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Teleflex Inc. Reports Operating Results (10-Q)

April 28, 2010 | About:

Teleflex Inc. (NYSE:TFX) filed Quarterly Report for the period ended 2010-03-28.

Teleflex Inc. has a market cap of $2.45 billion; its shares were traded at around $61.55 with a P/E ratio of 17.1 and P/S ratio of 1.3. The dividend yield of Teleflex Inc. stocks is 2.2%. Teleflex Inc. had an annual average earning growth of 6.5% over the past 10 years.TFX is in the portfolios of Robert Olstein of Olstein Financial Alert Fund, David Dreman of Dreman Value Management, Chuck Royce of Royce& Associates, Manning & Napier Advisors, Inc, Murray Stahl of Horizon Asset Management.

Highlight of Business Operations:

In connection with the acquisition of Arrow in 2007, we formulated a plan related to the integration of Arrow and our other Medical businesses. The integration plan focused on the closure of Arrow corporate functions and the consolidation of manufacturing, sales, marketing and distribution functions in North America, Europe and Asia. Costs related to actions that affected employees and facilities of Arrow have been included in the allocation of the purchase price of Arrow. Costs related to actions that affected employees and facilities of Teleflex are charged to earnings and included in restructuring and impairment charges within the condensed consolidated statement of operations. These costs amounted to approximately $0.5 million during the three months ended March 28, 2010. As of March 28, 2010, we estimate that, for the remainder of 2010, the aggregate of future restructuring and impairment charges that we will incur in connection with the Arrow integration plan are approximately $1.6 $2.5 million. Of this amount, $0.8 $1.1 million relates to employee termination costs, $0.5 $0.7 million relates to facility closure costs, $0.2 - $0.5 million relates to contract termination costs associated with the termination of leases and certain distribution agreements and $0.1 $0.2 million relates to other restructuring costs. We expect to have realized aggregate annual pre-tax savings of between $70 $75 million after these integration and restructuring actions are complete.

Operating profit in the Medical Segment increased 6%, from $69.4 million in the first quarter of 2009 to $73.5 million during the first quarter of 2010. Operating profit during the first quarter of 2010 was favorably impacted by a weaker U.S. dollar compared to the same period of a year ago, improved sales mix of approximately $2 million (loss of lower margin custom IV tubing sales were replaced with sales of higher margin vascular access products), lower manufacturing and raw material costs of approximately $3 million and lower spending on remediation of FDA regulatory issues of approximately $2 million, offset by approximately $5 million higher spending on sales, marketing and research and development activities.

During the first quarter of 2010, operating profit in the Commercial Segment increased 50%, from $2.0 million in the first quarter of 2009 to $3.1 million, in spite of a 9% decrease in revenue. The trend in operating income was favorably impacted by the elimination of approximately $3 million of operating costs compared to the corresponding prior year quarter.

Operating activities from continuing operations provided net cash of approximately $32.2 million during the first three months of 2010. Year over year cash flow from operating activities increased $39.8 million from the first quarter of 2009. The increase is due to a tax refund of $49.4 million in 2010 coupled with improved operations from the synergies achieved through the restructuring and integration programs as well as improved management of inventories and receivables. The increase was partly offset by a decrease of $39.7 million that resulted from the adoption of an amendment to Financial Accounting Standards Board Accounting Standards Codification topic 860, Transfers and Servicing (ASC topic 860) in the first quarter of 2010. Specifically, upon adoption of the amendment, the accounts receivable that we previously treated as sold and removed from the balance sheet under our securitization program are now required to be accounted for as secured borrowings and reflected as short-term debt on our balance sheet. The effect of the amendment is reflected in our condensed consolidated statements of cash flows under financing activities in the increase (decrease) in notes payable and current borrowings and under operating activities in the accounts receivable use of cash.

Financing activities from continuing operations used net cash of $21.3 million during the first three months of 2010 due to the payments of $51.1 million of long-term borrowings and $13.5 million of dividends, partly offset by the $39.7 million effect of adopting the amendment to ASC topic 860. This amendment is reflected in the $39.7 million increase (decrease) in notes payable and current borrowings source of cash reflecting the securitization program as a secured borrowing. Other than the accounting amendment there has been no change to our securitization program.

Investing activities from continuing operations provided net cash of $17.5 million during the first three months of 2010 reflecting $24.8 million in proceeds from the sale of SSI, partly offset by capital expenditures of $7.2 million.

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