EX-99.1 2 d720578dex991.htm EX-99.1

EX-99.1

TELEFLEX INCORPORATED

FIRST QUARTER 2014

EARNINGS CONFERENCE CALL

1

Exhibit 99.1

Conference Call Logistics

The release, accompanying slides, and replay webcast are available online at

www.teleflex.com (click on “Investors”)

Telephone replay available by dialing 888-286-8010 or for international calls, 617-

801-6888, pass code number 11286884

2

Introductions

Benson Smith

Chairman, President and CEO

Thomas Powell

Executive Vice President and CFO

Jake Elguicze

Treasurer and Vice President of Investor Relations

3

Forward-Looking Statements/Additional Notes

This presentation and our discussion contain forward-looking information and statements including, but not limited to, the

expected accretive impact of our acquisition of Mayo Healthcare Pty Ltd.; our expectations that actions related to our announced

restructuring plan to improve our cost structure will be completed by 2017 and that we will begin to realize plan-related savings beginning

in 2015; forecasted 2014 constant currency revenue growth; the expected contributions of our acquisition of Vidacare and distributor-to-

direct conversions, both completed and planned, to our 2014 constant currency revenue growth; our expectation that 2014 constant

currency revenue growth from new product introductions will be at levels comparable to 2012 and 2013; our expectation that 2014 base

volume growth will be modest; our expectation that the majority of pricing improvements in 2014 will result from our distributor-to-direct

strategy and that we will be selective with respect to product pricing opportunities; forecasted 2014 adjusted gross and operating

margins; our expectation that 2014 gross margins for the Vidacare business will remain at approximately 85%; our expectation that

distributor-to-direct conversions and manufacturing cost improvements will contribute to improvements in our 2014 adjusted gross and

operating margins; our expectations with respect to benefits from manufacturing cost improvement programs and that those benefits will

be

offset

by

certain

additional

costs

associated

with

the

manufacturing

facility

consolidation

program

that

will

note

be

treated

as

non-

GAAP add-backs; forecasted 2014 adjusted operating margins excluding intangible amortization expense; our expectation that year-over-

year gross margin gains will be tempered by investment in our distributor-to-direct strategy and Vidacare’s higher relative SG&A;

forecasted

2014

adjusted

earnings

per

share

and

growth;

our

expectation

that

interest

expense

for

Q2

through

Q4

will

be

lower

as

a

result

of reduced borrowings under our revolving credit facility; our expectations with respect to the impact on our forecasted 2014 adjusted

earnings per share of certain expenses associated  with our facility footprint rationalization program that will not be treated as non-GAAP

add-backs; and other matters which inherently involve risks and uncertainties which could cause actual results to differ from those

projected or implied in the forward–looking statements. These risks and uncertainties are addressed in our SEC filings, including our most

recent Form 10-K.

This presentation includes certain non-GAAP financial measures, which include revenue growth on a constant currency basis;

adjusted diluted earnings per share; adjusted gross profit and margin; adjusted operating income and margin; and adjusted tax rate.

Adjusted diluted earnings per share excludes, depending on the period presented (i) the effect of charges associated with our

restructuring programs, as well as goodwill and other asset impairment charges; (ii) loss on extinguishment of debt; (iii) the gain or loss

on

sales

of

businesses

and

assets;

(iv)

losses

and

other

charges

related

to

acquisition

and

integration

costs,

the

reversal

of

liabilities

related to certain contingent consideration arrangements, the establishment of a litigation reserve and a litigation verdict against the

Company with respect to a non-operating joint venture; (v) amortization of the debt discount on the Company’s convertible notes; (vi)

intangible

amortization

expense;

and

(vii)

tax

benefits

resulting

from

the

resolution

of

prior

years’

tax

matters

and

the

filing

of

prior

years’

amended tax returns.  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 excludes the impact of translating the results of

international

subsidiaries

at

different

currency

exchange

rates

from

period

to

period.

Adjusted

gross

profit

and

margin

exclude

the

impact

of certain losses and other charges, primarily related to acquisition and integration costs.  Adjusted operating income and margins

exclude the impact of restructuring and other impairment charges, losses and other charges primarily relating to the reversal of

contingent consideration liabilities, acquisition and integration costs and a litigation verdict against us with respect to a non-operating

joint

venture.

In

addition,

adjusted

operating

margins

exclude

the

impact

of

intangible

amortization

expense.

Adjusted

tax

rate

is

the

percentage of the Company’s adjusted taxes on income from continuing operations to its adjusted income from continuing operations

before taxes.  Adjusted taxes on income from continuing operations excludes, depending on the period presented, the impact of tax

benefits or costs associated with (i) restructuring and impairment charges, (ii) amortization of the debt discount on the Company’s

convertible notes, (iii) intangible amortization expense, (iv) the resolution of, or expiration of statutes of limitations with respect to, various

prior years’

tax matters and (v) losses and other charges related to related

to acquisition and integration costs, the reversal of liabilities

related to certain contingent consideration arrangements, the establishment of a litigation reserve and a litigation verdict against the

Company with respect to a non-operating joint venture. Reconciliation of these non-GAAP measures to the most comparable GAAP

measures is contained within this presentation.

Unless otherwise noted, the following slides reflect continuing operations.

4

FIRST

QUARTER

2014

HIGHLIGHTS

5

First Quarter Highlights

First quarter constant currency revenue growth and adjusted earnings

per share achievement exceeded internal expectations

Revenue of $438.5 million, up 6.5% vs. prior year period on an as-

reported basis; up 6.0% vs. prior year period on a constant currency

basis

Adjusted EPS of $1.22, up 15.1% vs. prior year

6

First Quarter Highlights

Improvement in the average selling prices of products contributes 108

bps of top-line growth in Q1’14 compared to Q1’13

New product introductions contribute 78 bps of top-line growth in

Q1’14 compared to Q1’13

Continue to expand GPO & IDN relationships

•

5 new agreements (2 IDN; 3 GPO)

•

12 renewed agreements (1 IDN; 11 GPO)

7

First Quarter Highlights

Vidacare contributes 4.9% to Teleflex’s constant currency revenue growth

•

Q1’14 revenue of $20.2 million, ahead of initial internal expectations

•

Q1’14 revenue up ~ 24% versus Q1’13 on an as-reported basis

•

Integration activities on schedule

•

Continue to invest in additional clinical training and cadaver lab

workshops to drive future sustainable revenue growth

8

EZ-IO®

Vascular Access System

EZ-IO®

provides the medical professional

immediate vascular access to the central

circulation within seconds, delivering

medications, intravenous fluids and blood

products to adult and pediatric patients alike.

PRODUCT DESCRIPTION

First Quarter Highlights

PRODUCT UPDATE

9

510(k) clearance received for restated

Indications for Use of the EZ-IO®

Vascular

Access System.  EZ-IO®

25 mm Needle Set is

now indicated for patients 3 kg or over.

Mayo Healthcare Pty Ltd.

•

Accretive, all-cash acquisition of one of Australia’s largest medical

device distributors, completed in February 2014

•

Contributed 99 bps to Teleflex’s constant currency revenue growth in Q1;

mixture of additional volume and improved pricing

•

Integration activities on schedule

•

Represents the major distributor-to-direct conversion assumed in

previously provided 2014 financial guidance

First Quarter Highlights

10

Restructuring Plan to Improve Cost Structure Announced

•

Plan developed in response to continuing cost pressures in the healthcare

industry and designed to enhance our competitive position and improve longer-

term profitability

•

Focused on the consolidation of operations and a related reduction in workforce

at certain of the Company’s facilities

o

Will include the relocation of manufacturing operations from certain higher-cost

locations to previously existing lower-cost Teleflex locations

•

Goal is to improve the Company’s cost structure and allow for additional

investment in higher growth opportunities in the future

•

Actions will commence in the second quarter of 2014 and are expected to be

substantially completed by the end of 2017

•

Currently expect to realize savings beginning in 2015

First Quarter Highlights

11

FIRST

QUARTER

2014

FINANCIAL

REVIEW

12

Financial Results

Revenue of $438.5 million

•

Up 6.5% vs. prior year period on an as-reported basis

•

Up 6.0% vs. prior year period on a constant currency basis

Adjusted gross margin of 50.4%

•

Up 161 bps vs. prior year period

Adjusted operating margin excluding amortization expense of 18.9%, up 113 bps

vs. prior year period

Adjusted tax rate of 24.5%, down 340 bps versus prior year period

Adjusted EPS of $1.22, up 15.1% vs. prior year period

Realigned operating segments to reflect changes in internal financial reporting

structure

13

FIRST QUARTER 2014 SEGMENT REVENUE REVIEW

14

Segment Revenue Review

Q1’14

Q1’13

Vascular N.A: $62.5 million, up 10.8%

Anesthesia/Respiratory N.A: $54.7 million, down 5.6%

Surgical N.A: $35.2 million, down 3.0%

EMEA: $150.2 million, up 2.5%

Asia: $49.6 million, up 20.3%

OEM: $33.2 million, up 5.3%

All Other: $53.1 million, up 20.9%

Note:

Increases and decreases in revenue referred to above are as compared to results for the first quarter of 2013.

15

Constant Currency Revenue Commentary

POST FIRST QUARTER 2014 EVENTS

16

Vidacare Integration

•

In April, we integrated Vidacare into the existing Teleflex legal entity structure

•

In

connection

with

this

integration,

we

restructured

our

foreign

holdings

which enabled us to efficiently repatriate $230 million of cash

•

On April 28

th

we used the repatriated cash to partially fund a $235 million

repayment of a portion of the outstanding principal amount of borrowings

under our revolving credit facility

Post First Quarter Events

17

2014

Restructuring

Plan

Aggregate

pre-tax

charges

of

approximately

$42

to

$53

million

1

,

of

which

approximately $32 to $40 million will result in future cash outlays

•

2014

pre-tax

charges

of

approximately

$22

to

$23

million

1

,

of

which

approximately

$9

to

$11 million will result in cash outlays

Aggregate capital expenditures of approximately $24 to $30 million

•

2014 capital expenditures of approximately $10 to $15 million

Expects to achieve annualized savings of approximately $28 to $35 million once the

plan is fully implemented, and currently expects to realize plan-related savings

beginning in 2015

Other

Additional 2014 pre-tax operating expenses in the range of $5 to $6 million that will not be

added-back when calculating adjusted earnings per share

1 =

will be added-back when calculating adjusted earnings per share

Post First Quarter Events

18

2014 FINANCIAL OUTLOOK

19

2014 Financial Outlook

20

Constant currency revenue growth expected to be between 7% and 9%

•Full year impact of Vidacare and distributor-to-direct conversions, both

completed and planned to be completed in 2014

•

Growth from new product pipeline comparable to 2012-2013 levels

•

Assumption of modest base volume growth

•

Distributor-to-direct strategy yields majority of pricing gains; product pricing

opportunities will be selective

Adjusted gross margin anticipated to improve by approximately

240bps to 290bps and reach 52.0% to 52.5%

•

Vidacare gross margin expected to remain at current level of ~ 85%

•

Pricing and margin gains from distributor to direct strategy

•Manufacturing cost improvement programs, offset by additional costs

associated

with

facility

footprint

rationalization

that

will

not

be

treated

as

non-

GAAP add-backs

2014 Financial Outlook

21

Adjusted operating margin excluding intangible amortization expense

expected to be between 20% and 21%

•Year-over-year gross margin gains tempered by investment in distributor-to-

direct strategy and Vidacare’s higher relative SG&A

Adjusted earnings per share anticipated to be between $5.35 and $5.55

•First quarter 2014 earnings achievement above initial expectations and reduced  

interest expense for Q2 through Q4 of 2014 as a result of reduced revolver

borrowings

•Certain expenses associated with facility footprint  rationalization that will not be

treated as non-GAAP add-backs

•

Represents growth of between 6% and 10% as compared to 2013 adjusted EPS

QUESTION & ANSWER

22

APPENDICES

23

Appendix A –

Reconciliation of Segment Constant Currency Revenue Growth

Dollars in Millions

24

March 30, 2014

March 31, 2013

Constant Currency

Currency

Total

Vascular North America

62.5

$                         

56.7

$                         

10.8%

(0.5%)

10.3%

Anesthesia/Respiratory North America

54.7

58.2

(5.6%)

(0.3%)

(5.9%)

Surgical North America

35.2

36.7

(3.0%)

(1.0%)

(4.0%)

EMEA

150.2

142.4

2.5%

3.0%

5.5%

Asia

49.6

42.4

20.3%

(3.2%)

17.1%

OEM

33.2

31.3

5.3%

0.6%

5.9%

All Other

53.1

44.2

20.9%

(0.9%)

20.0%

Net Revenues

438.5

$                       

411.9

$                       

6.0%

0.5%

6.5%

Three Months Ended

% Increase / (Decrease)

Appendix B –

Reconciliation of Constant Currency Revenue Growth

Dollars in Millions

25

Year-over-

year growth

Three Months Ended March 31, 2013 Revenue As-Reported

$411.9

Foreign Currency

1.9

0.47%

Vidacare

20.2

4.90%

Mayo

4.1

0.99%

All other

0.5

0.11%

Three Months Ended March 30, 2014 Revenue As-Reported

$438.5

6.5%

26

Appendix C –

Reconciliation of Teleflex Gross Profit and Margin

Note:

In 2013, losses and other charges primarily relate to acquisition and integration costs.

March 30, 2014

March 31, 2013

Teleflex gross profit as-reported

221,159

$                       

200,520

$                       

Teleflex gross margin as-reported

50.4%

48.7%

Losses and other charges (A)

-

544

Adjusted Teleflex gross profit

221,159

$                       

201,064

$                       

Adjusted Teleflex gross margin

50.4%

48.8%

Teleflex revenue as-reported

438,546

$                       

411,877

$                       

$ thousands

Three Months Ended

27

Appendix D –

Reconciliation of Teleflex Operating Profit and Margin

Note:

In 2014, losses and other charges primarily relate to the reversal of contingent consideration liabilities; and acquisition and

integration costs.  In 2013, losses and other charges primarily relate to the reversal of contingent consideration liabilities; a litigation

verdict against the Company with respect to a non-operating joint venture; and acquisition and integration costs.

March 30, 2014

March 31, 2013

Teleflex income from continuing operations before interest and taxes

59,020

$                                

49,404

$                                

Teleflex income from continuing operations before interest and taxes margin

13.5%

12.0%

Restructuring and other impairment charges

7,780

9,159

Losses and other charges (A)

(106)

2,024

Adjusted Teleflex income from continuing operations before interest and taxes

66,694

$                                

60,587

$                                

Adjusted Teleflex income from continuing operations before interest and taxes

margin

15.2%

14.7%

Intangible amortization expense

16,019

12,438

Adjusted Teleflex income from continuing operations before interest, taxes and

intangible amortization expense

82,713

$                                

73,025

$                                

Adjusted Teleflex income from continuing operations before interest, taxes and

intangible amortization expense margin

18.9%

17.7%

Teleflex revenue as-reported

438,546

$                              

411,877

$                              

$ thousands

Three Months Ended

Appendix E –

EPS Reconciliation from Continuing Operations

Quarter

Ended

–

March

30,

2014

Dollars in millions, except per share data

28

Cost of

goods

sold

Selling,  general

and

administrative

expenses

Restructuring

and other

impairment

charges

Interest

expense, net

Income

taxes

Net income

(loss)

attributable to

common

shareholders

from

continuing

operations

Diluted earnings

per share

available to

common

shareholders

Shares used in

calculation of

GAAP and

adjusted

earnings per

share

GAAP Basis

$217.4

$140.3

$7.8

$15.2

$8.5

$35.1

$0.77

45,749

Adjustments

Restructuring and

other impairment

charges

Losses and other

charges (A)

Amortization of debt

discount on

convertible notes

Intangible

amortization

expense

—

16.0

—

—

5.5

10.5

$0.23

—

Tax adjustment (B)

—

—

—

—

0.2

(0.2)

—

—

Shares due to

Teleflex under note

hedge (C)

Adjusted basis

$217.4

$124.4

—

$12.2

$17.2

$53.0

$1.22

43,299

$0.04

—

—

—

—

—

—

—

$0.06

(2,450)

—

—

—

3.0

1.1

1.9

$0.15

—

—

(0.1)

—

—

0.8

(0.9)

($0.02)

—

—

—

7.8

—

1.1

6.7

(A)

In

2014,

losses

and

other

charges

include

approximately

($2.3)

million,

net

of

tax,

or

($0.05)

per

share,

related

to

the

reversal

of

contingent

consideration

liabilities;

and

approximately

$1.4

million,

net

of

tax,

or

$0.03

per

share,

related

to

acquisition

and

integration

costs.

(B)

The

tax

adjustment

represents

a

net

benefit

resulting

from

the

resolution

of,

or

the

expiration

of

statute

of

limitations

with

respect

to

various

prior

years’

U.S.

federal

, state

and

foreign

tax

matters.

(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.

Appendix F –

EPS Reconciliation from Continuing Operations

Quarter

Ended

–

March

31,

2013

Dollars in millions, except per share data

29

Cost of

goods

sold

Selling, general

and

administrative

expenses

Restructuring and

other impairment

charges

Interest

expense, net

Income

taxes

Net income

(loss)

attributable to

common

shareholders

from

continuing

operations

Diluted earnings

per share available

to common

shareholders

Shares used in

calculation of GAAP

and adjusted

earnings per share

GAAP Basis

$211.4

$127.0

$9.2

$14.0

$7.7

$27.5

$0.64

43,047

Adjustments

Restructuring  and other

impairment charges

Losses and other charges (A)

0.5

1.5

—

—

0.7

1.3

$0.03

—

Amortization of debt discount

on convertible notes

Intangible amortization expense

—

12.4

—

—

4.3

8.1

$0.19

—

Tax adjustment (B)

Shares due to Teleflex under

note hedge (C)

Adjusted basis

$210.8

$113.0

—

$11.3

$17.2

$44.3

$1.06

41,675

(A)  In 2013, losses and other charges include approximately ($1.0) million, net of tax, or ($0.02) per share, related to the reversal of contingent consideration

liabilities; approximately $0.8 million, net of tax, or $0.02 per share, related to a litigation verdict against the Company with respect to a non-operating joint

venture; and $1.5 million, net of tax, or $0.03 per share, related to acquisition and integration costs.

(B)  The tax adjustment represents a net benefit resulting from the resolution of, or the expiration of statute of limitations with respect to various prior years’

U.S. federal, state and foreign tax matters.

(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.

($0.02)

—

—

—

—

—

—

—

$0.03

(1,372)

—

—

—

—

0.9

(0.9)

$0.15

—

—

—

—

2.8

1.0

1.7

$0.04

—

—

—

9.2

—

2.6

6.6

30

Appendix G –

Reconciliation of Teleflex Tax Rate

Dollars in Thousands

Three Months Ended March 30, 2014

Income from

continuing

operations

before taxes

Taxes on

income from

continuing

operations

Tax rate

GAAP basis

$43,803

$8,534

19.5%

Restructuring and impairment charges

7,780

1,072

Losses and other charges (A)

(106)

819

Amortization of debt discount on convertible notes

2,974

1,086

Intangible amortization expense

16,019

5,533

Tax adjustment (B)

0

203

Adjusted basis

$70,470

$17,247

24.5%

Three Months Ended March 31, 2013

GAAP basis

$35,368

$7,667

21.7%

Restructuring and impairment charges

9,159

2,596

Losses and other charges (A)

2,024

745

Amortization of debt discount on convertible notes

2,755

1,006

Intangible amortization expense

12,438

4,304

Tax adjustment (B)

0

900

Adjusted basis

$61,744

$17,218

27.9%

(A)  In 2014, losses and other charges relate to the reversal of contingent consideration liabilities and acquisition and

integration costs.  In 2013, losses and other charges relate to the reversal of contingent consideration liabilities; a litigation

verdict against the Company with respect to a non-operating joint venture; and acquisition and integration costs.

(B)  The tax adjustment represents a net benefit resulting from the resolution of, or the expiration of statute of limitations

with respect to various prior years’ U.S. federal, state and foreign tax matters.

Appendix H –

Reconciliation of 2014 Constant Currency Revenue Growth Guidance

31

Low

High

Forecasted GAAP Revenue Growth

6.0%

8.0%

Estimated impact of foreign currency fluctuations

1.0%

1.0%

Forecasted Constant Currency Revenue Growth

7.0%

9.0%

Appendix I –

Reconciliation of 2014 Gross Margin Guidance

32

Note:

In

2014,

losses

and

other

charges

relate

to

expenses

associated

with

the

Restructuring

Plan

approved

by

the

Board

of

Directors

on April 28, 2014.

Low

High

GAAP Gross Margin

51.4%

51.8%

Losses and other charges

0.65%

0.70%

Adjusted Gross Margin

52.0%

52.5%

Appendix J –

Reconciliation of 2014 Operating Margin Guidance

33

Note:

In 2014, losses and other charges include expenses associated with the Restructuring Plan approved by the Board of Directors

on April 28, 2014, acquisition costs and the reversal of contingent consideration liabilities.

Low

High

GAAP Operating Margin

15.5%

16.4%

Losses and other charges

1.0%

1.1%

Adjusted Operating Margin

16.5%

17.5%

Intangible amortization expense

3.5%

3.5%

20.0%

21.0%

Adjusted Operating Margin  Excluding Intangible Amortization Expense

Appendix K –

Reconciliation of 2014 Adjusted Earnings per Share Guidance

34

Low

High

Forecasted diluted earnings per share attributable to

common shareholders

$3.40

$3.55

Restructuring, impairment charges, and special items,

net of tax

$0.88

$0.93

Intangible amortization expense, net of tax

$0.90

$0.90

Amortization of debt discount on convertible notes,

net of tax

$0.17

$0.17

Forecasted adjusted diluted earnings per share

$5.35

$5.55