<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997
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 NO. 1-5353
------------------------
TELEFLEX INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 23-1147939
(STATE OR OTHER JURISDICTION OF (I.R.S.
INCORPORATION OR ORGANIZATION) EMPLOYER
IDENTIFICATION
NO.)
630 WEST GERMANTOWN PIKE, SUITE 450, PLYMOUTH MEETING, 19462
PENNSYLVANIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
Registrant's telephone number, including area code: (610) 834-6301
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $1 per share--New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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 __
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $1,164,123,532 as of February 1, 1998.
The registrant had 37,129,696 Common Shares outstanding as of February 1,
1998.
Documents Incorporated by Reference: (a) Annual Report to Shareholders for
the fiscal year ended December 28, 1997, incorporated partially in Part I and
Part II hereof; and (b) Proxy Statement for the 1998 Annual Meeting of
Shareholders, incorporated partially in Part III hereof.
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PART I
ITEM 1. BUSINESS
The Company* was incorporated in 1943 as a manufacturer of precision
mechanical push/pull controls for military aircraft. From this original single
market, single product orientation, the Company began to emphasize products and
services in a broader range of economically diverse markets to reduce its
vulnerability to economic cycles. Since the mid-1970s, the Company's investments
have been directed toward specific market niches employing its technical
capabilities to provide solutions to specific engineering problems and, over the
last ten years toward expanding into medical businesses. The continuing stream
of new products and value-added product improvements that have resulted from
this strategy have enabled the Company to participate in larger market segments.
Several of these new products and product improvements were developed by means
of an unusual investment program of the Company called the New Venture Fund.
Established in 1972, the Fund directs monies representing one-half percent of
sales into the development of new products and services. This concept allows for
entrepreneurial risk taking in new areas by encouraging innovation and
competition among the Company's managers for funds to pursue new programs and
activities independent of their operating budgets. Examples of New Venture
projects include the initial funding of SermeTel(R) research and most of the
early seed money for certain medical products.
The Company's business is separated into three segments -- Commercial,
Medical and Aerospace.
COMMERCIAL SEGMENT
The Commercial Segment designs and manufactures proprietary mechanical
controls for the automotive market; mechanical, electrical and hydraulic
controls, and electronic products for the pleasure marine market; and
proprietary products for the fluid transfer and outdoor power equipment markets.
Products in the Commercial Segment generally are less complex and are
produced in higher unit volume than those of the Company's other two segments.
They are manufactured both for general distribution as well as custom fabricated
to meet individual customer needs. Consumer spending patterns generally
influence the market trends for these products.
The Commercial Segment consists of three major product lines: Marine,
Automotive and Industrial.
The Company is a leading domestic producer of mechanical steering systems
for pleasure power boats. It also manufactures hydraulic steering systems,
engine throttle and shift controls, electrical gauges and instrumentation and
electronic location, communication and navigation systems. Techsonic Industries,
Inc., a manufacturer of marine information systems (electronic navigation,
communication and fish location devices) sold through mass merchandisers under
the Humminbird brand name, became a wholly owned subsidiary in 1992. In 1994,
the Company acquired TX Controls, a Swedish manufacturer of mechanical and
hydraulic steering systems, engine control systems and cables for application on
marine craft and industrial vehicles. Aside from the Humminbird products, the
Company's marine products are sold principally to boat builders and in the
aftermarket. These products are used principally on pleasure craft but also have
application on commercial vessels.
The Company is a major supplier of driver control systems to automotive
manufacturers worldwide. The principal products in this market are accelerator,
transmission shift, park lock, window regulator controls, pedal box and gear
shift systems and a heat resistant flexible fuel line. In 1995 the Company
acquired the cable controls businesses of Handy & Harmon Automotive Group. This
acquisition broadened the automotive product line by adding a park brake and
provided a manufacturing plant in Mexico. In 1996 the Company acquired a U.K.
manufacturer of cable control products which establishes the Company's
automotive cable operations in Europe. In May 1997 the Company acquired Comcorp
Technologies, Inc. a supplier of pedal assemblies and other automotive
components and systems. In December 1997 the company acquired United Parts N.V.
a European manufacturer of gear shift systems and other components supplying
most of the
- ---------------
* As used herein the "Company" refers to Teleflex Incorporated and its
consolidated subsidiaries.
1
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European auto and truck makers. The Truck Systems Division of United Parts was
sold in February 1998. The remaining Driver Control Division which has five
manufacturing plants throughout Europe, expanded the Company's entrance into the
European automotive market. The acquisitions of both Comcorp and United Parts
are part of the Company's strategy to integrate cable controls with other
automotive components in order to provide systems solutions for customers.
Acceptance by the automobile manufacturers of a Company-developed control for
use on a new model ordinarily assures the Company a large, but not exclusive,
market share for the supply of that control. The sales of mechanical automotive
cable controls were $193,361,000, $217,904,000 and $248,397,000 in 1995, 1996
and 1997, respectively.
Industrial controls and electrical instrumentation products are also
manufactured for use in other applications, including agricultural equipment,
outdoor power equipment, leisure vehicles and other on- and off-road vehicles.
In addition, the Company produces stainless steel overbraided fluoroplastic hose
for fluid transfer in such markets as the chemical, petroleum and food
processing industries.
MEDICAL SEGMENT
The Medical Segment manufactures and distributes a broad range of invasive
disposable and reusable devices for the urology, gastroenterology,
anesthesiology and respiratory care markets worldwide. It also designs and
manufactures a variety of surgical instruments, closure systems and provides
instrument management services. Products in this segment generally are required
to meet exacting standards of performance and have long product life cycles.
External economic influences on sales relate primarily to spending patterns in
the worldwide medical devices and supplies market.
Within the Medical Segment, the Company has two major product lines:
Hospital Supply and Surgical Devices. In addition the Company has extrusion
capabilities which it uses to serve original equipment manufacturers. In the
late 1970s, the Company decided to apply its polymer technologies to the medical
market, and began by extruding intravenous catheter tubing which it sold to
original equipment manufacturers. Through Teleflex OEM, the Company produces
standard and custom-designed semi-finished components for other medical device
manufacturers using its polymer materials and processing technology. Through
acquisitions the Company established the other two product lines of this
segment.
In 1989, the acquisition of Willy Rusch AG and affiliates in Germany
brought with it an established manufacturing base and distribution network,
primarily in Europe. This and other smaller acquisitions designed to broaden the
Company's product offerings form the base of the Hospital Supply product line.
The Hospital Supply product line includes the manufacture and sale of invasive
disposable and reusable devices for the urology, gastroenterology,
anesthesiology and respiratory care markets worldwide. Product offerings
include, among others, latex catheters, endotracheal tubes, laryngoscopes, face
masks, tracheostomy tubes and stents for airway and esophageal management.
The acquisitions of the Pilling Company in 1991 and Edward Weck
Incorporated in 1993 became the foundation of the Surgical Devices product line.
The Pilling and Weck businesses significantly expanded the product offerings,
marketing opportunities and selling capabilities in the surgical devices market
in the United States and provide opportunities for increasing international
sales. During 1994 and 1995, smaller acquisitions were made to balance the
Company's product offerings in Europe. In 1997 the acquisition of a manufacturer
with a complementary line of closure products broadened the Company's product
offerings. The Surgical Devices product line will focus on three distinct
markets: surgical instruments, surgical closure products and instrument
management services. Each market is served by a separate sales force and
management team dedicated to each market. Surgical Devices designs, manufactures
and distributes, primarily through its own sales force, instruments used in both
open and minimally-invasive surgical procedures including general and
specialized surgical instruments such as scissors, forceps, vascular clamps,
needle holders and retractors; closure products such as ligation clips, appliers
and skin staples; and, provides specialized instrument management services.
2
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AEROSPACE SEGMENT
The Aerospace Segment serves the commercial aerospace and turbine engine
markets. Its businesses design and manufacture precision controls and cargo
systems for aviation; provide coatings, repair services and manufactured
components for users of both flight and land-based turbine engines. Sales are
both to original equipment manufacturers and the aftermarket. These products and
services, many of which are proprietary, require a high degree of engineering
sophistication and are often custom designed. External economic influences on
these products and services relate primarily to spending patterns in the
worldwide aerospace industry.
In 1995 and in the first quarter of 1996 the Company sold product lines as
part of a structural realignment within the Aerospace Segment. These businesses
produced a variety of mechanical and electromechanical controls for commercial
and military aircraft, ordnance and space vehicles. The sale of these product
lines effectively ended most of the Company's involvement in the
military/defense sector of the aerospace industry. Telair International
manufactures and distributes cargo handling systems for commercial aircraft and
other aircraft controls. The Company's cargo handling systems include patented
digitally controlled systems to move and secure containers of cargo inside
commercial aircraft. In 1997 the Company acquired Scandinavian Bellyloading
Company, a European manufacturer of cargo loading systems for narrow-body
aircraft which complements the Company's existing wide-body cargo handling
systems. Cargo handling systems are sold either to aircraft manufacturers as
original installations or to airlines and air freight carriers for retrofit of
existing systems. The Company also designs, manufactures and repairs mechanical
and electromechanical components used on both commercial and, to a lesser extent
military aircraft. These other aircraft controls include flight controls, canopy
and door actuators, cargo winches and control valves. The Company's design
engineers work with design personnel from the major aircraft manufacturers in
the development of controls for use on new aircraft. In addition, the Company
supplies spare parts to aircraft operators typically through distributors. This
spare parts business extends as long as the particular type of aircraft
continues in service.
In the early 1960s, aircraft manufacturers began to encounter high
temperature lubrication problems in connection with mechanical controls for
aircraft jet engines. Through Sermatech International, the Company utilized its
aerospace experience and engineering capabilities to develop a series of
formulations of inorganic coatings to solve these high temperature lubrication
problems. These products were further developed by the Company and sold under
the trademark SermeTel(R) to provide anti-corrosion protection for compressor
blades and other airfoils. Sermatech International, through a network of
facilities in five countries, provides a variety of sophisticated protective
coatings and repair services for ground turbine engine components; highly-
specialized repairs for critical components such as fan blades and airfoils for
flight-based turbine engines; and manufacturing and high quality dimensional
finishing of airfoils and other turbine engine components. The Company has added
technologies through acquisition and internal development and now offers a
diverse range of technical services and materials technologies to turbine
markets throughout the world. In 1993 the Company acquired Mal Tool &
Engineering, a manufacturer of fan blades for flight turbines, and airfoils for
both flight and ground-based gas turbines and steam turbines. This acquisition
broadened the Company's product offering including turnkey manufactured and
coated airfoils and provided another entree to major international turbine
manufacturers. During the fourth quarter of 1995 the Company formed a joint
venture, Airfoil Technologies International LLC (ATI), with General Electric
Aircraft Engines to provide fan blade and airfoil repair services for
flight-based turbine engine blades. The Sermatech repair operations were
contributed to ATI which is owned 51% by the Company. ATI provides a vehicle for
the technological and geographic expansion of the Sermatech repairs services
business. To further broaden the Company's turbo-machinery technological and
manufacturing capabilities, and to improve the range of product offerings, the
Company, in 1996 acquired Lehr Precision, Inc., an electro-chemical machining
manufacturer of turbo-machinery components used on both flight and ground
turbines. In 1997 the Company acquired Gas-Path Technology, Inc. to further
expand its ground turbine repair capabilities within the Sermatech network of
facilities.
3
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MARKETING
In 1997, the percentages of the Company's consolidated net sales
represented by its major markets were as follows: aerospace -- 28%;
medical -- 28%; marine and industrial -- 20%; and automotive -- 24%.
The major portion of the Company's products are sold to original equipment
manufacturers. Generally, products sold to the aerospace and automotive markets
are sold through the Company's own force of field engineers. Products sold to
the marine, medical and general industrial markets are sold both through the
Company's own sales forces and through independent representatives and
independent distributor networks.
For information on foreign operations, export sales, and principal
customers, see text under the heading "Business segments and other information"
on page 25 of the Company's 1997 Annual Report to Shareholders, which
information is incorporated herein by reference.
COMPETITION
The Company has varying degrees of competition in all elements of its
business. None of the Company's competitors offers products for all the markets
served by the Company. The Company believes that its competitive position
depends on the technical competence and creative ability of its engineering and
development personnel, the know-how and skill of its manufacturing personnel as
well as its plants, tooling and other resources.
PATENTS
The Company owns a number of patents and has a number of patent
applications pending. The Company does not believe that its business is
materially dependent on patent protection.
SUPPLIERS
Materials used in the manufacture of the Company's products are purchased
from a large number of suppliers. The Company is not dependent upon any single
supplier for a substantial amount of the materials it uses.
BACKLOG
As of December 28, 1997 the Company's backlog of firm orders for the
Aerospace Segment was $364 million, of which it is anticipated that
approximately one-half will be filled in 1998. The Company's backlog for the
Aerospace Segment on December 29, 1996 was $180 million.
As of December 28, 1997 the Company's backlog of firm orders for the
Medical and Commercial segments was $26 million and $98 million, respectively.
This compares with $21 million and $88 million, respectively, as of December 29,
1996. Substantially all of the December 28, 1997 backlog will be filled in 1998.
Most of the Company's medical and commercial products are sold on orders calling
for delivery within no more than a few months so that the backlog of such orders
is not indicative of probable net sales in any future 12-month period.
EMPLOYEES
The Company had approximately 11,700 employees at December 28, 1997.
4
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EXECUTIVE OFFICERS
The names and ages of all executive officers of the Company as of March 1,
1998 and the positions and offices with the Company held by each such officer
are as follows:
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AGE WITH COMPANY
---- --- ---------------------
<S> <C> <C>
Lennox K. Black 67 Chairman of the Board and Director
David S. Boyer 55 President, Chief Executive Officer and Director
John J. Sickler 55 President, TFX Equities Inc.
Dr. Roy C. Carriker 60 President and Chief Operating Officer, TFX Sermatech
Harold L. Zuber, Jr. 48 Vice President, Chief Financial Officer and Controller
Steven K. Chance 52 Vice President, General Counsel and Secretary
Ira Albom 68 Senior Vice President
Louis T. Horvath 59 Vice President, Quality and Productivity
Ronald D. Boldt 55 Vice President, Human Resources
Janine Dusossoit 44 Vice President, Investor Relations
Thomas M. Byrne 51 Assistant Treasurer
</TABLE>
Mr. Boyer was elected President and Chief Executive Officer on April 28,
1995. Prior to that date he was President.
Dr. Carriker was named President and Chief Operating Officer, TFX Sermatech
on January 3, 1994. Prior to that date he was President, Sermatech
International.
Mr. Horvath was named to the position of Vice Presidents, Quality and
Productivity on January 4, 1996. Prior to that date he was Vice President,
Quality Management.
Officers are elected by the Board of Directors for one year terms. No
family relationship exists among any of the executive officers of the Company.
ITEM 2. PROPERTIES
The Company's operations have approximately 90 owned and leased properties
consisting of plants, engineering and research centers, distribution warehouses
and other facilities. The properties are maintained in good operating condition.
All the plants are suitably equipped and utilized, and have space available for
the activities currently conducted therein and the increased volume expected in
the foreseeable future.
The following are the Company's major facilities:
<TABLE>
<CAPTION>
SQUARE OWNED OR EXPIRATION
LOCATION FOOTAGE LEASED DATE
-------- ------- -------- ----------
<S> <C> <C> <C>
COMMERCIAL SEGMENT
Dassel, Germany............................................. 140,000 Owned N/A
Van Wert, OH................................................ 130,000 Owned(1) N/A
Limerick, PA................................................ 110,000 Owned N/A
Dalstorp, Sweden............................................ 105,000 Owned N/A
Hagerstown, MD.............................................. 103,000 Owned(1) N/A
Warren, MI.................................................. 100,000 Leased 1999
Waterbury, CT............................................... 99,000 Leased 1998
Eufaula, AL................................................. 98,000 Owned N/A
Haysville, KS............................................... 98,000 Leased 2002
Suffield, CT................................................ 90,000 Leased 2000
Hillsdale, MI............................................... 85,000 Owned(1) N/A
Sarasota, FL................................................ 82,000 Owned(1) N/A
Willis, TX.................................................. 70,000 Owned(1) N/A
Nuevo Laredo, Mexico........................................ 67,000 Leased 1998
Eufaula, AL................................................. 61,000 Owned N/A
Birmingham, England......................................... 60,000 Leased 2016
</TABLE>
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<TABLE>
<CAPTION>
SQUARE OWNED OR EXPIRATION
LOCATION FOOTAGE LEASED DATE
-------- ------- -------- ----------
<S> <C> <C> <C>
Plymouth, MI................................................ 55,000 Leased 1998
Lebanon, VA................................................. 53,000 Owned(1) N/A
Lyons, OH................................................... 50,000 Owned N/A
Vrable, Slovakia............................................ 49,000 Leased 2000
Auburn Hills, MI............................................ 38,000 Owned N/A
Goteborg, Sweden............................................ 37,000 Owned N/A
Swainsboro, GA.............................................. 37,000 Leased 2004
Richmond, Canada............................................ 35,000 Leased 2002
Vancouver, B.C., Canada..................................... 30,000 Owned N/A
Troy, MI.................................................... 29,000 Leased 2003
Selmer, TN.................................................. 24,000 Leased 2005
Birmingham, England......................................... 24,000 Leased 2011
Poole, England.............................................. 20,000 Owned N/A
MEDICAL SEGMENT
Kernen, Germany............................................. 263,000 Owned N/A
Durham, NC.................................................. 144,000 Owned N/A
Kernen, Germany............................................. 114,000 Leased 2013
Taiping, Malaysia........................................... 85,000 Owned N/A
Lurgan, Northern Ireland.................................... 80,000 Owned N/A
Duluth, GA.................................................. 69,000 Leased 1999
Fort Washington, PA......................................... 65,000 Owned N/A
Jaffrey, NH................................................. 60,000 Owned(1) N/A
Franiere, Belgium........................................... 59,000 Leased 2005
Montevideo, Uruguay......................................... 45,000 Owned N/A
Bad Liebenzell, Germany..................................... 36,000 Leased 2000
Bourg-en-Bresse, France..................................... 34,000 Leased 1999
Betschdorf, France.......................................... 32,000 Owned N/A
High Wycombe, England....................................... 25,000 Leased 2012
Limerick, Ireland........................................... 16,000 Leased 2020
AEROSPACE SEGMENT
Cincinnati, OH.............................................. 160,000 Leased 2001
Oxnard, CA.................................................. 145,000 Owned N/A
Mentor, OH.................................................. 90,000 Owned N/A
Manchester, CT.............................................. 74,000 Owned N/A
Limerick, PA................................................ 70,000 Owned N/A
Derbyshire, England......................................... 70,000 Leased 1999
Singapore, Asia............................................. 61,000 Owned N/A
Lincoln, England............................................ 50,000 Leased 2018
Compton, CA................................................. 49,000 Leased 1999
Biddeford, ME............................................... 32,000 Leased 1998
Hausham, Germany............................................ 30,000 Owned N/A
</TABLE>
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(1) The Company is the beneficial owner of these facilities under installment
sale or similar financing agreements.
In addition to the above, the Company owns or leases approximately 800,000
square feet of warehousing, manufacturing and office space located in the United
States, Canada, Europe and Asia.
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ITEM 3. LEGAL PROCEEDINGS
Two subsidiaries of the Company were identified as potentially responsible
parties (PRPs) in connection with the Casmalia Hazardous Waste Management
Facility in 1994. The Company and other PRPs have negotiated with the United
States Environmental Protection Agency (EPA) a good faith offer and have taken
over certain closure and post-closure activities. These activities will take
place over the next three years.
In addition, the Company has been named as a PRP by the EPA at various
sites throughout the country.
In the opinion of the Company's management, based on current allocation
formulas and the facts presently known, the ultimate outcome of these
environmental matters will not result in a liability material to the Company's
consolidated financial position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
See "Quarterly Financial Data" on page 27 of the Company's 1997 Annual
Report to Shareholders for market price and dividend information. Also see the
Note entitled "Borrowings and Leases" on pages 23 and 24 of such Annual Report
for certain dividend restrictions under loan agreements, all of which
information is incorporated herein by reference. The Company had approximately
1,400 registered shareholders at February 1, 1998.
ITEM 6. SELECTED FINANCIAL DATA
See pages 28 through 31 of the Company's 1997 Annual Report to
Shareholders, which pages are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See the text under the heading "Financial Review" on pages 32 through 37 of
the Company's 1997 Annual Report to Shareholders, which information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages 19 through 27 of the Company's 1997 Annual Report to
Shareholders, which pages are incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the Company's Directors and Director
nominees, see "Election Of Directors" and "Additional Information About The
Board Of Directors" on pages 2 through 4 of the Company's Proxy Statement for
its 1998 Annual Meeting, which information is incorporated herein by reference.
For information with respect to the Company's Executive Officers, see Part
I of this report on page 5, which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
See "Additional Information About The Board of Directors", "Board
Compensation Committee", "Five-Year Shareholder Return Comparison" and
"Executive Compensation and Other Information" on pages 6 through 8 of the
Company's Proxy Statement for its 1998 Annual Meeting, which information is
incorporated herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See "Security Ownership of Certain Beneficial Owners and Management" on
pages 1 and 2, "Section 16(a) Beneficial Ownership Reporting Compliance" on page
2 and "Election Of Directors" on pages 2 and 3 of the Company's Proxy Statement
for its 1998 Annual Meeting, which information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Additional Information About The Board Of Directors", "Board
Compensation Committee" and "Executive Compensation and Other Information" on
pages 4 through 8 of the Company's Proxy Statement for its 1998 Annual Meeting,
which information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Consolidated Financial Statements:
The index to Consolidated Financial Statements and Schedules is set
forth on page 10 hereof.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
(c) Exhibits:
The Exhibits are listed in the Index to Exhibits.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into registrant's Registration Statements on Form S-8
Nos. 2-84148 (filed June 28, 1989), 2-98715 (filed May 11, 1987), 33-34753
(filed May 10, 1990) and 33-53385 (filed April 29, 1994):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized as of the
date indicated below.
TELEFLEX INCORPORATED
By LENNOX K. BLACK
------------------------------------
Lennox K. Black
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and as of the date indicated below.
By DAVID S. BOYER
------------------------------------
David S. Boyer
(Principal Executive Officer)
By HAROLD L. ZUBER, JR.
------------------------------------
Harold L. Zuber, Jr.
(Principal Financial and Accounting
Officer)
Pursuant to General Instruction D to Form 10-K, this report has been signed
by Steven K. Chance as Attorney-in-Fact for a majority of the Board of Directors
as of the date indicated below.
<TABLE>
<S> <C>
John H. Remer Director
Lewis E. Hatch, Jr. Director
Palmer E. Retzlaff Director
Sigismundus W. W. Lubsen Director
David S. Boyer Director
Lennox K. Black Director
Pemberton Hutchinson Director
Donald Beckman Director
James W. Stratton Director
Joseph S. Gonnella, MD Director
Patricia C. Barron Director
</TABLE>
By STEVEN K. CHANCE
------------------------------------
Steven K. Chance
Attorney-in-Fact
Dated: March 20, 1998
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<PAGE> 11
TELEFLEX INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements together with the report thereon of
Price Waterhouse LLP dated February 11, 1998 on pages 19 to 31 of the
accompanying 1997 Annual Report to Shareholders are incorporated in this Annual
Report on Form 10-K. With the exception of the aforementioned information, and
those portions incorporated by specific reference in this document, the 1997
Annual Report to Shareholders is not to be deemed filed as part of this report.
The following Financial Statement Schedule together with the report thereon of
Price Waterhouse LLP dated February 11, 1998 on page 11 should be read in
conjunction with the consolidated financial statements in such 1997 Annual
Report to Shareholders. Financial Statement Schedules not included in this Form
10-K Annual Report have been omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
FINANCIAL STATEMENT SCHEDULE
Schedule:
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
VIII Valuation and qualifying accounts........................... 12
</TABLE>
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REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Teleflex Incorporated
Our audits of the consolidated financial statements referred to in our report
dated February 11, 1998 appearing on page 26 of the 1997 Annual Report to
Shareholders of Teleflex Incorporated (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
February 11, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 2-84148, No. 2-98715, No. 33-34753, and No.
33-53385) of Teleflex Incorporated of our report dated February 11, 1998
appearing on page 26 of the 1997 Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears above.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
March 20, 1998
11
<PAGE> 13
TELEFLEX INCORPORATED
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS DOUBTFUL BALANCE AT
BEGINNING CHARGED TO ACCOUNTS END OF
FOR THE YEAR ENDED OF YEAR INCOME WRITTEN OFF YEAR
------------------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
December 28, 1997........................ $4,110,000 $2,218,000 $ (660,000) $5,668,000
December 29, 1996........................ $3,797,000 $2,026,000 $(1,713,000) $4,110,000
December 31, 1995........................ $3,036,900 $1,333,600 $ (573,500) $3,797,000
</TABLE>
12
<PAGE> 14
March 20, 1998
INDEX TO EXHIBITS
Exhibit
- -------
3 (a) -- The Company's Articles of Incorporation (except for Article Thirteenth
and the first paragraph of Article Fourth) are incorporated herein by reference
to Exhibit 3(a) to the Company's Form 10-Q for the period ended June 30, 1985.
Article Thirteenth of the Company's Articles of Incorporation is incorporated
herein by reference to Exhibit 3 of the Company's Form 10-Q for the period ended
June 28, 1987. The first paragraph of Article Fourth of the Company's Articles
of Incorporation is incorporated herein by reference to Exhibit 3 of the
Company's Form 10-Q for the period ended June 25, 1989 (filed with Form 8, dated
August 23, 1989).
(b) -- The Company's Bylaws are incorporated herein by reference to Exhibit
3(b) of the Company's Form 10-K for the year ended December 28, 1987.
10 (a) -- The 1982 Stock Option Plan, incorporated herein by reference to the
Company's registration statement on Form S-8 (Registration No. 2-84148), as
supplemented, with amendments of April 26, 1991 incorporated by reference to
the Company's definitive Proxy Statement for the 1991 Annual Meeting of
Shareholders.
(b) -- The 1990 Stock Compensation Plan, incorporated herein by reference to
the Company's registration statement on Form S-8 (Registration No. 33-34753),
revised and restated as of December 1, 1997 included herein.
(c) -- The Salaried Employees' Pension Plan, as amended and restated in its
entirety, effective July 1, 1989 and the retirement income plan as amended and
restated in its entirety effective January 1, 1994 and related Trust
Agreements, dated July 1, 1994 is incorporated by reference to the company's
Form 10-K for the year ended December 25, 1994.
(d) -- Description of deferred compensation arrangements between the Company
and its Chairman, L. K. Black, incorporated by reference to the Company's
definitive Proxy Statement for the 1998 Annual Meeting of Shareholders.
<PAGE> 15
INDEX TO EXHIBITS --- PAGE 2
(e) -- Description of compensation arrangement between the Company and its
President and Chief Executive Officer, David S. Boyer, incorporated by
reference to the Company's definitive Proxy Statement for the 1998 Annual
Meeting of Shareholders.
(f) -- Teleflex Incorporated Deferred Compensation Plan effective as of
January 1, 1995 and amended and restated November 3, 1997.
(g) -- Information on the Company's Profit Participation Plan, insurance
arrangements with certain officers and deferred compensation arrangements with
certain officers, non-qualified supplementary pension plan for salaried
employees and compensation arrangements with directors is incorporated by
reference to the Company's definitive Proxy Statement for the 1996, 1997 and
1998 Annual Meeting of Shareholders.
(h) -- The Company's Voluntary Investment Plan is incorporated by reference
to Exhibit 28 of the Company's registration statement on Form S-8 (Registration
No. 2-98715).
13 -- Pages 19 through 37 of the Company's Annual Report to Shareholders for the
period ended December 28, 1997.
21 -- The Company's Subsidiaries.
24 -- Consent of Independent Accountants (see page 11 herein).
25 -- Power of Attorney.
27 -- Financial Data Schedule
<PAGE> 1
EXHIBIT 10(b)
[TELEFLEX INCORPORATED LOGO]
============================
1990 STOCK COMPENSATION PLAN
============================
REVISED AND RESTATED AS OF DECEMBER 1, 1997
<PAGE> 2
TELEFLEX INCORPORATED
1990 STOCK COMPENSATION PLAN
1. PURPOSE OF PLAN
The purpose of the Plan is to provide individual performance incentives
and awards to the Company's employees, to assist the Company in retaining the
employment of valued employees by offering them a greater stake in the Company's
success and a closer identity with it, to aid in gaining the services of
individuals whose employment would be helpful to the Company and would
contribute to its success, and to encourage ownership in the Company by outside
directors of the Company whose services are considered essential to the
Company's continued progress and thus to provide them with a further incentive
to continue as a director of the Company.
2. DEFINITIONS
(a) "Board" means the board of directors of the Parent Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee described in Paragraph 5.
(d) "Company" means Teleflex Incorporated and each of its Subsidiary
Companies.
(e) "Consultant" means a person who provides personal services to the
Company, otherwise than as an employee or director, pursuant to a contract with
a Company calling for the equivalent of at least 100 work days service per year.
(f) "Date of Grant" means the date on which an Option or a Restricted Stock
Award is granted.
(g) "Eligible Director" means any member of the Board who is not an officer
or employee of the Company.
(h) "Incentive Stock Option" means an Option granted under the Plan,
designated by the Committee at the time of such grant as an Incentive Stock
Option and containing the terms specified herein for Incentive Stock Options.
(i) "Non-Qualified Option" means an Option granted under the Plan designated
by the Committee at the time of such grant as a Non-Qualified Option and
containing the terms specified herein for Non-Qualified Options.
(j) "Officer" means an officer as defined in Rule 3b-2 (or any similar
rule) of the Securities and Exchange Commission.
(k) "Option" means any stock option granted under the Plan and described
either in Paragraph 3(a) or 3(b).
(l) "Optionee" means a person to whom an Option has been granted under the
Plan, which Option has not been exercised and has not expired or terminated.
(m) "Parent Company" means Teleflex Incorporated.
(n) "Participant" means a person to whom a Restricted Stock Award has been
granted under the Plan, the Shares under which have not yet Vested in full or
the Restriction Period of which has not expired.
(o) "Relationship" of a person with the Company means the relationship of
such person with the Company as an employee, an Eligible Director or a
Consultant.
(p) "Restricted Stock Award" means any award of Shares granted under the
Plan and described in Paragraph 3(c).
(q) "Restriction Period" means the period of time commencing with the Date of
Grant during which restrictions shall apply to the Shares subject to a
Restricted Stock Award, as determined by the Committee.
(r) "Shares" means shares of common stock of the Parent Company.
(s) "Subsidiary Companies" means all corporations that at any relevant
time are subsidiary corporations to the Parent Company within the meaning of
section 425(f) of the Code.
1
<PAGE> 3
(t) "Ten Percent Shareholder" means a person who on the Date of Grant owns,
either directly or within the meaning of the attribution rules contained in
section 425(d) of the Code, stock possessing more ten percent of the total
combined voting power of all classes of stock of his or her employer corporation
or of its parent or subsidiary corporations, as defined respectively in sections
425(e) and (f) of the Code.
(u) "Value" on any date means the mean between the highest and lowest prices
of actual sales of Shares on the principal national securities exchange on which
the Shares are listed on such date (or if such securities exchange shall not be
open for the trading of securities on such date, the last previous day in which
such exchange was so open) or, if there are no such sales on such date, the mean
between the closing bid and asked prices of the Shares on such exchange on such
date (in each case, rounded to the nearest $.25).
(v) "Vest" as to any Shares subject to a Restricted Stock Award, means the
lapse of the possibility of forfeiture of such Shares pursuant to Paragraph
9(d).
3. RIGHTS TO BE GRANTED
Rights that may be granted under the Plan are:
(a) Incentive Stock Options that give the Optionee the right for a
specified time period to purchase a specified number of Shares for a price
not less than their Value on the Date of Grant;
(b) Non-Qualified Options that give the Optionee the right for a
specified time period to purchase a specified number of Shares for a price not
less than their Value on the Date of Grant; and
(c) Restricted Stock Awards that give the Participant the right to
receive without payment a specified number of Shares subject to forfeiture
under specified circumstances on termination of employment by a Company
during the Restriction Period applicable to the Shares.
4. STOCK SUBJECT TO PLAN
Subject to Paragraph 12, not more than 4,100,000 Shares in the aggregate
may be issued pursuant to the Plan. If an Option terminates or expires
without having been exercised in full or if any Shares subject to a
Restricted Stock Award are forfeited, other Options or Restricted Stock
Awards may be granted covering such Shares.
5. ADMINISTRATION OF PLAN
(a) The Plan shall be administered by the Committee, which shall be
composed of three directors of the Parent Company appointed by the Board.
(b) The Committee may delegate to a person designated from time to time by
the Committee as the Plan Administrator the Committee's discretion pursuant
to Paragraphs 8(c), 8(j) and 9(e).
6. GRANT OF RIGHTS
(a) Subject to Paragraph 7, the Committee, or the Board on the
recommendation of the Committee, may grant Non-Qualified Options and Restricted
Stock Awards to Eligible Directors and Options and Restricted Stock Awards to
eligible employees of the Company.
7. ELIGIBILITY
(a) Options and Restricted Stock Awards may be granted only to Eligible
Directors and employees of the Company who are officers or persons whose
principal duties consist of supervising the work of other employees of the
Company or who are otherwise key employees of the Company, including employees
who are also directors.
(b) An Incentive Stock Option shall not be granted to a Ten Percent
Shareholder except on such terms concerning the option price and period of
exercise as are provided in Paragraphs 8(a) and 8(e) with respect to such a
person.
(c) The maximum aggregate number of Shares with respect to which Options
may be granted to any one person in any five year period is 5% of the shares
authorized for issuance under the Plan.
2
<PAGE> 4
(d) The maximum aggregate number of Shares with respect to which
Restricted Stock Awards may be granted to any one person in any five year period
(when aggregated with the number of Options granted to such person in such
period) is 5% of the shares authorized for issuance under the Plan.
8. OPTION AGREEMENTS AND TERMS
All Options shall be granted prior to February 4, 2000 and be evidenced by
option agreements that shall be executed on behalf of the Parent Company and by
the respective Optionees. Each Option shall be granted on the following terms
and such additional terms, not inconsistent therewith or with any other
provisions of this Plan, as the Committee shall determine and set forth in the
option agreement therefor, including without limitation conditions to the
exercise of such Option relating to the attainment of one or more performance
goals, the occurrence of other specified events or the existence of other
specified conditions.
(a) Option Price. The option price per Share of any Options granted to an
Optionee shall be determined by the Committee but shall not be less than 100
percent of the Value of the Shares on the Date of Grant; provided that with
respect to any Incentive Stock Options granted to a Ten Percent Shareholder,
the option price per Share shall not be less than 110 percent of the Value of
the Shares on the Date of Grant.
(b) Restrictions on Transferability. An Option shall not be transferable
otherwise than by will or the laws of descent and distribution and, during
the lifetime of the Optionee, shall be exercisable only by him or her. Upon
the death of an Optionee, the person to whom the rights shall have passed by
will or by the laws of descent and distribution may exercise any Options only
in accordance with the provisions of Paragraph 8(e).
(c) Payment. Full payment for Shares purchased upon the exercise of an
Option shall be made in cash or, at the election of the person exercising the
Option and subject to the approval of the Committee at the time of exercise,
by surrendering, or by the Parent Company's withholding from Shares
purchased, Shares with an aggregate Value, on the date immediately preceding
such exercise date, equal to all or any portion of the option price not paid
in cash.
(d) Issuance of Certificates; Payment of Cash. Only whole Shares shall be
issuable upon exercise of Options. Any right to a fractional Share shall be
satisfied in cash. Upon receipt of payment of the option price and any
withholding taxes payable pursuant to subparagraph (j), the Parent Company
shall deliver a certificate for the number of whole Shares and a check for
the Value on the date of exercise of the fractional Share to which the person
exercising the Option is entitled. The Parent Company shall not be obligated
to deliver any certificates for Shares until such Shares have been listed (or
authorized for listing upon official notice of issuance) upon each stock
exchange upon which outstanding Shares of such class at the time are listed
nor until there has been compliance with such laws or regulations as the
Parent Company may deem applicable. The Parent Company shall use its best
efforts to effect such listing and compliance.
(e) Periods of Exercise of Options. An Option shall be exercisable in
whole or in part during such period as may be determined by the Committee and
stated in the option agreement, subject to the following further limitations:
(i) No Option shall be exercisable before six months (in the case of
a Non-Qualified Option granted to an Eligible Director) or one year (in
the case of any other Option) from the Date of Grant. No Option shall be
exercisable after five years (in the case of an Option granted to a Ten
Percent Shareholder) or after ten years (in the case of any other Option)
from the Date of Grant.
(ii) The time when an Incentive Stock Option shall be exercisable
with respect to any Shares shall comply with subparagraph (g) of this
Paragraph.
(iii) If an Optionee of an Incentive Stock Option ceases to be an
employee of the Company, such Option may not be exercised after the
expiration of the applicable period after such cessation of employment
stated below:
(1) If such employment shall have ceased for any reason other
than the death or disability of such Optionee, such period shall be
three months after such cessation of employment;
(2) If such employment shall have ceased by reason of the
death of such Optionee, such period shall be six months after such
cessation of employment; or
(3) If such employment shall have ceased by reason of the
disability of such Optionee, such period shall be the longer of
three months after such cessation of employment or such period, if
any, ending not more than one year after such cessation of
employment, as the Committee may determine not later than three
months after such cessation of such employment.
3
<PAGE> 5
(iv) If an Optionee of a Non-Qualified Option (other than a
Non-Qualified Option granted to an Eligible Director) ceases to have a
Relationship with the Company, such Option may not be exercised after the
expiration of the applicable period after such cessation of such
Relationship stated below:
(1) If such Relationship shall have ceased for any reason
other than the death or disability of such Optionee, such period
shall be three months after such cessation of Relationship;
(2) If such Relationship shall have ceased by reason of the
death of such Optionee, such period shall be six months after such
cessation of Relationship; or
(3) If such Relationship shall have ceased by reason of the
disability of such Optionee, such period shall be the longer of
three months after such cessation of Relationship or such period, if
any, after such cessation of Relationship as the Committee may
determine not later than three months after such cessation of
Relationship.
(v) If an Optionee of a Non-Qualified Option granted to an Eligible
Director ceases to have a Relationship with the Company, such Option may
not be exercised after the expiration of such period, ending not more than
five years after such cessation of Relationship, as may be determined by
the Committee and stated in the option agreement.
(vi) An Option exercisable after the Optionee thereof ceases to be
an employee of the Company (in the case of an Incentive Stock Option) or
after the Optionee thereof ceases to have a Relationship with the Company
(in the case of Non-Qualified Option) shall be exercisable only to the
extent exercisable as of the date of such cessation.
(vii) Notwithstanding the foregoing, an Option shall not be
exercisable after five years (in the case of an Option granted to a Ten
Percent Shareholder) or after ten years (in the case of any other Option)
from the Date of Grant.
(f) Date and Notice of Exercise. The date of exercise of an Option shall
be the date on which written notice of exercise, addressed to the Parent
Company at its main office to the attention of its Secretary, is hand
delivered, telecopied or mailed, first class postage prepaid; provided that
the Parent Company shall not be obliged to deliver any certificates for
Shares pursuant to the exercise of an Option until the Company shall have
received payment in full of the option price for such Shares and any
withholding taxes payable pursuant to subparagraph (j). Each such notice of
exercise shall be irrevocable when given. Each notice of exercise must state
whether the person exercising the Option is exercising an Incentive Stock
Option or a Non-Qualified Option and must include a statement of preference
as to the manner in which payment to the Parent Company shall be made (Shares
or cash or a combination of Shares and cash).
(g) Limitation On Exercise Of Incentive Stock Options. The aggregate fair
market value (determined as of the time Options are granted) of the Shares
with respect to which Incentive Stock Options may first become exercisable by
an Optionee in any one calendar year under the Plan and any other plan of his
or her employer corporation and its parent and subsidiary corporations, as
defined respectively in sections 425(e) and (f) of the Code, shall not exceed
$100,000. The foregoing limitation shall apply only to Incentive Stock
Options granted under the Plan, and not to any other Options granted under
the Plan.
(h) No Relation Between Incentive Stock Options and Non-Qualified Options.
The grant, exercise, termination or expiration of any Incentive Stock Option
granted to an Optionee shall have no effect upon any Non-Qualified Option
held by such Optionee, nor shall the grant, exercise, termination or
expiration any Non-Qualified Option granted to an Optionee have any effect
upon any Incentive Stock Option held by such Optionee.
(i) Continued Employment. Each Optionee holding an Incentive Stock Option
shall agree that the Company shall have the right to require him or her to
continue in the service of the Company for such period, not less than two
years from the date the Option was granted, as the Board may determine and as
may be stated in the option agreement.
(j) Payment of Withholding Taxes. Full payment for the amount of any taxes
required by law to be withheld upon the exercise of an Option shall be made
on or before the date such taxes must be withheld, in cash or, at the
election of the person exercising the Option and subject to the approval of
the Committee by surrendering or by the Parent Company's withholding from
Shares purchased, Shares with an aggregate Value on the date immediately
preceding the date that the withholding taxes due are determined (the "Tax
Date") equal to all or any portion of the withholding taxes not paid in cash.
4
<PAGE> 6
9. RESTRICTED STOCK AWARD AGREEMENTS AND TERMS
All Restricted Stock Awards shall be granted prior to February 4, 2000 and
be evidenced by restricted stock award agreements that shall be executed on
behalf of the Parent Company and by the respective Participants. Each Restricted
Stock Award shall be granted on the following terms and such additional terms,
not inconsistent therewith or with any other provisions of this Plan, as the
Committee shall determine and set forth in the restricted stock award agreement
therefor, including without limitation conditions to the Vesting of the Shares
subject thereto relating to the attainment of one or more performance goals, the
occurrence of other specified events or the existence of other specified
conditions.
(a) Restrictions on Transferability. During the Restriction Period,
neither a Restricted Stock Award nor any interest therein shall be
transferable otherwise than by will or the laws of descent and distribution.
Upon the death of a Participant the person to whom the rights shall have
passed by will or the laws of descent and distribution shall become entitled
to the Shares subject to the Restricted Stock Award only in accordance with
the provisions of subparagraph (d).
(b) Issuance of Certificates; Payment of Cash. Upon receipt from a
Participant of a fully executed restricted stock award agreement and a stock
power relating to the Shares issuable thereunder executed in blank by the
Participant, the Parent Company shall issue to such Participant the Shares
subject to the Restricted Stock Award. The certificates representing such
Shares shall be registered in such Participant's name, with such legend
thereon as the Committee shall deem appropriate. The Parent Company shall
retain the certificates for such Shares pending the vesting or forfeiture
thereof. Upon the vesting of any such Shares, the Company shall deliver to
the Participant the certificates for such Shares. The Parent Company shall
not be obligated to deliver any certificates for Shares until such Shares
have been listed (or authorized for listing upon official notice of issuance)
upon each stock exchange upon which outstanding Shares of such class at the
time are listed nor until there has been compliance with such laws or
regulations as the Parent Company may deem applicable. The Parent Company
shall use its best efforts to effect such listing and compliance.
(c) Restriction Period and Vesting Schedule. The Restriction Period for
Restricted Stock Awards granted to a Participant and the times at which the
Shares subject to such Restricted Stock Awards shall Vest shall be determined
by the Committee and specified in the restricted stock award agreement,
provided that no Shares shall Vest prior to one year from the Date of Grant.
Notwithstanding the foregoing, only whole Shares shall Vest. In the event
that a Participant shall become entitled to a fractional Share, such
fractional Share shall not Vest unless and until the Participant becomes
entitled to such number of fractional shares as shall be equal in sum to a
whole Share.
(d) Forfeiture of Shares; Vesting on Disability or Death.
(i) In the event that a Participant shall cease to have a
Relationship with the Company for any reason other than such Participant's
death or disability, any Shares subject to such Participant's Restricted
Stock Award which theretofore shall not have Vested shall automatically be
forfeited by such Participant and revert to and become the property of the
Company.
(ii) Except as shall have been determined by the Committee and
specified in the restricted stock award agreement, in the event that a
Participant shall cease to have a Relationship with the Company by reason
of such Participant's death or disability, any Shares subject to such
Participant's Restricted Stock Award which theretofore shall not have
Vested shall automatically be forfeited by the Participant and revert to
and become the property of the Company, except that, if such cessation
occurs more than one year after the date of the Award and, under the terms
of the Award, no Shares have then Vested, there shall be Vested that
portion of the Award that shall equal the ratio of (a) the number of whole
years between the date of the Award and the date of such cessation to (b)
the total Restriction Period to which the Award is subject.
(e) Payment of Withholding Taxes. Full payment for the amount of any taxes
required by law to be withheld in connection with a Restricted Stock Award
shall be made, on or before the date such taxes must be withheld, in cash or,
at the election of the Participant and subject to the approval of the
Committee by surrendering, or by the Parent Company's withholding from Shares
subject to such Restricted Stock Award which have Vested in such Participant.
Shares with an aggregate Value on the Tax Date equal to all or any portion of
the withholding taxes not paid in cash.
10. TERMINATION OF EMPLOYMENT OR RELATIONSHIP
(a) For the purposes of the Plan, a transfer of an employee between two
employers, each of which is a Company, shall not be deemed a termination of
employment.
5
<PAGE> 7
(b) The cessation of a person's employment by the Company, term of office
as an Eligible Director or service as a Consultant will not result in the
cessation of such person's Relationship so long as such person shall continue
to serve without interruption as an employee of the Company, an Eligible
Director or a Consultant.
11. RIGHTS AS STOCKHOLDERS
(a) An Optionee shall have no right as a Stockholder with respect to any
Shares covered by his or her Options until the date of the issuance of a
stock certificate to him or her for such Shares.
(b) Except as shall have been determined by the Committee and specified in
the restricted stock award agreement, pending forfeiture of Shares subject to
a Restricted Stock Award, the Participant thereunder shall have all of the
rights of a holder of such Shares including without limitation the right to
receive such dividends as may be declared from time to time and to vote such
Shares (in person or by proxy).
12. CHANGES IN CAPITALIZATION
In the event of a stock dividend, stock split, recapitalization,
combination, subdivision, issuance of rights or other similar corporate change,
the Board shall make an appropriate adjustment in the number of Shares that may
be subject to Options and Restricted Stock Awards, in the aggregate and
individually, the number of Shares subject to each then outstanding Option and
the option price of each then outstanding Option.
13. MERGERS, DISPOSITIONS AND CERTAIN OTHER TRANSACTIONS
If during any Restriction Period or during the term of any Option the
Parent Company or any of the Subsidiary Companies shall be merged into or
consolidated with or otherwise combined with or acquired by another person or
entity, or there is a divisive reorganization or a liquidation or a partial
liquidation of the Parent Company, the Parent Company may choose to take no
action with regard to the Options and the Restricted Stock Awards outstanding or
to take any of the following courses of action:
(a) Subject to the limitations on the exercise of Incentive Stock Options
contained in Paragraph 8(g), not less than 15 days nor more than 60 days
prior to any such transaction, all Optionees shall be notified that their
Options shall expire on the 45th day after the date of such notice, in which
event all Optionees shall have the right to exercise all of their Options
prior to such new expiration date;
(b) The Parent Company shall provide in any agreement with respect to any
such merger, consolidation, combination or acquisition that the surviving,
new or acquiring corporation shall grant options to the Optionees to acquire
shares in such corporation with respect to which the excess of the fair
market value of the shares of such corporation immediately after the
consummation of such merger, consolidation, combination or acquisition over
the option price shall not be less than the excess of the Value of the Shares
over the option price of Options, immediately prior to the consummation of
such merger, consolidation, combination or acquisition;
(c) The Parent Company shall provide in any agreement with respect to any
such merger, consolidation, combination or acquisition that the shares of the
surviving, new or acquiring corporation issued in exchange for any Shares
subject to Restricted Stock Awards shall be subject to the same restrictions
as the Shares issued pursuant to the Restricted Stock Awards; or
(d) The Parent Company shall take such other action as the Board shall
determine to be reasonable under the circumstances in order to permit
Optionees and Participants to realize the value of rights granted to them
under the Plan.
14. PLAN NOT TO AFFECT EMPLOYMENT
Neither the Plan nor any Option or Restricted Stock Award shall confer
upon any employee of the Company any right to continue in the employment of the
Company.
15. INTERPRETATION
The Committee shall have the power to interpret the Plan and to make and
amend rules for putting it into effect and administering it. It is intended that
the Incentive Stock Options shall constitute Incentive Stock Options within the
meaning of Section 422A of the Code, that the Non-Qualified Options and
Restricted Stock Awards shall constitute property subject to federal income tax
pursuant to the provisions of Section 83 of the Code and that the
6
<PAGE> 8
Plan shall qualify for the exemption available under Rule 16b-3 (or any similar
rule) of the Securities and Exchange Commission. The provisions of the Plan
shall be interpreted and applied insofar as possible to carry out such intent.
16. AMENDMENTS
The Plan, any Option and the related option agreement and any Restricted
Stock Award and the related restricted stock award agreement may be amended by
the Board or the Committee, but any amendment that increases the aggregate
number of Shares that may be issued pursuant to the Plan upon the exercise of
Options or the grant of Restricted Stock Awards, that changes the class of
eligible employees, or that otherwise requires the approval of the shareholders
of the Parent Company in order to maintain the exemption available under Rule
I6b-3 (or any similar rule) of the Securities and Exchange Commission shall
require the approval of the holders of such portion of the shares of the capital
stock of the Parent Company present and entitled to vote on such amendment as is
required by applicable state law and the terms of the Parent Company's capital
stock to make the amendment effective. Notwithstanding the foregoing, no
amendment shall be made which would disqualify any member of the Committee from
being "disinterested" within the meaning of Rule I6b-3 (or any similar rule) of
the Securities and Exchange Commission. No outstanding Option shall be adversely
affected by any such amendment without the written consent of the Optionee or
other person then entitled to exercise such Option. No Restricted Stock Award
shall be adversely affected by any such amendment without the written consent of
the Participant or other person then entitled to receive the Shares subject to
such Restricted Stock Award.
17. SECURITIES LAWS
The Committee shall have the power to make each grant under the Plan
subject to such conditions as it deems necessary or appropriate to comply with
the then-existing requirements of Rule 16b-3 (or any similar rule) of the
Securities and Exchange Commission.
18. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which the Plan is adopted
by the Shareholders of the Parent Company, and shall expire on February 4, 2000
unless sooner terminated by the Board. The Board shall submit the Plan to the
shareholders of the Parent Company for their approval at the first annual
meeting of shareholders held after February 4,1990 unless such shareholders'
approval shall have been obtained prior to such meeting. Any Option or
Restricted Stock Award granted before the approval of the Plan by the Parent
Company's shareholders shall be expressly conditioned upon, and any Option shall
not be exercisable until, such approval on or prior to the date of the first
annual meeting of such shareholders after February 4, 1990. If such shareholder
approval is not received before February 4,1991 the Board shall have the right
to terminate the Plan, in which case all Options granted under the Plan shall
expire and all Restricted Stock Awards granted under the Plan shall be
forfeited.
7
<PAGE> 1
DPR: 10/29/97 EXHIBIT 10(f)
TELEFLEX INCORPORATED
DEFERRED COMPENSATION PLAN
This is the TELEFLEX INCORPORATED DEFERRED COMPENSATION PLAN, as
amended and restated effective November 3, 1997 (the "Plan"), which Teleflex
Incorporated, a Delaware corporation (the "Corporation"), maintains to provide
its directors with a deferred compensation arrangement and that the Corporation
and its participating affiliates maintain to provide certain of their employees
with such an arrangement.
1. Effective Date. The Plan was effective January 1, 1995.
This amendment and restatement is effective November 3, 1997. "Fiscal Year"
shall mean each twelve-consecutive month period beginning on January 1 and
ending the following December 31 during which the Plan is in effect.
2. Eligibility. Any director of the Corporation, and any
employee of the Corporation or a participating affiliate who is designated
by the Corporation as a Key (Management) Employee, shall be eligible to
participate herein (hereinafter referred to as the "Participant").
3. Annual Retainer Deferrals. Prior to the beginning of the
1998 Fiscal Year and thereafter prior to the beginning of any subsequent
Fiscal Year, a Participant who is a director entitled to receive an annual
retainer from the Corporation for service on the Corporation's Board of
Directors may elect to defer receipt of any whole percent of his retainer
payable during that Fiscal Year.
4. Salary and Bonus Deferrals. Prior to the beginning of any
Fiscal Year, a Participant who is an employee may elect to defer receipt of any
whole percent (2% minimum to 50% maximum) of his base salary, commissions or
other regularly paid cash compensation payable during that Fiscal Year. In
addition, such a Participant may elect to defer receipt of any whole percentage
(10% minimum to 75% maximum) of his annual discretionary bonus.
5. Restricted Stock Deferrals. Prior to the beginning of the
1998 Fiscal Year and thereafter prior to the beginning of any other Fiscal Year
in which a restricted stock award is scheduled to be made by the Corporation's
Board of Directors under the Corporation's Restricted Stock Plan, a Participant
who is potentially eligible to receive such an award in such year may elect to
defer receipt of any whole number of shares (10% minimum to 10% maximum) of the
award under this Plan.
a. Vesting. Any rule under the Restricted Stock
Plan relating to risk of forfeiture of shares awarded under that plan
shall continue to apply to any portion of an award the receipt of
which is deferred under this Plan.
<PAGE> 2
b. Dividends and Stock Splits. Cash dividends paid with
respect to shares deferred under the Plan and any cash paid in lieu of
fractional shares shall be deferred in the same manner as salary and
bonus deferrals under Paragraph 4. Stock dividends and stock splits
paid with respect to deferred shares shall also be deferred and held
and paid under the Plan, in the same manner as deferred shares.
6. Deferred Benefits. Any amounts deferred by a Participant
pursuant to Paragraph 3 or Paragraph 4, and cash dividends and cash payable in
lieu of a fractional share that are deferred pursuant to Paragraph 5b, together
with the accrued interest thereon from the investment of such amounts in
accordance with Paragraph 7 hereof, and any restricted stock award deferred by
a Participant pursuant to Paragraph 5, as adjusted for stock dividends and
splits, shall constitute the deferred benefits ("Deferred Benefits") payable
hereunder. Deferred Benefits shall be credited to an account ("Account")
established for each Participant by the Committee.
7. Investments.
The cash portion of each Participant's Account will be credited with
interest quarterly in arrears based upon the yield on five year U.S. Treasury
Bonds as published in the Wall Street Journal on the last business day of the
preceding November.
8. Funding. In order to meet its contingent deferred obligation
hereunder, the Corporation and any participating affiliate may, but shall not
be required to, set aside or earmark an amount necessary to provide the
Deferred Benefits described in Paragraph 6 hereof. In any event, the
obligations of the Corporation and any participating affiliate hereunder shall
constitute a general, unsecured obligation, payable solely out of their
respective general assets, and no Participant shall have any right to specific
assets. This shall be considered an "unfunded" arrangement for purposes of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
9. Distributions.
a. Deferred Benefits shall be distributed or commence to
be distributed to a Participant within 30 days after his election to
have benefits commence (not less than five years hence) or at death,
disability, retirement or termination of employment for any reason.
The Corporation may permit a Participant to elect an earlier
distribution; provided, however, that early distributions will only be
permitted under the circumstances set forth in Treas. Reg. section
1.457-2(h)(4) and (5), as determined by the Committee. Any
installments of Deferred Benefits which are unpaid at a Participant's
death shall be paid to the beneficiary designated by the Participant
or, in the absence of an effective beneficiary designation, to his
estate.
- 2 -
<PAGE> 3
b. Distribution elections shall be made at the time of
deferral. Distribution options include: a lump sum or five or ten
approximately equal annual installments.
10. Administration of the Plan. The Corporation shall appoint a
Plan Administrative Committee ("Committee"), which shall have full power and
authority to interpret, construe and administer the Plan and the Committee's
interpretation and construction hereof, and actions hereunder, or the amount or
recipient of the payment to be made herefrom, shall be binding and conclusive on
all persons for all purposes. In this connection, the Committee may delegate to
any individual, the duty to act for the Committee hereunder. No director,
officer or employee of the Corporation shall be liable to any person for any
action taken or omitted in connection with the interpretation and administration
of the Plan unless attributable to his own willful misconduct or lack of good
faith.
11. Amendments.
a. All amendments to the Plan may be accomplished by
execution of a written document by an executive officer of the
Corporation.
b. The Corporation, through the Committee, reserves the
right to amend the Plan at any time, in any manner whatsoever, after
delivery of written notification to all Participants of its intention
and the effective date thereof; provided, however, that no amendment
shall reduce any Deferred Benefits which a Participant had credited to
his Account before the later of the date of the Committee's action or
the effective date of the amendment, as determined in accordance with
the provisions of the Plan in effect immediately before such date.
12. Change of Control. In the event that any person, entity or
group of persons, within the meaning of section 13(d) or section 14(d) of the
Securities Exchange Act of 1934 ("Act"), or any comparable successor provisions
shall acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Act) of 20 percent or more of either the outstanding shares of common
stock or the combined voting power of the Corporation's then outstanding voting
securities entitled to vote generally, or the approval by the stockholders of
the Corporation of a reorganization, merger, or consolidation, in each case,
with respect to which persons who were stockholders of the Corporation
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50 percent of the combined voting power
entitled to vote generally in the election of directors of the reorganized,
merged or consolidated Corporation's then outstanding securities, or a
liquidation or dissolution of the Corporation's then outstanding securities, or
in the event of liquidation or dissolution of the Corporation or of the sale of
all or substantially all of the Corporation's assets, then the Corporation and
each participating affiliate shall contribute to a Grantor Trust meeting the
requirements of section 671 of the Internal Revenue Code of 1986, as amended,
within 30 days
- 3 -
<PAGE> 4
thereafter, an amount equal to the entire Account balance standing to the credit
of each Participant who was a director of or employed, or formerly employed, by
them or any of them.
13. Termination of the Plan. Continuance of the Plan is completely
voluntary, and is not assumed as a contractual obligation of the Corporation or
any participating affiliate. The Corporation and each participating affiliate,
having adopted the Plan, shall each have the right, at any time, to discontinue
prospectively the Plan as to Participants employed or formerly employed by each,
or, in the case of the Corporation, serving as a director, after delivery of
written notification to the affected Participants of such an intention and the
effective date thereof; provided, however, that any such termination shall not
adversely affect a Participant's Deferred Benefits accrued to the date of such
termination.
14. Miscellaneous.
a. Title to and beneficial ownership of any assets,
whether cash or investments, which the Corporation or any participating
affiliate may set aside or earmark to meet their respective deferred
obligations hereunder, shall at all times remain in the Corporation
or affiliate and no Participant or beneficiary shall under any
circumstances acquire any property interest in any specific assets of
the Corporation or affiliate; provided, however, that legal title to
any assets set aside in trust shall be in the trustee of the trust.
Nothing contained in the Plan and no action taken pursuant to the
provisions of the Plan shall create or be construed to create a
fiduciary relationship between the Corporation or affiliate and any
Participant or any other person. Any funds which may be invested under
the provisions of the Plan shall continue for all purposes to be a part
of the general funds of the Corporation or an affiliate and no person
other than the Corporation or affiliate shall by virtue of the
provisions of the Plan have any interest in such funds. To the extent
that any person acquires a right to receive payments from the
Corporation or an affiliate under the Plan, such right shall be no
greater than the right of any unsecured general creditor of the
Corporation or affiliate.
b. The right of the Participant or any other person to
the payment of deferred compensation or other benefits hereunder
shall not be assigned, transferred, pledged or encumbered except by
will or by the laws of descent and distribution.
c. If the Committee shall find that any person to whom
any payment is payable under the Plan is unable to care for his
affairs because of illness or accident, or is a minor, any payment
due (unless a prior claim therefor shall have been made by a duly
appointed guardian, committee or other legal representative) may be
paid to the spouse, a child, a parent, or a brother or sister, or to
any person deemed by the Committee to have incurred expense for such
person otherwise entitled to payment, in such manner and proportions
as the Committee
- 4 -
<PAGE> 5
may determine. Any such payment shall be a complete discharge of the
liabilities of the Corporation and its affiliates under the Plan.
d. Nothing contained herein shall be construed as
conferring upon a Participant the right to continue in the employ of
the Corporation or an affiliate in any capacity.
e. The Plan shall be binding upon and inure to the benefit
of the Corporation and participating affiliates, and their successors
and assigns, and the Participants and their heirs, executors,
administrators and legal representatives.
15. The Plan shall be construed in accordance with, and governed
by, the law of the State of Delaware except to the extent that such law is
superseded by ERISA.
IN WITNESS WHEREOF, the Corporation has caused this amendment and
restatement of the Plan to be executed and attested by its duly authorized
officers and has caused its seal to be affixed as of the date first above
written.
(CORPORATE SEAL) TELEFLEX INCORPORATED
Attest:
/s/ HERBERT K. ZEARFOSS By: /s/ THOMAS M. BYRNE
- --------------------------- ----------------------------
HERBERT K. ZEARFOSS THOMAS M. BYRNE
ASSISTANT SECRETARY
Date: 12/14/97
--------------------------
- 5 -
<PAGE> 1
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year ended
- -------------------------------------------------------------------------------------------------------------
DECEMBER 28, December 29, December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share)
<S> <C> <C> <C>
REVENUES $1,145,773 $931,183 $912,689
- -------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Materials, labor and other product costs 794,780 640,187 628,027
Selling, engineering and administrative expenses 230,153 190,341 192,430
Interest expense, net 14,435 13,876 18,632
- -------------------------------------------------------------------------------------------------------------
1,039,368 844,404 839,089
- -------------------------------------------------------------------------------------------------------------
Income before taxes 106,405 86,779 73,600
Estimated taxes on income 36,333 29,617 24,730
- -------------------------------------------------------------------------------------------------------------
NET INCOME $ 70,072 $ 57,162 $ 48,870
- -------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Basic $1.91 $1.61 $1.40
Diluted $1.86 $1.58 $1.37
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
19
<PAGE> 2
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
DECEMBER 28, December 29,
1997 1996
- -------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 30,702 $ 68,618
Accounts receivable, less allowance for doubtful
accounts, 1997 - $5,668; 1996 - $4,110 260,187 193,587
Inventories 218,538 190,696
Prepaid expenses 21,182 13,120
Assets held for sale 35,868 --
- -------------------------------------------------------------------------------------------------------------------
Total current assets 566,477 466,021
- -------------------------------------------------------------------------------------------------------------------
Plant assets
Land and buildings 122,127 110,379
Machinery and equipment 471,233 375,277
- -------------------------------------------------------------------------------------------------------------------
593,360 485,656
Less accumulated depreciation 229,347 193,869
- -------------------------------------------------------------------------------------------------------------------
Net plant assets 364,013 291,787
Investments in affiliates 37,510 17,356
Intangibles and other assets 111,165 82,690
- -------------------------------------------------------------------------------------------------------------------
$1,079,165 $857,854
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Demand loans $ 87,414 $ 57,168
Current portion of long-term borrowings 28,315 13,419
Accounts payable 80,437 53,728
Accrued expenses 77,949 55,194
Estimated income taxes payable 20,792 17,157
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 294,907 196,666
Long-term borrowings 237,562 195,945
Deferred income taxes and other 82,943 56,067
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 615,412 448,678
- -------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Common shares, $1 par value
Issued: 1997 - 37,118,146 shares; 1996 - 18,111,321 shares 37,118 18,111
Additional paid-in capital 63,158 58,941
Retained earnings 373,467 336,173
Cumulative translation adjustment (9,990) (4,049)
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 463,753 409,176
- -------------------------------------------------------------------------------------------------------------------
$1,079,165 $857,854
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE> 3
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
- -------------------------------------------------------------------------------------------------------------------
DECEMBER 28, December 29, December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 70,072 $ 57,162 $ 48,870
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation and amortization 47,940 38,751 37,740
Deferred income taxes 1,530 (711) 1,061
(Increase) decrease in accounts receivable (38,886) (9,131) 411
(Increase) in inventories (13,920) (3,964) (9,266)
(Increase) in prepaid expenses (3,477) (2,191) (2,142)
Increase (decrease) in accounts payable
and accrued expenses 13,896 (5,056) (13,179)
Increase (decrease) in estimated income
taxes payable 3,635 (1,198) 7,320
Gain on disposition of product lines -- (2,055) --
- -------------------------------------------------------------------------------------------------------------------
80,790 71,607 70,815
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from new borrowings 85,259 30,824 34,941
Reduction in long-term borrowings (43,488) (39,114) (35,693)
Increase (decrease) in current borrowings and
demand loans 36,948 (3,671) 6,130
Proceeds from stock compensation plans 4,362 5,523 7,011
Dividends (14,258) (12,056) (10,453)
- -------------------------------------------------------------------------------------------------------------------
68,823 (18,494) 1,936
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for plant assets (74,622) (40,500) (30,708)
Payments for businesses acquired (99,802) (26,599) (9,202)
Proceeds from disposition of product lines and assets -- 32,140 5,038
Investments in affiliates (11,466) (2,568) (4,172)
Other (1,639) (2,622) (2,147)
- -------------------------------------------------------------------------------------------------------------------
(187,529) (40,149) (41,191)
- -------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (37,916) 12,964 31,560
Cash and cash equivalents at the beginning of the year 68,618 55,654 24,094
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year $ 30,702 $ 68,618 $ 55,654
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
21
<PAGE> 4
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Year ended
- -------------------------------------------------------------------------------------------------------------------
DECEMBER 28, December 29, December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share)
<S> <C> <C> <C>
COMMON SHARES
Balance, beginning of year $ 18,111 $ 17,537 $ 17,277
Shares issued under compensation plans 235 174 260
Common stock dividend 18,520 -- --
Shares issued in acquisitions 252 400 --
- -------------------------------------------------------------------------------------------------------------------
Balance, end of year 37,118 18,111 17,537
- -------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year 58,941 49,999 43,248
Shares issued under compensation plans 4,127 5,349 6,751
Shares issued in acquisitions 90 3,593 --
- -------------------------------------------------------------------------------------------------------------------
Balance, end of year 63,158 58,941 49,999
- -------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance, beginning of year 336,173 291,067 252,650
Net income 70,072 57,162 48,870
Cash dividends (14,258) (12,056) (10,453)
Common stock dividend (18,520) -- --
- -------------------------------------------------------------------------------------------------------------------
Balance, end of year 373,467 336,173 291,067
- -------------------------------------------------------------------------------------------------------------------
CUMULATIVE TRANSLATION ADJUSTMENT
Balance, end of year (9,990) (4,049) (3,239)
- -------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $463,753 $409,176 $355,364
- -------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER SHARE $.39 $.34 $.30
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share)
DESCRIPTION OF BUSINESS
Teleflex Incorporated designs, manufactures and distributes engineered products
and services for the automotive, marine, industrial, medical and aerospace
markets worldwide.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Teleflex
Incorporated and its subsidiaries. These consolidated financial statements have
been prepared in conformity with generally accepted accounting principles, and
include management's estimates and assumptions that affect the recorded
amounts.
Cash and cash equivalents include funds invested in a variety of liquid
short-term investments with an original maturity of three months or less.
Inventories are stated principally at the lower of average cost or market and
consisted of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------
1997 1996
- -------------------------------------------------------
<S> <C> <C>
Raw materials $72,806 $ 72,704
Work-in-process 40,368 35,010
Finished goods 105,364 82,982
- -------------------------------------------------------
$218,538 $190,696
- -------------------------------------------------------
</TABLE>
Plant assets include the cost of additions and those improvements which
increase the capacity or lengthen the useful lives of the assets. Repairs and
maintenance costs are expensed as incurred. With minor exceptions,
straight-line composite lives for depreciation of plant assets are as follows:
buildings 20 to 40 years; machinery and equipment 8 to 12 years.
Intangible assets, principally the excess purchase price of acquisitions over
the fair value of net tangible assets acquired, are being amortized over
periods not exceeding 30 years.
Assets and liabilities of foreign subsidiaries are translated at the rates of
exchange at the balance sheet date; income and expenses are translated at the
average rates of exchange prevailing during the year. The related translation
adjustments are accumulated in shareholders' equity.
Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed in the same manner except that the weighted average
number of common shares is increased for dilutive securities. The difference
between basic and diluted weighted average common shares results from the
assumption that dilutive stock options were exercised.
ACQUISITIONS AND DISPOSITIONS
In December 1997 the company acquired the shares of United Parts Group N.V.
(United Parts), a European company with two businesses, Driver Control Systems
and Truck Systems and Components, for $87 million in cash. In February 1998 the
Truck Systems and Components business was sold for $36 million in cash and is
presented in the balance sheet as assets held for sale.The net cash paid of $51
million for Driver Control Systems was allocated to the assets acquired and
liabilities assumed. A total of $17 million representing the excess of
acquisition cost over the fair value of Driver ControlSystems' net tangible
assets, was allocated to intangible assets and is being amortized over 20
years. Revenues would have increased approximately $115 million and net income
would not have been significantly different had the acquisition of United Parts
occurred at the beginning of 1996. Also during 1997, the company paid $12,788
to purchase the assets of various businesses and issued 504,800 shares of
common stock for all of the outstanding shares of an automotive components
manufacturer in an acquisition accounted for as a pooling of interests.
During the first quarter of 1996 the company disposed of two product lines
for total proceeds of $37,640 including a $5,500 note receivable due in 2003. A
pre-tax gain on these dispositions of $2,055 or, $.04 per share after tax has
been reported as a reduction of operating expenses in the Consolidated
Statement of Income and is included in the Aerospace Segment operating profit.
Also in 1996 the company paid $26,599 to acquire the net assets of various
businesses and issued 800,000 shares of stock for all of the outstanding shares
of an electro-chemical machining company in an acquisition accounted for as a
pooling of interests.
For 1997 and 1996 liabilities of $82,896 and $32,116 were assumed in
connection with the acquisitions. The assets, liabilities and operating results
of these businesses are included in the company's financial statements from
their dates of acquisition. With the exception of United Parts as described
above, financial position and results of operations would not have been
materially different had the acquisitions occurred as of the beginning of the
years acquired.
<TABLE>
<CAPTION>
BORROWINGS AND LEASES
1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Senior Notes at an average
rate of 6.9% due in installments
through 2008 $ 76,000 $ 80,000
Deutsche Mark denominated
notes at an average rate
of 5.6% due in installments
through 2004 140,980 78,496
Other debt, mortgage notes and capital
lease obligations, at interest rates
ranging from 3% to 9% 48,897 50,868
- ----------------------------------------------------------------------
265,877 209,364
Current portion of borrowings (28,315) (13,419)
- ----------------------------------------------------------------------
$237,562 $195,945
- ----------------------------------------------------------------------
</TABLE>
23
<PAGE> 6
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share)
The various senior note agreements provide for the maintenance of minimum
working capital amounts and ratios and limit the repurchase of the company's
stock and payment of cash dividends. Under the most restrictive of these
provisions, $86,000 of retained earnings was available for dividends at
December 28, 1997.
The weighted average interest rate on the $87,414 of demand loans was 5.7% at
December 28, 1997. In addition, the company has approximately $200,000
available under several interest rate alternatives in unused lines of credit.
Interest expense in 1997, 1996 and 1995 did not differ materially from
interest paid, nor did the carrying value of year end long-term borrowings
differ materially from fair value.
The aggregate amounts of debt, including capital leases, maturing in each of
the four years after 1998 are as follows: 1999 - $44,084; 2000 - $36,776; 2001
- - $30,760; 2002 - $65,668.
The company has entered into certain operating leases which require minimum
annual payments as follows: 1998 - $15,707; 1999 - $14,159; 2000 - $12,701;
2001 - $10,614; 2002 - $9,323. The total rental expense for all operating
leases was $15,311, $13,288 and $11,855 in 1997, 1996 and 1995, respectively.
SHAREHOLDERS' EQUITY AND STOCK COMPENSATION PLANS The authorized capital of the
company is comprised of 50,000,000 common shares, $1 par value, and 500,000
preference shares. No preference shares were outstanding during the last three
years.
Effective June 16, 1997 the Board of Directors approved a 2-for-1 stock split
effected in the form of a stock dividend. All per share and appropriate share
data in the accompanying financial statements have been restated to reflect the
stock split.
Options to purchase common stock are awarded at market price on the date of
grant and expire no later than 10 years after that date. No compensation
expense has been recognized for stock option plans. Earnings per share would
have been reduced less than $.02 in both 1997 and 1996 had compensation expense
for stock options been determined based on the fair value at the grant date.
The weighted average fair value of options granted during 1997 and 1996 of
$10.38 and $6.51, respectively, was estimated using the Black-Scholes
option-pricing model.
Officers and key employees held options for the purchase of 2,309,515 shares
of common stock at prices ranging from $9.17 to $38.75 per share with a
weighted average exercise price of $18.93 per share and a weighted average
remaining contractual life of 6 years. Such options are presently exercisable
with respect to 1,245,740 shares at a weighted average exercise price of
$14.42. Options to purchase 421,175, 40,000 and 766,000 shares of common stock
were granted at weighted average exercise prices of $30.39, $24.63 and $20.35,
in 1997, 1996 and 1995, respectively. Options exercised were 457,752, 251,330
and 411,226 at weighted average exercise prices of $13.05, $13.49 and $10.69 in
1997, 1996 and 1995, respectively.
INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $24,557 $22,534 $17,323
State 2,622 2,438 2,177
Foreign 7,624 5,356 4,169
Deferred 1,530 (711) 1,061
- --------------------------------------------------------
$36,333 $29,617 $24,730
- --------------------------------------------------------
</TABLE>
The deferred income taxes provided and the balance sheet amounts of $34,273
in 1997 and $31,971 in 1996 related substantially to the methods of accounting
for depreciation. Income taxes paid were $29,581, $28,210 and $16,565 in 1997,
1996 and 1995, respectively.
A reconciliation of the company's effective tax rate to the U.S. statutory
rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------
<S> <C> <C> <C>
Tax at U.S. statutory rate 35.0% 35.0% 35.0%
State income taxes 1.7 1.8 1.9
Foreign income taxes (.7) (.5) (1.0)
Export sales benefit (1.6) (1.7) (1.7)
Other (.3) (.5) (.6)
- --------------------------------------------------------
Effective income tax rate 34.1% 34.1% 33.6%
- --------------------------------------------------------
</TABLE>
PENSIONS
The company has defined benefit plans which provide retirement benefits to
eligible employees. Assumptions used in determining the actuarial present value
of domestic benefit obligations reflect a weighted average discount rate of
7.7% in 1997 and 1996, an investment rate of 9% and a salary increase of 5%.
The discount rate was 6% for foreign plans.
Pension expense is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------
<S> <C> <C> <C>
Domestic plans
Service cost $ 2,769 $ 2,485 $2,554
Interest cost 4,249 3,921 3,766
Actual return on
plan assets (12,065) (9,250) (7,285)
Net amortization
and deferral 6,779 4,653 3,755
Foreign plans 328 360 420
- --------------------------------------------------------
$ 2,060 $ 2,169 $3,210
- --------------------------------------------------------
</TABLE>
24
<PAGE> 7
The following table sets forth the funded status of the plans and the amounts
shown in the balance sheet:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Domestic
Plan assets at fair value,
primarily common stock
and U.S. Government
obligations $ 69,300 $ 58,530
- ------------------------------------------------------------------------
Actuarial present value of
the benefit obligation
Vested (54,465) (52,135)
Non-vested (2,122) (2,330)
- ------------------------------------------------------------------------
Accumulated benefit
obligation (56,587) (54,465)
Projected effect of future
salary increases (6,058) (6,270)
- ------------------------------------------------------------------------
Total projected benefit
obligation (62,645) (60,735)
- ------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 6,655 (2,205)
Unrecognized--
Prior service cost (97) 661
Net gain (12,842) (4,106)
Transition asset (792) (894)
Unfunded foreign pension amounts (16,273) (5,200)
- ------------------------------------------------------------------------
Accrued pension liability $(23,349) $(11,744)
- ------------------------------------------------------------------------
</TABLE>
The accrued pension liability includes the obligations assumed by the company
in 1997 in connection with acquisitions. In addition to the pension expense in
1996 the company recognized a curtailment expense of $3,840 in connection with
the disposition of product lines.
OTHER POSTRETIREMENT BENEFITS
The company provides postretirement medical and other benefits to eligible
employees. Assumptions used in determining the expense and benefit obligations
include a weighted average discount rate of 7.7% in 1997 and 1996 and an
initial health care cost trend rate of 10%, declining to 6% over a period of 5
years. Increasing the health care cost trend rate by one percentage point would
increase the accumulated postretirement benefit obligation by $1,305 and would
increase the 1997 postretirement benefit expense by $139.
Postretirement benefit expense is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 212 $ 148 $ 250
Interest cost 886 805 1,127
Net amortization and deferral 209 104 566
- ---------------------------------------------------------------
$1,307 $1,057 $1,943
- ---------------------------------------------------------------
</TABLE>
The following table sets forth the accumulated obligation of the plans and
the amounts shown in the balance sheet:
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ (7,583) $ (8,639)
Fully eligible active plan
participants (1,607) (1,306)
Other active plan participants (3,356) (3,360)
- ----------------------------------------------------------------------
(12,546) (13,305)
Unrecognized--
Prior service cost (484) (541)
Transition obligation 6,279 6,698
Actuarial net gain (3,602) (2,705)
- ----------------------------------------------------------------------
Accrued postretirement liability $(10,353) $ (9,853)
- ----------------------------------------------------------------------
</TABLE>
In addition to the postretirement benefit expense in 1996 the company
recognized a curtailment expense of $4,471 in connection with the disposition
of product lines.
BUSINESS SEGMENTS AND OTHER INFORMATION
Reference is made to pages 28 through 31 for a summary of operations by
business segment.
A summary of revenues, identifiable assets and operating profit relating to
the company's foreign operations, substantially European, is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $373,437 $314,141 $283,892
Identifiable assets $458,880 $326,993 $281,429
Operating profit $ 35,077 $ 28,408 $ 27,053
- ------------------------------------------------------------------------
</TABLE>
Export sales from the United States to unaffiliated customers approximated
$130,600, $98,500 and $90,200 for 1997, 1996 and 1995, respectively. Export
sales included $45,600, $41,200 and $39,900 to Canada in 1997, 1996 and 1995,
respectively.
25
<PAGE> 8
REPORT OF INDEPENDENT ACCOUNTANTS [LOGO]
To the Board of Directors and Shareholders
Teleflex Incorporated
In our opinion, the consolidated financial statements appearing on pages 19
through 31 of this Annual Report present fairly, in all material respects, the
financial position of Teleflex Incorporated and its subsidiaries at December
28, 1997 and December 29, 1996 and the results of their operations and their
cash flows for each of the three years in the period ended December 28, 1997,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Philadelphia, Pennsylvania
February 11, 1998
26
<PAGE> 9
QUARTERLY FINANCIAL DATA
(unaudited)
<TABLE>
<CAPTION>
Quarter ended
- --------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share) March June Sept. Dec.
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997
- --------------------------------------------------------------------------------------------------------------------------------
Revenues $269,344 $280,263 $281,757 $314,409
Gross profit 83,205 86,321 84,692 96,775
Income before taxes 25,578 28,057 21,176 31,594
Net income 16,677 18,349 13,828 21,218
Earnings per share
Basic .46 .50 .38 .57
Diluted .45 .49 .36 .56
Cash dividends per share .088 .100 .100 .100
Price range of common stock 23 1/4 - 27 25 3/4 - 33 1/4 30 1/2 - 35 3/4 34 5/8 - 39 3/4
- --------------------------------------------------------------------------------------------------------------------------------
1996
- --------------------------------------------------------------------------------------------------------------------------------
Revenues $234,448 $238,394 $215,144 $243,197
Gross profit 73,338 75,104 66,371 76,183
Income before taxes 22,816 23,181 15,413 25,369
Net income 14,852 15,137 10,049 17,124
Earnings per share
Basic .42 .43 .29 .47
Diluted .42 .42 .28 .46
Cash dividends per share .078 .088 .088 .088
Price range of common stock 19 3/4 - 23 3/8 21 1/4 - 24 3/8 22 - 25 23 3/8 - 26
- --------------------------------------------------------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------------------------------------------------------
Revenues $226,893 $233,888 $210,340 $241,568
Gross profit 71,774 74,224 64,464 74,200
Income before taxes 18,974 20,467 12,696 21,463
Net income 12,333 13,304 8,252 14,981
Earnings per share
Basic .35 .38 .24 .43
Diluted .35 .37 .23 .42
Cash dividends per share .068 .078 .078 .078
Price range of common stock 20 - 20 1/4 19 3/4 - 22 7/8 19 1/8 - 22 3/4 19 - 22 1/2
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 10
TELEFLEX INCORPORATED AND SUBSIDIARIES
SELECTED FINANCIAL AND INDUSTRY SEGMENT DATA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues
Commercial $ 497,366 $422,443 $403,637
Medical 323,114 307,555 293,341
Aerospace 325,293 201,185 215,711
- --------------------------------------------------------------------------------------------------------------------
Net sales 1,145,773 931,183 912,689
Other income(a) -- -- --
- --------------------------------------------------------------------------------------------------------------------
Total revenues $1,145,773 $931,183 $912,689
- --------------------------------------------------------------------------------------------------------------------
Operating profit
Commercial $ 61,562 $ 57,849 $ 59,719
Medical 35,466 34,630 30,237
Aerospace 38,787 21,007 12,683
- --------------------------------------------------------------------------------------------------------------------
135,815 113,486 102,639
Less:
Interest expense, net 14,435 13,876 18,632
Corporate expenses, net of other income 14,975 12,831 10,407
- --------------------------------------------------------------------------------------------------------------------
Income before taxes 106,405 86,779 73,600
Estimated taxes on income 36,333 29,617 24,730
- --------------------------------------------------------------------------------------------------------------------
Net income $ 70,072 $ 57,162 $ 48,870
- --------------------------------------------------------------------------------------------------------------------
Earnings per share
Basic $1.91 $1.61 $1.40
Diluted $1.86 $1.58 $1.37
Cash dividends per share $.39 $.34 $.30
Net income as a percent of revenues 6.1% 6.1% 5.4%
Percent of net sales
Commercial 44% 45% 44%
Medical 28% 33% 32%
Aerospace 28% 22% 24%
Average number of common and common equivalent
shares outstanding
Basic 36,759 35,482 34,885
Diluted 37,661 36,197 35,574
Average number of employees 10,830 9,373 9,553
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SALES BY BUSINESS SEGMENT
(millions)
Aerospace Medical Commercial Total
--------- ------- ---------- -----
<S> <C> <C> <C> <C>
1987 113.5 26.0 130.3 269.8
1988 132.4 38.0 153.2 323.6
1989 139.2 42.4 174.0 355.6
1990 162.7 115.8 162.6 441.1
1991 180.4 130.5 168.6 479.5
1992 177.3 179.4 210.4 567.1
1993 202.1 180.6 284.1 666.8
1994 202.9 253.0 356.7 812.6
1995 215.7 293.4 403.6 912.7
1996 201.2 307.6 422.4 931.2
1997 325.3 323.1 497.4 1,145.8
</TABLE>
28
<PAGE> 11
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
- --------------------------------------------------------------------------------------------------------------------
(Dollars and shares in thousands, except per share and employee data)
<S> <C> <C> <C> <C> <C> <C> <C>
$356,708 $284,106 $210,464 $168,598 $162,646 $173,957 $153,144 $130,310
253,020 180,623 179,376 130,540 115,756 42,406 38,032 25,928
202,944 202,067 177,292 180,399 162,731 139,262 132,413 113,540
- --------------------------------------------------------------------------------------------------------------------
812,672 666,796 567,132 479,537 441,133 355,625 323,589 269,778
-- -- 3,206 3,472 3,080 4,441 4,634 1,988
- --------------------------------------------------------------------------------------------------------------------
$812,672 $666,796 $570,338 $483,009 $444,213 $360,066 $328,223 $271,766
- --------------------------------------------------------------------------------------------------------------------
$ 53,324 $ 37,794 $ 25,754 $ 19,996 $ 22,224 $ 22,025 $ 26,794 $ 25,239
32,386 21,486 25,463 19,900 16,183 5,782 3,755 2,107
5,367 14,906 16,100 21,722 20,781 20,711 16,548 15,095
- --------------------------------------------------------------------------------------------------------------------
91,077 74,186 67,317 61,618 59,188 48,518 47,097 42,441
18,361 14,466 15,482 13,765 12,401 6,886 6,225 4,886
9,725 7,410 3,185 2,519 3,880 2,395 4,493 5,894
- --------------------------------------------------------------------------------------------------------------------
62,991 52,310 48,650 45,334 42,907 39,237 36,379 31,661
21,795 18,624 16,638 15,527 14,340 12,440 12,370 11,990
- --------------------------------------------------------------------------------------------------------------------
$ 41,196 $ 33,686 $ 32,012(b) $ 29,807 $ 28,567 $ 26,797 $ 24,009 $ 19,671
- --------------------------------------------------------------------------------------------------------------------
$1.20 $.99 $.95 $.90 $.87 $.83 $.75 $.61
$1.17 $.98 $.93 $.88 $.87 $.82 $.74 $.60
$.26 $.23 $.21 $.20 $.18 $.16 $.13 $.11
5.1% 5.1% 5.6% 6.2% 6.4% 7.4% 7.3% 7.2%
44% 43% 37% 35% 37% 49% 47% 48%
31% 27% 32% 27% 26% 12% 12% 10%
25% 30% 31% 38% 37% 39% 41% 42%
34,373 33,958 33,557 33,062 32,667 32,321 31,986 32,319
35,061 34,533 34,264 33,701 32,952 32,805 32,487 32,919
8,740 7,920 6,920 6,160 5,860 5,080 4,350 3,760
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Beginning in 1993, other income, which was insignificant, has been
reclassified as an offset to interest expense and corporate expenses.
(b) Excludes an increase in net income of $860, or $.03 per share as a result
of a change in accounting for income taxes.
<TABLE>
<CAPTION>
OPERATING PROFIT BY BUSINESS SEGMENT
(millions)
Aerospace Medical Commercial Total
--------- ------- ---------- -----
<S> <C> <C> <C> <C>
1987 15.1 2.1 25.2 42.4
1988 16.5 3.8 26.8 47.1
1989 20.7 5.8 22.0 48.5
1990 20.8 16.2 22.2 59.2
1991 21.7 19.9 20.0 61.6
1992 16.1 25.5 25.7 67.3
1993 14.9 21.5 37.8 74.2
1994 5.4 32.4 53.3 91.1
1995 12.7 30.2 59.7 102.6
1996 21.0 34.6 57.9 113.5
1997 38.8 35.5 61.6 135.8
</TABLE>
29
<PAGE> 12
TELEFLEX INCORPORATED AND SUBSIDIARIES
SELECTED FINANCIAL AND INDUSTRY SEGMENT DATA (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL POSITION
Identifiable assets
Commercial $ 351,345 $227,594 $201,808
Medical 333,698 320,699 331,349
Aerospace 276,708 194,305 183,636
Corporate 117,414 115,256 68,378
- --------------------------------------------------------------------------------------------------------------------
Total assets $1,079,165 $857,854 $785,171
- --------------------------------------------------------------------------------------------------------------------
Capital expenditures
Commercial $ 22,570 $ 12,821 $ 15,445
Medical $ 10,611 $ 10,421 $ 12,107
Aerospace $ 40,992 $ 16,767 $ 2,794
Depreciation and amortization
Commercial $ 14,335 $ 11,907 $ 11,446
Medical $ 18,459 $ 16,267 $ 15,087
Aerospace $ 14,440 $ 9,827 $ 10,471
Long-term borrowings $ 237,562 $195,945 $196,844
Shareholders' equity $ 463,753 $409,176 $355,364
Working capital $ 271,570 $269,355 $252,651
Current ratio 1.9 2.4 2.3
Book value per share $12.49 $11.30 $10.13
Return on average shareholders' equity 16.1% 15.0% 14.7%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STOCK PRICE
LOW HIGH
---- -----
<S> <C> <C>
1987 5.79 11.63
1988 7.13 10.21
1989 9.38 12.92
1990 8.33 12.08
1991 9.81 17.18
1992 12.50 19.75
1993 13.88 19.13
1994 15.88 20.13
1995 19.00 22.88
1996 19.75 26.00
1997 23.25 39.75
</TABLE>
30
<PAGE> 13
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share)
<S> <C> <C> <C> <C> <C> <C> <C>
$184,971 $158,206 $142,041 $101,187 $ 84,678 $ 90,557 $ 83,601 $ 60,099
311,547 266,239 206,562 194,609 147,954 125,635 34,819 28,997
188,348 202,130 142,523 141,104 143,419 130,762 107,524 108,769
25,923 14,001 43,805 40,793 49,049 19,708 38,172 28,042
- ----------------------------------------------------------------------------------------------------------
$710,789 $640,576 $534,931 $477,693 $425,100 $366,662 $264,116 $225,907
- ----------------------------------------------------------------------------------------------------------
$ 13,489 $ 7,967 $ 7,386 $ 7,505 $ 5,581 $ 5,507 $ 8,880 $ 6,065
$ 7,029 $ 7,361 $ 5,316 $ 7,138 $ 4,236 $ 2,373 $ 960 $ 2,360
$ 4,538 $ 8,865 $ 6,384 $ 5,585 $ 7,166 $ 10,701 $ 5,228 $ 6,446
$ 9,930 $ 9,251 $ 6,262 $ 5,633 $ 5,369 $ 4,715 $ 3,675 $ 3,038
$ 11,694 $ 8,030 $ 6,505 $ 4,725 $ 3,999 $ 1,693 $ 1,455 $ 1,097
$ 10,771 $ 10,176 $ 8,002 $ 7,366 $ 7,024 $ 5,777 $ 5,556 $ 5,272
$190,499 $183,504 $134,600 $119,370 $112,941 $106,128 $ 57,104 $ 55,013
$309,024 $269,790 $240,467 $211,702 $187,875 $160,038 $136,328 $115,517
$220,544 $171,397 $166,803 $131,589 $133,840 $112,325 $ 98,217 $ 90,270
2.3 2.1 2.4 2.1 2.3 2.4 2.6 2.8
$8.94 $7.90 $7.12 $6.37 $5.72 $4.94 $4.25 $3.62
14.2% 13.2% 14.2% 14.9% 16.4% 18.1% 19.1% 18.2%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOREIGN/DOMESTIC SALES
Foreign* Domestic Total
--------- -------- ----------
<S> <C> <C> <C>
1987 42,003 227,775 269,778
1988 52,733 270,856 323,589
1989 62,932 292,693 355,625
1990 131,805 309,328 441,133
1991 153,532 326,005 479,537
1992 172,618 394,514 567,132
1993 187,259 479,537 666,796
1994 221,145 591,527 812,672
1995 283,892 628,797 912,689
1996 314,141 617,042 931,183
1997 373,437 772,336 1,145,773
</TABLE>
* Per Business Segments footnote
31
<PAGE> 14
TELEFLEX INCORPORATED AND SUBSIDIARIES
FINANCIAL GOALS
The company's major financial objectives are to achieve a 15% to 20% annual
growth rate in revenues and net income and to generate a 20% return on average
shareholders' equity. Results for 1997 exceeded these goals as both revenues
and net income grew by 23%. Over the last five years revenues have grown by a
compounded rate of 15% and net income by 17%. The 1997 return on average
shareholders' equity was 16% and has improved in each of the last four years.
The company is committed to maintaining a balance among its three
segments--Commercial, Medical and Aerospace. Balance among the three segments
reduces the company's risk from changes in the business cycle of any one
segment thus assisting the company in consistently achieving its growth
objectives. It also gives the company the ability to invest funds at the bottom
of a segment's operating cycle and provides a broader base of markets in which
to grow. Balance is also maintained within the individual operating segments
either geographically, by original equipment manufacturers versus aftermarket
customers, or by participating in different markets. As a result, the company's
total operating profit has increased in each of the last five years despite
cyclical downturns in each of the segments.
The company intends to achieve its growth objectives internally through both
development of new products and new markets for existing products and
externally, primarily through acquisitions. It is expected that approximately
half the growth over time will be achieved through expansion of the core
product lines with the remainder derived externally. Over the past five years,
the company's internal growth has accounted for less than half of its overall
growth. During the same time the company has invested approximately $400
million for acquisitions which have accounted for the remainder of the revenue
increase. During 1997, the company purchased businesses with annualized sales
of approximately $200 million, $90 million of which is included in the 1997
financial statements. The largest of these was United Parts Group N.V. (United
Parts) a European manufacturer of driver control systems. These acquisitions
fit strategically with the company's businesses and brought new technologies,
capabilities and market opportunities which will supplement future growth.
Acquisitions, while adding initially to revenues, generally do not contribute
proportionately to earnings in the early years. In these years, earnings are
generally reduced by up-front costs such as interest, depreciation and
amortization and, in many instances, the expenses of integrating a
newly-acquired business into an existing operation. Additionally, many of the
acquisitions include new technologies and products which require incremental
investment to enhance their future growth prospects.
<TABLE>
<CAPTION>
REVENUES
(millions)
<S> <C>
93 666.8
94 812.7
95 912.7
96 931.2
97 1145.8
</TABLE>
The company has maintained a conservative capital structure with long-term
debt ranging from 30% to 40% of total capitalization. This provides the
flexibility to increase borrowings should growth opportunities arise. Under
these circumstances it is conceivable that debt may increase to as much as 50%
of capitalization for a period of time. The use of debt financing enables the
company to maintain a lower cost of capital thus further enhancing value for
shareholders. The company finances foreign operations and acquisitions
primarily in their local currencies, thus reducing exposure to exchange rate
fluctuations. As a result of these natural hedges, approximately 70% of the
company's total borrowings are denominated in currencies other than the U.S.
dollar.
Historically, operations have generated sufficient cash flow to finance the
company's operating requirements while borrowings have been incurred largely to
finance acquisitions. Over the past five years cash flow from operations has
totaled over $300 million. This operating cash flow is reinvested in the
company's core businesses, provides for the payment of dividends and enables
the company to continue to upgrade and expand its plant and equipment. The
company, whose businesses are not particularly capital intensive, spends
approximately 4% of sales annually on plant and equipment. This past year was
an exception, as investments were made to support the explosive growth in the
aerospace markets.
With respect to dividends, the company's policy is to pay 20% of trailing
twelve months' earnings. The policy has been adhered to since the first cash
payment was made in 1977.
RESULTS OF OPERATIONS
1997 VS. 1996: Revenues increased 23% in 1997 to $1,145.8 million from $931.2
million in 1996. The increase was attributable to gains in each of the
company's three segments. Acquisitions accounted for approximately 40% of the
growth. For 1997 the Commercial, Medical and Aerospace segments comprised 44%,
28% and 28% of the company's net sales, respectively. Foreign operations
represented 33% of the company's revenues, increased
32
<PAGE> 15
19% over 1996 and were affected slightly by declines in foreign currency
exchange rates.
Both gross profit margin and selling, engineering and administrative expenses
as a percent of sales decreased slightly in 1997. This was caused by the lower
contribution of sales from the Medical Segment which has higher gross margin
and higher selling expenses relative to the other two segments.
Operating profit increased 20% in 1997 to $135.8 million from $113.5 million
in 1996. All three segments reported gains with the largest coming from
Aerospace. For 1997 the Commercial, Medical and Aerospace segments represented
45%, 26% and 29% of the company's operating profit, respectively. Operating
profit as a percentage of sales (operating margin) remained unchanged at
approximately 12% as an increase in the Aerospace Segment offset declines in
Commercial and to a lesser extent, Medical.
Net income in 1997 increased 23% to $70.1 million while diluted earnings
per share increased 18% to $1.86. Basic earnings per share increased 19% to
$1.91. Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" became effective during the fourth quarter of 1997. The standard
requires presentation of both basic and diluted earnings per share. The
difference between basic and diluted earnings per share is the number of shares
used in the denominator of the calculation. The basic earnings per share
calculation uses the weighted average number of common shares outstanding
during the period. The diluted per share calculation for the company adds to
the number of shares dilutive stock options outstanding during the period.
1996 VS. 1995: Revenues increased 2% in 1996 to $931.2 million from $912.7
million in 1995. The increase was the result of gains in the Commercial and
Medical segments which offset a decline in the Aerospace Segment brought about
by several product line dispositions. Excluding the dispositions, sales
increased 8% in 1996 of which acquisitions accounted for less than half. For
1996 the Commercial, Medical and Aerospace segments comprised 45%, 33% and 22%
of the company's net sales, respectively. Foreign operations represented 34% of
the company's revenues, increased 11% over 1995 and were not significantly
affected by changes in foreign currency exchange rates.
Gross profit margin remained relatively flat in 1996 as increases in the
Aerospace Segment and, to a lesser extent, the Medical Segment offset a decline
in the Commercial Segment. Selling, engineering and administrative expenses
declined from 21% of sales in 1995 to 20% of sales in 1996 resulting from
improvements in all three segments, particularly Aerospace.
Operating profit increased 11% in 1996 to $113.5 million from $102.6
million in 1995 and operating margin increased to 12% from 11%. Increases in
both operating profit and margins in the Aerospace Segment and, to a lesser
extent, the Medical Segment more than offset declines in the Commercial
Segment. For 1996, the Commercial, Medical and Aerospace segments comprised
51%, 31% and 18% of the company's operating profit, respectively.
Net income in 1996 increased 17% to $57.2 million and earnings per share
increased 15% to $1.58 from $1.37 in 1995. The Aerospace product line
dispositions resulted in a $.04 increase in earnings per share in 1996.
INTEREST EXPENSE AND INCOME TAX EXPENSE
Interest expense, which is presented net of interest income, increased in 1997
as the effect of lower interest rates was offset by the decline in invested
cash balances. Interest expense declined in 1996 due to lower interest rates on
total borrowings and increased interest income on higher cash balances during
the year. Interest expense as a percent of sales decreased in 1997 to 1.3% from
1.5% in 1996. Interest expense is expected to be higher in 1998 as a result of
the borrowings incurred to finance the acquisition of United Parts in the
fourth quarter of 1997.
The effective income tax rate was 34.1% in both 1997 and 1996 and 33.6% in
1995. The mix of the company's foreign taxable income in 1997 and 1996 was
comparable while in 1995 a higher proportion of income was earned in countries
with relatively lower income tax rates.
COMMERCIAL SEGMENT
The Commercial Segment designs and manufactures proprietary mechanical controls
for the automotive market; mechanical, electrical and hydraulic controls, and
electronic products for the pleasure marine market; and proprietary products
for the fluid transfer and outdoor power equipment markets.
<TABLE>
<CAPTION>
OPERATING PROFIT
(millions)
<S> <C>
93 74.2
94 91.1
95 102.6
96 113.5
97 135.8
</TABLE>
33
<PAGE> 16
TELEFLEX INCORPORATED AND SUBSIDIARIES
Products in the Commercial Segment generally are less complex and are
produced in higher unit volume than those of the company's other two segments.
They are manufactured both for general distribution as well as custom
fabricated to meet individual customer needs. Consumer spending patterns
generally influence the market trends for these products.
1997 VS. 1996: Sales in the Commercial Segment increased 18% in 1997 to $497.4
million from $422.4 million in 1996. All three product lines, Automotive,
Marine, and Industrial, reported sales gains with the largest increase coming
from the Automotive product line. Acquisitions in the Automotive product line
accounted for one-third of the increase in Commercial Segment sales and
approximately two-thirds of the Automotive sales growth. The remainder of the
gain in the Automotive product line resulted from increased penetration of the
North American market, primarily in light duty trucks. Within the Marine
product line, sales of marine steering systems and increased sales to
non-marine customers, such as off-road manufacturers, resulted in the increase.
Sales in the Industrial product line benefited from a strong outdoor power
equipment market and from new applications for the automotive market.
Operating profit rose 6% in 1997 to $61.6 million from $57.8 million in 1996
as increases in both the Automotive and Industrial product lines offset a
decline in Marine. The increases in Automotive and Industrial were primarily
related to volume gains while the decline in Marine stemmed from lower margin
sales to non-marine markets and costs associated with the relocation of an
electrical instrumentation facility. Operating margin decreased from 14% in
1996 to 12% in 1997 as a result of declines in Marine and Automotive. The
margin was higher in the Industrial product line as two customer-focused
manufacturing facilities, initiated in 1996, came on stream. Marine operating
margins declined as a result of the plant relocation and increased engineering
and development expenses related to the new non-marine products. Automotive
operating margins declined due to lower margins realized at newly-acquired
businesses, increased selling expenses to accelerate expansion into the
European market and higher engineering expenses for the development of new
products.
In December 1997 the company acquired the shares of United Parts which
manufactures gear shift systems and other components for the European
automotive market. The acquisition will add approximately $115 million in
revenues in 1998; however, profits are not expected to be significant due to
the costs of integrating the new business into the existing automotive
operations.
<TABLE>
<CAPTION>
NET INCOME
(millions)
<S> <C>
93 33.7
94 41.2
95 48.9
96 57.2
97 70.1
</TABLE>
Investment in total assets in this segment grew by over $100 million
primarily as a result of the United Parts acquisition.
1996 VS. 1995: Sales in the Commercial Segment increased 5% in 1996 from $403.6
million to $422.4 million reflecting an increase in the Automotive product line
which offset a decline in the Marine product line while Industrial product line
sales were flat. The Automotive product line sales increased from acquisitions
and, to a lesser extent, from internal growth. Within the Marine product line,
a decrease in sales of marine electronic products was minimized by an increase
in sales of controls and by sales of new products. Sales were flat in 1996
compared with 1995 in the Industrial product line as increased sales of
flexible hose mitigated declines in volume of light-duty cable controls.
Operating profit decreased 3% in 1996 to $57.8 million from $59.7 million and
operating margin declined to 14% from 15%. Operating profit and operating
margin were lower in all product lines in this Segment with the exception of
the Automotive product line which increased its operating profit. The
increased operating profit in the Automotive product line resulted from the
acquisitions while operating margin declined because of the continued downward
pressure on prices and the integration of the acquisitions into the existing
business. Within the Marine product line the declines were the result of the
reduced volume of marine electronic products and additional expenses associated
with investments in new products. The decreases in the Industrial product line
were the result of start-up costs incurred in connection with customer-focused
manufacturing facilities in the U.K. and Tennessee.
34
<PAGE> 17
Assets increased in 1996 due primarily to a fourth quarter acquisition of a
U.K. manufacturer of automotive cable controls.
MEDICAL SEGMENT
The Medical Segment manufactures and distributes a broad range of invasive
disposable and reusable devices for the urology, gastroenterology,
anesthesiology and respiratory care markets worldwide. It also designs and
manufactures a variety of surgical devices, closure systems and provides
instrument management services.
Products in the Medical Segment generally are required to meet exacting
standards of performance and have long product life cycles. External economic
influences on sales relate primarily to spending patterns in the worldwide
medical devices and supplies market. The Hospital Supply product line conducts
its business primarily outside the United States and accordingly, its sales and
profits are subject to changes from foreign exchange rate movements. The
Surgical Devices product line operates mostly within the United States and
conducts its business primarily in U.S. dollars.
1997 VS. 1996: In 1997 Medical Segment sales increased by 5% to $323.1 million
from $307.6 million in 1996. Sales growth was equally split between the
Hospital Supply and Surgical Devices product lines. New products contributed to
the growth in the Hospital Supply product line while a first quarter
acquisition of a small ligation clip manufacturer was the primary cause of the
increase in Surgical Devices. The growth rate for sales in Hospital Supply,
which is European based, was reduced by weaker foreign currencies.
Operating profit rose 2% in 1997 to $35.5 million from $34.6 million in 1996
while operating margin remained relatively constant. The gain in profitability
in Hospital Supply due to volume increases, was offset by a decline in the
Surgical Devices product line. The decline in Surgical Devices operating
profit and margin is the result of costs associated with the realignment of
manufacturing facilities and sales forces into three market units; instruments,
closure and service.
Assets increased in 1997 as a result of the acquisition which offset the
effects of weaker foreign currencies.
1996 VS. 1995: In 1996 Medical Segment sales increased 5% to $307.6 million
from $293.3 million from geographic expansion of Hospital Supply sales in
certain European markets and, to a lesser extent, sales of new products. Sales
in the Surgical Devices product line were unchanged from the prior year.
Operating profit increased 15% in 1996 to $34.6 million from $30.2 million
and operating margin improved to 11% from 10%. The operating profit and
operating margin of both the Hospital Supply and Surgical Devices product lines
increased in 1996. Higher volume and lower manufacturing costs in Hospital
Supply, cost reduction efforts initiated during the prior year in Surgical
Devices and a reduction of administrative expenses in both product lines
resulted in the improvements.
Assets decreased in 1996 due to a reduction of inventory primarily in the
Surgical Devices product line and weaker foreign currencies.
AEROSPACE SEGMENT
The Aerospace Segment serves the commercial aerospace and turbine engine
markets. Its businesses design and manufacture precision controls and cargo
systems for aviation; provide coatings, repair services and manufactured
components for users of both flight and ground-based turbine engines. Sales are
both to original equipment manufacturers and the aftermarket.
These products and services, many of which are proprietary, require a high
degree of engineering sophistication, and often are custom-designed. External
economic influences on these products and services relate primarily to spending
patterns in the worldwide aerospace industry.
1997 VS. 1996: Sales in the Aerospace Segment grew an exceptional 62% in 1997
to $325.3 million from $201.2 million the prior year. Approximately one-third
of the Segment's growth was the result of acquisitions while the remainder came
from existing products which benefited from the robust aerospace market. All
product lines; cargo systems, coatings, repair services and turbine components
contributed. The majority of the growth came from turbine components, including
the results of an acquisition and the internal growth in the repairs product
line. During 1997 Aerospace made two small acquisitions. The first extended the
cargo systems product line to
<TABLE>
<CAPTION>
DIVIDENDS
PER SHARE
(Dollars)
<S> <C>
93 23
94 26
95 30
96 34
97 39
</TABLE>
35
<PAGE> 18
TELEFLEX INCORPORATED AND SUBSIDIARIES
narrow-body aircraft while the second helped further diversify the coatings
product line into the ground turbine repairs market.
Operating profit grew from $21.0 million in 1996 to $38.8 million in 1997, an
increase of 85%. Operating margins improved from a little over 10% in 1996 to
nearly 12% in 1997. The increase in both profits and margins was principally
the result of volume increases in the turbine component and repair services
product lines.
Including acquisitions, assets increased in 1997 by more than $80 million.
Capital expenditures increased substantially in order to support the higher
level of expected business activity, including construction of an airfoil
repair facility in Singapore.
1996 VS. 1995: During the first quarter of 1996, the company disposed of two
product lines in the Aerospace Segment for proceeds of $37.6 million resulting
in a $2.1 million pre-tax gain. The gain has been reported as a reduction of
operating expenses in the Statement of Income and is included in the Aerospace
Segment operating profit. The product lines had combined sales and operating
profit in 1995 of $50.0 million and $3.0 million, respectively. The
dispositions were part of the structural realignment in the Aerospace Segment
which began in 1995.
Sales in the Aerospace Segment decreased 7% from $215.7 million in 1995 to
$201.2 million in 1996. Excluding the dispositions, sales increased 21% in
1996. The increase resulted from gains in all product lines including coatings,
repair services and turbine components. The increase in sales of turbine
components which includes both flight and ground-based turbine engine products
was aided by the fourth quarter acquisition of an electro-chemical machining
company with sales of approximately $24.0 million in 1995.
Operating profit in 1996 increased 66% from $12.7 million to $21.0 million
and operating margin increased from 6% to 10%. These gains were the result of
the volume increases, improvements in the repair services product line, the
ongoing cost reduction and productivity improvement efforts and the gain on
disposition of the product lines.
Assets increased in 1996 from the acquisition and additional inventory
related to the repair services product line partially offset by the sale of
assets associated with the divested product lines.
LIQUIDITY AND CAPITAL RESOURCES
The company continued to generate high levels of cash from operations. In 1997
cash flows from operating activities grew to $80.8 million compared to $71.6
million in 1996 and $70.8 million in 1995. The increase in 1997 was due to
higher net income and non-cash depreciation and amortization offset by working
capital needs related to incremental sales volume. The increase in 1996 was due
to higher net income offset by the timing of working capital needs primarily
accounts receivable related to volume and the non-cash gain on the disposition
of product lines. In addition to the cash generated from operations the company
has approximately $200 million in unused lines of credit available which
provide the ability to pursue strategic growth opportunities.
Total borrowings for the company increased nearly $90 million in 1997 as
long-term debt to total capitalization increased to 34% from 32% in 1996. The
increase was primarily a result of the year end acquisition of United Parts.
Subsequent to year end, certain assets of United Parts, the non-strategic Truck
Systems and Components group, were sold for $36 million in cash and the related
borrowings reduced. Approximately 70% of the company's total borrowings of $350
million are denominated in currencies other than the U.S. dollar which provides
a natural hedge for currency fluctuations. In addition to the natural hedge
positions, the company from time to time employs a variety of financial
instruments to manage exposures to changes in interest rates and currency
exchange rates. The financial instruments are contracted for periods consistent
with related underlying exposures and do not constitute positions independent
of those exposures.
<TABLE>
<CAPTION>
Cash Flow from Operations
(millions)
- -------------------------
<S> <C>
1991 31.8
1992 43.7
1993 46.4
1994 57.7
1995 70.8
1996 71.5
1997 80.8
</TABLE>
During 1997 the company invested $74.6 million in plant and equipment
compared to $40.5 million in 1996 and $30.7 million in 1995. The 1997 increase
was primarily attributable to capacity expansion in the Aerospace Segment,
including a new repairs plant in Singapore that will commence operations in the
first quarter of 1998. Capital expenditures in the Commercial and Medical
Segments of $22.6 million and $10.6 million, respectively were incurred to
upgrade and maintain plant and equipment. Expenditures in 1996 related
primarily to expansion efforts in the Aerospace Segment and to support new
product and productivity improvements.
36
<PAGE> 19
The most significant investment of cash for 1997 was payments for businesses
acquired. Cash payments in 1997 of nearly $100 million, related primarily to
the acquisition of United Parts.
The company's financial condition remains strong. The company believes that
cash flows from operations and access to additional funds through available
credit facilities provide adequate resources to fund operating requirements,
capital expenditures and additional acquisition opportunities to meet its
strategic and financial goals.
SHAREHOLDERS' EQUITY
Shareholders' Equity increased to $463.8 million at the end of 1997 from $409.2
million at prior year's end. Book value per share increased to $12.49 at
December 28, 1997 compared to $11.30 at December 29, 1996. During 1997 the per
share dividend was increased 15% to $.39 per share from $.34 per share in 1996.
In April 1997 the company announced a 2-for-1 stock split, distributed on June
16, 1997 in the form of a stock dividend. All the common share and per share
amounts in this report have been restated to reflect the stock split.
ENVIRONMENTAL MATTERS
The company is subject to numerous federal, state and local environmental laws
and regulations including the Resource Conservation and Recovery Act,
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Air Act and, the Clean Water Act. Environmental programs are in place
throughout the company which include training, auditing and monitoring to
ensure compliance with such laws and regulations. In addition, the company has
been named as a Potentially Responsible Party by the Environmental Protection
Agency at various sites throughout the country. Environmental costs, including
liabilities associated with such sites, and the costs of complying with
existing environmental regulations are not expected to result in a liability
material to the company's consolidated financial position or results of
operations.
<TABLE>
<CAPTION>
Capitalization
(millions)
--------------
Equity LTD Total
------ --- -----
<S> <C> <C> <C>
1991 211.7 119.4 331.1
1992 240.5 134.6 375.1
1993 269.8 183.5 453.3
1994 309.0 190.5 499.5
1995 355.4 196.8 552.2
1996 409.2 195.9 605.1
1997 463.8 237.6 701.4
</TABLE>
<TABLE>
<CAPTION>
Capital Expenditures
(millions)
Aerospace Medical Commercial Total
--------- ------- ---------- -----
<S> <C> <C> <C> <C>
1991 5.6 7.1 7.5 20.2
1992 6.4 5.3 7.4 19.1
1993 8.9 7.3 8.0 24.2
1994 4.5 7.1 13.5 25.1
1995 2.8 12.1 15.4 30.3
1996 16.8 10.4 12.8 40.0
1997 41.0 10.6 22.6 74.2
</TABLE>
OTHER MATTERS
The company is currently working to resolve the potential impact of the "year
2000" on the processing of date sensitive information by the company's
computerized information systems. Certain computer programs have been written
using two digits rather than four to define a year which could, for example,
result in a computer system incorrectly recognizing the year 2000 as the year
1900. Costs of resolving the year 2000 matter are not currently expected to
have a material adverse impact on financial position or results of operations.
37
<PAGE> 1
EXHIBIT 21
TELEFLEX INCORPORATED
SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION PARENT PERCENTAGE
OF INCORP.
<S> <C> <C> <C>
924593 Ontario Limited Ontario Pilling Weck (PA) 100
Airfoil Technologies International LLC Delaware TFX Equities 51 (1)
Access Medical S.A. France TFX International S.A. 100
Airfoil Management Company Delaware TFX Equities 100
Airfoil Management Limited UK Sermatech (U.K.) Limited 100
American General Aircraft Holding Co., Inc. Delaware Teleflex 74
Asept Inmed S.A. France TFX International S.A. 100
Asid Bonz GmbH Germany Willy Rusch AG 100
Astraflex Limited UK TFX Group Ltd. 100
Aunic Engineering Limited UK Sermatech (U.K.) Limited 100
Aviation Product Support, Inc. Delaware TFX Equities 100
Avtech Systems, Inc. Utah Telair International (CA) 100
Bavaria Avionik Technologie GmbH Germany Telair Cargo Electronic Systems 100
Bavaria Cargo Technologie GmbH Germany Telair International GmbH 100
Capro de Mexico, S.A. de C.V. Mexico TFX International Corp. 99.99 (2)
Capro Inc. Texas Teleflex 100
CCT De'Couper Industries, Inc. Michigan Comcorp, Inc. 100
CCT Plymouth Stamping Company Michigan Comcorp Technologies, Inc. 100
CCT Thomas Die & Stamping, Inc. Michigan CCT De'Couper Industries, Inc. 100
Cepco Precision Company of Canada, Inc. Canada Sermatech Engineering 100
Cetrek Engineering Ltd. UK Cetrek Ltd. 100
Cetrek Inc. Massachusetts Teleflex 100
Cetrek Limited UK TFX International Ltd. 100
Chemtronics International Ltd. UK Sermatech (U.K.) Limited 100
Claes Johansson Automotive AB Sweden UPDC Systems AB 100
Claes Johansson Components AB Sweden Claes Johansson Automotive AB 100
Comcorp Inc. Michigan Teleflex 100
Comcorp Technologies, Inc. Michigan Teleflex 100
Comfort Pedals, Inc. Michigan Comcorp, Inc. 100
ComPort Automotive B.V. The Netherlands United Parts Group N.V. 100
Endoscopy Specialists Incorporated Delaware TFX Equities 100
Entech, Inc. New Jersey TFX Equities 100
Europe Medical, S.A. France TFX International S.A. 100
Flexible Flyer, Inc. Delaware Teleflex 100
Franklin Medical Ltd. UK TFX Group Ltd. 100
G-Tel Aviation Limited UK Sermatech (U.K.) Limited 50
Gas-Path Technology, Inc. Delaware Teleflex 100
</TABLE>
Page 1
<PAGE> 2
TELEFLEX INCORPORATED
SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION PARENT PERCENTAGE
OF INCORP.
<S> <C> <C> <C>
Gator-Gard Incorporated Delaware Sermatech 100
Inmed (Malaysia) Holdings Sdn. Berhad Malaysia Willy Rusch AG 100
Inmed Acquisition, Inc. Delaware Teleflex 100(3)
Inmed Corporation (4) Georgia Inmed Acquisition 100
Inmed Corporation (U.K.) Ltd. UK TFX Group Ltd. 100
Kordial S.A. France TFX International S.A. 100
Lehr Precision, Inc. Ohio Teleflex 100
Lipac Liebinzeller Verpackungs-GmbH Germany Willy Rusch AG 100
Machine Tool Leasing, Inc. Nevada Teleflex 100
Mal Tool & Engineering Limited UK TFX Group Ltd. 100
Mal Tool & Engineering S.A.R.L. France TFX International S.A. 100
Meddig Medizintechnik Vertriebs-GmbH Germany Rusch G B 87.5
Medical Service Vertriebs-GmbH Germany Willy Rusch AG 100
Norland Plastics Company Delaware TFX Equities 100
Phosphor Products Co. Limited UK TFX International Ltd. 100
Pilling Weck Chiurgische Produkte GmbH Germany TFX Holding GmbH 100
Pilling Weck Incorporated Delaware Teleflex 100
Pilling Weck Incorporated Pennsylvania Teleflex 100
Pilling Weck Inc. Canada 924593 Ontario 50.5 (5)
Pilling Weck n.v. Belgium TFX International S.A. 100
Primaklimat AB Sweden Claes Johansson Components AB 100
Rigel Compasses Limited UK TFX International Ltd. 100
Rusch Asia Pacific Sdn. Berhad Malaysia Inmed (Malaysia) Holdings 100
Rusch AVT Medical Private Limited India TFX Equities 50
Rusch (UK) Ltd. UK TFX Group Ltd. 100
Rusch Austria Ges.mbH Austria Teleflex 100
Rusch France S.A.R.L. France Rusch G B 100
Rusch Inc. Delaware Rusch G B 100
Rusch Italia S.A.R.L. Italy Willy Rusch AG 100
Rusch Manufacturing (UK) Ltd. UK TFX Group Ltd. 100
Rusch Manufacturing Sdn. Berhad Malaysia Inmed (Malaysia) Holdings 96.5
Rusch Mexico, S.A. de C.V. Mexico Teleflex 99 (6)
Rusch Sdn. Berhad Malaysia Inmed (Malaysia) Holdings 96.5
Rusch Uruguay Ltda. Uruguay Rusch G B 60
Rusch-Pilling Limited Canada Willy Rusch AG 50.5 (7)
Rusch-Pilling (Asia) PTE Ltd. Singapore Pilling Weck (PA) 99.99
Rusch-Pilling S.A. France TFX International S.A. 100
S. Asferg Hospitalsartikler ApS Denmark Teleflex 100
Scandinavian Bellyloading Company AB Sweden Telair International GmbH 100
Scandinavian Bellyloading Internat'l, Inc. California Teleflex 100
</TABLE>
Page 2
<PAGE> 3
TELEFLEX INCORPORATED
SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION PARENT PERCENTAGE
OF INCORP.
<S> <C> <C> <C>
Sermatech (Canada) Inc. Canada Sermatech 100
Sermatech Engineering Group, Inc. Delaware Teleflex 100
Sermatech (Germany) GmbH Germany TFX Holding GmbH 100
Sermatech International Incorporated PA Teleflex 100
Sermatech Repair Services Limited UK Airfoil Technologies Inc. 60 (8)
Sermatech (U.K.) Limited UK TFX Group Ltd. 100
SermeTel Technical Services (STS) GmbH Germany TFX Holding GmbH 100
Simal S.A. Belgium TFX International S.A. 100
SSI Surgical Services, Inc. Delaware TFX Equities 62.5 (9)
Technology Holding Company Delaware TFX Equities 100
Technology Holding Company II Delaware Technology Holding Company III 100
Technology Holding Company III Delaware Techsonic Industries, Inc. 86 (10)
Techsonic Industries, Inc. Alabama Teleflex 100
Telair Cargo Electronic Systems GmbH Germany Bavaria Cargo Technologie 100
Telair International GmbH Germany TFX Holding GmbH 100
Telair International Incorporated(11) California Teleflex 100
Telair International Incorporated Delaware Teleflex 100
Teleflex (Canada) Limited Canada(B.C.) Teleflex 100
Teleflex Automotive de Mexico S.A. de C.V. Mexico TFX Equities 99.9 (12)
Teleflex Automotive Manufacturing
Corporation Delaware Teleflex 100
Teleflex Control Systems, Inc. Pennsylvania Teleflex 100
Teleflex Fluid Systems, Inc. Connecticut Teleflex 100
Teleflex Precision Casting Company Utah Teleflex 100
TFX Automotive LTD UK TFX Group Ltd. 100 (13)
TFX Engineering Ltd. Bermuda Teleflex 100
TFX Equities Incorporated Delaware Teleflex 100
TFX Foreign Sales Corporation Virgin Is. Teleflex 100
TFX Group Limited UK TFX International Corp. 100
TFX Holding GmbH Germany Teleflex 57 (14)
TFX International Corporation Delaware Teleflex 100
TFX International Limited UK TFX Group Ltd. 100
TFX International S. A. France Teleflex 100
TFX Marine Incorporated Delaware Teleflex 100
TFX Medical Incorporated Delaware Teleflex 100
TFX Medical Wire Products, Inc. Delaware TFX Equities 100
TFX Scandinavia AB Sweden Teleflex 100 (15)
Top Surgical GmbH Germany PW Chiurgische Produkte GmbH 100
United Parts Automotive Engineering GmbH Germany UPDC Systems (Holding) GmbH 100
</TABLE>
Page 3
<PAGE> 4
TELEFLEX INCORPORATED
SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION PARENT PERCENTAGE
OF INCORP.
<S> <C> <C> <C>
United Parts Driver's Control Systems AB Sweden United Parts Group N.V. 100
United Parts Driver Control Systems B.V. The Netherlands United Parts Group N.V. 100
United Parts Driver Control Systems (UK) Ltd. UK UP FHS Automobile Systeme GmbH 100
United Parts Driver Control Systems (Holding) GmbH Germany United Parts Group N.V. 94 (16)
United Parts de Mexico SA de CV Mexico United Parts Group N.V. 99.998 (17)
United Parts Group N.V. The Netherlands TFX Holding GmbH 100
United Parts FHS Automobile Systeme GmbH Germany UPDC Systems (Holding) GmbH 99.9 (18)
United Parts Slovakia sro Slovekia UPDC Systems BV 100
Victor Huber GmbH Germany Teleflex 100
Weck Closure Systems LLC Delaware Pilling Weck Incorporated (DE) 81 (19)
Willy Rusch AG Germany TFX Holding GmbH 100
Willy Rusch Grundstucks und
Beteiligungs AG ("Rusch G B") Germany Willy Rusch AG 99.8 (20)
</TABLE>
1. 49% owned by General Electric Company
2. One share (.002%) is owned by TFX Equities
3. Except for nominee shares.
4. Trades under name "Rusch Inc."
5. 49.5% owned by Rusch G B.
6. 1% owned by Rusch Inc.
7. 49.5% owned by 924593 Ontario.
8. 40% owned by TFX Equities.
9. 37.5% owned by Medical Sterilization,Inc.
10. 14% owned by six other subsidiary companies
11. Formerly The Talley Corporation. Trades under name "Teleflex Control
Systems."
12. One share (.001%) is owned by TFX International Corporation
13. Formerly S.J. Clark (Cables) Limited. Trades under name "Clarks Cables".
14. 22% owned by Inmed Corporation, 13% by Telair International Incorporated,
and 8% by Sermatech
15. Formerly TX Controls AB.
16. 6% owned by Compart Automotive B.V.
17. 0.002% owned by Compart Automotive B.V.
18. 0.1% owned by Arminium Treuhand.
19. 19% owned by Horizon Surgical Incorporated
20. Two shares (.2%) are owned by Inmed Corporation.
Page 4
<PAGE> 1
EXHIBIT 25
POWER OF ATTORNEY
Each of the undersigned Directors of Teleflex Incorporated, a Delaware
corporation (the "Company"), hereby appoints Lennox K. Black, Harold L. Zuber,
Jr. and Steven K. Chance, and each of them, with full power of substitution, to
act as his attorney-in-fact to execute, on behalf of the undersigned, the
Company's Annual Report on Form 10-K for the fiscal year ended December 28,
1997.
IN WITNESS WHEREOF, this Power of Attorney is executed this 2nd day of
March, 1998.
/s/ Lennox K. Black /s/ Patricia C. Barron
- ------------------------------ ------------------------------
Lennox K. Black Patricia C. Barron
/s/ Donald Beckman /s/ David S. Boyer
- ------------------------------ ------------------------------
Donald Beckman David S. Boyer
/s/ Joseph S. Gonnella /s/ Lewis E. Hatch, Jr.
- ------------------------------ ------------------------------
Joseph S. Gonnella Lewis E. Hatch, Jr.
/s/ Pemberton Hutchinson /s/ Sigismundus W. W. Lubsen
- ------------------------------ ------------------------------
Pemberton Hutchinson Sigismundus W. W. Lubsen
/s/ Palmer E. Retzlaff /s/ John H. Remer
- ------------------------------ ------------------------------
Palmer E. Retzlaff John H. Remer
/s/ James W. Stratton
- ------------------------------
James W. Stratton
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> DEC-28-1997
<CASH> 30,702
<SECURITIES> 0
<RECEIVABLES> 260,187
<ALLOWANCES> 0
<INVENTORY> 218,538
<CURRENT-ASSETS> 566,477
<PP&E> 593,360
<DEPRECIATION> 229,347
<TOTAL-ASSETS> 1,079,165
<CURRENT-LIABILITIES> 294,907
<BONDS> 237,562
0
0
<COMMON> 37,118
<OTHER-SE> 426,635
<TOTAL-LIABILITY-AND-EQUITY> 1,079,165
<SALES> 1,145,773
<TOTAL-REVENUES> 1,145,773
<CGS> 794,780
<TOTAL-COSTS> 794,780
<OTHER-EXPENSES> 230,153
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,435
<INCOME-PRETAX> 106,405
<INCOME-TAX> 36,333
<INCOME-CONTINUING> 70,072
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,072
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 1.86
</TABLE>
