Teleflex Incorporated (NYSE: TFX) today announced financial results for the Third Quarter ended September 27, 2009.
Third Quarter Financial Highlights
Revenues from continuing operations were $461.5 million compared to $504.0 million in the third quarter of 2008, down 8%. This decline resulted from a decrease in core revenue of 6% and an unfavorable currency impact of 2%. Core revenue was down 1% in the Medical Segment and 23% and 16% in the Aerospace and Commercial Segments, respectively.
Income from continuing operations excluding special items increased 12% to $35.2 million, or $0.88 per diluted share compared to $31.4 million or $0.78 per diluted share in the prior year quarter. The third quarter of 2009 included a pre-tax non-cash charge of $3.3 million, $0.05 per diluted share after tax, related to an impairment of an investment in an affiliate. Income from continuing operations attributable to common shareholders including special items increased to $34.7 million or $0.87 per diluted share compared to $29.4 million or $0.74 per diluted share in the prior year quarter. A complete reconciliation of the results for the comparable periods including the special items is provided in the table below.
Income from discontinued operations attributable to common shareholders was $3.6 million, or $0.09 per diluted share compared to $12.9 million or $0.32 per diluted share in the prior year quarter. Net income attributable to common shareholders in the third quarter of 2009 was $38.3 million and diluted earnings per share available to common shareholders were $0.96 compared to $42.3 million and $1.06 per diluted share in the prior year quarter.
Cash flow from continuing operations increased 88% in the third quarter of 2009 to $103.5 million, up from $55.1 million in the prior year quarter.
“During the quarter Teleflex generated double digit adjusted earnings growth, improved our working capital as evidenced by our strong cash flow performance, and progressed on our capital structure,” said Jeffrey P. Black, chairman and chief executive officer. Added Black, “We achieved core revenue growth in our higher-margin, critical care product offerings and continued to expand our Medical Segment adjusted operating margins.” Stated Black, “We also expect the sequential operating profit improvements reported in our Aerospace and Commercial businesses to continue in the fourth quarter. In light of these factors, we now expect our 2009 earnings per share excluding special items to be at the top end of our previously announced guidance of $3.40 to $3.60 per diluted share.”
Third Quarter Business Segment Commentary
Medical Segment
Medical Segment revenues were $355.9 million for the third quarter, including core revenue increases in vascular access, urology, anesthesia, respiratory and cardiac products. These increases were more than offset by declines in surgical and orthopedic devices sold to medical OEM’s, resulting in an overall core revenue decline of 1% compared to the prior year quarter. Foreign currency translation negatively impacted revenues by 2%.
Medical Segment sales by product group were comprised of the following:
* Certain reclassifications within product categories have been made to 2008 results to conform with current year presentation.
Adjusted segment operating profit, which excludes the impact of certain integration costs not qualified for restructuring, increased to $74.5 million from $73.4 million in the prior year. The improvement resulted from lower operating expenses, reduced FDA remediation spending, and synergies from the Arrow integration activities offset by reduced volume and the effect of the stronger U.S. dollar compared with the prior year quarter. Adjusted segment operating margins in the quarter improved 90 basis points to 20.9% versus 20.0% in the prior year quarter. A reconciliation of adjusted segment operating profit and margins are noted in the table below.
Aerospace Segment
Aerospace Segment revenues declined 26% in the third quarter of 2009 to $45.8 million from $62.1 million in the same period last year. Higher sales of wide and narrow-body cargo handling systems to OEM’s were more than offset by lower cargo systems sales for aftermarket conversions, lower cargo spares, components and repairs sales, and lower demand for cargo containers and actuators due to the current weakness in the commercial aviation sector, all of which contributed to the 23% decline in core revenue during the quarter. An unfavorable currency impact of 3% also contributed to the decline.
Segment operating profit decreased in the third quarter of 2009 to $4.6 million from $7.3 million in the same period last year. This was principally due to the lower sales volumes across all product lines noted above, including an unfavorable mix of lower margin systems sales compared with higher margin spares and repairs, that was partially offset by cost reduction initiatives. Segment operating margin for the quarter was 9.9% versus 11.8% in the prior year quarter.
Commercial Segment
Commercial Segment revenues declined 20% in the third quarter of 2009 to $59.8 million from $74.6 million in the same period last year. Reductions in core revenue, which accounted for 16% of the decline, were principally a result of a decrease in sales of rigging and Marine OEM products partially offset by sales of the modern burner unit to the U.S. military. The impact of the Marine gauge business divestiture contributed 4% to the decline.
During the third quarter of 2009 operating profit in the Commercial Segment declined to $4.6 million from $4.9 million in the prior year period, principally due to the lower sales volumes, which more than offset the impact from the elimination of approximately $3 million of operating costs compared to the prior year quarter. Segment operating margin for the quarter improved to 7.8% versus 6.5% in the prior year quarter.
Power Systems Transaction
During the third quarter of 2009, the Company completed the sale of its Power Systems business for $14.5 million and realized a loss of $3.3 million, net of tax. During the second quarter, the Company recognized a non-cash goodwill impairment charge of $25.1 million to adjust the carrying value of these operations to their estimated fair value. Beginning in the third quarter of 2009, the results of the Company’s Power Systems operations have been classified as discontinued operations and, as such, have been excluded from the Company’s results from continuing operations for all periods presented.
Nine Month Results
For the first nine months of 2009, Teleflex revenues from continuing operations decreased 12% to $1,375.1 million from $1,569.5 million in the first nine months of 2008. Income from continuing operations excluding special items increased 12% to $105.1 million or $2.63 per diluted share, compared to $94.0 million or $2.36 per diluted share in the prior year. Income from continuing operations attributable to common shareholders including special items increased to $93.8 million or $2.35 per diluted share compared to $77.3 million or $1.94 per diluted share in the prior year.