1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 29, 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 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. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of Common Stock as of the latest practicable date. <TABLE> <S> <C> Class Outstanding at June 29, 1997 - ----------------------------- ---------------------------- Common Stock, $1.00 Par Value 36,910,496 </TABLE>
2 Teleflex Incorporated Condensed Consolidated Balance Sheet (Dollars in Thousands) Assets <TABLE> <CAPTION> June 29, Dec. 29, 1997 1996 ----------- ----------- <S> <C> <C> Current assets Cash and cash equivalents $60,650 $68,618 Accounts receivable less allowance for doubtful accounts 214,577 193,587 Inventories 196,833 190,696 Prepaid expenses 11,053 13,120 ----------- ----------- 483,113 466,021 Property, plant and equipment, at cost, less accumulated depreciation 304,825 291,787 Investments in affiliates 23,975 17,356 Intangibles and other assets 89,474 82,690 ----------- ----------- $901,387 $857,854 =========== =========== Liabilities and shareholders' equity Current liabilities Current portion of borrowings and demand loans $68,730 $70,587 Accounts payable and accrued expenses 108,251 108,922 Estimated income taxes payable 19,718 17,157 ----------- ----------- 196,699 196,666 Long-term borrowings 195,655 195,945 Deferred income taxes and other 69,257 56,067 ----------- ----------- 461,611 448,678 Shareholders' equity 439,776 409,176 ----------- ----------- $901,387 $857,854 =========== =========== </TABLE>
3 Teleflex Incorporated Condensed Consolidated Statement of Income (Dollars in Thousands Except Per Share) <TABLE> <CAPTION> Three Months Ended Six Months Ended ----------------------- ----------------------- June 29, June 30, June 29, June 30, 1997 1996 1997 1996 ---------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Revenues $280,263 $238,394 $549,607 $472,842 ---------- ----------- ----------- ----------- Cost of sales 193,942 163,290 380,081 324,400 Operating expenses 54,786 48,373 109,057 94,961 Interest expense 3,478 3,550 6,834 7,484 ---------- ----------- ----------- ----------- 252,206 215,213 495,972 426,845 ---------- ----------- ----------- ----------- Income before taxes 28,057 23,181 53,635 45,997 Provision for taxes on income 9,708 8,044 18,609 16,008 ---------- ----------- ----------- ----------- Net income $18,349 $15,137 $35,026 $29,989 ========== =========== =========== =========== Earnings per share $0.49 $0.42 $0.94 $0.84 Dividends per share $0.100 $0.088 $0.188 $0.165 Average number of common and common equivalent shares outstanding 37,624 35,980 37,388 35,897 </TABLE>
4 Teleflex Incorporated Condensed Consolidated Statement of Cash Flows (Dollars in Thousands) <TABLE> <CAPTION> Six Months Ended ----------------------- June 29, June 30, 1997 1996 ---------- ----------- <S> <C> <C> Cash flows from operating activities: Net income $35,026 $29,989 Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 23,346 18,248 (Increase) in accounts receivable (17,073) (5,329) (Increase) in inventory (3,088) (6,846) Decrease in prepaid expenses 1,925 2,588 (Decrease) increase in accounts payable and accrued expenses (1,915) 1,232 Increase in estimated income taxes payable 2,284 1,732 Gain on disposition of product lines (2,055) ---------- ----------- 40,505 39,559 ---------- ----------- Cash flows from financing activities: Proceeds from new borrowings 9,000 6,600 Reduction in long-term borrowings (10,754) (4,062) Increase in current borrowings and demand loans 2,516 6,496 Proceeds from stock compensation plans 2,089 3,112 Dividends (6,858) (5,803) ---------- ----------- (4,007) 6,343 ---------- ----------- Cash flows from investing activities: Expenditures for plant assets (34,975) (16,110) Payments for businesses acquired (349) Proceeds from disposition of product lines and assets 32,140 Investments in affiliates (7,215) (160) Other (1,927) (1,972) ---------- ----------- (44,466) 13,898 ---------- ----------- Net increase in cash and cash equivalents (7,968) 59,800 Cash and cash equivalents at the beginning of the period 68,618 55,654 ---------- ----------- Cash and cash equivalents at the end of the period $60,650 $115,454 ========== =========== </TABLE>
5 Teleflex Incorporated Notes to Condensed Consolidated Financial Statements Note 1 The accompanying unaudited condensed consolidated financial statements for the three months ended June 29, 1997 and June 30, 1996 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 29, 1997, 3,511,774 shares of common stock were reserved for issuance under the company's stock compensation plans. Note 3 On April 25, 1997 the Board of Directors approved a two-for-one split of the Company's common stock effected in the form of a 100% stock dividend. The dividend was distributed on June 16, 1997 to holders of record on May 23, 1997. The per share data included in this report have been adjusted to reflect this stock dividend. Note 4 Inventories consisted of the following: <TABLE> <CAPTION> 1997 1996 <S> <C> <C> Raw materials $ 67,025 $ 72,704 Work-in-process 37,828 35,010 Finished goods 91,980 82,982 -------- -------- $196,833 $190,696 ======== ======== </TABLE>
6 Note 5 Business segment information: <TABLE> <CAPTION> Three months ended (000) June 29, 1997 June 30, 1996 <S> <C> <C> Sales Commercial Products $125,692 $113,170 Medical Products 81,127 77,737 Aerospace Products 73,444 47,487 -------- -------- Total $280,263 $238,394 ======== ======== Operating profit Commercial Products $18,010 $16,928 Medical Products 8,101 9,168 Aerospace Products 8,762 3,847 ------- ------- Total $34,873 $29,943 ======= ======= </TABLE> <TABLE> <CAPTION> Six months ended (000) June 29, 1997 June 30, 1996 <S> <C> <C> Sales Commercial Products $248,432 $224,632 Medical Products 160,695 153,571 Aerospace Products 140,480 94,639 -------- -------- Total $549,607 $472,842 ======== ======== Operating profit Commercial Products $34,117 $32,095 Medical Products 16,689 17,722 Aerospace Products 16,498 9,863 ------- ------- Total $67,304 $59,680 ======= ======= </TABLE>
7 Management's Analysis of Quarterly Financial Data Results of Operations: Revenues increased 18% in the second quarter of 1997 to $280.3 million from $238.4 million in 1996. The increase resulted from gains in all three segments, Commercial, Medical and Aerospace, approximately one-half of which resulted from acquisitions. The Commercial, Medical and Aerospace segments comprised 45%, 29% and 26% of the company's net sales, respectively. Gross profit margin declined to 30.8% in 1997 compared with 31.5% in 1996. Increases in the gross profit margins in the Commercial and Aerospace segments were offset by a decline in the Medical segment. Operating expenses as a percentage of sales declined to 19.5% in 1997 from 20.3% in 1996 as declines in the Medical and Aerospace segments offset an increase in the Commercial Segment. Operating profit increased 16% in the second quarter of 1997 from $29.9 million to $34.9 million while operating margin decreased slightly from 12.6% of sales to 12.4%. Increases in the Aerospace and Commercial segments operating profit offset a decline in the Medical Segment while the increase in operating margin in the Aerospace Segment did not offset declines in the Commercial and Medical segments. Industry Segment Review: Sales in the Commercial Segment increased 11% from $113.2 million in 1996 to $125.7 million in 1997 as all three product lines, Automotive, Marine and Industrial improved. Operating profit in 1997 of $18.0 million represents a 6% increase compared with 1996 while operating margin declined from 15.0% to 14.3% due to a decrease in the Automotive product line, in part as a result of recent acquisitions. The Medical Segment sales increased 4% from $77.7 million to $81.1 million in the second quarter of 1997 compared with 1996. Improved sales of hospital supply products in Europe and sales from a 1997 acquisition in the surgical devices product line offset a decline from the effects of the stronger dollar against major European currencies. Operating profit decreased 12% from $9.2 million in 1996 to $8.1 million in 1997 and operating margin declined from 11.8% in 1996 to 10.0% in 1997. The decline is the result of the stronger dollar on the primarily European - based hospital supply product line and additional expenses in the surgical devices product line in connection with integrating the 1997 acquisition.
8 The Aerospace Segment sales increased 55% from $47.5 million in 1996 to $73.4 million in 1997 primarily from gains in the turbo-machinery coatings, repairs and component manufacturing businesses. The addition of an electro-chemical machining company contributed nearly one-half of the sales growth in the segment. Operating profit increased over 100% from $3.8 million in 1996 to $8.8 million in 1997 and operating margin improved from 8.1% in 1996 to 11.9% in 1997. The increases in both operating profit and operating margin resulted primarily from the increased sales volume in the turbo-machinery businesses. Cash flow from operations increased approximately $1.0 million in the second quarter of 1997 compared with 1996 as increased net income and depreciation offset the effects of increased working capital, primarily accounts receivable. Working capital increased from $269.4 million at December 29, 1996, to $286.4 million at June 29, 1997. The ratio of current assets to current liabilities was 2.5 to 1 at June 29, 1997 compared with 2.4 to 1 at December 29, 1996. Expenditures for plant assets increased $18.9 million over the same period in 1996. The increase is primarily within the Aerospace Segment where construction of a turbomachinery repairs facility in Singapore is ongoing and where additional equipment is necessary to meet the higher sales volume. Long-term borrowings at June 29, 1997 of $195.7 million remained constant compared with December 29, 1996. An increase from additional borrowings was offset by repayments and lower foreign currency translation rates. The increase in shareholders' equity resulted in an improvement in the ratio of long-term borrowings to total capitalization from 32% at December 29, 1996 to 31% at June 29, 1997.
9 Teleflex Incorporated Part II Other Information Item 4. Submission of Matters to a Vote of Security Holders At the company's Annual Meeting of Shareholders held on April 25, 1997, the following were elected to the Board of Directors of the company for a term expiring in 1999: <TABLE> <CAPTION> Name Votes For Withheld ---- --------- -------- <S> <C> <C> David S. Boyer 31,615,564 369,856 Sigismundus W.W. Lubsen 31,612,844 372,576 James W. Stratton 31,615,298 370,122 </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.
10 Teleflex Incorporated Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TELEFLEX INCORPORATED /s/ Harold L. Zuber, Jr. ------------------------ Harold L. Zuber, Jr. (Principal Financial and Accounting Officer) /s/ Steven K. Chance ------------------------ Steven K. Chance (Vice President) August 7, 1997