-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TFDzg0fRRTIYOoVwU1/XCEjMUPL/UhZTbkn5g2W4nf1SYgj8RmGh7q6afqRwPi6Z OvXiRrDOrDg0sQKCUA+MUg== 0000893220-96-000475.txt : 19960326 0000893220-96-000475.hdr.sgml : 19960326 ACCESSION NUMBER: 0000893220-96-000475 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960325 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELEFLEX INC CENTRAL INDEX KEY: 0000096943 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 231147939 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-05353 FILM NUMBER: 96537944 BUSINESS ADDRESS: STREET 1: 630 W GERMANTOWN PK STE 450 STREET 2: SUITE 450 CITY: PLYMOUTH MEETING STATE: PA ZIP: 19462 BUSINESS PHONE: 2158346301 MAIL ADDRESS: STREET 1: 630 WEST GERMANTOWN PIKE STREET 2: SUITE 450 CITY: PLYMOUTH MEETING STATE: PA ZIP: 19462 10-K405 1 TELEFLEX ANNUAL REPORT 1995 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NO. 1-5353 ------------------------ TELEFLEX INCORPORATED (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 23-1147939 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 630 WEST GERMANTOWN PIKE, SUITE 450, PLYMOUTH 19462 MEETING, PENNSYLVANIA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (610) 834-6301 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $1 per share--New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE 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 registrant's 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. /X/ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $607,143,292 as of February 1, 1996. The registrant had 17,549,691 Common Shares outstanding as of February 1, 1996. Documents Incorporated by Reference: (a) Annual Report to Shareholders for the fiscal year ended December 31, 1995, incorporated partially in Part I and Part II hereof; and (b) Proxy Statement for the 1996 Annual Meeting of Shareholders, incorporated partially in Part III hereof. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS The Company* was incorporated in 1943 as a manufacturer of precision mechanical push/pull controls for military aircraft. From this original single market, single product orientation, the Company began to emphasize products and services in a broader range of economically diverse markets to reduce its vulnerability to economic cycles. Since the mid-1970s, the Company's investments have been directed toward specific market niches employing its technical capabilities to provide solutions to specific engineering problems and, more recently toward expanding into new but related medical businesses. The continuing stream of new products and value-added product improvements that have resulted from this strategy have enabled the Company to participate in larger market segments. Several of these new products and product improvements were developed by means of an unusual investment program of the Company called the New Venture Fund. Established in 1972, the Fund directs monies representing one-half percent of sales into the development of new products and services. This concept allows for entrepreneurial risk taking in new areas by encouraging innovation and competition among the Company's managers for funds to pursue new programs and activities independent of their operating budgets. Examples of New Venture projects include the initial funding of SermeTel(R) research and most of the early seed money for certain medical products. The Company's business is separated into three segments -- Aerospace Products and Services, Medical Products and Commercial Products. AEROSPACE PRODUCTS AND SERVICES SEGMENT The Aerospace Products and Services Segment serves the commercial aerospace and turbine engine markets. Its businesses design and manufacture precision controls and cargo systems for aviation, provide coating and repair services and blade manufacturing for users of both flight and land-based turbine engines. These products and services, many of which are proprietary, require a high degree of engineering sophistication and are often custom designed. External economic influences on these products and services relate primarily to spending patterns in the worldwide aerospace industry. The Aerospace Products and Services Segment consists of the Aerospace Controls (formerly Aerospace/Defense) Group and Sermatech International. In 1995 and in the first quarter of 1996 the Company sold three product lines as part of a structural realignment within the Aerospace Products and Services Segment. These businesses produced a variety of mechanical and electromechanical controls for commercial and military aircraft, ordnance and space vehicles. The sale of these product lines effectively ends most of the Company's involvement in the military/defense sector of the aerospace industry to focus the Aerospace Controls Group on air cargo handling systems for commercial aircraft and other aircraft controls. The Company's cargo handling systems include patented digitally controlled systems to move and secure containers of cargo inside commercial aircraft. These systems are sold either to aircraft manufacturers as original installations or to airlines and air freight carriers for retrofit of existing systems. The Company also designs, manufactures and repairs electromechanical components used on both commercial and, to a lesser extent military aircraft. These other aircraft controls include flight controls, canopy and door activators, cargo winches and control valves. The Company's design engineers work with design personnel from the major aircraft manufacturers in the development of controls for use on new aircraft. In addition, the Company supplies spare parts to aircraft operators typically through distributors. This spare parts business extends as long as the particular type of aircraft continues in service. In the early 1960s, aircraft manufacturers began to encounter high temperature lubrication problems in connection with mechanical controls for aircraft jet engines. Through its subsidiary, Sermatech International, the Company utilized its aerospace experience and engineering capabilities to develop a series of formulations of inorganic coatings to solve these high temperature lubrication problems. These products were further - --------------- * As used herein the "Company" refers to Teleflex Incorporated and its consolidated subsidiaries. 1 3 developed by the Company and sold under the trademark SermeTel(R) to provide anti-corrosion protection for compressor blades and other airfoils. Sermatech International, through a network of facilities in five countries, provides a variety of sophisticated protective coatings and other services for gas turbine engine components; highly-specialized repairs for critical components such as fan blades and airfoils; and manufacturing and high quality dimensional finishing of airfoils. The Company has added technologies through acquisition and internal development and now offers a diverse range of technical services and materials technologies to turbine markets throughout the world. In 1993 the Company acquired Mal Tool & Engineering, a manufacturer of fan blades for flight turbines, and airfoils for both flight and land-based gas turbines and steam turbines. The acquisition broadens the Company's product offering including turnkey manufactured and coated airfoils and provides another entree to major international turbine manufacturers. During the fourth quarter of 1995 the Company formed a joint venture with General Electric Aircraft Engines, Airfoil Technologies International LLC (ATI), to provide fan blade and airfoil repair services. The Sermatech repair operations were contributed to ATI which is owned 51% by the Company. ATI will provide a vehicle for the technological and geographic expansion of the Sermatech repairs services business. MEDICAL PRODUCTS SEGMENT Within the Medical Products Segment, the Company operates three businesses: TFX OEM, Rusch International and Pilling Weck. In the late 1970s, the Company decided to apply its polymer technologies to the medical market, and began by extruding intravenous catheter tubing which it sold to original equipment manufacturers. Through TFX OEM, the Company produces standard and custom-designed semi-finished components for other medical device manufacturers using its polymer materials and processing technology. Through acquisitions the Company established the other two product lines of this segment: hospital supply and surgical devices. In 1989, the acquisition of Willy Rusch AG and affiliates in Germany brought with it an established manufacturing base and distribution network, primarily in Europe. This and other smaller acquisitions designed to broaden the Company's product offerings form the base of the hospital supply business. The Company conducts its hospital supply business under the name of Rusch International. This business includes the manufacture and sale of invasive disposable and reusable devices for the urology, gastroenterology, anesthesiology and respiratory care markets worldwide. The Rusch International product offerings include, among others, latex catheters, endotracheal tubes, laryngoscopes, face masks and tracheostomy tubes. The acquisitions of the Pilling Company in 1991 and Edward Weck Incorporated in 1993 became the foundation of the surgical devices business now operating as Pilling Weck. The Weck acquisition was assimilated during 1994 into the existing surgical device operations. The combination of Pilling and Weck significantly expands the product offerings, marketing opportunities and selling capabilities in the surgical devices market in the United States; and provides opportunities for increasing international sales. During 1994 and 1995, smaller acquisitions were made to balance the Company's product offerings in Europe. Pilling Weck manufactures and distributes primarily through its own sales force instruments used in both traditional (open) and minimally-invasive surgical procedures including general and specialized surgical instruments such as scissors, forceps, vascular clamps, needle holders, retractors, ligation clips, appliers, skin staples and electrosurgery products. COMMERCIAL PRODUCTS SEGMENT The Commercial Products Segment businesses design and manufacture proprietary mechanical controls for the automotive market; mechanical, electrical and hydraulic controls, and electronics products for the pleasure marine market; and proprietary products for the fluid transfer and outdoor power equipment markets. Products in the Commercial Products Segment generally are less complex and are produced in higher unit volume, are manufactured for general distribution, as well as custom fabricated to meet individual customer needs. Consumer spending patterns generally influence the market trends for these products. 2 4 The Commercial Products Segment consists of three major product lines: Marine, Automotive and Industrial. The Company is a leading domestic producer of mechanical steering systems for pleasure power boats. It also manufactures hydraulic steering systems, engine throttle and shift controls and electrical instrumentation and has expanded into electronic navigation, location and communication systems. In 1991 the Company acquired Marinex Industries, Ltd., a British manufacturer of marine electronics. Its Cetrek autopilots and navigational equipment complement Teleflex's hydraulic steering products which together can be sold to both the commercial and pleasure marine markets. Techsonic Industries, Inc., a manufacturer of marine information systems (electronic navigation, communication and fish location devices) sold through mass merchandisers under the Humminbird brand name, became a wholly owned subsidiary in 1992. In 1994, the Company acquired TX Controls, a Swedish manufacturer of mechanical and hydraulic steering systems, engine control systems and cables for application on marine craft and industrial vehicles. The acquisition of TX Controls, along with Marinex, enhanced the Company's access to the international marine market. Aside from the Humminbird products, the Company's marine products are sold principally to boat builders, in the aftermarket, and are used principally on pleasure craft but also have application on commercial vessels. The Company is a major supplier of mechanical controls to the domestic automotive market. The principal products in this market are accelerator, transmission, shift, park lock, window regulator controls and a new heat resistant flexible fuel line. In 1995 the Company acquired the cable controls businesses of Handy & Harmon Automotive Group. This acquisition broadens the automotive product line by adding a park brake and provides a manufacturing plant in Mexico. Acceptance by the automobile manufacturers of a Company- developed control for use on a new model ordinarily assures the Company a large, but not exclusive, market share for the supply of that control. The sales of mechanical automotive controls were $139,128,000, $164,500,000 and $193,361,000 in 1993, 1994 and 1995, respectively. Industrial controls and electrical instrumentation products are also manufactured for use in other applications, including agricultural equipment, outdoor power equipment, leisure vehicles and other on- and off-road vehicles. In addition, the Company produces stainless steel overbraided fluoroplastic hose for fluid transfer in such markets as the chemical, petroleum and food processing industries. MARKETING In 1995, the percentages of the Company's consolidated net sales represented by its major markets were as follows: aerospace -- 24%; medical -- 32%; marine and industrial -- 23%; and automotive -- 21%. The major portion of the Company's products are sold to original equipment manufacturers. Generally, products sold to the aerospace and automotive markets are sold through the Company's own force of field engineers. Products sold to the marine, medical and general industrial markets are sold both through the Company's own sales forces and through independent representatives and independent distributor networks. For information on foreign operations, export sales, and principal customers, see text under the heading "Business segments and other information" on page 21 of the Company's 1995 Annual Report to Shareholders, which information is incorporated herein by reference. COMPETITION The Company has varying degrees of competition in all elements of its business. None of the Company's competitors offers products for all the markets served by the Company. The Company believes that its competitive position depends on the technical competence and creative ability of its engineering and development personnel, the know-how and skill of its manufacturing personnel as well as its plants, tooling and other resources. PATENTS The Company owns a number of patents and has a number of patent applications pending. The Company does not believe that its business is materially dependent on patent protection. 3 5 SUPPLIERS Materials used in the manufacture of the Company's products are purchased from a large number of suppliers. The Company is not dependent upon any single supplier for a substantial amount of the materials it uses. BACKLOG As of December 31, 1995 the Company's backlog of firm orders for the Aerospace Products and Services Segment was $81 million, of which it is anticipated that substantially all will be filled in 1996. The Company's backlog for Aerospace Products and Services on December 25, 1994 was $106 million. The decline in the backlog in 1995 compared with 1994 is due to the sale of two product lines in 1995 and one in the first quarter of 1996. As of December 31, 1995 the Company's backlog of firm orders for the Medical Products and Commercial Products segments was $24 million and $84 million, respectively. This compares with $21 million and $74 million, respectively, as of December 25, 1994. Substantially all of the December 31, 1995 backlog will be filled in 1996. Most of the Company's medical and commercial products are sold on orders calling for delivery within no more than a few months so that the backlog of such orders is not indicative of probable net sales in any future 12-month period. EMPLOYEES The Company had approximately 9,800 employees at December 31, 1995. EXECUTIVE OFFICERS The names and ages of all executive officers of the Company as of March 1, 1995 and the positions and offices with the Company held by each such officer are as follows:
POSITIONS AND OFFICES NAME AGE WITH COMPANY - ------------------------ --- ------------------------------------------------------------- Lennox K. Black 65 Chairman of the Board and Director David S. Boyer 53 President, Chief Executive Officer and Director John J. Sickler 53 President -- TFX Equities Inc. Dr. Roy C. Carriker 58 President and Chief Operating Officer -- TFX Aerospace Richard A. Woodfield 53 President and Chief Operating Officer -- TFX Medical Harold L. Zuber, Jr. 46 Vice President, Chief Financial Officer and Controller Steven K. Chance 50 Vice President, General Counsel and Secretary Ira Albom 66 Senior Vice President Louis T. Horvath 57 Vice President -- Quality and Productivity Ronald D. Boldt 53 Vice President -- Human Resources Janine Dusossoit 42 Vice President -- Investor Relations Thomas M. Byrne 49 Assistant Treasurer
Mr. Boyer was elected President and Chief Executive Officer on April 28, 1995. Prior to that date he was President. Dr. Carriker was named President and Chief Operating Officer -- TFX Aerospace on January 3, 1994. Prior to that date he was President -- Sermatech International. Mr. Woodfield was elected President and Chief Operating Officer -- TFX Medical on March 9, 1992. Prior to that date, he was President of Empire Abrasive Equipment Corporation. 4 6 Mr. Horvath was named to the position of Vice President -- Quality and Productivity on January 4, 1996. Prior to that date he was Vice President -- Quality Management. Mr. Boldt was named to the position of Vice President -- Human Resources on March 9, 1992. Prior to that date he was Director of Human Resources. Ms. Dusossoit was named to the position of Vice President -- Investor Relations on March 1, 1993. From April 1, 1992 to March 1, 1993 she was Director of Investor Relations. Prior to that date she was a business consultant. Officers are elected by the Board of Directors for one year terms. No family relationship exists between any of the executive officers of the Company. ITEM 2. PROPERTIES The Company's operations have approximately 90 owned and leased properties consisting of plants, engineering and research centers, distribution warehouses and other facilities. The properties are maintained in good operating condition. All the plants are suitably equipped and utilized, and have space available for the activities currently conducted therein and the increased volume expected in the foreseeable future. The following are the Company's major facilities:
SQUARE OWNED OR EXPIRATION LOCATION FOOTAGE LEASED DATE - ------------------------------------------------------------- ------- -------- ---------- AEROSPACE PRODUCTS AND SERVICES SEGMENT Spanish Fork, UT............................................. 189,000 Owned N/A Oxnard, CA................................................... 145,000 Leased 2003 Mentor, OH................................................... 90,000 Owned N/A Limerick, PA................................................. 70,000 Owned(1) N/A Derbyshire, England.......................................... 70,000 Leased 1999 Manchester, CT............................................... 63,000 Owned N/A Compton, CA.................................................. 49,000 Leased 1999 Biddeford, ME................................................ 32,000 Leased 1998 Hausham, Germany............................................. 30,000 Owned N/A MEDICAL PRODUCTS SEGMENT Kernen, Germany.............................................. 263,000 Owned N/A Durham, NC................................................... 144,000 Owned N/A Kernen, Germany.............................................. 114,000 Leased 2013 Taiping, Malaysia............................................ 85,000 Owned N/A Lurgan, Northern Ireland..................................... 80,000 Owned N/A Duluth, GA................................................... 69,000 Leased 1999 Fort Washington, PA.......................................... 65,000 Owned N/A Jaffrey, NH.................................................. 60,000 Owned(1) N/A Franiere, Belgium............................................ 59,000 Leased 2005 Montevideo, Uruguay.......................................... 45,000 Owned N/A Bourg-en-Bresse, France...................................... 38,000 Leased 1999 Bad Liebenzell, Germany...................................... 36,000 Leased 2000 Betschdorf, France........................................... 32,000 Owned N/A High Wycombe, England........................................ 25,000 Leased 2012 Limerick, Ireland............................................ 16,000 Leased 2020 COMMERCIAL PRODUCTS SEGMENT Van Wert, OH................................................. 110,000 Owned(1) N/A Limerick, PA................................................. 110,000 Owned N/A Hagerstown, MD............................................... 103,000 Owned(1) N/A Waterbury, CT................................................ 99,000 Leased 1998
5 7
SQUARE OWNED OR EXPIRATION LOCATION FOOTAGE LEASED DATE - ------------------------------------------------------------- ------- -------- ---------- Eufaula, AL.................................................. 98,000 Owned N/A Suffield, CT................................................. 90,000 Leased 1998 Haysville, KS................................................ 98,000 Leased 2002 Hillsdale, MI................................................ 75,000 Owned(1) N/A Nuevo Laredo, Mexico......................................... 67,000 Leased 1998 Willis, TX................................................... 65,000 Owned(1) N/A Eufaula, AL.................................................. 61,000 Owned N/A Lebanon, VA.................................................. 52,000 Owned(1) N/A Goteborg, Sweden............................................. 37,000 Owned N/A Swainsboro, GA............................................... 37,000 Leased 2004 Vancouver, B.C., Canada...................................... 30,000 Owned N/A Troy, MI..................................................... 29,000 Leased 2003 Sarasota, FL................................................. 25,000 Owned N/A Selmer, TN................................................... 24,000 Leased 2005 Poole, England............................................... 20,000 Owned N/A
- --------------- (1) The Company is the beneficial owner of these facilities under installment sale or similar financing agreements. In addition to the above, the Company owns or leases approximately 600,000 square feet of warehousing, manufacturing and office space located in the United States, Canada, Europe and Asia. ITEM 3. LEGAL PROCEEDINGS Two subsidiaries of the Company have been identified as potentially responsible parties (PRPs) in connection with the Casmalia Resources Hazardous Waste Management Facility. The Company has joined a group of other PRPs, predominately in the aerospace industry, to negotiate with the United States Environmental Protection Agency (EPA) a good faith offer to take over responsibility for a program of closure and post-closure care of the site. The PRPs from the aerospace industry are currently engaged in negotiations with a second PRP group with the aim of providing a common negotiating front with the EPA. In July 1994, the North Penn Water Authority (NPWA) instituted suit against the Company in the United States District Court for the Eastern District of Pennsylvania. NPWA alleges that acts or omissions of the Company and four other defendants caused releases of chlorinated solvents that have contaminated, and continue to contaminate, one of NPWA's wells located near Lansdale, Pennsylvania. NPWA seeks injunctive relief to require defendants to abate the alleged contamination. NPWA also seeks the recovery of costs allegedly incurred because of the contamination. The Company filed an answer denying any liability to NPWA for the claims made in the complaint and is vigorously defending this action. The parties are engaged in settlement negotiations. In addition, the Company has been named as a PRP by the EPA at various sites throughout the country. In the opinion of the Company's management, based on current allocation formulas and the facts presently known, the ultimate outcome of these environmental matters will not result in a liability material to the Company's consolidated financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 6 8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS See "Quarterly Financial Data" on page 23 of the Company's 1995 Annual Report to Shareholders for market price and dividend information. Also see the Note entitled "Borrowings and Leases" on pages 19 and 20 of such Annual Report for certain dividend restrictions under loan agreements, all of which information is incorporated herein by reference. The Company had approximately 1,400 registered shareholders at February 1, 1996. ITEM 6. SELECTED FINANCIAL DATA See pages 24 through 27 of the Company's 1995 Annual Report to Shareholders, which pages are incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS See the text under the heading "Financial Review" on pages 28 through 33 of the Company's 1995 Annual Report to Shareholders, which information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See pages 15 through 23 of the Company's 1995 Annual Report to Shareholders, which pages are incorporated herein by reference. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT For information with respect to the Company's Directors and Director nominees, see "Election Of Directors" and "Additional Information About The Board Of Directors" on pages 2 through 4 of the Company's Proxy Statement for its 1996 Annual Meeting, which information is incorporated herein by reference. For information with respect to the Company's Executive Officers, see Part I of this report on pages 4 and 5, which information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION See "Additional Information About The Board of Directors", "Board Compensation Committee", "Five-Year Shareholder Return Comparison" and "Executive Compensation and Other Information" on pages 3 through 8 of the Company's Proxy Statement for its 1996 Annual Meeting, which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See "Security Ownership of Certain Beneficial Owners and Management" on pages 1 and 2 and "Election Of Directors" on pages 2 and 3 of the Company's Proxy Statement for its 1996 Annual Meeting, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See "Additional Information About The Board Of Directors", "Board Compensation Committee" and "Executive Compensation and Other Information" on pages 3 through 8 of the Company's Proxy Statement for its 1996 Annual Meeting, which information is incorporated herein by reference. 7 9 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Consolidated Financial Statements: The index to Consolidated Financial Statements and Schedules is set forth on page 10 hereof. (b) Reports on Form 8-K: No reports on Form 8-K have been filed during the last quarter of the period covered by this report. (c) Exhibits: The Exhibits are listed in the Index to Exhibits. For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's Registration Statements on Form S-8 Nos. 2-84148 (filed June 28, 1989), 2-98715 (filed May 11, 1987), 33-34753 (filed May 10, 1990) and 33-53385 (filed April 29, 1994): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 8 10 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 By LENNOX K. BLACK ------------------------------------ Lennox K. Black Chairman of the Board 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 DAVID S. BOYER ------------------------------------ David S. Boyer (Principal Executive Officer) By HAROLD L. ZUBER, JR. ------------------------------------ Harold L. Zuber, Jr. (Principal Financial and Accounting Officer) Pursuant to General Instruction D to Form 10-K, this report has been signed by Steven K. Chance as Attorney-in-Fact for a majority of the Board of Directors as of the date indicated below. John H. Remer Director Lewis E. Hatch, Jr. Director Palmer E. Retzlaff Director Sigismundus W. W. Lubsen Director David S. Boyer Director Lennox K. Black Director Pemberton Hutchinson Director Donald Beckman Director James W. Stratton Director Joseph S. Gonnella, MD Director
By STEVEN K. CHANCE ------------------------------------ Steven K. Chance Attorney-in-Fact Dated: March 22, 1996 9 11 TELEFLEX INCORPORATED INDEX TO CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements together with the report thereon of Price Waterhouse LLP dated February 13, 1996 on pages 15 to 22 of the accompanying 1995 Annual Report to Shareholders are incorporated in this Annual Report on Form 10-K. With the exception of the aforementioned information, and those portions incorporated by specific reference in this document, the 1995 Annual Report to Shareholders is not to be deemed filed as part of this report. The following Financial Statement Schedule together with the report thereon of Price Waterhouse LLP dated February 13, 1996 on page 11 should be read in conjunction with the consolidated financial statements in such 1995 Annual Report to Shareholders. Financial Statement Schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. FINANCIAL STATEMENT SCHEDULE Schedule:
PAGE ---- VIII Valuation and qualifying accounts............................................. 12
10 12 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Teleflex Incorporated Our audits of the consolidated financial statements referred to in our report dated February 13, 1996 appearing on page 22 of the 1995 Annual Report to Shareholders of Teleflex Incorporated (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE LLP Thirty South Seventeenth Street Philadelphia, Pennsylvania 19103 February 13, 1996 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 2-84148, No. 2-98715, No. 33-34753, and No. 33-53385) of Teleflex Incorporated of our report dated February 13, 1996 appearing on page 22 of the 1995 Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears above. PRICE WATERHOUSE LLP Thirty South Seventeenth Street Philadelphia, Pennsylvania 19103 March 22, 1996 11 13 TELEFLEX INCORPORATED SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS ALLOWANCE FOR DOUBTFUL ACCOUNTS
BALANCE AT ADDITIONS DOUBTFUL BALANCE AT BEGINNING CHARGED TO ACCOUNTS END OF FOR THE YEAR ENDED OF YEAR INCOME WRITTEN OFF YEAR - ----------------------------------------- ---------- ---------- ----------- ---------- December 31, 1995........................ $3,036,900 $1,333,600 $ (573,500) $3,797,000 December 25, 1994........................ $2,352,700 $1,251,800 $ (567,600) $3,036,900 December 26, 1993........................ $2,701,100 $1,151,100 $(1,499,500) $2,352,700
12 14 MARCH 22, 1996 INDEX TO EXHIBITS EXHIBIT 3 (a) - The Company's Articles of Incorporation (except for Article Thirteenth and the first paragraph of Article Fourth) are incorporated herein by reference to Exhibit 3(a) to the Company's Form 10-Q for the period ended June 30, 1985. Article Thirteenth of the Company's Articles of Incorporation is incorporated herein by reference to Exhibit 3 of the Company's Form 10-Q for the period ended June 28, 1987. The first paragraph of Article Fourth of the Company's Articles of Incorporation is incorporated herein by reference to Exhibit 3 of the Company's Form 10-Q for the period ended June 25, 1989 (filed with Form 8, dated August 23, 1989). (b) - The Company's Bylaws are incorporated herein by reference to Exhibit 3(b) of the Company's Form 10-K for the year ended December 28, 1987. 10 (a) - The 1982 Stock Option Plan, incorporated herein by reference to the Company's registration statement on Form S-8 (Registration No. 2-84148), as supplemented, with amendments of April 26, 1991 incorporated by reference to the Company's definitive Proxy Statement for the 1991 Annual Meeting of Shareholders. (b) - The 1990 Stock Compensation Plan, incorporated herein by reference to the Company's registration statement on Form S-8 (Registration No. 33-34753), with amendments of April 28, 1995 incorporated by reference to the Company's definitive Proxy Statement for the 1995 Annual Meeting of Shareholders. (c) - The 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 is incorporated by reference to the company's Form 10-K for the year ended December 25, 1994. (d) - Description of deferred compensation arrangements between the Company and its Chairman, L. K. Black, incorporated by reference to the Company's definitive Proxy Statement for the 1996 Annual Meeting of Shareholders. 15 INDEX TO EXHIBITS . . . PAGE 2 (e) - Description of compensation arrangement between the company and its President and Chief Executive Officer, David S. Boyer, incorporated by reference to the company's definitive Proxy Statement for the 1996 Annual Meeting of Shareholders. (f) - Teleflex Incorporated Deferred Compensation Plan entered into as of January 1, 1995. (g) - Information on the Company's Profit 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 is incorporated by reference to the Company's definitive Proxy Statement for the 1994, 1995 and 1996 Annual Meeting of Shareholders. (h) - The Company's Voluntary Investment Plan is incorporated by reference to Exhibit 28 of the Company's registration statement on Form S-8 (Registration No. 2-98715). 13 - Pages 15 through 27 of the Company's Annual Report to Shareholders for the period ended December 31, 1995. 22 - The Company's Subsidiaries. 24 - Consent of Independent Accountants (see page 11 herein). 25 - Power of Attorney. EX-10.F 2 TELEFLEX DEFERRED COMPENSATION PLAN 1 EXHIBIT 10(F) TELEFLEX INCORPORATED DEFERRED COMPENSATION PLAN THIS PLAN is entered into as of the 1st day of January, 1995 by Teleflex Incorporated (the "Corporation"), a Delaware corporation. WITNESSETH: Teleflex Incorporated and its' participating affiliates that have adopted the Plan wish to provide certain employees it and with a deferred compensation arrangement. It is the intent of the Corporation to provide this benefit under the terms and conditions hereinafter set forth. 1. Effective Date. The Plan shall be effective January 1, 1995. "Fiscal Year" shall mean each twelve-consecutive month period beginning on January 1 and ending the following December 31 during which the Plan is in effect. 2. Eligibility. Any employee of the Corporation or an affiliate who is a Key (Management) Employee shall be eligible to participate herein (hereinafter referred to as the "Participant"). 3. Salary Deferrals. Prior to the beginning of any Fiscal Year, a Participant may elect to defer any whole percent (2% to 10% max.) of their base salary, commissions or other regularly paid cash compensation payable during that Fiscal Year. In addition, a participant may elect to defer any whole percentage (up to 100%) of their annual discretionary bonus (minimum 10%). 4. Deferred Benefits. Any amounts deferred by a Participant pursuant to Paragraph 3, together with the accrued interest thereon from the investment of such amounts in accordance with Paragraph 5 hereof, shall constitute the Deferred Benefits payable hereunder. 5. Investments. Each participant's deferred compensation account will be credited with earnings quarterly in arrears based upon the yield on 5 yr. U.S. Treasury Bonds as published in the Wall Street Journal the last business day of the preceding November. 2 6. Funding. In order to meet its contingent deferred obligation hereunder, the Corporation may, but shall not be required to, set aside or earmark an amount necessary to provide the Deferred Benefits described in Paragraph 4 hereof. In any event, the Corporation's obligation hereunder shall constitute a general, unsecured obligation, payable solely out of its general assets, and no Participant shall have any right to specific assets. This shall be considered an "unfunded" arrangement for purposes of ERISA. 7. Distributions. a. Deferred Benefits shall be distributed or commence to be distributed to a Participant within 30 days after their election to have benefits commence (not less than 5 years hence) or at death, disability, retirement or termination of employment for any reason. The Corporation may permit an earlier distribution; provided, however, that early distributions will only be permitted under the circumstances set forth in Treas. Reg. Section 1.457-2 (h)(4) and (5). Any installments of Deferred Benefits which are unpaid at a Participant's death shall be paid to the beneficiary designated by the Participant or, in the absence of a surviving beneficiary, to their estate. Distribution elections shall be made at the time of deferral. Distribution options include: a lump-sum, five or ten annual installments of principal and interest. 8. Administration of the Plan. The Plan Administrative Committee shall have full power and authority to interpret, construe and administer this Plan and the Committee's interpretation and construction hereof, and actions hereunder, or the amount or recipient of the payment to be made herefrom, shall be binding and conclusive on all persons for all purposes. In this connection, the Committee may delegate to any individual, the duty to act for the Committee hereunder. No officer or employee of the Corporation shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to his own willful misconduct or lack of good faith. 9. Amendments. a. All amendments to the Plan may be accomplished by execution of a written document by an executive officer of the Corporation. -2- 3 b. The Corporation, through The Plan Administrative Committee reserves the right to amend the Plan at any time, in any manner whatsoever, after delivery of written notification to all Participants of its intention and the effective date thereof; provided, however, that no amendment shall reduce any Deferred Benefits which a Participant had earned for any Fiscal Year or part thereof before the effective date of the amendment, as determined in accordance with the provisions of the Plan in effect immediately before such date. 10. Change of Control. In the event that any person, entity or group of persons, within the meaning of section 13(d) or 14(d) of the Securities Exchange Act of 1934 ("Act"), or any comparable successor provisions shall acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 20 percent or more of either the outstanding shares of common stock or the combined voting power of Company's then outstanding voting securities entitled to vote generally, or the approval by the stockholders of Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were stockholders of Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50 percent of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated Company's then outstanding securities, or a liquidation or dissolution of Company's then outstanding securities, or in the event of liquidation or dissolution of Company or of the sale of all or substantially all of Company's assets, then the entire deferred benefit account balance standing to the credit of each participant shall be contributed to a Grantor Trust within 30 days thereafter. 11. Termination of the Plan. Continuance of the Plan is completely voluntary, and is not assumed as a contractual obligation of the Corporation. The Corporation, having adopted the Plan, shall have the right, at any time, to discontinue prospectively the Plan, after delivery of written notification to the Participants of its intention and the effective date thereof; provided, however, that any such termination shall not adversely affect a Participant's Deferred Benefits accrued to the date of such termination. -3- 4 12. Miscellaneous. a. Title to and beneficial ownership of any assets, whether cash or investments, which the Corporation may set aside or earmark to meet its deferred obligation hereunder, shall at all times remain in the Corporation and no Participant or beneficiary shall under any circumstances acquire any property interest in any specific assets of the Corporation; provided, however, that legal title to any assets set aside in trust by the Corporation shall be in the trustee of the trust. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a fiduciary relationship between the Corporation and any Participant or any other person. Any funds which may be invested under the provisions of this Plan shall continue for all purposes to be a part of the general funds of the Corporation and no person other than the Corporation shall by virtue of the provisions of this Plan have any interest in such funds. To the extent that any person acquires a right to receive payments from the Corporation under this agreement, such right shall be no greater than the right of any unsecured general creditor of the Corporation. b. The right of the Participant or any other person to the payment of deferred compensation or other benefits hereunder shall not be assigned, transferred, pledged or encumbered except by will or by the laws of descent and distribution. c. If the Corporation shall find that any person to whom any payment is payable under this Plan is unable to care for their affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Corporation to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Corporation may determine. Any such payment shall be a complete discharge of the liabilities of the Corporation under this Plan. d. Nothing contained herein shall be construed as conferring upon a Participant the right to continue in the employ of the Corporation in any capacity. -4- 5 e. This Plan shall be binding upon and inure to the benefit of the Corporation, its successors and assigns and the Participant and their heirs, executors, administrators and legal representatives. This Plan shall be construed in accordance with, and governed by, the law of the State of Delaware except to the extent that such law is superseded by ERISA. In WITNESS WHEREOF, the Corporation has caused this Plan to be executed and attested by its duly authorized officers and has caused its seal to be affixed as of the date first above written. (CORPORATE SEAL) TELEFLEX INCORPORATED Attest: [SIG] By [SIG] - ------------------------ ------------------- Secretary Date 2/20/95 ------------------- -5- EX-13 3 PAGES FROM THE COMPANY'S 1995 ANNUAL REPORT 1 EXHIBIT 13 Teleflex Incorporated and Subsidiaries CONSOLIDATED STATEMENT OF INCOME
Year ended - ------------------------------------------------------------------------------------------------------------------------------- DECEMBER 31, December 25, December 26, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share) REVENUES $912,689 $812,672 $666,796 - ------------------------------------------------------------------------------------------------------------------------------- COSTS AND EXPENSES Materials, labor and other product costs 628,027 557,391 459,055 Selling, engineering and administrative expenses 192,430 173,929 140,965 Interest expense 18,632 18,361 14,466 - ------------------------------------------------------------------------------------------------------------------------------- 839,089 749,681 614,486 - ------------------------------------------------------------------------------------------------------------------------------- Income before taxes 73,600 62,991 52,310 Estimated taxes on income 24,730 21,795 18,624 - ------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 48,870 $ 41,196 $ 33,686 - ------------------------------------------------------------------------------------------------------------------------------- EARNINGS PER SHARE $2.75 $2.35 $1.95 - -------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 15 2 Teleflex Incorporated and Subsidiaries CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------------------------------- DECEMBER 31, December 25, 1995 1994 - --------------------------------------------------------------------------------------------------------- (Dollars in thousands) ASSETS Current assets Cash and cash equivalents $ 55,654 $ 24,094 Accounts receivable, less allowance for doubtful accounts, 1995 - $3,797; 1994 - $3,037 186,077 183,745 Inventories 192,522 173,105 Prepaid expenses 11,553 9,273 - --------------------------------------------------------------------------------------------------------- Total current assets 445,806 390,217 - --------------------------------------------------------------------------------------------------------- Plant assets Land and buildings 104,339 101,991 Machinery and equipment 344,171 310,680 - --------------------------------------------------------------------------------------------------------- 448,510 412,671 Less accumulated depreciation 176,724 148,354 - --------------------------------------------------------------------------------------------------------- Net plant assets 271,786 264,317 Investments in affiliates 13,557 7,980 Intangibles and other assets 54,022 48,275 - --------------------------------------------------------------------------------------------------------- $785,171 $710,789 - --------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Demand loans $ 61,487 $ 52,240 Current portion of long-term borrowings 12,731 11,438 Accounts payable 47,569 50,631 Accrued expenses 53,836 45,512 Estimated income taxes payable 17,532 9,852 - --------------------------------------------------------------------------------------------------------- Total current liabilities 193,155 169,673 Long-term borrowings 196,844 190,499 Deferred income taxes and other 39,808 41,593 - --------------------------------------------------------------------------------------------------------- Total liabilities 429,807 401,765 - --------------------------------------------------------------------------------------------------------- Shareholders' equity Common shares, $1 par value Issued: 1995 - 17,536,967 shares; 1994 - 17,277,221 shares 17,537 17,277 Additional paid-in capital 49,999 43,248 Retained earnings 291,067 252,650 Cumulative translation adjustment (3,239) (4,151) - --------------------------------------------------------------------------------------------------------- Total shareholders' equity 355,364 309,024 - --------------------------------------------------------------------------------------------------------- $785,171 $710,789 - ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 16 3 Teleflex Incorporated and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended - ----------------------------------------------------------------------------------------------------------------------------- DECEMBER 31, December 25, December 26, 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------- (Dollars ln thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 48,870 $ 41,196 $ 33,686 Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 37,740 33,019 28,071 Deferred income taxes 1,061 2,050 1,151 Decrease (increase) in accounts receivable 411 (32,269) (19,734) (Increase) in inventories (9,266) (4,003) (1,015) (Increase) in prepaid expenses (2,142) (704) (359) (Decrease) increase in accounts payable and accrued expenses (13,179) 11,641 8,224 increase (decrease)in estimated income taxes payable 7,320 6,776 (3,661) - ----------------------------------------------------------------------------------------------------------------------------- 70,815 57,706 46,363 - ----------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from new borrowings 34,941 14,131 76,171 Reduction in long-term borrowings, including acquisition debt retired (35,693) (17,054) (27,517) Increase (decrease)in current borrowings and demand loans 6,130 (13,840) 12,531 Proceeds from stock compensation plans and distribution of treasury shares 7,011 4,837 6,132 Dividends (10,453) (8,934) (7,640) - ----------------------------------------------------------------------------------------------------------------------------- 1,936 (20,860) 59,677 - ----------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FOR INVESTING ACTIVITIES Expenditures for plant assets 30,708 25,325 24,400 Payments for businesses acquired 9,202 4,485 103,530 Proceeds from sale of businesses and assets (5,038) (6,700) -- Investments in affiliates 4,172 3,251 1,369 Other 2,147 (2,354) 1,817 - ----------------------------------------------------------------------------------------------------------------------------- 41,191 24,007 131,116 - ----------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 31,560 12,839 (25,076) Cash and cash equivalents at the beginning of the year 24,094 11,255 36,331 - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at the end of the year $ 55,654 $ 24,094 $ 11,255 - -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 17 4 Teleflex Incorporated and Subsidiaries CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Year ended - ----------------------------------------------------------------------------------------------------------------------------- DECEMBER 31, December 25, December 26, 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share) COMMON SHARES Balance, beginning of year $ 17,277 $ 17,084 $ 16,914 Shares issued under compensation plans 260 193 170 - ----------------------------------------------------------------------------------------------------------------------------- Balance, end of year 17,537 17,277 17,084 - ----------------------------------------------------------------------------------------------------------------------------- ADDITIONAL PAID-IN CAPITAL Balance, beginning of year 43,248 38,604 33,118 Shares issued under compensation plans 6,751 4,644 5,486 - ----------------------------------------------------------------------------------------------------------------------------- Balance, end of year 49,999 43,248 38,604 - ----------------------------------------------------------------------------------------------------------------------------- RETAINED EARNINGS Balance, beginning of year 252,650 220,388 194,342 Net income 48,870 41,196 33,686 Cash dividends (10,453) (8,934) (7,640) - ----------------------------------------------------------------------------------------------------------------------------- Balance, end of year 291,067 252,650 220,388 - ----------------------------------------------------------------------------------------------------------------------------- CUMULATIVE TRANSLATION ADJUSTMENT Balance, end of year (3,239) (4,151) (6,286) - ----------------------------------------------------------------------------------------------------------------------------- TREASURY SHARES Balance, beginning of year -- -- (476) Distribution of treasury shares -- -- 476 - ----------------------------------------------------------------------------------------------------------------------------- Balance, end of year -- -- -- - ----------------------------------------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY $355,364 $309,024 $269,790 - ----------------------------------------------------------------------------------------------------------------------------- CASH DIVIDENDS PER SHARE $.60 $.52 $.45 - -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 18 5 Teleflex Incorporated and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share) DESCRIPTION OF BUSINESS Teleflex Incorporated designs, manufactures and distributes engineered products and services for the automotive, marine, industrial, medical and aerospace markets worldwide. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements include the accounts of Teleflex Incorporated and its subsidiaries. These consolidated financial statements have been prepared in conformity with generally accepted accounting principles, and include management's estimates and assumptions that affect the recorded amounts. Cash and cash equivalents include funds invested in a variety of liquid short-term investments with an original maturity of three months or less. Inventories are stated principally at the lower of average cost or market and consisted of the following:
1995 1994 - ----------------------------------------------------------------------- Raw materials $ 74,281 $ 75,269 Work-in-process 40,694 44,074 Finished goods 77,547 53,762 - ----------------------------------------------------------------------- $192,522 $173,105 - -----------------------------------------------------------------------
Plant assets include the cost of additions and those improvements which increase the capacity or lengthen the useful lives of the assets. Repairs and maintenance costs are expensed as incurred. With minor exceptions, straight-line composite lives for depreciation of plant assets are as follows: buildings 20 to 40 years; machinery and equipment 8 to 12 years. Intangible assets, principally the excess purchase price of acquisitions over the fair value of net tangible assets acquired, are being amortized over periods not exceeding 30 years. Assets and liabilities of foreign subsidiaries are translated 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 related translation adjustments are accumulated in shareholders' equity. Earnings per share is based on the weighted average number of common and common equivalent shares outstanding. ACQUISITIONS AND JOINT VENTURE During 1995 and 1994 the company paid $9,202 and $4,485 to acquire the net assets of various businesses. The assets, liabilities and operating results of these businesses are included in the company's financial statements from their dates of acquisition. Liabilities of $8,400 and $18,000 were assumed in 1995 and 1994, respectively, in connection with the acquisitions. Results of operations would not have been materially different had the acquisitions occurred as of the beginning of the years acquired. During the fourth quarter, the company combined certain assets of the Sermatech repairs business with that of GE Aircraft Engines into a joint venture, Airfoil Technologies International LLC (ATI) which will provide fan blade and airfoil repair services. ATI, which is 51% owned by the company, did not have a material effect on financial position or results of operations in 1995. BORROWINGS AND LEASES
1995 1994 - ----------------------------------------------------------------------- Senior Notes at an average rate of 7.2% due in installments through 2008 $ 98,000 $101,000 Mortgage notes secured by certain assets with a net book value of $12,084 10,294 11,161 Deutsche Mark denominated notes at an average rate of 6.4% due in installments through 2000 73,710 50,085 Other debt and capital lease obligations, at interest rates ranging from 3% to 9% 27,571 39,691 - ----------------------------------------------------------------------- 209,575 201,937 Current portion of borrowings (12,731) (11,438) - ----------------------------------------------------------------------- $196,844 $190,499 - -----------------------------------------------------------------------
The various senior note agreements provide for the maintenance of minimum working capital amounts and ratios and limit the purchase of the company's stock and payment of cash dividends. Under the most restrictive of these provisions, $50,000 of retained earnings was available for dividends at December 31, 1995. The weighted average interest rate on the $61,487 of demand loans due to banks was 6.3% at December 31, 1995. In addition, the company has approximately $100,000 available under several interest rate alternatives in unused lines of credit. Interest expense in 1995, 1994 and 1993 did not differ materially from interest paid, nor did the carrying value of year end long-term borrowings differ materially from fair value. 19 6 Teleflex Incorporated and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share) The aggregate amounts of debt, including capital leases, maturing in each of the four years after 1996 are as follows: 1997 - $25,639; 1998 - $50,940; 1999 - $23,436; 2000 - $33,609. The company has entered into certain operating leases which require minimum annual payments as follows: 1996 - $11,813; 1997 - $10,778; 1998 - $9,814; 1999 - $8,378; 2000 - $8,511. The total rental expense for all operating leases was $11,855, $9,418 and $8,460 in 1995, 1994 and 1993, respectively. SHAREHOLDERS' EQUITY The authorized capital of the company is comprised of 50,000,000 common shares, $1 par value, and 500,000 preference shares. No preference shares were outstanding during the last three years. At December 31. 1995, 2,003,063 shares of common stock were reserved for issuance under the company's stock compensation plans. During 1995, the number of shares available for grant was increased by 1,000,000 and options to purchase 383,000 shares of common stock were granted. Officers and key employees held options for the purchase of 1,324,011 shares of common stock at prices ranging from $14.00 to $41.75 per share with an average price of $30.93 per share. Such options are presently exercisable with respect to 676,760 shares and become exercisable with respect to an additional 167,320 shares in 1996. In 1995 and 1994, 259,746 shares and 192,976 shares, respectively, were issued under the compensation plans. The effect of adopting SFAS No. 123, Accounting for Stock-Based Compensation is discussed in the financial review section on page 30. INCOME TAXES The provision for income taxes consisted of the following:
1995 1994 1993 - ----------------------------------------------------------------------- Current Federal $17,323 $13,274 $14,133 State 2,177 1,759 1,711 Foreign 4,169 4,712 1,629 Deferred 1,061 2,050 1,151 - ----------------------------------------------------------------------- $24,730 $21,795 $18,624 - -----------------------------------------------------------------------
The deferred income taxes provided and the balance sheet amounts of $28,310 in 1995 and $29,173 in 1994 related substantially to the methods of accounting for depreciation. Income taxes paid were $16,565, $13,300 and $20,600 in 1995. 1994 and 1993, respectively. A reconciliation of the company's effective tax rate to the U.S. statutory rate is as follows:
1995 1994 1993 - ----------------------------------------------------------------------- Tax at U.S. statutory rate 35.0% 35.0% 35.0% State income taxes 1.9 1.9 2.0 Foreign income taxes (1.0) .1 -- Export sales benefit (1.7) (1.6) (1.5) Other (.6) (.8) .1 - ----------------------------------------------------------------------- Effective income tax rate 33.6% 34.6% 35.6% - ------------------------------------------------------------------------
PENSIONS The company has defined benefit plans which provide retirement benefits to eligible employees. Assumptions used in determining the actuarial present value of domestic benefit obligations reflect a weighted average discount rate of 7.7% in 1995 and 8.0% in 1994, an investment rate of 9% and a salary increase of 5%. The assumed discount rate was 6% for foreign plans. Pension expense is summarized as follows:
1995 1994 1993 - ----------------------------------------------------------------------- Domestic plans Service cost-- benefits earned during the year $ 2,554 $ 2,825 $ 1,595 Interest cost on projected ben- efit obligation 3,766 3,718 2,673 Actual return on plan assets (7,285) 664 (1,547) Net amortization and deferral 3,755 (4,356) (1,324) Foreign plans 420 440 495 - ----------------------------------------------------------------------- $ 3,210 $ 3,291 $ 1,892 - -----------------------------------------------------------------------
20 7 Teleflex Incorporated and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share) The following table sets forth the funded status of the plans and the amounts shown in the balance sheet:
1995 1994 - ----------------------------------------------------------------------- Domestic Plan assets at fair value, primarily common stock and U.S. Government obligations $ 49,194 $ 41,112 - ----------------------------------------------------------------------- Actuarial present value of the benefit obligation Vested (44,358) (40,238) Non-vested (2,266) (2,429) - ----------------------------------------------------------------------- Accumulated benefit obligation (46,624) (42,667) Projected effect of future salary increases (5,733) (5,356) - ----------------------------------------------------------------------- Total projected benefit obligation (52,357) (48,023) - ----------------------------------------------------------------------- Protected benefit obligation in excess of plan assets (3,163) (6,911) Unrecognized-- Prior service cost (366) (418) Net loss 1,585 5,779 Transition asset (1,249) (1,385) Unfunded foreign pension amounts (5,500) (4,700) - ----------------------------------------------------------------------- Accrued pension liability $ (8,693) $ (7,635) - -----------------------------------------------------------------------
OTHER POSTRETIREMENT BENEFITS The company provides postretirement medical and other benefits to eligible employees. Assumptions used in determining the expense and benefit obligations include a weighted average discount rate of 7.7% in 1995 and 8.0% in 1994 and an initial health care cost trend rate of 10% in 1995 and 11% in 1994, declining to 6% over a period of 5 years. Increasing the health care cost trend rate by one percentage point would increase the accumulated postretirement benefit obligation by $993 and would increase the 1995 postretirement benefit expense by $121. Postretirement benefit expense is summarized as follows:
1995 1994 1993 - -------------------------------------------------------------------------------- Service cost--benefits earned during the year $ 250 $ 399 $ 312 Interest cost on accumulated postretirement benefit obligation 1,127 1,402 1,385 Net amortization and deferral 566 776 783 - -------------------------------------------------------------------------------- $1,943 $2,577 $2,480 - --------------------------------------------------------------------------------
The following table sets forth the accumulated obligation of the plans and the amounts shown in the balance sheet:
1995 1994 - ----------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $ (7,840) $ (9,548) Fully eligible active plan participants (869) (1,255) Other active plan participants (3,048) (3,666) - ----------------------------------------------------------------- (11,757) (14,469) Unrecognized-- Prior service cost (547) (598) Transition obligation 10,900 11,541 Actuarial net gain (3,824) (654) - ----------------------------------------------------------------- Accrued postretirement liability $ (5,228) $ (4,180) - -----------------------------------------------------------------
BUSINESS SEGMENTS AND OTHER INFORMATION Reference is made to pages 24 through 27 for a summary of operations by business segment. A summary of revenues, identifiable assets and operating profit relating to the company's foreign operations, substantially European, is as follows:
1995 1994 1993 - -------------------------------------------------------------------------------- Revenues $283,892 $221,145 $187,259 Identifiable assets $281,429 $249,000 $202,593 Operating profit $ 27,053 $ 22,600 $ 19,700 - --------------------------------------------------------------------------------
Export sales from the United States to unaffiliated customers approximated $90,200, $92,200 and $69,800 for 1995, 1994 and 1993, respectively. Export sales included $39,900, $30,600 and $24,000 to Canada in 1995, 1994 and 1993, respectively. 21 8 REPORT OF INDEPENDENT ACCOUNTANTS [LOGO] To the Board of Directors and Shareholders Teleflex Incorporated In our opinion, the consolidated financial statements appearing on pages 15 through 27 of this Annual Report present fairly, in all material respects, the financial position of Teleflex Incorporated and its subsidiaries at December 31, 1995 and December 25, 1994 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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 the opinion expressed above. PRICE WATERHOUSE LLP - --------------------------- Price Waterhouse LLP Philadelphia, Pennsylvania February 13, 1996 22 9 QUARTERLY FINANCIAL DATA (unaudited)
Quarter ended - ------------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share) March June Sept. Dec. - ------------------------------------------------------------------------------------------------------------------------------- 1995 - ------------------------------------------------------------------------------------------------------------------------------- Revenues $226,893 $233,888 $210,340 $241,568 Gross profit 71,774 74,224 64,464 74,200 Income before taxes 18,974 20,467 12,696 21,463 Net income 12,333 13,304 8,252 14,981 Earnings per share .70 .75 .46 .84 Cash dividends per share .135 .155 .155 .155 Price range of common stock 40 3/8--40 1/2 39 5/8--45 3/4 38 1/4--45 5/8 38--44 7/8 - ------------------------------------------------------------------------------------------------------------------------------- 1994 - ------------------------------------------------------------------------------------------------------------------------------- Revenues $191,084 $209,456 $193,367 $218,765 Gross profit 58,508 64,765 59,765 72,243 Income before taxes 15,330 17,194 11,380 19,087 Net income 9,965 11,176 7,397 12,658 Earnings per share .57 .64 .42 .72 Cash dividends per share .115 .135 .135 .135 Price range of common stock 36 1/8--40 32 1/8--37 32 3/8--39 3/4 31 3/4--40 1/4 - --------------------------------------------------------------------------------------------------------------------------------- 1993 - ------------------------------------------------------------------------------------------------------------------------------- Revenues $157,575 $174,921 $156,878 $177,422 Gross profit 49,257 54,421 47,700 56,363 Income before taxes 13,174 14,250 9,661 15,225 Net income 8,563 9,263 5,904 9,956 Earnings per share .50 .54 .34 .57 Cash dividends per share .105 .115 .115 .115 Price range of common stock 29--33 5/8 27 3/4--32 30 3/4--33 3/8 28--38 1/4 - ---------------------------------------------------------------------------------------------------------------------------------
23 10 Teleflex Incorporated and Subsidiaries SELECTED FINANCIAL AND INDUSTRY SEGMENT DATA
- ----------------------------------------------------------------------------------------------------------- 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Revenues Commercial Products $403,637 $356,708 $284,106 Medical Products 293,341 253,020 180,623 Aerospace Products and Services 215,711 202,944 202,067 - ---------------------------------------------------------------------------------------------------------- Net sales 912,689 812,672 666,796 Other income(a) -- -- -- - ---------------------------------------------------------------------------------------------------------- Total revenues $912,689 $812,672 $666,796 - ---------------------------------------------------------------------------------------------------------- Operating profit Commercial Products $ 59,719 $ 53,324 $ 37,794 Medical Products 30,237 32,386 21,486 Aerospace Products and Services 12,683 5,367 14,906 - ---------------------------------------------------------------------------------------------------------- 102,639 91,077 74,186 Less: Interest expense 18,632 18,361 14,466 Corporate expenses, net of other income 10,407 9,725 7,410 - ---------------------------------------------------------------------------------------------------------- Income before taxes 73,600 62,991 52,310 Estimated taxes on income 24,730 21,795 18,624 - ---------------------------------------------------------------------------------------------------------- Net income $ 48,870 $ 41,196 $ 33,686 - ---------------------------------------------------------------------------------------------------------- Earnings per share $2.75 $2.35 $1.95 Cash dividends per share $.60 $.52 $.45 Net income from operations as a percent of revenues 5.4% 5.1% 5.1% Percent of net sales Commercial Products 44% 44% 43% Medical Products 32% 31% 27% Aerospace Products and Services 24% 25% 30% Average number of common and common equivalent shares outstanding 17,787 17,530 17,267 Average number of employees 9,553 8,740 7,920 - ----------------------------------------------------------------------------------------------------------
[FIGURE 1] 24 11
- -------------------------------------------------------------------------------------------------------------------- 1992 1991 1990 1989 1988 1987 1986 1985 - -------------------------------------------------------------------------------------------------------------------- (Dollars and shares in thousands, except per share and employee data) $210,464 $168,598 $162,646 $173,957 $153,144 $130,310 $109,811 $101,495 179,376 130,540 115,756 42,406 38,032 25,928 21,314 -- 177,292 180,399 162,731 139,262 132,413 113,540 83,057 70,321 - -------------------------------------------------------------------------------------------------------------------- 567,132 479,537 441,133 355,625 323,589 269,778 214,182 171,816 3,206 3,472 3,080 4,441 4,634 1,988 3,965 3,221 - -------------------------------------------------------------------------------------------------------------------- $570,338 $483,009 $444,213 $360,066 $328,223 $271,766 $218,147 $175,037 - -------------------------------------------------------------------------------------------------------------------- $ 25,754 $ 19,996 $ 22,224 $ 22,025 $ 26,794 $ 25,239 $ 19,993 $ 15,251 25,463 19,900 16,183 5,782 3,755 2,107 168 -- 16,100 21,722 20,781 20,711 16,548 15,095 14,090 13,470 - -------------------------------------------------------------------------------------------------------------------- 67,317 61,618 59,188 48,518 47,097 42,441 34,251 28,721 15,482 13,765 12,401 6,886 6,225 4,886 3,679 1,626 3,185 2,519 3,880 2,395 4,493 5,894 3,642 4,887 - -------------------------------------------------------------------------------------------------------------------- 48,650 45,334 42,907 39,237 36,379 31,661 26,930 22,208 16,638 15,527 14,340 12,440 12,370 11,990 10,500 8,900 - -------------------------------------------------------------------------------------------------------------------- $ 32,012(b) $ 29,807 $ 28,567 $ 26,797 $ 24,009 $ 19,671 $ 16,430 $ 13,308 - -------------------------------------------------------------------------------------------------------------------- $1.87(b) $1.77 $1.73 $1.63 $1.48 $1.20 $1.01 $.84 $.42 $.39 $.35 $.31 $.26 $.22 $.18 $.15 5.6% 6.2% 6.4% 7.4% 7.3% 7.2% 7.5% 7.6% 37% 35% 37% 49% 47% 48% 51% 59% 32% 27% 26% 12% 12% 10% 10% -- 31% 38% 37% 39% 41% 42% 39% 41% 17,132 16,850 16,476 16,403 16,243 16,459 16,315 15,902 6,920 6,160 5,860 5,080 4,350 3,760 3,300 2,380 - --------------------------------------------------------------------------------------------------------------------
(a) Beginning in 1993, other income, which was insignificant, has been reclassified as an offset to interest expense and corporate expenses. (b) Excludes an increase in net income of $860, or $.05 per share as a result of a change in accounting for income taxes [FIGURE 2] 25 12 Teleflex Incorporated and Subsidiaries SELECTED FINANCIAL AND INDUSTRY SEGMENT DATA (continued)
- ----------------------------------------------------------------------------------------------------- 1995 1994 1993 - ----------------------------------------------------------------------------------------------------- FINANCIAL POSITION Identifiable assets Commercial Products $201,808 $184,971 $158,206 Medical Products 331,349 311,547 266,239 Aerospace Products and Services 183,636 188,348 202,130 Corporate 68,378 25,923 14,001 - ----------------------------------------------------------------------------------------------------- Total assets $785,171 $710,789 $640,576 - ----------------------------------------------------------------------------------------------------- Capital expenditures Commercial Products $ 15,445 $ 13,489 $ 7,967 Medical products $ 12,107 $ 7,029 $ 7,361 Aerospace Products and Services $ 2,794 $ 4,538 $ 8,865 Depreciation and amortization Commercial Products $ 11,446 $ 9,930 $ 9,251 Medical Products $ 15,087 $ 11,694 $ 8,030 Aerospace Products and Services $ 10,471 $ 10,771 $ 10,176 Long-term borrowings $196,844 $190,499 $183,504 Shareholders' equity $355,364 $309,024 $269,790 Working capital $252,651 $220,544 $171,397 Current ratio 2.3 2.3 2.1 Book value per share $20.26 $17.89 $15.79 Return on average shareholders' equity 14.7% 14.2% 13.2% - -----------------------------------------------------------------------------------------------------
26 13
- -------------------------------------------------------------------------------------------------------------------- 1992 1991 1990 1989 1988 1987 1986 1985 - -------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share) $142,041 $101,187 $ 84,678 $ 90,557 $ 83,601 $ 60,099 $ 51,342 $ 40,790 206,562 194,609 147,954 125,635 34,819 28,997 19,715 -- 142,523 141,104 143,419 130,762 107,524 108,769 85,173 55,963 43,805 40,793 49,049 19,708 38,172 28,042 28,932 40,134 - -------------------------------------------------------------------------------------------------------------------- $534,931 $477,693 $425,100 $366,662 $264,116 $225,907 $185,162 $136,887 - -------------------------------------------------------------------------------------------------------------------- $ 7,386 $ 7,505 $ 5,581 $ 5,507 $ 8,880 $ 6,065 $ 9,289 $ 3,848 $ 5,316 $ 7,138 $ 4,236 $ 2,373 $ 960 $ 2,360 $ 1,436 -- $ 6,384 $ 5,585 $ 7,166 $ 10,701 $ 5,228 $ 6,446 $ 4,722 $ 3,186 $ 6,262 $ 5,633 $ 5,369 $ 4,715 $ 3,675 $ 3,038 $ 2,238 $ 1,816 $ 6,505 $ 4,725 $ 3,999 $ 1,693 $ 1,455 $ 1,097 $ 1,003 -- $ 8,002 $ 7,366 $ 7,024 $ 5,777 $ 5,556 $ 5,272 $ 3,682 $ 2,661 $134,600 $119,370 $112,941 $106,128 $ 57,104 $ 55,013 $ 37,578 $ 23,477 $240,467 $211,702 $187,875 $160,038 $136,328 $115,517 $100,573 $ 84,312 $166,803 $131,589 $133,840 $112,325 $ 98,217 $ 90,270 $ 69,723 $ 66,777 2.4 2.1 2.3 2.4 2.6 2.8 2.7 3.6 $14.25 $12.73 $11.44 $9.87 $8.49 $7.25 $6.25 $5.36 14.2% 14.9% 16.4% 18.1% 19.1% 18.2% 17.8% 17.0% - --------------------------------------------------------------------------------------------------------------------
27 14 Teleflex Incorporated and Subsidiaries 1995 FINANCIAL REVIEW OVERVIEW The company's major financial objectives are to achieve a 15% to 20% growth rate in revenues and net income and to generate a 20% return on average shareholders' equity. Over the past five years the compounded growth rates for sales and net income have been 15% and 11%, respectively, while return on shareholders' equity has averaged 14%. On average over the past two years, the company achieved its revenue and net income objectives and return on average shareholders' equity improved to 15%. Prior to 1994, the growth rates were tempered by the relatively weak economy first in the United States and then in Europe, and the downward cycle in both the military and commercial aerospace markets. Additionally, during that time period the company invested heavily, primarily through acquisition, to build the Medical Segment. The company is also committed to maintaining a reasonable balance among its three segments--Commercial, Medical and Aerospace. Balance reduces dependence on any one segment, allows for investment at the bottom of a segment's operating cycle and gives the company a broader base of markets in which to grow. Over the past five years, the company's operating profit has increased despite cyclical downturns in each of the segments. As a result of the divestiture of three product lines in the Aerospace Segment, it is expected that the future balance among the three segments will be weighted more heavily toward the Commercial and Medical segments. Additionally, the opportunities for growth in these other markets are stronger than those for the Aerospace Segment. The company intends to achieve its growth objectives through both internal development of new products and new markets for existing products as well as through external means. It is expected that half of the growth over time will be achieved through internal means and the remainder externally, primarily through acquisitions. Over the past five years, the company's internal growth has averaged close to the 50% objective. During the same time, the company invested approximately $250 million in acquisitions which have contributed the remainder of the growth. Acquisitions, while adding initially to sales, generally do not contribute proportionately to earnings in the early years. In these years, earnings generally are reduced by up-front costs such as interest, depreciation and amortization and, in many instances, the expenses of integrating a newly-acquired business into an existing operation. [FIGURE 3] Historically, operations have generated sufficient cash flow to finance the company's operating requirements while borrowings have been incurred largely to finance acquisitions. Over the past five years, cash flow from operations has totaled more than $250 million. This healthy cash flow also provides for the payment of dividends and enables the company to continue to upgrade plant and equipment. While not particularly capital intensive, the company's businesses spend approximately 3% to 4% of net sales annually on plant and equipment. With respect to dividends, the company's policy is to pay 20% of trailing twelve months' earnings. This policy has been followed since the first cash dividend payment was made in 1977. The company generally has maintained conservative levels of long-term debt ranging from 30% to 40% of total capitalization. However, it is not inconceivable that debt may range up to 50% of capitalization for a limited period in order to finance acquisitions. The company finances foreign operations and acquisitions mostly in their local currencies, thus reducing the overall risk of exchange rate fluctuations. As a result, approximately 50% of the company's short and long-term debt is denominated in currencies other than the U.S. dollar. In summary, the company believes its strong financial position, healthy cash flows from operations and unused debt capacity provide it with adequate financial resources and flexibility to pursue its long-term strategic growth objectives. 28 15 RESULTS OF OPERATIONS 1995 VS. 1994: Revenues increased 12% in 1995 to $912.7 million from $812.7 million in 1994. The increase was attributable to gains in each of the company's three segments. For 1995 the Commercial, Medical and Aerospace segments comprised 44%, 32% and 24% of the company's net sales, respectively. Growth in the company's core businesses accounted for approximately 60% of the increase in sales, while acquisitions in the Commercial and Medical segments contributed the remainder. Foreign operations represented 31% of the company's revenues and increased 28% over 1994. The increase in foreign sales resulted from internal growth, acquisitions and to a much lesser extent, stronger foreign currencies. Gross profit margin remained relatively flat in 1995 as the gain in the Aerospace Segment offset slight declines in the Medical and Commercial segments. Selling, engineering and administrative expenses decreased slightly as a percentage of sales due primarily to a reduction of expenses combined with an increase in sales in the Aerospace Segment. Operating profit increased 13% in 1995 to $102.6 million from $91.1 million in 1994. Increases in the Aerospace and Commercial segments more than offset the decline in the Medical Segment. For 1995 the Commercial, Medical and Aerospace segments comprised 58%, 30% and 12% of the company's operating profit, respectively. In 1995 operating profit as a percentage of sales (operating margin) remained unchanged as the increase in the Aerospace Segment offset a decline in the Medical Segment. Net income in 1995 increased 19% to $48.9 million while earnings per share increased 17% to $2.75 from $2.35 in 1994. 1994 VS. 1993: Revenues increased 22% in 1994 to $812.7 million from $666.8 million in 1993. The increase was attributable to the Commercial and Medical segments while the Aerospace Segment was essentially flat. For 1994, the Commercial, Medical and Aerospace segments comprised 44%, 31% and 25% of the company's net sales, respectively. The acquisition of Edward Weck Incorporated (Weck) in December 1993 accounted for a significant portion of the growth in the Medical Segment. The Commercial Segment gain was generated internally from the strength in its markets and the introduction of new products. Foreign operations, which accounted for 27% of revenues, increased 18% in 1994 and were affected minimally by changes in foreign currency exchange rates. Gross profit margin remained relatively flat in 1994 as gains in Commercial and Medical segment margins were offset by a decline in Aerospace margins. Selling, engineering and administrative expenses increased absolutely but remained relatively constant as a percentage of sales. The major factor contributing to the increased expenses was the larger sales contribution from the Medical Segment, which has higher selling costs compared with the other segments. Operating profit increased 23% in 1994 to $91.1 million from $74.2 million in 1993. Increases in the Commercial and Medical segments offset a drop in the Aerospace Segment. In 1994 after several years of decline, operating margin increased fractionally over 1993. The improvement was due primarily to increased margins in the Commercial and Medical segments which offset a decline in the Aerospace Segment. Net income in 1994 was $41.2 million, up 22% from 1993 while earnings per share increased 21% to $2.35 per share from $1.95 in 1993. INTEREST EXPENSE, INCOME TAX EXPENSE AND OTHER Interest expense increased slightly in 1995 resulting from additional borrowings, incurred primarily to support foreign operations, offset by lower rates. In 1994 the increase in interest expense was due to the significant borrowings incurred at the end of 1993 to finance an acquisition. Interest expense as a percent of sales decreased in 1995 to 2% from 2.3% in 1994. [FIGURE 4] 29 16 The effective income tax rate was 33.6% in 1995 compared with 34.6% in 1994 and 35.6% in 1993. The lower rate in 1995 compared with 1994 is attributable to a change in the mix of the company's foreign income to countries with lower tax rates. The reduced rate in 1994 was due to a nonrecurring increase in deferred taxes in 1993 stemming from an increase in the U.S. corporate rate from 34% to 35%. In October 1995 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No.123). SFAS No. 123 defines a fair value based method of accounting for employee stock options and similar instruments and must be either adopted or the pro forma income statement effects must be disclosed in notes to the financial statements. The company intends to elect disclosure of the pro forma income statement effects of SFAS No. 123, therefore the new Statement will not affect the company's financial position or results of operations. COMMERCIAL PRODUCTS SEGMENT The Commercial Products Segment businesses design and manufacture proprietary mechanical controls for the automotive market; mechanical, electrical and hydraulic controls, and electronics products for the pleasure marine market; and proprietary products for the fluid transfer and outdoor power equipment markets. Products in the Commercial Segment generally are less complex and are produced in higher unit volume than those of the company's other two segments. They are manufactured both for general distribution as well as custom fabricated to meet individual customer needs. Consumer spending patterns generally influence the market trends for these products. 1995 VS. 1994: Sales in the Commercial Segment increased 13% in 1995 from $356.7 million to $403.6 million. All three product lines, Marine, Automotive, and Industrial reported higher sales with the largest gain coming from the Automotive product line. Internal growth, primarily from increased market penetration, and acquisitions in each of the product lines, contributed equally to the increase. [FIGURE 5] Operating profit increased 12% to $59.7 million in 1995 from $53.3 million in 1994 generally as a result of volume improvements in all three product lines. Operating margin remained relatively constant in 1995 as an increase in the Marine product line, due in part to lower manufacturing costs of electronics products, was offset by declines in the Automotive product line from a very strong 1994 and, to a lesser extent, the Industrial product line. In the Automotive product line, productivity improvements have not yet fully offset the costs of integrating a 1995 acquisition into the existing operations nor the downward pressure on sales prices. In the Industrial product line, slightly lower operating margins were the result of expansion costs incurred to support future sales growth in flexible hose and light-duty cable products. The Commercial Segment's assets increased 9% in 1995 due to the acquisitions, capital expenditures, and an increase in inventory related to volume, offset by a decline in accounts receivable. 1994 VS. 1993: Sales in the Commercial Segment increased 26% from $284.1 million to $356.7 million. All three product lines, Marine, Automotive and Industrial, reported higher sales as demand for their products was boosted by the strength of their markets. Sales of new products, primarily in the Marine product line and to a lesser extent the Automotive and Industrial product lines, also contributed to the increase. Operating profit increased 41% to $53.3 million in 1994 from $37.8 million in 1993 as a result of volume and operating margin gains in all three product lines. The improved performance in the Automotive and Industrial product lines stemmed primarily from the increased volume. Within the Marine product line, increases in sales, primarily electronics products, coupled with lower design and manufacturing costs accounted for the gain. 30 17 Assets increased in 1994 due to a higher level of accounts receivable related to volume and to capital equipment additions in the Marine and Industrial product lines for new products and capacity expansion. MEDICAL PRODUCTS SEGMENT The Medical Products Segment includes the manufacture and distribution of a broad range of invasive disposable and reusable devices for the urology, gastroenterology, anesthesiology and respiratory care markets worldwide. It also manufactures general and specialized surgical instruments used in both traditional (open) and minimally-invasive surgical procedures. These products generally are required to meet exacting standards of performance and have long product life cycles. External economic influences on the sales of these products relate primarily to spending patterns in the worldwide medical devices and supplies market. 1995 VS. 1994: In 1995 the Medical Segment sales increased 16% to $293.3 million from $253.0 million. The gain was spread equally among internal growth, acquisitions made over the past fifteen months and the effects of stronger foreign currencies. The internal growth primarily resulted from increased market penetration in the hospital supply product line in Europe and to expansion of the surgical devices product line sales in the Asia Pacific region. Operating profit declined 7% in 1995 to $30.2 million compared with $32.4 million in 1994 and operating margin was also lower. Slower than expected improvement in businesses acquired over the last several years, development and start up costs of new products which have not contributed significantly to sales volume, costs associated with changing to a direct selling approach in several markets and, a $1.2 million severance charge combined to result in the reduction. Future improvement in the Medical Segment operating margin is primarily dependent on the success of the company's ongoing programs to integrate several acquisitions and to increase productivity in both the hospital supply and surgical devices product lines. Assets increased in 1995 due to the effects of stronger foreign currencies, higher inventory in the hospital supply product line related to volume and support of the direct selling effort. 1994 VS. 1993: In 1994, the Medical Segment achieved sales of $253.0 million, exceeding 1993 sales by $72.4 million or 40%. The increase was the result of the acquisition of Weck in December 1993 and, to a lesser extent, improved sales in the hospital supply product line. Several small acquisitions, made throughout the year had no significant impact on results of operations in 1994. Operating profit increased 51% in 1994 to $32.4 million and operating margin improved to 12.8% from 11.9% in 1993. Approximately one-half of the increase in operating profit was the result of the Weck acquisition with the remainder due to the higher volume in the hospital supply product line. Operating margin was enhanced by the hospital supply product line cost reduction program begun in 1993. The improvements in both operating profit and operating margin were achieved despite the additional costs of assimilating the Weck acquisition into the existing surgical device businesses. Assets increased in 1994 due to several small acquisitions in both the hospital supply and surgical device product lines. Also contributing to the increase were higher accounts receivable from the Weck acquisition and the sales increase in the hospital supply product line. AEROSPACE PRODUCTS AND SERVICES SEGMENT The Aerospace Products and Services Segment serves the aerospace and turbine engine markets. Its businesses design and manufacture precision controls and cargo systems for aviation; provide coating and repair services and blade manufacturing for users of both flight and land-based turbine engines. Sales are to both original equipment manufacturers and the aftermarket. [FIGURE 6] 31 18 These products and services, many of which are proprietary, require a high degree of engineering sophistication, and often are custom-designed. External economic influences on these products and services relate primarily to spending patterns in the worldwide aerospace industry. 1995 VS. 1994: Sales in the Aerospace Segment increased 6% from $202.9 million in 1994 to $215.7 million in 1995. The gain resulted from increased sales of cargo handling systems in the aftermarket and higher sales in the aerospace controls product line. Within the Sermatech product line, increased sales of Sermatech coatings and turbo-machinery were offset by declines in repair services. Over the past year, the company completed a portion of its strategic realignment of the Aerospace Segment, by selling three product lines (two were sold in 1995 and one in January 1996) and forming a joint venture. The three product lines which had sales and operating profit of approximately $50 million and $3 million, respectively, were sold for total proceeds of approximately $40 million in cash and notes. There was no significant effect on results of operations from the two product lines sold in 1995; however, a gain of between $.10 and $.15 per share will be recorded in the first quarter of 1996 for the product line sold subsequent to year end. During the fourth quarter the company formed a joint venture with GE Aircraft Engines to provide fan blade and airfoil repair services. The results of the joint venture, which is 51% owned by the company, did not have a material effect on the 1995 financial statements. Future growth in this Segment will depend upon the successful implementation of a strategy which includes the redeployment of assets in selected aerospace markets, primarily air cargo and turbo-machinery products and services. Operating profit more than doubled in 1995 to $12.7 million from $5.4 million in 1994 and operating margin improved from 3% to 6%. The gains resulted from increased volume, cost reduction and productivity improvement efforts made over the past two years and, a reduction in the level of selling, engineering and administrative expenses. Assets declined in 1995 due to lower capital expenditures and the sale of assets associated with two divested product lines. The decline was partially offset by inventory increases in the Sermatech product line. 1994 VS. 1993: Sales in 1994 of $202.9 million in the Aerospace Segment were essentially flat as gains from cargo handling systems, ground turbine business and the March 1993 acquisition of Mal Tool & Engineering were offset by declines resulting from the impact of the weak commercial aviation and defense markets. Operating profit decreased 64% from $14.9 million in 1993 to $5.4 million in 1994. The major factors contributing to the decline were lower volume in certain of the operating units, costs associated with the reduction in capacity and significant expenditures related to the development of the cargo handling systems business. [FIGURE 7] Assets decreased in 1994 as a result of a decline in plant and equipment, and inventories due to capacity reduction efforts. LIQUIDITY AND CAPITAL RESOURCES The company continued to generate high levels of cash from operations. In 1995, cash flows from operating activities were $70.8 million compared with $57.7 million in 1994 and $46.4 million in 1993. The increase in 1995 was due to higher net income and noncash depreciation and amortization. The increase in 1994 was due to higher net income and the timing of income tax and other payments partially offset by an increase in accounts receivable related to volume. In addition to cash from operations, the company has unused credit lines of approximately $100 million to meet its short-term working capital and long-term strategic growth objectives. Also, the company has a favorable debt to total capitalization ratio which provides additional borrowing capacity for future growth. The combination of lower 32 19 acquisition-related, long-term borrowing and the increase in shareholders' equity resulted in an improvement in the company's debt to total capitalization from 38% in 1994 to 36% in 1995. Historically the most significant investment of cash has been payments for businesses acquired. Although minimal during 1995 and 1994, one-half of the company's future growth is expected to come from acquisitions. These payments over the last three years were more than $100 million and generally have been financed through fixed-rate, long-term borrowing. Capital expenditures were $30.7 million, $25.3 million and $24.4 million in 1995, 1994 and 1993, respectively, and are adequate to support the ongoing requirements of the company. The expenditures in 1995 are within the company's historical spending patterns of between 3% and 4% of sales and it is expected that this trend will continue into the next year. The 1995 expenditures were primarily for machinery and equipment related to improving productivity within the Medical Segment and increasing capacity in the Commercial Segment. In 1994, expenditures were primarily related to the expansion of capacity within the Commercial Segment. In 1995 dividends per share were increased 15% over 1994 to $.60 and aggregated $10.5 million. Dividends per share in 1994 increased 16% to $.52 per share and totaled $8.9 million. Cash dividends have been paid since 1977 and have increased every year since inception of the payment. The company's policy has been to use cash from operations to finance capital expenditures and dividend payments and borrowings to finance acquisitions. The combination of cash flows from operations, unused lines of credit and strong financial position provide the company with adequate liquidity for meeting the company's operating and strategic growth needs. [FIGURE 8] [FIGURE 9] SHAREHOLDERS' EQUITY Shareholders' equity increased 15% to $355.4 million at December 31, 1995 compared with $309.0 million at December 25, 1994. The book value per share at December 31, 1995 increased to $20.26 compared with $17.89 at December 25, 1994. ENVIRONMENTAL MATTERS The company is subject to numerous federal, state and local environmental laws and regulations including the Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation and Liability Act, the Clean Air Act and, the Clean Water Act. Environmental programs are in place throughout the company which include training, auditing and monitoring to ensure compliance with such laws and regulations. In addition, the company has been named as a Potentially Responsible Party by the Environmental Protection Agency at various sites throughout the country. Environmental costs, including liabilities associated with such sites; and the costs of complying with existing environmental regulations are not expected to result in a liability material to the company's consolidated financial position or results of operations. 33 EX-22 4 THE COMPANY'S SUBSIDIARIES 1 EXHIBIT 22 Teleflex Incorporated Subsidiaries
JURISDICTION PARENT PERCENTAGE SUBSIDIARY OF INCORP. 924593 Ontario Limited Ontario Pilling Weck 100 Access Medical S.A. France TFX International S.A. 80 Airfoil Management Company Delaware Sermatech 100 Airfoil Management Limited UK Sermatech (U.K.) Limited 100 American General Aircraft Holding Co., Inc. Delaware Teleflex 74 Asept+ France TFX International S.A. 100 Astraflex Limited UK TFX Group Ltd. 100 Aunic Engineering Limited UK Sermatech (U.K.) Limited 100 Aviation Product Support, Inc. (1) Delaware Teleflex 100 Avtech Systems, Inc, Utah The Talley Corporation 100 Bavaria Cargo Technologie GmbH Germany Telair Int'l Cargo Systems GmbH 100 Capro de Mexico Mexico TFX International Corp. 99.99 (2) Capro Inc. Texas Teleflex 100 Cepco Precision Company of Canada, Inc. Canada Sermatech Engineering 100 Cetrek Engineering Ltd. UK Cetrek Ltd. 100 Cetrek Inc. Massachusetts Teleflex 100 Cetrek Limited UK TFX International Ltd. 100 Chemtronics International Ltd. UK Sermatech (U.K.) Limited 100 ECT Inc. Delaware Sermatech 50 Endoscopy Specialists Incorporated Delaware TFX Equities 100 Entech, Inc. New Jersey TFX Equities 100 Europe Medical, S.A. France TFX International S.A. 100 Flexible Flyer, Inc. Delaware Teleflex 100 Franklin Medical Ltd. UK TFX Group Ltd. 100 G-Tel Aviation Limited UK Sermatech (U.K.) Limited 50 Gator-Gard Incorporated Delaware Sermatech 100 Inmed (Malaysia) Holdings Sdn. Berhad Malaysia Willy Rusch AG 100 Inmed Acquisition, Inc. Delaware Teleflex 100 (3) Inmed Corporation (4) Georgia Immed Acquisition 100 Inmed Corporation (U.K.) Ltd. UK TFX Group Ltd. 100 Inmed S.A.R.L. France TFX International S.A. 100 Kordial S.A. France TFK international S.A. 100
PAGE 1 3/15/96 2 Teleflex Incorporated Subsidiaries Lipac Liebinzeller Verpackungs-GmbH Germany Willy Rusch AG 100 Machine Tool Leasing, Inc. Nevada Teleflex 100 Mal Tool & Engineering Limited UK TFX Group Ltd. 100 Mal Tool & Engineering S.A.R.L. France TFX International S.A. 100 Meddig Medizintechnik Vertriebs-GmbH Germany Rusch G B 87.5 Medical Service Vertriebs-GmbH Germany Willy Rusch AG 100 Norland Plastics Company Delaware TFX Equities 100 Novadis S.A. France TFX international S.A. 100 Orpac, Inc. Delaware Teleflex 100 Phosphor Products Co. Limited UK TFX International Ltd. 100 Pilling Weck Chiurgische Produkte GmbH Germany TFX Holding GmbH 100 Pilling Weck Incorporated Delaware Teleflex 100 Pilling Weck Incorporated Pennsylvania Teleflex 100 Pilling Weck n.v. Belgium TFX International S.A. 100 Rigel Compasses Limited UK TFK International Ltd. 100 Rusch Asia Pacific Sdn. Berhad Malaysia Inmed (Malaysia) Holdings 100 Rusch AVT Medical Private Limited India TFX Equities 50 Rusch (UK) Ltd. UK TFX Group Ltd. 100 Rusch Austria Ges.mbH Austria Teleflex 100 Rusch France S.A.R.L. France Rusch G B 100 Rusch Inc. Delaware Rusch G B 100 Rusch Italia S.A.R.L. Italy Willy Rusch AG 100 Rusch Manufacturing (UK) Ltd. UK TFX Group Ltd. 100 Rusch Manufacturing Sdn. Berhad Malaysia Inmed (Malaysia) Holdings 96.5 Rusch Sdn. Berhad Malaysia Inmed (Malaysia) Holdings 96.5 Rusch Uruguay Ltda. Uruguay Rusch G B 60 Rusch-Pilling (Asia) PTE Ltd. Singapore Pilling Weck 99.99 Rusch-Pilling Inc. Canada 924593 Ontario 50.5 (5) Rusch-Pilling S.A. France TFX International S.A. 100 S. Asferg Hospitalsartikier ApS Denmark Teleflex 100 Sermatech (Canada) Inc. Canada Sermatech 100 Sermatech Engineering Group, Inc. Delaware Teleflex 100 Sermatech (Germany) GmbH Germany TFX Holding GmbH 100 Sermatech International Incorporated PA Teleflex 100 Sermatech Repair Services Limited UK Sermatech (U.K.) Limited 100
3/15/96 Page 2 3 TeleFlex Incorporated Subsidiaries Sermatech (U.K.) Limited UK TFX Group Limited 100 SermeTel Technical Services (STS) GmbH Germany TFX Holding GmbH 100 Simal S.A. Belgium TFX International S.A. 100 Technology Holding Company Delaware TFX Equities 100 Technology Holding Company II Delaware Techsonic Industries, Inc. 86 (6) Techsonic Industries, Inc. Alabama Teleflex 100 Telair International Cargo Systems GmbH Germany Telair Int'l Cargo Systems, Inc 100 Telair International Cargo Systems, Inc. Delaware Teleflex 100 Teleflex (Canada) Limited Canada (B.C.) Teleflex 100 Teleflex Automotive de Mexico S.A. de C.V. Mexico TFX Equities 99.9 (7) Teleflex Automotive Manufacturing Corporation Delaware Teleflex 100 Teleflex Fluid Systems, Inc. Connecticut Teleflex 100 Teleflex Precision Casting Company Utah Teleflex 100 TFX Automotive Incorporated Delaware Teleflex 100 TFX Engineering Ltd. Bermuda Teleflex 100 TFX Equities Incorporated Delaware Teleflex 100 TFX Foreign Sales Corporation Virgin Is. Teleflex 100 TFX Group Limited UK TFX International Corp. 100 TFX Holding GmbH Germany Teleflex 100 TFX International Corporation Delaware Teleflex 100 TFX International Limited UK TFX Group Ltd. 100 TFX International S. A. France Teleflex 100 TFX Marine Incorporated Delaware Teleflex 100 TFX Medical Incorporated Delaware Teleflex 100 TFX Medical Wire Products, Inc. Delaware TFX Equities 100 The Talley Corporation(8) California Teleflex 100 Top Surgical GmbH Germany PW Chiurgische Produkte GmbH 100 TX Controls AB Sweden Teleflex 100 Victor Huber GmbH Germany Teleflex 100 Willy Rusch AG Germany TFX Holding GmbH 100 Willy Rusch Grundstucks und Beteiligungs AG ("Rusch G B") Germany Willy Rusch AG 99.8 (9)
3/15/96 Page 3 4 Teleflex Incorporated Subsidiaries 1. Trades under name "APS" 2. One share (.002%) is owned by TFX Equities 3. Except for nominee shares. 4. Trades under name "Rusch Inc." 5. 49.5% owned by Rusch G B. 6. 14% owned by five other subsidiary companies 7. One share (.001%) is owned by TFX International Corporation 8. Trades under names "Teleflex Defense Systems" and "Teleflex Control Systems" 9. Two shares (.2%) are owned by Inmed Corporation. 3/15/96 Page 4 EX-25 5 POWER OF ATTORNEY 1 EXHIBIT 25 POWER OF ATTORNEY Each of the undersigned Directors of Teleflex Incorporated, a Delaware corporation (the "Company"), hereby appoints Lennox K. Black, Harold L. Zuber, Jr. and Steven K. Chance, and each of them, with full power of substitution, to act as his attorney-in-fact to execute, on behalf of the undersigned, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. IN WITNESS WHEREOF, this Power of Attorney is executed this 11th day of March, 1996. /s/ DONALD BECKMAN /s/ LENNOX K. BLACK - ------------------ ------------------- Donald Beckman Lennox K. Black /s/ DAVID S. BOYER /s/ JOSEPH S. GONNELLA - ------------------ ---------------------- David S. Boyer Joseph S. Gonnella /s/ PEMBERTON HUTCHINSON /s/ LEWIS E. HATCH, JR. - ------------------------ ----------------------- Pemberton Hutchinson Lewis E. Hatch, Jr. /s/ SIGISMUNDUS W. W. LUBSEN /s/ PALMER E. RETZLAFF - ---------------------------- ------------------------ Sigismundus W. W. Lubsen Palmer E. Retzlaff /s/ JOHN H. REMER /s/ JAMES W. STRATTON - ----------------- --------------------- John H. Remer James W. Stratton EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1995 DEC-26-1994 DEC-31-1995 55,654 0 186,077 0 192,522 445,806 448,510 176,724 785,171 193,155 196,844 0 0 17,537 337,827 785,171 912,689 912,689 628,027 628,027 192,430 0 18,632 73,600 24,730 48,870 0 0 0 48,870 2.75 2.75
-----END PRIVACY-ENHANCED MESSAGE-----