e10vk
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.
20549
FORM 10-K
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(Mark
One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2006 or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to .
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Commission file number 1-5353
TELEFLEX INCORPORATED
(Exact name of registrant as
specified in its charter)
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Delaware
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23-1147939
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. employer identification
no.)
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155 South Limerick Road,
Limerick,
Pennsylvania
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19468
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(Address of principal executive
offices)
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(Zip
Code)
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Registrants telephone number, including area code:
(610) 948-5100
Securities registered pursuant to Section 12(b) of
the Act:
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Name of Each
Exchange
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Title of Each
Class
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On Which
Registered
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Common Stock, par value
$1 per share
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New York Stock Exchange
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Preference Stock Purchase Rights
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of
the Act:
NONE
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act.
Yes o No þ
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 þ No o
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 the registrants 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. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer (as defined in Exchange Act
Rule 12b-2).
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Act).
Yes o No þ
The aggregate market value of the Common Stock of the registrant
held by non-affiliates of the registrant
(36,554,671 shares) on June 25, 2006 (the last
business day of the registrants most recently completed
fiscal second quarter) was
$1,940,687,483(1).
The aggregate market value was computed by reference to the
closing price of the Common Stock on such date.
The registrant had 39,118,349 Common Shares outstanding as of
February 15, 2007.
Document Incorporated By Reference: certain provisions of the
registrants definitive proxy statement in connection with
its 2007 Annual Meeting of Shareholders, to be filed within
120 days of the close of the registrants fiscal year
are incorporated by reference in Part III hereof.
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(1) |
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For the purposes of this definition
only, the registrant has defined affiliate as
including executive officers and directors of the registrant and
owners of more than five percent of the common stock of the
registrant, without conceding that all such persons are
affiliates for purposes of the federal securities
laws.
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TELEFLEX
INCORPORATED
ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
TABLE OF CONTENTS
1
Information
Concerning Forward-Looking Statements
All statements made in this Annual Report on
Form 10-K,
other than statements of historical fact, are forward-looking
statements. The words anticipate,
believe, estimate, expect,
intend, may, plan,
will, would, should,
guidance, potential,
continue, project, forecast,
confident, prospects and similar
expressions typically are used to identify forward-looking
statements. Forward-looking statements are based on the
then-current expectations, beliefs, assumptions, estimates and
forecasts about our business and the industry and markets in
which we operate. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions
which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or implied
by these forward-looking statements due to a number of factors,
including changes in business relationships with and purchases
by or from major customers or suppliers, including delays or
cancellations in shipments; demand for and market acceptance of
new and existing products; our ability to integrate acquired
businesses into our operations, realize planned synergies and
operate such businesses profitably in accordance with
expectations; our ability to effectively execute our
restructuring programs; competitive market conditions and
resulting effects on revenues and pricing; increases in raw
material costs that cannot be recovered in product pricing;
global economic factors, including currency exchange rates and
interest rates; difficulties entering new markets; and general
economic conditions. For a further discussion of the risks that
our business is subject to, see Item 1A. Risk
Factors of this Annual Report on
Form 10-K.
We expressly disclaim any intent or obligation to update these
forward-looking statements, except as otherwise specifically
stated by us.
2
PART I
Overview
Teleflex Incorporated is a diversified industrial company
specializing in the design, manufacture and distribution of
specialty-engineered products. We serve a wide range of
customers in niche segments of the commercial, medical and
aerospace industries. Our products include: driver controls,
motion controls, power and vehicle management systems and fluid
management systems for commercial industries; disposable medical
products, surgical instruments, medical devices and specialty
devices for hospitals and healthcare providers; and repair
products and services, precision-machined components and
cargo-handling systems for commercial and military aviation as
well as other industrial markets.
For more than 60 years, we have provided engineered
products that help our customers meet their business
requirements. We have grown through an active program of
development of new products, introduction of products into new
geographic or end-markets and through acquisitions of companies
with related market, technology or industry expertise. We serve
a diverse customer base through operations in 23 countries and
local direct sales and distribution networks. In 2006, products
directly distributed from our operations in the United States
accounted for 43 percent of revenues, and products directly
distributed from our operations in other countries represented
57 percent of revenues.
Our Business
Segments
We organize our business into three business
segments Commercial, Medical and Aerospace. For
2006, the percentages of our consolidated net revenues
represented by our segments were as follows:
Commercial 47%; Medical 33%; and
Aerospace 20%. Additional information regarding our
segments and geographic areas is presented in Note 15 to
our consolidated financial statements included in this Annual
Report on
Form 10-K.
Commercial
Our Commercial Segment businesses principally design,
manufacture and distribute driver control, motion control, power
and vehicle management and fluid management products and
systems. Our products are used by a wide range of markets
including the passenger car and light truck, marine,
recreational, mobile power equipment, military, agricultural and
construction vehicle, truck and bus and various other industrial
equipment sectors. Major manufacturing operations are located in
North America, Europe and Asia.
Driver Controls: This is the largest single
product category in the Commercial Segment, representing
44 percent of Commercial Segment revenues in 2006. Products
in this category include: full manual and automatic gearshift
systems, transmission guide controls, park-lock cables, control
cables, mechanical and hydraulic steering, steering columns,
throttle controls and industrial vehicle pedal systems. Our
driver controls are used in a variety of vehicles, including
passenger cars, boats, trucks, agricultural vehicles and
recreational vehicles. We are a global supplier of manual and
automatic gearshift systems and control cables for passenger
cars and light trucks and a leading global provider of both
mechanical and hydraulic steering systems for recreational boats.
Motion Controls: Products in this category
represented 25 percent of Commercial Segment revenues in
2006. Motion controls include: mechanical and electro-mechanical
controls for seat-comfort, interior flexibility, movement and
regulation of window, door, function and other safety controls
and mobile power equipment controls and products for heavy-lift
applications. While the largest portion of this category relates
to seat and interior comfort and motion systems sold to
automotive suppliers and industrial vehicle manufacturers, our
motion systems also serve a wide range of other markets and
applications. For example, we are a large supplier of safety
cable and light-duty motion controls used in mobile power
equipment, and our heavy-lift products,
3
which include heavy-duty cables,
hoisting and rigging equipment, are used in oil drilling and
other industrial markets.
Power and Vehicle Management Systems: Products
in this category represented 20 percent of Commercial
Segment revenues in 2006. Power and vehicle management systems
include: mobile auxiliary power systems, fuel management systems
and components, industrial actuation products and components,
instrumentation and electronic controls for engine and vehicle
management, diagnostics and monitoring. These products generally
address the need for greater fuel efficiency, reduced emissions,
mobile power and improved connectivity of engine and vehicle
systems. Our major products in this category include mobile
auxiliary power units used for power and climate control in
heavy duty trucks, industrial vehicles and locomotives,
instrumentation and electronic products for marine and
industrial vehicles and components and systems for the use of
alternative fuels in military, industrial and automotive
applications.
Fluid Management Systems: Products in this
category represented 11 percent of Commercial Segment
revenues in 2006. Fluid management products include
premium-branded, custom-manufactured and bulk hose and related
assemblies that are generally custom-designed and manufactured
to address specific requirements for vapor permeation,
durability and flexibility. Our fluid management products can be
found in automobiles, recreational boats, remote sensing
devices, high-purity food processing, underground fuel transfer,
compressed natural gas applications and in a number of other
industrial product and equipment applications. The largest
percentage of fluid management systems are sold to automotive
and industrial customers.
The following table sets forth revenues for 2006, 2005 and 2004
by product category for the Commercial Segment.
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2006
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2005
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2004
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(Dollars in
thousands)
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Driver Controls
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$
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557,421
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$
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554,707
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$
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570,410
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Motion Controls
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$
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308,003
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$
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283,698
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$
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264,653
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Power and Vehicle Management
Systems
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$
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250,121
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$
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222,951
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$
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238,838
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Fluid Management Systems
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$
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135,293
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$
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128,289
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$
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126,947
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The following table sets forth the percentage of revenues by end
market for 2006 for the Commercial Segment.
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Automotive
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52
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%
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Marine/Recreational
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19
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%
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Industrial Equipment and Other
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13
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%
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Truck and Bus
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8
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%
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Heavy Lift
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5
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%
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Agricultural/Construction
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3
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%
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Backlog: As of December 31, 2006, our
backlog of firm orders for our Commercial Segment was
$247 million. This compares with $257 million as of
December 25, 2005. Standard Commercial Segment products are
typically shipped between two weeks and three months after
receipt of order. Therefore, the backlog of such orders is not
indicative of probable revenues in any future
12-month
period.
Marketing: The majority of our Commercial
Segment products are sold to original equipment manufacturers,
or OEMs, through a direct sales force of field representatives
and technical specialists. We also market our marine products
and mobile auxiliary power units through dealers, distributors
and retail outlets serving owners of recreational boats. Fuel
systems and components include custom applications sold directly
to industrial equipment manufacturers and to the automotive
aftermarket principally in Europe.
4
Medical
Our Medical Segment businesses develop, manufacture and
distribute disposable medical products, surgical instruments,
medical devices and specialty devices for healthcare providers
and medical equipment manufacturers. Our products are largely
sold and distributed to hospitals and healthcare providers in a
range of clinical settings. Major manufacturing operations are
located in North America, Europe and Asia.
Markets for these products are influenced by a number of factors
including demographics, utilization and reimbursement patterns
in the worldwide healthcare market.
Disposable Medical Products: This is the
largest product category in the Medical Segment, representing
63 percent of segment revenues in 2006. Our disposable
medical products are generally used in the clinical specialty
areas of anesthesia, respiratory care and urology. Anesthesia
and respiratory care products include those used in airway
management, sleep therapy, oxygen administration and therapy,
humidification and aerosol therapy. Urology products include:
catheters and drain and irrigation supplies. Our products are
marketed under the brand names of Rusch, HudsonRCI, Gibeck and
Sheridan. The large majority of sales for disposable medical
products are made to the hospital/healthcare provider market,
with a smaller percentage sold to the home health market and
medical device manufacturers.
Surgical Instruments and Medical
Devices: Products in this category represented
27 percent of Medical Segment revenues in 2006. Our
surgical instrument and medical device products include:
hand-held instruments for general and specialty surgical
procedures, devices used in cardiovascular, orthopedic and
general surgery and minimally-invasive diagnostic and
therapeutic care. We also produce and market a range of ligation
and closure products. In addition, we provide instrument
management and sterilization services. We market surgical
instruments and medical devices under the Deknatel, Pleur-evac,
Pilling and Weck brand names.
Specialty Devices: Specialty devices
represented 10 percent of Medical Segment revenues in 2006.
Products in this category include custom-designed and
manufactured specialty instruments for cardiovascular and
orthopedic procedures, specialty sutures, microcatheters,
introducers and guidewires. We also design and manufacture
specialty devices and instruments for industry leading medical
device manufacturers and provide them with outsourcing services.
Our brands include Beere, KMedic and Deknatel. Specialty devices
are generally marketed to medical device manufacturers.
The following table sets forth revenues for 2006, 2005 and 2004
by product category for the Medical Segment.
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2006
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2005
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2004
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(Dollars in
thousands)
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Disposable Medical Products
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$
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538,859
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$
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502,768
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$
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427,888
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Surgical Instruments and Medical
Devices
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$
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232,555
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$
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261,199
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$
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256,389
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Specialty Devices
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$
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87,262
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$
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67,171
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$
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52,075
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The following table sets forth the percentage of revenues by end
market for 2006 for the Medical Segment.
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Hospitals/Healthcare Providers
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75
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%
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Medical Device Manufacturers
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17
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%
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Home Health
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8
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%
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Backlog: As of December 31, 2006, our
backlog of firm orders for our Medical Segment was
$65 million. This compares with $65 million as of
December 25, 2005. We expect substantially all of the
December 31, 2006 backlog to be filled in 2007. Most of our
medical products are sold on orders calling for delivery within
a few months. Therefore, the backlog of such orders is not
indicative of probable revenues in any future
12-month
period.
5
Marketing: Medical products are sold directly
to hospitals, healthcare providers, distributors and to original
equipment manufacturers of medical devices through our own sales
forces and through independent representatives and independent
distributor networks.
Aerospace
Our Aerospace Segment businesses provide repair products and
services for flight and ground-based turbine engines;
manufacture and distribute precision-machined components; and
design, manufacture and market cargo-handling systems. These
products require a high degree of engineering sophistication and
are often custom-designed. Major operations are located in North
America, Europe and Asia.
Commercial aviation markets represent a significant majority
percentage of revenues in this segment. Markets for these
products are generally influenced by spending patterns in the
commercial aviation and military markets.
Repair Products and Services: The largest
single product category in the Aerospace Segment, repair
products and services represented 47 percent of segment
revenues in 2006. This category includes repair technologies and
services primarily for critical components of flight turbines,
including fan blades and airfoils. We utilize advanced
reprofiling and adaptive-machining techniques to improve
efficiency of aircraft engine performance and reduce turnaround
time for maintenance and repairs. Repair products and services
are provided through service locations in North America, Europe
and Asia. Our repair products and services business is conducted
through a consolidated, but not wholly-owned, subsidiary called
Airfoil Technologies International (ATI), whose product line
serves many of the industrys leading aircraft engine
providers and a range of commercial airlines.
Cargo-handling Systems: Products in this
category represented 29 percent of Aerospace Segment
revenues in 2006. Our cargo-handling systems include on-board
cargo-handling systems for wide-body and narrow-body aircraft,
actuators, cargo containers, aftermarket spare parts and repair
services. Marketed under the Telair International brand name,
our wide-body cargo-handling systems are sold to aircraft OEMs
or to airlines and air freight carriers as buyer furnished
equipment for original installations or as retrofits for
existing equipment. Our other Telair products in this category
include narrow-body aircraft cargo-loading systems and cargo
containers. We also manufacture and repair components for our
systems and other related aircraft controls, including canopy
and door actuators, cargo winches and flight controls.
Precision-Machined Components: Products in
this category represented 24 percent of Aerospace Segment
revenues in 2006. Our precision-machined components include: fan
blades, compressor blades, cases, blisks and other components
for military and commercial flight turbine engines and a range
of custom-designed and manufactured products for industrial
markets. Most of our precision-machined components are sold to
original equipment manufacturers of aircraft engines and for
military applications, with a very small percentage of products
sold to industrial markets.
The following table sets forth revenues for 2006, 2005 and 2004
by product category for the Aerospace Segment.
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2006
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2005
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2004
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(Dollars in
thousands)
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Repair Products and Services
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$
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250,519
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$
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241,532
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$
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234,822
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Cargo-handling Systems
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$
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154,853
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$
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125,298
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$
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99,970
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Precision-Machined Components
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$
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131,871
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$
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126,939
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$
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118,419
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6
The following table sets forth the percentage of revenues by end
market for 2006 for the Aerospace Segment.
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Commercial Aviation
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89
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%
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Military
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8
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%
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Industrial and Other
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3
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%
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Backlog: As of December 31, 2006, our
backlog of firm orders for our Aerospace Segment was
$329 million, of which we expect approximately
80 percent to be filled in 2007. Our backlog for our
Aerospace Segment on December 25, 2005 was
$316 million.
Marketing: Generally, products sold to the
aerospace market are sold through our own force of field
representatives.
Discontinued
Operations
In October 2006, we sold a small medical business that was
classified as held for sale during the second quarter of 2005.
During the third quarter of 2005, we completed the sale of our
automotive pedal systems business and sold a European medical
product sterilization business. During the first quarter of
2005, we completed the sale of Sermatech International, a
surface-engineering/specialty coatings business. For 2006 and
comparable periods, the small medical business, the automotive
pedal systems business, the European medical product
sterilization business and Sermatech business have been
presented in our consolidated financial statements as
discontinued operations. The Sermatech business was previously
reported as part of our Aerospace Segment. For a more complete
discussion, see Note 16 to our consolidated financial
statements included in this Annual Report on
Form 10-K.
Government
Regulation
Government agencies in a number of countries regulate our
products and the products sold by our customers utilizing our
products. The U.S. Food and Drug Administration and
government agencies in other countries regulate the approval,
manufacturing and sale and marketing of many of our healthcare
products. The U.S. Federal Aviation Administration and the
European Aviation Safety Agency regulate the manufacture and
sale of some of our aerospace products and license the operation
of our repair stations. The U.S. National Highway Traffic
Safety Administration and government agencies in other countries
regulate the manufacture and sale of many of our automotive
products.
Competition
Given the range and diversity of our products and markets, no
one competitor offers competitive products for all the markets
and customers that we serve. In general, all of our segments and
product lines face significant competition from competitors of
varying sizes, although the number of competitors in each market
tends to be limited. We believe that our competitive position
depends on the technical competence and creative ability of our
engineering personnel, the know-how and skill of our
manufacturing personnel and the strength and scope of our sales,
service and distribution networks.
Patents and
Trademarks
We own a portfolio of patents, patents pending and trademarks.
We also license various patents and trademarks. Patents for
individual products extend for varying periods according to the
date of patent filing or grant and the legal term of patents in
the various countries where patent protection is obtained.
Trademark rights may potentially extend for longer periods of
time and are dependent upon national laws and use of the marks.
All capitalized product names throughout this document are
trademarks owned by, or licensed to, us or our subsidiaries.
Although these have been of value and are expected to continue
to be of value in the future, we
7
do not consider any single patent or trademark, except for the
Teleflex brand, to be essential to the operation of our business.
Suppliers and
Materials
Materials used in the manufacture of our products are purchased
from a large number of suppliers in diverse geographic
locations. We are not dependent on any single supplier for a
substantial amount of the materials used or components supplied
for our overall operations. Most of the materials and components
we use are available from multiple sources, and where practical,
we attempt to identify alternative suppliers. Volatility in
commodity markets, particularly steel and plastic resins, can
have a significant impact on the cost of producing certain of
our products. We cannot be assured of successfully passing these
cost increases through to all of our customers, particularly
OEMs.
Seasonality
A portion of our revenues, particularly in the Commercial and
Medical segments, are subject to seasonal fluctuations. Revenues
in the automotive and industrial markets are generally reduced
in the third quarter of each year as a result of preparations by
OEMs for the upcoming model year. In addition, marine
aftermarket revenues generally increase in the second quarter as
boat owners prepare their watercraft for the upcoming season.
Incidence of flu and other disease patterns as well as the
frequency of elective medical procedures affect revenues related
to disposable medical products.
Employees
We employed approximately 19,800 full-time and temporary
employees at December 31, 2006. Of these employees,
approximately 7,100 were employed in the United States and
12,700 in countries outside of the United States. Less than
10 percent of our employees in the United States were
covered by union contracts. We have government-mandated
collective-bargaining arrangements or union contracts that cover
employees in other countries. We believe we have good
relationships with our employees.
Investor
Information
We are subject to the informational requirements of the
Securities Exchange Act of 1934. Therefore, we file reports and
information, proxy statements and other information with the
Securities and Exchange Commission. Such reports, proxy and
information statements and other information may be obtained by
visiting the Public Reference Room of the SEC at 100 F Street,
NE, Washington, DC 20549 or by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding issuers
that file electronically.
You can access financial and other information in the Investors
section of our Web site. The address is www.teleflex.com.
We make available through our Web site, free of charge, copies
of our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after filing such material electronically
or otherwise furnishing it to the SEC. The information on our
Web site is not and should not be considered part of this Annual
Report on
Form 10-K
and is intended to be an inactive textual reference only.
We are a Delaware corporation organized in 1943. Our executive
offices are located at 155 South Limerick Road, Limerick, PA
19468. Our telephone number is
(610) 948-5100.
8
EXECUTIVE
OFFICERS
The names and ages of all of our executive officers as of
February 15, 2007 and the positions and offices held by
each such officer are as follows:
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Name
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Age
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Positions and
Offices with Company
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Jeffrey P. Black
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47
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Chairman, Chief Executive Officer
and Director
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John J. Sickler
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64
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Vice Chairman and Director
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Martin S. Headley
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50
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Executive Vice President and Chief
Financial Officer
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Laurence G. Miller
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52
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Senior Vice President, General
Counsel and Secretary
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Kevin K. Gordon
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44
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Senior Vice President
Corporate Development
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Vince Northfield
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43
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President Commercial
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R. Ernest Waaser
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50
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President Medical
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John Suddarth
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47
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President Aerospace
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Mr. Black has been Chairman since May 2006, Chief Executive
Officer since May 2002 and President since December 2000. He has
been a Director since November 2002. Mr. Black was
President of the Teleflex Industrial Group from July 2000 to
December 2000 and President of Teleflex Fluid Systems from
January 1999 to July 2000.
Mr. Sickler has been Vice Chairman since December 2000. He
has been a director since May 2006. From May 2006 to October
2006, he served as Interim President of Teleflex Medical, and
from December 2003 until August 2004, he was Interim Chief
Financial Officer. Prior to December 2000 he was a Senior Vice
President.
Mr. Headley has been Executive Vice President and Chief
Financial Officer since August 2004. From July 1996 until August
2004, he was Vice President and Chief Financial Officer of Roper
Industries, Inc., a diversified industrial company that designs,
manufactures and distributes engineered products and solutions
for global niche markets. From July 1993 to June 1996,
Mr. Headley served as Chief Financial Officer of the
U.S. operations of McKechnie Group, plc, a manufacturer of
components and assemblies for a variety of industries.
Mr. Miller has been Senior Vice President, General Counsel
and Secretary since November 2004, following a
20-year
career with Aramark Corporation, a diversified management
services company providing food, refreshment, facility and other
support services for a variety of organizations. From November
2001 until November 2004, he was Senior Vice President and
Associate General Counsel for the Food & Support
Services division of Aramark. From June 1994 until November
2001, Mr. Miller was Senior Vice President and General
Counsel for Aramark Uniform Services.
Mr. Gordon has been Senior Vice President
Corporate Development since June 2005. From December 2000 to
June 2005, Mr. Gordon was Vice President
Corporate Development. Prior to December 2000, Mr. Gordon
was Director of Business Development.
Mr. Northfield has been the President of Teleflex
Commercial since June 2005. From 2004 to 2005,
Mr. Northfield was the President of Teleflex Automotive and
the Vice President of Strategic Development. Mr. Northfield
held the position of Vice President of Strategic Development
from 2001 to 2004. Prior to 2001, Mr. Northfield was Vice
President and General Manager of North American operations of
Morse Controls, a manufacturer of performance and control
systems and aftermarket parts for marine and industrial
applications, which was acquired by Teleflex in 2001.
Mr. Waaser has been the President of Teleflex Medical since
October 2006. Prior to joining Teleflex, Mr. Waaser served
as President and Chief Executive Officer of Hill-Rom, Inc., a
manufacturer and provider of products and services for the
healthcare industry, including patient room equipment,
therapeutic wound and pulmonary care products, biomedical
equipment services and communications systems, from 2001 to
2005. Prior to 2001, Mr. Waaser served as Senior Vice
President of AGFA Corporation, a producer of analog and digital
imaging products for medical, industrial, graphics and consumer
applications.
9
Mr. Suddarth has been the President of Teleflex Aerospace
since July 2004. From 2003 to 2004, Mr. Suddarth was the
President of Techsonic Industries Inc., a former subsidiary of
Teleflex that manufactured underwater sonar and video viewing
equipment which was divested in 2004. Mr. Suddarth was the
Chief Operating Officer of AMF Bowling Products, Inc., a bowling
equipment manufacturer, from 2001 to 2003. Prior to 2001,
Mr. Suddarth was President of Morse Controls, a
manufacturer of performance and control systems and aftermarket
parts for marine and industrial applications, which was acquired
by Teleflex in 2001.
Our officers are elected annually by the Board of Directors at
the first meeting of the Board held after our annual
stockholders meeting. Each officer serves at the pleasure of the
Board until their respective successors have been elected.
We are subject to certain risks that could adversely affect our
business, financial condition and results of operations. These
risks include, but are not limited to, the following:
Many of the industries in which we operate are cyclical, and,
accordingly, our business is subject to changes in the
economy.
Although we believe that the diversified nature of our business
reduces the risk that all of our operations would experience
simultaneous cyclical downturns, many of the businesses which we
operate are subject to specific industry and general economic
cycles, most acutely in the automotive, marine, aerospace and
transportation industries. Accordingly, any downturn in these or
other markets in which we participate could materially adversely
affect us. Moreover, if we fail to respond promptly to changes
in demand, our results of operations could be materially
adversely affected in any given quarter.
We are subject to risks associated with our
non-U.S. operations.
Although no material concentration of our manufacturing
operations exists in any single country, we have significant
manufacturing operations outside the United States, including
entities that are not wholly-owned and other alliances. As of
December 31, 2006, approximately 45% of our total assets
and 57% of our total revenues were attributable to products
directly distributed from our operations outside the
U.S. Our international operations are subject to varying
degrees of risk inherent in doing business outside the U.S.,
including:
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exchange controls and currency restrictions;
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trade protection measures and import or export requirements;
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|
subsidies or increased access to capital for firms who are
currently or may emerge as competitors in countries in which we
have operations;
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potentially negative consequences from changes in tax laws;
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differing labor regulations;
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differing protection of intellectual property; and
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unsettled political conditions and possible terrorist attacks
against American interests.
|
These and other factors may have a material adverse effect on
our international operations or on our business, results of
operations and financial condition generally.
Our products are typically integrated into other
manufacturers products. As a result, changes in demand for
our customers products may adversely affect our revenues
on short notice.
Many of our customers in the Commercial and Aerospace segments,
including OEMs, integrate our products into products our
customers sell. Our customers also generally have no obligation
to purchase any minimum quantity of product from us and may
terminate our arrangement on short notice, typically 30 to
90 days, sometimes less. Therefore, our reported backlog
may not be realized as revenues. Revenues could
10
materially decline if these customers experience a reduction in
demand for their products or cancel a significant number of
contracts and we cannot replace them with similar arrangements.
Customers in our Medical Segment depend on third party
reimbursement.
Demand for some of our medical products is impacted by the
reimbursement to our customers of patients medical
expenses by government healthcare programs and private health
insurers in the countries where we do business. Internationally,
medical reimbursement systems vary significantly, with medical
centers in some countries having fixed budgets, regardless of
the level of patient treatment. Other countries require
application for, and approval of, government or third party
reimbursement. Without both favorable coverage determinations
by, and the financial support of, government and third party
insurers, the market for some of our medical products could be
adversely impacted.
We cannot be sure that third party payors will maintain the
current level of reimbursement to our customers for use of our
existing products. Adverse coverage determinations or any
reduction in the amount of this reimbursement could harm our
business. In addition, as a result of their purchasing power,
these payors often seek discounts, price reductions or other
incentives from medical products suppliers. Our provision of
such pricing concessions could negatively impact our revenues
and product margins.
Uncertainties regarding future healthcare policy, legislation
and regulations, as well as private market practices, could
affect our ability to sell our products in acceptable quantities
at profitable prices.
Foreign currency exchange rate, commodity price and interest
rate fluctuations may adversely affect our results.
We are exposed to a variety of market risks, including the
effects of changes in foreign currency exchange rates, commodity
prices and interest rates. We expect revenue from products
manufactured in, and sold into,
non-U.S. markets
to continue to represent a significant portion of our net
revenue. Our consolidated financial statements reflect
translation of items denominated in
non-U.S. currencies
to U.S. dollars, our reporting currency. When the
U.S. dollar strengthens or weakens in relation to the
foreign currencies of the countries where we sell or manufacture
our products, such as the euro, our U.S. dollar-reported
revenue and income will fluctuate. Although we maintain a
currency hedging program to reduce the effects of this
fluctuation, changes in the relative values of currencies occur
from time to time and may, in some instances, have a significant
effect on our results of operations.
Many of our products have significant steel and plastic resin
content. We also use quantities of other commodities, including
copper and zinc. Although we monitor our exposure to these
commodity price increases as an integral part of our overall
risk management program, volatility in the prices of these
commodities could increase the costs of our products and
services. We may not be able to pass on these costs to our
customers and this could have a material adverse effect on our
results of operations and cash flows.
Our failure to successfully develop new products could
adversely affect our results.
The future success of our business will depend, in part, on our
ability to design and manufacture new competitive products and
to enhance existing products, including developing electronic
technology to replace or improve upon mechanical technology.
This product development may require substantial investment by
us. There can be no assurance that unforeseen problems will not
occur with respect to the development, performance or market
acceptance of new technologies or products, such as the
inability to:
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identify viable new products;
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obtain adequate intellectual property protection;
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11
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gain market acceptance of new products; or
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successfully obtain regulatory approvals.
|
Moreover, we may not otherwise be able to successfully develop
and market new products. Our failure to successfully develop and
market new products could reduce our margins, which would have
an adverse effect on our business, financial condition and
results of operations.
Our technology is important to our success, and our failure
to protect this technology could put us at a competitive
disadvantage.
Because many of our products rely on proprietary technology, we
believe that the development and protection of these
intellectual property rights is important to the future success
of our business. In addition to relying on our patents,
trademarks and copyrights, we rely on confidentiality agreements
with employees and other measures, to protect our know-how and
trade secrets. Despite our efforts to protect proprietary
rights, unauthorized parties or competitors may copy or
otherwise obtain and use these products or technology. The steps
we have taken may not prevent unauthorized use of this
technology, particularly in foreign countries where the laws may
not protect our proprietary rights as fully as in the
U.S. Moreover, there can be no assurance that others will
not independently develop the know-how and trade secrets or
develop better technology than us or that current and former
employees, contractors and other parties will not breach
confidentiality agreements, misappropriate proprietary
information and copy or otherwise obtain and use our information
and proprietary technology without authorization or otherwise
infringe on our intellectual property rights. Our inability to
protect our proprietary technology could result in competitive
harm that could adversely affect our business.
We are subject to a variety of litigation in the course of
our business that could have a material adverse effect on our
results of operations and financial condition.
We are a party to various lawsuits and claims arising in the
normal course of business. These lawsuits and claims include
actions involving product liability, contracts, intellectual
property, employment and environmental matters. The defense of
these lawsuits may divert our managements attention, and
we may incur significant expenses in defending these lawsuits.
In addition, we may be required to pay damage awards or
settlements, or become subject to injunctions or other equitable
remedies, that could have a material adverse effect on our
financial condition and results of operations.
While we do not believe that any litigation in which we are
currently engaged would have such an adverse effect, the outcome
of these legal proceedings may differ from our expectations
because the outcomes of litigation, including regulatory
matters, are often difficult to reliably predict.
We may incur material losses and costs as a result of product
liability, warranty and recall claims that may be brought
against us.
We may be exposed to product liability and warranty claims in
the event that our products actually or allegedly fail to
perform as expected or the use of our products results, or is
alleged to result, in bodily injury
and/or
property damage. Accordingly, we could experience material
warranty or product liability losses in the future and incur
significant costs to defend these claims. In addition, if any of
our products are, or are alleged to be, defective, we may be
required to participate in a recall of that product if the
defect or the alleged defect relates to safety. Product
liability, warranty and recall costs may have a material adverse
effect on our financial condition and results of operations.
Much of our business is subject to extensive government
regulation, and failure to comply with those regulations could
have a material adverse effect on our results of operations and
financial condition.
Numerous national and local government agencies in a number of
countries regulate our products and the products sold by our
customers incorporating our products. The U.S. National
Highway Traffic Safety Administration regulates the manufacture
and sale of many of our automotive products. The U.S. Food
and Drug
12
Administration regulates the approval, manufacturing and sale
and marketing of many of our medical products. The
U.S. Federal Aviation Administration and the European
Aviation Safety Agency regulate the manufacture and sale of some
of our aerospace products and licenses the operation of our
repair stations. Failure to comply with applicable regulations
and quality assurance guidelines could lead to manufacturing
shutdowns, product shortages or delays in product manufacturing.
We are also subject to numerous foreign, federal, state and
local environmental protection and health and safety laws
governing, among other things:
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the generation, storage, use and transportation of hazardous
materials;
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emissions or discharges of substances into the environment; and
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the health and safety of our employees.
|
These laws and government regulations are complex, change
frequently and have tended to become more stringent over time.
We cannot provide assurance that our costs of complying with
current or future environmental protection and health and safety
laws, or our liabilities arising from past or future releases
of, or exposures to, hazardous substances will not exceed our
estimates or adversely affect our financial condition and
results of operations. Moreover, we may be subject to additional
environmental claims, which may include claims for personal
injury or cleanup, in the future based on our past, present or
future business activities, which could also adversely affect
our financial condition and results of operations.
The costs associated with our restructuring programs may be
greater than expected.
We are engaged in restructuring programs, which require
management to utilize significant estimates related to
realizable values of assets made redundant or obsolete and
expenses for severance and other employee separation costs,
lease cancellation and other exit costs. Actual results could
differ materially from those estimated due to, among other
things: unanticipated expenditures in connection with the
effectuation of the programs; costs and length of time required
to comply with legal requirements applicable to certain aspects
of the programs; inability to realize anticipated cost savings;
and unanticipated difficulties in connection with consolidation
of manufacturing and administrative functions.
Our implementation of a new enterprise resource planning
system in our Medical Segment may result in problems that could
adversely affect us.
We are in the process of implementing a third party enterprise
resource planning, or ERP, system across our Medical Segment in
an effort to enhance operating efficiencies and provide more
effective management of business operations. The first phase of
the implementation, which relates to our Medical Segment
operations in North America, is expected to be completed in the
third quarter of 2007. In the event we encounter any problems in
the implementation of the ERP system, we could experience
business disruptions in our Medical Segment, which could
adversely affect customer relationships and divert the attention
of our Medical Segment management team away from daily
operations. In addition, any delays in the implementation of the
ERP system could cause us to incur additional unexpected costs.
Should we experience such difficulties, our business, cash flows
and results of operations could be adversely affected.
Our acquisitions and strategic alliances may not meet revenue
or profit expectations.
As part of our strategy for growth, we have made and may
continue to make acquisitions and divestitures and enter into
strategic alliances. However, we may not be able to identify
suitable acquisition candidates, complete acquisitions or
integrate acquisitions successfully. In this regard,
acquisitions involve numerous risks, including difficulties in
the integration of the operations, technologies, services and
products of the acquired companies and the diversion of
managements attention from other business concerns.
Although our management will endeavor to evaluate the risks
inherent in any particular transaction, there can be no
assurance that we will properly ascertain all such risks. In
addition, prior acquisitions have resulted, and future
acquisitions could result, in the incurrence of substantial
additional indebtedness and other expenses. Future acquisitions
13
may also result in potentially dilutive issuances of equity
securities. There can be no assurance that difficulties
encountered with acquisitions will not have a material adverse
effect on our business, financial condition and results of
operations.
Our workforce covered by collective bargaining and similar
agreements could cause interruptions in our provision of
services.
Approximately 17% of our manufacturing revenues are produced by
operations for which a significant part of our workforce is
covered by collective bargaining agreements and similar
agreements in foreign jurisdictions. It is likely that a
significant portion of our workforce will remain covered by
collective bargaining and similar agreements for the foreseeable
future. Strikes or work stoppages could occur that would
adversely impact our relationships with our customers and our
ability to conduct our business.
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ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
None.
Our operations have approximately 170 owned and leased
properties consisting of plants, engineering and research
centers, distribution warehouses, offices and other facilities.
The properties are maintained in good operating condition and
are suitable for their intended use. All the plants have space
available for the activities currently conducted therein and
expected in the next several years.
Our major facilities are as follows:
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Square
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Owned or
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Location
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Footage
|
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Leased
|
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Commercial
Segment
|
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|
|
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Dassel, Germany
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232,000
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|
Owned
|
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Shanghai, P.R. China
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199,000
|
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|
Leased
|
|
Vrable, Slovakia
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175,000
|
|
|
|
Leased
|
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Richmond, Canada
|
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168,000
|
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|
|
Leased
|
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Litchfield, IL
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163,000
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|
|
Owned
|
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Chongqing, P.R. China
|
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149,000
|
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|
Leased
|
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Houston, TX
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147,000
|
|
|
|
Owned
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Van Wert, OH
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145,000
|
|
|
|
Owned
|
|
Nuevo Laredo, Mexico
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143,000
|
|
|
|
Leased
|
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Cluses, France
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120,000
|
|
|
|
Owned
|
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Matamoros, Mexico
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120,000
|
|
|
|
Leased
|
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Singapore, Singapore
|
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118,000
|
|
|
|
Owned
|
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Kitchener, Canada
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110,000
|
|
|
|
Owned
|
|
Shanghai, P.R. China
|
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|
106,000
|
|
|
|
Owned
|
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Basildon, England
|
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102,000
|
|
|
|
Leased
|
|
Haysville, KS
|
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100,000
|
|
|
|
Leased
|
|
Hagerstown, MD
|
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99,000
|
|
|
|
Owned
|
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Limerick, PA
|
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|
98,000
|
|
|
|
Owned
|
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Willis, TX
|
|
|
96,000
|
|
|
|
Owned
|
|
Hillsdale, MI
|
|
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91,000
|
|
|
|
Owned
|
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Suffield, CT
|
|
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90,000
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|
|
|
Leased
|
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Heiligenhaus, Germany
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87,000
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|
Owned
|
|
14
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|
|
|
|
|
|
|
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|
|
Square
|
|
|
Owned or
|
|
Location
|
|
Footage
|
|
|
Leased
|
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|
Gorinchem, Netherlands
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|
|
87,000
|
|
|
|
Leased
|
|
Sarasota, FL
|
|
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83,000
|
|
|
|
Owned
|
|
Quebec, Canada
|
|
|
76,000
|
|
|
|
Leased
|
|
Laredo, TX
|
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|
65,000
|
|
|
|
Leased
|
|
Shenyang, P.R. China
|
|
|
64,000
|
|
|
|
Leased
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Epila, Spain
|
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63,000
|
|
|
|
Owned
|
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Enschede, Netherlands
|
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54,000
|
|
|
|
Owned
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Siofok, Hungary
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|
50,000
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|
|
|
Leased
|
|
|
|
|
|
|
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Medical
Segment
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Haslet, TX
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368,000
|
|
|
|
Leased
|
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Nuevo Laredo, Mexico
|
|
|
358,000
|
|
|
|
Leased
|
|
Tecate, Mexico
|
|
|
290,000
|
|
|
|
Leased
|
|
Durham, NC
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|
|
199,000
|
|
|
|
Leased
|
|
Kernen, Germany
|
|
|
190,000
|
|
|
|
Owned
|
|
Kamunting, Malaysia
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|
|
184,000
|
|
|
|
Owned
|
|
Durham, NC
|
|
|
145,000
|
|
|
|
Owned
|
|
Kernen, Germany
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|
|
109,000
|
|
|
|
Leased
|
|
Arlington Heights, IL
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86,000
|
|
|
|
Leased
|
|
Kenosha, WI
|
|
|
76,000
|
|
|
|
Owned
|
|
Kamunting, Malaysia
|
|
|
74,000
|
|
|
|
Leased
|
|
Jaffrey, NH
|
|
|
62,000
|
|
|
|
Owned
|
|
Betschdorf, France
|
|
|
54,000
|
|
|
|
Owned
|
|
Bad Liebenzell, Germany
|
|
|
53,000
|
|
|
|
Leased
|
|
|
|
|
|
|
|
|
|
|
Aerospace
Segment
|
|
|
|
|
|
|
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|
Cincinnati, OH
|
|
|
199,000
|
|
|
|
Leased
|
|
Simi Valley, CA
|
|
|
122,000
|
|
|
|
Leased
|
|
Singapore, Singapore
|
|
|
122,000
|
|
|
|
Owned
|
|
Muncie, IN
|
|
|
105,000
|
|
|
|
Leased
|
|
Miesbach, Germany
|
|
|
101,000
|
|
|
|
Leased
|
|
Mentor, OH
|
|
|
90,000
|
|
|
|
Leased
|
|
Ripley, England
|
|
|
77,000
|
|
|
|
Leased
|
|
In addition to the properties listed above, we own or lease
approximately 1,399,000 square feet of warehousing,
manufacturing and office space located in the United States,
Canada, Mexico, South America, Europe, Australia and Asia. We
also own or lease certain properties that are no longer being
used in our operations. We are actively marketing these owned
properties and seeking to sublease these leased properties. At
December 31, 2006, the owned properties were classified as
held for sale.
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ITEM 3.
|
LEGAL
PROCEEDINGS
|
We are a party to various lawsuits and claims arising in the
normal course of business. These lawsuits and claims include
actions involving product liability, intellectual property,
employment and environmental matters. Based on information
currently available, advice of counsel, established reserves and
other resources, we do not believe that any such actions are
likely to be, individually or in the aggregate, material to our
business, financial condition, results of operations or
liquidity. However, in the event of unexpected further
15
developments, it is possible that the ultimate resolution of
these matters, or other similar matters, if unfavorable, may be
materially adverse to our business, financial condition, results
of operations or liquidity.
In February 2004, a jury verdict of $34.8 million was
rendered against one of our subsidiaries in a trademark
infringement action. In February 2005, the trial judge entered
an order rejecting the jury award in its entirety. In October
2006, the United States Court of Appeals for the Federal Circuit
upheld the February 2005 decision. As no appeal of the Court of
Appeals decision was filed within the requisite time for
filing appeals in this matter, the decision has become final.
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|
ITEM 4.
|
SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
|
No matters were submitted to a vote of our stockholders during
the quarter ended December 31, 2006.
PART II
|
|
ITEM 5.
|
MARKET FOR
REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
|
Our common stock is listed on the New York Stock Exchange, Inc.
(symbol TFX). Our quarterly high and low stock
prices and dividends for 2006 and 2005 are shown below.
Price
Range and Dividends of Common Stock
|
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|
2006
|
|
High
|
|
|
Low
|
|
|
Dividends
|
|
|
First Quarter
|
|
$
|
70.80
|
|
|
$
|
62.56
|
|
|
$
|
0.250
|
|
Second Quarter
|
|
$
|
72.22
|
|
|
$
|
49.67
|
|
|
$
|
0.285
|
|
Third Quarter
|
|
$
|
60.98
|
|
|
$
|
50.31
|
|
|
$
|
0.285
|
|
Fourth Quarter
|
|
$
|
65.89
|
|
|
$
|
54.00
|
|
|
$
|
0.285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
High
|
|
|
Low
|
|
|
Dividends
|
|
|
First Quarter
|
|
$
|
52.85
|
|
|
$
|
48.24
|
|
|
$
|
0.220
|
|
Second Quarter
|
|
$
|
59.85
|
|
|
$
|
49.41
|
|
|
$
|
0.250
|
|
Third Quarter
|
|
$
|
71.58
|
|
|
$
|
56.97
|
|
|
$
|
0.250
|
|
Fourth Quarter
|
|
$
|
71.99
|
|
|
$
|
64.08
|
|
|
$
|
0.250
|
|
Various senior and term note agreements provide for the
maintenance of certain financial ratios and limit the repurchase
of our stock and payment of cash dividends. Under the most
restrictive of these provisions, $148 million of retained
earnings was available for dividends and stock repurchases at
December 31, 2006. On February 21, 2007, the Board of
Directors declared a quarterly dividend of $0.285 per share
on our common stock, which is payable on March 15, 2007 to
holders of record on March 5, 2007. As of February 15,
2007, we had approximately 957 holders of record of our common
stock.
On July 25, 2005, our Board of Directors authorized the
repurchase of up to $140 million of outstanding Teleflex
common stock over twelve months ended July 2006. In June 2006,
our Board of Directors extended for an additional six months,
until January 2007, its authorization for the repurchase of
shares. Under the approved plan, we repurchased a total of
2,317,347 shares on the open market during 2005 and the
first nine months of 2006 for an aggregate purchase price of
$140.0 million, and aggregate fees and commissions of
$0.1 million.
16
The following graph provides a comparison of five year
cumulative total stockholder returns of Teleflex common stock,
the Standard & Poor (S&P) 500 Stock Index and the
S&P MidCap 400 Index. We have selected the S&P MidCap
400 Index because, due to the diverse nature of our businesses,
we do not believe that there exists a relevant published
industry or
line-of-business
index and do not believe we can reasonably identify a peer
group. The annual changes for the five-year period shown on the
graph are based on the assumption that $100 had been invested in
Teleflex common stock and each index on December 31, 2001
and that all dividends were reinvested.
MARKET PERFORMANCE
Comparison of Cumulative Five Year Total Return
17
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(Dollars in
thousands, except per share)
|
|
|
Statement of Income
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues(1)
|
|
$
|
2,646,757
|
|
|
$
|
2,514,552
|
|
|
$
|
2,390,411
|
|
|
$
|
2,060,896
|
|
|
$
|
1,849,897
|
|
Income from continuing operations
before interest, taxes and minority interest
|
|
$
|
254,612
|
|
|
$
|
248,068
|
|
|
$
|
134,256
|
|
|
$
|
199,690
|
|
|
$
|
209,012
|
|
Income from continuing operations
|
|
$
|
139,930
|
|
|
$
|
139,772
|
|
|
$
|
65,124
|
|
|
$
|
115,551
|
|
|
$
|
122,431
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations basic
|
|
$
|
3.52
|
|
|
$
|
3.45
|
|
|
$
|
1.62
|
|
|
$
|
2.92
|
|
|
$
|
3.12
|
|
Income from continuing
operations diluted
|
|
$
|
3.50
|
|
|
$
|
3.41
|
|
|
$
|
1.61
|
|
|
$
|
2.89
|
|
|
$
|
3.08
|
|
Cash dividends
|
|
$
|
1.105
|
|
|
$
|
0.97
|
|
|
$
|
0.86
|
|
|
$
|
0.78
|
|
|
$
|
0.71
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,359,052
|
|
|
$
|
2,403,048
|
|
|
$
|
2,691,734
|
|
|
$
|
2,144,745
|
|
|
$
|
1,844,496
|
|
Long-term borrowings, less current
portion(1)
|
|
$
|
487,370
|
|
|
$
|
505,272
|
|
|
$
|
685,912
|
|
|
$
|
229,634
|
|
|
$
|
240,038
|
|
Shareholders equity
|
|
$
|
1,189,421
|
|
|
$
|
1,142,074
|
|
|
$
|
1,109,733
|
|
|
$
|
1,062,302
|
|
|
$
|
912,281
|
|
Statement of Cash Flows
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities from continuing operations
|
|
$
|
343,875
|
|
|
$
|
333,459
|
|
|
$
|
249,874
|
|
|
$
|
222,797
|
|
|
$
|
194,405
|
|
Net cash provided by (used in)
financing activities from continuing operations
|
|
$
|
(250,105
|
)
|
|
$
|
(258,924
|
)
|
|
$
|
260,293
|
|
|
$
|
(33,643
|
)
|
|
$
|
(87,925
|
)
|
Net cash provided by (used in)
investing activities from continuing operations
|
|
$
|
(100,412
|
)
|
|
$
|
58,440
|
|
|
$
|
(461,925
|
)
|
|
$
|
(159,552
|
)
|
|
$
|
(118,038
|
)
|
Free cash
flow(2)
|
|
$
|
236,547
|
|
|
$
|
224,288
|
|
|
$
|
162,361
|
|
|
$
|
115,618
|
|
|
$
|
94,536
|
|
Certain reclassifications have been made to the prior
years selected financial data to conform to current year
presentation. Certain financial information is presented on a
rounded basis, which may cause minor differences.
|
|
|
(1) |
|
Amounts exclude the impact of certain businesses sold or
discontinued, which have been presented in our consolidated
financial results as discontinued operations. |
|
(2) |
|
Free cash flow is calculated by reducing operating cash flow by
capital expenditures and dividends. Free cash flow may be
considered a non-GAAP financial measure. We use this financial
measure for internal managerial purposes, when publicly
providing guidance on possible future results, and as a means to
evaluate
period-to-period
comparisons. This financial measure is used in addition to and
in conjunction with results presented in accordance with GAAP
and should not be relied upon to the exclusion of GAAP financial
measures. This financial measure reflects an additional way of
viewing an aspect of our operations |
18
|
|
|
|
|
that, when viewed with our GAAP results and the accompanying
reconciliation to the corresponding GAAP financial measure,
provides a more complete understanding of factors and trends
affecting our business. Management believes that free cash flow
is a useful measure to investors because it provides an
indication of the amount of our cash flow currently available to
support our ongoing operations. Management strongly encourages
investors to review our financial statements and publicly-filed
reports in their entirety and to not rely on any single
financial measure. The following is a reconciliation of free
cash flow to the nearest GAAP measure as required under
Securities and Exchange Commission rules. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(Dollars in
thousands)
|
|
|
Free cash flow
|
|
$
|
236,547
|
|
|
$
|
224,288
|
|
|
$
|
162,361
|
|
|
$
|
115,618
|
|
|
$
|
94,536
|
|
Capital expenditures
|
|
|
63,232
|
|
|
|
69,851
|
|
|
|
52,938
|
|
|
|
76,298
|
|
|
|
72,008
|
|
Dividends
|
|
|
44,096
|
|
|
|
39,320
|
|
|
|
34,575
|
|
|
|
30,881
|
|
|
|
27,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities from continuing operations
|
|
$
|
343,875
|
|
|
$
|
333,459
|
|
|
$
|
249,874
|
|
|
$
|
222,797
|
|
|
$
|
194,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Overview
We are focused on achieving consistent and sustainable growth
through the continued development of our core businesses and
carefully selected acquisitions. Our internal growth initiatives
include the development of new products, moving existing
products into market adjacencies in which we already participate
with other products and the expansion of market share. Our core
revenue growth in 2006 as compared to 2005, excluding the
impacts of currency, acquisitions and divestitures, was 5%. Core
growth was strongest in our Aerospace Segment, which grew 8%,
and weakest in our Medical Segment, which grew 3% year over year.
Segment operating profit increased 10% in 2006 due primarily to
cost and productivity improvements in our Aerospace and Medical
segments, offset, in part, by a decline in our Commercial
Segment margins.
On July 25, 2005, our Board of Directors authorized the
repurchase of up to $140 million of our outstanding common
stock over twelve months ended July 2006. In June 2006, our
Board of Directors extended for an additional six months, until
January 2007, its authorization for the repurchase of shares.
Under the approved plan, we repurchased a total of
2,317,347 shares on the open market during 2005 and 2006
for an aggregate purchase price of $140.0 million, and
aggregate fees and commissions of $0.1 million, with
1,627,247 shares repurchased during 2006 for an aggregate
purchase price of $93.5 million, and aggregate fees and
commissions of $0.1 million.
In November 2006, we acquired Taut, Inc., or Taut, a producer of
instruments and devices for minimally invasive surgical
procedures, particularly laparoscopic surgery, for
$28.0 million. The results for Taut are included in our
Medical Segment. Also in November 2006, we acquired Ecotrans
Technologies, Inc., or Ecotrans, a leading supplier of
locomotive anti-idling and emissions reduction solutions for the
railroad industry, for $10.1 million. The results for
Ecotrans are included in our Commercial Segment.
Critical
Accounting Estimates
The preparation of consolidated financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates and assumptions.
19
We have identified the following as critical accounting
estimates, which are defined as those that are reflective of
significant judgments and uncertainties, are the most pervasive
and important to the presentation of our financial condition and
results of operations and could potentially result in materially
different results under different assumptions and conditions.
Inventories are valued at the lower of cost or market. Inherent
in this valuation are significant management judgments and
estimates concerning excess inventory and obsolescence rates.
Based upon these judgments and estimates, we record a reserve to
adjust the carrying amount of our inventories. We regularly
compare inventory quantities on hand against historical usage or
forecasts related to specific items in order to evaluate
obsolescence and excessive quantities. In assessing historical
usage, we also qualitatively assess business trends to evaluate
the reasonableness of using historical information as an
estimate of future usage. Our inventory reserve was
$46.6 million and $44.6 million at December 31,
2006 and December 25, 2005, respectively.
|
|
|
Accounting for
Long-Lived Assets and Investments
|
The ability to realize long-lived assets is evaluated
periodically as events or circumstances indicate a possible
inability to recover their carrying amount. Such evaluation is
based on various analyses, including undiscounted cash flow
projections. The analyses necessarily involve significant
management judgment. Any impairment loss, if indicated, is
measured as the amount by which the carrying amount of the asset
exceeds the estimated fair value of the asset.
|
|
|
Accounting for
Goodwill and Other Intangible Assets
|
In accordance with SFAS No. 142, we perform an annual
impairment test of our recorded goodwill. In addition, we test
our other indefinite-lived intangible assets for impairment.
These impairment tests can be significantly altered by estimates
of future performance, long-term discount rates and market price
valuation multiples. These estimates will likely change over
time. Many of our businesses operate in cyclical industries and
the valuation of these businesses can be expected to fluctuate
as a result of this cyclicality. Goodwill and other intangible
assets totaled $725.8 million and $712.0 million at
December 31, 2006 and December 25, 2005, respectively.
|
|
|
Accounting for
Pensions and Other Postretirement Benefits
|
We provide a range of benefits to eligible employees and retired
employees, including pensions and postretirement healthcare.
Several statistical and other factors which are designed to
project future events are used in calculating the expense and
liability related to these plans. These factors include
actuarial assumptions about discount rates, expected rates of
return on plan assets, compensation increases, turnover rates
and healthcare cost trend rates. We review the actuarial
assumptions on an annual basis and make modifications to the
assumptions based on current rates and trends when appropriate.
Significant differences in our actual experience or significant
changes in our assumptions may materially affect our pension and
other postretirement obligations and our future expense. A
50 basis point increase in the assumed discount rate would
have decreased the total net periodic pension and postretirement
healthcare expense for 2006 by approximately $1.8 million
and would have decreased the projected benefit obligation at
December 31, 2006 by approximately $17.9 million. A
50 basis point decrease in the assumed discount rate would
have increased these amounts by approximately $2.0 million
and $19.7 million, respectively. A 50 basis point
change in the expected return on plan assets would have impacted
2006 annual pension expense by approximately $0.7 million.
A 1.0% increase in the assumed healthcare trend rate would have
increased the 2006 benefit expense by approximately
$0.3 million and would have increased the projected benefit
obligation by approximately $2.7 million. A 1.0% decrease
in the assumed healthcare trend rate would have decreased the
20
2006 benefit expense by approximately $0.1 million and
would have decreased the projected benefit obligation by
approximately $2.3 million.
|
|
|
Accounting for
Restructuring Costs
|
Restructuring costs, which include termination benefits,
contract termination costs and other restructuring costs, are
recorded at estimated fair value. Key assumptions in calculating
the restructuring costs include the terms that may be negotiated
to exit certain contractual obligations and the timing of
employees leaving the company.
|
|
|
Accounting for
Allowance for Doubtful Accounts
|
An allowance for doubtful accounts is maintained for which the
collection of the full amount of accounts receivable is
doubtful. The allowance is based on our historical experience,
the period an account is outstanding, the financial position of
the customer and information provided by credit rating services.
We review the allowance periodically and adjust it as necessary.
Our allowance for doubtful accounts was $10.1 million at
both December 31, 2006 and December 25, 2005.
|
|
|
Product Warranty
Liability
|
Most of our sales are covered by warranty provisions for the
repair or replacement of qualifying defective items for a
specified period after the time of the sales. We estimate our
warranty costs and liability based on a number of factors
including historical trends of units sold, the status of
existing claims, recall programs and communication with
customers. Our estimated product warranty liability was
$14.1 million and $14.2 million at December 31,
2006 and December 25, 2005, respectively.
|
|
|
Accounting for
Income Taxes
|
Our annual provision for income taxes and determination of the
deferred tax assets and liabilities require management to assess
uncertainties, make judgments regarding outcomes and utilize
estimates. We conduct a broad range of operations around the
world, subjecting us to complex tax regulations in numerous
international taxing jurisdictions, resulting at times in tax
audits, disputes and potentially litigation, the outcome of
which is uncertain. Management must make judgments about such
uncertainties and determine estimates of our tax assets and
liabilities. To the extent the final outcome differs, future
adjustments to our tax assets and liabilities will be necessary.
Our income taxes payable was $38.6 million and
$46.2 million at December 31, 2006 and
December 25, 2005, respectively.
We are also required to assess the realizability of our deferred
tax assets, taking into consideration our forecast of future
taxable income and available tax planning strategies that could
be implemented to realize the deferred tax assets. Based on this
assessment, management must evaluate the need for, and amount
of, valuation allowances against our deferred tax assets. To the
extent facts and circumstances change in the future, adjustments
to the valuation allowances may be required.
Accounting
Standards Issued Not Yet Adopted
In June 2006, the Financial Accounting Standards Board, or FASB,
issued Interpretation, or FIN, No. 48, Accounting for
Uncertainty in Income Taxes an interpretation of
FASB Statement No. 109. FIN No. 48
clarifies the accounting for uncertainty in income taxes
recognized in an enterprises financial statements in
accordance with SFAS No. 109, Accounting for
Income Taxes. FIN No. 48 requires that the
impact of a tax position be recognized in the financial
statements if it is more likely than not that the tax position
will be sustained on tax audit, based on the technical merits of
the position. FIN No. 48 also provides guidance on
derecognition of tax positions that do not meet the more
likely than not standard, classification of tax assets and
liabilities, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions of
21
FIN No. 48 are effective for fiscal years beginning
after December 15, 2006. We are currently evaluating the
impact of FIN No. 48 on our financial position,
results of operations and cash flows.
See also Note 2 to our consolidated financial statements
included in this Annual Report on
Form 10-K.
Results of
Operations
Discussion of growth from acquisitions reflects the impact of a
purchased company up to twelve months beyond the date of
acquisition. Activity beyond the initial twelve months is
considered core growth. Core growth excludes the impact of
translating the results of international subsidiaries at
different currency exchange rates from year to year, the impact
of eliminating the one-month reporting lag for certain of our
foreign operations and the comparable activity of divested
companies within the most recent twelve-month period. The
following comparisons exclude the impact of the automotive pedal
systems business, Sermatech International business, European
medical product sterilization business and small medical
business, which have been presented in our consolidated
financial results as discontinued operations.
|
|
|
Comparison of
2006 and 2005
|
Revenues increased 5% in 2006 to $2.65 billion from
$2.51 billion in 2005, principally due to core growth. The
Commercial, Medical and Aerospace segments comprised 47%, 33%
and 20% of our 2006 revenues, respectively.
Materials, labor and other product costs as a percentage of
revenues improved to 70.7% in 2006 from 71.8% in 2005, due
primarily to the benefits of our restructuring initiatives and
other cost reduction efforts. Selling, engineering and
administrative expenses (operating expenses) as a percentage of
revenues increased to 18.6% in 2006 compared with 17.9% in 2005,
due primarily to $10.4 million of costs associated with the
initial phases of an information systems implementation program
in our Medical Segment, $6.8 million of stock-based
compensation expensed under SFAS No. 123(R) and
various temporary inefficiencies in our Medical Segment during
the first half of 2006.
Interest expense declined in 2006 principally as a result of
lower debt balances. Interest income increased in 2006 primarily
due to higher average cash balances and more favorable interest
rates compared to the prior period. The effective income tax
rate was 24.72% in 2006 compared with 22.99% 2005. The increase
in the effective income tax rate primarily reflects the
favorable impact in 2005 of the American Jobs Creation Act, or
AJCA, repatriation benefit. Minority interest in consolidated
subsidiaries increased $4.6 million in 2006 due to
increased profits from our entities that are not wholly-owned.
Net income for 2006 was $139.4 million compared to
$138.8 million for 2005. Diluted earnings per share
increased 3% to $3.49 for 2006.
On December 26, 2005, we adopted the provisions of
SFAS No. 123(R), Share-Based Payment,
which requires the measurement and recognition of compensation
expense for all stock-based awards made to employees based on
estimated fair values. SFAS No. 123(R) supersedes
previous accounting under Accounting Principles Board, or APB,
Opinion No. 25, Accounting for Stock Issued to
Employees, for periods beginning in fiscal 2006. In March
2005, the SEC issued Staff Accounting Bulletin, or SAB,
No. 107, providing supplemental implementation guidance for
SFAS 123(R). We have applied the provisions of
SAB No. 107 in our adoption of
SFAS No. 123(R).
SFAS No. 123(R) requires companies to estimate the
fair value of stock-based awards on the date of grant using an
option pricing model. The value of the portion of the award that
is ultimately expected to vest is recognized as expense over the
requisite service periods. We adopted SFAS No. 123(R)
using the modified prospective application method, which
requires the application of the standard starting from
December 26, 2005, the first day of our 2006 fiscal year.
Our consolidated financial statements for 2006 reflect the
impact of SFAS No. 123(R).
22
Stock-based compensation expense related to employee stock
options recognized under SFAS No. 123(R) for 2006 was
$6.8 million and is included in selling, engineering and
administrative expenses. The total income tax benefit recognized
for share-based compensation arrangements for 2006 was
$1.4 million. As of December 31, 2006, total
unamortized stock-based compensation cost related to non-vested
stock options, net of expected forfeitures, was
$9.2 million, which is expected to be recognized over a
weighted-average period of 1.9 years.
Prior to the adoption of SFAS No. 123(R), we accounted
for stock-based awards to employees using the intrinsic value
method in accordance with APB No. 25, as allowed under
SFAS No. 123, Accounting for Stock-Based
Compensation. Under the intrinsic value method, no
stock-based compensation expense for employee stock options had
been recognized in our consolidated statements of operations
because the exercise price of our stock options granted to
employees equaled the fair market value of the underlying stock
at the date of grant. In accordance with the modified
prospective transition method we used in adopting
SFAS No. 123(R), our results of operations prior to
fiscal 2006 have not been restated to reflect, and do not
include, the impact of SFAS No. 123(R).
Additional information regarding stock-based compensation and
our stock compensation plans is presented in Notes 1 and 11
to our consolidated financial statements included in this Annual
Report on
Form 10-K.
In June 2006, we began certain restructuring initiatives that
affect all three of our operating segments. These initiatives
involve the consolidation of operations and a related reduction
in workforce at several of our facilities in Europe and North
America. We have determined to undertake these initiatives as a
means to improving operating performance and to better leverage
our existing resources. The charges associated with the 2006
restructuring program that are included in restructuring and
impairment charges during 2006 totaled $5.9 million, of
which 55%, 26% and 19% were attributable to our Commercial,
Medical and Aerospace segments, respectively. As of
December 31, 2006, we expect to incur future restructuring
costs associated with our 2006 restructuring program of between
$3.0 million and $5.4 million in our Commercial,
Medical and Aerospace segments over the next two quarters.
During the first quarter of 2006, we began a restructuring
activity in our Aerospace Segment. The actions relate to the
closure of a manufacturing facility, termination of employees
and relocation of operations. The charges associated with this
activity that are included in restructuring and impairment
charges during 2006 totaled $0.6 million. We do not expect
to incur future restructuring costs associated with this
activity.
During the fourth quarter of 2004, we announced and commenced
implementation of a restructuring and divestiture program
designed to improve future operating performance and position us
for future earnings growth. The actions have included exiting or
divesting non-core or low performing businesses, consolidating
manufacturing operations and reorganizing administrative
functions to enable businesses to share services. The charges,
including changes in estimates, associated with the 2004
restructuring and divestiture program for continuing operations
that are included in restructuring and impairment charges during
2006, 2005 and 2004 totaled $10.4 million,
$27.1 million and $67.6 million, respectively. The
$10.4 million was attributable to our Medical Segment. Of
the $27.1 million, 13%, 76% and 11% were attributable to
our Commercial, Medical and Aerospace segments, respectively. Of
the $67.6 million, 31%, 15% and 54% were attributable to
our Commercial, Medical and Aerospace segments, respectively. As
of December 31, 2006, we expect to incur future
restructuring costs associated with our 2004 restructuring and
divestiture program of between $1.6 million and
$3.2 million in our Medical Segment during 2007.
Certain costs associated with the 2004 restructuring and
divestiture program are not included in restructuring and
impairment charges. All inventory adjustments that resulted from
the 2004 restructuring and divestiture program and certain other
costs associated with closing out businesses during 2005 and
2004 are included in materials, labor and other product costs
and totaled $2.0 million and $17.0 million,
respectively. The $2.0 million in costs for 2005 related to
our Aerospace Segment. Of the $17.0 million in costs for
2004, $4.5 million and $12.5 million were attributed
to our Commercial and Aerospace segments, respectively.
23
The cost savings from our restructuring programs were lower than
expected in 2006 due primarily to implementation inefficiencies
in our Medical Segment during the first half of the year, but we
began to experience our anticipated rate of savings during the
second half of the year.
For a more complete discussion of our restructuring programs,
see Note 4 to our consolidated financial statements
included in this Annual Report on
Form 10-K.
We performed an annual impairment test of our recorded goodwill
and indefinite-lived intangible assets in the fourth quarter of
2006 and determined that a portion of our goodwill was impaired.
We recorded a charge of $1.0 million, which is included in
restructuring and impairment charges. Also during 2006, we
determined that three minority held investments and certain
fixed assets were impaired and recorded an aggregate charge of
$7.4 million, which is included in restructuring and
impairment charges.
|
|
|
Comparison of
2005 and 2004
|
Revenues increased 5% in 2005 to $2.51 billion from
$2.39 billion in 2004. This increase was due to increases
of 5% from core growth and 4% from acquisitions, offset, in
part, by decreases of 3% from dispositions and 1% from the
impact of eliminating the one-month reporting lag in 2004 for
certain of our foreign operations. The Commercial, Medical and
Aerospace segments comprised 47%, 33% and 20% of our 2005
revenues, respectively.
Materials, labor and other product costs as a percentage of
revenues increased to 71.8% in 2005 compared with 71.3% in 2004
due primarily to the impact of duplicate costs and
inefficiencies related to the transfer of products between
facilities in the Commercial Segment associated with the
restructuring program. Selling, engineering and administrative
expenses (operating expenses) as a percentage of revenues
declined to 17.9% in 2005 compared with 20.4% in 2004 due
primarily to the continuing reduction of facilities and
supporting infrastructure costs and decreased corporate expenses
relative to higher revenues.
Interest expense increased in 2005 principally from higher
acquisition related debt balances in the first half of 2005.
Interest income increased in 2005 primarily due to higher
average cash balances, related to increased proceeds received
from sales of businesses and assets in 2005. The effective
income tax rate was 22.99% in 2005 compared with 13.17% in 2004.
The higher rate in 2005 was primarily the result of the increase
in foreign earnings for businesses located in higher-taxed
jurisdictions. Minority interest in consolidated subsidiaries
increased $1.1 million in 2005 due to increased profits
from our entities that are not wholly-owned. Net income for 2005
was $138.8 million, an increase of $129.3 million from
2004, due primarily to a 60% decrease in restructuring costs and
to the gain on the sale of the Sermatech business. Diluted
earnings per share increased $3.15 to $3.39, and includes the
net gain on sales of businesses and assets and the cost of
restructuring and discontinued operations.
Segment
Reviews
The following is a discussion of our segment operating results.
Additional information regarding our segments is presented in
Note 15 to our consolidated financial statements included
in this Annual Report on
Form 10-K.
Commercial
Products in the Commercial Segment are manufactured for broad
distribution as well as custom fabricated to meet individual
customer needs. Consumer spending patterns influence the market
trends for products sold to the automotive, marine and certain
power equipment markets.
Automotive cable and shifter products are manufactured primarily
for automotive OEMs. Discussion of marine and industrial product
lines below includes the manufacturing and distribution of
driver controls,
24
motion controls, power and vehicle management systems and fuel
management systems to the automotive supply, marine and
industrial markets.
|
|
|
Comparison of
2006 and 2005
|
Commercial Segment revenues increased 5% in 2006 to
$1.25 billion from $1.19 billion in 2005, principally
due to core growth. The segment benefited from increased sales
in 2006 of alternative fuel systems and auxiliary power systems
and sales of heavy-duty rigging and cable used in marine
construction and the securing of oil platforms, offset, in part,
by lower volume and customer price reductions for automotive
products.
Commercial Segment operating profit declined 3% in 2006 to
$78.4 million from $81.1 million in 2005. Operating
profit improvements resulting from sales of auxiliary power
units and other higher margin industrial products were more than
offset by costs associated with the end of certain automotive
programs, mix and margin pressure associated with lower volume
and customer price reductions for automotive products coupled
with increases in commodity pricing. Operating profit as a
percent of revenues declined to 6.3% in 2006 from 6.8% in 2005.
Assets in the Commercial Segment declined $11.1 million or
2%, primarily due to the decrease in net property, plant and
equipment and accounts receivable, offset, in part, by the
impact of currency.
|
|
|
Comparison of
2005 and 2004
|
Commercial Segment revenues declined 1% in 2005 to
$1.19 billion from $1.20 billion in 2004. The segment
generated an increase of 3% from core growth that was more than
offset by a 4% decrease from dispositions. The segment benefited
from strength in its industrial OEM markets, the contribution of
new driver controls and power and vehicle management system
products and increased sales of driver and motion controls to
automotive OEM markets. These benefits were more than offset by
slower sales of products into marine and recreational markets.
Commercial Segment operating profit declined 23% in 2005 to
$81.1 million from $105.7 million in 2004. This
decline primarily reflects lower volume related contributions
from higher margin marine and recreational products, the impact
of duplicate costs and inefficiencies related to the transfer of
products between two Tier 2 automotive supply facilities,
the bankruptcy of an automotive supply customer and the impact
of divestitures made in 2004. Operating profit as a percent of
revenues declined to 6.8% in 2005 from 8.8% in 2004.
Assets in the Commercial Segment declined $120.2 million or
14%, primarily due to the decrease in non-current deferred tax
assets and net property, plant and equipment and the impact of
currency.
Medical
Products in the Medical Segment generally are required to meet
exacting standards of performance and have long product life
cycles. Economic influences on revenues relate primarily to
spending patterns in the worldwide medical devices and hospital
supply market.
|
|
|
Comparison of
2006 and 2005
|
Medical Segment revenues increased 3% in 2006 to
$858.7 million from $831.1 million in 2005,
principally due to core growth. The segment benefited from sales
of new products in respiratory care and sleep therapy, including
distribution of products through alliances with other
manufacturers, and continued growth of diagnostic and
therapeutic device products sold to medical device
manufacturers, offset by a decline in sales of orthopedic
specialty devices sold to medical device manufacturers.
Medical Segment operating profit increased 8% in 2006 to
$161.7 million from $150.0 million in 2005. This
increase primarily reflects cost and productivity improvements
in the second half of the year, following
25
completion of significant restructuring activities. During the
first half of 2006, operating profit was negatively impacted by
costs associated with operational inefficiencies and the
consolidation of facilities and distribution centers. We also
incurred significant costs as planned in connection with the
initial phases of an information systems implementation program
during the first half of 2006. Operating profit as a percent of
revenues increased to 18.8% in 2006 from 18.0% in 2005.
Assets in the Medical Segment declined $6.6 million or 1%,
primarily due to the decrease in accounts receivable, deferred
tax assets and net property, plant and equipment, offset, in
part, by the impact of the Taut acquisition and the impact of
currency.
|
|
|
Comparison of
2005 and 2004
|
Medical Segment revenues increased 13% in 2005 to
$831.1 million from $736.4 million in 2004. This
increase was due to increases of 13% from acquisitions and 3%
from core growth, offset, in part, by decreases of 2% from the
impact of eliminating the one-month reporting lag in 2004 for
certain of our foreign operations and 1% from dispositions.
Medical Segment revenues increased primarily as a result of the
increased sale of disposable medical products, particularly
related to the third quarter 2004 acquisition of HudsonRCI, a
provider of respiratory care products. Sales of surgical
instruments and medical devices increased primarily as a result
of new product sales and volume increases for specialty devices
sold to medical device manufacturers.
Medical Segment operating profit increased 29% in 2005 to
$150.0 million from $116.7 million in 2004 driven
primarily by the HudsonRCI acquisition and significant
improvements in the core business as benefits of the
restructuring program began to be recognized. Operating profit
as a percent of revenues increased to 18.0% in 2005 from 15.8%
in 2004.
Assets in the Medical Segment declined $166.0 million or
15%, primarily due to the decrease in accounts receivable,
including the sale of certain receivables under a non-recourse
securitization program, the decrease in non-current deferred tax
assets and the impact of currency.
Aerospace
Products and services in the Aerospace Segment, many of which
are proprietary, require a high degree of engineering
sophistication and are often custom-designed. Economic
influences on these products and services relate primarily to
spending patterns in the worldwide aerospace industry and the
demand for additional air cargo capacity.
|
|
|
Comparison of
2006 and 2005
|
Aerospace Segment revenues increased 9% in 2006 to
$537.2 million from $493.8 million in 2005. This
increase was due to increases of 8% from core growth and 1% from
acquisitions. Core growth in wide body cargo handling systems,
repair services and precision machined components was partially
offset by the $6.5 million decrease in revenues resulting
from the phase out of our industrial gas turbine aftermarket
services business in 2005.
Aerospace Segment operating profit increased 51% to
$50.6 million from $33.4 million in 2005.
Volume-related efficiencies, additional higher margin cargo
spares sales and mix within our precision-machined components
business contributed to the improvement as did a reduction in
losses resulting from the exit of the industrial gas turbine
aftermarket services business. Operating profit as a percent of
revenues increased to 9.4% in 2006 from 6.8% in 2005.
Assets in the Aerospace Segment increased $4.3 million or
2%, primarily due to the impact of currency.
26
|
|
|
Comparison of
2005 and 2004
|
Aerospace Segment revenues increased 9% in 2005 to
$493.8 million from $453.2 million in 2004. Strong
core growth in repair products and services and in sales of both
narrow-body cargo loading systems and wide-body cargo system
conversions, along with an increase due to a small acquisition
in 2005, was partially offset by the impact of eliminating the
one-month reporting lag in 2004 for certain of our foreign
operations and by the phase out and closure of industrial gas
turbine aftermarket services.
Aerospace Segment operating profit increased to a profit of
$33.4 million in 2005 from a loss of $10.5 million in
2004, an improvement of $43.9 million. Higher volume and
improvements in precision-machined components and the cargo
systems businesses contributed to the increase as did a
reduction in losses resulting from the exit of the industrial
gas turbine aftermarket services. Operating profit (loss) as a
percent of revenues was 6.8% in 2005 versus (2.3)% in 2004.
Assets in the Aerospace Segment declined $107.7 million or
30%, primarily due to the impact of the sale of the Sermatech
International business.
Liquidity and
Capital Resources
Operating activities from continuing operations provided net
cash of $343.9 million during 2006. Changes in our
operating assets and liabilities during 2006 resulted in a net
cash inflow of $46.8 million. The most significant change
was a decrease in accounts receivable, which was primarily due
to improved cash collection. Our financing activities from
continuing operations during 2006 consisted primarily of
purchases of shares of our common stock of $93.6 million, a
decrease in notes payable and current borrowings of
$68.8 million, a reduction in long-term borrowings of
$55.0 million and payment of dividends of
$44.1 million. Our investing activities from continuing
operations during 2006 consisted primarily of capital
expenditures of $63.2 million and payments for businesses
acquired of $41.7 million, including a $4.3 million
deferred payment related to a prior period acquisition. During
2006, we also had proceeds from the sale of businesses and
assets of $8.0 million and made a $6.0 million payment
in connection with a post-closing purchase price adjustment
based on working capital for a divested business. We had net
cash provided by discontinued operations of $0.7 million in
2006.
Operating activities from continuing operations provided net
cash of approximately $333.5 million during 2005. Changes
in our operating assets and liabilities during 2005 resulted in
a net cash inflow of $69.7 million. The most significant
change was a decrease in accounts receivable, which was
primarily due to improved cash collection including the sale of
certain receivables under a non-recourse securitization program.
Our financing activities during 2005 consisted primarily of a
reduction in long-term borrowings of $270.3 million and
proceeds from long-term borrowings of $109.2 million, as a
result of improved operating cash flow, the repatriation of
foreign earnings, proceeds from the disposition of businesses
and lower capital spending. During 2005, we also paid dividends
to minority interest shareholders of $63.0 million and made
purchases of shares of our common stock of $46.5 million.
Our investing activities during 2005 consisted primarily of
proceeds from the sale of businesses and assets of
$142.9 million. During 2005, we also had capital
expenditures of $69.9 million. We had net cash used in
discontinued operations of $2.7 million in 2005.
Operating activities from continuing operations provided net
cash of approximately $249.9 million during 2004. Changes
in our operating assets and liabilities during 2004 resulted in
a net cash inflow of $25.9 million. The most significant
changes were an increase in accounts payable and accrued
expenses and a decrease in inventories, offset, in part, by an
increase in accounts receivable and a decrease in income taxes
payable. The increase in accounts payable and accrued expenses
was due primarily to increased accruals associated with the
restructuring and divestiture program. The decrease in
inventories was the result of our focus on improved working
capital management. The increase in accounts receivable was
largely a result of increased business levels and the HudsonRCI
acquisition. The decrease in income taxes payable was a result
of tax deductions associated with the restructuring and
divestiture program, for which the cash benefits were received
in 2005.
27
Our financing activities during 2004 consisted primarily of the
receipt of $511.6 million in gross proceeds from long-term
borrowings, primarily for the acquisition of HudsonRCI. This
amount is offset by a decrease in notes payable and current
borrowings of $137.8 million and a reduction in long-term
borrowings of $77.9 million, driven by improved operating
cash flow, proceeds from the disposition of businesses and lower
year-over-year
capital spending. Our investing activities during 2004 consisted
primarily of payments for businesses acquired of
$458.5 million. We had net cash provided by discontinued
operations of $7.4 million in 2004.
We use an accounts receivable securitization program to gain
access to enhanced credit markets and reduce financing costs. As
currently structured, we sell certain trade receivables on a
non-recourse basis to a consolidated special purpose entity,
which in turn sells an interest in those receivables to a
commercial paper conduit. The conduit issues notes secured by
that interest to third party investors. The assets of the
special purpose entity are not available to satisfy our
obligations. In accordance with the provisions of
SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities, transfers of assets under the program qualify
as sales of receivables and accordingly, $40.1 million of
accounts receivable and the related amounts previously recorded
in notes payable were removed from the consolidated balance
sheet as of both December 31, 2006 and December 25,
2005.
On July 25, 2005, our Board of Directors authorized the
repurchase of up to $140 million of our outstanding common
stock over twelve months ended July 2006. In June 2006, our
Board of Directors extended for an additional six months, until
January 2007, its authorization for the repurchase of shares.
Under the approved plan, we repurchased a total of
2,317,347 shares on the open market during 2005 and 2006
for an aggregate purchase price of $140.0 million, and
aggregate fees and commissions of $0.1 million, with
1,627,247 shares repurchased during 2006 for an aggregate
purchase price of $93.5 million, and aggregate fees and
commissions of $0.1 million.
The valuation allowance for deferred tax assets of
$51.3 million and $32.6 million at December 31,
2006 and December 25, 2005, respectively, relates
principally to the uncertainty of the utilization of certain
deferred tax assets, primarily tax loss and credit carryforwards
in various jurisdictions. We believe that we will generate
sufficient future taxable income to realize the tax benefits
related to the remaining net deferred tax asset. The valuation
allowance was calculated in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes,
which requires that a valuation allowance be established and
maintained when it is more likely than not that all
or a portion of deferred tax assets will not be realized. The
valuation allowance increase in 2006 was primarily attributable
to the recording of deferred tax assets associated with state
tax loss carryforwards at full value which required a valuation
allowance.
In addition to the cash generated from operations, we have
approximately $406 million in committed and
$165 million in uncommitted unused lines of credit
available. The availability of the lines of credit is dependent
upon us maintaining our financial condition including our
continued compliance with bank covenants. Various senior and
term note agreements provide for the maintenance of certain
financial ratios and limit the repurchase of our stock and
payment of cash dividends. Under the most restrictive of these
provisions, $148 million of retained earnings was available
for dividends and stock repurchases at December 31, 2006.
On February 21, 2007, the Board of Directors declared a
quarterly dividend of $0.285 per share on our common stock,
which is payable on March 15, 2007 to holders of record on
March 5, 2007. As of February 15, 2007, we had
approximately 957 holders of record of our common stock.
Fixed rate borrowings, excluding the effect of derivative
instruments, comprised 82% of total borrowings at
December 31, 2006. Approximately 19% of our total
borrowings of $518.4 million are denominated in currencies
other than the U.S. dollar, principally the euro, which we
believe provides a natural hedge against fluctuations in the
value of assets outside the United States.
During the fourth quarter of 2005, in order to take advantage of
the provisions of the AJCA, management executed a foreign
earnings repatriation plan. Under this plan, we repatriated
$304 million of dividends during November and December 2005.
28
The following table provides our net debt to total capital ratio:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in
thousands)
|
|
|
Net debt includes:
|
|
|
|
|
|
|
|
|
Current borrowings
|
|
$
|
31,022
|
|
|
$
|
125,510
|
|
Long-term borrowings
|
|
|
487,370
|
|
|
|
505,272
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
518,392
|
|
|
|
630,782
|
|
Less: Cash and cash equivalents
|
|
|
248,409
|
|
|
|
239,536
|
|
|
|
|
|
|
|
|
|
|
Net debt
|
|
$
|
269,983
|
|
|
$
|
391,246
|
|
|
|
|
|
|
|
|
|
|
Total capital includes:
|
|
|
|
|
|
|
|
|
Net debt
|
|
$
|
269,983
|
|
|
$
|
391,246
|
|
Shareholders equity
|
|
|
1,189,421
|
|
|
|
1,142,074
|
|
|
|
|
|
|
|
|
|
|
Total capital
|
|
$
|
1,459,404
|
|
|
$
|
1,533,320
|
|
|
|
|
|
|
|
|
|
|
Percent of net debt to total
capital
|
|
|
18%
|
|
|
|
26%
|
|
The decline in our percent of net debt to total capital for 2006
as compared to 2005 is primarily due to the repayment of current
and long-term borrowings during 2006, which was funded
principally by cash generated from operations.
We believe that our cash flow from operations and our ability to
access additional funds through credit facilities will enable us
to fund our operating requirements, capital expenditures and
additional acquisition opportunities.
Contractual obligations at December 31, 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by
period
|
|
|
|
|
|
|
Less
|
|
|
|
|
|
|
|
|
More
|
|
|
|
|
|
|
than
|
|
|
1-3
|
|
|
3-5
|
|
|
than
|
|
|
|
Total
|
|
|
1 year
|
|
|
years
|
|
|
years
|
|
|
5 years
|
|
|
|
(Dollars in
millions)
|
|
|
Long-term borrowings
|
|
$
|
494
|
|
|
$
|
7
|
|
|
$
|
68
|
|
|
$
|
169
|
|
|
$
|
250
|
|
Interest obligations
|
|
|
163
|
|
|
|
28
|
|
|
|
50
|
|
|
|
43
|
|
|
|
42
|
|
Operating lease obligations
|
|
|
170
|
|
|
|
35
|
|
|
|
57
|
|
|
|
35
|
|
|
|
43
|
|
Minimum purchase
obligations(1)
|
|
|
146
|
|
|
|
117
|
|
|
|
21
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
973
|
|
|
$
|
187
|
|
|
$
|
196
|
|
|
$
|
255
|
|
|
$
|
335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Purchase obligations are defined as agreements to purchase goods
or services that are enforceable and legally binding and that
specify all significant terms, including fixed or minimum
quantities to be purchased, fixed, minimum or variable pricing
provisions and the approximate timing of the transactions. These
obligations relate primarily to material purchase requirements. |
We also have obligations with respect to our pension and other
postretirement benefit plans. See Note 13 to our
consolidated financial statements included in this Annual Report
on
Form 10-K.
Off Balance Sheet
Arrangements
We have residual value guarantees under operating leases for
plant and equipment. The maximum potential amount of future
payments we could be required to make under these guarantees is
approximately $4.8 million.
We use an accounts receivable securitization program to gain
access to enhanced credit markets and reduce financing costs. As
currently structured, we sell certain trade receivables on a
non-recourse basis to a
29
consolidated special purpose entity, which in turn sells an
interest in those receivables to a commercial paper conduit. The
conduit issues notes secured by that interest to third party
investors. The assets of the special purpose entity are not
available to satisfy our obligations. In accordance with the
provisions of SFAS No. 140, transfers of assets under
the program qualify as sales of receivables and accordingly,
$40.1 million of accounts receivable and the related
amounts previously recorded in notes payable were removed from
the consolidated balance sheet as of both December 31, 2006
and December 25, 2005.
See also Note 14 to our consolidated financial statements
included in this Annual Report on
Form 10-K.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Market
Risk
We are exposed to certain financial risks, specifically
fluctuations in market interest rates, foreign currency exchange
rates and, to a lesser extent, commodity prices. We use
derivative financial instruments to manage or reduce the impact
of some of these risks. All instruments are entered into for
other than trading purposes. We are also exposed to changes in
the market traded price of our common stock as it influences the
valuation of stock options and their effect on earnings.
Interest
Rate Risk
We are exposed to changes in interest rates as a result of our
borrowing activities and our cash balances. Interest rate swaps
are used to manage a portion of our interest rate risk. The
table below is an analysis of the amortization and related
interest rates by year of maturity for our fixed and variable
rate debt obligations. Variable interest rates shown below are
weighted average rates of the debt portfolio. For the swaps,
notional amounts and related interest rates are shown by year of
maturity. The fair value of the interest rate swaps as of
December 31, 2006 was $0.3 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year of
Maturity
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
Thereafter
|
|
|
Total
|
|
|
|
(Dollars in
thousands)
|
|
|
Fixed rate debt
|
|
$
|
6,515
|
|
|
$
|
19,189
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
150,000
|
|
|
$
|
250,000
|
|
|
$
|
425,704
|
|
Average interest rate
|
|
|
7.1%
|
|
|
|
6.0%
|
|
|
|
|
|
|
|
|
|
|
|
5.2%
|
|
|
|
5.8%
|
|
|
|
5.6%
|
|
Variable rate debt
|
|
$
|
24,507
|
|
|
$
|
47,299
|
|
|
$
|
1,291
|
|
|
$
|
|
|
|
$
|
19,591
|
|
|
$
|
|
|
|
$
|
92,688
|
|
Average interest rate
|
|
|
5.2%
|
|
|
|
4.6%
|
|
|
|
7.0%
|
|
|
|
|
|
|
|
5.6%
|
|
|
|
|
|
|
|
5.0%
|
|
Amount subject to
swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable to fixed
|
|
|
|
|
|
$
|
59,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average rate to be received
|
|
|
|
|
|
|
4.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average rate to be paid
|
|
|
|
|
|
|
5.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A 1.0% increase or decrease in variable interest rates would
adversely or positively impact our expected net earnings by
approximately $0.2 million or ($0.2 million),
respectively.
Foreign
Currency Risk
We are exposed to fluctuations in market values of transactions
in currencies other than the functional currencies of certain
subsidiaries. We have entered into forward contracts with
several major financial institutions to hedge a portion of
projected cash flows from these exposures. The fair value of the
open forward contracts as of December 31, 2006 was
$0.4 million. The following table presents our open forward
currency
30
contracts as of December 31, 2006, which all mature in
2007. Forward contract notional amounts presented below are
expressed in the stated currencies (in thousands).
Forward
Currency Contracts:
|
|
|
|
|
|
|
(Pay)/Receive
|
|
|
U.S. dollars
|
|
|
(114,000
|
)
|
Euros
|
|
|
(4,472
|
)
|
Singapore dollars
|
|
|
37,180
|
|
Canadian dollars
|
|
|
81,234
|
|
Malaysian ringgits
|
|
|
85,963
|
|
A movement of 10% in the value of the U.S. dollar against
foreign currencies would impact our expected net earnings by
approximately $0.1 million.
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The financial statements and supplementary data required by this
Item are included herein, commencing on
page F-1.
|
|
ITEM 9.
|
CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A.
|
CONTROLS AND
PROCEDURES
|
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness
of our disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures as of the end of the
period covered by this report are functioning effectively to
provide reasonable assurance that the information required to be
disclosed by us in reports filed under the Securities Exchange
Act of 1934 is (i) recorded, processed, summarized and
reported within the time periods specified in the SECs
rules and forms and (ii) accumulated and communicated to
our management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions
regarding disclosure. A controls system cannot provide absolute
assurance, however, that the objectives of the controls system
are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if
any, within a company have been detected.
(b) Managements Report on Internal Control Over
Financial Reporting
Our managements report on internal control over financial
reporting is set forth on
page F-2
of this Annual Report on
Form 10-K
and is incorporated by reference herein.
(c) Change in Internal Control over Financial Reporting
No change in our internal control over financial reporting
occurred during our most recent fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
31
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
For the information required by this Item 10, other than
with respect to our Executive Officers, see Election Of
Directors, Nominees for Election to the Board of
Directors, Corporate Governance and
Section 16(a) Beneficial Ownership Reporting
Compliance, in the Proxy Statement for our 2007 Annual
Meeting, which information is incorporated herein by reference.
The Proxy Statement for our 2007 Annual Meeting will be filed
within 120 days of the close of our fiscal year.
For the information required by this Item 10 with respect
to our Executive Officers, see Part I of this report on
page 9, which information is incorporated herein by
reference.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
For the information required by this Item 11, see
Executive Compensation, Compensation Committee
Report on Executive Compensation and Compensation
Committee Interlocks and Insider Participation in the
Proxy Statement for our 2007 Annual Meeting, which information
is incorporated herein by reference.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
For the information required by this Item 12 under
Item 403 of
Regulation S-K,
see Security Ownership of Certain Beneficial Owners and
Management in the Proxy Statement for our 2007 Annual
Meeting, which information is incorporated herein by reference.
The following table sets forth certain information as of
December 31, 2006 regarding our 1990 Stock Compensation
Plan, 2000 Stock Compensation Plan and Global Employee Stock
Purchase Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Securities
|
|
|
|
|
|
|
|
|
|
Remaining
Available for
|
|
|
|
Number of
Securities
|
|
|
|
|
|
Future Issuance
Under
|
|
|
|
to be Issued
Upon
|
|
|
Weighted-Average
|
|
|
Equity
Compensation
|
|
|
|
Exercise of
|
|
|
Exercise Price
of
|
|
|
Plans
(Excluding
|
|
|
|
Outstanding
Options,
|
|
|
Outstanding
Options,
|
|
|
Securities
Reflected in
|
|
Plan
Category
|
|
Warrants and
Rights
|
|
|
Warrants and
Rights
|
|
|
Column
(A))
|
|
|
|
(A)
|
|
|
(B)
|
|
|
(C)
|
|
|
Equity compensation plans approved
by security holders
|
|
|
2,108,998
|
|
|
$
|
51.96
|
|
|
|
928,029
|
|
Equity compensation plans not
approved by security holders
|
|
|
|
|
|
|
|
|
|
|
28,185
|
(1)
|
|
|
|
(1) |
|
28,185 shares are available under purchase rights granted
to our
non-United
States employees under our Global Employee Stock Purchase Plan. |
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
For the information required by this Item 13, see
Certain Transactions and Corporate
Governance in the Proxy Statement for our 2007 Annual
Meeting, which information is incorporated herein by reference.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
For the information required by this Item 14, see
Audit and Non-Audit Fees and Policy on Audit
Committee Pre-Approval of Audit and Non-Audit Services of
Independent Registered Public Accounting Firm in the Proxy
Statement for our 2007 Annual Meeting, which information is
incorporated herein by reference.
32
PART IV
|
|
ITEM 15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES.
|
(a) Consolidated Financial Statements:
The Index to Consolidated Financial Statements and Schedule is
set forth on
page F-1
hereof.
(b) Exhibits:
The Exhibits are listed in the Index to Exhibits.
33
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
Jeffrey P. Black
Chairman and Chief Executive
Officer
(Principal Executive
Officer)
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:
|
/s/ Martin
S. Headley
|
Martin S. Headley
Executive Vice President and
Chief Financial Officer
(Principal Financial
Officer)
|
|
|
|
By:
|
/s/ Charles
E. Williams
|
Charles E. Williams
Corporate Controller and Chief
Accounting Officer
(Principal Accounting
Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ George
Babich, Jr.
George
Babich, Jr.
Director
|
|
By:
|
|
/s/ Judith
M. von
Seldeneck
Judith
M. von Seldeneck
Director
|
|
|
|
|
|
|
|
By:
|
|
/s/ Patricia
C. Barron
Patricia
C. Barron
Director
|
|
By:
|
|
/s/ John
J. Sickler
John
J. Sickler
Director
|
|
|
|
|
|
|
|
By:
|
|
/s/ Donald
Beckman
Donald
Beckman
Director
|
|
By:
|
|
/s/ Benson
F. Smith
Benson
F. Smith
Director
|
|
|
|
|
|
|
|
By:
|
|
/s/ Jeffrey
P. Black
Jeffrey
P. Black
Chairman, Chief Executive Officer & Director
|
|
By:
|
|
/s/ Harold
L.
Yoh III
Harold
L. Yoh III
Director
|
|
|
|
|
|
|
|
By:
|
|
/s/ William
R. Cook
William
R. Cook
Director
|
|
By:
|
|
/s/ James
W. Zug
James
W. Zug
Director
|
|
|
|
|
|
|
|
By:
|
|
/s/ Sigismundus
W.W. Lubsen
Sigismundus
W.W. Lubsen
Director
|
|
|
|
|
Dated: March 1, 2007
34
TELEFLEX
INCORPORATED
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED
FINANCIAL STATEMENTS
|
|
|
|
|
Page
|
|
|
|
F-2
|
|
|
F-3
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7
|
|
|
F-8
|
|
|
F-9
|
|
|
F-38
|
FINANCIAL
STATEMENT SCHEDULE
F-1
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Teleflex Incorporated and its subsidiaries
(the Company) is responsible for establishing and
maintaining adequate internal control over financial reporting.
Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. A companys internal control over
financial reporting includes those policies and procedures that
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance
with authorizations of management and directors of the company;
and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of
the companys assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Companys
internal control over financial reporting as of
December 31, 2006. In making this assessment, management
used the framework established in Internal
Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO). As a result of this assessment and based on the criteria
in the COSO framework, management has concluded that, as of
December 31, 2006, the Companys internal control over
financial reporting was effective.
Managements assessment of the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2006 has been audited by
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which appears herein.
|
|
|
/s/ Jeffrey
P. Black
Jeffrey
P. Black
Chairman and Chief Executive Officer
|
|
/s/ Martin
S. Headley
Martin
S. Headley
Executive Vice President and
Chief Financial Officer
|
February 28, 2007
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Teleflex
Incorporated:
We have completed integrated audits of Teleflex
Incorporateds consolidated financial statements and of its
internal control over financial reporting as of
December 31, 2006, in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Our
opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement
schedule
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Teleflex Incorporated and its
subsidiaries at December 31, 2006 and December 25,
2005 and the results of their operations and their cash flows
for the years ended December 31, 2006, December 25,
2005 and December 26, 2004 in conformity with accounting
principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedule
listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read
in conjunction with the related consolidated financial
statements. These financial statements and financial statement
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit of financial statements 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 our opinion.
As discussed in Note 1 to the consolidated financial
statements, the Company changed the manner in which it accounts
for share-based compensation in 2006.
Internal control over financial reporting
Also, in our opinion, managements assessment, included in
Managements Report on Internal Control Over Financial
Reporting, appearing on
page F-2,
that the Company maintained effective internal control over
financial reporting as of December 31, 2006 based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly
stated, in all material respects, based on those criteria.
Furthermore, in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2006, based on criteria
established in Internal Control Integrated
Framework issued by the COSO. The Companys management
is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting. Our responsibility
is to express opinions on managements assessment and on
the effectiveness of the Companys internal control over
financial reporting based on our audit. We conducted our audit
of internal control over financial reporting in accordance with
the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was
maintained in all material respects. An audit of internal
control over financial reporting includes obtaining an
understanding of internal control over financial reporting,
evaluating managements assessment, testing and evaluating
the design and operating effectiveness of internal control, and
performing such other procedures as we consider necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.
F-3
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers
LLP
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 28, 2007
F-4
TELEFLEX
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
|
|
December 31,
|
|
|
December 25,
|
|
|
December 26,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars and
shares in thousands,
|
|
|
|
except per
share)
|
|
|
Revenues
|
|
$
|
2,646,757
|
|
|
$
|
2,514,552
|
|
|
$
|
2,390,411
|
|
Materials, labor and other product
costs
|
|
|
1,872,565
|
|
|
|
1,804,601
|
|
|
|
1,704,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
774,192
|
|
|
|
709,951
|
|
|
|
686,241
|
|
Selling, engineering and
administrative expenses
|
|
|
493,516
|
|
|
|
449,040
|
|
|
|
487,100
|
|
(Gain) loss on sales of businesses
and assets
|
|
|
838
|
|
|
|
(14,223
|
)
|
|
|
(2,733
|
)
|
Restructuring and impairment
charges
|
|
|
25,226
|
|
|
|
27,066
|
|
|
|
67,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before interest, taxes and minority interest
|
|
|
254,612
|
|
|
|
248,068
|
|
|
|
134,256
|
|
Interest expense
|
|
|
41,997
|
|
|
|
44,516
|
|
|
|
37,683
|
|
Interest income
|
|
|
(6,412
|
)
|
|
|
(4,363
|
)
|
|
|
(565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before taxes and minority interest
|
|
|
219,027
|
|
|
|
207,915
|
|
|
|
97,138
|
|
Taxes on income from continuing
operations
|
|
|
54,140
|
|
|
|
47,806
|
|
|
|
12,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before minority interest
|
|
|
164,887
|
|
|
|
160,109
|
|
|
|
84,343
|
|
Minority interest in consolidated
subsidiaries, net of tax
|
|
|
24,957
|
|
|
|
20,337
|
|
|
|
19,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
139,930
|
|
|
|
139,772
|
|
|
|
65,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) from
discontinued operations (including net gain on disposal of $182,
$34,851 and $0, respectively)
|
|
|
(483
|
)
|
|
|
2,304
|
|
|
|
(68,262
|
)
|
Taxes (benefit) on income (loss)
from discontinued operations
|
|
|
17
|
|
|
|
3,259
|
|
|
|
(12,655
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
(500
|
)
|
|
|
(955
|
)
|
|
|
(55,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
139,430
|
|
|
$
|
138,817
|
|
|
$
|
9,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
3.52
|
|
|
$
|
3.45
|
|
|
$
|
1.62
|
|
Loss from discontinued operations
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(1.38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3.51
|
|
|
$
|
3.43
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
3.50
|
|
|
$
|
3.41
|
|
|
$
|
1.61
|
|
Loss from discontinued operations
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(1.37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3.49
|
|
|
$
|
3.39
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
39,760
|
|
|
|
40,516
|
|
|
|
40,205
|
|
Diluted
|
|
|
39,988
|
|
|
|
40,958
|
|
|
|
40,495
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
TELEFLEX
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 25,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars and
shares in thousands)
|
|
|
ASSETS
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
248,409
|
|
|
$
|
239,536
|
|
Accounts receivable, net
|
|
|
376,404
|
|
|
|
421,236
|
|
Inventories
|
|
|
415,879
|
|
|
|
404,271
|
|
Prepaid expenses
|
|
|
27,689
|
|
|
|
20,571
|
|
Deferred tax assets
|
|
|
60,963
|
|
|
|
57,915
|
|
Assets held for sale
|
|
|
10,185
|
|
|
|
16,899
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,139,529
|
|
|
|
1,160,428
|
|
Property, plant and equipment, net
|
|
|
422,178
|
|
|
|
447,816
|
|
Goodwill
|
|
|
514,006
|
|
|
|
504,666
|
|
Intangibles and other assets
|
|
|
259,229
|
|
|
|
259,218
|
|
Investments in affiliates
|
|
|
23,076
|
|
|
|
24,666
|
|
Deferred tax assets
|
|
|
1,034
|
|
|
|
6,254
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,359,052
|
|
|
$
|
2,403,048
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
Current liabilities
|
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
24,324
|
|
|
$
|
88,902
|
|
Current portion of long-term
borrowings
|
|
|
6,698
|
|
|
|
36,608
|
|
Accounts payable
|
|
|
210,890
|
|
|
|
206,548
|
|
Accrued expenses
|
|
|
115,657
|
|
|
|
131,602
|
|
Payroll and benefit-related
liabilities
|
|
|
74,407
|
|
|
|
74,629
|
|
Income taxes payable
|
|
|
38,635
|
|
|
|
46,222
|
|
Deferred tax liabilities
|
|
|
164
|
|
|
|
408
|
|
Liabilities held for sale
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
470,775
|
|
|
|
584,985
|
|
Long-term borrowings
|
|
|
487,370
|
|
|
|
505,272
|
|
Deferred tax liabilities
|
|
|
33,344
|
|
|
|
50,535
|
|
Pension and postretirement benefit
liabilities
|
|
|
97,191
|
|
|
|
65,349
|
|
Other liabilities
|
|
|
38,894
|
|
|
|
37,433
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,127,574
|
|
|
|
1,243,574
|
|
|
|
|
|
|
|
|
|
|
Minority interest in equity of
consolidated subsidiaries
|
|
|
42,057
|
|
|
|
17,400
|
|
Commitments and contingencies (See
Note 14)
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Common shares, $1 par value
Issued: 2006 41,364 shares; 2005
41,123 shares
|
|
|
41,364
|
|
|
|
41,123
|
|
Additional paid-in capital
|
|
|
223,609
|
|
|
|
204,550
|
|
Retained earnings
|
|
|
1,034,669
|
|
|
|
939,335
|
|
Accumulated other comprehensive
income
|
|
|
30,035
|
|
|
|
6,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,329,677
|
|
|
|
1,191,622
|
|
Less: Treasury stock, at cost
|
|
|
140,256
|
|
|
|
49,548
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
1,189,421
|
|
|
|
1,142,074
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
2,359,052
|
|
|
$
|
2,403,048
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-6
TELEFLEX
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
|
|
December 31,
|
|
|
December 25,
|
|
|
December 26,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in
thousands)
|
|
|
Cash Flows from Operating
Activities of Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
139,430
|
|
|
$
|
138,817
|
|
|
$
|
9,517
|
|
Adjustments to reconcile net income
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
500
|
|
|
|
955
|
|
|
|
55,607
|
|
Depreciation expense
|
|
|
83,720
|
|
|
|
85,931
|
|
|
|
92,498
|
|
Amortization expense of intangible
assets
|
|
|
13,952
|
|
|
|
13,851
|
|
|
|
13,579
|
|
Amortization expense of deferred
financing costs
|
|
|
1,332
|
|
|
|
1,071
|
|
|
|
462
|
|
Stock-based compensation
|
|
|
6,776
|
|
|
|
|
|
|
|
|
|
(Gain) loss on sales of businesses
and assets
|
|
|
838
|
|
|
|
(14,223
|
)
|
|
|
(2,733
|
)
|
Impairment of long-lived assets
|
|
|
8,444
|
|
|
|
5,324
|
|
|
|
29,926
|
|
Impairment of goodwill
|
|
|
1,003
|
|
|
|
|
|
|
|
14,122
|
|
Deferred income taxes
|
|
|
13,387
|
|
|
|
14,093
|
|
|
|
(3,330
|
)
|
Minority interest in consolidated
subsidiaries
|
|
|
24,957
|
|
|
|
20,337
|
|
|
|
19,219
|
|
Other
|
|
|
2,714
|
|
|
|
(2,433
|
)
|
|
|
(4,921
|
)
|
Changes in operating assets and
liabilities, net of effects of acquisitions and disposals:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
71,683
|
|
|
|
49,618
|
|
|
|
(37,123
|
)
|
Inventories
|
|
|
10,257
|
|
|
|
2,830
|
|
|
|
26,527
|
|
Prepaid expenses
|
|
|
(6,420
|
)
|
|
|
7,216
|
|
|
|
(630
|
)
|
Accounts payable and accrued
expenses
|
|
|
(15,707
|
)
|
|
|
10,045
|
|
|
|
56,890
|
|
Income taxes payable
|
|
|
(12,991
|
)
|
|
|
27
|
|
|
|
(19,736
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities from continuing operations
|
|
|
343,875
|
|
|
|
333,459
|
|
|
|
249,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities of Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term borrowings
|
|
|
|
|
|
|
109,208
|
|
|
|
511,582
|
|
Reduction in long-term borrowings
|
|
|
(55,031
|
)
|
|
|
(270,335
|
)
|
|
|
(77,936
|
)
|
Increase (decrease) in notes
payable and current borrowings
|
|
|
(68,760
|
)
|
|
|
27,903
|
|
|
|
(137,751
|
)
|
Proceeds from stock compensation
plans
|
|
|
11,952
|
|
|
|
23,173
|
|
|
|
16,227
|
|
Payments to minority interest
shareholders
|
|
|
(618
|
)
|
|
|
(63,035
|
)
|
|
|
(17,254
|
)
|
Purchases of treasury stock
|
|
|
(93,552
|
)
|
|
|
(46,518
|
)
|
|
|
|
|
Dividends
|
|
|
(44,096
|
)
|
|
|
(39,320
|
)
|
|
|
(34,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities from continuing operations
|
|
|
(250,105
|
)
|
|
|
(258,924
|
)
|
|
|
260,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities of Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property, plant
and equipment
|
|
|
(63,232
|
)
|
|
|
(69,851
|
)
|
|
|
(52,938
|
)
|
Payments for businesses acquired,
net of cash acquired
|
|
|
(41,704
|
)
|
|
|
(14,701
|
)
|
|
|
(458,531
|
)
|
Proceeds from sales of businesses
and assets
|
|
|
7,956
|
|
|
|
142,930
|
|
|
|
49,444
|
|
Proceeds from affiliates
|
|
|
2,597
|
|
|
|
62
|
|
|
|
100
|
|
Working capital payment for
divested business
|
|
|
(6,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities from continuing operations
|
|
|
(100,412
|
)
|
|
|
58,440
|
|
|
|
(461,925
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Discontinued
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
787
|
|
|
|
1,576
|
|
|
|
14,226
|
|
Net cash used in financing
activities
|
|
|
|
|
|
|
(1,584
|
)
|
|
|
(811
|
)
|
Net cash used in investing
activities
|
|
|
(96
|
)
|
|
|
(2,700
|
)
|
|
|
(5,996
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
discontinued operations
|
|
|
691
|
|
|
|
(2,708
|
)
|
|
|
7,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
14,824
|
|
|
|
(6,686
|
)
|
|
|
3,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
8,873
|
|
|
|
123,581
|
|
|
|
59,375
|
|
Cash and cash equivalents at the
beginning of the year
|
|
|
239,536
|
|
|
|
115,955
|
|
|
|
56,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the
end of the year
|
|
$
|
248,409
|
|
|
$
|
239,536
|
|
|
$
|
115,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-7
TELEFLEX
INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Treasury
Stock
|
|
|
|
|
|
|
Shares
|
|
|
Dollars
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
Income
|
|
|
Shares
|
|
|
Dollars
|
|
|
Total
|
|
|
|
(Dollars and
shares in thousands, except per share)
|
|
|
Balance at December 28, 2003
|
|
|
39,817
|
|
|
$
|
39,817
|
|
|
$
|
126,421
|
|
|
$
|
864,896
|
|
|
|
|
|
|
$
|
32,226
|
|
|
|
22
|
|
|
$
|
(1,058
|
)
|
|
$
|
1,062,302
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,517
|
|
|
$
|
9,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,517
|
|
Cash dividends ($0.86 per
share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,575
|
)
|
Financial instruments marked to
market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(382
|
)
|
|
|
(382
|
)
|
|
|
|
|
|
|
|
|
|
|
(382
|
)
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,127
|
|
|
|
32,127
|
|
|
|
|
|
|
|
|
|
|
|
32,127
|
|
Minimum pension liability
adjustment, net of tax of $5,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,363
|
)
|
|
|
(6,363
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued under compensation
plans
|
|
|
633
|
|
|
|
633
|
|
|
|
46,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
(118
|
)
|
|
|
47,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 26, 2004
|
|
|
40,450
|
|
|
$
|
40,450
|
|
|
$
|
173,013
|
|
|
$
|
839,838
|
|
|
|
|
|
|
$
|
57,608
|
|
|
|
26
|
|
|
$
|
(1,176
|
)
|
|
$
|
1,109,733
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138,817
|
|
|
$
|
138,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138,817
|
|
Cash dividends ($0.97 per
share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39,320
|
)
|
Financial instruments marked to
market, net of tax of $1,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(944
|
)
|
|
|
(944
|
)
|
|
|
|
|
|
|
|
|
|
|
(944
|
)
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,076
|
)
|
|
|
(47,076
|
)
|
|
|
|
|
|
|
|
|
|
|
(47,076
|
)
|
Minimum pension liability
adjustment, net of tax of $375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,974
|
)
|
|
|
(2,974
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,974
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
87,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued under compensation
plans
|
|
|
673
|
|
|
|
673
|
|
|
|
31,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
1,376
|
|
|
|
33,586
|
|
Deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
(3,230
|
)
|
|
|
(3,230
|
)
|
Purchases of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
690
|
|
|
|
(46,518
|
)
|
|
|
(46,518
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 25, 2005
|
|
|
41,123
|
|
|
$
|
41,123
|
|
|
$
|
204,550
|
|
|
$
|
939,335
|
|
|
|
|
|
|
$
|
6,614
|
|
|
|
766
|
|
|
$
|
(49,548
|
)
|
|
$
|
1,142,074
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,430
|
|
|
$
|
139,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,430
|
|
Cash dividends ($1.105 per
share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,096
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,096
|
)
|
Financial instruments marked to
market, net of tax of $459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,234
|
|
|
|
1,234
|
|
|
|
|
|
|
|
|
|
|
|
1,234
|
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,468
|
|
|
|
47,468
|
|
|
|
|
|
|
|
|
|
|
|
47,468
|
|
Minimum pension liability
adjustment, net of tax of $4,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,117
|
)
|
|
|
(8,117
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
180,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adoption of SFAS No. 158,
net of tax of $10,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,164
|
)
|
|
|
|
|
|
|
|
|
|
|
(17,164
|
)
|
Shares issued under compensation
plans
|
|
|
241
|
|
|
|
241
|
|
|
|
19,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38
|
)
|
|
|
2,497
|
|
|
|
21,797
|
|
Deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
347
|
|
|
|
347
|
|
Purchases of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,627
|
|
|
|
(93,552
|
)
|
|
|
(93,552
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
41,364
|
|
|
$
|
41,364
|
|
|
$
|
223,609
|
|
|
$
|
1,034,669
|
|
|
|
|
|
|
$
|
30,035
|
|
|
|
2,346
|
|
|
$
|
(140,256
|
)
|
|
$
|
1,189,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-8
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in
thousands, except per share)
Note 1
Summary of significant accounting policies
Consolidation: The consolidated financial
statements include the accounts of Teleflex Incorporated and its
subsidiaries (the Company). Also, in accordance with
Interpretation (FIN) No. 46(R),
Consolidation of Variable Interest Entities, the
Company consolidates variable interest entities in which it
bears a majority of the risk of the potential losses or gains
from a majority of the expected returns. Intercompany
transactions are eliminated in consolidation. Investments in
affiliates over which the Company has significant influence but
not a controlling equity interest are carried on the equity
basis. Investments in affiliates over which the Company does not
have significant influence are accounted for by the cost method.
These consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States of America and include managements estimates
and assumptions that affect the recorded amounts.
During the fourth quarter of 2004, the Company eliminated the
one-month lag for certain of its foreign operations to coincide
with the timing of reporting for all of the Companys other
operations. As a result, the Companys consolidated results
for 2004 include the results of those operations for the month
of December 2003 and the entire twelve months of 2004, whereas
the Companys consolidated results for 2005 and 2006
include the results of those operations for the entire twelve
months of 2005 and 2006, respectively. This change increased the
Companys consolidated revenues for 2004 by $16,879 and
reduced the Companys consolidated income from continuing
operations before taxes and minority interest for 2004 by $1,114.
Use of estimates: The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fair values: The estimated fair value amounts
presented in these consolidated financial statements have been
determined by the Company using available market information and
appropriate methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of
fair value. The use of different market assumptions and/or
estimation methodologies may have a material effect on the
estimated fair value amounts. Such fair value estimates are
based on pertinent information available to management as of
December 31, 2006 and December 25, 2005.
Cash and cash equivalents: All highly liquid
debt instruments with an original maturity of three months or
less are classified as cash equivalents. The carrying value of
cash equivalents approximates their current market value.
Accounts receivable: Accounts receivable
represents amounts due from customers related to the sale of
products. An allowance for doubtful accounts is maintained and
represents the Companys estimate of probable losses on
realization of the full receivable. The allowance is provided at
such time that management believes reasonable doubt exists that
such balances will be collected within a reasonable period of
time. The allowance is based on the Companys historical
experience, the period an account is outstanding, the financial
position of the customer and information provided by credit
rating services. The allowance for doubtful accounts was $10,097
and $10,090 as of December 31, 2006 and December 25,
2005, respectively.
Inventories: Inventories are valued at the
lower of cost or market. The cost of the Companys
inventories is determined by the average cost method. Elements
of cost in inventory include raw materials, direct labor, and
manufacturing overhead. In estimating market value, the Company
evaluates inventory for excess and obsolete quantities based on
estimated usage and sales.
F-9
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Property, plant and equipment: Property, plant
and equipment are stated at cost, net of accumulated
depreciation. Costs incurred to develop internal-use computer
software during the application development stage generally are
capitalized. Costs of enhancements to internal-use computer
software are capitalized, provided that these enhancements
result in additional functionality. Other additions and those
improvements which increase the capacity or lengthen the useful
lives of the assets are also capitalized. With minor exceptions,
straight-line composite lives for depreciation of property,
plant and equipment are as follows: buildings
30 years; machinery and equipment 5 to
10 years; computer equipment and software 3 to
5 years. Leasehold improvements are depreciated over the
remaining lease periods. Repairs and maintenance costs are
expensed as incurred.
Goodwill and other intangible assets: Goodwill
and other intangible assets with indefinite lives are not
amortized but are tested for impairment at least annually, or
more frequently if there is a triggering event. Impairment
losses, if any, are recorded as part of income from operations.
The goodwill impairment test is applied to each of the
Companys reporting units. A reporting unit is the
operating segment, or a business one level below that operating
segment (the component level) if discrete financial information
is prepared and regularly reviewed by segment management.
However, components are aggregated as a single reporting unit if
they have similar economic characteristics. The goodwill
impairment test is applied using a two-step approach. In the
first step, the Company estimates the fair values of its
reporting units using the present value of future cash flows
approach. If the reporting unit carrying amount exceeds the fair
value, the second step of the goodwill impairment test is
performed to measure the amount of the impairment loss, if any.
In the second step, the implied fair value of the goodwill is
estimated as the fair value of the reporting unit used in the
first step less the fair values of all net tangible and
intangible assets of the reporting unit other than goodwill. If
the carrying amount of the goodwill exceeds its implied fair
market value, an impairment loss is recognized in an amount
equal to that excess, not to exceed the carrying amount of the
goodwill. For other indefinite lived intangible assets, the
impairment test consists of a comparison of the fair value of
the intangible assets to their carrying amounts.
The Company performed an annual impairment test of its recorded
goodwill and indefinite-lived intangible assets in the fourth
quarter of 2006 and determined that a portion of its goodwill
was impaired. The Company recorded a charge of $1,003, which is
included in restructuring and impairment charges. The Company
performed an annual impairment test of its recorded goodwill and
indefinite-lived intangible assets in the fourth quarter of 2005
and found no instances of impairment. In connection with the
Companys 2004 restructuring and divestiture program, the
Company determined in the fourth quarter of 2004 that a portion
of its goodwill was impaired and recorded a charge of $18,582,
$14,122 of which was included in restructuring and impairment
charges and $4,460 of which was included in discontinued
operations.
Intangible assets consisting of intellectual property, customer
lists and distribution rights are being amortized over their
estimated useful lives, which range from 3 to 30 years,
with a weighted average amortization period of 13 years.
The Company continually evaluates the reasonableness of the
useful lives of these assets.
Long-lived assets: The ability to realize
long-lived assets is evaluated periodically as events or
circumstances indicate a possible inability to recover their
carrying amount. Such evaluation is based on various analyses,
including undiscounted cash flow and profitability projections
that incorporate, as applicable, the impact on the existing
business. The analyses necessarily involve significant
management judgment. Any impairment loss, if indicated, is
measured as the amount by which the carrying amount of the asset
exceeds the estimated fair value of the asset.
F-10
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Product warranty liability: Product warranty
liability arises out of the need to repair or replace product
without charge to the customer. The Company warrants such
products from manufacturing defect. The Company estimates its
warranty liability based on historical trends of units sold, the
status of existing claims, recall programs and communication
with customers.
Foreign currency translation: Assets and
liabilities of non-domestic subsidiaries denominated in local
currencies are translated into U.S. dollars 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 resultant translation adjustments are reported as
a component of accumulated other comprehensive income in
shareholders equity.
Derivative financial instruments: The Company
uses derivative financial instruments primarily for purposes of
hedging exposures to fluctuations in interest rates and foreign
currency exchange rates. All instruments are entered into for
other than trading purposes. All derivatives are recognized on
the balance sheet at fair value. Changes in the fair value of
derivatives are recorded in earnings or other comprehensive
income, based on whether the instrument is designated as part of
a hedge transaction and, if so, the type of hedge transaction.
Gains or losses on derivative instruments reported in other
comprehensive income are reclassified to earnings in the period
in which earnings are affected by the underlying hedged item.
The ineffective portion of all hedges is recognized in current
period earnings. If the hedging relationship ceases to be highly
effective or it becomes probable that an expected transaction
will no longer occur, gains or losses on the derivative are
recorded in current period earnings.
Stock-based compensation: On December 26,
2005, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS)
No. 123(R), Share-Based Payment, which requires
the measurement and recognition of compensation expense for all
stock-based awards made to employees based on estimated fair
values. SFAS No. 123(R) supersedes previous accounting
under Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees, for periods beginning in fiscal 2006. In March
2005, the SEC issued Staff Accounting Bulletin (SAB)
No. 107, providing supplemental guidance for
SFAS No. 123(R). The Company has applied the
provisions of SAB No. 107 in its adoption of
SFAS No. 123(R).
SFAS No. 123(R) requires companies to estimate the
fair value of stock-based awards on the date of grant using an
option pricing model. The value of the portion of the award that
is ultimately expected to vest is recognized as expense over the
requisite service periods. The Company adopted
SFAS No. 123(R) using the modified prospective
application method, which requires the application of the
standard starting from December 26, 2005, the first day of
the Companys 2006 fiscal year. The Companys
consolidated financial statements for 2006 reflect the impact of
SFAS No. 123(R).
Stock-based compensation expense related to employee stock
options recognized under SFAS No. 123(R) for 2006 was
$6,776 and is included in selling, engineering and
administrative expenses. The total income tax benefit recognized
for share-based compensation arrangements for 2006 was $1,373.
As of December 31, 2006, total unamortized stock-based
compensation cost related to non-vested stock options, net of
expected forfeitures, was $9,202, which is expected to be
recognized over a weighted-average period of 1.9 years.
Prior to the adoption of SFAS No. 123(R), the Company
accounted for stock-based awards to employees using the
intrinsic value method in accordance with APB No. 25, as
allowed under SFAS No. 123, Accounting for
Stock-Based Compensation. Under the intrinsic value
method, no stock-based compensation expense for employee stock
options had been recognized in the Companys consolidated
statements of operations because the exercise price of the
Companys stock options granted to employees equaled the
fair market value of the underlying stock at the date of grant.
In accordance with the modified prospective transition method
the
F-11
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Company used in adopting SFAS No. 123(R), the
Companys results of operations prior to fiscal 2006 have
not been restated to reflect, and do not include, the impact of
SFAS No. 123(R).
Stock-based compensation expense recognized during a period is
based on the value of the portion of stock-based awards that is
ultimately expected to vest during the period. Stock-based
compensation expense recognized in 2006 included compensation
expense for (1) stock-based awards granted prior to, but
not yet vested as of December 25, 2005, based on the fair
value on the grant date estimated in accordance with the pro
forma provisions of SFAS No. 123 and
(2) compensation expense for the stock-based awards granted
subsequent to December 25, 2005, based on the fair value on
the grant date estimated in accordance with the provisions of
SFAS No. 123(R). As stock-based compensation expense
recognized for fiscal 2006 is based on awards ultimately
expected to vest, it has been reduced for estimated forfeitures.
SFAS No. 123(R) requires forfeitures to be estimated
at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates.
The following table illustrates the pro forma net income and
earnings per share for 2005 and 2004 as if compensation expense
for stock options issued to employees had been determined
consistent with SFAS No. 123:
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
Net income, as reported
|
|
$
|
138,817
|
|
|
$
|
9,517
|
|
Deduct: Stock-based employee
compensation determined under fair value based method, net of
tax of $1,959 and $2,335, respectively
|
|
|
(3,197
|
)
|
|
|
(3,809
|
)
|
|
|
|
|
|
|
|
|
|
Pro forma net income
|
|
$
|
135,620
|
|
|
$
|
5,708
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
basic:
|
|
|
|
|
|
|
|
|
Net income per share, as reported
|
|
$
|
3.43
|
|
|
$
|
0.24
|
|
Pro forma net income per share
|
|
$
|
3.35
|
|
|
$
|
0.14
|
|
Earnings per share
diluted:
|
|
|
|
|
|
|
|
|
Net income per share, as reported
|
|
$
|
3.39
|
|
|
$
|
0.24
|
|
Pro forma net income per share
|
|
$
|
3.32
|
|
|
$
|
0.14
|
|
Stock-based compensation expense is measured using a multiple
point Black-Scholes option pricing model that takes into account
highly subjective and complex assumptions. The expected life of
options granted is derived from the vesting period of the award,
as well as historical exercise behavior, and represents the
period of time that options granted are expected to be
outstanding. Expected volatilities are based on a blend of
historical volatility and implied volatility derived from
publicly traded options to purchase the Companys common
stock, which the Company believes is more reflective of the
market conditions and a better indicator of expected volatility
than solely using historical volatility. The risk-free interest
rate is the implied yield currently available on
U.S. Treasury zero-coupon issues with a remaining term
equal to the expected life of the option.
The fair value for options granted in 2006 was estimated at the
date of grant using a multiple point Black-Scholes option
pricing model. The fair value for options granted in 2005 and
2004 was estimated at the date of grant using the Black-Scholes
option pricing model. The following weighted-average assumptions
were used:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Risk-free interest rate
|
|
|
4.44%
|
|
|
|
4.09%
|
|
|
|
3.00%
|
|
Expected life of option
|
|
|
4.46 yrs.
|
|
|
|
4.60 yrs.
|
|
|
|
4.60 yrs.
|
|
Expected dividend yield
|
|
|
1.57%
|
|
|
|
1.70%
|
|
|
|
1.71%
|
|
Expected volatility
|
|
|
23.36%
|
|
|
|
24.44%
|
|
|
|
24.32%
|
|
F-12
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On November 10, 2005, the Financial Accounting Standards
Board (FASB) issued FASB Staff Position
(FSP)
No. FAS 123(R)-3,
Transition Election Related to Accounting for Tax Effects
of Share-Based Payment Awards, that allows for a
simplified method to establish the beginning balance of the
additional paid-in capital pool (APIC Pool) related
to the tax effects of employee stock-based compensation and to
determine the subsequent impact on the APIC Pool and
consolidated statements of cash flows of the tax effects of
employee stock-based compensation awards that are outstanding
upon adoption of SFAS No. 123(R). During the second
quarter of 2006, the Company elected to adopt the simplified
method.
See Note 11 for additional information regarding the
Companys stock compensation plans.
Income taxes: The provision for income taxes
is determined using the asset and liability approach of
accounting for income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes.
Under this approach, deferred taxes represent the future tax
consequences expected to occur when the reported amounts of
assets and liabilities are recovered or paid. The provision for
income taxes represents income taxes paid or payable for the
current year plus the change in deferred taxes during the year.
Deferred taxes result from differences between the financial and
tax bases of the Companys assets and liabilities and are
adjusted for changes in tax rates and tax laws when changes are
enacted. Provision has been made for income taxes on unremitted
earnings of subsidiaries and affiliates, except for subsidiaries
in which earnings are deemed to be permanently invested.
Pensions and other postretirement
benefits: The Company provides a range of
benefits to eligible employees and retired employees, including
pensions and postretirement healthcare. The Company records
annual amounts relating to these plans based on calculations
which include various actuarial assumptions such as discount
rates, expected rates of return on plan assets, compensation
increases, turnover rates and healthcare cost trend rates. The
Company reviews its actuarial assumptions on an annual basis and
makes modifications to the assumptions based on current rates
and trends when appropriate. As required, the effect of the
modifications is generally amortized over future periods.
Restructuring costs: Restructuring costs,
which include termination benefits, contract termination costs
and other restructuring costs are recorded at estimated fair
value. Key assumptions in calculating the restructuring costs
include the terms that may be negotiated to exit certain
contractual obligations and the timing of employees leaving the
company.
Revenue recognition: The Company recognizes
revenues from product sales, including sales to distributors, or
services provided when the following revenue recognition
criteria are met: persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the
selling price is fixed or determinable and collectibility is
reasonably assured. This generally occurs when products are
shipped, when services are rendered or upon customers
acceptance.
Revenues from product sales, net of estimated returns and other
allowances based on historical experience and current trends,
are recognized upon shipment of products to customers or
distributors. Revenues from services provided are recognized as
the services are rendered and comprised less than 10% of total
revenues for all periods presented.
The Company considers the criteria presented in
SFAS No. 48, Revenue Recognition When Right of
Return Exists, in determining the appropriate revenue
recognition treatment. The Companys normal policy is to
accept returns only in cases in which the product is defective
and covered under the Companys standard warranty
provisions. However, in the limited cases where an arrangement
provides a right of return to the customer, including a
distributor, the Company believes it has the ability to
reasonably estimate the amount of returns based on its
substantial historical experience with respect to these
arrangements. The Company accrues
F-13
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
any costs or losses that may be expected in connection with any
returns in accordance with SFAS No. 5,
Accounting for Contingencies. Revenues and
Materials, labor and other product costs are reduced to reflect
estimated returns.
The Company applies the provisions of Emerging Issues Task Force
(EITF) Issue
No. 01-09,
Accounting for Consideration Given from a Vendor to a
Customer (Including a Reseller of the Vendors
Products), to its customer incentive programs, which
include discounts or rebates. Appropriate allowances are
determined and recorded as a reduction of revenue.
Revisions and reclassifications: The Company
revised its 2005 consolidated balance sheet to adjust for the
netting of non-current deferred tax assets and liabilities. In
addition, certain reclassifications have been made to the prior
years consolidated financial statements to conform to
current year presentation. Certain financial information is
presented on a rounded basis, which may cause minor differences.
Note 2
New accounting standards
Inventory costs: In November 2004, the FASB
issued SFAS No. 151, Inventory Costs, an
amendment of ARB No. 43, Chapter 4, which
clarifies the types of costs that should be expensed rather than
capitalized as inventory. This statement also clarifies the
circumstances under which fixed overhead costs associated with
operating facilities involved in inventory processing should be
capitalized. The provisions of SFAS No. 151 are
effective for fiscal years beginning after June 15, 2005.
The Company adopted the provisions of this statement on
December 26, 2005, and it did not have a material impact on
the Companys financial position, results of operations or
cash flows.
Stock-based compensation: In December 2004,
the FASB issued SFAS No. 123(R), Share-Based
Payment, which establishes accounting standards for
transactions in which an entity receives employee services in
exchange for (a) equity instruments of the entity or
(b) liabilities that are based on the fair value of the
entitys equity instruments or that may be settled by the
issuance of equity instruments. SFAS No. 123(R)
requires an entity to recognize the grant-date fair value of
stock options and other equity-based compensation issued to
employees in the statement of income. The statement also
requires that such transactions be accounted for using the
fair-value-based method, thereby eliminating use of the
intrinsic value method of accounting in APB No. 25,
Accounting for Stock Issued to Employees, which was
permitted under Statement 123, as originally issued.
SFAS No. 123(R) is effective for fiscal years
beginning after June 15, 2005. The Company adopted the
provisions of this statement on December 26, 2005 using
modified prospective application. See the Stock-based
compensation section of Note 1 above for information
regarding the effect of adoption on the Companys financial
position, results of operations and cash flows.
Accounting changes and error corrections: In
May 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections.
SFAS No. 154 replaces APB Opinion No. 20,
Accounting Changes and SFAS No. 3,
Reporting Accounting Changes in Interim Financial
Statements and changes the requirements of the accounting
for and reporting of a change in accounting principle.
SFAS No. 154 also provides guidance on the accounting
for and reporting of error corrections. The provisions of this
statement are applicable for accounting changes and error
corrections made in fiscal years beginning after
December 15, 2005. The Company adopted the provisions of
this statement on December 26, 2005, and it did not have a
material impact on the Companys financial position,
results of operations or cash flows.
Certain Hybrid Financial Instruments: In
February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial Instruments.
SFAS No. 155 provides entities with relief from having
to separately determine the fair value of an embedded derivative
that would otherwise be required to be bifurcated from its host
contract in accordance with SFAS No. 133.
SFAS No. 155 allows an entity to make an irrevocable
election to
F-14
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
measure such a hybrid financial instrument at fair value in its
entirety, with changes in fair value recognized in earnings. The
election may be made on an
instrument-by-instrument
basis and can be made only when a hybrid financial instrument is
initially recognized or when certain events occur that
constitute a remeasurement (i.e., new basis) event for a
previously recognized hybrid financial instrument. An entity
must document its election to measure a hybrid financial
instrument at fair value, either concurrently or via a
preexisting policy for automatic election. Once the fair value
election has been made, that hybrid financial instrument may not
be designated as a hedging instrument pursuant to
SFAS No. 133. Additionally, SFAS No. 155
requires that interests in securitized financial assets be
evaluated to identify whether they are freestanding derivatives
or hybrid financial instruments containing an embedded
derivative that requires bifurcation (previously, these were
exempt from SFAS No. 133). When determining whether an
interest in securitized financial assets is a hybrid financial
instrument, SFAS No. 155 does not consider a
concentration of credit risk, in the form of subordination of
one interest in securitized assets to another, to be an embedded
derivative. The provisions of this statement are applicable for
all financial instruments acquired, issued or subject to a
remeasurement (new basis) event occurring in fiscal years
beginning after September 15, 2006. The Company will adopt
this standard on January 1, 2007 and does not expect the
provisions of this statement to have a material impact on the
Companys financial position, results of operations or cash
flows.
Uncertain Tax Positions: In June 2006, the
FASB issued FIN No. 48, Accounting for
Uncertainty in Income Taxes an interpretation of
FASB Statement No. 109. FIN No. 48
clarifies the accounting for uncertainty in income taxes
recognized in an enterprises financial statements in
accordance with SFAS No. 109, Accounting for
Income Taxes. FIN No. 48 requires that the
impact of a tax position be recognized in the financial
statements if it is more likely than not that the tax position
will be sustained on tax audit, based on the technical merits of
the position. FIN No. 48 also provides guidance on
derecognition of tax positions that do not meet the more
likely than not standard, classification of tax assets and
liabilities, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions of
FIN No. 48 are effective for fiscal years beginning
after December 15, 2006. The Company is currently
evaluating the impact of FIN No. 48 on the Companys
financial position, results of operations and cash flows.
Fair Value Measurements: In September 2006,
the FASB issued SFAS No. 157, Fair Value
Measurements, which defines fair value, establishes
guidelines for measuring fair value and expands disclosures
regarding fair value measurements. SFAS No. 157 does
not require any new fair value measurements but eliminates
inconsistencies in guidance found in various prior accounting
pronouncements. The provisions of this statement are effective
for fiscal years beginning after November 15, 2007. The
Company is currently evaluating the impact of
SFAS No. 157 on the Companys financial position,
results of operations and cash flows.
Quantifying Misstatements: In September 2006,
the Securities and Exchange Commission issued
SAB No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements, which is aimed at eliminating
the diversity in practice of quantifying an identified
misstatement by putting forward a single quantification
framework to be used by all public companies. The provisions of
SAB No. 108 are effective for annual financial
statements covering the first fiscal year ending after
November 15, 2006. The Company adopted the provisions of
this statement during the fourth quarter of fiscal 2006 and it
did not have a material impact on the Companys financial
position, results of operations or cash flows.
Defined Benefit Pension and Other Postretirement
Plans: In September 2006, the FASB issued
SFAS No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement
Plans an amendment of FASB Statements No. 87,
88, 106 and 132(R). SFAS No. 158 requires the
recognition of the funded status of a defined benefit plan in
the statement of financial position, requires that changes in
the funded status be recognized through comprehensive income,
changes the measurement date for defined benefit plan assets and
obligations
F-15
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
to the entitys fiscal year-end and expands disclosures.
The recognition and disclosures under SFAS No. 158 are
required as of the end of the fiscal year ending after
December 15, 2006 while the new measurement date is
effective for fiscal years ending after December 15, 2008.
The new measurement date provisions of SFAS No. 158
will not affect the Company, as the measurement date for the
Companys defined benefit pension and postretirement plan
assets and obligations is currently the Companys fiscal
year-end. The Company adopted the recognition and disclosure
provisions of this statement as of December 31, 2006 and
included in accumulated other comprehensive income, net of tax
as of December 31, 2006, the gains and losses and prior
service costs and credits that pursuant to SFAS No. 87
and 106 have not been recognized as components of net periodic
benefit cost. The Company also recognized in its consolidated
balance sheet an asset or a liability that represents the funded
status of its various defined benefit pension and postretirement
plans. See Note 13 for additional information regarding the
effect of adopting the recognition and disclosure provisions of
this statement.
Note 3
Acquisitions
Acquisition
of Taut, Inc.
On November 8, 2006, the Company completed the acquisition
of Taut, Inc. (Taut), a producer of instruments and
devices for minimally invasive surgical procedures, particularly
laparoscopic surgery, for $28,002. The results for Taut are
included in the Companys Medical Segment.
The acquisition has been accounted for using the purchase method
of accounting in accordance with SFAS No. 141,
Business Combinations. The following table presents
the preliminary allocation of purchase price for the Taut
acquisition based on estimated fair values:
|
|
|
|
|
Assets
|
|
|
|
|
Accounts receivable
|
|
$
|
1,360
|
|
Inventories
|
|
|
1,787
|
|
Property, plant and equipment
|
|
|
869
|
|
Goodwill
|
|
|
12,574
|
|
Intangible assets
|
|
|
11,780
|
|
|
|
|
|
|
Total assets acquired
|
|
$
|
28,370
|
|
|
|
|
|
|
Less:
|
|
|
|
|
Accounts payable
|
|
$
|
271
|
|
Accrued expenses
|
|
|
97
|
|
|
|
|
|
|
Liabilities assumed
|
|
$
|
368
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
28,002
|
|
|
|
|
|
|
The amount allocated to goodwill is reflective of the benefit
the Company expects to realize from integrating Taut into its
surgical business. Goodwill is deductible for tax purposes. Of
the $11,780 in intangible assets, $6,918 and $344 were assigned
to technology and customer relationships, respectively, with
estimated remaining amortizable lives of 5 years. $4,518
was assigned to trade names with indefinite useful lives.
F-16
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table provides unaudited pro forma results of
operations for the periods noted below, as if the acquisition
had been made at the beginning of each period. The pro forma
amounts are not necessarily indicative of the results that would
have occurred if the acquisition had been completed at that time.
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
$
|
2,654,804
|
|
|
$
|
2,523,543
|
|
Income from continuing operations
before interest, taxes and minority interest
|
|
$
|
254,497
|
|
|
$
|
247,702
|
|
Net income
|
|
$
|
139,387
|
|
|
$
|
138,348
|
|
Diluted net earnings per share
|
|
$
|
3.49
|
|
|
$
|
3.38
|
|
Acquisition
of Ecotrans Technologies, Inc.
On November 30, 2006, the Company completed the acquisition
of all of the issued and outstanding capital stock of Ecotrans
Technologies, Inc. (Ecotrans), a leading supplier of
locomotive anti-idling and emissions reduction solutions for the
railroad industry, for $10,118. Based on the purchase price
allocation, $4,016 of goodwill was recognized in the
transaction. The results for Ecotrans are included in the
Companys Commercial Segment.
2005
Acquisition
In 2005, the Company acquired a small repair products and
services business in the Aerospace Segment for $8,000. Based on
the purchase price allocation, no goodwill was recognized in the
transaction.
Acquisition
of Hudson Respiratory Care, Inc.
On July 6, 2004, the Company completed the acquisition of
all of the issued and outstanding capital stock of Hudson
Respiratory Care Inc. (HudsonRCI), a provider of
disposable medical products for respiratory care and anesthesia,
for $457,499. The results for HudsonRCI are included in the
Companys Medical Segment.
The following table provides unaudited pro forma results of
operations for 2004, as if the acquisition had been made at the
beginning of 2004. The pro forma amounts are not necessarily
indicative of the results that would have occurred if the
acquisition had been completed at that time.
|
|
|
|
|
|
|
2004
|
|
|
Revenues
|
|
$
|
2,582,975
|
|
Income from continuing operations
before interest, taxes and minority interest
|
|
$
|
125,810
|
|
Net loss
|
|
$
|
(17,223
|
)
|
Diluted net loss per share
|
|
$
|
(0.43
|
)
|
The unaudited pro forma results of operations for the twelve
months ended December 26, 2004 includes $25,686 of
expenses, or $0.63 per share, incurred by HudsonRCI in
contemplation of the transaction. These expenses include bonus
and stock option settlement expenses, professional fees, broker
fees and insurance costs.
In connection with this acquisition, the Company formulated a
plan related to the future integration of the acquired entity.
The Company finalized the integration plan during the second
quarter of 2005 and the integration activities are ongoing as of
December 31, 2006. The Company expects the integration
activities to be completed during the first quarter of 2007. The
Company has accrued estimates for certain costs, related
primarily to personnel reductions and facility closings and the
termination of certain distribution agreements at
F-17
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the date of acquisition, in accordance with EITF Issue
No. 95-3,
Recognition of Liabilities in Connection with a Purchase
Business Combination. During June 2006, the Company
determined that the remaining integration cost accrual exceeded
the total amount of the remaining estimated integration costs
and therefore adjusted the accrual with a corresponding
reduction to goodwill. Set forth below is a reconciliation of
the Companys future integration cost accrual:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
Employee
|
|
|
Facility Closure
and
|
|
|
|
|
|
|
Termination
Benefits
|
|
|
Restructuring
Costs
|
|
|
Total
|
|
|
Balance at acquisition
|
|
$
|
14,217
|
|
|
$
|
9,205
|
|
|
$
|
23,422
|
|
Costs incurred
|
|
|
(4,550
|
)
|
|
|
(2,200
|
)
|
|
|
(6,750
|
)
|
Adjustments to reserve
|
|
|
|
|
|
|
(1,420
|
)
|
|
|
(1,420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 26, 2004
|
|
|
9,667
|
|
|
|
5,585
|
|
|
|
15,252
|
|
Costs incurred
|
|
|
(3,470
|
)
|
|
|
(2,829
|
)
|
|
|
(6,299
|
)
|
Adjustments to reserve
|
|
|
965
|
|
|
|
2,158
|
|
|
|
3,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 25, 2005
|
|
|
7,162
|
|
|
|
4,914
|
|
|
|
12,076
|
|
Costs incurred
|
|
|
(4,569
|
)
|
|
|
(3,124
|
)
|
|
|
(7,693
|
)
|
Adjustments to reserve
|
|
|
(2,517
|
)
|
|
|
(1,027
|
)
|
|
|
(3,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
76
|
|
|
$
|
763
|
|
|
$
|
839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4
Restructuring
The amounts recognized in restructuring and impairment charges
for 2006, 2005 and 2004 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006 restructuring program
|
|
$
|
5,854
|
|
|
$
|
|
|
|
$
|
|
|
Aerospace segment restructuring
activity
|
|
|
609
|
|
|
|
|
|
|
|
|
|
2004 restructuring and divestiture
program
|
|
|
10,382
|
|
|
|
27,066
|
|
|
|
67,618
|
|
Aggregate impairment
charges investments and certain fixed assets
|
|
|
7,378
|
|
|
|
|
|
|
|
|
|
Impairment charge
goodwill (See Note 1)
|
|
|
1,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,226
|
|
|
$
|
27,066
|
|
|
$
|
67,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
Restructuring Program
In June 2006, the Company began certain restructuring
initiatives that affect all three of the Companys
operating segments. These initiatives involve the consolidation
of operations and a related reduction in workforce at several of
the Companys facilities in Europe and North America. The
Company has determined to undertake these initiatives as a means
to improving operating performance and to better leverage the
Companys existing resources.
F-18
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For 2006, the charges associated with the 2006 restructuring
program by segment that are included in restructuring and
impairment charges were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
Commercial
|
|
|
Medical
|
|
|
Aerospace
|
|
|
Total
|
|
|
Termination benefits
|
|
$
|
2,392
|
|
|
$
|
1,419
|
|
|
$
|
1,042
|
|
|
$
|
4,853
|
|
Contract termination costs
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
119
|
|
Other restructuring costs
|
|
|
730
|
|
|
|
94
|
|
|
|
58
|
|
|
|
882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,241
|
|
|
$
|
1,513
|
|
|
$
|
1,100
|
|
|
$
|
5,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination benefits are comprised of severance-related payments
for all employees terminated in connection with the 2006
restructuring program. Contract termination costs relate
primarily to the termination of leases in conjunction with the
consolidation of facilities in the Companys Commercial
Segment. Other restructuring costs include expenses primarily
related to the consolidation of operations and the
reorganization of administrative functions.
At December 31, 2006, the accrued liability associated with
the 2006 restructuring program consisted of the following and
was entirely due within twelve months:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
December 25,
|
|
|
Subsequent
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
Accruals
|
|
|
Payments
|
|
|
2006
|
|
|
Termination benefits
|
|
$
|
|
|
|
$
|
4,853
|
|
|
$
|
(1,447
|
)
|
|
$
|
3,406
|
|
Contract termination costs
|
|
|
|
|
|
|
119
|
|
|
|
(24
|
)
|
|
|
95
|
|
Other restructuring costs
|
|
|
|
|
|
|
882
|
|
|
|
(878
|
)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
5,854
|
|
|
$
|
(2,349
|
)
|
|
$
|
3,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006, the Company expects to incur the
following future restructuring costs associated with the 2006
restructuring program in its Commercial, Medical and Aerospace
segments over the next two quarters:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
Medical
|
|
Aerospace
|
|
Termination benefits
|
|
$
|
500
|
- 1,000
|
|
$
|
500
|
- 1,000
|
|
$
|
150
|
- 500
|
Contract termination costs
|
|
|
|
|
|
|
500
|
- 600
|
|
|
500
|
- 600
|
Other restructuring costs
|
|
|
225
|
- 700
|
|
|
300
|
- 500
|
|
|
300
|
- 500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
725
|
- 1,700
|
|
$
|
1,300
|
- 2,100
|
|
$
|
950
|
- 1,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace Segment
Restructuring Activity
During the first quarter of 2006, the Company began a
restructuring activity in its Aerospace Segment. The actions
relate to the closure of a manufacturing facility, termination
of employees and relocation of operations. For 2006, the Company
recorded termination benefits of $433, asset impairments of $139
and other restructuring costs of $37 that are included in
restructuring and impairment charges. As of December 31,
2006, the accrued liability associated with this activity was
$38 and was entirely due within twelve months. The Company does
not expect to incur future restructuring costs associated with
this activity.
F-19
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2004
Restructuring and Divestiture Program
During the fourth quarter of 2004, the Company announced and
commenced implementation of a restructuring and divestiture
program designed to improve future operating performance and
position the Company for future earnings growth. The actions
have included exiting or divesting of non-core or low performing
businesses, consolidating manufacturing operations and
reorganizing administrative functions to enable businesses to
share services.
Certain costs associated with the 2004 restructuring and
divestiture program are not included in restructuring and
impairment charges. All inventory adjustments that resulted from
the 2004 restructuring and divestiture program and certain other
costs associated with closing out businesses during 2005 and
2004 are included in materials, labor and other product costs
and totaled $2,000 and $17,040, respectively. The $2,000 in
costs for 2005 related to the Companys Aerospace Segment.
Of the $17,040 in costs for 2004, $4,537 and $12,503 were
attributed to the Companys Commercial and Aerospace
segments, respectively.
For 2006, 2005 and 2004, the charges, including changes in
estimates, associated with the 2004 restructuring and
divestiture program by segment that are included in
restructuring and impairment charges were as follows:
|
|
|
|
|
|
|
2006
|
|
|
|
Medical
|
|
|
Termination benefits
|
|
$
|
(706
|
)
|
Contract termination costs
|
|
|
2,122
|
|
Asset impairments
|
|
|
927
|
|
Other restructuring costs
|
|
|
8,039
|
|
|
|
|
|
|
|
|
$
|
10,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
Commercial
|
|
|
Medical
|
|
|
Aerospace
|
|
|
Total
|
|
|
Termination benefits
|
|
$
|
2,456
|
|
|
$
|
6,492
|
|
|
$
|
517
|
|
|
$
|
9,465
|
|
Contract termination costs
|
|
|
(154
|
)
|
|
|
1,184
|
|
|
|
|
|
|
|
1,030
|
|
Asset impairments
|
|
|
156
|
|
|
|
3,270
|
|
|
|
1,898
|
|
|
|
5,324
|
|
Other restructuring costs
|
|
|
943
|
|
|
|
9,694
|
|
|
|
610
|
|
|
|
11,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,401
|
|
|
$
|
20,640
|
|
|
$
|
3,025
|
|
|
$
|
27,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
Commercial
|
|
|
Medical
|
|
|
Aerospace
|
|
|
Total
|
|
|
Termination benefits
|
|
$
|
8,407
|
|
|
$
|
6,625
|
|
|
$
|
1,388
|
|
|
$
|
16,420
|
|
Contract termination costs
|
|
|
775
|
|
|
|
|
|
|
|
2,300
|
|
|
|
3,075
|
|
Asset impairments
|
|
|
11,244
|
|
|
|
3,681
|
|
|
|
32,662
|
|
|
|
47,587
|
|
Other restructuring costs
|
|
|
390
|
|
|
|
146
|
|
|
|
|
|
|
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,816
|
|
|
$
|
10,452
|
|
|
$
|
36,350
|
|
|
$
|
67,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination benefits are comprised of severance-related payments
for all employees terminated in connection with the 2004
restructuring and divestiture program. Contract termination
costs relate primarily to the termination of leases in
conjunction with the consolidation of facilities in the
Companys Medical Segment and in 2005 also include a $531
reduction in the estimated cost associated with a lease
termination in
F-20
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
conjunction with the consolidation of manufacturing facilities
in the Companys Commercial Segment. Asset impairments
relate primarily to machinery and equipment associated with the
consolidation of manufacturing facilities and in 2004 also
relate to goodwill associated with the Companys Industrial
Gas Turbine aftermarket services business. Other restructuring
costs include expenses primarily related to the consolidation of
manufacturing operations and the reorganization of
administrative functions.
Set forth below is a reconciliation of the Companys
accrued liability associated with the 2004 restructuring and
divestiture program. At December 31, 2006, the accrued
liability was entirely due within twelve months:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Accruals and
|
|
|
|
|
|
Balance at
|
|
|
|
December 25,
|
|
|
Changes in
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
Estimates
|
|
|
Payments
|
|
|
2006
|
|
|
Termination benefits
|
|
$
|
7,848
|
|
|
$
|
(706
|
)
|
|
$
|
(6,938
|
)
|
|
$
|
204
|
|
Contract termination costs
|
|
|
775
|
|
|
|
2,122
|
|
|
|
(945
|
)
|
|
|
1,952
|
|
Other restructuring costs
|
|
|
31
|
|
|
|
8,039
|
|
|
|
(7,971
|
)
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,654
|
|
|
$
|
9,455
|
|
|
$
|
(15,854
|
)
|
|
$
|
2,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Accruals and
|
|
|
|
|
|
Balance at
|
|
|
|
December 26,
|
|
|
Changes in
|
|
|
|
|
|
December 25,
|
|
|
|
2004
|
|
|
Estimates
|
|
|
Payments
|
|
|
2005
|
|
|
Termination benefits
|
|
$
|
15,014
|
|
|
$
|
9,465
|
|
|
$
|
(16,631
|
)
|
|
$
|
7,848
|
|
Contract termination costs
|
|
|
3,075
|
|
|
|
1,030
|
|
|
|
(3,330
|
)
|
|
|
775
|
|
Other restructuring costs
|
|
|
228
|
|
|
|
11,247
|
|
|
|
(11,444
|
)
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,317
|
|
|
$
|
21,742
|
|
|
$
|
(31,405
|
)
|
|
$
|
8,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006, the Company expects to incur the
following future restructuring costs associated with the 2004
restructuring and divestiture program in its Medical Segment
during 2007:
|
|
|
|
|
Termination benefits
|
|
$
|
100
|
- 150
|
Contract termination costs
|
|
|
|
|
Other restructuring costs
|
|
|
1,500
|
- 3,000
|
|
|
|
|
|
|
|
$
|
1,600
|
- 3,150
|
|
|
|
|
|
Impairment
Charges
During 2006, the Company determined that three minority held
investments and certain fixed assets were impaired and recorded
an aggregate charge of $7,378, which is included in
restructuring and impairment charges.
F-21
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Note 5
Inventories
Inventories at year end consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Raw materials
|
|
$
|
214,440
|
|
|
$
|
199,955
|
|
Work-in-process
|
|
|
65,058
|
|
|
|
70,870
|
|
Finished goods
|
|
|
182,954
|
|
|
|
178,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
462,452
|
|
|
|
448,844
|
|
Less: Inventory reserve
|
|
|
(46,573
|
)
|
|
|
(44,573
|
)
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
415,879
|
|
|
$
|
404,271
|
|
|
|
|
|
|
|
|
|
|
Note 6
Property, plant and equipment
The major classes of property, plant and equipment, at cost, at
year end are as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Land, buildings and leasehold
improvements
|
|
$
|
244,095
|
|
|
$
|
180,275
|
|
Machinery and equipment
|
|
|
689,608
|
|
|
|
681,895
|
|
Computer equipment and software
|
|
|
66,991
|
|
|
|
64,679
|
|
Construction in progress
|
|
|
41,921
|
|
|
|
42,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,042,615
|
|
|
|
968,948
|
|
Less: Accumulated depreciation
|
|
|
(620,437
|
)
|
|
|
(521,132
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
422,178
|
|
|
$
|
447,816
|
|
|
|
|
|
|
|
|
|
|
Note 7
Goodwill and other intangible assets
Changes in the carrying amount of goodwill, by operating
segment, for 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Medical
|
|
|
Aerospace
|
|
|
Total
|
|
|
Goodwill at December 25, 2005
|
|
$
|
105,435
|
|
|
$
|
391,933
|
|
|
$
|
7,298
|
|
|
$
|
504,666
|
|
Acquisitions
|
|
|
4,016
|
|
|
|
12,675
|
|
|
|
|
|
|
|
16,691
|
|
Dispositions
|
|
|
(172
|
)
|
|
|
(938
|
)
|
|
|
|
|
|
|
(1,110
|
)
|
Impairment
|
|
|
|
|
|
|
(1,003
|
)
|
|
|
|
|
|
|
(1,003
|
)
|
Adjustments(1)
|
|
|
1,963
|
|
|
|
(14,076
|
)
|
|
|
|
|
|
|
(12,113
|
)
|
Translation adjustment
|
|
|
3,636
|
|
|
|
3,239
|
|
|
|
|
|
|
|
6,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill at December 31, 2006
|
|
$
|
114,878
|
|
|
$
|
391,830
|
|
|
$
|
7,298
|
|
|
$
|
514,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Goodwill adjustments relate primarily to the adjustment of the
HudsonRCI integration cost accrual (see Note 3) and to
purchase price allocation changes associated with certain tax
adjustments. |
F-22
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Intangible assets at year end consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Customer lists
|
|
$
|
84,593
|
|
|
$
|
80,362
|
|
|
$
|
20,246
|
|
|
$
|
13,930
|
|
Intellectual property
|
|
|
68,476
|
|
|
|
59,174
|
|
|
|
28,388
|
|
|
|
22,967
|
|
Distribution rights
|
|
|
36,266
|
|
|
|
35,820
|
|
|
|
19,124
|
|
|
|
16,602
|
|
Trade names
|
|
|
90,252
|
|
|
|
85,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
279,587
|
|
|
$
|
260,820
|
|
|
$
|
67,758
|
|
|
$
|
53,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to intangible assets was $13,952,
$13,851, and $13,579 for 2006, 2005 and 2004, respectively.
Estimated annual amortization expense for each of the five
succeeding years is as follows:
|
|
|
|
|
2007
|
|
$
|
14,700
|
|
2008
|
|
|
14,600
|
|
2009
|
|
|
14,400
|
|
2010
|
|
|
14,000
|
|
2011
|
|
|
13,500
|
|
Note 8
Borrowings
Long-term borrowings at year end consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Senior notes at an average fixed
rate of 5.6%, due in installments through 2016
|
|
$
|
410,500
|
|
|
$
|
417,000
|
|
Term loan notes, primarily
non-U.S. dollar
denominated, at an average rate of 4.8%, with an average
maturity of 2 years
|
|
|
54,797
|
|
|
|
97,265
|
|
Revolving credit loans at an
average interest rate of 5.6%, due 2011
|
|
|
19,591
|
|
|
|
17,371
|
|
Other debt, mortgage notes and
capital lease obligations, at interest rates ranging from 3% to
7%
|
|
|
9,180
|
|
|
|
10,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
494,068
|
|
|
|
541,880
|
|
Current portion of borrowings
|
|
|
(6,698
|
)
|
|
|
(36,608
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
487,370
|
|
|
$
|
505,272
|
|
|
|
|
|
|
|
|
|
|
The various senior and term note agreements require the
maintenance of certain financial ratios and limit the repurchase
of the Companys stock and payment of cash dividends. As of
December 31, 2006, the Company was in compliance with these
provisions. Under the most restrictive of these provisions,
$148,000 of retained earnings was available for dividends and
stock repurchases at December 31, 2006.
Notes payable at December 31, 2006 consists of demand loans
due to banks of $24,324 at an average interest rate of 5.2%. In
addition, the Company has approximately $571,000 available under
several interest rate alternatives in unused lines of credit.
Interest expense in 2006, 2005 and 2004 did not differ
materially from interest paid, nor did the carrying value of
year-end long-term borrowings differ materially from fair value.
F-23
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The aggregate amount of notes payable and long-term debt,
including capital leases, maturing in the next five years are as
follows:
|
|
|
|
|
2007
|
|
$
|
31,022
|
|
2008
|
|
|
66,488
|
|
2009
|
|
|
1,291
|
|
2010
|
|
|
|
|
2011
|
|
|
169,591
|
|
Note 9
Financial instruments
The Company uses forward rate contracts to manage currency
transaction exposure and interest rate swaps for exposure to
interest rate changes. These cash flow hedges are recorded on
the balance sheet at fair market value and subsequent changes in
value are recognized in the statement of income or as part of
comprehensive income. Approximately $669 of the amount in
accumulated other comprehensive income at December 31, 2006
would be reclassified as expense to the statement of income
during 2007 should foreign currency exchange rates and interest
rates remain at December 31, 2006 levels.
The following table provides financial instruments activity
included as part of accumulated other comprehensive income, net
of tax:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Amount at beginning of year
|
|
$
|
(1,983
|
)
|
|
$
|
(1,039
|
)
|
Additions and revaluations
|
|
|
3,048
|
|
|
|
(1,789
|
)
|
Clearance of hedge results to
income
|
|
|
(1,814
|
)
|
|
|
845
|
|
|
|
|
|
|
|
|
|
|
Amount at end of year
|
|
$
|
(749
|
)
|
|
$
|
(1,983
|
)
|
|
|
|
|
|
|
|
|
|
Note 10
Shareholders equity
The authorized capital of the Company is comprised of
100,000,000 common shares, $1 par value, and 500,000
preference shares. No preference shares have been outstanding
during the last three years.
On July 25, 2005, the Companys Board of Directors
authorized the repurchase of up to $140 million of
outstanding Company common stock over twelve months ended July
2006. In June 2006, the Companys Board of Directors
extended for an additional six months, until January 2007, its
authorization for the repurchase of shares. Under the approved
plan, the Company repurchased (in thousands) a total of
2,317 shares on the open market during 2005 and 2006 for an
aggregate purchase price of $140,000, and aggregate fees and
commissions of $69.
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 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. A
reconciliation of basic to diluted weighted average shares
outstanding is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Shares in
thousands)
|
|
|
Basic
|
|
|
39,760
|
|
|
|
40,516
|
|
|
|
40,205
|
|
Dilutive shares assumed issued
|
|
|
228
|
|
|
|
442
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
39,988
|
|
|
|
40,958
|
|
|
|
40,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Weighted average stock options (in thousands) of 406, 199 and
790 were antidilutive and therefore not included in the
calculation of earnings per share for 2006, 2005 and 2004,
respectively.
Accumulated other comprehensive income at year end consisted of
the following:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Financial instruments marked to
market, net of tax
|
|
$
|
(749
|
)
|
|
$
|
(1,983
|
)
|
Cumulative translation adjustment
|
|
|
73,657
|
|
|
|
26,189
|
|
Defined benefit pension and
postretirement plans, net of tax
|
|
|
(42,873
|
)
|
|
|
(17,592
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive
income
|
|
$
|
30,035
|
|
|
$
|
6,614
|
|
|
|
|
|
|
|
|
|
|
Note 11
Stock compensation plans
The Company has stock-based compensation plans that provide for
the granting of incentive and non-qualified options to officers
and key employees to purchase up to 4,000,000 shares of
common stock at the market price of the stock on the dates
options are granted. Outstanding options generally are
exercisable three to five years after the date of the grant and
expire no more than ten years after the grant.
The following table summarizes the option activity as of
December 31, 2006 and changes during the year then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Shares
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Subject to
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
Life In
Years
|
|
|
Value
|
|
|
Outstanding, beginning of the year
|
|
|
1,809,234
|
|
|
$
|
46.82
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
714,131
|
|
|
|
64.08
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(224,571
|
)
|
|
|
45.76
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(189,796
|
)
|
|
|
55.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of the year
|
|
|
2,108,998
|
|
|
$
|
51.96
|
|
|
|
7.2
|
|
|
$
|
26,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, end of the year
|
|
|
1,084,924
|
|
|
$
|
45.17
|
|
|
|
5.7
|
|
|
$
|
21,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006, 928,029 shares were available
for future grant under the plans.
The weighted average grant-date fair value was $14.24, $12.45
and $10.64 for options granted during 2006, 2005 and 2004,
respectively. The total intrinsic value of options exercised was
$4,464, $11,064 and $8,758 during 2006, 2005 and 2004,
respectively.
During 2006, the Company issued 40,930 shares of restricted
stock with vesting periods ranging from 6 months to
2 years. The Company recorded $991 of expense related to
the portion of these shares that vested during 2006, which is
included in selling, engineering and administrative expenses.
F-25
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Note 12
Income taxes
The following table summarizes the components of the provision
for income taxes from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(7,302
|
)
|
|
$
|
22,659
|
|
|
$
|
5,681
|
|
State
|
|
|
1,768
|
|
|
|
(1,407
|
)
|
|
|
1,573
|
|
Foreign
|
|
|
46,287
|
|
|
|
12,461
|
|
|
|
8,871
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
28,991
|
|
|
|
17,418
|
|
|
|
(9,872
|
)
|
State
|
|
|
27
|
|
|
|
1,602
|
|
|
|
(377
|
)
|
Foreign
|
|
|
(15,631
|
)
|
|
|
(4,927
|
)
|
|
|
6,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
54,140
|
|
|
$
|
47,806
|
|
|
$
|
12,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the U.S. and
non-U.S. components
of income from continuing operations before taxes and minority
interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
United States
|
|
$
|
60,280
|
|
|
$
|
78,632
|
|
|
$
|
18,994
|
|
Other
|
|
|
158,747
|
|
|
|
129,283
|
|
|
|
78,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
219,027
|
|
|
$
|
207,915
|
|
|
$
|
97,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid were $65,151, $29,560 and $23,042 in 2006,
2005 and 2004, respectively.
Reconciliations between the statutory federal income tax rate
and the effective income tax rate for 2006, 2005 and 2004 were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Federal statutory rate
|
|
|
35.00%
|
|
|
|
35.00%
|
|
|
|
35.00%
|
|
Export sales benefit
|
|
|
(0.35%
|
)
|
|
|
(1.01%
|
)
|
|
|
(2.82%
|
)
|
American Jobs Creation Act
(AJCA) repatriation benefit
|
|
|
0.00%
|
|
|
|
(2.80%
|
)
|
|
|
0.00%
|
|
Taxes on foreign earnings
|
|
|
(7.62%
|
)
|
|
|
(6.65%
|
)
|
|
|
(18.30%
|
)
|
State taxes, net of federal benefit
|
|
|
1.00%
|
|
|
|
0.06%
|
|
|
|
1.00%
|
|
Other, net
|
|
|
(3.31%
|
)
|
|
|
(1.61%
|
)
|
|
|
(1.71%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24.72%
|
|
|
|
22.99%
|
|
|
|
13.17%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-26
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Significant components of the deferred tax assets and
liabilities at year end were as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Tax loss carryforwards
|
|
$
|
80,288
|
|
|
$
|
71,928
|
|
Intangibles asset
acquisitions
|
|
|
17,391
|
|
|
|
22,342
|
|
Accrued employee benefits
|
|
|
25,455
|
|
|
|
22,467
|
|
Tax credit carryforwards
|
|
|
36,554
|
|
|
|
22,664
|
|
Pension
|
|
|
2,844
|
|
|
|
11,375
|
|
Inventories
|
|
|
9,292
|
|
|
|
9,713
|
|
Bad debts
|
|
|
4,235
|
|
|
|
7,602
|
|
Other reserves and accruals
|
|
|
40,824
|
|
|
|
32,013
|
|
Less: Valuation allowance
|
|
|
(51,323
|
)
|
|
|
(32,598
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
165,560
|
|
|
|
167,506
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
|
61,068
|
|
|
|
71,425
|
|
Intangibles stock
acquisitions
|
|
|
50,589
|
|
|
|
62,859
|
|
Foreign exchange
|
|
|
2,423
|
|
|
|
9,140
|
|
Accrued expenses
|
|
|
15,675
|
|
|
|
3,014
|
|
Other
|
|
|
7,316
|
|
|
|
7,842
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
137,071
|
|
|
|
154,280
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
28,489
|
|
|
$
|
13,226
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006, the cumulative unremitted earnings of
subsidiaries outside the United States, for which no income or
withholding taxes have been provided, approximated $321,000.
Such earnings are expected to be reinvested indefinitely and as
a result, no deferred tax liability has been recognized with
regard to the remittance of such earnings. It is not practicable
to estimate the income tax liability that might be incurred if
such earnings were remitted to the United States.
Under the tax laws of various jurisdictions in which the Company
operates, deductions or credits that cannot be fully utilized
for tax purposes during the current year may be carried forward,
subject to statutory limitations, to reduce taxable income or
taxes payable in a future tax year. At December 31, 2006,
the tax effect of such carry forwards approximated $116,842. Of
this amount, $6,009 has no expiration date, $3,303 expires after
2006 but before the end of 2011 and $107,530 expires after 2011.
A substantial amount of these carryforwards consist of tax
losses which were acquired in an acquisition by the Company in
2004. Therefore, the utilization of these tax attributes is
subject to an annual limitation imposed by Section 382 of
the Internal Revenue Code. It is not expected that this annual
limitation will prevent the Company from utilizing its
carryforwards. The determination of state net operating loss
carryforwards are dependent upon the
U.S. subsidiaries taxable income or loss,
apportionment percentages and other respective state laws, which
can change year to year and impact the amount of such
carryforward.
The valuation allowance for deferred tax assets of $51,323 and
$32,598 at December 31, 2006 and December 25, 2005,
respectively, relates principally to the uncertainty of the
utilization of certain deferred tax assets, primarily tax loss
and credit carryforwards in various jurisdictions. The valuation
allowance was calculated in accordance with the provisions of
SFAS No. 109, which requires that a valuation
allowance be established and maintained when it is more
likely than not that all or a portion of deferred tax
assets will
F-27
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
not be realized. The valuation allowance increase in 2006 was
primarily attributable to the recording of deferred tax assets
associated with state tax loss carryforwards at full value which
required a valuation allowance.
Several foreign subsidiaries continue to operate under separate
tax holiday arrangements as granted by certain foreign
jurisdictions. The nature and extent of such arrangements vary
and the benefits of such arrangements phase out in future years
according to the specific terms and schedules as set forth by
the particular taxing authorities having jurisdiction over the
arrangements. The most significant arrangement expires in March
2008.
Note 13
Pension and other postretirement benefits
The Company has a number of defined benefit pension and
postretirement plans covering eligible U.S. and
non-U.S. employees.
The defined benefit pension plans are noncontributory. The
benefits under these plans are based primarily on years of
service and employees pay near retirement. The
Companys funding policy for U.S. plans is to
contribute annually, at a minimum, amounts required by
applicable laws and regulations. Obligations under
non-U.S. plans
are systematically provided for by depositing funds with
trustees or by book reserves.
The parent Company and certain subsidiaries provide medical,
dental and life insurance benefits to pensioners and survivors.
The associated plans are unfunded and approved claims are paid
from Company funds.
The following table illustrates the incremental effect of
applying SFAS No. 158 on individual line items in the
December 31, 2006 consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Before
|
|
|
Adjustments
|
|
|
Balance Sheet
at
|
|
|
|
Application of
|
|
|
Required by
|
|
|
December 31,
|
|
|
|
SFAS No. 158
|
|
|
SFAS No. 158
|
|
|
2006
|
|
|
Deferred tax assets
|
|
$
|
59,446
|
|
|
$
|
1,517
|
|
|
$
|
60,963
|
|
Total current assets
|
|
|
1,138,012
|
|
|
|
1,517
|
|
|
|
1,139,529
|
|
Intangibles and other assets
|
|
|
262,991
|
|
|
|
(3,762
|
)
|
|
|
259,229
|
|
Deferred tax assets
|
|
|
(6,533
|
)
|
|
|
7,567
|
|
|
|
1,034
|
|
Total assets
|
|
|
2,353,730
|
|
|
|
5,322
|
|
|
|
2,359,052
|
|
Payroll and benefit-related
liabilities
|
|
|
70,413
|
|
|
|
3,994
|
|
|
|
74,407
|
|
Total current liabilities
|
|
|
466,781
|
|
|
|
3,994
|
|
|
|
470,775
|
|
Deferred tax liabilities
|
|
|
34,774
|
|
|
|
(1,430
|
)
|
|
|
33,344
|
|
Pension and postretirement benefit
liabilities
|
|
|
77,269
|
|
|
|
19,922
|
|
|
|
97,191
|
|
Total liabilities
|
|
|
1,105,088
|
|
|
|
22,486
|
|
|
|
1,127,574
|
|
Accumulated other comprehensive
income
|
|
|
47,199
|
|
|
|
(17,164
|
)
|
|
|
30,035
|
|
Total shareholders equity
|
|
|
1,206,585
|
|
|
|
(17,164
|
)
|
|
|
1,189,421
|
|
Total liabilities and
shareholders equity
|
|
|
2,353,730
|
|
|
|
5,322
|
|
|
|
2,359,052
|
|
F-28
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Net benefit cost for pension and postretirement benefit plans
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Other
Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Service cost
|
|
$
|
3,607
|
|
|
$
|
4,716
|
|
|
$
|
4,789
|
|
|
$
|
311
|
|
|
$
|
280
|
|
|
$
|
231
|
|
Interest cost
|
|
|
11,784
|
|
|
|
11,339
|
|
|
|
10,871
|
|
|
|
1,490
|
|
|
|
1,342
|
|
|
|
1,283
|
|
Expected return on plan assets
|
|
|
(12,553
|
)
|
|
|
(9,978
|
)
|
|
|
(16,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amortization and deferral
|
|
|
2,465
|
|
|
|
898
|
|
|
|
8,149
|
|
|
|
937
|
|
|
|
740
|
|
|
|
439
|
|
Curtailment charge (credit)
|
|
|
|
|
|
|
(585
|
)
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net benefit cost
|
|
$
|
5,303
|
|
|
$
|
6,390
|
|
|
$
|
7,562
|
|
|
$
|
2,738
|
|
|
$
|
2,441
|
|
|
$
|
1,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated net loss, prior service cost and net transition
obligation for U.S. and foreign defined benefit pension plans
that will be amortized from accumulated other comprehensive
income into net benefit cost during 2007 are $2,862, $(128) and
$78, respectively. The estimated net loss, prior service cost
and net transition obligation for postretirement benefit plans
that will be amortized from accumulated other comprehensive
income into net benefit cost during 2007 are $607, $90 and $217,
respectively.
The weighted average assumptions for U.S. and foreign plans used
in determining net benefit cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Other
Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Discount rate
|
|
|
5.71%
|
|
|
|
5.75%
|
|
|
|
6.5%
|
|
|
|
5.75%
|
|
|
|
5.75%
|
|
|
|
6.5%
|
|
Rate of return
|
|
|
8.73%
|
|
|
|
8.54%
|
|
|
|
8.66%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial healthcare trend rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.0%
|
|
|
|
10.0%
|
|
|
|
8.0%
|
|
Ultimate healthcare trend rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.5%
|
|
|
|
4.5%
|
|
|
|
4.5%
|
|
F-29
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Summarized information on the Companys pension and
postretirement benefit plans, measured as of year end, and the
amounts recognized in the consolidated balance sheet and in
accumulated other comprehensive income were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Other
Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Benefit obligation, beginning of
year
|
|
$
|
207,145
|
|
|
$
|
200,854
|
|
|
$
|
26,110
|
|
|
$
|
21,984
|
|
Service cost
|
|
|
3,332
|
|
|
|
4,716
|
|
|
|
311
|
|
|
|
280
|
|
Interest cost
|
|
|
11,784
|
|
|
|
11,339
|
|
|
|
1,490
|
|
|
|
1,342
|
|
Amendments
|
|
|
765
|
|
|
|
751
|
|
|
|
1,102
|
|
|
|
748
|
|
Actuarial loss
|
|
|
11,294
|
|
|
|
9,511
|
|
|
|
1,478
|
|
|
|
3,888
|
|
Currency translation
|
|
|
7,574
|
|
|
|
(4,919
|
)
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(8,468
|
)
|
|
|
(8,470
|
)
|
|
|
(2,194
|
)
|
|
|
(1,946
|
)
|
Medicare Part D reimbursement
|
|
|
|
|
|
|
|
|
|
|
168
|
|
|
|
|
|
Divestitures
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailments
|
|
|
|
|
|
|
(6,637
|
)
|
|
|
|
|
|
|
(186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of year
|
|
|
233,399
|
|
|
|
207,145
|
|
|
|
28,465
|
|
|
|
26,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets,
beginning of year
|
|
|
144,436
|
|
|
|
132,278
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
12,101
|
|
|
|
10,039
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
10,990
|
|
|
|
11,219
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(8,468
|
)
|
|
|
(8,470
|
)
|
|
|
|
|
|
|
|
|
Currency translation
|
|
|
2,778
|
|
|
|
(630
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, end of
year
|
|
|
161,837
|
|
|
|
144,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status, end of year
|
|
$
|
(71,562
|
)
|
|
|
(62,709
|
)
|
|
$
|
(28,465
|
)
|
|
|
(26,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized transition obligation
|
|
|
|
|
|
|
959
|
|
|
|
|
|
|
|
1,509
|
|
Unrecognized net actuarial loss
|
|
|
|
|
|
|
43,727
|
|
|
|
|
|
|
|
9,288
|
|
Unrecognized prior service cost
|
|
|
|
|
|
|
(1,360
|
)
|
|
|
|
|
|
|
558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
|
|
|
|
$
|
(19,383
|
)
|
|
|
|
|
|
$
|
(14,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Other
Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Amounts recognized in the
consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid benefit cost
|
|
$
|
1,158
|
|
|
$
|
740
|
|
|
$
|
|
|
|
$
|
|
|
Payroll and benefit-related
liabilities
|
|
|
(1,920
|
)
|
|
|
|
|
|
|
(2,074
|
)
|
|
|
|
|
Pension and postretirement benefit
liabilities
|
|
|
(70,800
|
)
|
|
|
(50,594
|
)
|
|
|
(26,391
|
)
|
|
|
(14,755
|
)
|
Intangible asset
|
|
|
|
|
|
|
2,096
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive
income
|
|
|
55,384
|
|
|
|
28,375
|
|
|
|
12,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(16,178
|
)
|
|
$
|
(19,383
|
)
|
|
$
|
(15,468
|
)
|
|
$
|
(14,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Other
Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Amounts recognized in accumulated
other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
54,814
|
|
|
|
n/a
|
|
|
$
|
10,135
|
|
|
|
n/a
|
|
Prior service cost (credit)
|
|
|
(417
|
)
|
|
|
n/a
|
|
|
|
1,570
|
|
|
|
n/a
|
|
Net transition obligation
|
|
|
987
|
|
|
|
n/a
|
|
|
|
1,292
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
55,384
|
|
|
|
n/a
|
|
|
$
|
12,997
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average assumptions for U.S. and foreign plans used
in determining benefit obligations as of year end were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Other
Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Discount rate
|
|
|
5.46%
|
|
|
|
5.71%
|
|
|
|
5.85%
|
|
|
|
5.75%
|
|
Expected return on plan assets
|
|
|
7.52%
|
|
|
|
8.73%
|
|
|
|
|
|
|
|
|
|
Rate of compensation increase
|
|
|
3.0%
|
|
|
|
3.1%
|
|
|
|
|
|
|
|
|
|
Initial healthcare trend rate
|
|
|
|
|
|
|
|
|
|
|
8.0%
|
|
|
|
9.0%
|
|
Ultimate healthcare trend rate
|
|
|
|
|
|
|
|
|
|
|
4.5%
|
|
|
|
4.5%
|
|
The discount rate for U.S. plans of 5.85% was established
by comparing the projection of expected benefit payments to the
Citigroup Pension Discount Curve (published monthly) as of
December 31, 2006. The expected benefit payments are
discounted by each corresponding discount rate on the yield
curve. Once the present value of the string of benefit payments
is established, the Company solves for the single spot rate to
apply to all obligations of the plan that will exactly match the
previously determined present value.
The Citigroup Pension Discount Curve is constructed beginning
with a U.S. Treasury par curve that reflects the entire
Treasury and Separate Trading of Registered Interest and
Principal Securities (STRIPS) market. From the
Treasury curve, Citibank produces a AA corporate par curve by
adding option-adjusted spreads that are drawn from the AA
corporate sector of the Citigroup Broad Investment
Grade Bond Index. Finally, from the AA corporate par curve,
Citigroup derives the spot rates that constitute the Pension
Discount Curve. For payments beyond 30 years the Company
extends the curve assuming that the discount rate derived in
year 30 is extended to the end of the plans payment
expectations.
Increasing the assumed healthcare trend rate by 1% would
increase the benefit obligation by $2,678 and would increase the
2006 benefit expense by $253. Decreasing the trend rate by 1%
would decrease the benefit obligation by $2,265 and would
decrease the 2006 benefit expense by $135.
The accumulated benefit obligation for all U.S. and foreign
defined benefit pension plans was $221,942 and $193,536 for 2006
and 2005, respectively.
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for U.S. and foreign
plans with accumulated benefit obligations in excess of plan
assets were $233,399, $221,942 and $161,837, respectively for
2006 and $205,457, $192,039 and $141,804, respectively for 2005.
Plan assets are allocated among various categories of equities,
fixed income, cash and cash equivalents with professional
investment managers whose performance is actively monitored. The
target allocation among plan assets allows for variances based
on economic and market trends. The primary investment objective
is long-term growth of assets in order to meet present and
future benefit obligations. The Company periodically
F-31
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
conducts an asset/liability modeling study to ensure the
investment strategy is aligned with the profile of benefit
obligations.
The plan asset allocations for U.S. and foreign plans are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
% of
Assets
|
|
|
|
Allocation
|
|
|
2006
|
|
|
2005
|
|
|
Equity securities
|
|
|
60%
|
|
|
|
64%
|
|
|
|
68%
|
|
Debt securities
|
|
|
30%
|
|
|
|
19%
|
|
|
|
18%
|
|
Real estate
|
|
|
10%
|
|
|
|
17%
|
|
|
|
14%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys contributions to U.S. and foreign pension
plans during 2007 are expected to be in the range of
$10 million to $14 million. Contributions to
postretirement healthcare plans during 2007 are expected to be
approximately $2 million.
The Companys expected benefit payments for U.S. and
foreign plans for each of the five succeeding years and the
aggregate of the five years thereafter, net of the annual
Medicare Part D subsidy of approximately $220, is as
follows:
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Other
Benefits
|
|
|
2007
|
|
$
|
8,949
|
|
|
$
|
2,074
|
|
2008
|
|
|
9,402
|
|
|
|
2,138
|
|
2009
|
|
|
9,866
|
|
|
|
2,187
|
|
2010
|
|
|
10,463
|
|
|
|
2,223
|
|
2011
|
|
|
11,124
|
|
|
|
2,236
|
|
Years 2012 2016
|
|
|
66,963
|
|
|
|
10,979
|
|
The Company maintains a number of defined contribution savings
plans covering eligible U.S. and
non-U.S. employees.
The Company partially matches employee contributions. Costs
related to these plans were $9,132, $8,914 and $9,952 for 2006,
2005 and 2004, respectively.
Note 14
Commitments and contingent liabilities
Product warranty liability: The Company
warrants to the original purchaser of certain of its products
that it will, at its option, repair or replace, without charge,
such products if they fail due to a manufacturing defect.
Warranty periods vary by product. The Company has recourse
provisions for certain products that would enable recovery from
third parties for amounts paid under the warranty. The Company
accrues for product warranties when, based on available
information, it is probable that customers will make claims
under warranties relating to products that have been sold, and a
reasonable estimate of the costs (based on historical claims
experience relative to sales) can be made. Set forth below is a
reconciliation of the Companys estimated product warranty
liability for 2006:
|
|
|
|
|
Balance
December 25, 2005
|
|
$
|
14,156
|
|
Accrued for warranties issued in
2006
|
|
|
12,503
|
|
Settlements (cash and in kind)
|
|
|
(13,008
|
)
|
Accruals related to pre-existing
warranties
|
|
|
(143
|
)
|
Effect of translation
|
|
|
550
|
|
|
|
|
|
|
Balance
December 31, 2006
|
|
$
|
14,058
|
|
|
|
|
|
|
F-32
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Operating leases: The Company uses various
leased facilities and equipment in its operations. The terms for
these leased assets vary depending on the lease agreement. In
connection with these operating leases, the Company has residual
value guarantees in the amount of $4,771 at December 31,
2006. The Companys future payments cannot exceed the
minimum rent obligation plus the residual value guarantee
amount. The guarantee amounts are tied to the unamortized lease
values of the assets under lease, and are due should the Company
decide neither to renew these leases, nor to exercise its
purchase option. At December 31, 2006, the Company had no
liabilities recorded for these obligations. Any residual value
guarantee amounts paid to the lessor may be recovered by the
Company from the sale of the assets to a third party.
Future minimum lease payments (including residual value
guarantee amounts) under noncancelable operating leases are as
follows:
|
|
|
|
|
2007
|
|
$
|
35,115
|
|
2008
|
|
|
30,485
|
|
2009
|
|
|
26,008
|
|
2010
|
|
|
19,853
|
|
2011
|
|
|
15,508
|
|
Rental expense under operating leases was $38,850, $36,734 and
$40,827 in 2006, 2005 and 2004, respectively.
Accounts receivable securitization
program: The Company uses an accounts receivable
securitization program to gain access to enhanced credit markets
and reduce financing costs. As currently structured, the Company
sells certain trade receivables on a non-recourse basis to a
consolidated special purpose entity, which in turn sells an
interest in those receivables to a commercial paper conduit. The
conduit issues notes secured by that interest to third party
investors. The assets of the special purpose entity are not
available to satisfy the obligations of the Company. In
accordance with the provisions of SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, transfers of assets
under the program qualify as sales of receivables and
accordingly, $40,068 of accounts receivable and the related
amounts previously recorded in notes payable were removed from
the consolidated balance sheet as of both December 31, 2006
and December 25, 2005.
Environmental: The Company is subject to
contingencies pursuant to environmental laws and regulations
that in the future may require the Company to take further
action to correct the effects on the environment of prior
disposal practices or releases of chemical or petroleum
substances by the Company or other parties. Much of this
liability results from the U.S. Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA),
often referred to as Superfund, the U.S. Resource
Conservation and Recovery Act (RCRA) and similar
state laws. These laws require the Company to undertake certain
investigative and remedial activities at sites where the Company
conducts or once conducted operations or at sites where
Company-generated waste was disposed.
Remediation activities vary substantially in duration and cost
from site to site. These activities, and their associated costs,
depend on the mix of unique site characteristics, evolving
remediation technologies, diverse regulatory agencies and
enforcement policies, as well as the presence or absence of
potentially responsible parties. At December 31, 2006 and
December 25, 2005, the Companys consolidated balance
sheet included an accrued liability of $7,417 and $6,317,
respectively, relating to these matters. Considerable
uncertainty exists with respect to these costs and, under
adverse changes in circumstances, potential liability may exceed
the amount accrued as of December 31, 2006. The time-frame
over which the accrued or presently unrecognized amounts may be
paid out, based on past history, is estimated to be
15-20 years.
F-33
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Litigation: The Company is a party to various
lawsuits and claims arising in the normal course of business.
These lawsuits and claims include actions involving product
liability, intellectual property, employment and environmental
matters. Based on information currently available, advice of
counsel, established reserves and other resources, the Company
does not believe that any such actions are likely to be,
individually or in the aggregate, material to its business,
financial condition, results of operations or liquidity.
However, in the event of unexpected further developments, it is
possible that the ultimate resolution of these matters, or other
similar matters, if unfavorable, may be materially adverse to
the Companys business, financial condition, results of
operations or liquidity. Legal costs such as outside counsel
fees and expenses are charged to expense in the period incurred.
In February 2004, a jury verdict of $34,800 was rendered against
one of the Companys subsidiaries in a trademark
infringement action. In February 2005, the trial judge entered
an order rejecting the jury award in its entirety. In October
2006, the United States Court of Appeals for the Federal Circuit
upheld the February 2005 decision. As no appeal of the Court of
Appeals decision was filed within the requisite time for
filing appeals in this matter, the decision has become final.
Other: The Company has various purchase
commitments for materials, supplies and items of permanent
investment incident to the ordinary conduct of business. In the
aggregate, such commitments are not at prices in excess of
current market.
Note 15
Business segments and other information
The Company has determined that its reportable segments are
Commercial, Medical and Aerospace.
The Commercial Segment businesses principally design,
manufacture and distribute engineered products in the technical
areas of driver control, motion control, power and vehicle
management and fluid management. The Companys products are
used by a wide range of markets including the passenger car and
light truck, marine, recreational, mobile power equipment,
military, agricultural and construction vehicle, truck and bus
and various other industrial equipment sectors.
The Medical Segment businesses develop, manufacture and
distribute disposable medical products, surgical instruments and
medical devices, and specialty devices that support healthcare
providers and medical equipment manufacturers. The
Companys products are largely sold and distributed to
hospitals and healthcare providers in a range of clinical
settings.
The Aerospace Segment businesses develop and provide repair
products and services for flight and ground-based turbine
engines, manufacture and distribute precision-machined
components and design, manufacture and market cargo-handling
systems to commercial aviation, military and industrial markets
worldwide.
F-34
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Information about continuing operations by business segment is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Segment data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
1,250,838
|
|
|
$
|
1,189,645
|
|
|
$
|
1,200,848
|
|
Medical
|
|
|
858,676
|
|
|
|
831,138
|
|
|
|
736,352
|
|
Aerospace
|
|
|
537,243
|
|
|
|
493,769
|
|
|
|
453,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2,646,757
|
|
|
|
2,514,552
|
|
|
|
2,390,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
78,363
|
|
|
|
81,129
|
|
|
|
105,665
|
|
Medical
|
|
|
161,707
|
|
|
|
149,956
|
|
|
|
116,664
|
|
Aerospace
|
|
|
50,585
|
|
|
|
33,444
|
|
|
|
(10,519
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating
profit(1)
|
|
|
290,655
|
|
|
|
264,529
|
|
|
|
211,810
|
|
Corporate expenses
|
|
|
34,936
|
|
|
|
23,955
|
|
|
|
31,888
|
|
(Gain) loss on sales of businesses
and assets
|
|
|
838
|
|
|
|
(14,223
|
)
|
|
|
(2,733
|
)
|
Restructuring and impairment
charges
|
|
|
25,226
|
|
|
|
27,066
|
|
|
|
67,618
|
|
Minority interest
|
|
|
(24,957
|
)
|
|
|
(20,337
|
)
|
|
|
(19,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before interest, taxes and minority interest
|
|
$
|
254,612
|
|
|
$
|
248,068
|
|
|
$
|
134,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
710,917
|
|
|
$
|
721,985
|
|
|
$
|
842,176
|
|
Medical
|
|
|
921,401
|
|
|
|
927,996
|
|
|
|
1,093,971
|
|
Aerospace
|
|
|
251,629
|
|
|
|
247,362
|
|
|
|
355,048
|
|
Corporate(2)
|
|
|
464,920
|
|
|
|
488,806
|
|
|
|
346,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,348,867
|
|
|
$
|
2,386,149
|
|
|
$
|
2,637,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
20,963
|
|
|
$
|
23,526
|
|
|
$
|
28,004
|
|
Medical
|
|
|
25,896
|
|
|
|
26,523
|
|
|
|
14,023
|
|
Aerospace
|
|
|
15,603
|
|
|
|
18,147
|
|
|
|
9,027
|
|
Corporate
|
|
|
770
|
|
|
|
1,655
|
|
|
|
1,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63,232
|
|
|
$
|
69,851
|
|
|
$
|
52,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
42,598
|
|
|
$
|
42,316
|
|
|
$
|
46,296
|
|
Medical
|
|
|
34,944
|
|
|
|
38,508
|
|
|
|
35,772
|
|
Aerospace
|
|
|
16,644
|
|
|
|
17,856
|
|
|
|
21,997
|
|
Corporate
|
|
|
4,818
|
|
|
|
2,173
|
|
|
|
2,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
99,004
|
|
|
$
|
100,853
|
|
|
$
|
106,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Segment operating profit includes a segments revenues
reduced by its materials, labor and other product costs along
with the segments selling, engineering and administrative
expenses and minority interest. Unallocated corporate expenses,
(gain) loss on sales of businesses and assets, restructuring and
impairment charges, interest income and expense and taxes on
income are excluded from the measure. |
F-35
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(2) |
|
Identifiable corporate assets include cash, investments in
unconsolidated entities, property, plant and equipment and
deferred tax assets primarily related to net operating losses
and pension and retiree medical plans. |
Information about continuing operations in different geographic
areas is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues (based on business unit
location):
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,146,434
|
|
|
$
|
1,119,978
|
|
|
$
|
1,080,735
|
|
Other Americas
|
|
|
326,630
|
|
|
|
289,915
|
|
|
|
268,174
|
|
Germany
|
|
|
328,355
|
|
|
|
308,536
|
|
|
|
276,611
|
|
Other Europe
|
|
|
567,870
|
|
|
|
574,451
|
|
|
|
560,038
|
|
Asia/Australia
|
|
|
277,468
|
|
|
|
221,672
|
|
|
|
204,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,646,757
|
|
|
$
|
2,514,552
|
|
|
$
|
2,390,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
171,442
|
|
|
$
|
193,355
|
|
|
$
|
299,951
|
|
Other Americas
|
|
|
59,599
|
|
|
|
55,022
|
|
|
|
37,236
|
|
Germany
|
|
|
69,996
|
|
|
|
67,894
|
|
|
|
91,597
|
|
Other Europe
|
|
|
69,663
|
|
|
|
80,833
|
|
|
|
103,441
|
|
Asia/Australia
|
|
|
51,478
|
|
|
|
50,712
|
|
|
|
52,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
422,178
|
|
|
$
|
447,816
|
|
|
$
|
584,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 16
Discontinued operations and assets held for sale
In October 2006, the Company sold a small medical business that
was classified as held for sale during the second quarter of
2005 and recognized a loss on the sale of $481. The Company
previously recognized a $956 reduction in the carrying value of
this business to the estimated fair value of the business less
costs to sell. During 2006, the Company recognized a loss on
disposal of $484 in connection with a post-closing purchase
price adjustment based on working capital for its divested
automotive pedal systems business. Also during 2006, the Company
recognized a pre-tax gain of $917 related to the first quarter
2005 divestiture of Sermatech International, a
surface-engineering/specialty coatings business and recognized a
pre-tax gain of $230 related to the third quarter 2005
divestiture of a European medical product sterilization business.
In August 2005, the Company completed the sale of its automotive
pedal systems business and received $7,500 in gross proceeds.
The Company recognized a $20,874 reduction in the carrying value
of this business to the estimated fair value of the business
less costs to sell and recognized a loss on the sale of $1,686
in 2005. During the third quarter of 2005, the Company sold a
European medical product sterilization business that was
classified as held for sale during the second quarter of 2005
and recognized a pre-tax gain on the sale of $2,122 in 2005.
During the second quarter of 2005, the Company adopted a plan to
sell a small medical business and recognized a loss of $4,560 in
2005 based upon the excess of the carrying value of the business
as compared to the estimated fair value of the business less
costs to sell. On February 28, 2005, the Company completed
the sale of Sermatech International, received gross proceeds of
$79,868 and recorded a net gain on the sale of $34,415 in 2005.
During the fourth quarter of 2004, the Company recognized a loss
of $50,531 based upon a write-down of the automotive pedal
systems business from its carrying value to the estimated fair
value of the business less
F-36
TELEFLEX
INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Concluded)
costs to sell. $44,466 of the write-down applied to long-lived
assets, consisting primarily of machinery and equipment.
For financial statement purposes, the assets, liabilities,
results of operations and cash flows of these businesses have
been segregated from those of continuing operations and are
presented in the Companys consolidated financial
statements as discontinued operations and assets and liabilities
held for sale.
Revenues of discontinued operations were $3,980, $112,515 and
$227,967 for 2006, 2005 and 2004, respectively. Operating income
(loss) from discontinued operations was $(483), $2,304 and
$(68,262) for 2006, 2005 and 2004, respectively.
As part of the Companys 2006 restructuring program, the
Company determined that assets totaling $4,062 met the criteria
for held for sale classification during 2006. The assets are
comprised primarily of land and a building that are no longer
being used in the Companys operations. In December 2006,
the Company sold these assets and recognized a loss on the sale
of $106. Also during 2006, the Company sold assets, including
assets held for sale totaling $3,007, and recognized an
aggregate net loss on these sales of $732. The Company is
actively marketing its remaining assets held for sale.
As part of the Companys 2004 restructuring and divestiture
program, the Company determined that assets totaling $32,789 met
the criteria for held for sale classification during 2005. The
assets are comprised primarily of land and buildings that are no
longer being used in the Companys operations. The Company
determined that the carrying value of each asset held for sale
did not exceed the estimated fair value of the asset less costs
to sell and therefore did not adjust the carrying value of the
asset in 2005.
In October 2005, the Company completed the sale of a product
line in its Medical Segment. The Company received gross proceeds
of $10,265 and recorded a pre-tax gain on the sale of $8,989.
Also during 2005, the Company sold assets, including assets held
for sale totaling $12,942, and recognized an aggregate net gain
on these sales of $5,234.
During 2004, the Company sold six non-strategic businesses
resulting in a net pre-tax gain of $2,733. No individual
transaction resulted in a material gain or loss.
Assets and liabilities held for sale are comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Assets held for sale:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
|
|
|
$
|
1,341
|
|
Inventories
|
|
|
|
|
|
|
47
|
|
Property, plant and equipment
|
|
|
10,185
|
|
|
|
14,451
|
|
Other
|
|
|
|
|
|
|
1,060
|
|
|
|
|
|
|
|
|
|
|
Total assets held for sale
|
|
$
|
10,185
|
|
|
$
|
16,899
|
|
|
|
|
|
|
|
|
|
|
Liabilities held for sale:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
|
|
|
$
|
66
|
|
|
|
|
|
|
|
|
|
|
F-37
QUARTERLY DATA
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
|
(Dollars in
thousands, except per share)
|
|
|
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues(1)
|
|
$
|
632,167
|
|
|
$
|
682,615
|
|
|
$
|
639,132
|
|
|
$
|
692,843
|
|
Gross
profit(1)
|
|
|
183,598
|
|
|
|
202,524
|
|
|
|
185,142
|
|
|
|
202,928
|
|
Income from continuing operations
before interest, taxes and minority interest
|
|
|
56,629
|
|
|
|
62,556
|
|
|
|
67,311
|
|
|
|
68,116
|
|
Income from continuing operations
|
|
|
29,000
|
|
|
|
36,027
|
|
|
|
36,282
|
|
|
|
38,621
|
|
Income (loss) from discontinued
operations
|
|
|
106
|
|
|
|
612
|
|
|
|
(316
|
)
|
|
|
(902
|
)
|
Net income
|
|
|
29,106
|
|
|
|
36,639
|
|
|
|
35,966
|
|
|
|
37,719
|
|
Earnings (losses) per
share
basic(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.72
|
|
|
$
|
0.90
|
|
|
$
|
0.92
|
|
|
$
|
0.99
|
|
Income (loss) from discontinued
operations
|
|
|
|
|
|
|
0.02
|
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.72
|
|
|
$
|
0.91
|
|
|
$
|
0.91
|
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) per
share
diluted(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.71
|
|
|
$
|
0.89
|
|
|
$
|
0.92
|
|
|
$
|
0.98
|
|
Income (loss) from discontinued
operations
|
|
|
|
|
|
|
0.02
|
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.72
|
|
|
$
|
0.90
|
|
|
$
|
0.91
|
|
|
$
|
0.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues(1)
|
|
$
|
623,600
|
|
|
$
|
657,009
|
|
|
$
|
587,390
|
|
|
$
|
646,553
|
|
Gross
profit(1)
|
|
|
173,742
|
|
|
|
190,238
|
|
|
|
166,063
|
|
|
|
179,908
|
|
Income from continuing operations
before interest, taxes and minority interest
|
|
|
50,101
|
|
|
|
67,362
|
|
|
|
61,190
|
|
|
|
69,415
|
|
Income from continuing operations
|
|
|
24,865
|
|
|
|
38,138
|
|
|
|
35,714
|
|
|
|
41,055
|
|
Income (loss) from discontinued
operations
|
|
|
13,861
|
|
|
|
(9,165
|
)
|
|
|
(2,114
|
)
|
|
|
(3,537
|
)
|
Net income
|
|
|
38,726
|
|
|
|
28,973
|
|
|
|
33,600
|
|
|
|
37,518
|
|
Earnings (losses) per
share
basic(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.61
|
|
|
$
|
0.94
|
|
|
$
|
0.88
|
|
|
$
|
1.02
|
|
Income (loss) from discontinued
operations
|
|
|
0.34
|
|
|
|
(0.23
|
)
|
|
|
(0.05
|
)
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.96
|
|
|
$
|
0.71
|
|
|
$
|
0.83
|
|
|
$
|
0.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) per
share
diluted(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.61
|
|
|
$
|
0.93
|
|
|
$
|
0.87
|
|
|
$
|
1.00
|
|
Income (loss) from discontinued
operations
|
|
|
0.34
|
|
|
|
(0.22
|
)
|
|
|
(0.05
|
)
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.95
|
|
|
$
|
0.71
|
|
|
$
|
0.82
|
|
|
$
|
0.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts exclude the impact of the automotive pedal systems
business, Sermatech International business, European medical
product sterilization business and small medical business, which
have been presented in the Companys consolidated financial
results as discontinued operations. |
|
(2) |
|
The sum of the quarterly per share amounts may not equal per
share amounts reported for
year-to-date
periods. This is due to changes in the number of weighted
average shares outstanding and the effects of rounding for each
period. |
F-38
TELEFLEX
INCORPORATED
SCHEDULE II VALUATION AND QUALIFYING
ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Additions
|
|
|
Doubtful
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning
|
|
|
Charged to
|
|
|
Accounts
|
|
|
Translation
|
|
|
End of
|
|
|
|
of Year
|
|
|
Income
|
|
|
Written
Off
|
|
|
and
Other
|
|
|
Year
|
|
|
December 31, 2006
|
|
$
|
10,090
|
|
|
$
|
4,225
|
|
|
$
|
(4,018
|
)
|
|
$
|
(200
|
)
|
|
$
|
10,097
|
|
December 25, 2005
|
|
$
|
11,296
|
|
|
$
|
2,773
|
|
|
$
|
(2,310
|
)
|
|
$
|
(1,669
|
)
|
|
$
|
10,090
|
|
December 26, 2004
|
|
$
|
9,273
|
|
|
$
|
3,726
|
|
|
$
|
(3,697
|
)
|
|
$
|
1,994
|
|
|
$
|
11,296
|
|
INVENTORY
RESERVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Additions
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning
|
|
|
Charged to
|
|
|
Inventory
|
|
|
Translation
|
|
|
End of
|
|
|
|
of Year
|
|
|
Income
|
|
|
Write-offs
|
|
|
and
Other
|
|
|
Year
|
|
|
December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
20,067
|
|
|
$
|
12,124
|
|
|
$
|
(11,481
|
)
|
|
$
|
1,565
|
|
|
$
|
22,275
|
|
Work-in-process
|
|
|
1,635
|
|
|
|
1,703
|
|
|
|
(908
|
)
|
|
|
177
|
|
|
|
2,607
|
|
Finished goods
|
|
|
22,871
|
|
|
|
9,074
|
|
|
|
(8,413
|
)
|
|
|
(1,841
|
)
|
|
|
21,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
44,573
|
|
|
$
|
22,901
|
|
|
$
|
(20,802
|
)
|
|
$
|
(99
|
)
|
|
$
|
46,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 25, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
25,368
|
|
|
$
|
4,836
|
|
|
$
|
(9,865
|
)
|
|
$
|
(272
|
)
|
|
$
|
20,067
|
|
Work-in-process
|
|
|
1,660
|
|
|
|
506
|
|
|
|
(458
|
)
|
|
|
(73
|
)
|
|
|
1,635
|
|
Finished goods
|
|
|
34,248
|
|
|
|
5,187
|
|
|
|
(13,964
|
)
|
|
|
(2,600
|
)
|
|
|
22,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
61,276
|
|
|
$
|
10,529
|
|
|
$
|
(24,287
|
)
|
|
$
|
(2,945
|
)
|
|
$
|
44,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
15,100
|
|
|
$
|
14,820
|
|
|
$
|
(6,803
|
)
|
|
$
|
2,251
|
|
|
$
|
25,368
|
|
Work-in-process
|
|
|
1,137
|
|
|
|
646
|
|
|
|
(37
|
)
|
|
|
(86
|
)
|
|
|
1,660
|
|
Finished goods
|
|
|
26,350
|
|
|
|
11,155
|
|
|
|
(4,251
|
)
|
|
|
994
|
|
|
|
34,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
42,587
|
|
|
$
|
26,621
|
|
|
$
|
(11,091
|
)
|
|
$
|
3,159
|
|
|
$
|
61,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-39
INDEX TO
EXHIBITS
The following exhibits are filed as part of, or incorporated by
referenced into, this report:
|
|
|
|
|
|
|
Exhibit
No.
|
|
|
|
Description
|
|
|
*3
|
.1
|
|
|
|
Articles of Incorporation of the
Company (except for Article Thirteenth and the first
paragraph of Article Fourth) are incorporated by reference
to Exhibit 3(a) to the Companys
Form 10-Q
for the period ended June 30, 1985. Article Thirteenth
of the Companys Articles of Incorporation is incorporated
by reference to Exhibit 3 of the Companys
Form 10-Q
for the period ended June 28, 1987. The first paragraph of
Article Fourth of the Companys Articles of
Incorporation is incorporated by reference to Exhibit 3(a)
of the Companys
Form 10-K
for the year ended December 27, 1998.
|
|
*3
|
.2
|
|
|
|
Amended and Restated Bylaws of the
Company (incorporated by reference to Exhibit 3.2 to the
Companys
Form 10-K
filed on March 20, 2006).
|
|
*4
|
.1
|
|
|
|
Shareholders Rights Plan of
the Company (incorporated by reference to the Companys
Form 8-K
dated December 7, 1998).
|
|
*10
|
.1
|
|
|
|
1990 Stock Compensation Plan
(incorporated by reference to the Companys registration
statement on
Form S-8
(Registration
No. 33-34753),
revised and restated as of December 1, 1997 incorporated by
reference to Exhibit 10(b) of the Companys
Form 10-K
for the year ended December 28, 1997. As subsequently
amended and restated on
Form S-8
(Registration
No. 333-59814)
which is herein incorporated by reference).
|
|
*10
|
.2
|
|
|
|
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
(incorporated by reference to the Companys
Form 10-K
for the year ended December 25, 1994).
|
|
*10
|
.3
|
|
|
|
Teleflex Incorporated Deferred
Compensation Plan effective as of January 1, 1995, and
amended and restated on
Form S-8
(Registration
No. 333-77601)
(incorporated by reference to Exhibit 10(f) of the
Companys
Form 10-K
for the year ended December 27, 1998).
|
|
+*10
|
.4
|
|
|
|
Information on the Companys
Performance 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
(incorporated by reference to the Companys definitive
Proxy Statement for the 2006 Annual Meeting of Stockholders
filed on April 6, 2006).
|
|
*10
|
.5
|
|
|
|
Voluntary Investment Plan of the
Company (incorporated by reference to Exhibit 28 of the
Companys registration statement on
Form S-8
(Registration
No. 2-98715),
as amended and revised on
Form S-8
(Registration
No. 333-101005),
filed November 5, 2002).
|
|
*10
|
.6
|
|
|
|
2000 Stock Compensation Plan
(incorporated by reference to the Companys registration
statement on
Form S-8
(Registration
No. 333-38224),
filed on May 31, 2000).
|
|
*10
|
.7
|
|
|
|
Global Employee Stock Purchase
Plan of the Company (incorporated by reference to the
Companys registration statement on
Form S-8
(Registration
No. 333-41654)
filed on July 18, 2000).
|
|
+*10
|
.8
|
|
|
|
Teleflex Incorporated Executive
Incentive Plan (incorporated by reference to Appendix B to
the Companys definitive Proxy Statement for the 2006
Annual Meeting of Stockholders filed on April 6, 2006).
|
|
+*10
|
.9
|
|
|
|
Letter Agreement, dated
July 2, 2004, between the Company and Martin S. Headley
(incorporated by reference to Exhibit 10(i) to the
Companys
Form 10-K
filed on March 9, 2005).
|
|
+*10
|
.10
|
|
|
|
Letter Agreement, dated
September 23, 2004, between the Company and Laurence G.
Miller (incorporated by reference to Exhibit 10(j) to the
Companys
Form 10-K
filed on March 9, 2005).
|
|
+*10
|
.11
|
|
|
|
Executive Change In Control
Agreement, dated June 21, 2005, between the Company and
Jeffrey P. Black (incorporated by reference to
Exhibit 10(m) to the Companys
Form 10-Q
filed on July 27, 2005).
|
|
+*10
|
.12
|
|
|
|
Executive Change In Control
Agreement, dated June 21, 2005, between the Company and
Martin S. Headley (incorporated by reference to
Exhibit 10(m) to the Companys
Form 10-Q
filed on July 27, 2005).
|
|
+*10
|
.13
|
|
|
|
Executive Change In Control
Agreement, dated June 21, 2005, between the Company and
Laurence G. Miller (incorporated by reference to
Exhibit 10(o) to the Companys
Form 10-Q
filed on July 27, 2005).
|
|
+*10
|
.14
|
|
|
|
Executive Change In Control
Agreement, dated June 21, 2005, between the Company and
Kevin K. Gordon (incorporated by reference to Exhibit 10(p)
to the Companys
Form 10-Q
filed on July 27, 2005).
|
|
|
|
|
|
|
|
Exhibit
No.
|
|
|
|
Description
|
|
|
+*10
|
.15
|
|
|
|
Executive Change In Control
Agreement, dated June 21, 2005, between the Company and
Vincent Northfield (incorporated by reference to
Exhibit 10.16 to the Companys
Form 10-K
filed on March 20, 2006).
|
|
+*10
|
.16
|
|
|
|
Executive Change In Control
Agreement, dated October 23, 2006, between the Company and
R. Ernest Waaser (incorporated by reference to
Exhibit 10.2 to the Companys
Form 8-K
filed on October 25, 2006).
|
|
+*10
|
.17
|
|
|
|
Executive Change In Control
Agreement, dated July 13, 2005, between the Company and
John Suddarth (incorporated by reference to
Exhibit 10.18 to the Companys
Form 10-K
filed on March 20, 2006).
|
|
+*10
|
.18
|
|
|
|
Amended and Restated Agreement,
dated July 31, 2006, between the Company and John J.
Sickler (incorporated by reference to Exhibit 10.1 to the
Companys
Form 10-Q
filed on August 1, 2006).
|
|
+*10
|
.19
|
|
|
|
Letter Agreement, dated
October 13, 2006, between the Company and R. Ernest Waaser
(incorporated by reference to Exhibit 10.1 to the
Companys
Form 8-K
filed on October 25, 2006).
|
|
+*10
|
.20
|
|
|
|
Letter Agreement, dated
August 10, 2006, between the Company and Charles E.
Williams (incorporated by reference to Exhibit 99.1 to the
Companys
Form 8-K
filed on September 25, 2006).
|
|
*10
|
.21
|
|
|
|
Amended and Restated Credit
Agreement, dated October 30, 2006, between Teleflex
Incorporated, the Lenders party thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, JPMorgan Securities Inc. and Banc
of America Securities LLC, as Joint Lead Arrangers and Joint
Bookrunners, Bank of America, N.A., as Syndication Agent, and
HSBC Bank USA, National Association, PNC Bank, National
Association and Wachovia Bank, National Association, as
Documentation Agents (incorporated by reference to
Exhibit 10.1 to the Companys
Form 8-K
filed on November 3, 2006).
|
|
*14
|
|
|
|
|
Code of Ethics policy applicable
to the Companys Chief Executive Officer and senior
financial officers (incorporated by reference to Exhibit 14
of the Companys
Form 10-K
filed on March 11, 2004).
|
|
21
|
|
|
|
|
Subsidiaries of the Company.
|
|
23
|
|
|
|
|
Consent of Independent Registered
Public Accounting Firm.
|
|
31
|
.1
|
|
|
|
Certification of Chief Executive
Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
|
31
|
.2
|
|
|
|
Certification of Chief Financial
Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
|
32
|
.1
|
|
|
|
Certification of Chief Executive
Officer, Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
32
|
.2
|
|
|
|
Certification of Chief Financial
Officer, Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
|
|
* |
|
Each such exhibit has heretofore been filed with the Securities
and Exchange Commission as part of the filing indicated and is
incorporated herein by reference. |
|
+ |
|
Indicates management contract or compensatory plan or
arrangement required to be filed pursuant to Item 15(b) of
this report. |