||||
| Intangible amortization expense, net | 6,883 | 7,528 | 27,822 | 28,131 | ||||||||||||
| $0.17 | $0.19 | $0.69 | $0.70 | |||||||||||||
| Cash income and diluted earnings per share excluding restructuring and impairment charges, losses and other changes, and tax adjustments | $ | 48,680 | $ | 45,746 | $ | 188,533 | $ | 165,408 | ||||||||
| $1.21 | $1.14 | $4.68 | $4.14 | |||||||||||||
| (A) In 2010, losses and other charges principally related to the prepayment of Teleflex’s outstanding senior notes issued in 2004 and 2007, and related transaction fees and expenses; factory shut down costs associated with the custom IV tubing product. In 2009, losses and other charges principally related to the loss on sale of assets and restructuring related costs associated with the Arrow acquisition. |
| (B) The tax adjustments represents a benefit from the net reduction in income tax reserves and discrete tax benefits related primarily to the resolution of various uncertain tax provisions; the settlement of tax audits; and other adjustments to taxes recorded with respect to prior years, principally resulting from changes to tax law and adjustments to previously filed income tax returns. |
|
Full Year Reconciliation of Cash Flow from Operations |
||||
|
Twelve Months Ended Dec. 31, 2010 |
Twelve Months Ended Dec. 31, 2009 |
|||
| (Dollars in thousands) | ||||
| Cash flow from operations as reported | $206,585 | $172,189 | ||
| Add: Impact of the adoption of the amendment to Accounting Standards Codification topic 860 “Transfers and Servicing” | 39,700 | — | ||
| Add: Tax payments on gain on sale of ATI business | — | 97,536 | ||
| Less: Tax refund on sale of ATI business | 59,499 | — | ||
| Adjusted cash flow from operations | $186,786 | $269,725 | ||
|
Net Debt Reconciliation |
||||
|
Twelve Months Ended
Dec. 31, 2010 |
Twelve Months Ended
Dec. 31, 2009 |
|||
| (Dollars in thousands) | ||||
| Note payable and current portion of long-term borrowings | $103,711 | $4,008 | ||
| Long term borrowings | 813,409 | 1,192,491 | ||
| Total debt | 917,120 | 1,196,499 | ||
| Less: cash and cash equivalents | 208,452 | 188,305 | ||
| Net Debt | $708,668 | $1,008,194 | ||
About Teleflex Incorporated
Teleflex is a global provider of medical technology products that enable healthcare providers to improve patient outcomes, reduce infections and support patient and provider safety. Teleflex, which employs approximately 12,500 people worldwide, also has niche businesses that serve segments of the aerospace and commercial markets with specialty engineered products. Additional information about Teleflex can be obtained from the company's website at www.teleflex.com.
Caution Concerning Forward-looking Information
This press release contains forward-looking statements, including, but not limited to, statements relating to our intentions to increase our medical product revenue growth rate for the full year, as compared to 2010; the heightening of our focus on new product development; the incorporation of VasoNova’s technology into the Teleflex product line; efforts to increase returns and capitalize on our strengths in the marketplace; forecasted 2011 total revenue; adjusted total cash earnings per share; our longer-term growth and profitability objectives with respect to consolidated annual organic revenue growth, consolidated gross margins, consolidated research and development expense and consolidated operating margins; our expectations that revenue growth will be achieved through the introduction of new products and product line extensions, expansion of our geographic reach, leveraging our existing distribution channels, further investment in our global sales and marketing groups and select acquisitions that enhance or expedite our development initiatives and our ability to increase our market share; our anticipation that margin expansion will be achieved through various initiatives which may include: consolidation of distribution facilities; efficiencies gained from the reduction of third-party vendors; consolidation and productivity improvements of manufacturing locations and customer service; and further initiatives to realize increased efficiencies with respect to general and administrative expenses; and our expectation that increased spending in research and development will offset some of the benefits we expect to achieve. 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; unanticipated difficulties, expenditures and delays in complying with government regulations applicable to our businesses, including unanticipated costs and difficulties in connection with the resolution of issues related to the FDA corporate warning letter issued to Arrow; the impact of government healthcare reform legislation; our ability to meet our debt obligations; changes in general and international economic conditions; and other factors described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
