Teleflex Incorporated (NYSE: TFX) today announced financial results for the third quarter ended September 29, 2013.
Third quarter 2013 net revenues were $413.8 million, an increase of 12.4% over the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2013 net revenues increased 11.6% over the prior year period.
Third quarter 2013 GAAP diluted earnings per share from continuing operations were $1.05, as compared to $0.58 in the prior year period. Third quarter 2013 adjusted diluted earnings per share from continuing operations were $1.33, as compared to $1.05 in the prior year period, an increase of 26.7%.
"Teleflex delivered solid third quarter constant currency revenue growth and continued to successfully execute on our initiatives to expand both gross and operating margins," said Benson Smith, Chairman, President and Chief Executive Officer. "Our quarterly revenue performance was paced by continued strength in Critical Care, which was aided by the contribution from our acquisition of LMA International in 2012, an improvement in the average selling price of products and the continued introduction of new products to the marketplace. In addition, the third quarter results demonstrate the early benefit of our actions focused on cost control to improve operating leverage in the business."
Added Mr. Smith, "Despite the improved revenue performance as compared to the first half of 2013, third quarter sales were below our expectations, driven in part by weakness with respect to sales of our OEM and respiratory therapy products. We now expect continued weakness in the performance of those product lines in the fourth quarter as well. In addition, during the fourth quarter, we expect lower revenue in Asia than previously anticipated due to the timing of certain distributor negotiations which are progressing, but slower than originally planned. As a result, we are revising our outlook for full year 2013 constant currency revenue growth to be between 8.5% to 10%."
"In contrast, our adjusted earnings performance in the third quarter was above our expectations. Based on that, and continued cost reduction efforts, we are raising our adjusted earnings per share estimate to between $4.85 and $5.00 per share."
"Finally, yesterday we announced our entry into a definitive agreement to acquire Vidacare Corporation for $262.5 million, net of cash acquired. This acquisition will expand our vascular access product portfolio by adding a defining technology focused on intraosseous, or inside the bone, access devices. While we expect to complete the transaction by the end of the year, it is not expected to significantly impact our financial results for full year 2013. However, we expect the transaction to contribute approximately $68 million to $72 million of revenue and approximately $0.10 to $0.15 in adjusted earnings per share in fiscal year 2014, excluding non-recurring purchase accounting items and other acquisition and integration related costs," said Smith.
THIRD QUARTER NET REVENUE BY PRODUCT GROUP AND SEGMENT
Product Group Revenues
Critical Care third quarter 2013 net revenues were $289.3 million, an increase of 18.7% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2013 net revenues increased 17.9% compared to the prior year period. The increase in constant currency revenue was due to higher sales of anesthesia, vascular, urology and interventional access products. The growth in sales of anesthesia products was primarily due to the contribution from the LMA International business ("LMA"), which was acquired in October of 2012. Constant currency sales growth was partially offset by a decline in sales of respiratory products as compared to the third quarter of 2012.
Surgical Care third quarter 2013 net revenues were $73.2 million, an increase of 5.2% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2013 net revenues increased 3.9% compared to the prior year period. The increase in constant currency revenue was due to higher sales of ligation, suture and access products, partially offset by a decline in sales of general surgical instrument products as compared to the third quarter of 2012.
Cardiac Care third quarter 2013 net revenues were $17.6 million, a decrease of 1.6% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2013 net revenues also decreased 1.6% compared to the prior year period. The decrease in constant currency revenue was due to a decline in sales of intra-aortic balloon pumps as compared to the third quarter of 2012.
OEM and Development Services ("OEM") third quarter 2013 net revenues were $33.7 million, a decrease of 8.5% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2013 net revenues decreased 9.4% compared to the prior year period. The decrease in constant currency revenue was primarily due to a decline in sales of catheter, extrusion and performance fiber products as compared to the third quarter of 2012.
Segment Revenues
Americas third quarter 2013 net revenues were $192.5 million, an increase of 13.5% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2013 net revenues increased 13.8% compared to the prior year period. The increase in constant currency revenue was largely due to LMA product sales, price increases and new product introductions, partially offset by lower sales volume of existing products as compared to the third quarter of 2012.
EMEA third quarter 2013 net revenues were $132.3 million, an increase of 14.0% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2013 net revenues increased 9.6% compared to the prior year period. The increase in constant currency revenue was due to LMA product sales, price increases, higher sales volume of existing products and new product introductions as compared to the third quarter of 2012.
Asia third quarter 2013 net revenues were $55.3 million, an increase of 21.2% compared to the prior year period. Excluding the impact of foreign currency fluctuations, third quarter 2013 net revenues increased 25.2% compared to the prior year period. The increase in constant currency revenue was due to LMA product sales, higher sales volume of existing products and price increases.
OTHER FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE METRICS
Depreciation expense and amortization of intangible assets and deferred financing costs for the first nine months of 2013 were $79.0 million compared to $69.2 million for the prior year period.
Cash and cash equivalents at September 29, 2013 were $326.4 million compared to $337.0 million at December 31, 2012.
Net accounts receivable at September 29, 2013 were $313.7 million compared to $298.0 million at December 31, 2012.
Net inventories at September 29, 2013 were $346.1 million compared to $323.3 million at December 31, 2012.
Net debt obligations at September 29, 2013 were $710.3 million compared to $692.7 million at December 31, 2012.
ACQUISITION OF VIDACARE CORPORATION
As previously announced, the Company has entered into a definitive agreement to acquire privately-held Vidacare Corporation, the leading provider of intraosseous, or inside the bone, access devices.
The transaction, which Teleflex intends to initially fund with borrowings under its revolving credit facility, is valued at $262.5 million, net of cash acquired. The acquisition is subject to customary closing conditions, including receipt of certain regulatory approvals and is expected to be completed in the fourth quarter of 2013.
Based on the anticipated date of closing, the acquisition is not expected to significantly impact Teleflex's 2013 revenue and adjusted earnings per share. The transaction is expected to contribute approximately $68 million to $72 million of revenue and approximately $0.10 to $0.15 in adjusted earnings per share in fiscal year 2014, excluding non-recurring purchase accounting items and other acquisition and integration related costs.
2013 OUTLOOK
The Company's updated financial estimates for full year 2013 are as follows:
Constant currency revenue growth between 8.5% and 10%. This compares to the previously provided constant currency revenue growth range of between 10% and 12%.
Adjusted diluted earnings per share in the range of $4.85 to $5.00. This compares to the previously provided adjusted diluted earnings per share range of $4.70 to $4.90.
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