SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
[X]
For the fiscal year ended December 28, 2003
OR
[ ]
For the transition period from to
Commission File No. 1-5353
TELEFLEX INCORPORATED
Delaware
(State or other jurisdiction of incorporation or organization) |
23-1147939
(I.R.S. Employer Identification No.) |
155 South Limerick Road, Limerick
Pennsylvania
(Address of principal executive offices) |
19468
(Zip Code) |
Registrants telephone number, including area code: (610) 948-5100
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $1 per share New York Stock Exchange
Preference Stock Purchase Rights 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 registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant (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 |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
YES X NO |
The aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant (35,552,291 shares) on June 29, 2003 (the last business day of the registrants most recently completed fiscal second quarter) was $1,543,324,952. The aggregate market value was computed by reference to the closing price of the Common Stock on such date.
The registrant had 39,999,406 Common Shares outstanding as of February 29, 2004.
Document Incorporated by Reference: Proxy Statement for the 2004 Annual Meeting of Shareholders, incorporated partially in Part III hereof. The Proxy Statement for the 2004 Annual Meeting of Shareholders will be filed within 120 days of the close of the registrants fiscal year.
PART I
Item 1. Business
Teleflex Incorporated (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 companys
investments have been directed toward specific market niches
employing its technical capabilities to provide solutions to
specific engineering problems and toward expanding into 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 companys
managers for funds to pursue new programs and activities
independent of their operating budgets. Examples of New Venture
projects include the funding of second generation adjustable
pedal research, flexible fuel hose and most of the early seed
money for certain medical products.
The companys annual report on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to those reports
will be made available free of charge through the Investor
Relations section of the companys Internet website
(www.teleflex.com) as soon as practicable after such material is
electronically filed with, or furnished to, the Securities and
Exchange Commission. In addition, the Board of Directors has
adopted a statement of Corporate Governance Principles and a
Code of Ethics for all company directors, officers and
employees. The Corporate Governance Principles, the Code of
Ethics and the Governance Committee, Compensation Committee and
Audit Committee Charters are posted on the companys
website (www.teleflex.com). These documents are also available
in print form to any shareholder who requests them. Requests
should be sent to the Legal Department at Teleflex Incorporated,
155 South Limerick Road, Limerick, PA 19468.
The companys business is separated into
three business segments Commercial, Medical and
Aerospace.
COMMERCIAL SEGMENT
The Commercial Segment designs and manufactures
proprietary mechanical and electrical/electronic controls for
the automotive market; mechanical, electronic and hydraulic
controls, and electronic products for the recreational marine
market; and proprietary products for fluid transfer and
industrial applications. Products in the Commercial Segment
generally are produced in higher unit volume than those of the
companys other two segments. They are manufactured for
broad distribution as well as custom fabricated to meet
individual customer needs. For the most part consumer spending
patterns influence the market trends for these products. The
Commercial Segment consists of three major product lines:
Automotive, Marine, and Industrial.
The company is a major supplier of driver control
systems to automotive manufacturers worldwide. The principal
products in this market are automatic and manual transmission
gearshift systems; mechanical and electronic throttle systems;
complete pedal box systems, including adjustable pedals; and
various release cables and flexible fluoropolymer hoses.
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. In 2000, the company acquired GFI
Control Systems, a Tier I supplier of natural gas and
propane systems, and hydrogen components to the alternative fuel
vehicle market. In 2002, the company acquired a majority stake
in Uniflex, Inc., a manufacturer of mechanical controls for the
automobile industry in Japan. In 2002 and 2003, the company
acquired Autogastechniek Holland b.v. and Koltec-Necam to
broaden the geographic offering of products to the alternative
fuel market, providing greater presence in the European market.
In 2003, the company acquired the passenger and light truck
electronic throttle control business from Williams Controls,
Inc., expanding the companys ability to expedite future
development of
1
The company is a leading domestic producer of
mechanical steering systems for recreational powerboats. It also
manufactures hydraulic steering systems, engine throttle and
shift controls, electrical gauges and instrumentation,
autopilots and electronic fishfinders. The companys marine
products are sold to boatbuilders and in the aftermarket, with
the Humminbird line of electronic fishfinders sold substantially
through retail outlets. These products are used principally on
recreational watercraft. In February 2001, the company acquired
Morse Controls, a supplier of performance and control systems
and aftermarket parts to the recreational and commercial marine
markets, as well as for the truck, bus, construction and
agricultural vehicle markets.
Industrial controls and electrical
instrumentation products are also manufactured for use in other
applications, including construction and agricultural 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, food processing and automotive industries.
In July 2001, the company acquired the Fluid Handling Division
of McKechnie Vehicle Components. With operations in the United
States and Europe, this acquisition added fuel vapor assemblies,
brake vacuum assemblies and other products to the companys
existing product lines, expanding the companys offering to
the automotive and truck fluid transfer markets. To broaden its
industrial product line, the company acquired Southwest Wire
Rope in May 2002, a cable fabricator serving the offshore
drilling, utilities and heavy equipment markets. In February
2003, the company purchased Megatech Electro, Inc., to expedite
the development and delivery of electronic control products for
the companys global customer base.
MEDICAL SEGMENT
The Medical Segment manufactures and distributes
a broad range of invasive disposable and reusable devices for
the urology, gastroenterology, anesthesiology and respiratory
care markets worldwide. It also designs and manufactures a
variety of specialty surgical products, and provides instrument
management services. Products in this Segment generally are
required to meet exacting standards of performance and have long
product life cycles. Economic influences on sales relate
primarily to spending patterns in the worldwide medical devices
and hospital supply markets.
Within the Medical Segment, the company has two
major product lines: Health Care Supply and Surgical Devices.
The company also supplies other medical device manufacturers
with standard and custom-designed semi-finished components using
its polymer materials and processing technology, including
precision extrusions.
The Health Care Supply product line, operating as
Rusch International, has established a manufacturing base and
distribution network, primarily in Europe. Acquisitions designed
to broaden the companys product and geographic offerings
have been made over the years. During 2000, the company acquired
Medical Marketing Group, a supplier of specialty catheters to
the United States home care market. The Health Care Supply
product line includes the manufacture and sale of invasive
disposable and reusable devices for the urology,
gastroenterology, anesthesiology and respiratory care markets
worldwide. Product offerings include, among others, catheters,
endotracheal tubes, laryngoscopes, face masks, tracheostomy
tubes and stents for airway management, fluoropolymer-based
precision tubing, components and wire products.
Surgical Devices designs, manufactures and
distributes, largely through its own sales force, instruments
used in surgical procedures. These products include general and
specialized surgical instruments primarily for the
cardiovascular, ear, nose and throat, and orthopedic markets,
and closure products, such as ligation clips, appliers and skin
staplers. The company also provides specialized instrument
management services. In 1997, the acquisition of a manufacturer
with a complementary line of closure products increased the
companys product offerings. During 1998 and 1999, the
company acquired Sterilization Management Group (SMG) and a
majority of the shares of Medical Sterilization, Inc., thus
expanding its instrument management service capabilities. In
1999, the company extended its mix and distribution of the
Surgical Devices product line in the United States with the
acquisition of Kmedic, an orthopedic instrument company. In
2002, the company
2
AEROSPACE SEGMENT
The Aerospace Segment serves the commercial
aerospace, power generation and industrial turbomachinery
markets and, to a lesser extent, the military market. Its
businesses design and manufacture cargo handling systems and
containers for aviation, and provide surface treatments, repair
services and manufactured components for users of both flight
and ground-based turbine engines. Sales are both to original
equipment manufacturers and the aftermarket. These products and
services, many of which are proprietary, require a high degree
of engineering sophistication and are often custom designed.
Economic influences on these products and services relate
primarily to spending patterns in the worldwide aerospace
industry and to demand for power generation.
Cargo handling systems are manufactured and sold
under the Telair International brand name. The companys
baggage and cargo handling systems include patented, digitally
controlled systems to move and secure containers of cargo inside
commercial aircraft. In 1997, the company acquired Scandinavian
Bellyloading Company, a European manufacturer of cargo loading
systems for narrow-body aircraft, which complemented the
companys existing wide-body cargo handling systems. Cargo
handling systems are sold either to aircraft manufacturers as
original installations or to airlines and air freight carriers
for retrofit of existing systems. The acquisition of Century
Aero Products in 1999 and Air Cargo Equipment Corporation in
2000, both domestic manufacturers of cargo containers, further
complemented the companys cargo handling systems and
positioned the company as a full service provider of both
wide-body and narrow-body systems and components. The company
also designs, manufactures and repairs mechanical and
electromechanical components used on both commercial and, to a
lesser extent, military aircraft. These other aircraft controls
include flight controls, canopy and door actuators, cargo
winches and control valves. In addition, the company supplies
spare parts to aircraft operators. This spare parts business
extends as long as the particular type of aircraft continues in
service.
Through a network of facilities in eight
countries, Teleflex provides a variety of sophisticated
protective coatings and repair services marketed under the
Sermatech International brand. These services are for ground
turbine engine components, highly-specialized repairs for
critical components such as fan blades and airfoils for
flight-based turbine engines, and manufacturing and high quality
dimensional finishing of airfoils and other turbine engine
components. The company offers a diverse range of technical
services and materials technologies to turbine markets
throughout the world. Through a joint venture with General
Electric Aircraft Engines, called Airfoil Technologies
International LLC (ATI), the company provides fan blade and
airfoil product and repair services for flight-based turbine
engine blades. ATI serves as a vehicle for the technological and
geographic expansion of the Sermatech repairs services business.
In 2000, the company acquired an engineering firm, Turbine
Technology Services Corporation, which broadened the
companys capabilities and provided a mechanism for
expanding coating and repair services to the power generation
market.
MARKETING
In 2003, the percentages of the companys
consolidated net sales represented by its major markets were as
follows: Commercial 53%; Medical 24%;
and Aerospace 23%.
The major portion of the companys
Automotive and Industrial products are sold to original
equipment manufacturers. The majority of the companys
Marine and Aerospace products are sold to the aftermarket.
Medical products are sold directly to medical providers,
distributors and original equipment manufacturers. Generally,
products sold to the aerospace and automotive markets are sold
through the companys own force of field representatives.
Products sold to the marine, medical and general industrial
markets are sold both through the companys own sales
forces and through independent representatives and independent
distributor networks.
3
For information on foreign operations see Note 13
to the consolidated financial statements
Business segments and other information on
pages F-19 through F-21, which information is incorporated
herein by reference.
COMPETITION
The company has varying degrees of competition in
all elements of its business. None of the companys
competitors offer 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, and 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.
SUPPLIERS
Materials used in the manufacture of the
companys products are purchased from a large number of
suppliers around the world. The company is not dependent upon
any single supplier for a substantial amount of the materials it
uses.
BACKLOG AND SEASONAL NATURE OF
BUSINESS
As of December 28, 2003, the companys
backlog of firm orders for the Aerospace Segment was
$203 million, of which it is anticipated that three-fourths
will be filled in 2004. The companys backlog for the
Aerospace Segment on December 29, 2002 was
$255 million.
As of December 28, 2003, the companys
backlog of firm orders for the Medical and Commercial segments
was $42 million and $204 million, respectively. This
compares with $31 million and $187 million,
respectively, as of December 29, 2002. Substantially all of
the December 28, 2003 backlog will be filled in 2004. Most
of the companys 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.
A portion of the companys sales,
particularly in the Commercial Segment are subject to seasonal
fluctuations. Revenue in the automotive market is generally
reduced in the third quarter of each year as a result of
preparations by vehicle manufacturers for the upcoming model
year. In addition, marine aftermarket sales generally increase
in the second quarter as boat owners prepare their watercraft
for the upcoming season.
EMPLOYEES
The company had approximately 19,300 employees at
December 28, 2003.
4
EXECUTIVE OFFICERS
The names and ages of all executive officers of
the company as of March 1, 2004 and the positions and
offices with the company held by each such officer are as
follows:
Mr. Lennox K. Black relinquished his
position of Chief Executive Officer on May 9, 2002 to
Jeffrey P. Black. Currently, Lennox K. Black is Chairman of the
Board. Previously, Mr. Black replaced David S. Boyer as
Chief Executive Officer on January 31, 2000. Prior to that
date he was Chairman of the Board. Mr. Boyer resigned his
position as President and Chief Executive Officer on
January 31, 2000. Mr. Jeffrey P. Black is the son of
Lennox K. Black.
Mr. Sickler was elected Interim Chief
Financial Officer effective December 31, 2003 and was
elected Vice Chairman on December 8, 2000. Prior to that
date he was a Senior Vice President of the company.
Mr. Jeffrey P. Black was named to the
companys Board of Directors on November 4, 2002. In
addition, Mr. Black was elected Chief Executive Officer on
May 9, 2002, assuming the Chief Executive Officer duties
from Mr. Lennox K. Black. Mr. Jeffrey P. Black was
elected President of the company on December 8, 2000. Prior
to that date he was President of the Teleflex Industrial Group
from July 2000 to December 2000 and President of Teleflex Fluid
Systems from 1999 to 2000.
Mr. Handy was elected Executive Vice
President Human Resources on April 25, 2003.
Prior to joining the company, he was Vice President of Human
Resources for the Research and Development division of Wyeth
from 2000 to 2003. Prior to that he was Vice President of Human
Resources for the Supply Chain division of Wyeth from 1998 to
2000.
Mr. Gordon was elected Vice
President Corporate Development on December 8,
2000. Prior to that date he was Director of Business Development.
Mr. Jacobs was elected Treasurer on
April 27, 2001. Prior to that date he was Director,
Treasury Operations.
Ms. Schwartz was named Associate General
Counsel on March 1, 2002 and was elected Assistant
Secretary on April 27, 2001. Prior to that date she was
Assistant General Counsel.
Mr. Steven J. Gambone resigned his position
of Controller and Chief Accounting Officer effective
March 31, 2003.
Mr. Ronald D. Boldt resigned his position of
Vice President Human Resources effective
April 22, 2003.
Mr. Harold L. Zuber, Jr. resigned his
position of Executive Vice President and Chief Financial Officer
effective December 31, 2003.
Officers are elected by the Board of Directors
for one year terms.
5
Item 2. Properties
The companys operations have approximately
200 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 companys major
facilities:
6
In addition to the above, the company owns or
leases approximately 2,400,000 square feet of warehousing,
manufacturing and office space located in the United States,
Canada, Mexico, South America, Europe, Australia and Asia.
Item 3. Legal
Proceedings
The company is subject to contingencies pursuant
to environmental laws and regulations that in the future may
require the company to take further action to correct the
effects on the environment of prior disposal practices or
releases of chemical or petroleum substances by the company or
other parties. Much of this liability results from the
Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA, often referred to as Superfund), the Resource
Conservation and Recovery Act (RCRA), and similar state laws.
These laws require the company to undertake certain
investigative and remedial activities at sites where the company
conducts or once conducted operations or at sites where
company-generated waste was disposed.
Remediation activities vary substantially in
duration and cost from site to site. These activities, and their
associated costs, depend on the mix of unique site
characteristics, evolving remediation technologies, diverse
regulatory agencies and enforcement policies, as well as the
presence or absence of potentially responsible parties. The
time-frame over which the accrued or presently unrecognized
amounts may be paid out, based on past history, is estimated to
be 15-20 years.
The company is a party to various lawsuits and
claims arising in the normal course of business. These lawsuits
and claims include actions involving product liability
contracts, intellectual property and environmental matters. The
ultimate effect on future financial results is not subject to
reasonable estimation because
7
Subsequent to the companys year-end, the
company was notified that a jury had rendered a verdict against
one of its subsidiaries. A judgment on the verdict had not yet
been entered as of March 11, 2004 pending further
consideration by the court. See Note 14 to the consolidated
financial statements, Subsequent event
on page F-21, for a further discussion of this matter.
Item 4. Submission
of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market
for the Registrants Common Stock and Related Stockholder
Matters
The companys common stock is listed on the
New York Stock Exchange, Inc. (symbol TFX). The companys
quarterly high, low and closing stock prices and dividends for
2003 and 2002 are shown below.
Price Range and Dividends of Common
Stock
Various senior and term note agreements provide
for the maintenance of certain financial ratios and limit the
repurchase of the companys stock and payment of cash
dividends. Under the most restrictive of these provisions,
$270 million of retained earnings was available for
dividends at December 28, 2003. The company had
approximately 1,124 direct-registered shareholders at
December 28, 2003. In addition, more than 250 mutual funds,
insurance companies, banks and other institutional investors own
the companys stock.
8
Item 6. Selected
Financial Data
See Part II Item 7
Managements Discussion and Analysis of Financial
Condition and Results of Operations on pages 9 to 17
and the Notes to Consolidated Financial Statements on
pages F-6 to F-21 which are contained herein by reference
for information relating to significant items affecting the
results of operations and financial position.
Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations
CRITICAL ACCOUNTING ESTIMATES
Accounting estimates that management believes are
most critical to the companys financial condition and
operating results pertain to the valuation of accounts
receivable, inventory, goodwill and revenue recognition. In
developing estimates, management considered available
information and used judgment.
Accounts receivable represent amounts due from
customers related to the sale of products. An allowance is
maintained where realization of the full receivable is doubtful.
The allowance is reviewed periodically and adjustments are made
to reflect the current circumstances. We base our adjustments on
historical experience, the period the account is outstanding,
the financial position of the customer and information provided
by credit rating services.
Inventories are stated at the lower of average
cost or market. Inventories have been reduced by a reserve for
excess and obsolete inventories. The estimated reserve is based
on managements review of inventories on hand compared to
estimated usage and sales.
9
Goodwill is tested for impairment on an annual
basis. Impairment testing is performed at the reporting unit
level using a discounted cash flow model to estimate the fair
value of a reporting unit. This model requires the use of
long-term planning forecasts and assumptions regarding industry
specific economic conditions that are outside the control of the
company.
Substantially all of the companys revenues
are recognized when products are shipped or the service is
completed in accordance with the terms of agreement, title and
risk of loss transfers to customers, collection is probable, and
pricing is fixed or determinable. In less than 2% of the
companys revenues the business uses the percentage of
completion method on certain contracts to recognize its revenue.
Product warranty liability arises out of the need
to repair or replace product without charge to the customer. The
company warrants such products from manufacturing defect. In
estimating warranty liability, management bases its judgment on
historical trends of units sold, recourse provisions against
third parties, the status of existing claims, recall programs
and communication with customers.
OVERVIEW
The companys major financial objectives,
modified in 2003, are to achieve 10% to 14% average annual
growth rate in revenues, to attain a 14% to 18% increase in net
income, to return 10% of revenue in cash flow from operations,
to pay cash dividends to shareholders that represent
approximately 25% of trailing twelve months earnings and
to earn 17% on average shareholders equity.
The company is committed to maintaining a balance
among its three segments: Commercial, Medical, and Aerospace.
Balance among the three segments reduces the companys risk
from changes in the business cycle of any one segment, thus
providing the company with the ability to consistently achieve
its growth objectives. Diversification gives the company the
opportunity to invest in all stages of a segments market
cycle and provides a broader base of markets in which to grow.
The company also diversifies within each segment by entering
into new geographic areas and different sectors within a market
and by extending products to additional markets.
The company intends to achieve its growth
objectives through a combination of acquisition and core growth.
Core growth is defined as development and sales of new and
existing products as well as sales into new markets. Over the
past five years, the companys core growth has accounted
for approximately one-third of its overall growth. During the
same time, the company has invested more than $450 million
for acquisitions. These acquisitions fit strategically within
the companys businesses and bring new technologies,
capabilities and market opportunities that will supplement
future core growth. During 2002 and 2003, the company purchased
thirteen businesses with annualized sales of approximately
$260 million, $106 million of which contributed to
revenue growth in 2003. Acquisitions, while adding initially to
revenues, may 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. Additionally, many
of the acquisitions include new technologies and products that
require incremental investment to enhance their growth prospects.
The company has maintained a conservative capital
structure with total debt ranging from 30% to 40% of total
capitalization. This provides the flexibility to increase
borrowings should growth opportunities arise. Under these
circumstances, it is conceivable that debt for a period of time
may be higher than the historical average. The use of debt
financing enables the company to maintain a lower cost of
capital thus further enhancing value for shareholders. The
company finances international operations primarily in their
local currencies, reducing exposure to exchange rate
fluctuations.
Historically, operations have generated
sufficient cash flow to finance the companys core growth
while borrowings have been incurred largely to finance
acquisitions. Over the past five years, cash flow from
operations has totaled over $930 million and represented
9.7% of cumulative sales. This operating cash flow is reinvested
in the companys core businesses, provides for the payment
of dividends and enables the company to continue to upgrade and
expand its plant and equipment. The company, while not
particularly capital intensive, has spent approximately 4% to 5%
of sales annually on plant and equipment. Over the past five
years, dividends paid per share have increased at a compounded
rate of 12%, and in 2003 the annualized quarterly dividend rate
was increased 11% to 80 cents per share.
10
RESULTS OF OPERATIONS
Beginning in 2002, the company adopted Statement
of Financial Accounting Standards 142, Goodwill and
Other Intangible Assets (SFAS 142), which requires
that goodwill no longer be amortized but requires testing for
impairment. No goodwill amortization was recorded in 2003 or
2002. Goodwill amortization of $12.9 million was expensed
in 2001. The company determined that a goodwill impairment was
not incurred in 2003 and 2002.
Discussion of growth from acquisition reflects
the impact of a purchased company twelve months beyond the date
of acquisition. Activity beyond the initial twelve months is
considered core growth. Core growth excludes the impact of
translating the results of international subsidiaries at
different currency exchange rates from year to year.
2003 VS. 2002
Revenues increased 10% in 2003 to
$2.28 billion from $2.08 billion resulting from gains
in the Commercial and Medical Segments, which offset a decline
in the Aerospace Segment. Acquisitions, net of dispositions,
accounted for one-half of the companys increase in
revenue. The impact of currency exchange rates provided the
remainder of the revenue increase. Overall core growth was
relatively constant. Sales from international operations, which
represented 49% of the companys revenues, increased 23% in
2003 of which 12% resulted from stronger foreign currency and 5%
from acquisitions. The Commercial, Medical and Aerospace
segments accounted for 53%, 24% and 23% of the companys
revenues, respectively.
In 2003, materials, labor and other product costs
were 73.8% of revenues versus 73.4% in 2002, as increased costs
in the Aerospace Segment and, to a lesser extent, the Commercial
Segment were partially offset by a reduction in the Medical
Segment. Selling, engineering and administrative expenses
(operating expenses) increased to 18.5% of revenues in 2003
compared with 17.6% in 2002 due to increases in the Medical
Segment, and to a lesser extent the Commercial Segment.
Aerospace Segment operating expenses as a percent of revenues
remained relatively constant. In the first quarter of 2003, the
company sold an investment which resulted in a pretax gain of
$3.1 million, or $0.05 per share. In the fourth quarter of
2002, the company sold two minor non-core businesses and also
received insurance proceeds resulting in a $10.1 million
gain, or $0.16 per share.
Interest expense increased in 2003 by
$1.3 million, largely a result of currency movement during
the year. As a percent of revenues, interest expense has
remained constant at 1.2%. The effective income tax rate
increased to 28.0% in 2003 from 27.4% in 2002. The lower rate in
2002 was the result of favorable income tax settlements of
$3.1 million. Excluding the effects of these settlements,
the effective tax rate would have been 29.2% in 2002.
Net income in 2003 decreased 13% to
$109.1 million from $125.3 million. Diluted earnings
per share decreased 13% from $3.15 in 2002 to $2.73 per share in
2003.
The company closed or severely curtailed
operations at 11 facilities in 2003. Costs related to these
consolidation efforts were $9.0 million, of which 48% was
Commercial, 24% Medical and 28% Aerospace. These costs were
incurred throughout the year.
2002 VS. 2001
Revenues increased 9% in 2002 to
$2.08 billion from $1.90 billion resulting from gains
in the Commercial and Medical segments, which offset a decline
in the Aerospace Segment. Acquisitions, net of dispositions,
accounted for two-thirds of the companys increase in
revenue. Core operations and the impact of currency exchange
rates provided the remainder of the revenue increase. Sales from
international operations, which represented 44% of the
companys revenues, increased 21% in 2002 from
acquisitions, core growth, and in part from the companys
shift of production to countries where the cost of manufacturing
is lower. The Commercial, Medical and Aerospace segments
accounted for 52%, 22% and 26% of the companys revenues,
respectively.
In 2002, materials, labor and other product costs
increased to 73.4% of sales compared with 71.9% in 2001, as an
improvement in the Commercial Segment was more than offset by
higher costs in the Aerospace
11
Interest expense declined in 2002 due primarily
to lower interest rates, and interest expense decreased to 1.2%
of sales from 1.5% in 2001. The effective income tax rate
declined to 27.4% in 2002 from 29.7% in 2001. The reduction in
the income tax rate includes a benefit of $3.1 million, or
$0.08 per share, from favorable tax settlements. Excluding the
effects of these settlements, the effective tax rate would have
been 29.2%.
Net income increased 12% in 2002 to
$125.3 million from $112.3 million, and diluted
earnings per share increased 10% to $3.15 in 2002 from $2.86 per
share in 2001. Adjusting for the elimination of goodwill
amortization in 2001, net income and diluted earnings per share
would have increased 3% and 2%, respectively.
SEGMENT REVIEWS
The following is a discussion of segment
operating results as set forth in Note 13 to the
consolidated financial statements Business
segments and other information on pages F-19 through
F-21 which information is incorporated herein by reference. For
comparative purposes, 2001 goodwill amortization of
$12.9 million (Commercial $2.9 million,
Medical $8.5 million, Aerospace
$1.5 million) has been reclassified from operating profit
to a separate line item. Discussion of 2001 operating profit in
these segment reviews reflects the reclassified amounts.
COMMERCIAL SEGMENT
The Commercial Segment designs and manufactures
proprietary mechanical and electrical/ electronic controls for
the automotive market; mechanical, electronic and hydraulic
controls, and electronic products for the recreational marine
market; and proprietary products for fluid transfer and
industrial applications, including fuel hose for the automotive
market.
Products in the Commercial Segment generally are
produced in higher unit volume than those of the companys
other two segments. They are manufactured for broad distribution
as well as custom fabricated to meet individual customer needs.
For the most part, consumer spending patterns influence the
market trends for these products.
2003 VS. 2002
Commercial Segment sales increased 12% to
$1.22 billion in 2003 from $1.09 billion in 2002.
Acquisitions and currency translation added 6% and 5% to
revenues, respectively. In Automotive, approximately one-half of
the sales increase was due to stronger European currencies,
while product sales such as the shifter, the guide control
program, and the adjustable pedal system contributed
substantially to the remainder. In Marine, sales increased
mid-single digits on the strength of currency translations as
sales declines in the marine aftermarket, primarily fishfinders,
were offset by increased product sales to both truck and
military markets. Industrial product line sales increased nearly
20% due to acquisitions, and to a lesser extent, currency. The
acquisitions included electromechanical products and light-duty
cable controls for the automotive, marine and industrial markets.
Commercial Segment operating profit increased 2%
in 2003 to $101.6 million from $99.8 million as slight
improvements in the Automotive and Industrial product lines
offset a modest decline in the Marine product line. Automotive
operating profit improved as the result of higher volume from
new products which served to more than offset the impact of
customer price reductions and new product launch expenses.
Conversely, Marine operating profit declined from the prior year
due to adverse mix as lower margin marine OEM (original
equipment manufacturers) and non-marine products replaced sales
of higher margin aftermarket products. Industrial operating
profit increased primarily from acquisitions, more than
offsetting a core product decline. The most significant decline
was in alternative fuel systems, the result of lower volume in
part related to delays in the passage of the energy bill.
12
Assets in this Segment increased
$221 million; 41% of the increase resulted from
acquisitions in the Automotive and Industrial product lines, and
36% from the impact of currency exchange rates. Return on
average assets declined in 2003 to 11.5% from 13.7% in 2002 due
to a lower return from acquisitions and the alternative fuel
systems business.
2002 VS. 2001
Sales in the Commercial Segment increased 20% to
$1.09 billion in 2002 from $0.91 billion in 2001. All
three product lines, Automotive, Marine and Industrial reported
gains, with two-thirds of the improvement coming from
acquisitions. Automotive sales increased from the acquisition of
a Japanese cable manufacturer, additional adjustable pedal
system volume, and new programs in Europe. Higher vehicle
production in North America helped offset the effect of lower
prices. In Marine, a stronger marine market in the niches served
by the company led to higher OEM and aftermarket volume. Sales
of new non-marine products such as auxiliary power units for
locomotives and the modern burner unit for the military also
contributed to sales growth. The growth in Industrial resulted
primarily from acquisitions as core growth in light-duty cables
was offset by declines in alternative fuel systems sales.
Operating profit rose 15% in 2002 to
$99.8 million from $86.7 million as all three product
lines improved generally on the higher volume, while operating
profit as a percent of revenues declined slightly from 9.5% in
2001 to 9.2 % in 2002. An increase in operating profit as a
percent of revenues in the Marine product line was offset by
declines in the Automotive and Industrial product lines. Within
Automotive, operating profit was enhanced by gains in Europe and
the adjustable pedal system; however, operating profit as a
percent of revenues was lower primarily from price declines and
plant shut down and curtailment costs and also from the dilutive
impact of the acquisition. Marine gained in both operating
profit and operating profit as a percent of revenues from the
increase in sales and from the full year benefits of combining
Morse Controls with existing Teleflex facilities. Within
Industrial, operating profit increased from the acquisitions,
which also lowered operating profit as a percent of revenues.
Assets in this Segment increased from
acquisitions in the Automotive and Industrial product line, and
from the impact of currency exchange rates. Return on average
assets declined in 2002 to 13.7% from 14.5% in 2001 due to a
lower return from the acquisitions.
MEDICAL SEGMENT
The Medical Segment manufactures and distributes
a broad range of invasive disposable and reusable devices for
the urology, gastroenterology, anesthesiology and respiratory
care markets worldwide. It also designs and manufactures a
variety of specialty surgical devices and provides instrument
management services.
Products in the Medical Segment generally are
required to meet exacting standards of performance and have long
product life cycles. Economic influences on sales relate
primarily to spending patterns in the worldwide medical devices
and hospital supply markets.
2003 VS. 2002
In 2003, Medical Segment sales increased 19% to
$534.7 million from $448.7 million. Revenues gained
10% from acquisitions and 8% from the effects of stronger
currencies while core growth remained relatively constant. In
the Health Care Supply product line, two-thirds of the revenue
increase came from stronger foreign currencies. Sales in the
Surgical Devices product line improved substantially due to
acquisitions including a cardiothoracic devices business in 2003.
Operating profit increased 18% in 2003 to
$85.4 million compared with $72.3 million in 2002. The
increase in operating profit was comprised of equal
contributions from Health Care Supply volume and acquisitions in
the Surgical Devices product line. Overall operating profit as a
percent of revenues declined as an improvement in the Health
Care Supply product line from volume gains was more than offset
by a decline in Surgical Devices, as a result of the
acquisition. Going forward, Medical Segment margins are expected
to improve, in part, from the integration of the acquisition and
further consolidation efforts.
13
Assets increased $69 million or 14%. The
cardiothoracic devices acquisition accounted for 75% of the
increase. Return on average assets increased from 15.4% to 16.0%
as a result of strong operating profit improvements.
2002 VS. 2001
In 2002, Medical Segment sales increased 5% to
$448.7 million from $429.3 million due to gains in
both the Health Care Supply and Surgical Devices product lines.
In Health Care Supply, sales growth in core products
supplemented by a number of new products provided the increase,
with the impact of currency exchange rates also adding to sales.
Within the Surgical Devices product line, growth in sales of
instruments and instrument management services as well as the
acquisition of an orthopedic instrument manufacturer offset a
decline in core closure products sales.
Operating profit increased 2% in 2002 to
$72.3 million from $71.2 million, while operating
profit as a percent of revenues declined to 16.1% from 16.6%.
The increase in operating profit is due primarily to the volume
gains in Health Care Supply while Surgical Devices declined
slightly, and the drop in operating profit as a percent of
revenues resulted from declines in both product lines. Within
Health Care Supply, operating profit as a percent of revenues
declined due to sales from lower margin products. Within
Surgical Devices, a change in product mix, severance expenses
and expenses related to the closing of an instrument management
services facility resulted in the decline of operating profit as
a percent of revenues.
Assets increased due to the acquisition and from
increases in currency exchange rates. Return on average assets
declined from 16.4% to 15.4% as a result of the lower return
from the acquisition.
AEROSPACE SEGMENT
The Aerospace Segment serves the commercial
aerospace, power generation and industrial turbomachinery
markets and, to a lesser extent, the military market. Its
businesses design and manufacture cargo handling systems and
containers for aviation and provide surface treatments, repair
services and manufactured components for users of both flight
and ground-based turbine engines. Sales are both to OEMs and to
the aftermarket.
These products and services, many of which are
proprietary, require a high degree of engineering sophistication
and are often custom-designed. Economic influences on these
products and services relate primarily to spending patterns in
the worldwide aerospace industry and to demand for power
generation.
2003 VS. 2002
In 2003 Aerospace Segment sales decreased 2% to
$528.6 million from $542.1 million in 2002. Core
products declined by 4% while currency contributed a positive
2%. Sales declined due to weaker end markets in the Industrial
Gas Turbine (IGT) product line and to a lesser extent the Cargo
Systems and Manufactured Components product lines. These
declines were tempered by an increase in Repair Product and
Services revenues brought about by higher sales of low margin
material product offerings.
Operating profit declined 73% from
$34.2 million in 2002 to $9.2 million in 2003, while
operating profit as a percent of revenues fell to 1.7% from 6.3%
in the prior year. A significant portion of the decline was
attributable to the IGT product line which declined due to lower
volume, major investments in new parts development, and contract
losses in the engineering services business. Results in Cargo
Systems and Manufactured Components were adversely impacted by
volume declines and continued pricing pressures. Margins of
Repair Product and Services declined due to the unfavorable
product mix. Operating results are expected to improve in 2004
primarily as a result of substantial cost reductions in 2003.
In 2003, assets increased $11 million or 2%
due substantially to currency fluctuations. Return on average
assets decreased to 2.0% in 2003 from 8.0% in 2002 primarily as
a result of lower profits.
2002 VS. 2001
Sales in the Aerospace Segment decreased 4% in
2002 to $542.1 million from $567.5 million in 2001.
Sales dropped in three of four product lines in this
Segment Cargo Systems, IGT and Manufactured
14
Operating profit declined 45% to
$34.2 million from $61.8 million, and operating profit
as a percent of revenues fell to 6.3% from 10.9%, due to
reductions in all four product lines in this Segment. Throughout
the product lines, workforce reduction expenses lowered both
operating profit and operating profit as a percent of revenues.
In addition, the results in Cargo Systems were impacted by lower
volume and prices and expenses related to the launch of
wide-body products. In IGT, costs relating to the aftermarket
parts and services business reduced the operating profit and
operating profit as a percent of revenues. In Manufactured
Components, a drop in volume lowered the operating profit and
operating profit as a percent of revenues, and in Repair Product
and Services, a change in mix to lower margin services impacted
results. It is expected that expenses associated with the
Aerospace Segment cost reduction efforts will continue into 2003.
The increase in assets in 2002 was due primarily
to an increase in inventory in connection with new wide-body
cargo handling systems, Repair Product and Services programs and
IGT aftermarket parts products. Return on average assets
decreased to 8.0% in 2002 from 16.2% in 2001 due to the decline
in operating profit combined with the increase in assets.
LIQUIDITY, MARKET RISK AND CAPITAL
RESOURCES
Cash flows from operating activities were
$225.2 million in 2003 compared to $200.6 million in
2002 and $188.3 million in 2001. In 2003, higher
depreciation and deferred tax gains compensated for lower net
income and slightly higher working capital requirements.
Accounts receivable and inventory as a percentage of fourth
quarter revenues remained flat. Deferred income taxes increased
primarily due to domestic changes in depreciation rates for
fixed assets. In 2002, higher net income and depreciation offset
additional working capital requirements. Amortization expense
declined in 2002 because of the implementation of SFAS 142,
which requires that goodwill no longer be amortized. Accounts
receivable as a percentage of fourth quarter revenues was
constant in 2002 compared to 2001 while inventory as a
percentage of revenues increased 1% due to the increase in
inventory in the Aerospace Segment primarily for new wide-body
cargo handling systems and IGT aftermarket parts programs.
In addition to the cash generated from operations
the company has approximately $140 million in committed and
$200 million in uncommitted unused lines of credit
available. The availability of the lines of credit is dependent
upon the company maintaining its strong financial condition
including its continued compliance with bank covenants. Various
senior note agreements provide for the maintenance of ratios and
limit the payment of cash dividends. Under the most restrictive
of these provisions, $270 million of retained earnings was
available for dividends at December 28, 2003. In 2003,
total borrowings increased $33 million. The increase is
comprised of $35 million from currency translation,
$34 million from current borrowings, offset by
$36 million in long-term debt repayments. Total debt to
total capitalization decreased from 32% to 30% as equity
increased at a higher rate relative to debt. Fixed rate
borrowings comprised 48% of total borrowing at December 28,
2003. Approximately 46% of the companys total borrowings
of $456 million are denominated in currencies other than
the US dollar, principally Euro, providing a natural hedge
against fluctuations in the value of assets outside the United
States. In 2002 total borrowings decreased $17 million from
repayments offset by currency translation increases. Total debt
to total capitalization decreased from 36% to 32% as a result of
the reductions in borrowings. Contractual obligations at
December 28, 2003 are summarized as follows (in millions):
15
In summary, the companys financial
condition remains strong. The company believes that its cash
flows from operations and the ability to access additional funds
through the credit facilities will enable it to fund its
operating requirements, capital expenditures and additional
acquisition opportunities.
OFF BALANCE SHEET ARRANGEMENTS
The company has residual value guarantees under
operating leases for plant and equipment. The maximum potential
amount of future payments the company could be required to make
under these guarantees is approximately $20 million. See
also Note 12 to the consolidated financial
statements Commitments and contingent
liabilities on pages F-18 and F-19, which information
is incorporated herein by reference.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The company periodically uses derivative
instruments such as interest rate swaps and forward currency
contracts to hedge the exposure of fluctuating interest rates
and foreign currencies. The company is exposed to foreign
currency exchange movements from transactions in currencies,
primarily the Singapore dollar, Euro, Swedish krona and Canadian
dollar. The company utilizes foreign currency forward contracts
in order to manage volatility associated with foreign currency
purchases and sales. Contracts typically have maturities of less
than one year. Changes in fair value of the companys
financial instruments are recorded in the income statement or as
part of comprehensive income. Qualifying forward exchange
contracts are accounted for as cash flow hedges when the hedged
item is a forecasted transaction. Gains and losses on these
instruments are recorded in other comprehensive income
(loss) until the underlying transaction is recorded in
earnings. When the hedged item is realized, gains or losses are
reclassified from accumulated other comprehensive income/ loss
to the statement of income.
CONTINGENCIES AND ENVIRONMENTAL
MATTERS
The company is subject to contingencies pursuant
to environmental laws and regulations that in the future may
require the company to take further action to correct the
effects on the environment of prior disposal practices or
releases of chemical or petroleum substances by the company or
other parties. Much of this liability results from the
Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA, often referred to as Superfund), the Resource
Conservation and Recovery Act (RCRA), and similar state laws.
These laws require the company to undertake certain
investigative and remedial activities at sites where the company
conducts or once conducted operations or at sites where
company-generated waste was disposed.
Remediation activities vary substantially in
duration and cost from site to site. These activities, and their
associated costs, depend on the mix of unique site
characteristics, evolving remediation technologies, diverse
regulatory agencies and enforcement policies, as well as the
presence or absence of potentially responsible parties. At
December 28, 2003, the companys consolidated balance
sheet included an accrued liability of $3.6 million
relating to these matters. Considerable uncertainty exists with
respect to these costs and, under adverse changes in
circumstances, potential liability may range up to two or three
times the amount accrued as of December 28, 2003. The
time-frame over which the accrued or presently unrecognized
amounts may be paid out, based on past history, is estimated to
be 15-20 years.
The company is a party to various lawsuits and
claims arising in the normal course of business. These lawsuits
and claims include actions involving product liability
contracts, intellectual property and environmental matters. The
ultimate effect on future financial results is not subject to
reasonable estimation because considerable uncertainty exists as
to the final outcome of these lawsuits and claims in the opinion
of company counsel. However, while the ultimate liabilities
resulting from such lawsuits and claims may be significant to
results of operations in the period recognized, management does
not anticipate they will have a material adverse effect on the
companys consolidated financial position, results of
operations, or liquidity.
Subsequent to the companys year-end, the
company was notified that a jury had rendered a verdict against
one of its subsidiaries. A judgment on the verdict had not yet
been entered as of March 11, 2004 pending further
consideration by the court. See Note 14 to the consolidated
financial statements, Subsequent event
on page F-21 for a further discussion of this matter.
16
FORWARD-LOOKING STATEMENTS
In accordance with the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995, the
company notes that certain statements contained in this annual
report are forward-looking in nature. These forward-looking
statements include matters such as business strategies, market
potential, future financial performance, product deployments and
other future oriented matters. Such matters involve risks and
uncertainties which can cause actual results to differ
materially from those projected in the forward-looking
statements and include, but are not limited to:
The company undertakes no obligation to update or
publicly revise these forward-looking statements to reflect
events or circumstances that arise after the date of this report.
See the text section entitled Liquidity,
Market Risk and Capital Resources and Quantitative
and Qualitative Disclosures About Market Risk in Part II
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations on pages 9
to 17 which information is incorporated herein by reference.
The financial statements and supplementary data
required by this Item are included herein, commencing on page
F-2.
Not applicable.
As of the end of the year ended December 28,
2003, our Chief Executive Officer and Chief Financial Officer
have reviewed and evaluated the effectiveness of our disclosure
controls and procedures, which included inquiries made to
certain other of our employees. Based on their evaluation, our
Chief Executive Officer and Chief Financial Officer have each
concluded that our disclosure controls and procedures are
effective and sufficient to ensure that we record, process,
summarize, and report information required to be disclosed by us
in our periodic reports filed under the Securities Exchange Act
within the time periods specified by the Securities and Exchange
Commissions rules and forms. During the quarter ended
December 28, 2003, there were no changes in the
companys internal control over financial reporting that
materially affected, or are reasonably likely to materially
affect, such internal control over financial reporting.
PART III
For information with respect to the
companys Directors and Director nominees, see
Election Of Directors, Nominees For The Board
of Directors and Additional Information About The
Board Of Directors and Corporate Governance in the
companys Proxy Statement for its 2004 Annual Meeting, which
17
For information with respect to the
companys Executive Officers, see Part I of this report on
page 5, which information is incorporated herein by reference.
The company has a Code of Ethics applicable to
all directors, employees, and agents of the company. The Chief
Executive Officer and all senior financial officers, including
the Chief Financial Officer and Principal Accounting Officer,
are bound by the provisions set forth therein relating to
ethical conduct, conflicts of interest and compliance with law.
In addition to the Code of Ethics, the CEO and senior financial
officers are subject to additional policies which are filed as
Exhibit 14 to this Form 10-K. Copies of the Code of
Ethics and additional policies applicable to the CEO and all
senior financial officers are available through the Investor
Relations section of the companys website
(www.teleflex.com). These documents are also available in print
form to any shareholder who requests them. Requests should be
sent to the Legal Department at Teleflex Incorporated, 155 South
Limerick Road, Limerick, PA 19468.
See Additional Information About The Board
Of Directors and Corporate Governance, Compensation
Committee Report on Executive Compensation,
Five-Year Shareholder Return Comparison and
Executive Compensation and Other Information in the
companys Proxy Statement for its 2004 Annual Meeting,
which information is incorporated herein by reference.
See Security Ownership of Certain
Beneficial Owners and Management, Election Of
Directors and Nominees For The Board of
Directors in the companys Proxy Statement for its
2004 Annual Meeting, which information is incorporated herein by
reference.
The following table sets forth certain
information as of December 28, 2003 regarding the
companys 1990 Stock Compensation Plan, 2000 Stock
Compensation Plan and Global Employee Stock Purchase Plan:
See Additional Information About The Board
Of Directors and Corporate Governance, Compensation
Committee Report on Executive Compensation and
Executive Compensation and Other Information in the
companys Proxy Statement for its 2004 Annual Meeting,
which information is incorporated herein by reference.
See Audit and Non-Audit Fees and
Policy on Audit Committee Pre-Approval of Audit and
Non-Audit Services of Independent Auditors in the
companys Proxy Statement for its 2004 Annual Meeting,
which information is incorporated herein by reference.
18
Positions and Offices
Name
Age
with Company
73
Chairman of the Board (since 1982)
61
Vice Chairman (since 2000) and Interim Chief
Financial Officer (since 2003)
44
President (since 2000), Chief Executive Officer
(since 2002) and Director (since 2002)
47
Executive Vice President Human
Resources (since 2003)
58
Vice President (since 1984), General Counsel and
Secretary (since 1992)
41
Vice President Corporate Development
(since 2000)
50
Treasurer (since 2001)
57
Assistant Treasurer (since 1990)
61
Associate General Counsel (since 2002) and
Assistant Secretary
(since 2001)
Square
Owned or
Expiration
Location
Footage
Leased
Date
243,000
Owned
N/A
164,000
Owned
N/A
150,000
Owned
N/A
149,000
Leased
2005
141,000
Leased
2010
141,000
Owned
(1)
N/A
129,000
Owned
N/A
120,000
Leased
2011
117,000
Owned
N/A
114,000
Owned
N/A
111,000
Owned
N/A
108,000
Owned
N/A
104,000
Leased
2007
102,000
Leased
2054
100,000
Leased
2010
99,000
Owned
(1)
N/A
98,000
Owned
N/A
96,000
Leased
2016
91,000
Owned
N/A
90,000
Leased
2009
88,000
Owned
N/A
87,000
Owned
N/A
83,000
Owned
(1)
N/A
80,000
Owned
(1)
N/A
77,000
Owned
(1)
N/A
70,000
Leased
2006
70,000
Leased
2006
65,000
Leased
2008
64,000
Leased
2008
60,000
Leased
2016
56,000
Leased
2006
55,000
Owned
(1)
N/A
54,000
Leased
2004
54,000
Owned
N/A
53,000
Leased
2006
50,000
Owned
N/A
300,000
Owned
N/A
165,000
Leased
2004
157,000
Owned
N/A
145,000
Owned
N/A
110,000
Leased
2013
103,000
Leased
2010
Square
Owned or
Expiration
Location
Footage
Leased
Date
85,000
Owned
N/A
69,000
Leased
2009
67,000
Owned
N/A
65,000
Owned
N/A
58,000
Owned
(1)
N/A
52,000
Leased
2005
51,000
Leased
2004
235,000
Leased
2004
164,000
Owned
N/A
110,000
Leased
2013
110,000
Leased
2004
105,000
Leased
2008
104,000
Owned
N/A
94,000
Leased
2004
89,000
Leased
2014
86,000
Owned
N/A
76,000
Owned
N/A
70,000
Owned
N/A
70,000
Leased
2024
69,000
Owned
N/A
65,000
Leased
2011
62,000
Leased
2004
59,000
Owned
N/A
55,000
Leased
2010
50,000
Leased
2018
(1)
The company is the beneficial owner of these
facilities under installment sale or similar financing
agreements.
2003
High
Low
Last
Dividends
$
44.40
$
33.82
$
36.00
$
0.18
$
44.91
$
35.25
$
43.41
$
0.20
$
50.19
$
41.52
$
42.84
$
0.20
$
49.15
$
42.60
$
48.32
$
0.20
2002
High
Low
Last
Dividends
$
55.60
$
43.60
$
54.67
$
0.17
$
59.35
$
53.78
$
57.15
$
0.18
$
57.53
$
40.85
$
45.27
$
0.18
$
47.08
$
40.64
$
41.30
$
0.18
2003
2002
2001
2000
1999
(Dollars and shares in thousands, except per share and employee data)
$
2,282,435
$
2,076,229
$
1,905,004
$
1,764,482
$
1,601,069
$
177,828
$
197,511
$
188,160
$
179,001
$
160,488
26,337
25,023
28,465
20,787
17,732
151,491
172,488
159,695
158,214
142,756
42,388
47,222
47,384
48,990
47,536
$
109,103
$
125,266
$
112,311
$
109,224
$
95,220
$
2.76
$
3.19
$
2.90
$
2.86
$
2.52
$
2.73
$
3.15
$
2.86
$
2.83
$
2.47
$
0.78
$
0.71
$
0.66
$
0.58
$
0.51
$
26.69
$
23.16
$
19.99
$
18.01
$
15.85
$
393,516
$
339,412
$
252,051
$
278,166
$
275,528
$
2,110,613
$
1,813,384
$
1,635,020
$
1,401,288
$
1,263,444
$
229,882
$
240,123
$
228,180
$
220,557
$
246,191
$
1,062,302
$
912,281
$
778,143
$
690,422
$
602,564
$
94,230
$
87,163
$
97,744
$
80,652
$
96,516
$
95,860
$
89,435
$
74,382
$
62,728
$
58,435
19,243
17,746
16,927
15,986
13,980
39,598
39,251
38,752
38,203
37,857
39,942
39,786
39,280
38,633
38,525
4.8
%
6.0
%
5.9
%
6.2
%
5.9
%
11.1
%
14.8
%
15.3
%
16.9
%
16.7
%
Payments Due by Period
Less
After
Than 1
1-3
4-5
5
Total
Year
Years
Years
Years
$
256
$
27
$
69
$
107
$
53
181
41
64
40
36
78
75
3
0
0
$
515
$
143
$
136
$
147
$
89
changes in business relationships with and
purchases by or from major customers or suppliers, including
delays or cancellations in shipments;
demand for and market acceptance of new and
existing products;
the ability to integrate acquired businesses into
the companys operations, realize planned synergies and
operate such businesses profitably in accordance with
expectations;
competitive market conditions and resulting
effects on sales and pricing;
increases in raw material costs that cannot be
recovered in product pricing; and
global economic factors, including currency
exchange rates, difficulties entering new markets and general
economic conditions such as interest rates.
Item 7A.
Quantitative and Qualitative Disclosures About
Market Risk
Item 8.
Financial Statements and Supplementary
Data
Item 9.
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 10.
Directors and Executive Officers of the
Registrant
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial
Owners and Management
Number of Securities
Remaining Available for
Number of Securities
Future Issuance Under
to be Issued Upon
Weighted-Average
Equity Compensation
Exercise of
Exercise Price of
Plans (Excluding
Outstanding Options,
Outstanding Options,
Securities Reflected in
Plan Category
Warrants and Rights
Warrants and Rights
Column (A))
(A)
(B)
(C)
2,471,044
$
39.36
2,500,310
70,860
(1)
(1)
70,860 shares are available under purchase rights
granted to non-United States employees of the company under the
companys Global Employee Stock Purchase Plan.
Item 13.
Certain Relationships and Related
Transactions
Item 14.
Principal Accountant Fees and
Services
PART IV
(a) Consolidated Financial Statements:
The Index to Consolidated Financial Statements
and Schedules is set forth on page F-1 hereof.
(b) Reports on Form 8-K:
On October 2, 2003 Teleflex Incorporated
filed a report on Form 8-K dated October 1, 2003 to
file as exhibits two separate press releases. One announcing the
purchase of assets of an automotive cable division from Siemens
VDO Automotive AG and the second announcing the acquisition of
the passenger and light truck electronic throttle control
business of Williams Controls Inc., located in Sarasota, Florida.
On October 16, 2003 Teleflex Incorporated
filed a report on Form 8-K dated October 15, 2003, to
file as an exhibit a press release announcing earnings for the
quarter ended September 28, 2003.
On December 24, 2003 Teleflex Incorporated
filed a report on Form 8-K dated December 23, 2003 to
file as an exhibit a press release announcing the resignation of
the companys Chief Financial Officer and plan for
succession.
(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 registrants Registration
Statements on Form S-8, Nos. 2-98715 (filed May 11,1987),
33-34753 (filed May 10, 1990), 33-53385 (filed
April 29, 1994), 333-77601 (filed May 3, 1999),
333-38224 (filed May 31,2000), 333-41654 (filed July 18,
2000), 333-59814 (filed April 30, 2001) and 333-101005
(filed November 5, 2002):
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.
19
Item 15.
Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
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.
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following person on behalf of the registrant and in the
capacities and as of the date indicated below.
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.
Dated: March 11, 2004
20
TELEFLEX INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULE
The following Financial Statement Schedule
together with the report thereon of PricewaterhouseCoopers LLP
dated February 11, 2004, except for Note 14, as to
which the date is March 3, 2004, should be read in
conjunction with the consolidated financial statements.
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.
Schedule:
F-1
TELEFLEX INCORPORATED
By
/s/ JEFFREY P. BLACK
Jeffrey P. Black
President & Chief Executive
Officer
(Principal Executive Officer)
By
/s/ JOHN J. SICKLER
John J. Sickler
Vice Chairman & Interim Chief Financial
Officer
(Principal Financial and Accounting
Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
By
/s/ STEVEN K. CHANCE
Steven K. Chance
Attorney-in-Fact
Page
F-2
F-3
F-4
F-5
F-6 F-21
F-22
F-23
Page
Valuation and qualifying accounts
F-24
TELEFLEX INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended
December 28, 2003
December 29, 2002
December 30, 2001
(Dollars in thousands, except per share)
$
2,282,435
$
2,076,229
$
1,905,004
1,684,647
1,523,779
1,369,713
423,028
365,024
347,131
(3,068
)
(10,085
)
2,104,607
1,878,718
1,716,844
177,828
197,511
188,160
26,337
25,023
28,465
151,491
172,488
159,695
42,388
47,222
47,384
$
109,103
$
125,266
$
112,311
$
2.76
$
3.19
$
2.90
$
2.73
$
3.15
$
2.86
The accompanying notes are an integral part of the consolidated financial statements.
F-2
TELEFLEX INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Year Ended
December 28,
December 29,
2003
2002
(Dollars in thousands)
ASSETS
$
56,580
$
44,494
2003 $9,440; 2002 $10,059
478,433
401,888
443,145
365,535
28,029
25,978
1,006,187
837,895
256,979
230,261
981,703
856,793
1,238,682
1,087,054
571,063
482,813
667,619
604,241
289,644
257,999
111,868
68,810
35,295
44,439
$
2,110,613
$
1,813,384
LIABILITIES AND SHAREHOLDERS
EQUITY
$
199,571
$
148,254
26,532
34,522
187,641
141,786
156,294
135,152
42,633
38,769
612,671
498,483
229,882
240,123
205,758
162,497
1,048,311
901,103
39,795
39,398
125,385
112,243
864,896
786,674
32,226
(26,034
)
1,062,302
912,281
$
2,110,613
$
1,813,384
The accompanying notes are an integral part of the consolidated financial statements.
F-3
TELEFLEX INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended
December 28,
December 29,
December 30,
2003
2002
2001
(Dollars in thousands)
$
109,103
$
125,266
$
112,311
95,860
89,435
74,382
8,492
5,682
18,019
17,883
7,281
9,682
(25,259
)
(14,805
)
3,287
(7,998
)
(25,250
)
(14,621
)
2,343
3,138
(4,563
)
20,186
4,444
(9,497
)
4,589
5,394
(743
)
225,199
200,585
188,257
53,000
75,000
(37,377
)
(35,040
)
(46,304
)
34,159
(74,167
)
74,531
6,495
9,846
8,228
(30,881
)
(27,861
)
(25,586
)
(27,604
)
(74,222
)
85,869
(94,230
)
(87,163
)
(97,744
)
(93,963
)
(57,229
)
(170,700
)
4,728
11,419
(2,737
)
(219
)
(766
)
693
4,423
(3,155
)
(185,509
)
(128,769
)
(272,365
)
12,086
(2,406
)
1,761
44,494
46,900
45,139
$
56,580
$
44,494
$
46,900
The accompanying notes are an integral part of the consolidated financial statements.
F-4
TELEFLEX INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS EQUITY
Year Ended
December 28,
December 29,
December 30,
2003
2002
2001
(Dollars and shares in thousands,
except per share)
39,398
38,933
38,344
397
465
589
39,795
39,398
38,933
$
39,398
$
38,933
$
38,344
397
465
589
39,795
39,398
38,933
112,243
96,143
79,546
13,142
16,100
16,597
125,385
112,243
96,143
786,674
689,269
602,544
109,103
125,266
112,311
(30,881
)
(27,861
)
(25,586
)
864,896
786,674
689,269
41,138
(16,808
)
(44,404
)
(657
)
(3,622
)
(1,798
)
(8,255
)
(5,604
)
32,226
(26,034
)
(46,202
)
$
1,062,302
$
912,281
$
778,143
$
.78
$
.71
$
.66
$
109,103
$
125,266
$
112,311
2,965
(1,824
)
(1,798
)
57,946
27,596
(14,392
)
(2,651
)
(5,604
)
$
167,363
$
145,434
$
96,121
The accompanying notes are an integral part of the consolidated financial statements.
F-5
TELEFLEX INCORPORATED AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Consolidation.
The
consolidated financial statements include the accounts of
Teleflex Incorporated and its majority owned subsidiaries (the
company). Intercompany transactions are eliminated
in consolidation. Investments in affiliates over which the
company has significant influence but not a controlling equity
interest are carried on the equity basis. Investments in
affiliates over which the company does not have significant
influence are accounted for by the cost method. These
consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and
include managements estimates and assumptions that affect
the recorded amounts.
Cash and cash equivalents.
All highly liquid debt instruments
with an original maturity of three months or less are classified
as cash equivalents.
Accounts receivable.
The allowance for doubtful accounts
receivable represents the companys estimate of probable
losses on realization of the full receivable. The allowance is
based on historical experience, specific allowance for known
issues, and other currently available information.
Inventories.
Substantially all inventories are
stated at the lower of average cost or market. Elements of cost
in inventory include raw materials, direct labor, and
manufacturing overhead. In estimating market value, the company
evaluates inventory for excess and obsolete quantities based on
estimated usage and sales.
Plant assets.
Additions and those improvements which
increase the capacity or lengthen the useful lives of the assets
are recorded in plant assets at cost. 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.
Goodwill and other intangible assets.
Beginning in 2002, the company adopted
Statement of Financial Accounting Standards (SFAS) 142,
Goodwill and Other Intangible Assets, which requires
that goodwill no longer be amortized, but requires testing for
impairment at least annually. Accordingly, the company
discontinued the amortization of goodwill effective
December 31, 2001. Goodwill is tested annually in the
fourth quarter for impairment, or more frequently if there is a
triggering event. Impairment losses after initial adoption will
be recorded as part of income from operations. Intangible assets
consisting of intellectual property, customer lists and
distribution rights are being amortized over their estimated
useful lives, which range from 4 to 30 years, with a
weighted average amortization period of 12 years. The
company continually evaluates the reasonableness of the useful
lives of these assets.
Foreign currency translation.
Assets and liabilities of non-domestic
subsidiaries denominated in local currencies are translated into
U.S. dollars at the rates of exchange at the balance sheet date;
income and expenses are translated at the average rates of
exchange prevailing during the year. The resultant translation
adjustments are reported as a component of accumulated other
comprehensive income (loss) in shareholders equity.
Derivative financial instruments.
The company uses derivative financial
instruments primarily for purposes of hedging exposures to
fluctuations in interest rates and foreign currency exchange
rates. Beginning in 2001, all derivatives are accounted for in
accordance with SFAS 133, Accounting for Derivatives
and Hedging Activities, as amended by SFAS 137 and
138. All derivatives are recognized on the balance sheet at fair
value. Changes in the fair value of derivatives are recorded in
earnings or other comprehensive income (loss), based on whether
the instrument is designated as part of a hedge transaction and,
if so, the type of hedge transaction. Gains or losses on
derivative instruments reported in other comprehensive income
(loss) are reclassified to earnings in the period in which
earnings are affected by the underlying hedged item. The
cumulative effect of adopting SFAS 133 was not material to
the companys consolidated financial statements.
Stock based compensation.
In December 2002, the FASB issued
SFAS 148, Accounting for Stock-Based
Compensation Transition and Disclosure. This
standard amends the transition and disclosure
F-6
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
requirements of SFAS 123, Accounting
for Stock-Based Compensation. As permitted by
SFAS 148, the company accounts for stock option grants and
restricted stock awards in accordance with APB Opinion 25,
Accounting for Stock Issued to Employees, and
related Interpretations. Accordingly, no compensation expense
has been recognized for stock options since all options granted
had an exercise price equal to the market value of the
underlying stock on the grant date. Restricted stock awards are
expensed. If compensation costs for the companys stock
option plans had been determined using the fair value method of
accounting as set forth in SFAS 123, the companys
reported net income and earnings per share would have been
reduced (see Note 9).
Income taxes.
The
provision for income taxes is determined using the asset and
liability approach of accounting for income taxes in accordance
with SFAS 109, Accounting for Income Taxes.
Under this approach, deferred taxes represent the future tax
consequences expected to occur when the reported amounts of
assets and liabilities are recovered or paid. The provision for
income taxes represents income taxes paid or payable for the
current year plus the change in deferred taxes during the year.
Deferred taxes result from differences between the financial and
tax bases of the companys assets and liabilities and are
adjusted for changes in tax rates and tax laws when changes are
enacted. Provision has been made for income taxes on unremitted
earnings of subsidiaries and affiliates, except for subsidiaries
in which earnings are deemed to be permanently invested.
Pensions and other postretirement benefits.
The company provides a range of
benefits to eligible employees and retired employees, including
pensions and postretirement health care. The company records
annual amounts relating to these plans based on calculations
which include various actuarial assumptions such as discount
rates, assumed rates of return on plan assets, compensation
increases, turnover rates and health care cost trend rates. The
company reviews its actuarial assumptions on an annual basis and
makes modifications to the assumptions based on current rates
and trends when it is deemed appropriate to do so. As required,
the effect of the modifications is generally recorded or
amortized over future periods.
Revenue recognition.
Revenues are recognized when the
earnings process is complete. For substantially all revenues,
this occurs when products are shipped in accordance with terms
of agreements, title and risk of loss transfers to customers,
collection is probable, and pricing is fixed or determinable.
Service revenues, which comprise less than 10% of total revenues
for all periods presented, are recognized when services to be
performed are complete. Revenues for longer term construction
contracts, which comprise less than 2% of total revenues for all
periods presented, are accounted for based on the percentage of
completion method. Provisions are made for estimated sales
returns, other allowances, and warranty based on the
companys experience.
In November 2002, the FASB issued Interpretation
(FIN) 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. The initial recognition and
measurement provisions of FIN 45 apply on a prospective
basis to guarantees issued or modified after December 31,
2002. As required, the company has adopted the disclosure
requirements of FIN 45 as of December 29, 2002 and the
initial recognition and measurement provisions effective
December 30, 2002. The Interpretation modifies existing
disclosure requirements for most guarantees and requires that at
the time a company issues a guarantee, the company must
recognize an initial liability for the fair value of the
obligation it assumes under that guarantee. Adoption of
FIN 45 did not have a material impact on the companys
financial position, results of operations or cash flows.
In April 2003, the FASB issued SFAS 149,
Amendment of Statement 133 on Derivative Instruments
and Hedging Activities. This standard amends and clarifies
financial accounting and reporting for derivative instruments
and hedging activities. This standard is generally effective
prospectively for contracts and hedging relationships entered
into or modified after June 30, 2003. Adoption of
SFAS 149 did not have a material impact on the
companys financial position, results of operations or cash
flows.
F-7
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
In May 2003, the FASB issued SFAS 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.
SFAS 150 establishes standards for how an issuer classifies
and measures in its statement of financial position certain
financial instruments with characteristics of both liabilities
and equity, and requires disclosure regarding the terms of those
instruments and settlement alternatives. It requires that an
issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances) because that
financial instrument embodies an obligation of the issuer.
SFAS 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is
effective at the first interim period beginning after
June 15, 2003. Adoption of SFAS 150 did not have a
material impact on the companys financial position,
results of operations or cash flows.
In December 2003, the FASB issued SFAS 132R,
Employers Disclosures about Pensions and Other
Postretirement Benefits an amendment of FASB
Statements 87, 88, and 106, which replaced SFAS 132,
Employers Disclosures about Pensions and Other
Postretirement Benefits. SFAS 132R retains the
disclosure requirements of SFAS 132 and requires additional
disclosures about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other
defined benefit postretirement plans. The disclosure
requirements of SFAS 132R are generally effective for
fiscal years ending after December 15, 2003. Disclosure of
the estimated future benefit payments and certain information
about foreign plans shall be effective for fiscal years ending
after June 15, 2004. The interim-period disclosures
required by this Statement shall be effective for interim
periods beginning after December 15, 2003. The company has
incorporated the required disclosures of SFAS 132R in
Note 11. Disclosures related to the estimated future
benefit payments and foreign plans shall be incorporated into
the footnotes to the companys 2004 financial statements.
The adoption of SFAS 132R did not have a material impact on
the companys financial position, results of operations or
cash flows.
In December 2003, the FASB issued FIN 46R,
Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51, which replaced FASB
Interpretation 46, Consolidation of Variable Interest
Entities, and clarifies the application of Accounting
Research Bulletin 51, Consolidated Financial
Statements, to certain entities in which equity investors
do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity
to finance its activities without additional subordinated
financial support. The disclosure requirements of FIN 46R
are effective for financial statements issued after
December 31, 2003. The initial recognition provisions of
FIN 46R are to be implemented no later than the end of the
first reporting period that ends after March 15, 2004. The
company is in the process of evaluating its entities under the
provisions of FIN 46R, but does not expect that adoption of
FIN 46R will have a material impact on the companys
financial position, results of operations or cash flows.
In November 2002, the Emerging Issues Task Force
(EITF) of the FASB reached a consensus on EITF 00-21,
Accounting for Revenue Arrangements with Multiple
Deliverables, which provides guidance on how to determine
when an arrangement that involves multiple revenue-generating
activities or deliverables should be divided into separate units
of accounting for revenue recognition purposes. It further
states, that if this division is required, the arrangement
consideration should be allocated among the separate units of
accounting. The guidance in the consensus is effective for
revenue arrangements entered into in fiscal periods that begin
after June 15, 2003. The adoption of EITF 00-21 did
not have a material effect on the companys financial
position, results of operations or cash flows.
In December 2003, the Securities and Exchange
Commission issued SAB 104, Revenue Recognition,
which supersedes SAB 101, Revenue Recognition in
Financial Statements, and updates portions of the
interpretive guidance included in Topic 13 of the
codification of staff accounting bulletins in order to make this
interpretive guidance consistent with current authoritative
accounting guidance. The company had previously adopted the
necessary changes incorporated into SAB 104, which did not
have a material effect on the companys financial position,
results of operations or cash flows.
F-8
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
In 2003, the company acquired seven smaller
businesses for a total cost of $97,199, of which $93,963 was
paid in cash and $3,236 is payable in 2004. The acquisitions
included a cardiothoracic devices business and an anesthesia and
respiratory care business in the Medical Segment; a designer and
manufacturer of electronic and electromechanical products for
the automotive, marine and industrial markets, a European
manufacturer of alternative fuel systems, a passenger and light
truck electronic throttle control business, a European
light-duty cable operation, and an automotive seat comfort
systems business in the Commercial Segment. Goodwill recognized
in those transactions amounted to $20,641, of which $1,780 is
expected to be deductible for tax purposes. Goodwill was
assigned to the Commercial and Medical segments in the amounts
of $19,578 and $1,063, respectively. The pro forma income
statement impact of these acquisitions is not material.
In 2002, the company acquired six smaller
businesses for a total cost of $47,229 all of which was paid in
cash. The acquisitions included an orthopedic surgical
instrument manufacturer and two small catheter manufacturers in
the Medical Segment; a 55% controlling interest in a
manufacturer of mechanical controls for the automobile industry
in Japan, a European alternative fuel systems business, and a
fabricator of stainless and carbon steel stranded products in
the Commercial Segment. Goodwill recognized in those
transactions amounted to $15,319, all of which applies to the
Medical Segment. Of that amount $9,265 is expected to be
deductible for tax purposes. The pro forma income statement
impact of these acquisitions is not material.
In 2001, the company acquired eight smaller
businesses for a total cost of $180,700 all of which was paid in
cash, $10,000 of which was paid in 2002. The acquisitions
included a distributor of home care products, a manufacturer of
sterile medical devices, and a distributor of health care
supplies in the Medical Segment; a supplier of industrial and
marine products, a manufacturer of plastic fluid handling
systems, and an industrial alternative fuel systems business in
the Commercial Segment; a developer of gas turbine condition
monitoring software, and a manufacturer of power drive units for
cargo systems in the Aerospace Segment. Goodwill recognized in
those transactions amounted to $50,750, of which $39,414 is
expected to be deductible for tax purposes. Goodwill was
assigned to the Commercial and Medical segments in the amounts
of $39,414 and $11,336, respectively. The pro forma income
statement impact of these acquisitions is not material.
In the first quarter of 2003, the company sold an
investment, resulting in a gain of $3,068. In the fourth quarter
of 2002, the company sold 50% of one of its investments and also
sold a minor non-core business in its Medical Segment. Also in
the fourth quarter of 2002, the company received insurance
proceeds related to building, equipment and inventory that
incurred weather related damage and fire. These transactions all
resulted in gains that aggregated $10,085.
Inventories at year end are:
Effective in 2002, the company adopted
SFAS 142, Goodwill and Other Intangible Assets.
Under this standard, goodwill and intangible assets with
indefinite useful lives are no longer amortized, but rather are
to be tested at least annually for impairment. Intangible assets
with finite lives should continue to be amortized over the
estimated useful life and reviewed for impairment in accordance
with SFAS 144, Accounting for the
F-9
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Impairment or Disposal of Long-lived
Assets. In connection with the adoption of SFAS 142,
the company is required to perform an annual impairment
assessment on all goodwill and indefinite-lived intangible
assets. The company performs this assessment annually in the
fourth quarter. The assessment of goodwill is a two-step process
in which the first step identifies impairment by requiring a
comparison of the fair value of each of the companys
fourteen reporting units to the carrying value, including
goodwill allocated to the unit. If the carrying value exceeds
the fair value, goodwill is considered to be impaired. The
amount of impairment is measured in a second step as the
difference between the carrying value of goodwill and the
implied fair value of goodwill, which is determined
by calculating goodwill as if the reporting unit had just been
acquired and accounted for as a business combination. Fair
values were determined using discounted cash flow analyses. As a
result of this evaluation, the company determined that there
were no impairments in 2003 or 2002.
The provisions of SFAS 142 are to be applied on a
prospective basis and prior year results are not to be restated.
The following table presents a reconciliation for 2001 of
previously reported net income and earnings per share, adjusted
to exclude amortization of goodwill and indefinite-lived
intangible assets:
Changes in the carrying amount of goodwill for
2003 are as follows:
Intangible assets at year end consist of the
following:
F-10
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Amortization expense related to those intangible
assets was $8,492 and $5,682 for 2003 and 2002, respectively.
Estimated annual amortization expense for each of the five
succeeding years is as follows:
Long-term borrowings at year end are:
The various senior and term note agreements
provide for the maintenance of certain financial ratios and
limit the repurchase of the companys stock and payment of
cash dividends. Under the most restrictive of these provisions,
$270,000 of retained earnings was available for dividends at
December 28, 2003.
Notes payable consists of demand loans due to
banks of $91,727 at an average interest rate of 4.1%, loans
under committed facilities of $72,912 at an average rate of 4.0%
and a $34,932 loan secured by certain accounts receivable at an
interest rate of 1.7%. In addition, the company has
approximately $340,000 available under several interest rate
alternatives in unused lines of credit.
Interest expense in 2003, 2002 and 2001 did not
differ materially from interest paid, nor did the carrying value
of year-end long-term borrowings differ materially from fair
value.
The aggregate amount of long-term debt, including
capital leases, maturing in the next five years are as follows:
2004 $26,532; 2005 $47,446;
2006 $21,527; 2007 $47,936;
2008 $59,299.
F-11
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
The company uses forward rate contracts to manage
currency transaction exposure and interest rate swaps for
exposure to interest rate changes. All derivative financial
instruments are recorded on the balance sheet at fair market
value and subsequent changes in value are recognized in the
statement of income or as part of comprehensive income.
Approximately $1,447 of the amount in accumulated other
comprehensive income (loss) at December 28, 2003 would
be reclassified as income to the statement of income during 2004
should foreign currency exchange rates and interest rates remain
at December 28, 2003 levels.
The following table provides financial
instruments activity included as part of accumulated other
comprehensive income (loss):
The authorized capital of the company is
comprised of 100,000,000 common shares, $1 par value, and
500,000 preference shares. No preference shares were outstanding
during the last three years.
Basic earnings per share is computed by dividing
net income by the average number of common shares outstanding
during the period. Diluted earnings per share is computed in the
same manner except that the weighted average number of shares is
increased for dilutive securities. The difference between basic
and diluted weighted average common shares results from the
assumption that dilutive stock options were exercised. A
reconciliation of basic to diluted shares outstanding (in
thousands) is as follows:
Weighted average stock options (in thousands) of
787, 260 and 193 were antidilutive and were therefore not
included in the calculation of earnings per share for the years
2003, 2002 and 2001, respectively.
F-12
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
The company has stock-based compensation plans
that provide for the granting of incentive and non-qualified
options to officers and key employees to purchase shares of
common stock at the market price of the stock on the dates
options are granted. Outstanding options generally are
exercisable three to five years after the date of the grant and
expire no more than ten years after the grant. No stock-based
employee compensation cost related to stock options is reflected
in net income. The following table illustrates the effect on net
income and earnings per share if the company had applied the
fair value recognition provisions of SFAS 123,
Accounting for Stock-Based Compensation, to
stock-based employee compensation:
The fair value for options granted in 2003, 2002
and 2001 was estimated at the date of grant using the
Black-Scholes option pricing model with the following
weighted-average assumptions:
Options exercisable and shares available for
future grant at year end are:
F-13
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
A summary of the status and changes of shares
subject to options outstanding and the related average prices
per share follows:
No options expired during the three years ended
December 28, 2003.
The following table summarizes information about
stock options outstanding at December 28, 2003:
The provision for income taxes consists of the
following:
Income taxes paid were $22,040, $36,879 and
$36,170 in 2003, 2002 and 2001, respectively.
F-14
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
An analysis of the companys effective
income tax rate is as follows:
In the above table for 2002, Other includes a
reduction in the effective tax rate from favorable tax
settlements of $3,100.
The significant components of deferred tax assets
and liabilities at year-end are as follows:
At December 28, 2003, unremitted earnings of
subsidiaries outside the United States totaling $283,000 were
deemed to be permanently invested. No deferred tax liability has
been recognized with regard to the remittance of such earnings.
It is not practicable to estimate the income tax liability that
might be incurred if such earnings were remitted to the United
States.
Under the tax laws of various jurisdictions in
which the company operates, deductions or credits that cannot be
fully utilized for tax purposes during the current year may be
carried forward, subject to statutory limitations, to reduce
taxable income or taxes payable in a future year. At
December 28, 2003, the tax effect of such carry forwards
approximated $8,224. Of this amount, $4,245 has no expiration
date, $941 expires after 2003 but before the end of 2008, and
$3,038 expires after 2008.
The company has a number of defined benefit
pension and postretirement plans covering eligible U.S. and
non-U.S. employees. The defined benefit pension plans are
noncontributory. The benefits under these plans are based
primarily on years of service and employees pay near
retirement. The companys funding policy for
U.S. plans is to contribute annually, at a minimum, amounts
required by applicable laws and regulations. Obligations under
non-U.S. plans are systematically provided for by
depositing funds with trustees or by book reserves.
F-15
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
The parent company and certain subsidiaries
provide medical, dental and life insurance benefits to
pensioners and survivors. The associated plans are unfunded and
approved claims are paid from company funds.
Net benefit cost of defined benefit plans
consists of the following:
The weighted average assumptions for U.S. plans
used in determining net benefit cost are as follows:
Summarized information on the companys
postretirement plans, measured as of year end, and the net
amount recognized on the consolidated balance sheet is as
follows:
F-16
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
The weighted average assumptions for U.S. plans
used in determining benefit obligations as of end of year:
Increasing the assumed healthcare trend rate by
1% would increase the benefit obligation by $1,855 and would
increase the 2003 benefit expense by $162. Decreasing the trend
rate by 1% would decrease the benefit obligation by $1,588 and
would decrease the 2003 benefit expense by $134.
The accumulated benefit obligation for all
U.S. defined benefit pension plans was $122,929 and
$104,347 for 2003 and 2002, respectively.
The increase in minimum pension liability
included in other comprehensive income (loss) was $2,651 and
$5,604 for 2003 and 2002, respectively.
The projected benefit obligation, accumulated
benefit obligation, and fair value of plan assets for
U.S. plans with accumulated benefit obligations in excess
of plan assets were $138,763, $122,929, and $100,526,
respectively for 2003 and $112,152, $104,347, and $87,670,
respectively for 2002.
The change in the discount rate on U.S. plans
from 7% to 6.5% for the year ended 2003 resulted in an increase
of $9,426 to the defined benefit obligation for U.S. plans.
This amount is included in the 2003 actuarial losses in the
table above.
Plan assets are allocated among various
categories of equities, fixed income, cash and cash equivalents
with professional investment managers whose performance is
actively monitored. The target allocation among plan assets
allows for variances based on economic and market trends. The
primary investment objective is long-term growth of assets in
order to meet present and future benefit obligations. The
company periodically conducts an asset/liability modeling study
to ensure the investment strategy is aligned with the profile of
benefit obligations.
F-17
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
The plan asset allocations for U.S. plans
are as follows:
The companys expected contributions to U.S.
pension plans and postretirement healthcare plans during 2004
are approximately $5 million and $2 million,
respectively.
12. Commitments
and contingent liabilities
In November 2002, the FASB issued FIN 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. The company has adopted the disclosure
requirements of FIN 45 as of December 29, 2002. Disclosures
about each group of similar guarantees are provided as follows:
Product warranty liability.
The company warrants to the original
purchaser of certain of its products that it will, at its
option, repair or replace, without charge, such products if they
fail due to a manufacturing defect. Warranty periods vary by
product. The company has recourse provisions for certain
products that would enable recovery from third parties for
amounts paid under the warranty. The company accrues for product
warranties when, based on available information, it is probable
that customers will make claims under warranties relating to
products that have been sold, and a reasonable estimate of the
costs (based on historical claims experience relative to sales)
can be made. Set forth below is a reconciliation of the
companys estimated product warranty liability for 2003:
Operating leases.
The company uses various leased
facilities and equipment in its operations. The terms for these
leased assets vary depending on the lease agreement. The company
also has synthetic lease programs that are used primarily for
plant and equipment. In connection with the synthetic and other
leases, the company has residual value guarantees in the amount
of $20,066 at December 28, 2003. The companys future
payments cannot exceed the minimum rent obligation plus the
residual value guarantee amount. The guarantee amounts are tied
to the unamortized lease values of the assets under synthetic
lease, and are due should the company decide neither to renew
these leases, nor to exercise its purchase option. At
December 28, 2003, the company had no liabilities recorded
for these obligations. Any residual value guarantee amounts paid
to the lessor may be recovered by the company from the sale of
the assets to a third party.
Future minimum lease payments (including residual
value guarantee amounts) under noncancelable operating leases
are as follows: 2004 $41,491; 2005
$35,116; 2006 $28,862; 2007 $22,997;
2008 $16,552. Net rental expense under operating
leases was $37,785, $36,347 and $33,934 in 2003, 2002 and 2001,
respectively.
Accounts receivable securitization program.
The company uses an accounts
receivable securitization program to gain access to enhanced
credit markets and reduce financing costs. As currently
structured, the company sells certain trade receivables on a
non-recourse basis to a consolidated company, which in turn sells
F-18
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
an interest in those receivables to a commercial
paper conduit. The conduit issues notes secured by that interest
to third party investors. These notes are secured by a 364-day
liquidity facility provided by a bank. At December 28,
2003, $34,932 was recorded in notes payable under this program.
Environmental.
The
company is also subject to contingencies pursuant to
environmental laws and regulations that in the future may
require the company to take further action to correct the
effects on the environment of prior disposal practices or
releases of chemical or petroleum substances by the company or
other parties. Much of this liability results from the
Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA, often referred to as Superfund), the Resource
Conservation and Recovery Act (RCRA), and similar state laws.
These laws require the company to undertake certain
investigative and remedial activities at sites where the company
conducts or once conducted operations or at sites where
company-generated waste was disposed.
Remediation activities vary substantially in
duration and cost from site to site. These activities, and their
associated costs, depend on the mix of unique site
characteristics, evolving remediation technologies, diverse
regulatory agencies and enforcement policies, as well as the
presence or absence of potentially responsible parties. At
December 28, 2003, the companys consolidated balance
sheet included an accrued liability of $3,600 relating to these
matters. Considerable uncertainty exists with respect to these
costs and, under adverse changes in circumstances, potential
liability may range up to two or three times the amount accrued
as of December 28, 2003. The time-frame over which the
accrued or presently unrecognized amounts may be paid out, based
on past history, is estimated to be 15-20 years.
Litigation.
The
company is a party to various lawsuits and claims arising in the
normal course of business. These lawsuits and claims include
actions involving product liability contracts, intellectual
property and environmental matters. The ultimate effect on
future financial results is not subject to reasonable estimation
because considerable uncertainty exists as to the final outcome
of these lawsuits and claims in the opinion of company counsel.
However, while the ultimate liabilities resulting from such
lawsuits and claims may be significant to results of operations
in the period recognized, management does not anticipate they
will have a material adverse effect on the companys
consolidated financial position, results of operations, or
liquidity.
Other.
The company
has various purchase commitments for materials, supplies, and
items of permanent investment incident to the ordinary conduct
of business. In the aggregate, such commitments are not at
prices in excess of current market.
13. Business
segments and other information
The company has determined that its reportable
segments are Commercial, Medical and Aerospace. This assessment
reflects the aggregation of businesses which have similar
products and services, manufacturing processes, and to a lesser
extent, customers and distribution channels, and is consistent
with both internal management reporting and resource and
budgetary allocations.
The Commercial Segment designs and manufactures
proprietary mechanical and electrical/electronic controls for
the automotive market; mechanical, electronic and hydraulic
controls, and electronic products for the recreational marine
market; and proprietary products for fluid transfer and
industrial applications. Products in the Commercial Segment
generally are produced in higher unit volume than those of the
companys other two segments. They are manufactured for
broad distribution as well as custom fabricated to meet
individual customer needs. For the most part, consumer spending
patterns influence the market trends for these products.
The Medical Segment manufactures and distributes
a broad range of invasive disposable and reusable devices for
the urology, gastroenterology, anesthesiology and respiratory
care markets worldwide. It also designs and manufactures a
variety of specialty surgical devices, and provides instrument
management services. Products in this segment generally are
required to meet exacting standards of performance and have
F-19
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
long product life cycles. Economic influences on
sales relate primarily to spending patterns in the worldwide
medical devices and hospital supply markets.
The Aerospace Segment serves the commercial
aerospace, power generation and industrial turbomachinery
markets and, to a lesser extent, the military market. Its
businesses design and manufacture cargo handling systems and
containers for aviation and provide surface treatments, repair
services and manufactured components for users of both flight
and ground-based turbine engines. Sales are both to original
equipment manufacturers and the aftermarket. These products and
services, many of which are proprietary, require a high degree
of engineering sophistication and are often custom designed.
Economic influences on these products and services relate
primarily to spending patterns in the worldwide aerospace
industry and to demand for power generation.
Information about operations in different
geographic areas is as follows:
Information about operations by business segment
is as follows:
F-20
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
14. Subsequent
event
On February 13, 2004 the company was
notified that a jury sitting in the Federal District Court for
the Northern District of Georgia had rendered a verdict against
one of its subsidiaries, Rüsch, Inc., in a trademark
infringement case in the amount of $2,600 as reasonable
royalty and an additional $32,200 as unjust
enrichment. Judgment was not entered on the verdict, and
the trial judge held a hearing on February 25, 2004 on the
issue of what judgment would be entered by the court. The judge
reserved judgment at that hearing pending further briefing by
the parties. Under applicable Federal trademark law, the trial
judge has the discretion to determine whether and in what amount
an award for unjust enrichment should be made. As of
March 11, 2004, the date of filing of the companys
2003 Form 10-K, no judgment had been entered on this matter.
Rüsch, Inc., a manufacturer of health care
supply products, is a co-defendant in this case with Medical
Marketing Group, Inc. (MMG). The case involves a common law
trademark claim arising under 1988 and 1997 contracts between
MMG and the plaintiff, which were terminated in 1999.
Rüsch, Inc. acquired the business of MMG in February 2000.
In connection with the acquisition, the company escrowed a
portion of the purchase price, the balance of which approximates
the reasonable royalty found by the jury.
The company cannot predict when judgment will be
entered in this case, nor predict what amount, if any, may be
awarded for unjust enrichment. Accordingly, other than the
amount provided in the escrow noted above, no accrual has been
recorded in the accompanying consolidated financial statements.
F-21
1.
Summary of significant accounting
policies
2.
New accounting standards
3.
Acquisitions
4.
Gains from asset sales and net insurance
proceeds
5.
Inventories
2003
2002
$
192,149
$
154,552
84,030
59,596
166,966
151,387
$
443,145
$
365,535
6.
Goodwill and other intangible assets
2001
$
112,311
9,482
$
121,793
$
2.90
.24
$
3.14
$
2.86
.24
$
3.10
Commercial
Medical
Aerospace
Total
$
94,566
$
137,272
$
26,161
$
257,999
19,578
1,063
20,641
7,564
3,217
223
11,004
$
121,708
$
141,552
$
26,384
$
289,644
Gross Carrying
Accumulated
Amounts
Amortization
2003
2002
2003
2002
$
59,795
$
33,378
$
10,381
$
6,211
33,221
21,000
2,993
1,580
32,578
19,646
10,602
6,595
$
10,564
9,462
8,524
7,711
7,656
7.
Borrowings
2003
2002
through 2012
$
111,000
$
118,500
122,944
133,791
22,470
22,354
256,414
274,645
(26,532
)
(34,522
)
$
229,882
$
240,123
8.
Financial instruments
2003
2002
$
(3,622
)
$
(1,798
)
1,293
(2,955
)
1,672
1,131
$
(657
)
$
(3,622
)
9.
Shareholders equity and stock
compensation plans
2003
2002
2001
39,598
39,251
38,752
344
535
528
39,942
39,786
39,280
2003
2002
2001
$
109,103
$
125,266
$
112,311
(4,353
)
(3,497
)
(2,092
)
$
104,750
$
121,769
$
110,219
$
2.76
$
3.19
$
2.90
$
2.65
$
3.10
$
2.84
$
2.73
$
3.15
$
2.86
$
2.64
$
3.08
$
2.83
2003
2002
2001
3.0%
4.0%
5.3%
5.2 yrs.
5.2 yrs.
7.5 yrs.
1.9%
1.7%
2.0%
26.0%
29.0%
29.0%
2003
2002
2001
1,146,982
932,784
894,799
$
36.55
$
32.25
$
28.85
$
9.17
$
13.86
$
14.51
2,500,310
3,092,323
3,521,763
Shares
Average
Subject to
Option Price
Options
Per Share
1,976,914
$
29.13
514,150
$
42.43
(371,290
)
$
22.01
(83,580
)
$
32.93
2,036,194
$
33.65
509,900
$
49.02
(322,510
)
$
29.66
(87,760
)
$
33.67
2,135,824
$
37.92
652,550
$
40.59
(234,773
)
$
29.82
(82,557
)
$
38.78
2,471,044
$
39.36
$14-$30
$31-$43
$44-$57
458,649
1,305,195
707,200
4.1 yrs.
7.6 yrs.
8.2 yrs.
$24.70
$39.39
$48.83
327,769
595,109
224,104
$23.28
$39.39
$48.44
10.
Income taxes
2003
2002
2001
$
8,489
$
22,968
$
25,415
2,218
2,725
2,902
13,798
14,248
9,385
17,883
7,281
9,682
$
42,388
$
47,222
$
47,384
$
86,975
$
95,512
$
106,013
64,516
76,976
53,682
$
151,491
$
172,488
$
159,695
2003
2002
2001
35.0
%
35.0
%
35.0
%
1.0
1.0
1.2
(5.2
)
(4.5
)
(4.6
)
(1.8
)
(1.7
)
(1.7
)
(1.0
)
(2.4
)
(.2
)
28.0
%
27.4
%
29.7
%
2003
2002
$
90,393
$
71,426
10,077
2,287
7,103
6,392
5,712
6,953
6,100
5,707
119,385
92,765
14,897
13,151
8,224
9,572
5,059
3,435
1,891
1,321
4,061
3,633
34,132
31,112
$
85,253
$
61,653
11.
Pension and other postretirement
benefits
Pension
Other Benefits
2003
2002
2003
2002
$
5,107
$
4,618
$
347
$
324
8,406
8,330
1,567
1,584
(14,756
)
5,347
7,187
(14,239
)
634
612
1,754
1,215
219
$
7,698
$
5,271
$
2,767
$
2,520
7.0
%
7.7
%
7.0
%
7.7
%
8.75
%
9.0
%
7.5
%
7.5
%
4.5
%
4.5
%
Pension
Other Benefits
2003
2002
2003
2002
$
134,690
$
108,054
$
26,980
$
22,790
5,107
4,618
347
324
8,406
8,330
1,567
1,584
60
983
(1,453
)
(1,100
)
19,150
12,266
(2,370
)
5,065
7,118
1,443
5,212
3,661
(7,164
)
(5,880
)
(1,806
)
(1,683
)
(1,443
)
1,754
1,215
174,333
134,690
21,822
26,980
86,651
94,229
14,756
(5,347
)
9,491
6,463
2,961
(7,164
)
(5,192
)
1,205
111,402
86,651
Pension
Other Benefits
2003
2002
2003
2002
(62,931
)
(48,039
)
(21,822
)
(26,980
)
(385
)
(529
)
2,261
4,184
32,555
20,098
5,564
9,663
1,515
2,450
(152
)
(55
)
$
(29,246
)
$
(26,020
)
$
(14,149
)
$
(13,188
)
balance sheet:
$
(45,282
)
$
(37,911
)
$
(14,149
)
$
(13,188
)
2,722
2,852
13,314
9,039
$
(29,246
)
$
(26,020
)
$
(14,149
)
$
(13,188
)
Other
Pension
Benefits
2003
2002
2003
2002
6.5
%
7.0
%
6.5
%
7.0
%
8.75
%
8.75
%
4.5
%
4.5
%
8.0
%
7.5
%
4.5
%
4.5
%
Target
% of Assets
Allocation
2003
2002
60
%
69
%
63
%
30
%
14
%
21
%
10
%
17
%
16
%
100
%
100
%
100
%
$
7,490
7,580
(9,460
)
(90
)
1,440
$
6,960
Revenues (based on business unit location)
2003
2002
2001
$
1,169,564
$
1,168,439
$
1,152,425
206,230
147,762
124,368
242,925
206,673
176,369
463,228
380,398
347,958
200,488
172,957
103,884
$
2,282,435
$
2,076,229
$
1,905,004
Net Property
2003
2002
2001
$
347,484
$
343,100
$
329,565
40,025
24,324
21,074
100,769
85,521
73,700
127,798
101,726
95,615
51,543
49,570
45,741
$
667,619
$
604,241
$
565,695
2003
2002
2001
$
1,219,124
$
1,085,497
$
908,183
534,711
448,677
429,338
528,600
542,055
567,483
$
2,282,435
$
2,076,229
$
1,905,004
$
101,630
$
99,841
$
86,702
85,355
72,313
71,177
9,239
34,176
61,822
196,224
206,330
219,701
21,464
18,904
18,640
(3,068
)
(10,085
)
12,901
$
177,828
$
197,511
$
188,160
2003
2002
2001
$
990,482
$
769,399
$
683,188
566,740
497,243
442,648
457,650
446,592
405,315
95,741
100,150
103,869
$
2,110,613
$
1,813,384
$
1,635,020
$
55,305
$
43,220
$
40,768
15,475
18,637
20,688
20,886
24,586
35,681
2,564
720
607
$
94,230
$
87,163
$
97,744
$
49,517
$
42,921
$
34,897
25,126
22,951
18,537
27,845
27,533
25,235
1,864
1,712
831
12,901
$
104,352
$
95,117
$
92,401
(1)
Segment operating profit is defined as a
segments revenues reduced by its materials, labor and
other product costs along with the segments selling,
general and administrative expenses. Corporate expenses, gains
from asset sales and net insurance proceeds, interest expense
and taxes on income are excluded from the measure.
(2)
Goodwill amortization expense in 2001 has been
reclassified as a separate line item to facilitate comparison
with 2003 and 2002 results.
Report of Independent Auditors
To Board of Directors and
Shareholders
In our opinion, the consolidated financial
statements listed in the accompanying index present fairly, in
all material respects, the financial position of Teleflex
Incorporated and its subsidiaries at December 28, 2003 and
December 29, 2002, and the results of their operations and
their cash flows for each of the three years in the period ended
December 28, 2003 in conformity with accounting principles
generally accepted in the United States of America. In addition,
in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects,
the information set forth therein when read in conjunction with
the related consolidated financial statements. These financial
statements and financial statement schedule are the
responsibility of the Companys management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America, 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 our opinion.
As described in the notes to the consolidated
financial statements, the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Other
Intangible Assets on December 31, 2001.
PricewaterhouseCoopers LLP
Philadelphia, PA
F-22
Quarterly Data (Unaudited)
F-23
First
Second
Third
Fourth
$
546,221
$
577,945
$
550,850
$
607,419
48,100
51,440
31,889
46,399
29,241
31,835
18,222
29,805
.74
.81
.46
.75
.74
.80
.45
.74
$
508,396
$
546,306
$
508,238
$
513,289
49,930
54,353
39,420
53,808
30,418
33,536
26,280
35,032
.78
.85
.67
.89
.77
.84
.66
.88
TELEFLEX INCORPORATED
Balance at
Additions
Doubtful
Balance at
Beginning
Charged to
Accounts
End of
For the Year Ended
of Year
Income
Written Off
Year
$
10,059,000
$
3,747,000
$
(4,366,000
)
$
9,440,000
$
9,004,000
$
4,672,000
$
(3,617,000
)
$
10,059,000
$
5,776,000
$
5,957,000
$
(2,729,000
)
$
9,004,000
F-24
March 11, 2004
INDEX TO EXHIBITS
Exhibit
3(a)
The Companys 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 Companys Form 10-Q for the
period ended June 30, 1985. Article Thirteenth of the
Companys Articles of Incorporation is incorporated herein
by reference to Exhibit 3 of the Companys
Form 10-Q for the period ended June 28, 1987. The
first paragraph of Article Fourth of the Companys
Articles of Incorporation is incorporated herein by reference to
Exhibit 3(a) of the Companys Form 10-K for the
year ended December 27, 1998.
(b)
The Companys Bylaws are incorporated herein
by reference to Exhibit 3(b) of the Companys
Form 10-K for the year ended December 28, 1987.
4
The Companys Shareholders Rights Plan
is incorporated herein by reference to the Companys
Form 8-K dated December 7, 1998.
10(a)
The 1990 Stock Compensation Plan, incorporated
herein by reference to the Companys registration statement
on Form S-8 (Registration No. 33-34753), revised and
restated as of December 1, 1997 incorporated by reference
to Exhibit 10(b) of the Companys Form 10-K for
the year ended December 28, 1997. As subsequently amended
and restated on Form S-8 (Registration No. 333-59814)
which is herein incorporated by reference.
(b)
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 Companys Form 10-K for the year ended
December 25, 1994.
(c)
Description of deferred compensation arrangement
between the Company and its Chairman, L. K. Black, is
incorporated by reference to the Companys definitive Proxy
Statement for the 2004 Annual Meeting of Shareholders.
(d)
Teleflex Incorporated Deferred Compensation Plan
effective as of January 1, 1995, and amended and restated
on Form S-8 (Registration No. 333-77601) is
incorporated by reference to Exhibit 10(f) of the
Companys Form 10-K for the year ended
December 27, 1998.
(e)
Information on the Companys 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 Companys definitive Proxy Statement for
the 2002, 2003 and 2004 Annual Meeting of Shareholders.
(f)
The Companys Voluntary Investment Plan is
incorporated by reference to Exhibit 28 of the
Companys registration statement on Form S-8
(Registration No. 2-98715), as amended and revised on
Form S-8 (Registration No. 333-101005), filed
November 5, 2002.
(g)
The 2000 Stock Compensation Plan, incorporated
herein by reference to the Companys registration statement
on Form S-8 (Registration No. 333-38224), filed on
May 31, 2000.
(h)
The Companys Global Employee Stock Purchase
Plan, incorporated herein by reference to the Companys
registration statement on Form S-8 (Registration No.
333-41654) filed on July 18, 2000.
14
Code of Ethics policy applicable to the
Companys Chief Executive Officer and senior financial
officers.
21
The Companys Subsidiaries.
23
Consent of Independent Accountants.
24
Power of Attorney.
31(a)
Certification of Chief Executive Officer,
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(b)
Certification of Chief Financial Officer,
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit
32(a)
Certification of Chief Executive Officer,
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b)
Certification of Chief Financial Officer,
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EXHIBIT 14
TELEFLEX INCORPORATED
CODE OF ETHICS FOR CHIEF EXECUTIVE OFFICER
AND SENIOR FINANCIAL OFFICERS
The Company has a Code of Ethics and Business Conduct Guidelines applicable to all directors, employees, and agents of the Company. The Chief Executive Officer ("CEO") and all senior financial officers, including the Chief Financial Officer ("CFO") and principal accounting officer, are bound by the provisions set forth therein relating to ethical conduct, conflicts of interest and compliance with law. In addition to the Code of Ethics and Business Conduct Guidelines, the CEO and senior financial officers are subject to the following additional specific policies:
1. The CEO and all senior financial officers are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the Company with the U.S. Securities and Exchange Commission. Accordingly, it is the responsibility of the CEO and each senior financial officer promptly to bring to the attention of the Audit Committee any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise assist the Audit Committee in fulfilling its responsibilities.
2. The CEO and each senior financial officer shall promptly bring to the attention of the Audit Committee any information he or she may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's financial reporting, disclosures or internal controls.
3. The CEO and each senior financial officer shall promptly bring to the attention of the CEO and/or the Audit Committee any information he or she may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof.
4. The CEO and each senior financial officer shall promptly bring to the attention of the Business Ethics Oversight Committee any information he or she may have concerning any violation of the Company's Code of Ethics and Business Conduct Guidelines or these additional policies, including any actual or apparent conflicts of interest between personal and professional relationships, involving any management or
EXHIBIT 14
other employees who have a significant role in the Company's financial reporting, disclosures or internal controls.
5. The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of the Code of Ethics and Business Conduct Guidelines or these additional policies by the CEO and the Company's senior financial officers. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to the Code of Ethics and Business Conduct Guidelines and to these additional policies and shall include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual involved, suspension with or without pay or benefits, and termination of the individual's employment. In determining what action is appropriate in a particular case, the Board of Directors or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in question had committed other violations in the past.
.
.
.
EXHIBIT 21
Teleflex Incorporated
Subsidiaries
SUBSIDIARY JURISDICTION PARENT PERCENTAGE OF INCORP. 1950 Williams Drive, LLC Delaware TFX Equities 100 4045181 Canada Inc. Ontario Teleflex Holding Company 100 Advanced Thermodynamics Inc. Ontario Teleflex Holding Company 100 Access Medical S.A. France TFX International S.A. 100 AeroForge Corporation Indiana TFX Equities 100 Air Cargo Equipment Corporation Delaware Telair (CA) 100 Airfoil Technologies International-California, Inc Delaware TFX Equities 100(1) Airfoil Technologies International-Ohio, Inc. (APS) Delaware Airfoil Technologies Internat'l LLC 60 (2) Airfoil Technologies International LLC Delaware TFX Equities 51 (3) Airfoil Technologies International-UK, Ltd. UK Airfoil Technologies Internat'l LLC 60 (4) Airfoil Technologies Singapore PTE LTD Singapore Teleflex Holding Singapore Ptc.Ltd. 51 (5) American General Aircraft Holding Co., Inc. Delaware Teleflex 74 Astraflex Limited UK TFX Group Ltd. 100 Autogas Techniek Holland B.V. Netherlands United Parts Group B.V. 100 Bavaria Cargo Technologie GmbH Germany Telair International GmbH 100 Capro de Mexico, S.A. de C.V. Mexico TFX International Corp. 99.99 (6) Capro, Ltd. Texas Teleflex 100 * Capro-Casiraghi S.r.l. Italy Capro 100 Capro-Hungary Service Parts Manufacturing LLC Hungary TFX Group Ltd. 96.67 (7) CCT De'Couper Industries, Inc. Michigan Comcorp Technologies, Inc. 100 CCT Plymouth Stamping Company Michigan Comcorp Technologies, Inc. 100 CCT Thomas Die & Stamping, Inc. Michigan CCT De'Couper Industries, Inc. 100 Cepco Precision Company of Canada, Inc. Canada Sermatech Engineering 100 Chemtronics International Ltd. UK Sermatech (U.K.) Limited 100 Teleflex Automotive Sweden Sweden United Parts Driver Control Systems AB 100 Comcorp Inc. Michigan Teleflex 100 Comcorp Technologies, Inc. Michigan Teleflex 100 Comfort Pedals, Inc. Michigan Comcorp, Inc. 100 Compart Automotive B.V. The Netherlands United Parts Group B.V. 100 Entech, Inc. New Jersey TFX Equities 100 Gator-Gard Incorporated Delaware Sermatech 100 Inmed (Malaysia) Holdings Sdn. Berhad Malaysia Willy Rusch GmbH 100 Inmed Acquisition, Inc. Delaware Teleflex 100 Inmed Corporation (8) Georgia Teleflex 100 Intelligent Applications Limited UK TFX Group Ltd. 100 Koltec-Necam, B.V. Netherlands United Parts Group B.V. 100 Lehr Precision, Inc. Ohio Teleflex 100 Lipac Liebinzeller Verpackungs-GmbH Germany Willy Rusch GmbH 100 |
Teleflex Incorporated Subsidiaries
SUBSIDIARY JURISDICTION PARENT PERCENTAGE OF INCORP. Mal Tool & Engineering Limited UK TFX Group Ltd. 100 McKechnie Engineered Plastics Limited and UK Teleflex Incorporated 100 McKechnie Vehicle Components USA, Inc. Delaware Teleflex Incorporated 100 Meddig Medizintechnik Vertriebs-GmbH Germany Rusch G B 87.5 Medical Service Vertriebs-GmbH Germany Willy Rusch GmbH 100 Mediland Rusch Care S.r.l. Italy Rusch Italia S.A.R.L. 100 Teleflex Megatech Inc. Ontario TFX Holding LP 100 Morse Controls S.L. Spain Spain TFX Equities 100 Norland Plastics Company Delaware TFX Equities 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 (Asia) PTE Ltd. (9) Singapore Pilling Weck (PA) 99.99 Pilling Weck (Canada)Ltd. Canada Teleflex Holding Company 100 Pilling Weck Canada L.P. Canada TFX Holding LP 99.9 (10) Pilling Weck n.v. Belgium TFX International S.A. 100 Productos Aereos, S.A. de C.V. Mexico Telair International (CA) 99.99 (11) RMH Controls Limited UK Morse Controls Limited 100 Rusch Asia Pacific Sdn. Berhad Malaysia Inmed (Malaysia) Holdings 100 Rusch Austria GmbH Austria Teleflex Holdings Netherlands B.V. 90 (12) Rusch (UK) Ltd. UK TFX Group Ltd. 100 Rusch France S.A.R.L. France Rusch G B 100 Rusch Hospital (13) Germany Willy Rusch GmbH 100 Rusch Hospital S.r.l. Italy Rusch Italia S.A.R.L. 100 Rusch Italia S.A.R.L. Italy Willy Rusch GmbH 100 Rusch Manufacturing (UK) Ltd. UK TFX Group Ltd. 100 Rusch Manufacturing Sdn. Berhad Malaysia Inmed (Malaysia) Holdings 96.5 Rusch Medical, S.A. (14) France TFX International S.A. 100 Rusch Mexico, S.A. de C.V. Mexico Teleflex 99 (15) Rusch Sdn. Berhad Malaysia Inmed (Malaysia) Holdings 96.5 Rusch Uruguay Ltda. Uruguay Rusch G B 60 Rusch-Pilling Limited Canada Teleflex Holding Canada LP 100 Rusch-Pilling S.A. France TFX International S.A. 100 S. Asferg Hospitalsartikler ApS Denmark Teleflex 100 Scandinavian Bellyloading Internat'l, Inc. California Teleflex 100 Sermatech (Canada) Ltd. Canada Teleflex Holding Company 100 Sermatech de Mexico s. de R.L. de C.V. Mexico TFX Equities 99.97 (16) Sermatech Engineering Group, Inc. Delaware Teleflex 100 |
Teleflex Incorporated Subsidiaries
SUBSIDIARY JURISDICTION PARENT PERCENTAGE OF INCORP. Sermatech Gas-Path (Asia) Ltd. Thailand Sermatech 100 Sermatech (Germany) GmbH Germany TFX Holding GmbH 100 Sermatech International Incorporated PA Teleflex 100 Sermatech Korea, Ltd. Korea Sermatech 51 (17) Sermatech-Mal Tool SARL France TFX International S.A. 100 (18) Sermatech Power Solutions L.P. Canada TFX Holding LP 99.9 (19) Sermatech Private Limited India Sermatech International, Inc. 64 (20) Sermatech-Tourolle S.A. France TFX International S.A. 100 Sermatech (U.K.) Limited UK TFX Group Ltd. 100 SermeTel Technical Services (STS) GmbH Germany TFX Holding GmbH 100 Sierra International Inc. Illinois TFX Equities 100 Simal S.A. Belgium TFX International S.A. 100 Southwest Wire Rope, LP. Texas Capro, Ltd. 100 *** SSI Surgical Services, Inc. (21) New York TFX Equities 85 Technology Development Corporation Pennsylvania TFX Equities 100 Technology Holding Company Delaware TFX Equities 100 Technology Holding Company II Delaware Technology Holding Company III 100 Technology Holding Company III Delaware Techsonic Industries, Inc. 66 (22) Techsonic Industries, Inc. Alabama TFX Equities 100 Telair International AB Sweden Telair International GmbH 100 (23) Telair International GmbH Germany TFX Holding GmbH 100 Telair International Incorporated (24) California Teleflex 100 Telair International Incorporated Delaware Teleflex 100 Telair International Services GmbH (25) Germany Bavaria Cargo Technologie 100 Telair International Services PTE LTD Singapore Telair International GmbH 70.5 (26) Teleflex (Canada) Limited Canada(B.C.) Teleflex Holding Company 100 Teleflex Automotive (Co-Partnership) Michigan Teleflex 99 (27) Teleflex Automotive Germany GmbH (28) Germany UPDC Systems (Holding) GmbH 100 Teleflex Automotive Incorporated Delaware Teleflex 100 Teleflex Automotive de Mexico S.A. de C.V. Mexico TFX Equities 99.9 (29) Teleflex Automotive Manufacturing Corporation Delaware Teleflex 100 Teleflex do Brasil S.A. Brasil TFX Equities 100 Teleflex Canada LP Canada TFX Holding LP 99.9 (30) Teleflex Capro Pty Ltd Australia Teleflex Morse Pty Limited 100 Teleflex-CT Devices Incorporated Delaware Teleflex Incorporated 100 **** Telelfex Fluid Systems (Europe) BV Netherlands United Parts Group B.V. 100 |
Teleflex Incorporated Subsidiaries
SUBSIDIARY JURISDICTION PARENT PERCENTAGE OF INCORP. Teleflex Fluid Systems (Europe) SA Spain Rusch Austria GmbH 100 Teleflex Fluid Systems, Inc. Connecticut Teleflex 100 Teleflex Fluid Systems (UK) Limited UK Teleflex Machine Products, Inc. 100 Teleflex Funding Corporation Delaware Teleflex Incorporated 40 (31) TeleflexGFI Control Systems, Inc. Delaware Teleflex Holding Company 100 (32) Teleflex GFI Control Systems LP Canada TFX Holding LP 99.9 (33) Teleflex GFI Europe B.V. Netherlands United Parts Group B.V. 100 Teleflex Holding Company Canada TFX North America Inc. 100 Teleflex Holding Malta I Malta TFX Equities Incorporated 100 Teleflex Holding Malta II Malta Teleflex Holding Malta I 100 Teleflex Holding Netherlands B.V. Netherlands Teleflex Holding Malta II 100 Teleflex Holding Singapore Ptc. Ltd. Singapore Teleflex Holding Netherlands B.V. 100 Teleflex Industries Limited UK Teleflex UK Limited 100 Teleflex Limited UK Morse Control Ltd. 100 Teleflex Machine Products, Inc. Delaware Teleflex Fluid 100 Teleflex Medical Private Limited India TFX Equities 50 Teleflex Morse GmbH Germany TFX Holding GmbH 100 Teleflex Morse Limited UK Morse Control Ltd. 100 Teleflex-Morse (N.Z.) Limited New Zealand Teleflex Morse Pty. Limited 100 Teleflex Morse Pte. Ltd. Singapore Pilling Weck Asia Pte. Ltd. 100 Teleflex Morse PTY Limited Australia Teleflex Morse Limited 100 Teleflex Morse Stockholm AB (formerly Morse Controls AB) Sweden Morse Controls Ltd. 100 Teleflex UK Limited UK TFX Group Ltd. 100 TFX Automotive LTD (34) UK TFX Group Ltd. 100 TFX Engineering Ltd. Bermuda Rusch Austria GmbH 100 TFX Equities Incorporated Delaware Teleflex 100 TFX Financial Services (UK) UK TFX Engineering Ltd. (Bermuda) 100 TFX Foreign Sales Corporation Barbados TFX International Corp. 100 TFX Group Limited UK Rusch Austria GmbH 100 TFX Holding LP Canada Teleflex Holding Company 99.9 (35) TFX Holding GmbH Germany Rusch Austria GmbH 100 TFX International Corporation Delaware Teleflex 100 TFX International S. A. France Teleflex 100 TFX Marine Incorporated Delaware Teleflex 100 TFX Medical Incorporated Delaware Teleflex 100 TFX North America Inc. Delaware Teleflex 96 (36) |
Teleflex Incorporated Subsidiaries
SUBSIDIARY JURISDICTION PARENT PERCENTAGE OF INCORP. TFX Medical Wire Products, Inc. Delaware TFX Equities 100 TFX Scandinavia AB (37) Sweden Teleflex 100 The ISPA Company Maryland Sermatech 100 Top Surgical GmbH Germany PW Chiurgische Produkte GmbH 100 Turbine Technology Services Corporation New York Sermatech 100 United Parts Driver's Control Systems AB Sweden Telair International GmbH 100 United Parts Driver Control Systems B.V. The Netherlands United Parts Group B.V. 100 United Parts Driver Control Systems (UK) Ltd UK TFX Group Ltd. 100 United Parts Driver Control Systems (Holding) GmbH Germany United Parts Group B.V. 94 (38) United Parts de Mexico SA de CV Mexico United Parts Group B.V. 99.998 (39) United Parts France S.A. France TFX International S.A. 100 United Parts Group B.V. The Netherlands Willy Rusch Grundstucks and Beteiligungs AG + Co KG (Rusch G B") 100 United Parts FHS Automobile Systeme GmbH Germany UPDC Systems (Holding) GmbH 99.9 (40) United Parts s.a. France TFX International s.a. 100 United Parts Slovakia sro Slovakia UPDC Systems BV 100 Victor Huber GmbH Germany Willy Rusch GmbH 100 Willy Rusch GmbH Germany TFX Holding GmbH 100 Willy Rusch Grundstucks und Beteiligungs AG + Co KG ("Rusch G B") Germany Willy Rusch GmbH 99.8 (41) |
* In 2003, this corporation converted to a Texas Limited Partnership. GP is Capro GP LLC; LP is Capro LP LLC.
** Purchased the assets of Beere Medical Precision Instruments in 2002.
*** In 2003, the Southwest Wire Rope entities merged into Southwest Wire Rope, Inc., and the corporation was converted to a Texas Limited Partnership. GP is Southwest Wire Rope GP LLC; LP is Capro Ltd.
**** Purchased the assets of Genzyme Corporation.
1. Formerly Airfoil Management Company
2. 40% owned by TFX Equities. Formerly Aviation Product Support, Inc.
3. 49% owned by General Electric Company.
4. 40% owned by TFX Equities. Formerly Sermatech Repair Services Limited
5. 49% owned by General Electric Singapore.
6. One share (.002%) is owned by TFX Equities.
7. 3.33% owned by Capro, Ltd.
Teleflex Incorporated Subsidiaries
SUBSIDIARY JURISDICTION PARENT PERCENTAGE OF INCORP. |
8. Trades under name "Rusch Inc."
9. Formerly Rusch-Pilling (Asia) PTE LTD. -- 13 shares owned by Eric Cheong Pak Koon, 27 shares owned by Jim Yoncheck.
10. .1% owned by Pilling Weck (Canada) Ltd.
11. .01% owned by Air Cargo Equipment Corporation
12. 10% owned by Teleflex Incorporated
13. Formerly Asid Bonz GmbH.
14. Formerly Europe Medical, S.A.
15. 1% owned by Rusch Inc.
16. .03% owned by TFX International Corporation
17. 49% owned by Aerospace Industries Ltd.
18. Formerly Mal Tool & Engineering SARL.
19. .1% owned by Sermatech (Canada) Ltd.
20. 26% owned by AVT; 10% owned by ATTS
21. Formerly Medical Sterilization, Inc.
22. 34% owned by ten other subsidiary companies.
23. Formerly Scandinavian Bellyloading Co. AB
24. Formerly The Talley Corporation. Trades under name "Teleflex Control Systems."
25. Formerly Telair Cargo Electronic Systems GmbH.
26. 29.5% owned by TPA PTE LTD & Mr. Chan.
27. 1% owned by TFX Equities
28. New name for merger of former companies, United Parts Automotive Engineering GmbH and United Parts Germany GmbH
29. One share (.1%) is owned by TFX International Corporation.
30. .1% owned by Teleflex (Canada) Limited
31. 60% owned by GSS Holding, Inc.
32. Formerly GFI-USA, Inc.
33. .1% owned by Teleflex GFI Control Systems, Inc.
34. Formerly S.J. Clark (Cables) Limited. Trades under name "Clarks Cables."
35. .1% owned by 4045181 Canada Inc.
36. Teleflex owns 100% of voting stock; non-voting stock held by Pilling Weck (PA) 56.75 shares; Sermatech International 157.73 shares
37. Formerly TX Controls AB.
38. 6% owned by Compart Automotive B.V.
39. 0.002% owned by Compart Automotive B.V.
40. 0.1% owned by Arminium Treuhand.
41. Two shares (.2%) owned by Inmed Corporation
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (2-98715, 33-34753, No. 33-53385, No. 333-77601, No. 333-38224, No. 333-41654, No. 333-59814, and No. 333-101005) of Teleflex Incorporated of our report dated February 11, 2004, except for Note 14, which is as of March 3, 2004, relating to the consolidated financial statements and financial statement schedule of Teleflex Incorporated, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Philadelphia, PA
March 10, 2004
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned Directors of Teleflex Incorporated, a Delaware corporation (the "Company"), hereby appoints Jeffrey P. Black, John J. Sickler and Steven K. Chance, and each of them, with full power of substitution, to act as his or her 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 28, 2003.
IN WITNESS WHEREOF, this Power of Attorney is executed this 1st day of March 2004.
/s/ L. K. Black /s/ Patricia C. Barron ------------------------------- -------------------------------- Lennox K. Black Patricia C. Barron /s/ Donald Beckman /s/ Jeffrey P. Black ------------------------------- -------------------------------- Donald Beckman Jeffrey P. Black /s/ William R. Cook /s/ Joseph S. Gonnella ------------------------------- -------------------------------- William R. Cook Joseph S. Gonnella /s/ Sigismundus W. W. Lubsen /s/ Judith M. von Seldeneck ------------------------------- -------------------------------- Sigismundus W. W. Lubsen Judith M. von Seldeneck /s/ James W. Stratton /s/ Harold L. Yoh III ------------------------------- -------------------------------- James W. Stratton Harold L. Yoh III |
EXHIBIT 31(a)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Jeffrey P. Black, certify that:
1. I have reviewed this annual report on Form 10-K of Teleflex Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 11, 2004 /s/ JEFFREY P. BLACK ---------------------------------------- Jeffrey P. Black Chief Executive Officer and President |
EXHIBIT 31(b)
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, John J. Sickler, certify that:
1. I have reviewed this annual report on Form 10-K of Teleflex Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date : March 11, 2004
/s/ JOHN J. SICKLER ----------------------------------------- John J. Sickler Interim Chief Financial Officer and Vice Chairman |
EXHIBIT 32(a)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Teleflex Incorporated (the "Company") on Form 10-K for the period ending December 28,2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey P. Black, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial position and results of operations of the Company.
Date : March 11, 2004
/s/ JEFFREY P. BLACK ------------------------------------- Jeffrey P. Black Chief Executive Officer and President |
A signed original of this written statement required by Section 906 has been provided to Teleflex Incorporated and will be retained by Teleflex Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32(b)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Teleflex Incorporated (the "Company") on Form 10-K for the period ending December 28, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John J. Sickler, Chief Financial Officer and Vice Chairman of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial position and results of operations of the Company.
Date : March 11, 2004
/s/ JOHN J. SICKLER ----------------------------------------- John J. Sickler Interim Chief Financial Officer and Vice Chairman |
A signed original of this written statement required by Section 906 has been provided to Teleflex Incorporated and will be retained by Teleflex Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.