<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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Form 10-Q
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(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-5353
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TELEFLEX INCORPORATED
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(Exact Name of Registrant as Specified in its Charter)
Delaware 23-1147939
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(State of Incorporation) (IRS Employer Identification Number)
630 West Germantown Pike, Suite 450
Plymouth Meeting, PA 19462
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(Address of Principal Executive Office) (Zip Code)
(610) 834-6301
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(Telephone Number Including Area Code)
None
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(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 June 28, 1998
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Common Stock, $1.00 Par Value 37,378,428
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Teleflex Incorporated
Condensed Consolidated Balance Sheet
(Dollars in Thousands)
Assets
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<TABLE>
<CAPTION>
June 28, Dec 28,
1998 1997
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<S> <C> <C>
Current assets
Cash and cash equivalents $ 65,885 $ 30,702
Accounts receivable less allowance for
doubtful accounts 294,312 260,187
Inventories 220,152 218,538
Prepaid expenses 18,521 21,182
Assets held for sale 35,868
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598,870 566,477
Property, plant and equipment, at cost,
less accumulated depreciation 381,388 364,013
Investments in affiliates 32,705 37,510
Intangibles and other assets 113,672 111,165
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$1,126,635 $1,079,165
========== ==========
</TABLE>
Liabilities and shareholders' equity
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<TABLE>
<S> <C> <C>
Current liabilities
Current portion of borrowings and
demand loans $ 94,710 $ 115,729
Accounts payable and accrued expenses 175,256 158,386
Estimated income taxes payable 24,272 20,792
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294,238 294,907
Long-term borrowings 247,986 237,562
Deferred income taxes and other 82,823 82,943
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625,047 615,412
Shareholders' equity 501,588 463,753
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$1,126,635 $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 Six Months Ended
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June 28, June 29, June 28, June 29,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenues $363,011 $280,263 $708,771 $549,607
-------- -------- -------- --------
Cost of sales 259,834 193,942 505,569 380,081
Operating expenses 66,383 54,786 131,372 109,057
Interest expense 4,261 3,478 8,746 6,834
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330,478 252,206 645,687 495,972
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Income before taxes 32,533 28,057 63,084 53,635
Provision for taxes on income 11,289 9,708 21,982 18,609
-------- -------- -------- --------
Net income $ 21,244 $ 18,349 $ 41,102 $ 35,026
======== ======== ======== ========
Earnings per share
Basic $ 0.57 $ 0.50 $ 1.10 $ 0.96
Diluted $ 0.55 $ 0.49 $ 1.07 $ 0.94
Dividends per share $ 0.115 $ 0.100 $ 0.215 $ 0.188
Average number of common and common
equivalent shares outstanding
Basic 37,365 36,706 37,285 36,488
Diluted 38,459 37,624 38,390 37,388
</TABLE>
<PAGE> 4
Teleflex Incorporated
Condensed Consolidated Statement of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
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June 28, June 29,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 41,102 $ 35,026
Adjustments to reconcile net income to cash
flows from operating activities:
Depreciation and amortization 29,812 23,346
(Increase) in accounts receivable (25,907) (17,073)
Decrease (increase) in inventory 4,400 (3,088)
Decrease in prepaid expenses 2,846 1,925
Increase (decrease) in accounts payable
and accrued expenses 11,696 (1,915)
Increase in estimated income
taxes payable 1,026 2,284
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64,975 40,505
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Cash flows from financing activities:
Proceeds from new borrowings 11,713 9,000
Reduction in long-term borrowings (2,460) (10,754)
(Decrease) increase in current borrowings
and demand loans (30,904) 2,516
Proceeds from stock compensation plans 2,674 2,089
Dividends (8,008) (6,858)
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(26,985) (4,007)
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Cash flows from investing activities:
Expenditures for plant assets (35,018) (34,975)
Payments for businesses acquired (5,262) (349)
Proceeds from sale of businesses and assets 35,868
Investments in affiliates (836) (7,215)
Other 2,441 (1,927)
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(2,807) (44,466)
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Net increase (decrease) in cash
and cash equivalents 35,183 (7,968)
Cash and cash equivalents at the
beginning of the period 30,702 68,618
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Cash and cash equivalents at the
end of the period $ 65,885 $ 60,650
======== ========
</TABLE>
<PAGE> 5
Teleflex Incorporated
Statement of Comprehensive Income
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ------------------------
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 21,244 $ 18,349 $ 41,102 $ 35,026
Cumulative translation
adjustment (664) (891) (212) (2,175)
-------- -------- -------- --------
Comprehensive income $ 20,580 $ 17,458 $ 40,890 $ 32,851
======== ======== ======== ========
</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 and six months ended June 28, 1998
and June 29, 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 June 28, 1998, 3,137,599 shares of common stock were reserved
for issuance under the company's stock compensation plans.
Note 3 Inventories consisted of the following:
<TABLE>
<CAPTION>
June 28, Dec. 28,
1998 1997
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<S> <C> <C>
Raw materials $ 76,783 $ 72,806
Work-in-process 40,743 40,368
Finished goods 102,626 105,364
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$220,152 $218,538
======== ========
</TABLE>
<PAGE> 6
Note 4 Business segment information:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- -----------------------
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales
Commercial $170,797 $125,692 $333,391 $248,432
Medical 84,911 81,127 164,255 160,695
Aerospace 107,303 73,444 211,125 140,480
-------- -------- -------- --------
Total $363,011 $280,263 $708,771 $549,607
======== ======== ======== ========
Operating Profit
Commercial $ 18,073 $ 18,010 $ 36,127 $ 34,117
Medical 10,285 8,101 19,782 16,689
Aerospace 12,884 8,762 24,570 16,498
-------- -------- -------- --------
Total $ 41,242 $ 34,873 $ 80,479 $ 67,304
======== ======== ======== ========
</TABLE>
Management's Analysis of Quarterly Financial Data
Results of Operations:
Revenues increased 30% in the second quarter of 1998 to $363.0 million from
$280.3 million in 1997. The increase resulted from gains in the Commercial and
Aerospace segments and, to a lesser extent, the Medical Segment. Approximately
one-half of the growth was the result of acquisitions, primarily 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 second quarter of 1997. The Commercial, Medical and Aerospace segments
comprised 47%, 23% and 30% of the company's net sales, respectively.
Despite improvements within the Medical and Aerospace segments, gross profit
margin decreased to 28.4% in 1998 compared with 30.8% 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 18.3% in 1998 compared with 19.5% in 1997
resulting from the decline in the contribution of sales from the Medical
Segment.
<PAGE> 7
Operating profit increased 18% in the second quarter of 1998 from $34.9 million
to $41.2 million. Operating margin declined from 12.4% in 1997 to 11.4% of sales
in 1998. Operating profit increased in the Medical and Aerospace segments while
the Commercial Segment was flat compared with the same period in 1997. An
increase in the operating margin in the Medical Segment and, to a lesser extent,
the Aerospace Segment was offset by a decline in the Commercial Segment.
Industry Segment Review:
- ------------------------
Sales in the Commercial Segment increased 36% from $125.7 million in 1997 to
$170.8 million in 1998. The increase resulted from gains in the automotive and
industrial product lines while the marine product line sales remained steady.
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 remained steady compared with 1997;
however, operating margin declined from 14.3% to 10.6% due primarily to a
decrease in the automotive product line as a result of lower margins from
recently acquired businesses. The General Motors strike, which began in June,
reduced operating profits in the quarter by $1.4 million, or 2 cents per share.
The Medical Segment sales increased 5% from $81.1 million in 1997 to $84.9
million in 1998 as both the surgical devices product line and the hospital
supply product line showed improvements. The sales increased despite a negative
impact from weaker foreign currencies. Operating profit increased 27% from $8.1
million to $10.3 million and operating margin improved from 10.0% to 12.1%. 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 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 46% from $73.4 million in 1997 to $107.3
million in 1998. Sales increased in all product lines in this Segment: cargo
systems, coatings, repair services and turbine component manufacturing. The
majority of the growth came from turbine component manufacturing which, along
with other product lines in this Segment, has been affected by the favorable
conditions in the commercial aviation market. Operating profit increased 47% due
to the sales increase and operating margin improved slightly from 11.9% to
12.0%.
<PAGE> 8
Cash flow from operations increased $24.5 million during the period ended June
28, 1998 compared with 1997 due to higher net income, depreciation and working
capital improvements. 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 $10.4 million from $237.6 million at December 28, 1997,
to $248.0 million at June 28, 1998. The increase was the result of additional
long-term 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 June
28, 1998.
<PAGE> 9
Teleflex Incorporated
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Part II Other Information
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Item 6. Exhibits and Reports on Form 8-K
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(A) Reports on form 8-K.
No reports on form 8-K were filed during the quarter.
<PAGE> 10
Teleflex Incorporated
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Signatures
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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.
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Harold L. Zuber, Jr.
Vice President and Chief
Financial Officer
/s/ Stephen J. Gambone
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Stephen J. Gambone
Controller and Chief
Accounting Officer
August 7, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> MAR-02-1998
<PERIOD-END> JUN-28-1998
<CASH> 65,885
<SECURITIES> 0
<RECEIVABLES> 294,312
<ALLOWANCES> 0
<INVENTORY> 220,152
<CURRENT-ASSETS> 598,870
<PP&E> 381,388
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,126,635
<CURRENT-LIABILITIES> 294,238
<BONDS> 247,986
0
0
<COMMON> 37,378
<OTHER-SE> 464,210
<TOTAL-LIABILITY-AND-EQUITY> 1,126,635
<SALES> 363,011
<TOTAL-REVENUES> 363,011
<CGS> 259,834
<TOTAL-COSTS> 259,834
<OTHER-EXPENSES> 66,383
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,261
<INCOME-PRETAX> 32,533
<INCOME-TAX> 11,289
<INCOME-CONTINUING> 21,244
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,244
<EPS-PRIMARY> .57
<EPS-DILUTED> .55
</TABLE>
