Teleflex Incorporated (NYSE: TFX) — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This filing reports full-year results; it does not provide standalone fourth-quarter financial results. Teleflex is a global medical technology company whose revenues primarily come from single-use medical devices used in hospital and healthcare procedures.
Financial performance
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Net revenue | $2,809.6 million | $2,537.2 million | +10.7% |
| Gross profit / margin | $1,549.6 million / 55.2% | $1,324.9 million / 52.2% | Margin +3.0 percentage points |
| Income from continuing operations | $485.1 million | $335.8 million | +44.5% |
| Net income | $485.4 million | $335.3 million | +44.8% |
| Diluted EPS | $10.23 | $7.09 | Up |
| Operating cash flow from continuing operations | $652.1 million | $437.1 million | +$215.0 million |
| Capital expenditures | $71.6 million | $90.7 million | Down |
| Free cash flow (company-defined non-GAAP) | $580.5 million | $346.4 million | Up |
Revenue growth reflected higher existing-product volumes ($94.4 million), acquired-business revenue ($70.4 million), new-product sales ($50.0 million) and favorable foreign exchange ($44.9 million). Higher volume, cost initiatives, pricing and product mix lifted gross margin; higher logistics and distribution costs partly offset the improvement. SG&A rose to $860.1 million from $743.6 million, while R&D increased to $130.8 million from $119.7 million.
Net income benefited from a $91.2 million gain on the respiratory business sale. The comparison also reflects a prior-year benefit from lower estimated contingent-consideration liabilities. Interest expense fell to $57.0 million from $66.5 million; a $13.0 million loss was recorded on redemption of the 2026 notes. The effective tax rate was 13.3%, versus 6.1% in 2020.
Segments and portfolio
| Segment | 2021 revenue | 2021 operating profit | Revenue change |
|---|---|---|---|
| Americas | $1,659.3 million | $424.2 million | +13.3% |
| EMEA | $606.8 million | $94.9 million | +3.8% |
| Asia | $297.8 million | $84.6 million | +11.5% |
| OEM | $245.7 million | $56.2 million | +11.5% |
Segment operating profit totaled $659.9 million, up 14.0%; this is a segment measure, not consolidated operating income. Growth included pandemic-related recovery, acquisition contributions and foreign exchange. Z-Medica contributed $66.4 million of 2021 revenue. Product-category revenues included vascular access of $700.2 million, interventional of $427.5 million, surgical of $377.8 million and interventional urology of $341.7 million.
Cash, debt and liquidity
- Year-end cash and cash equivalents were $445.1 million, including $352.5 million held at non-U.S. subsidiaries.
- Gross debt was $1,863.5 million and net debt was $1,418.4 million; net debt to total capital declined to 27.4% from 38.9%.
- Debt reduction included repayment of the $400 million 2026 notes and paydowns using respiratory-sale proceeds and operating cash flow. The company paid $63.6 million in dividends and $31.4 million of contingent consideration in 2021.
- The $1.0 billion revolving credit facility and $700 million term loan mature in April 2024. The company reported compliance with debt covenants at year-end. It also had $75 million outstanding under its receivables securitization facility.
- Management said operating cash flow, cash and available borrowing capacity should fund operating needs, capital expenditures and debt obligations for the next 12 months and the foreseeable future.
Material changes, outlook and risks
- Respiratory divestiture: The initial phase closed June 28, 2021, with $259 million of cash proceeds. The company recognized a $91.2 million gain. A further $15 million is contingent on transferring additional manufacturing assets, expected before the end of 2023. The transfer plan is expected to entail $24–$30 million in restructuring and related charges and $22–$28 million in capital expenditures, mostly in 2022–2023.
- Restructuring: The 2021 restructuring plan is expected to produce $15 million in annual pretax savings. Across ongoing restructuring plans and the OEM initiative, estimated total annual pretax savings are $94–$104 million when fully implemented; estimates and timing may change.
- Management commentary: COVID-19 continued to affect elective-procedure demand, manufacturing productivity, staffing and supply-chain costs and delivery times. Management expected continuing near-term effects but said their scale and duration were difficult to predict. No quantified 2022 revenue or earnings guidance is provided in the supplied filing text.
- Reimbursement: 2022 Medicare physician-office reimbursement rates for UroLift procedures were set to decline 19–21%, phased in over four years; hospital outpatient and ambulatory surgery center rates were 3% higher. Management did not anticipate a significant portfolio impact in 2022 but noted possible changes in care setting.
- Key operating risks: Medical-device regulation, including EU MDR certification deadlines; product safety and liability; competition and reimbursement pressure; inflation, freight and foreign-exchange movements; manufacturing, supplier and sterilization capacity; and execution of acquisitions and restructuring. A 1% change in variable interest rates was estimated to change annual interest expense by $8.6 million.
- Contingencies: A DOJ civil False Claims Act investigation involving NeoTract remains unresolved; the company said it could not reasonably estimate potential liability. A Chinese tariff matter was believed likely resolved after payment, but authorities had not confirmed closure; possible penalties were estimated at $3–$20 million. The company also disclosed environmental and ordinary-course legal matters and said their ultimate outcomes could differ from current estimates.
- Unusual pension update: Effective in 2022, the expected return assumption for U.S. pension plan assets was reduced from 7.00% to 5.80% as the investment strategy shifts toward lower portfolio risk.
Investor verification points
- Separate underlying operating growth from acquisition contributions, currency effects, pandemic recovery and the $91.2 million divestiture gain when assessing earnings quality.
- Confirm the timing and final proceeds of the remaining respiratory-business transfer, and monitor restructuring cash costs, capital spending and realization of projected savings.
- Track operating cash flow, working capital, debt paydown, 2024 credit-facility maturities and the company’s ability to maintain covenant compliance.
- Follow the NeoTract DOJ investigation and Chinese tariff matter for new developments, potential costs or changes in reserves.
- Assess UroLift demand and provider response to reimbursement changes, along with EU MDR compliance and continuing supply-chain, sterilization and COVID-related disruption risks.