<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-5353
TELEFLEX INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Delaware 23-1147939
(State of Incorporation) (IRS Employer
Identification Number)
630 West Germantown Pike, Suite 450
Plymouth Meeting, PA 19462
(Address of Principal Executive Office) (Zip Code)
(610) 834-6301
(Telephone Number Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock as of the latest practicable date.
Class Outstanding at March 29,1998
Common Stock, $1.00 Par Value 37,326,802
<PAGE> 2
Teleflex Incorporated
Condensed Consolidated Balance Sheet
(Dollars in Thousands)
Assets
<TABLE>
<CAPTION>
Mar. 29, Dec. 28,
1998 1997
----------- ----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 47,226 $ 30,702
Accounts receivable less allowance for
doubtful accounts 286,803 260,187
Inventories 215,301 218,538
Prepaid expense 20,048 21,182
Assets held for sale 35,868
---------- ----------
569,378 566,477
Property, plant and equipment, at cost,
less accumulated depreciation 370,388 364,013
Investments in affiliates 37,946 37,510
Intangibles and other assets 112,146 111,165
---------- ----------
$1,089,858 $1,079,165
========== ==========
</TABLE>
Liabilities and shareholders' equity
<TABLE>
<CAPTION>
<S> <C> <C>
Current liabilities
Current portion of borrowings and
demand loans $ 85,983 $ 115,729
Accounts payable and accrued expenses 161,640 158,386
Estimated income taxes payable 31,266 20,792
---------- ----------
278,889 294,907
Long-term borrowings 242,995 237,562
Deferred income taxes and other 82,495 82,943
---------- ----------
604,379 615,412
Shareholders' equity 485,479 463,753
---------- ----------
$1,089,858 $1,079,165
========== ==========
</TABLE>
<PAGE> 3
Teleflex Incorporated
Condensed Consolidated Statement of Income
(Dollars and Shares in Thousands, Except Per Share)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
Mar. 29, Mar. 30,
1998 1997
-------- --------
<S> <C> <C>
Revenues $345,760 $269,344
-------- --------
Cost of sales 245,735 186,139
Operating expenses 64,989 54,271
Interest expense 4,485 3,356
-------- --------
315,209 243,766
-------- --------
Income before taxes 30,551 25,578
Provision for taxes on income 10,693 8,901
-------- --------
Net income $ 19,858 $ 16,677
======== ========
Earnings per share
Basic $ 0.53 $ 0.46
Diluted $ 0.52 $ 0.45
Dividends per share $ 0.100 $ 0.088
Average number of common and common
equivalent shares outstanding
Basic 37,204 36,254
Diluted 38,320 37,152
</TABLE>
<PAGE> 4
Teleflex Incorporated
Condensed Consolidated Statement of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
Mar. 29, Mar. 30,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,858 $ 16,677
Adjustments to reconcile net income to cash
flows from operating activities:
Depreciation and amortization 13,904 11,337
(Increase) in accounts receivable (27,132) (21,311)
Decrease (increase) in inventory 2,651 (1,132)
Decrease in prepaid expenses 1,096 707
Increase in accounts payable
and accrued expenses 9,784 5,498
Increase in estimated income
taxes payable 7,785 6,972
---------- -----------
27,946 18,748
---------- -----------
Cash flows from financing activities:
Proceeds from new borrowings 9,280
Reduction in long-term borrowings (1,056) (1,393)
(Decrease) increase in current borrowings
and demand loans (35,006) 4,012
Proceeds from stock compensation plans 1,629 1,010
Dividends (3,713) (3,222)
----------- -----------
(28,866) 407
----------- -----------
Cash flows from investing activities:
Expenditures for plant assets (18,925) (14,794)
Payments for businesses acquired (1,000) (349)
Proceeds from sale of businesses and assets 35,868
Investments in affiliates (602) (6,650)
Other 2,103 1,905
----------- -----------
17,444 (19,888)
----------- -----------
Net increase (decrease) in cash
and cash equivalents 16,524 (733)
Cash and cash equivalents at the
beginning of the period 30,702 68,618
----------- -----------
Cash and cash equivalents at the
end of the period $47,226 $67,885
=========== ===========
</TABLE>
<PAGE> 5
Teleflex Incorporated
Statement of Comprehensive Income
<TABLE>
<CAPTION>
Three Months Ended
------------------
Mar. 29, Mar. 30,
1998 1997
---- ----
<S> <C> <C>
Net income $19,858 $16,677
Cumulative translation adjustment 453 (1,284)
------- -------
Comprehensive income $20,311 $15,393
======= =======
</TABLE>
During the first quarter of 1998, the company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". As presented
above, cumulative translation adjustment represents the only element of other
comprehensive income.
Notes to Condensed Consolidated Financial Statements
Note 1 The accompanying unaudited condensed consolidated financial
statements for the three months ended March 29, 1998 and March 30, 1997
contain all adjustments, consisting only of normal recurring
adjustments, which in the opinion of management are necessary to
present fairly the financial position, results of operations and cash
flows for the periods then ended in accordance with the current
requirements for Form 10-Q.
Note 2 At March 29, 1998, 3,180,449 shares of common stock were reserved for
issuance under the company's stock compensation plans.
Note 3 On April 25, 1997, the Board of Directors approved a two-for-one
split of the Company's common stock to be effected in the form of a
100% stock dividend to holders of record at the close of business on
May 23, 1997. The per share data included in this report have been
adjusted to reflect this stock dividend.
Note 4 Inventories consisted of the following:
<TABLE>
<CAPTION>
Mar. 29, Dec. 28,
1998 1997
---- ----
<S> <C> <C>
Raw materials $ 74,287 $ 72,806
Work-in-process 45,253 40,368
Finished goods 95,761 105,364
-------- --------
$215,301 $218,538
======== ========
</TABLE>
<PAGE> 6
Note 5 Business segment information:
<TABLE>
<CAPTION>
Three Months Ended
------------------
Mar. 29, Mar. 30,
1998 1997
---- ----
<S> <C> <C>
Sales
Commercial $162,594 $122,740
Medical 79,344 79,568
Aerospace 103,822 67,036
-------- --------
Total $345,760 $269,344
======== ========
Operating Profit
Commercial $18,054 $16,107
Medical 9,497 8,588
Aerospace 11,686 7,736
------- -------
Total $39,237 $32,431
======= =======
</TABLE>
Management's Analysis of Quarterly Financial Data
Results of Operations:
Revenues increased 28% in the first quarter of 1998 to $345.8 million from
$269.3 million in 1997. The increase resulted from gains in the Commercial and
Aerospace segments while Medical Segment sales were flat. Approximately one-half
of the growth was the result of acquisitions, primarily of United Parts Group
N.V. (United Parts), a European manufacturer of driver control systems purchased
at the end of 1997. The other half of the increase in sales resulted from gains
in the company's core product lines, principally in the Aerospace Segment.
Changes in foreign exchange rates reduced reported sales by 2% compared with the
first quarter of 1997. The Commercial, Medical and Aerospace segments comprised
47%, 23% and 30% of the company's net sales, respectively.
Gross profit margin decreased to 28.9% in 1998 compared with 30.9% in 1997. A
reduction in the proportion of sales from the Medical Segment, which has a
higher gross margin compared with the other segments and a lower contribution to
gross margin from recent acquisitions, resulted in the decrease. Operating
expenses as a percentage of sales decreased to 18.8% in 1998 compared with 20.1%
in 1997 resulting from the decline in the contribution of sales from the Medical
Segment which has higher operating expenses relative to the other two segments.
<PAGE> 7
Operating profit increased 21% in the first quarter of 1998 from $32.4 million
to $39.2 million. Operating margin declined slightly from 12% in 1997 to 11.3%
of sales in 1998. While operating profit increased in all three segments,
operating margin declined overall as a result of the reduction in the Commercial
Segment.
Industry Segment Review:
Sales in the Commercial Segment increased 32% from $122.7 million in 1997 to
$162.6 million in 1998. The increase resulted from gains in the automotive and
industrial product lines while the marine product line sales declined. The
majority of the increase in sales in the Commercial Segment was the result of
acquisitions in the prior year, primarily United Parts in December 1997.
Operating profit in 1998 of $18.1 million represents a 12% increase compared
with 1997; however, operating margin declined from 13.1% to 11.1% due primarily
to a decrease in the automotive product line as a result of lower margins from
recently acquired businesses.
The Medical Segment sales remained unchanged at $79.3 million in 1998 as an
increase in the surgical devices product line offset a decline in the hospital
supply product line. The decline in reported hospital supply sales was due to
weaker foreign currencies. Sales in the surgical devices product line improved
as closure, instruments and services, all contributed to the increase. Operating
profit increased 11% from $8.6 million to $9.5 million and operating margin
improved from 10.8% to 12.0%. The improvement in operating profit and margin is
the result of gains made in the surgical devices product line. The prior-year
results were affected by the additional expenses associated with the realignment
of surgical devices sales and manufacturing and by the integration of an
acquisition of a ligation clip manufacturer.
The Aerospace Segment sales increased 55% from $67.0 million in 1997 to $103.8
million in 1998. Sales increased in all product lines in this Segment: cargo
systems, coatings, repair services and turbine components. The majority of the
growth came from repair services which, along with the company's other product
lines in this Segment, has been affected by the favorable conditions in the
commercial aviation market. Operating profit increased 51% and operating margin
declined slightly from 11.5% to 11.3% as a result of the higher sales
contribution from repair services.
<PAGE> 8
Cash flow from operations increased $9.2 million during the period ended March
29, 1998 compared with 1997 due to higher net income and depreciation.
Expenditures for plant assets totaling $18.9 million increased $4.1 million in
the first quarter over the same period in 1997. The increase was primarily
within the Aerospace Segment where capacity expansion, begun in 1997, is
continuing in order to meet higher sales demand. During the first quarter of
1998 certain non-strategic assets of United Parts, acquired in December 1997,
were sold for $35.9 million in cash which proceeds were used to repay related
current borrowings. Long-term borrowings increased by $5.4 million from $237.6
million at December 28, 1997, to $243.0 million at March 29, 1998. The increase
was the result of additional borrowings incurred to finance the construction of
a facility in Singapore offset by the effects of lower foreign currency
translation rates and, to a lesser extent, repayments. The increase in
shareholders' equity, primarily due to higher net income, resulted in an
improvement in the ratio of long-term borrowings to total capitalization from
34% at December 28, 1997 to 33% at March 29, 1998.
<PAGE> 9
Teleflex Incorporated
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K
(A) Reports on form 8-K.
No reports on form 8-K were filed during the quarter.
<PAGE> 10
Teleflex Incorporated
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELEFLEX INCORPORATED
/s/ Harold L. Zuber, Jr.
------------------------
Harold L. Zuber, Jr.
Vice President and Chief
Financial Officer
/s/ Stephen J. Gambone
-----------------------
Stephen J. Gambone
Controller
May 8, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-29-1998
<PERIOD-END> MAR-29-1998
<CASH> 47,226
<SECURITIES> 0
<RECEIVABLES> 286,803
<ALLOWANCES> 0
<INVENTORY> 215,301
<CURRENT-ASSETS> 569,378
<PP&E> 370,388
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,089,858
<CURRENT-LIABILITIES> 278,889
<BONDS> 242,995
0
0
<COMMON> 37,327
<OTHER-SE> 448,152
<TOTAL-LIABILITY-AND-EQUITY> 1,089,858
<SALES> 345,760
<TOTAL-REVENUES> 345,760
<CGS> 245,735
<TOTAL-COSTS> 245,735
<OTHER-EXPENSES> 64,989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,485
<INCOME-PRETAX> 30,551
<INCOME-TAX> 10,693
<INCOME-CONTINUING> 19,858
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,858
<EPS-PRIMARY> .53
<EPS-DILUTED> .52
</TABLE>
