Teleflex Incorporated (NYSE:TFX) today announced financial results for the second quarter and year to date ended June 27, 2010.
“In planning for this transition, Ernest and I recognized some time ago that the position of President, Teleflex Medical would likely be eliminated”
Financial Highlights
Second quarter 2010 net revenues increased 5% to $461.7 million from $439.2 million in the second quarter of 2009. Core revenues for the quarter increased 7%, offset by foreign currency translation which negatively impacted sales 1%, and the deconsolidation of an entity which negatively impacted sales 1%.
Second quarter 2010 GAAP income from continuing operations attributable to common shareholders increased 28% to $42.0 million, or $1.04 per diluted share, compared to $32.8 million, or $0.82 per diluted share in the prior year quarter. On an adjusted basis, as detailed in the reconciliation tables below, second quarter 2010 income from continuing operations increased 5% to $41.9 million, or $1.04 per diluted share, compared to $39.9 million, or $1.00 per diluted share, in the prior year quarter.
Second quarter 2010 GAAP net income attributable to common shareholders was $60.1 million compared to $6.5 million in the prior year quarter. These results included income from discontinued operations of $18.1 million in the second quarter of 2010, and a loss from discontinued operations of $26.4 million in the prior year quarter.
Net revenues for the first six months of 2010 increased 3% to $882.9 million from $854.3 million in 2009. Core revenues increased 3%, foreign currency translation increased sales 1%, while the disposition of a product line and the deconsolidation of an entity, together, accounted for a 1% decline in revenues.
GAAP income from continuing operations attributable to common shareholders for the first six months of 2010 increased 37% to $76.9 million, or $1.91 per diluted share, compared to $56.0 million, or $1.40 per diluted share, in the first six months of 2009. On an adjusted basis, as detailed in the reconciliation tables below, income from continuing operations for the first six months of 2010 increased 16% to $77.2 million, or $1.92 per diluted share, compared to $66.8 million, or $1.67 per diluted share, in the first six months of 2009.
GAAP net income attributable to common shareholders for the first six months of 2010 was $97.8 million compared to $222.0 million in the first six months of 2009. These results included income from discontinued operations of $20.9 million in the first six months of 2010, and income from discontinued operations of $166.0 million in the first six months of 2009.
GAAP cash flow from continuing operations for the first six months of 2010 was $100.2 million as compared to cash used in continuing operations of $27.8 million in the first six months of 2009. On an adjusted basis as detailed in the reconciliation tables below, cash flow from continuing operations for the first six months of 2010 was $80.4 million as compared to $69.8 million in 2009.
In the third quarter of 2010, the Company began submitting requests for certificates to foreign governments, or CFGs, to the FDA for review, and recently received approval on one of its requests. The Company believes that the FDA's approval of the CFG is a clear indication that it has substantially corrected the quality system issues identified in the corporate warning letter. The Company has now submitted all of its currently eligible CFG requests to the FDA for review and currently anticipates receiving the FDA's approval with respect to most of these requests in the third quarter of 2010.
The Company also announced organizational and leadership changes associated with its continued transition to a medical technology business. The new structure and leadership are designed to support strategic and financial objectives for the growth of the medical business globally.
The Company has consolidated its Corporate and Medical executive management teams to create a single Teleflex Leadership Team reporting directly to Jeff Black, Chairman and Chief Executive Officer. Teleflex also announced that the position of President, Teleflex Medical has been eliminated and Ernest Waaser will be leaving the Company. Mr. Waaser, who held this position for four years, will remain with the company through a transition period.
"In planning for this transition, Ernest and I recognized some time ago that the position of President, Teleflex Medical would likely be eliminated," stated Black. "Ernest and I have worked closely together over the last four years to execute integration plans, complete FDA audits related to the corporate warning letter, and enhance our quality systems and information systems infrastructure. I very much want to thank him for his efforts and wish him well in his new endeavors."
Added Black, "I am extremely pleased by the recent approval by the FDA of one of our CFG requests. Over the past few years there has been a tremendous amount of work put into FDA remediation efforts, and although we do not expect this CFG approval to have a material impact on revenues for the remainder of 2010, this is clearly a positive sign for our future. Looking ahead, we have set clear long term strategic and financial goals for Teleflex and we believe that we have significant opportunity to stimulate sales growth, leverage our global sales channels, expand in emerging markets, and create innovative new products that serve our customers and their patients."
Second Quarter Business Segment Commentary
Medical Segment
Medical Segment revenues in the second quarter of 2010 were $358.4 million as compared to $358.3 million in the prior year period. Core revenue growth of 2% was offset by an unfavorable currency impact of 1%, and impact of the deconsolidation of an entity of 1%. Core revenue increases in respiratory, urology, anesthesia, cardiac care and specialty products sold to medical OEM's were offset by a decline in surgical and vascular access sales. The decline in vascular access sales was due to the voluntary recall of custom IV tubing product that was announced in February of 2010.
Medical Segment sales by product group were comprised of the following:
* "Other" represents the impact of the deconsolidation of a variable interest entity as a result of the adoption of Accounting Standards Codification topic 810 "Consolidations."
Segment operating profit and margins in the second quarter of 2010 were $73.5 million, or 20.5%, compared to $77.8 million, or 21.7%, in the prior year quarter. Excluding the $0.5 million impact of integration costs not qualified for restructuring, segment operating profit and margins in the second quarter of 2009 were $78.3 million, or 21.8%, as noted in the reconciliation tables below.
Aerospace Segment
Aerospace Segment revenues in the second quarter of 2010 increased 30% to $48.0 million from $37.0 million in the prior year period. Increases in sales of wide-body cargo handling systems to OEM's, actuation product, and cargo containers and cargo spares and repair sales, more than offset lower sales of narrow-body cargo handling systems, resulting in a 32% increase in core revenue during the quarter. This was somewhat offset by an unfavorable currency impact of 2%.
Segment operating profit and margins in the second quarter of 2010 were $7.6 million, or 15.8%, compared to $1.0 million, or 2.8%, in the prior year quarter.
Commercial Segment
Commercial Segment revenues in the second quarter of 2010 increased 26% to $55.3 million from $44.0 million in the same period last year. Core revenue growth of 25% was the result of increased sales of Marine OEM and aftermarket sales. Foreign currency was favorable by 1%.
Segment operating profit and margins in the second quarter of 2010 were $7.5 million, or 13.6%, compared to $3.3 million, or 7.5%, in the prior year quarter.
Balance Sheet Highlights
Cash and cash equivalents on hand at June 27, 1010 was $287.1 million compared to $188.3 million at December 31, 2009, up 52%.
Net accounts receivable at June 27, 1010 were $291.4 million compared to $265.3 million at December 31, 2009, up 10%. Excluding the $39.7 million impact of the adoption of the amendment to Accounting Standards Codification topic 860 "Transfers and Servicing" ("ASC 860"), net accounts receivable declined 5%.
Net inventory at June 27, 1010 was $337.4 million compared to $360.8 million at December 31, 2009, a decline of 6%.
Net debt at June 27, 1010 was $882.5 million compared to $1,008.2 million at December 31, 2009, a decline of 12%. Excluding the $39.7 million impact of ASC 860, net debt declined 16%.
Business Outlook for 2010
The Company's financial estimates for 2010 include total revenues of approximately $1.8 billion and diluted earnings per share from continuing operations excluding special items in the range of $3.95 to $4.10. Cash flow from continuing operations, exclusive of the impact of the adoption of ASC 860, is expected to be in the range of $265 to $270 million. Restructuring and other special charges related to the Arrow integration program are anticipated to be $0.05 per diluted share for the year.
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