<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 25, 2000
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 1-5353
-----------------------------
TELEFLEX INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 23-1147939
------------------- ---------------------------------
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NUMBER)
630 WEST GERMANTOWN PIKE, SUITE 450
PLYMOUTH MEETING, PA 19462
-------------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
</TABLE>
(610) 834-6301
------------------------------------
(TELEPHONE NUMBER INCLUDING AREA CODE)
NONE
------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT JUNE 25, 2000
-------------------------------------------- ----------------------------
<S> <C>
Common Stock, $1.00 Par Value 38,210,112
</TABLE>
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<PAGE> 2
TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 25, DEC. 26,
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
--------------------------------------------------------------------------------------
Current assets
Cash and cash equivalents................................. $ 21,001 $ 29,040
Accounts receivable less allowance for doubtful
accounts............................................... 341,877 324,629
Inventories............................................... 253,203 227,486
Prepaid expenses.......................................... 25,456 23,785
---------- ----------
641,537 604,940
Property, plant and equipment, at cost, less accumulated
depreciation.............................................. 483,640 465,901
Investments in affiliates................................... 48,036 55,749
Intangibles and other assets................................ 194,019 136,854
---------- ----------
$1,367,232 $1,263,444
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------------
Current liabilities
Current portion of borrowings and demand loans............ $ 92,705 $ 98,500
Accounts payable and accrued expenses..................... 238,548 204,582
Income taxes payable...................................... 34,755 26,330
---------- ----------
366,008 329,412
Long-term borrowings........................................ 261,182 246,191
Deferred income taxes and other............................. 95,544 85,277
---------- ----------
722,734 660,880
Shareholders' equity........................................ 644,498 602,564
---------- ----------
$1,367,232 $1,263,444
========== ==========
</TABLE>
F-1
<PAGE> 3
TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF INCOME
---------------------------------------------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 25, JUNE 27, JUNE 25, JUNE 27,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues........................................ $465,553 $421,126 $893,143 $813,316
-------- -------- -------- --------
Cost of sales................................... 331,840 299,725 638,018 580,964
Operating expenses.............................. 84,714 77,608 161,130 149,628
Interest expense................................ 5,427 4,501 10,461 8,817
-------- -------- -------- --------
421,981 381,834 809,609 739,409
-------- -------- -------- --------
Income before taxes............................. 43,572 39,292 83,534 73,907
Provision for taxes on income................... 14,248 13,438 27,396 24,999
-------- -------- -------- --------
Net income...................................... $ 29,324 $ 25,854 $ 56,138 $ 48,908
======== ======== ======== ========
Earnings per share
Basic......................................... $ 0.77 $ 0.69 $ 1.47 $ 1.30
Diluted....................................... $ 0.76 $ 0.67 $ 1.46 $ 1.27
Dividends per share............................. $ 0.150 $ 0.130 $ 0.280 $ 0.245
Average number of common and common equivalent
shares outstanding
Basic......................................... 38,180 37,743 38,138 37,690
Diluted....................................... 38,624 38,528 38,519 38,459
</TABLE>
F-2
<PAGE> 4
TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
JUNE 25, JUNE 27,
2000 1999
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 56,138 $ 48,908
Adjustments to reconcile net income to cash flows from
operating activities:
Depreciation and amortization.......................... 37,561 32,567
(Increase) in accounts receivable...................... (13,304) (39,932)
(Increase) in inventory................................ (6,945) (3,892)
(Increase) in prepaid expenses......................... (1,233) (2,633)
Increase in accounts payable and accrued expenses...... 12,783 9,966
Increase (decrease) in income taxes payable............ 4,809 (150)
--------- --------
89,809 44,834
--------- --------
Cash flows from financing activities:
Proceeds from new borrowings.............................. 28,000 32,999
Reduction in long-term borrowings......................... (9,820) (21,160)
Increase in current borrowings and demand loans........... 1,765 5,748
Proceeds from stock compensation plans.................... 3,532 2,408
Dividends................................................. (10,684) (9,253)
--------- --------
12,793 10,742
--------- --------
Cash flows from investing activities:
Expenditures for plant assets............................. (39,385) (40,690)
Payments for businesses acquired.......................... (67,679) (39,445)
Investments in affiliates................................. (2,988) (8,946)
Other..................................................... (589) (833)
--------- --------
(110,641) (89,914)
--------- --------
Net (decrease) in cash and cash equivalents................. (8,039) (34,338)
Cash and cash equivalents at the beginning of the period.... 29,040 66,689
--------- --------
Cash and cash equivalents at the end of the period.......... $ 21,001 $ 32,351
========= ========
</TABLE>
F-3
<PAGE> 5
TELEFLEX INCORPORATED
STATEMENT OF COMPREHENSIVE INCOME
---------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- -------------------
JUNE 25, JUNE 27, JUNE 25, JUNE 27,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income............................................. $29,324 $ 25,854 $ 56,138 $48,908
Unrealized holding gain................................ 1,005 -- 1,240 --
Cumulative translation adjustment...................... (3,960) (584) (7,875) (3,091)
------- -------- -------- -------
Comprehensive income................................... $26,369 $ 25,270 $ 49,503 $45,817
======= ======== ======== =======
</TABLE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 1
The accompanying unaudited condensed consolidated financial statements for
the three months and six months ended June 25, 2000 and June 27, 1999 contain
all adjustments, consisting only of normal recurring adjustments, which in the
opinion of management are necessary to present fairly the financial position,
results of operations and cash flows for the periods then ended in accordance
with the current requirements for Form 10-Q.
NOTE 2
At June 25, 2000, 6,200,464 shares of common stock were reserved for
issuance under the company's stock compensation plans.
NOTE 3
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 25, DEC. 26,
2000 1999
-------- --------
<S> <C> <C>
Raw materials............................................... $100,041 $ 84,490
Work-in-process............................................. 44,073 38,690
Finished goods.............................................. 109,089 104,306
-------- --------
$253,203 $227,486
======== ========
</TABLE>
F-4
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
--------------------------------------------------------------------------------
NOTE 4
BUSINESS SEGMENT INFORMATION:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 25, JUNE 27, PERCENT JUNE 25, JUNE 27, PERCENT
2000 1999 CHANGE 2000 1999 CHANGE
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Sales
Commercial.................. $241,398 $204,301 18% $460,214 $388,797 18%
Medical..................... 105,376 94,395 12% 200,882 182,952 10%
Aerospace................... 118,779 122,430 -3% 232,047 241,567 -4%
-------- -------- -------- --------
Total................ $465,553 $421,126 11% $893,143 $813,316 10%
======== ======== ======== ========
Operating profit
Commercial.................. $ 26,273 $ 22,072 19% $ 50,761 $ 41,691 22%
Medical..................... 14,839 12,952 15% 27,048 23,255 16%
Aerospace................... 12,457 13,294 -6% 25,138 26,562 -5%
-------- -------- -------- --------
53,569 48,318 11% $102,947 91,508 13%
-------- -------- -------- --------
Less:
Interest expense............ 5,427 4,501 21% 10,461 8,817 19%
Corporate expenses.......... 4,570 4,525 1% 8,952 8,784 2%
-------- -------- -------- --------
Income before taxes........... 43,572 39,292 11% 83,534 73,907 13%
Taxes on income............... 14,248 13,438 6% 27,396 24,999 10%
-------- -------- -------- --------
Net income.................... $ 29,324 $ 25,854 13% $ 56,138 $ 48,908 15%
======== ======== ======== ========
</TABLE>
MANAGEMENT'S ANALYSIS OF QUARTERLY FINANCIAL DATA
--------------------------------------------------------------------------------
RESULTS OF OPERATIONS:
----------------------
Revenues increased 11% in the second quarter of 2000 to $465.6 million from
$421.1 million in 1999. The growth was almost equally split between core
business expansion and acquisitions. Sales increased in the Commercial and
Medical segments by 18% and 12%, respectively, offsetting a 3% decline in
Aerospace. The Commercial, Medical and Aerospace segments comprised 52%, 23% and
25% of the company's net sales, respectively.
The gross profit margin decreased slightly to 28.7% in 2000 compared with
28.8% in 1999. The decrease was due to an improvement in Commercial that was
more than offset by declines in Medical and Aerospace. Operating expenses as a
percentage of sales decreased to 18.2% in 2000 compared with 18.4% in 1999
resulting primarily from a decrease in Medical which offset increases in the
Commercial and Aerospace segments.
Operating profit increased 11% in the second quarter from $48.3 million in
1999 to $53.6 million in 2000 resulting from gains in the Commercial and Medical
segments which compensated for a decline in the Aerospace Segment. Operating
margin was constant at 11.5%. The Commercial, Medical and Aerospace segments
comprised 49%, 28% and 23% of the company's operating profit, respectively.
Interest expense increased in 2000 from borrowings incurred to finance
acquisitions and an increase in interest rates. The effective income tax rate
was 32.7% in 2000 compared with 34.2% in 1999. The decline resulted from a
higher proportion of income in 2000 earned in countries with relatively lower
tax rates. Net income and diluted earnings per share for the quarter were $29.3
million and $0.76, which represents a 13% increase for both compared with 1999.
F-5
<PAGE> 7
INDUSTRY SEGMENT REVIEW:
------------------------
Sales in the Commercial Segment increased 18% from $204.3 million in 1999
to $241.4 million in 2000, resulting from strong OEM markets, new product
offerings and enhanced market share. Operating profit increased from $22.1
million in 1999 to $26.3 million in 2000 and operating margin increased slightly
from 10.8% to 10.9%. Automotive, Marine and Industrial product lines all
reported increases in operating profit with the most significant reason being
improved volume in the domestic automotive business. The volume improvement
advanced Automotive operating margin enough to compensate for a margin decline
in Marine and Industrial. The Marine margin declined as investment in product
development increased while Industrial was tempered by recent acquisitions.
The Medical Segment sales increased 12% from $94.4 million in 1999 to
$105.4 million in 2000 due to gains in both the Hospital Supply and Surgical
Devices product lines. Approximately two-thirds of the increase can be
attributed to acquisitions, primarily in Hospital Supply. Operating profit
increased 15% from $13.0 million to $14.8 million, while operating margin
increased to 14.1% from 13.7% resulting from gains in operational efficiency and
improved product mix.
The Aerospace Segment sales decreased 3% from $122.4 million in 1999 to
$118.8 million in 2000 from a decline in the manufactured components product
line which more than offset the growth in the other product lines -- cargo
handling systems, coatings and repairs. Operating profit decreased 6% and
margins declined from 10.9% to 10.5% due to the drop in manufactured components
sales volume.
CASH FLOWS FROM OPERATIONS AND LIQUIDITY:
-----------------------------------------
Cash flow from operations more than doubled to $89.8 million. An emphasis
on working capital management, especially accounts receivable, was instrumental
in enhancing internal cash generation relative to the same period in 1999. All
three segments contributed to the increase. Long-term borrowings increased from
$261.2 million at June 25, 2000 as compared with $246.2 million at December 26,
1999 due to additional borrowings to finance recent acquisitions. The ratio of
long-term borrowings to total capitalization was 29% on June 25, 2000, remaining
unchanged from the December 26, 1999 figure.
FORWARD-LOOKING STATEMENTS:
---------------------------
This quarterly report includes the company's current plans and expectations
and is based on information available to it. It relies on a number of
assumptions and estimates which could be inaccurate and which are subject to
risks and uncertainties.
F-6
<PAGE> 8
TELEFLEX INCORPORATED
PART II OTHER INFORMATION
-------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
The company's 2000 Annual Meeting of Shareholders was held on April 28,
2000. At the meeting, shareholders approved the 2000 Stock Compensation Plan as
detailed in the Form S-8 filed with the Securities and Exchange Commission on
May 31, 2000. A total of 27,298,111 shares were voted in favor of the plan,
2,205,757 shares opposed and 157,873 shares abstained.
At the Annual Meeting, the following were elected to the Board of Directors
of the Company for a term expiring in 2003:
<TABLE>
<CAPTION>
NAME VOTES FOR WITHHELD
---- ---------- --------
<S> <C> <C>
Sigismundus W.W. Lubsen..................................... 33,814,272 507,855
Palmer E. Retzlaff.......................................... 33,742,760 579,367
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(A) Reports on form 8-K.
No reports on form 8-K were filed during the quarter.
F-7
<PAGE> 9
TELEFLEX INCORPORATED
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELEFLEX INCORPORATED
/s/ HAROLD L. ZUBER, JR.
--------------------------------------
Harold L. Zuber, Jr.
Vice President and Chief
Financial Officer
/s/ STEPHEN J. GAMBONE
--------------------------------------
Stephen J. Gambone
Controller and Chief
Accounting Officer
July 27, 2000
F-8
