Teleflex Announces New Workforce Reduction Plan to Further Improve Company Cost Structure

Teleflex

WAYNE, PA — Teleflex Incorporated (NYSE: TFX) announced financial results for the second quarter ended June 28, 2020.

Second quarter 2020 net revenues were $567.0 million, a decrease of 13.1% compared to the prior year period.  Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 12.0% over the year ago period.  The Company estimates that COVID-19 had a net negative impact to revenue of approximately $130 million, or 20%.

Second quarter 2020 GAAP earnings per share from continuing operations decreased 86.4% to $0.24, compared to $1.77 in the prior year period.  Second quarter 2020 adjusted diluted earnings per share from continuing operations decreased 27.4% to $1.93, compared to $2.66 in the prior year period.

Liam Kelly, President and Chief Executive Officer, said, “We were pleased with our second quarter 2020 performance, which significantly exceeded our internal expectations and reflected improvements in underlying monthly revenue trends for the product categories most impacted by the postponement of non-emergent procedures because of COVID-19, particularly Interventional Urology, Interventional Access, and Surgical. Like our revenue performance, our second quarter 2020 adjusted EPS of $1.93 also significantly exceeded our expectations, reflecting the recovery we saw in procedures, as well as prudent operating expense management.”

Mr. Kelly continued, “Despite the challenges caused by the global pandemic, Teleflex remains in a strong financial position, supported by a healthy balance sheet, which includes more than $550 million of cash on hand, and access to additional liquidity under our revolving credit facility.  We remain confident in our core business fundamentals, including robust demand for our innovative and critical care products. That said, due to the rapidly evolving environment, continued uncertainties from the impact of the COVID-19 global pandemic, and recent regional outbreaks that are impacting the recovery, we are not reinstating 2020 financial guidance at this time.”

Mr. Kelly concluded, “We remain confident that we will weather the storm given our diversified business model and our continued belief in our ability to generate significant constant currency revenue growth, margin expansion, adjusted earnings per share and free cash flow growth over the long term.”

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 six months ended June 30, 2019 and June 28, 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 June 28, 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.

Three Months Ended % Increase / (Decrease)
June 28, 2020 June 30, 2019 Total Sales
Growth
Currency
Impact
Constant
Currency
Revenue
Growth
Americas $ 312.5 $ 373.8 (16.4 ) % (0.4 ) % (16.0 ) %
EMEA 131.6 147.1 (10.5 ) % (2.5 ) % (8.0 ) %
Asia 67.1 75.2 (10.8 ) % (3.0 ) % (7.8 ) %
OEM 55.8 56.4 (1.1 ) % (0.4 ) % (0.7 ) %
Total $ 567.0 $ 652.5 (13.1 ) % (1.1 ) % (12.0 ) %
READ:  USA Technologies to Hold Third Quarter Results Conference Call
Six Months Ended % Increase / (Decrease)
June 28, 2020 June 30, 2019 Total Sales
Growth
Currency
Impact
Constant
Currency
Revenue
Growth
Americas $ 670.5 $ 717.8 (6.6 ) % (0.3 ) % (6.3 ) %
EMEA 287.8 301.6 (4.6 ) % (2.7 ) % (1.9 ) %
Asia 120.2 136.0 (11.6 ) % (3.2 ) % (8.4 ) %
OEM 119.2 110.7 7.7 % (0.6 ) % 8.3 %
Total $ 1,197.7 $ 1,266.1 (5.4 ) % (1.2 ) % (4.2 ) %
Americas second quarter 2020 net revenues were $312.5 million, a decrease of 16.4% compared to the prior year period.  Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 16.0% 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.  The Company estimates that COVID-19 had a negative impact to revenue of approximately $89 million, or 24%.

EMEA second quarter 2020 net revenues were $131.6 million, a decrease of 10.5% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 8.0% 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.  The Company estimates that COVID-19 had a negative impact to revenue of approximately $13 million, or 9%.

Asia second quarter 2020 net revenues were $67.1 million, a decrease of 10.8% compared to the prior year period.  Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 7.8% 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.  The Company estimates that COVID-19 had a negative impact to revenue of approximately $13 million, or 18%.

OEM second quarter 2020 net revenues were $55.8 million, a decrease of 1.1% compared to the prior year period.  Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 0.7% 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 IWG High Performance Conductors, Inc. (HPC).  The Company estimates that COVID-19 had a negative impact to revenue of approximately $15 million, or 26%.

NET REVENUE BY GLOBAL PRODUCT CATEGORY

The following table and commentary provide information regarding net revenues in each of the Company’s global product categories for the three months ended June 28, 2020 on both a GAAP and constant currency basis.

Three Months Ended % Increase / (Decrease)
June 28, 2020 June 30, 2019 Total
Revenue
Growth
Currency
Impact
Constant
Currency
Revenue
Growth
Vascular Access $ 164.9 $ 153.6 7.4 % (1.4 ) % 8.8 %
Interventional 82.6 104.8 (21.2 ) % (0.9 ) % (20.3 ) %
Anesthesia 64.9 85.7 (24.3 ) % (1.3 ) % (23.0 ) %
Surgical 67.3 95.6 (29.6 ) % (1.2 ) % (28.4 ) %
Interventional Urology 40.1 68.0 (40.9 ) % (0.0 ) % (40.9 ) %
OEM 55.8 56.4 (1.1 ) % (0.4 ) % (0.7 ) %
Other 91.4 88.4 3.4 % (2.0 ) % 5.4 %
Total $ 567.0 $ 652.5 (13.1 ) % (1.1 ) % (12.0 ) %
READ:  PQ Group Holdings Details Strategy, Sustainability Goals and Growth Outlook through 2025
Six Months Ended % Increase / (Decrease)
June 28, 2020 June 30, 2019 Total
Revenue
Growth
Currency
Impact
Constant
Currency
Revenue
Growth
Vascular Access $ 315.2 $ 297.5 5.9 % (1.4 ) % 7.3 %
Interventional 182.5 208.0 (12.2 ) % (0.9 ) % (11.3 ) %
Anesthesia 140.6 166.0 (15.3 ) % (1.6 ) % (13.7 ) %
Surgical 142.7 182.3 (21.7 ) % (1.3 ) % (20.4 ) %
Interventional Urology 114.3 127.7 (10.4 ) % (0.0 ) % (10.4 ) %
OEM 119.2 110.7 7.7 % (0.6 ) % 8.3 %
Other 183.2 174.0 5.3 % (2.0 ) % 7.3 %
Total $ 1,197.7 $ 1,266.1 (5.4 ) % (1.2 ) % (4.2 ) %
Second quarter 2020 net revenues from sales of Vascular Access products were $164.9 million, an increase of 7.4% compared to the prior year period.  Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues increased 8.8% compared to the prior year period.  The Company estimates that COVID-19 had a net positive impact to revenue of approximately $8 million, or 5%.

Second quarter 2020 net revenues from sales of Interventional products were $82.6 million, a decrease of 21.2% compared to the prior year period.  Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 20.3% compared to the prior year period. The Company estimates that COVID-19 had a negative impact to revenue of approximately $25 million, or 24%.

Second quarter 2020 net revenues from sales of Anesthesia products were $64.9 million, a decrease of 24.3% compared to the prior year period.  Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 23.0% compared to the prior year period. The Company estimates that COVID-19 had a negative impact to revenue of approximately $18 million, or 22%.

Second quarter 2020 net revenues from sales of Surgical products were $67.3 million, a decrease of 29.6% compared to the prior year period.  Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 28.4% compared to the prior year period. The Company estimates that COVID-19 had a negative impact to revenue of approximately $28 million, or 30%.

Second quarter 2020 net revenues from sales of Interventional Urology products were $40.1 million, a decrease of 40.9% compared to the prior year period. Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 40.9% compared to the prior year period. The Company estimates that COVID-19 had a negative impact to revenue of approximately $58 million, or 85%.

Second quarter 2020 net revenues from sales of OEM products were $55.8 million, a decrease of 1.1% compared to the prior year period.  Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues decreased 0.7% compared to the prior year period.  The Company estimates that COVID-19 had a negative impact to revenue of approximately $15 million, or 26%.

READ:  UGI Announces John L. Walsh to Retire as President and CEO

Second quarter 2020 net revenues from sales of other products were $91.4 million, an increase of 3.4% compared to the prior year period.  Excluding the impact of foreign currency exchange rate fluctuations, second quarter 2020 net revenues increased 5.4% compared to the prior year period.  The Company estimates that COVID-19 had a positive impact to revenue of approximately $6 million, or 6%.

OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS

Depreciation expense, amortization of intangible assets and deferred financing charges for the six months ended June 28, 2020 totaled $115.1 million compared to $109.5 million for the six months ended June 30, 2019.

Cash and cash equivalents at June 28, 2020 were $553.5 million compared to $301.1 million at December 31, 2019.

Net accounts receivable at June 28, 2020 were $374.9 million compared to $418.7 million at December 31, 2019.

Net inventories at June 28, 2020 were $514.8 million compared to $476.6 million at December 31, 2019.

2020 WORKFORCE REDUCTION PLAN

During the second quarter of 2020, the Company is committed to a workforce reduction designed to improve profitability and reduce cost primarily by streamlining certain sales and marketing functions in their EMEA segment and certain manufacturing operations in the Company’s OEM segment.

The workforce reduction was initiated to further align the business with the Company’s high growth strategic objectives. The Company estimates they will incur aggregate pre-tax restructuring charges of $10 million to $13 million, consisting primarily of termination benefits, and will result in future cash outlays.

This plan will be substantially complete during 2020 and, as a result, most of these charges are expected to be incurred prior to the end of 2020. The Company expects to begin realizing plan-related savings in 2020 and expect to achieve annual pre-tax savings of $11 million to $13 million once the plans are fully implemented.

ADDITIONAL NOTES

References in the Company’s announcement 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 the Company initiated commercial sales within the past 36 months and “existing products” refers to products they 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.

Thanks for visiting! MyChesCo brings reliable information and resources to Chester County, Pennsylvania. Please consider supporting us in our efforts. Your generous donation will help us continue this work and keep it free of charge. Show your support today by clicking here and becoming a patron.

Buy Us a Cup of Coffee