TELEFLEX ANNOUNCES SECOND QUARTER 2006 RESULTS Core Revenue Growth 4% Q2 Operating Cash Flow $96 Million Quarterly Dividend Announced
Limerick, PA — Teleflex Incorporated (NYSE: TFX) today reported financial results for the second quarter ended June 25, 2006. Revenues from continuing operations were $682.6 million, up 4 percent from $657.0 million in the second quarter of 2005. Core growth in the quarter was 4 percent. Income from continuing operations for the second quarter was $36.0 million or 89 cents per diluted share, compared to $38.1 million or 93 cents per diluted share in the prior year quarter. Excluding special charges, loss on sale of assets, and a second quarter tax benefit, income from continuing operations for the second quarter was $37.3 million or 92 cents per diluted share. This compares with income from continuing operations excluding special charges in the second quarter of 2005 of $42.4 million or $1.03 per diluted share.
Special charges related to restructuring and impairment during the second quarter of 2006 were $8.5 million pre-tax or 17 cents per diluted share, and loss on sale of assets for the quarter was $1.8 million pre-tax or 2 cents per diluted share. The quarter also included a tax benefit of $6.4 million or 16 cents per diluted share that resulted from the overstatement of tax expense in prior periods. Special charges in the second quarter of 2005 were $6.7 million pre-tax or 10 cents per diluted share.
Cash flow from continuing operations for the second quarter of 2006 was $96.4 million compared to $108.8 million realized in the second quarter of 2005. For the first six months of 2006, cash flow from operations was $132.4 million, compared with cash flow from operations of $171.2 million in the prior year period. The company continues to expect cash flow from operations for the full year 2006 will approach $300 million.
Jeffrey P. Black, chairman and chief executive officer of Teleflex said, “Second quarter results from operations came in slightly better than our revised expectations. The pace of
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change in our Medical Segment accelerated in June as our actions to reduce costs and improve operational efficiency began to show results, the Aerospace Segment continued to execute well, and the Commercial Segment delivered on plan. We expect to see ongoing progress in the second half of the year from our initiatives to improve business performance. We remain comfortable with the view of business performance established in our June outlook given current market trends and the normal third quarter seasonal slowdown. Our overall fundamentals remain strong with solid cash generation and a balance sheet that can clearly support growth initiatives.”
The company now expects diluted earnings per share from continuing operations for the full year 2006 before special charges, gain or loss on sale of assets and the tax benefit to be in the range of $3.75 to $3.90. This reflects a lower than expected tax rate for the year. Special charges and gain or loss on sale of assets for the full year are expected to be in the range of 45 to 55 cents. The tax benefit is expected to be 12 cents per diluted share.
Continuing Operations – First Six Months
For the first six months of 2006, revenues from continuing operations increased 3 percent to $1.31 billion compared to revenues of $1.28 billion for the same period in 2005. Income from continuing operations for the first six months of 2006 was $65.0 million or $1.60 per diluted share which compares with income from continuing operations for the prior year period of $63.0 million or $1.54 per diluted share.
For the first six months of 2006, income from continuing operations excluding special charges, net loss on sale of assets, and the tax benefit was $70.4 million or $1.73 per diluted share. Income from continuing operations, excluding special charges for the first six months of 2005 was $73.4 million or $1.80 per diluted share.
Second Quarter Business Segment Commentary
The following segment discussion excludes the impact of discontinued operations and items included in restructuring and impairment charges as disclosed in the condensed consolidated statements of income.
Total revenue during the second quarter of 2006 was $682.6 million, up 4 percent from $657.0 million in the second quarter of 2005. Core growth during the quarter was 4 percent, with no material impact from acquisitions, dispositions, or currency exchange rates.
Commercial
Commercial Segment revenues increased 7 percent in the second quarter of 2006 to $337.2 million from $314.7 million in the second quarter of 2005. The increase resulted from an 8 percent increase in core growth, offset by a 1 percent decrease from currency translation.
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Segment revenues benefited from increased sales of industrial products including auxiliary power units, alternative fuel systems and heavy duty rigging and cable and sales of automotive products in North America and Asia.
Commercial Segment operating profit of $25.0 million was generally flat in the second quarter, compared to $25.4 million in the second quarter of 2005. Operating profit for the segment was negatively impacted by a charge of $2 million in the quarter related to an inventory shortfall.
Medical
Second quarter Medical Segment revenues of $217.8 million were flat compared to revenues of $218.0 million in the second quarter of 2005. New product sales offset modest volume declines and backorders related to operational inefficiencies experienced in the quarter.
Medical Segment operating profit declined 13 percent to $37.3 million from $43.1 million in the second quarter of 2005. The decline in operating profit when compared to the prior year was primarily the result of increased costs and operational inefficiencies related to consolidation of facilities and distribution centers.
Aerospace
Aerospace Segment revenues increased 3 percent to $127.7 million from $124.3 million in the second quarter of 2005. Core growth of 2 percent was driven primarily by increased sales of cargo handling systems and related aftermarket parts, and increases in volume for repair products and services with 1 percent attributable to acquisitions.
Aerospace Segment operating profit increased to $11.4 million from $6.6 million in the second quarter of 2005. Operating profit increased as a result of higher volume levels across the segment and the benefits of restructuring actions taken in 2005.
Discontinued Operations
For the second quarter, income from discontinued operations was $0.3 million pre-tax or 2 cents per diluted share compared to a loss of $13.4 million pre-tax or 22 cents per diluted share in the prior year period. In the second quarter of 2005, results from discontinued operations included significant charges and a gain related to the restructuring and divestiture program.
Net Income
Net income for the second quarter was $36.6 million or 90 cents per diluted share, compared to $29.0 million or 71 cents per diluted share in the second quarter of 2005. Net income for the first six months of 2006 was $65.7 million or $1.62 per diluted share compared to $67.7 million or $1.66 per diluted share in the prior year period.
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Dividend Declared
The company also announced today that the Board of Directors has declared a quarterly cash dividend of 28.5 cents ($0.285) per share of common stock. The dividend is payable September 15, 2006 to shareholders of record at the close of business on August 6, 2006.
Stock Repurchase Program
In July 2005, the Board of Directors authorized the repurchase of up to $140 million of outstanding Teleflex common stock. To date, the cumulative number of shares of common stock repurchased under this plan is 1,312,800 shares at an aggregate price of $82.7 million.
As previously announced, Teleflex will comment on its second quarter results on a conference call to be held Friday, July 28, 2006, at 8:00 a.m. (ET). The call will be available live and archived on the company’s website atwww.teleflex.com and accompanying charts will be posted prior to the call. An audio replay will be available until 5:00 p.m. (ET) on Wednesday, August 2, 2006 by calling 888-286-8010 (US/Canada) or 617-801-6888 (International) and enter Passcode # 97169452.
Additional Notes and Notes on Non-GAAP Financial Measures:
This press release addresses certain income measures which exclude the effect of restructuring and other costs associated with our restructuring programs, net loss on sale of assets and a tax benefit. These may be considered non-GAAP financial measures. A table reconciling income and diluted earnings per share from continuing operations to income and diluted earnings per share from continuing operations excluding special charges, net loss on sale of assets and a tax benefit is set forth below.
Q2
2006
6 Month 2006
Continuing Operations
Continuing Operations
(dollars in thousands, except per share)
Income and diluted earnings per share
$
36,027
$
0.89
$
65,027
$
1.60
Special charges:
Restructuring and other costs
8,475
12,968
Income tax (benefit) on restructuring costs
(1,639
)
(3,272
)
Restructuring costs, net of tax
6,836
0.17
9,696
0.24
Losses:
Net loss on sale of assets
1,828
1,185
Income tax (benefit) on net loss on sale of assets
(994
)
(682
)
Net loss on sale of assets, net of tax
834
0.02
503
0.01
Tax benefit:
Q2 tax benefit
(6,374
)
(0.16
)
(4,843
)
(0.12
)
Income and diluted earnings per share excluding special charges, tax benefit, and net loss on sale of assets
$
37,323
$
0.92
$
70,383
$
1.73
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Q2
2005
6 Month 2005
Continuing Operations
Continuing Operations
(dollars in thousands, except per share)
Income and diluted earnings per share
$
38,138
$
0.93
$
63,003
$
1.54
Special charges:
Restructuring and other costs
6,653
15,947
Income tax (benefit) on restructuring costs
(2,410
)
(5,518
)
Restructuring costs, net of tax
4,243
0.10
10,429
0.26
Income and diluted earnings per share excluding special charges
$
42,381
$
1.03
$
73,432
$
1.80
Certain financial information is presented on a rounded basis which may cause minor differences.
Core growth includes activity of a purchased company beyond the initial twelve months after the date of acquisition. Core growth excludes the impact of translating the results of international subsidiaries at different currency exchange rates from year to year, and the comparable activity of divested companies within the most recent twelve-month period.
Teleflex at a Glance: Teleflex is a diversified industrial company with 2005 annual revenues of $2.5 billion. The Company designs, manufactures and distributes quality engineered products and services for the automotive, medical, aerospace, marine and industrial markets worldwide. Teleflex employs more than 20,000 people worldwide who focus on providing innovative solutions for customers. Additional information about Teleflex, including a recent archived conference call with analysts and investors, can be obtained from the Company’s website on the Internet atwww.teleflex.com.
Caution Concerning Forward-looking Information: This press release contains forward-looking statements, including, but not limited to, statements relating to our initiatives to improve business performance; expected market trends and seasonal forecasts; forecasted 2006 diluted earnings per share from continuing operations excluding special charges, gain or loss on sale of assets and a tax benefit; forecasted 2006 special charges related to restructuring; and forecasted 2006 cash flow from operations. Actual results could differ materially from those in these forward-looking statements due to, among other things, unanticipated expenditures in connection with the effectuation of restructuring programs; costs and length of time required to comply with legal requirements applicable to certain aspects of the restructuring programs; unanticipated difficulties in connection with consolidation of manufacturing and administrative functions; customer reaction to new programs; and other factors described in Teleflex’s filings with the Securities and Exchange Commission.
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TELEFLEX INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended
June 25,
June 26,
2006
2005
(Dollars and shares in thousands, except per share)
Income from continuing operations before taxes and minority interest.............................
53,253
56,797
Taxes on income from continuing operations.............................................................
11,291
13,478
Income from continuing operations before minority interest............................................
41,962
43,319
Minority interest in consolidated subsidiaries, net of tax...............................................
5,935
5,181
Income from continuing operations......................................................................
36,027
38,138
Operating income (loss) from discontinued operations (including gain on disposal of $1,000 and $1,687, respectively).........................................................................
304
(13,424
)
Tax benefit on income (loss) from discontinued operations............................................
(308
)
(4,259
)
Income (loss) from discontinued operations..............................................................
612
(9,165
)
Net income.....................................................................................................
$
36,639
$
28,973
Earnings (losses) per share:
Basic:
Income from continuing operations..................................................................
$
0.90
$
0.94
Income (loss) from discontinued operations........................................................
$
0.02
$
(0.23
)
Net income...........................................................................................
$
0.91
$
0.71
Diluted:
Income from continuing operations..................................................................
$
0.89
$
0.93
Income (loss) from discontinued operations........................................................
$
0.02
$
(0.22
)
Net income...........................................................................................
$
0.90
$
0.71
Dividends per share..........................................................................................
Income from continuing operations before taxes and minority interest.............................
101,445
95,810
Taxes on income from continuing operations.............................................................
24,830
22,928
Income from continuing operations before minority interest............................................
76,615
72,882
Minority interest in consolidated subsidiaries, net of tax...............................................
11,588
9,879
Income from continuing operations......................................................................
65,027
63,003
Operating income from discontinued operations (including gain on disposal of $1,064 and $36,121, respectively).......................................................................
449
7,944
Taxes (benefit) on income from discontinued operations...............................................
(269
)
3,248
Income from discontinued operations......................................................................
718
4,696
Net income.....................................................................................................
$
65,745
$
67,699
Earnings per share:
Basic:
Income from continuing operations..................................................................
$
1.61
$
1.55
Income from discontinued operations...............................................................
$
0.02
$
0.12
Net income...........................................................................................
$
1.63
$
1.67
Diluted:
Income from continuing operations..................................................................
$
1.60
$
1.54
Income from discontinued operations...............................................................
$
0.02
$
0.11
Net income...........................................................................................
$
1.62
$
1.66
Dividends per share..........................................................................................
Total operating profit................................................. ...............................
66,924
68,834
Loss on sales of businesses and assets................................................................ .......
1,828
—
Restructuring and impairment charges.....................................................................
8,475
6,653
Minority interest in consolidated subsidiaries (2).................................................. ........
(5,935
)
(5,181
)
Income from continuing operations before interest, taxes and minority interest..................
$
62,556
$
67,362
(1)
Total operating profit is defined as segment operating profit, which includes a segment’s revenues reduced by its materials, labor and other product costs along with the segment’s selling, engineering and administrative expenses and minority interest, less unallocated corporate expenses. Loss on sales of businesses and assets, restructuring and impairment charges, interest income and expense and taxes on income are excluded from the measure.
(2)
Minority interest in consolidated subsidiaries is included in segment operating profit presented above and must be removed in order to calculate income from continuing operations before interest, taxes and minority interest, as presented on the Company’s condensed consolidated statements of income for the three months ended June 25, 2006 and June 26, 2005, respectively.
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TELEFLEX INCORPORATED AND SUBSIDIARIES SUMMARY OF SEGMENT RESULTS (Unaudited)
Total operating profit................................................. ...............................
121,750
121,531
Net loss on sales of businesses and assets..................................................................
1,185
—
Restructuring and impairment charges.....................................................................
12,968
13,947
Minority interest in consolidated subsidiaries (2).................................................. ........
(11,588
)
(9,879
)
Income from continuing operations before interest, taxes and minority interest..................
$
119,185
$
117,463
(1)
Total operating profit is defined as segment operating profit, which includes a segment’s revenues reduced by its materials, labor and other product costs along with the segment’s selling, engineering and administrative expenses and minority interest, less unallocated corporate expenses. Net loss on sales of businesses and assets, restructuring and impairment charges, interest income and expense and taxes on income are excluded from the measure.
(2)
Minority interest in consolidated subsidiaries is included in segment operating profit presented above and must be removed in order to calculate income from continuing operations before interest, taxes and minority interest, as presented on the Company’s condensed consolidated statements of income for the six months ended June 25, 2006 and June 26, 2005, respectively.
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