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Teleflex Reports Third Quarter 2012 Results

Stocks in this article: TFX

RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS

    Three Months Ended Three Months Ended
September 30, 2012 September 25, 2011  
(Dollars in thousands, except per share )
Income and diluted earnings per share attributable to common $ 24,263 $ 32,632
shareholders $0.58 $0.80
 
Restructuring and impairment charges 1,087
Tax benefit (412 )
Restructuring and impairment charges, net of tax 675
$0.02
 
Losses and other charges (A) 9,862

Tax benefit

(1,503

)

Losses and other charges, net of tax 8,359
$0.20

 

Early termination of interest rate swap (B) 3,662
Tax benefit (1,347 )
Early termination of interest rate swap, net of tax 2,315
$0.06
 
Amortization of debt discount on convertible notes 2,651 2,455
Tax benefit (965 ) (892 )
Amortization of debt discount on convertible notes, net of tax 1,686 1,563
$0.04 $0.04
 
Intangible amortization expense 11,061 10,712
Tax benefit (4,029 ) (3,914 )
Intangible amortization expense, net of tax 7,032 6,798
$0.17 $0.17
 
Tax adjustments (C) (1,303 )
($0.03 )
 
Adjusted income and diluted earnings per share $ 43,027 $ 40,993
$1.04 $1.00

(A) In 2012, losses and other charges include approximately $8.4 million, net of tax, or $0.20 per share,related to acquisition costs.

 

(B) In 2011, the Company terminated an interest rate swap that, at the date of termination, had anotional amount of $350 million. The interest rate swap was designated as a cash flow hedge againstthe term loan under our senior credit facility. At the date of termination, the interest rate swapwas in a liability position resulting in a cash payment by the Company of approximately $14.8 million,which included $3.1 million of accrued interest. In accordance with GAAP, the Company amortized thisamount as additional interest expense over the remainder of the original term of the interest rate swap,which expired in September 2012. In the third quarter of 2012, the non-cash, net of tax impact wasapproximately $2.3 million, or $0.06 per share.

 

(C) The tax adjustment represents a net benefit resulting from the filing of amended prior years’tax returns.

RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS

     
Nine Months Ended Nine Months Ended
September 30, 2012 2012 September 25, 2011
(Dollars in thousands, except per share )

(Loss)/income and (basic)/diluted earnings per share attributableto shareholders

 

($213,097

) $ 76,749

 

($5.22 ) $1.88
 
Goodwill impairment 332,128
Tax benefit (16,983 )
Goodwill impairment, net of tax 315,145
$7.72
 
Restructuring and impairment charges 84 710
Tax charge / (benefit) 61 (250 )
Restructuring and impairment charges, net of tax 145 460
$0.00 $0.01
 
Losses and other charges (A) 10,142 20,913

Tax benefit

(1,726

)

(7,601

)

Losses and other charges, net of tax 8,416 13,312
$0.21 $0.33

 

Early termination of interest rate swap (B) 11,056
Tax benefit (4,024 )
Early termination of interest rate swap, net of tax 7,032
$0.17
 
Amortization of debt discount on convertible notes 7,787 7,212
Tax benefit (2,835 ) (2,621 )
Amortization of debt discount on convertible notes, net of tax 4,952 4,591
$0.12 $0.11
 
Intangible amortization expense 32,263 32,087
Tax benefit (11,766 ) (11,697 )
Intangible amortization expense, net of tax 20,497 20,390
$0.50 $0.50
 
Tax adjustments (C) (8,957 ) (2,165 )
($0.22 ) ($0.05 )
 
Anti-dilutive effect on EPS (D) ($0.03 )
 
Adjusted income and diluted earnings per share $ 134,133 $ 113,337
$3.26 $2.78
 

(A) In 2012, losses and other charges include approximately $8.7 million, net of tax, or $0.22 per share,related to acquisition costs; and ($0.3) million, net of tax, or ($0.01) per share related to a gainon sale of businesses and assets. In 2011, losses and other charges include approximately $9.8 million,net of tax, or $0.24 per share, related to loss on extinguishment of debt; and $3.5 million, net of tax,or $0.09 per share, in charges related to severance payments and benefits provided to our former chiefexecutive officer.

 

(B) In 2011, the Company terminated an interest rate swap that, at the date of termination, had anotional amount of $350 million. The interest rate swap was designated as a cash flow hedge againstthe term loan under our senior credit facility. At the date of termination, the interest rate swapwas in a liability position resulting in a cash payment by the Company of approximately $14.8 million,which included $3.1 million of accrued interest. In accordance with GAAP, the Company amortized thisamount as additional interest expense over the remainder of the original term of the interest rate swap,which expired in September 2012. In the first nine months of 2012, the non-cash, net of tax impact wasapproximately $7.0 million, or $0.17 per share.

 

(C) The tax adjustment represents a net benefit resulting from (i) the resolution (including theexpiration of statutes of limitations) of various prior years’ U.S. federal, state and foreigntax matters, and (ii) the filing of amended prior years’ tax returns.

 

(D) The Company has presented results using basic weighted average shares with the impact ofdilution on adjusted income, separately. In accordance with ASC 260, if income from continuingoperations is a loss no potential common shares are included in the computation of dilutedper-share amounts because inclusion would result in an anti-dilutive per share amount.

RECONCILIATION OF NET DEBT OBLIGATIONS

  September 30, 2012   December 31, 2011
  (Dollars in thousands)
Note payable and current portion of long-term borrowings $ 4,700   $ 4,986
 
Long term borrowings 962,596 954,809
 
Unamortized debt discount 62,404 70,191
 
Total debt obligations 1,029,700 1,029,986
 
Less: cash and cash equivalents 634,829 584,088
 
Net debt obligations $ 394,871 $ 445,898

ABOUT TELEFLEX INCORPORATED

Teleflex is a leading global provider of specialty medical devices for a range of procedures in critical care and surgery. Our mission is to provide solutions that enable healthcare providers to improve outcomes and enhance patient and provider safety. Headquartered in Limerick, PA, Teleflex employs approximately 11,100 people worldwide and serves healthcare providers in more than 130 countries. For additional information about Teleflex please refer to www.teleflex.com.

CAUTION CONCERNING FORWARD-LOOKING INFORMATION

This press release contains forward-looking statements, including, but not limited to, forecasted 2012 constant currency revenue growth and adjusted earnings per share. 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; 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 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, 2011.

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 
Three Months Ended
September 30,

2012

  September 25,

2011

(Dollars and shares in thousands,

except per share)

 
Net revenues $ 368,054 $ 362,741
Cost of goods sold   187,487   187,111
Gross profit 180,567 175,630
Selling, general and administrative expenses 114,878 101,582
Research and development expenses 14,760 12,316
Restructuring and other impairment charges   1,088   (173 )

Income from continuing operations before interest, loss on extinguishmentsof debt and taxes

49,841 61,905
Interest expense 18,493 19,177
Interest income   (340 )   (318 )
Income from continuing operations before taxes 31,688 43,046
Taxes on income from continuing operations   7,237   10,125
Income from continuing operations   24,451   32,921

Operating income (loss) from discontinued operations (including loss on disposalof $38 in 2012 and $4 in 2011)

(831 ) 14,588
Taxes on income (loss) from discontinued operations   1,690   3,444
Income (loss) from discontinued operations   (2,521 )   11,144
Net income 21,930 44,065
Less: Income from continuing operations attributable to noncontrolling interest 188 289
Income from discontinued operations attributable to noncontrolling interest     125
Net income attributable to common shareholders $ 21,742 $ 43,651
 
Earnings per share available to common shareholders:
Basic:
Income from continuing operations $ 0.59 $ 0.80
Income (loss) from discontinued operations   (0.06 )   0.27
Net income $ 0.53 $ 1.07
 
Diluted:
Income from continuing operations $ 0.58 $ 0.80
Income (loss) from discontinued operations   (0.06 )   0.27
Net income $ 0.52 $ 1.07
 
Dividends per common share $ 0.34 $ 0.34
 
Weighted average common shares outstanding:
Basic 40,890 40,684
Diluted 41,511 40,943
 
Amounts attributable to common shareholders:
Income from continuing operations, net of tax $ 24,263 $ 32,632
Income (loss) from discontinued operations, net of tax   (2,521 )   11,019
Net income $ 21,742 $ 43,651

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 
Nine Months Ended
September 30,

2012

  September 25,

2011

(Dollars and shares in thousands,

except per share)

 
Net revenues $ 1,131,953 $ 1,089,490
Cost of goods sold   582,908   570,462
Gross profit 549,045 519,028
Selling, general and administrative expenses 332,965 313,130
Research and development expenses 40,015 35,802
Goodwill impairment 332,128
Restructuring and other impairment charges 84 3,598
Gain on sales of businesses and assets   (332 )  

Income (loss) from continuing operations before interest, loss on extinguishmentsof debt and taxes

(155,815 ) 166,498
Interest expense 54,944 51,108
Interest income (1,324 ) (676 )
Loss on extinguishments of debt     15,413
Income (loss) from continuing operations before taxes (209,435 ) 100,653
Taxes on income (loss) from continuing operations   2,961   23,134

Income (loss) from continuing operations

  (212,396 )   77,519

Operating income (loss) from discontinued operations (including gain on disposal of$2,226 in 2012 and $52,265 in 2011)

(7,951 ) 75,705
Benefit on income (loss) from discontinued operations   (1,668 )   (3,522 )
Income (loss) from discontinued operations   (6,283 )   79,227
Net income (loss) (218,679 ) 156,746

Less: Income from continuing operations attributable to noncontrolling interest

701 770
Income from discontinued operations attributable to noncontrolling interest     443
Net income (loss) attributable to common shareholders $ (219,380 ) $ 155,533
 
Earnings per share available to common shareholders:
Basic:
Income (loss) from continuing operations $ (5.22 ) $ 1.90
Income (loss) from discontinued operations   (0.15 )   1.95
Net income (loss) $ (5.37 ) $ 3.85
 
Diluted:
Income (loss) from continuing operations $ (5.22 ) $ 1.88
Income (loss) from discontinued operations   (0.15 )   1.94
Net income (loss) $ (5.37 ) $ 3.82
 
Dividends per common share $ 1.02 $ 1.02
 
Weighted average common shares outstanding:
Basic 40,831 40,426
Diluted 40,831 40,738
 
Amounts attributable to common shareholders:
Income (loss) from continuing operations, net of tax $ (213,097 ) $ 76,749
Income (loss) from discontinued operations, net of tax   (6,283 )   78,784
Net income (loss) $ (219,380 ) $ 155,533

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

                                                 
September 30,

2012

December 31,

2011

(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents $ 634,829 $ 584,088
Accounts receivable, net 266,947 286,226
Inventories, net 295,611 298,775
Prepaid expenses and other current assets 23,361 33,405
Prepaid taxes 34,745 28,846
Deferred tax assets 29,700 41,014
Assets held for sale   7,861   7,902
Total current assets 1,293,054 1,280,256
Property, plant and equipment, net 267,392 251,912
Goodwill 1,113,940 1,438,542
Intangible assets, net 930,916 879,787
Investments in affiliates 1,771 2,008
Deferred tax assets 293 278
Other assets   63,423   71,320
Total assets $ 3,670,789 $ 3,924,103
 
LIABILITIES AND EQUITY
Current liabilities
Current borrowings $ 4,700 $ 4,986
Accounts payable 63,703 67,092
Accrued expenses 63,115 74,207
Current portion of contingent consideration 21,592 3,953
Payroll and benefit-related liabilities 67,606 64,386
Derivative liabilities 957 633
Accrued interest 9,772 10,960
Income taxes payable 11,980 21,084
Current liability for uncertain tax positions 4,201 22,656
Deferred tax liabilities   1,051   1,050
Total current liabilities 248,677 271,007
Long-term borrowings 962,596 954,809
Deferred tax liabilities 393,192 420,833
Pension and postretirement benefit liabilities 178,764 194,984
Noncurrent liability for uncertain tax positions 63,491 61,688
Other liabilities   68,670   37,999
Total liabilities 1,915,390 1,941,320
Commitments and contingencies
Total common shareholders’ equity 1,752,956 1,980,588
Noncontrolling interest   2,443   2,195
Total equity   1,755,399   1,982,783
Total liabilities and equity $ 3,670,789 $ 3,924,103

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
  Nine Months Ended
September 30, 2012   September 25, 2011
(Dollars in thousands)
Cash Flows from Operating Activities of Continuing Operations:
Net income (loss) $ (218,679 ) $ 156,746
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (income) from discontinued operations 6,283 (79,227 )
Depreciation expense 26,159 30,354
Amortization expense of intangible assets 32,263 32,087
Amortization expense of deferred financing costs and debt discount 10,739 10,064
Loss on extinguishments of debt 15,413
Stock-based compensation 6,170 2,479
Impairment of investments in affiliates 3,060
Gain on sales of businesses and assets (332 )
Goodwill impairment 332,128
Deferred income taxes, net (27,217 ) (2,561 )
Other (2,442 ) (2,263 )
Changes in operating assets and liabilities, net of effects of acquisitions and

disposals:

Accounts receivable 1,934 (41,009 )
Inventories (4,619 ) (41,649 )
Prepaid expenses and other current assets 10,144 (7,423 )
Accounts payable and accrued expenses (2,047 ) 7,580
Income taxes receivable and payable, net   (31,352 )   (23,431 )
Net cash provided by operating activities from continuing operations   139,132   60,220
 
Cash Flows from Investing Activities of Continuing Operations:
Expenditures for property, plant and equipment (46,092 ) (27,308 )
Proceeds from sales of businesses and assets, net of cash sold 66,605 100,905
Payments for businesses and intangibles acquired, net of cash acquired (62,627 ) (30,570 )
Investments in affiliates   (80 )  
Net cash (used in) provided by investing activities from continuing operations   (42,194 )   43,027
 
Cash Flows from Financing Activities of Continuing Operations:
Proceeds from long-term borrowings 515,000
Repayment of long-term borrowings (455,800 )
Decrease in notes payable and current borrowings (706 )
Proceeds from stock compensation plans 7,714 32,930
Dividends (41,661 ) (41,278 )
Debt extinguishment, issuance and amendment fees     (18,510 )
Net cash (used in) provided by financing activities from continuing operations   (34,653 )   32,342
 
Cash Flows from Discontinued Operations:
Net cash (used in) provided by operating activities (6,477 ) 28,546
Net cash used in investing activities   (2,351 )   (1,997 )
Net cash (used in) provided by discontinued operations   (8,828 )   26,549
 
Effect of exchange rate changes on cash and cash equivalents   (2,716 )   1,109
Net increase in cash and cash equivalents 50,741 163,247
Cash and cash equivalents at the beginning of the period   584,088   208,452
Cash and cash equivalents at the end of the period $ 634,829 $ 371,699




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