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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 SEPTEMBER 24, 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 SEPTEMBER 24, 2000
-------------------------------------------- ---------------------------------
<S> <C>
Common Stock, $1.00 Par Value 38,254,810
</TABLE>
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TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPT. 24, DEC. 26,
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 41,659 $ 29,040
Accounts receivable less allowance for doubtful
accounts............................................... 328,811 324,629
Inventories............................................... 256,550 227,486
Prepaid expenses.......................................... 26,078 23,785
---------- ----------
653,098 604,940
Property, plant and equipment, at cost, less accumulated
depreciation.............................................. 481,387 465,901
Investments in affiliates................................... 44,606 55,749
Intangibles and other assets................................ 186,490 136,854
---------- ----------
$1,365,581 $1,263,444
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of borrowings and demand loans............ $ 110,252 $ 98,500
Accounts payable and accrued expenses..................... 223,900 204,582
Income taxes payable...................................... 38,515 26,330
---------- ----------
372,667 329,412
Long-term borrowings........................................ 235,725 246,191
Deferred income taxes and other............................. 98,617 85,277
---------- ----------
707,009 660,880
Shareholders' equity........................................ 658,572 602,564
---------- ----------
$1,365,581 $1,263,444
========== ==========
</TABLE>
2
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TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ------------------------
SEPT. 24, SEPT. 26, SEPT. 24, SEPT. 26,
2000 1999 2000 1999
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues..................................... $420,405 $377,391 $1,313,548 $1,190,707
-------- -------- ---------- ----------
Cost of sales................................ 306,069 272,754 944,087 853,718
Operating expenses........................... 76,946 71,265 238,076 220,893
Interest expense............................. 5,209 4,561 15,670 13,378
-------- -------- ---------- ----------
388,224 348,580 1,197,833 1,087,989
-------- -------- ---------- ----------
Income before taxes.......................... 32,181 28,811 115,715 102,718
Provision for taxes on income................ 10,459 9,825 37,855 34,824
-------- -------- ---------- ----------
Net income................................... $ 21,722 $ 18,986 $ 77,860 $ 67,894
======== ======== ========== ==========
Earnings per share
Basic...................................... $ 0.57 $ 0.50 $ 2.04 $ 1.80
Diluted.................................... $ 0.56 $ 0.49 $ 2.02 $ 1.76
Dividends per share.......................... $ 0.150 $ 0.130 $ 0.430 $ 0.375
Average number of common and common
equivalent shares outstanding
Basic...................................... 38,240 37,951 38,172 37,777
Diluted.................................... 38,714 38,622 38,584 38,513
</TABLE>
3
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TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
SEPT. 24, SEPT. 26,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 77,860 $ 67,894
Adjustments to reconcile net income to cash flows from
operating activities:
Depreciation and amortization.......................... 57,181 49,832
(Increase) in accounts receivable...................... (6,507) (30,118)
(Increase) in inventory................................ (13,149) (4,604)
(Increase) in prepaid expenses......................... (2,600) (2,063)
Increase in accounts payable and accrued expenses...... 14,839 5,336
Increase (decrease) in income taxes payable............ 7,907 (3,879)
--------- ---------
135,531 82,398
--------- ---------
Cash flows from financing activities:
Proceeds from new borrowings.............................. 33,771 46,369
Reduction in long-term borrowings......................... (30,669) (25,733)
Increase in current borrowings and demand loans........... 14,186 8,639
Proceeds from stock compensation plans.................... 3,576 2,940
Dividends................................................. (16,422) (14,186)
--------- ---------
4,442 18,029
--------- ---------
Cash flows from investing activities:
Expenditures for plant assets............................. (60,374) (63,120)
Payments for businesses acquired.......................... (75,811) (43,895)
Proceeds from sale of investment.......................... 9,564
Investments in affiliates................................. (3,080) (12,053)
Other..................................................... 2,347 (1,848)
--------- ---------
(127,354) (120,916)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 12,619 (20,489)
Cash and cash equivalents at the beginning of the period.... 29,040 66,689
--------- ---------
Cash and cash equivalents at the end of the period.......... $ 41,659 $ 46,200
========= =========
</TABLE>
4
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TELEFLEX INCORPORATED
STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
SEPT. 24, SEPT. 26, SEPT. 24, SEPT. 26,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income......................................... $21,722 $18,986 $ 77,860 $67,894
Unrealized holding gain (loss)..................... 4,377 (2,173) 5,617 (2,173)
Reclassification for gain included in net income... (1,031) -- (1,031) --
Cumulative translation adjustment.................. (6,375) 1,696 (14,250) (1,395)
------- ------- -------- -------
Comprehensive income............................... $18,693 $18,509 $ 68,196 $64,326
======= ======= ======== =======
</TABLE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The accompanying unaudited condensed consolidated financial statements for
the three months and nine months ended September 24, 2000 and September 26, 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 September 24, 2000, 6,173,724 shares of common stock were reserved for
issuance under the company's stock compensation plans.
NOTE 3
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPT. 24, DEC. 26,
2000 1999
--------- --------
<S> <C> <C>
Raw materials............................................... $103,348 $ 84,490
Work-in-process............................................. 40,644 38,690
Finished goods.............................................. 112,558 104,306
-------- --------
$256,550 $227,486
======== ========
</TABLE>
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4
BUSINESS SEGMENT INFORMATION:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ------------------------
SEPT. 24, SEPT. 26, PERCENT SEPT. 24, SEPT. 26, PERCENT
2000 1999 CHANGE 2000 1999 CHANGE
--------- --------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Sales
Commercial............... $194,178 $169,055 15% $ 654,392 $ 557,852 17%
Medical.................. 104,418 91,414 14% 305,300 274,366 11%
Aerospace................ 121,809 116,922 4% 353,856 358,489 -1%
-------- -------- ---------- ----------
Total............. $420,405 $377,391 11% $1,313,548 $1,190,707 10%
======== ======== ========== ==========
Operating profit
Commercial............... $ 14,363 $ 12,082 19% $ 65,124 $ 53,773 21%
Medical.................. 14,148 12,086 17% 41,196 35,341 17%
Aerospace................ 12,851 13,718 -6% 37,989 40,280 -6%
-------- -------- ---------- ----------
41,362 37,886 9% 144,309 129,394 12%
-------- -------- ---------- ----------
Less:
Interest expense......... 5,209 4,561 14% 15,670 13,378 17%
Corporate expenses....... 3,972 4,514 -12% 12,924 13,298 -3%
-------- -------- ---------- ----------
Income before taxes........ 32,181 28,811 12% 115,715 102,718 13%
Taxes on income.......... 10,459 9,825 6% 37,855 34,824 9%
-------- -------- ---------- ----------
Net income............... $ 21,722 $ 18,986 14% $ 77,860 $ 67,894 15%
======== ======== ========== ==========
</TABLE>
MANAGEMENT'S ANALYSIS OF QUARTERLY FINANCIAL DATA
RESULTS OF OPERATIONS:
Revenues increased 11% in the third quarter of 2000 to $420.4 million from
$377.4 million in 1999 despite weaker European currencies. All three segments
reported increases. Acquisitions comprised approximately half of the overall
growth while the remainder resulted from growth in the company's core product
lines, particularly within the Commercial and Medical segments. The Commercial,
Medical and Aerospace segments comprised 46%, 25% and 29% of the company's net
sales, respectively.
The gross profit margin decreased from 27.7% in 1999 to 27.2% in 2000. The
decrease was due to a higher gross profit margin in Commercial being offset by a
decline in Aerospace, while Medical remained flat. Operating expenses as a
percentage of sales decreased to 18.3% in 2000 compared with 18.9% in 1999
resulting from a decline in Medical which offset increases in Commercial and
Aerospace.
Operating profit increased 9% in the third quarter from $37.9 million in
1999 to $41.4 million in 2000 resulting from double digit gains in the
Commercial and Medical segments more than offsetting a decline in the Aerospace
Segment. Recent acquisitions, especially in Aerospace had a dilutive impact on
margins this quarter, as operating margins declined slightly to 9.8% in 2000
from 10.0% in 1999. The Commercial, Medical and Aerospace segments comprised
35%, 34% and 31% of the company's operating profit, respectively.
Interest expense increased in 2000 as of result of higher interest rates.
The effective income tax rate was 32.5% in 2000 compared with 34.1% 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
increased 14% over the prior year comparable period to $21.7 million and $.56,
respectively.
6
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INDUSTRY SEGMENT REVIEW:
Sales in the Commercial Segment increased from $169.1 million in 1999 to
$194.2 million in 2000, or 15%. All three product lines contributed to the gain
as Marine increased sales of electronic products, Automotive generated more
volume from the adjustable pedal system and the Industrial product line
benefited from two recent acquisitions. Operating profit increased from $12.1
million in 1999 to $14.4 million in 2000 on the increased Automotive volume and
from the Industrial acquisitions. Operating margin increased from 7.1% to 7.4%
from the volume gains and productivity improvements, primarily in Automotive.
Margin improvement was tempered by continued expenditures in new products,
including adjustable pedal systems for the automotive and truck and bus markets
and new marine electronic products.
The Medical Segment sales increased 14% from $91.4 million in 1999 to
$104.4 million in 2000 due to gains in both the Hospital Supply and Surgical
Devices product lines. Growth was balanced between core products and newly
acquired companies and more than compensated for the impact of weaker European
currencies. Both product lines reported gains in operating profit and margin.
Overall operating profit gained 17% from $12.1 million to $14.1 million with
operating margin increasing to 13.5% from 13.2%, both resulting from a higher
volume of specialty products and improved operational efficiencies.
The Aerospace Segment sales increased 4% from $116.9 million in 1999 to
$121.8 million in 2000. Gains in coatings from a robust industrial gas turbine
market, in cargo handling systems from acquisitions and, from increased repair
sales offset a decline in manufactured components. Operating profit decreased to
$12.9 million in 2000 from $13.7 million in 1999 as a result of improvements in
the cargo handling systems, coatings and repairs products lines being more than
offset by a decline in manufactured components. Operating margin declined from
11.7% to 10.6% from the reduced volume in manufactured components and the cost
to integrate recent acquisitions.
CASH FLOWS FROM OPERATIONS AND LIQUIDITY:
Cash flow from operations improved 64% to $135.5 million for the first nine
months of 2000 compared to the same period last year due to higher net income,
depreciation and working capital improvements, mainly accounts receivable.
Long-term borrowings decreased by $10.5 million from year end to $235.7 million
at September 24, 2000 primarily due to weaker European currencies. The reduction
in long-term borrowings caused the ratio of long-term borrowings to total
capitalization to decline from 29% at December 26, 1999 to 26% at September 24,
2000.
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.
TELEFLEX INCORPORATED
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Reports on form 8-K.
No reports on form 8-K were filed during the quarter.
7
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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
October 23, 2000
8
