TFX » Topics » Results of Operations

This excerpt taken from the TFX 10-Q filed Oct 28, 2008.
Results of Operations
 
We are focused on achieving consistent and sustainable growth through the development of new products, expansion of market share, moving existing products into new geographies, and through selected acquisitions which enhance or expedite our development initiatives and our ability to increase market share. The discussion of growth from acquisitions included below reflects the impact of a purchased company up to twelve months from the date of acquisition. Activity after 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 and the comparable activity of divested companies within the most recent twelve-month period.
 
Comparison of the three and nine month periods ended September 28, 2008 and September 30, 2007
 
Revenues increased approximately 30% in the third quarter of 2008 to $595.9 million from $458.6 million in the same period of a year ago. Businesses acquired in 2007 were responsible for the entire increase. Revenue from core businesses declined 4% during the quarter which was largely offset by a 3% favorable impact on revenues from foreign currency translation. For the first nine months of 2008, revenues increased approximately 35% to $1.8 billion from $1.4 billion in the first nine months of 2007. Businesses acquired in the past twelve months contributed 34% to this increase in revenues and foreign currency translation contributed 4% to revenue growth, while revenues from core business declined 2% and divestitures reduced revenues by another 1%. Core revenue decline in the third quarter and first nine months of 2008 was primarily due to a significant decrease in sales volume for auxiliary power units sold into the North American truck market and sales of recreational marine products, and to a lesser extent, weaker sales of surgical and critical care products in North America.
 
Gross profit as a percentage of revenues increased to 40.1% in the third quarter of 2008 from 33.6% in the third quarter of 2007. For the first nine months of 2008, gross profit as a percentage of revenues increased to 40.0% compared to 35.4% for the nine months of 2007. For both the three month and nine month periods, the increases were largely due to the addition of higher margin Arrow critical care product lines and improved margins in the Aerospace Segment’s engine repairs business. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues were 24.2% for the three months ended September 28, 2008 compared to 20.9% for the three months ended September 30, 2007 and 25.2% for the first nine months of 2008 compared to 22.0% for the first nine months of 2007, principally due to the acquisition of Arrow.


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Interest expense increased significantly in the third quarter and first nine months of 2008 compared to the same periods in 2007 principally as a result of the debt incurred in connection with the Arrow acquisition. Interest income decreased in the third quarter and first nine months of 2008 compared to the same periods in 2007 primarily due to lower amounts of invested funds combined with lower average interest rates. The effective tax rate for the three months ending September 28, 2008 was 20.9% compared to 215.9% for the corresponding prior year period. For the nine months ending September 28, 2008 the effective tax rate was 24.2% compared to 83.8% for the corresponding prior year period. The rate decrease in both periods reflects the discrete income tax charge in the third quarter of 2007 of approximately $90.2 million in anticipation of the Arrow acquisition. Specifically, in connection with funding the acquisition of Arrow, the Company (i) repatriated approximately $197.0 million of cash from foreign subsidiaries which had previously been deemed to be permanently reinvested in the respective foreign jurisdictions; and (ii) changed its position with respect to certain additional previously untaxed foreign earnings to treat these earnings as no longer permanently reinvested. Minority interest in consolidated subsidiaries increased $2.4 million and $4.8 million in the third quarter and first nine months of 2008, respectively compared to the same periods in 2007 due to increased profits during the third quarter of 2008 from consolidated entities that are not wholly-owned.
 
In connection with the acquisition of Arrow, we have formulated a plan related to the future integration of Arrow and our Medical businesses. The integration plan focuses on the closure of Arrow corporate functions and the consolidation of manufacturing, sales, marketing and distribution functions in North America, Europe and Asia. Costs related to actions that affect employees and facilities of Arrow have been included in the allocation of the purchase price of Arrow. Costs related to actions that affect employees and facilities of Teleflex are charged to earnings and included in restructuring and impairment charges within the condensed consolidated statement of operations. These costs amounted to approximately $0.4 million and $11.2 million during the three and nine months ended September 28, 2008, respectively. As of September 28, 2008, we estimate that the aggregate of future restructuring and impairment charges that we will incur are approximately $22.0 — $25.0 million in 2008 and 2009 in connection with the Arrow integration plan. Of this amount, $10.3 — $11.3 million relates to employee termination costs, $10.5 — $11.5 million relates to costs associated with the termination of leases and certain distribution agreements and $1.2 — $2.2 million relates to other restructuring costs. The Company has also incurred restructuring related costs in the Medical Segment which do not qualify for classification as restructuring costs. For the three and nine months ended September 28, 2008, these costs amounted to $2.1 million and $5.9 million, respectively and are reported in the results of the Medical Segment’s operating profit in selling, engineering and administrative expenses.
 
In June 2006, we began certain restructuring initiatives that affect all three of our operating segments. These initiatives involved the consolidation of operations and a related reduction in workforce at several of our facilities in Europe and North America. We determined to undertake these initiatives to improve operating performance and to better leverage our existing resources. The charges, including changes in estimates, associated with the 2006 restructuring program that are included in restructuring and impairment charges within the condensed consolidated statement of operations amounted to approximately $38 thousand and $1.1 million for the three month periods ended September 28, 2008 and September 30, 2007, respectively and $705 thousand and $2.0 million for the nine month periods ended September 28, 2008 and September 30, 2007, respectively. As of September 28, 2008, we expect to incur approximately $228 thousand in contract termination costs under our 2006 restructuring program.
 
For additional information regarding our restructuring programs, see Note 4 to our Condensed Consolidated Financial Statements included in this report.


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This excerpt taken from the TFX 10-Q filed Jul 29, 2008.
Results of Operations
 
We are focused on achieving consistent and sustainable growth through the development of new products, expansion of market share, moving existing products into new geographies, and through selected acquisitions which enhance or expedite our development initiatives and our ability to increase market share. The discussion of growth from acquisitions included below reflects the impact of a purchased company up to 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 and the comparable activity of divested companies within the most recent twelve-month period.
 
Comparison of the three and six month periods ended June 29, 2008 and July 1, 2007
 
Revenues increased approximately 38% in the second quarter of 2008 to $624.1 million from $452.3 million in the same period of a year ago. Businesses acquired in 2007 contributed 34% to this increase in revenues and foreign currency benefited revenue growth by 4%. Core revenue growth was flat for the second quarter. For the first six months of 2008, revenues increased approximately 38% to $1.2 billion from $0.9 billion in the first six months of 2007. Businesses acquired in the past twelve months contributed 35% to this increase in revenues and foreign currency contributed 5% to revenue growth, while revenues from core business declined 1% and divestitures reduced revenues another 1%. Core revenue decline in the first six months of 2008 was primarily due to a significant decrease in sales volume for auxiliary power units sold into the North American truck market, and to a lesser extent, weaker sales of certain recreational marine products in North America, when compared to the corresponding prior year periods.
 
Gross profit as a percentage of revenues increased to 41.4% in the second quarter of 2008 from 36.1% in the second quarter of 2007. For the first six months of 2008, gross profit as a percentage of revenues increased to 40.0% compared to 36.4% for the six months of 2007. For both the three month and six month periods, the increases were largely due to the addition of higher margin Arrow critical care product lines and improved margins in the Aerospace Segment’s engine repairs business. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues were 26.1% for the three months ended June 29, 2008 compared to 22.9% for the three months ended July 1, 2007 and 25.6% for the first six months of 2008 compared to 22.6% for the first six months of 2007, principally due to the acquisition of Arrow.
 
Interest expense increased significantly in the second quarter and first six months of 2008 compared to the same periods in 2007 principally as a result of the debt incurred in connection with the Arrow acquisition. Interest


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income decreased in the second quarter and first six months of 2008 compared to the same periods in 2007 primarily due to lower amounts of invested funds combined with lower average interest rates. The effective tax rate for the three months ending June 29, 2008 was 24.7% compared to 18.7% for the corresponding prior year period. For the six months ending June 29, 2008 the effective tax rate was 26.3% compared to 22.7% for the corresponding prior year period. The rate increase in both periods reflects a higher concentration of US taxable income in 2008 due to the Arrow acquisition and the impact of a tax credit for research and development in 2007. Minority interest in consolidated subsidiaries increased $2.4 million in the second quarter and first six months of 2008 compared to the same periods in 2007 due to increased profits during the second quarter of 2008 from consolidated entities that are not wholly-owned.
 
In connection with the acquisition of Arrow, we have formulated a plan related to the future integration of Arrow and our Medical businesses. The integration plan focuses on the closure of Arrow corporate functions and the consolidation of manufacturing, sales, marketing, and distribution functions in North America, Europe and Asia. In as much as the actions affect employees and facilities of Arrow, the resultant costs have been included in the allocation of the purchase price of Arrow. Costs related to actions that affect employees and facilities of Teleflex are charged to earnings and included in “restructuring and impairment charges” within the condensed consolidated statement of operations and amounted to approximately $2.6 million and $11.4 million during the three and six months ended June 29, 2008, respectively. As of June 29, 2008, we expect to incur future restructuring costs of between $18.4 — $21.4 million when actions are taken or costs are incurred in 2008 and 2009 in connection with this plan. Of this amount, $6.4 — $7.4 million relates to employee termination costs, $10.5 — $11.5 million relates to lease termination costs as well as termination of certain distribution agreements and $1.5 — $2.5 million relates to other restructuring costs. In connection with the Arrow integration and restructuring activities, the Company has incurred restructuring related costs in the Medical Segment which do not qualify as restructuring costs. These costs are reported in the results of the Medical Segment’s operating profit in selling, engineering and administrative expenses.
 
In June 2006, we began certain restructuring initiatives that affect all three of our operating segments. These initiatives involve the consolidation of operations and a related reduction in workforce at several of our facilities in Europe and North America. We determined to undertake these initiatives to improve operating performance and to better leverage our existing resources. The charges, including changes in estimates, associated with the 2006 restructuring program that are included in restructuring and impairment charges resulted in a credit of $143 thousand and a charge of $849 thousand for the three month periods ended June 29, 2008 and July 1, 2007, respectively and charges of $667 thousand and $919 thousand for the six month periods ended June 29, 2008 and July 1, 2007, respectively. As of June 29, 2008, future restructuring costs associated with our 2006 restructuring program are related to contract termination costs of approximately $266 thousand.
 
For additional information regarding our restructuring programs, see Note 4 to our Condensed Consolidated Financial statements included in this report.


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This excerpt taken from the TFX 10-Q filed Apr 29, 2008.
Results of Operations
 
Discussion of growth from acquisitions reflects the impact of a purchased company up to 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 and the comparable activity of divested companies within the most recent twelve-month period.
 
Comparison of the three months ended March 30, 2008 and April 1, 2007
 
Revenues increased approximately 37% in the first quarter of 2008 to $604.5 million from $440.3 million in the same period of a year ago. We are focused on achieving consistent and sustainable growth through the development of new products, expansion of market share, moving existing products into new geographies, and through selected acquisitions which enhance or expedite our development initiatives and our ability to grow market share. When compared with the same period last year, businesses acquired in 2007 contributed 36% to revenue growth and foreign currency benefited revenue growth by 4%. These increases were partially offset by a 1% negative impact from divestitures and a 2% decline in core revenues. Core revenues declined primarily due to a dramatic decrease in sales volume for auxiliary power units sold into the North American truck market, and to a lesser extent, weaker sales of certain medical products in North America.
 
Gross profit as a percentage of revenues increased to 38.5% in the first quarter of 2008 from 36.7% in the first quarter of 2007 largely due to the addition of higher margin Arrow critical care product lines. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues were 25.0% for the first three months of 2008 compared to 22.3% for the first three months of 2007, principally due to the acquisition of Arrow.
 
Interest expense increased significantly in the first quarter of 2008 compared to the same period in 2007 principally as a result of the debt incurred in correction with the Arrow acquisition. Interest income decreased in the first quarter of 2008 compared to the same period in 2007 primarily due to lower amounts of invested funds combined with lower average interest rates. The higher effective tax rate for the three months ending March 30, 2008 of 28.7% compared to the rate of 26.4% during the same period in 2007 reflected the absence of the availability of a tax credit for research and development in 2008. Minority interest in consolidated subsidiaries was essentially unchanged from the same period in 2007 reflecting insignificant year on year change in profits from consolidated entities that are not wholly-owned.
 
In connection with the acquisition of Arrow, the Company has formulated a plan related to the future integration of Arrow and the Company’s Medical businesses. The integration plan focuses on the closure of Arrow corporate functions and the consolidation of manufacturing, sales, marketing, and distribution functions in North America, Europe and Asia. In as much as the actions affect employees and facilities of Arrow, the resultant costs have been included in the allocation of the purchase price of Arrow. Costs related to actions that affect employees and facilities of Teleflex are charged to earnings and included in “restructuring and impairment charges” within the condensed consolidated statement of operations and amounted to approximately $8.0 million during the three months ended March 30, 2008. As of March 30, 2008, the Company expects to incur future restructuring costs of between $18.0 — $22.0 million when actions are taken or costs are incurred in 2008 and 2009 in connection with this plan. Of this amount, $5.5 — $7.0 million relates to employee termination costs, $1.5 — $2.5 million relates to


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facility closure costs and $11.0 — $12.5 million relates to lease termination costs as well as termination of certain distribution agreements and other actions.
 
In June 2006, we began certain restructuring initiatives that affect all three of our operating segments. These initiatives involve the consolidation of operations and a related reduction in workforce at several of our facilities in Europe and North America. We have determined to undertake these initiatives as a means to improving operating performance and to better leverage our existing resources. The charges, including changes in estimates, associated with the 2006 restructuring program that are included in restructuring and impairment charges during the first three months of both 2008 and 2007 approximated $0.8 million and $0.1 million, respectively. As of March 30, 2008, we expect to incur future restructuring costs associated with our 2006 restructuring program of between $0.7 million and $1.0 million in our Medical Segment through the third quarter of 2008.
 
For additional information regarding our restructuring programs, see Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 
This excerpt taken from the TFX 10-Q filed Nov 1, 2007.
Results of Operations
 
Discussion of growth from acquisitions reflects the impact of a purchased company up to 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 and the comparable activity of divested companies within the most recent twelve-month period. The following comparisons exclude the impact of the TAMG business and a small medical business, which have been presented in our condensed consolidated financial results as discontinued operations.
 
Comparison of the three and nine months ended September 30, 2007 and September 24, 2006
 
Revenues increased approximately 8% in the third quarter of 2007 to $656.1 million from $605.5 million in the third quarter of 2006. This increase was due to core growth, currency movements and acquisitions of 3%, 3% and 2%, respectively. Revenues increased approximately 8% in the first nine months of 2007 to $2.0 billion from $1.86 billion in the first nine months of 2006. This increase was due to an increase of 3% from core growth, 3% from currency movements and 2% from acquisitions. The Commercial, Medical and Aerospace segments comprised 48%, 35% and 17% of our revenues, respectively, for the three months ended September 30, 2007 and comprised 49%, 34% and 17% of our revenues, respectively, for the first nine months of 2007.
 
Gross profit as a percentage of revenues declined to 29.5% in the third quarter of 2007 from 29.8% in the third quarter of 2006 largely due to approximately $4 million in provisions for warranty and other costs related to prior generation auxiliary power units sold to the North American truck market and to approximately $0.8 million of one-time purchase accounting adjustments in the Commercial Segment. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues were 19.7% for the first nine months of 2007 compared to 19.5% for the first nine months of 2006, and were 19.3% of revenues in the third quarter of 2007 compared to 18.6% during the same period of a year ago. Higher operating expenses were primarily attributable to engineering expense in advance of new product launches in businesses serving the marine, automotive and industrial markets, startup costs of a Medical Segment European Shared Services center, quality assurance investments made in the Medical Segment and the impact of acquisitions and currency movements.
 
Interest expense declined slightly in the third quarter and first nine months of 2007 principally as a result of lower debt balances. Interest income increased in the third quarter and first nine months of 2007 primarily due to higher amounts of invested funds. The higher effective tax rate for the three and nine months ending September 30, 2007, reflected discrete income tax charges incurred in anticipation of the Arrow acquisition. Specifically, in connection with funding the acquisition of Arrow, the Company (i) repatriated approximately $197.0 million of cash from foreign subsidiaries which had previously been deemed to be permanently reinvested in the respective foreign jurisdictions; and (ii) changed its position with respect to certain additional previously untaxed foreign earnings to treat these earnings as no longer permanently reinvested. These items resulted in a discrete income tax charge in the third quarter of 2007 of approximately $90.2 million. Also, the Company remeasured certain deferred tax assets and liabilities as a result of changes in enacted tax rates, resulting in the recognition of a tax benefit of approximately $2.8 million during the third quarter of 2007. Minority interest in consolidated subsidiaries increased $1.1 million and $4.2 million in the third quarter and first nine months of 2007, respectively, due to increased profits from consolidated entities that are not wholly-owned. Loss from continuing operations for the third quarter of 2007 was $56.8 million, compared to income from continuing operations of $34.7 million for the third quarter of 2006,


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reflecting the discrete charges to income tax expense in the third quarter of 2007. Income from continuing operations for the first nine months of 2007 was $29.2 million, a decrease of $67.0 million from the first nine months of 2006. Loss per share from continuing operations was ($1.44) in the third quarter of 2007 compared to diluted earnings per of $0.88 from the third quarter of 2006. Diluted earnings per share from continuing operations for the nine months ended September 30, 2007 was $0.74 a decrease of $1.65 from the comparable period last year.
 
We adopted the provisions of FASB Interpretation, or FIN, No. 48 “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” on January 1, 2007. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards, or SFAS, No. 109, “Accounting for Income Taxes.” FIN No. 48 requires that the impact of a tax position be recognized in the financial statements if it is more likely than not that the tax position will be sustained on tax audit, based on the technical merits of the position. FIN No. 48 also provides guidance on derecognition of tax positions that do not meet the “more likely than not” standard, classification of tax assets and liabilities, interest and penalties, accounting in interim periods, disclosure and transition. In connection with our adoption of the provisions of FIN No. 48, we recognized a charge of approximately $13.2 million to retained earnings.
 
For additional information regarding our uncertain tax positions, see Note 11 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 
In June 2006, we began certain restructuring initiatives that affect all three of our operating segments. These initiatives involve the consolidation of operations and a related reduction in workforce at several of our facilities in Europe and North America. We have determined to undertake these initiatives as a means to improving operating performance and to better leverage our existing resources. The charges, including changes in estimates, associated with the 2006 restructuring program that are included in restructuring and impairment charges during the first nine months of both 2007 and 2006 approximated $2.6 million, respectively. As of September 30, 2007, we expect to incur future restructuring costs associated with our 2006 restructuring program of between $3.0 million and $4.0 million in our Commercial, Medical and Aerospace segments through the second quarter of 2008.
 
During the first quarter of 2006, we began a restructuring activity in our Aerospace Segment. The actions related to the closure of a manufacturing facility, termination of employees and relocation of operations. No charges associated with this activity were included in restructuring and impairment charges during the third quarter and first nine months of 2007. The charges, including changes in estimates, associated with this activity that are included in restructuring and impairment charges during the third quarter first nine months of 2006 totaled $0.3 million and $0.6 million, respectively. We do not expect to incur any additional restructuring costs associated with this activity.
 
For additional information regarding our restructuring programs, see Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 
This excerpt taken from the TFX 10-Q filed Jul 31, 2007.
Results of Operations
 
Discussion of growth from acquisitions reflects the impact of a purchased company up to 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 and the comparable activity of divested companies within the most recent twelve-month period. The following comparisons exclude the impact of the TAMG business and a small medical business, which have been presented in our condensed consolidated financial results as discontinued operations.
 
Comparison of the three and six months ended July 1, 2007 and June 25, 2006
 
Revenues increased 4.5% in the second quarter of 2007 to $679.7 million from $650.2 million in the second quarter of 2006. This increase was due entirely to currency movements and acquisitions. Revenues increased 7.8% in the first six months of 2007 to $1.35 billion from $1.25 billion in the first six months of 2006. This increase was due to an increase of 4% from core growth, 3% from currency movements and 1% from acquisitions. The Commercial, Medical and Aerospace segments comprised 51%, 33% and 16% of our revenues, respectively, for both the second quarter and first six months of 2007.
 
Gross profit as a percentage of revenues improved to 31.3% in the second quarter of 2007 from 30.3% in the second quarter of 2006. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues were 19.9% for the first six months of 2007 and 2006, respectively, however they were 20.2% of revenues in the second quarter of 2007 compared to 19.6% during the same period of a year ago. Higher operating expenses were primarily attributable to engineering costs in connection with new automotive and marine platforms, startup costs of a European Shared Services center, quality assurance investments made in the Medical Segment and higher Corporate expenses during the second quarter of 2007.
 
Interest expense declined in the second quarter and first six months of 2007 principally as a result of lower debt balances. Interest income increased in the second quarter and first six months of 2007 primarily due to higher amounts of invested funds. The effective income tax rate was 22.6% and 25.8% in the second quarter and first six months of 2007, respectively, compared with 20.2% and 23.7% in the second quarter and first six months of 2006, respectively. The lower effective tax rate in the second quarter of 2006, reflected a correction of $6.4 million related to tax balance sheet accounts that were incorrectly stated as a result of discrete errors in our tax accounting analyses and computations in prior periods. Minority interest in consolidated subsidiaries increased $1.3 million and $3.1 million in the second quarter and first six months of 2007, respectively, due to increased profits from consolidated entities that are not wholly-owned. Income from continuing operations for the second quarter of 2007 was $43.0 million, an increase of 26.5% from the second quarter of 2006. Income from continuing operations for the first six months of 2007 was $86.1 million, an increase of 39.9% from the first six months of 2006. Diluted earnings per share from continuing operations increased 28.6% to $1.08 for the second quarter of 2007 and increased 43.4% to $2.18 for the first six months of 2007.
 
We adopted the provisions of FASB Interpretation, or FIN, No. 48 “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” on January 1, 2007. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards, or SFAS, No. 109, “Accounting for Income Taxes.” FIN No. 48 requires that the impact of a tax position be recognized in the financial statements if it is more likely than not that the tax position will be sustained on tax audit, based on the technical merits of the position. FIN No. 48 also provides guidance on derecognition of tax positions that do not meet the “more likely than not” standard, classification of tax assets and liabilities, interest and penalties, accounting in interim periods, disclosure and transition. In connection with our adoption of the provisions of FIN No. 48, we recognized a charge of approximately $13.2 million to retained earnings.
 
For additional information regarding more complete discussion of our uncertain tax positions, see Note 11 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 
In June 2006, we began certain restructuring initiatives that affect all three of our operating segments. These initiatives involve the consolidation of operations and a related reduction in workforce at several of our facilities in


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Europe and North America. We have determined to undertake these initiatives as a means to improving operating performance and to better leverage our existing resources. The charges, including changes in estimates, associated with the 2006 restructuring program that are included in restructuring and impairment charges during the second quarter of 2007 and 2006 totaled $0.9 million and $1.8 million, respectively. As of July 1, 2007, we expect to incur future restructuring costs associated with our 2006 restructuring program of between $4.2 million and $5.8 million in our Commercial, Medical and Aerospace segments during 2007.
 
During the first quarter of 2006, we began a restructuring activity in our Aerospace Segment. The actions related to the closure of a manufacturing facility, termination of employees and relocation of operations. The charges, including changes in estimates, associated with this activity that are included in restructuring and impairment charges during the second quarter of 2007 and 2006 totaled $0 and $0.1 million, respectively. The charges, including changes in estimates, associated with this activity that are included in restructuring and impairment charges during the first six months of 2007 and 2006 totaled $0 and $0.3 million, respectively. We do not expect to incur any additional restructuring costs associated with this activity.
 
During the fourth quarter of 2004, we announced and commenced implementation of a restructuring and divestiture program designed to improve future operating performance and position us for future earnings growth. The actions have included exiting or divesting non-core or low performing businesses, consolidating manufacturing operations and reorganizing administrative functions to enable businesses to share services. The charges, including changes in estimates, associated with the 2004 restructuring and divestiture program for continuing operations that are included in restructuring and impairment charges during the second quarter and first six months of 2007 totaled $0.2 million and $0.6 million, respectively, and were attributable to our Medical Segment. As of July 1, 2007, we expect to incur future restructuring costs associated with our 2004 restructuring and divestiture program of between $0.1 million and $0.2 million in our Medical Segment during 2007.
 
For additional information regarding our restructuring programs, see Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 
This excerpt taken from the TFX 10-Q filed May 1, 2007.
Results of Operations
 
Discussion of growth from acquisitions reflects the impact of a purchased company up to 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 and the comparable activity of divested companies within the most recent twelve-month period. The following comparisons exclude the impact of the TAMG business and a small medical business, which have been presented in our condensed consolidated financial results as discontinued operations.


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Comparison of the three months ended April 1, 2007 and March 26, 2006
 
Revenues increased 11% in the first quarter of 2007 to $667.3 million from $599.9 million in the first quarter of 2006. The increase was due to increases of 8% from core growth and 3% from currency. The Commercial, Medical and Aerospace segments comprised 49%, 34% and 17% of our first quarter 2007 revenues, respectively.
 
Materials, labor and other product costs as a percentage of revenues improved to 68.6% in the first quarter of 2007 from 70.2% in the first quarter of 2006. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues improved to 19.6% in the first quarter of 2007 from 20.2% in the first quarter of 2006. These improvements were due primarily to the correction of various temporary operational inefficiencies in our Medical Segment that occurred in the first half of 2006, the benefits of our restructuring initiatives and other cost reduction efforts.
 
Interest expense declined in the first quarter of 2007 principally as a result of lower debt balances. Interest income declined in the first quarter of 2007 primarily due to less favorable interest rates compared to the prior period. The effective income tax rate was 28.70% in the first quarter of 2007 compared with 27.61% in the first quarter of 2006. Minority interest in consolidated subsidiaries increased $1.8 million in the first quarter of 2007, due to increased profits from our entities that are not wholly-owned. Net income for the first quarter of 2007 was $44.3 million compared to $29.1 million for the first quarter of 2006. Diluted earnings per share increased 56% to $1.12 for the first quarter of 2007.
 
We adopted the provisions of Interpretation, or FIN, No. 48 “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” on January 1, 2007. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards, or SFAS, No. 109, “Accounting for Income Taxes.” FIN No. 48 requires that the impact of a tax position be recognized in the financial statements if it is more likely than not that the tax position will be sustained on tax audit, based on the technical merits of the position. FIN No. 48 also provides guidance on derecognition of tax positions that do not meet the “more likely than not” standard, classification of tax assets and liabilities, interest and penalties, accounting in interim periods, disclosure and transition. In connection with our adoption of the provisions of FIN No. 48, we recognized a charge of approximately $13.2 million to retained earnings.
 
For a more complete discussion of our uncertain tax positions, see Note 11 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 
In June 2006, we began certain restructuring initiatives that affect all three of our operating segments. These initiatives involve the consolidation of operations and a related reduction in workforce at several of our facilities in Europe and North America. We have determined to undertake these initiatives as a means to improving operating performance and to better leverage our existing resources. The charges, including changes in estimates, associated with the 2006 restructuring program that are included in restructuring and impairment charges during the first quarter of 2007 totaled $0.1 million. As of April 1, 2007, we expect to incur future restructuring costs associated with our 2006 restructuring program of between $6.6 million and $9.0 million in our Commercial, Medical and Aerospace segments during 2007.
 
During the first quarter of 2006, we began a restructuring activity in our Aerospace Segment. The actions related to the closure of a manufacturing facility, termination of employees and relocation of operations. The charges associated with this activity that are included in restructuring and impairment charges during the first quarter of 2007 and the first quarter of 2006 totaled $0 and $0.2 million, respectively. We do not expect to incur future restructuring costs associated with this activity.
 
During the fourth quarter of 2004, we announced and commenced implementation of a restructuring and divestiture program designed to improve future operating performance and position us for future earnings growth. The actions have included exiting or divesting non-core or low performing businesses, consolidating manufacturing operations and reorganizing administrative functions to enable businesses to share services. The charges, including changes in estimates, associated with the 2004 restructuring and divestiture program for continuing operations that are included in restructuring and impairment charges during the first quarter of 2007 and the first quarter of 2006 totaled $0.4 million and $4.3 million, respectively, and were attributable to our Medical Segment. As of April 1,


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2007, we expect to incur future restructuring costs associated with our 2004 restructuring and divestiture program of between $0.3 million and $0.7 million in our Medical Segment during 2007.
 
For a more complete discussion of our restructuring programs, see Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 
This excerpt taken from the TFX 10-K filed Mar 1, 2007.
Results of Operations
 
Discussion of growth from acquisitions reflects the impact of a purchased company up to 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, the impact of eliminating the one-month reporting lag for certain of our foreign operations and the comparable activity of divested companies within the most recent twelve-month period. The following comparisons exclude the impact of the automotive pedal systems business, Sermatech International business, European medical product sterilization business and small medical business, which have been presented in our consolidated financial results as discontinued operations.
 
  Comparison of 2006 and 2005
 
Revenues increased 5% in 2006 to $2.65 billion from $2.51 billion in 2005, principally due to core growth. The Commercial, Medical and Aerospace segments comprised 47%, 33% and 20% of our 2006 revenues, respectively.
 
Materials, labor and other product costs as a percentage of revenues improved to 70.7% in 2006 from 71.8% in 2005, due primarily to the benefits of our restructuring initiatives and other cost reduction efforts. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues increased to 18.6% in 2006 compared with 17.9% in 2005, due primarily to $10.4 million of costs associated with the initial phases of an information systems implementation program in our Medical Segment, $6.8 million of stock-based compensation expensed under SFAS No. 123(R) and various temporary inefficiencies in our Medical Segment during the first half of 2006.
 
Interest expense declined in 2006 principally as a result of lower debt balances. Interest income increased in 2006 primarily due to higher average cash balances and more favorable interest rates compared to the prior period. The effective income tax rate was 24.72% in 2006 compared with 22.99% 2005. The increase in the effective income tax rate primarily reflects the favorable impact in 2005 of the American Jobs Creation Act, or AJCA, repatriation benefit. Minority interest in consolidated subsidiaries increased $4.6 million in 2006 due to increased profits from our entities that are not wholly-owned. Net income for 2006 was $139.4 million compared to $138.8 million for 2005. Diluted earnings per share increased 3% to $3.49 for 2006.
 
On December 26, 2005, we adopted the provisions of SFAS No. 123(R), “Share-Based Payment,” which requires the measurement and recognition of compensation expense for all stock-based awards made to employees based on estimated fair values. SFAS No. 123(R) supersedes previous accounting under Accounting Principles Board, or APB, Opinion No. 25, “Accounting for Stock Issued to Employees,” for periods beginning in fiscal 2006. In March 2005, the SEC issued Staff Accounting Bulletin, or SAB, No. 107, providing supplemental implementation guidance for SFAS 123(R). We have applied the provisions of SAB No. 107 in our adoption of SFAS No. 123(R).
 
SFAS No. 123(R) requires companies to estimate the fair value of stock-based awards on the date of grant using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods. We adopted SFAS No. 123(R) using the modified prospective application method, which requires the application of the standard starting from December 26, 2005, the first day of our 2006 fiscal year. Our consolidated financial statements for 2006 reflect the impact of SFAS No. 123(R).


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Stock-based compensation expense related to employee stock options recognized under SFAS No. 123(R) for 2006 was $6.8 million and is included in selling, engineering and administrative expenses. The total income tax benefit recognized for share-based compensation arrangements for 2006 was $1.4 million. As of December 31, 2006, total unamortized stock-based compensation cost related to non-vested stock options, net of expected forfeitures, was $9.2 million, which is expected to be recognized over a weighted-average period of 1.9 years.
 
Prior to the adoption of SFAS No. 123(R), we accounted for stock-based awards to employees using the intrinsic value method in accordance with APB No. 25, as allowed under SFAS No. 123, “Accounting for Stock-Based Compensation.” Under the intrinsic value method, no stock-based compensation expense for employee stock options had been recognized in our consolidated statements of operations because the exercise price of our stock options granted to employees equaled the fair market value of the underlying stock at the date of grant. In accordance with the modified prospective transition method we used in adopting SFAS No. 123(R), our results of operations prior to fiscal 2006 have not been restated to reflect, and do not include, the impact of SFAS No. 123(R).
 
Additional information regarding stock-based compensation and our stock compensation plans is presented in Notes 1 and 11 to our consolidated financial statements included in this Annual Report on Form 10-K.
 
In June 2006, we began certain restructuring initiatives that affect all three of our operating segments. These initiatives involve the consolidation of operations and a related reduction in workforce at several of our facilities in Europe and North America. We have determined to undertake these initiatives as a means to improving operating performance and to better leverage our existing resources. The charges associated with the 2006 restructuring program that are included in restructuring and impairment charges during 2006 totaled $5.9 million, of which 55%, 26% and 19% were attributable to our Commercial, Medical and Aerospace segments, respectively. As of December 31, 2006, we expect to incur future restructuring costs associated with our 2006 restructuring program of between $3.0 million and $5.4 million in our Commercial, Medical and Aerospace segments over the next two quarters.
 
During the first quarter of 2006, we began a restructuring activity in our Aerospace Segment. The actions relate to the closure of a manufacturing facility, termination of employees and relocation of operations. The charges associated with this activity that are included in restructuring and impairment charges during 2006 totaled $0.6 million. We do not expect to incur future restructuring costs associated with this activity.
 
During the fourth quarter of 2004, we announced and commenced implementation of a restructuring and divestiture program designed to improve future operating performance and position us for future earnings growth. The actions have included exiting or divesting non-core or low performing businesses, consolidating manufacturing operations and reorganizing administrative functions to enable businesses to share services. The charges, including changes in estimates, associated with the 2004 restructuring and divestiture program for continuing operations that are included in restructuring and impairment charges during 2006, 2005 and 2004 totaled $10.4 million, $27.1 million and $67.6 million, respectively. The $10.4 million was attributable to our Medical Segment. Of the $27.1 million, 13%, 76% and 11% were attributable to our Commercial, Medical and Aerospace segments, respectively. Of the $67.6 million, 31%, 15% and 54% were attributable to our Commercial, Medical and Aerospace segments, respectively. As of December 31, 2006, we expect to incur future restructuring costs associated with our 2004 restructuring and divestiture program of between $1.6 million and $3.2 million in our Medical Segment during 2007.
 
Certain costs associated with the 2004 restructuring and divestiture program are not included in restructuring and impairment charges. All inventory adjustments that resulted from the 2004 restructuring and divestiture program and certain other costs associated with closing out businesses during 2005 and 2004 are included in materials, labor and other product costs and totaled $2.0 million and $17.0 million, respectively. The $2.0 million in costs for 2005 related to our Aerospace Segment. Of the $17.0 million in costs for 2004, $4.5 million and $12.5 million were attributed to our Commercial and Aerospace segments, respectively.


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The cost savings from our restructuring programs were lower than expected in 2006 due primarily to implementation inefficiencies in our Medical Segment during the first half of the year, but we began to experience our anticipated rate of savings during the second half of the year.
 
For a more complete discussion of our restructuring programs, see Note 4 to our consolidated financial statements included in this Annual Report on Form 10-K.
 
We performed an annual impairment test of our recorded goodwill and indefinite-lived intangible assets in the fourth quarter of 2006 and determined that a portion of our goodwill was impaired. We recorded a charge of $1.0 million, which is included in restructuring and impairment charges. Also during 2006, we determined that three minority held investments and certain fixed assets were impaired and recorded an aggregate charge of $7.4 million, which is included in restructuring and impairment charges.
 
  Comparison of 2005 and 2004
 
Revenues increased 5% in 2005 to $2.51 billion from $2.39 billion in 2004. This increase was due to increases of 5% from core growth and 4% from acquisitions, offset, in part, by decreases of 3% from dispositions and 1% from the impact of eliminating the one-month reporting lag in 2004 for certain of our foreign operations. The Commercial, Medical and Aerospace segments comprised 47%, 33% and 20% of our 2005 revenues, respectively.
 
Materials, labor and other product costs as a percentage of revenues increased to 71.8% in 2005 compared with 71.3% in 2004 due primarily to the impact of duplicate costs and inefficiencies related to the transfer of products between facilities in the Commercial Segment associated with the restructuring program. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues declined to 17.9% in 2005 compared with 20.4% in 2004 due primarily to the continuing reduction of facilities and supporting infrastructure costs and decreased corporate expenses relative to higher revenues.
 
Interest expense increased in 2005 principally from higher acquisition related debt balances in the first half of 2005. Interest income increased in 2005 primarily due to higher average cash balances, related to increased proceeds received from sales of businesses and assets in 2005. The effective income tax rate was 22.99% in 2005 compared with 13.17% in 2004. The higher rate in 2005 was primarily the result of the increase in foreign earnings for businesses located in higher-taxed jurisdictions. Minority interest in consolidated subsidiaries increased $1.1 million in 2005 due to increased profits from our entities that are not wholly-owned. Net income for 2005 was $138.8 million, an increase of $129.3 million from 2004, due primarily to a 60% decrease in restructuring costs and to the gain on the sale of the Sermatech business. Diluted earnings per share increased $3.15 to $3.39, and includes the net gain on sales of businesses and assets and the cost of restructuring and discontinued operations.
 
This excerpt taken from the TFX 10-Q filed Oct 26, 2006.
Results of Operations
 
Discussion of growth from acquisitions reflects the impact of a purchased company up to 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 and the comparable activity of divested companies within the most recent twelve-month period. The following comparisons exclude the impact of the automotive pedal systems business, Sermatech International business, European medical product sterilization business and small medical business, which have been presented in our condensed consolidated financial results as discontinued operations.
 
Comparison of the three and nine months ended September 24, 2006 and September 25, 2005
 
Revenues increased 9% in the third quarter of 2006 to $639.1 million from $587.4 million in the third quarter of 2005. This increase was due to an increase of 6% from core growth and an increase of 3% from currency. Revenues increased 5% in the first nine months of 2006 to $1.95 billion from $1.87 billion in the first nine months of 2005, principally due to core growth. The Commercial, Medical and Aerospace segments comprised 45%, 33% and 22% of our third quarter 2006 revenues, respectively, and 48%, 32% and 20% of our revenues for the first nine months of 2006, respectively.


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Materials, labor and other product costs as a percentage of revenues improved slightly to 71.0% in the third quarter of 2006 from 71.7% in the third quarter of 2005 and improved slightly to 70.8% in the first nine months of 2006 from 71.6% in the first nine months of 2005. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues increased slightly to 18.0% in the third quarter of 2006 compared with 17.8% in the third quarter of 2005. Operating expenses as a percentage of revenues increased to 18.8% in the first nine months of 2006 compared with 18.1% in the first nine months of 2005, due primarily to $8.6 million of costs associated with the initial phases of an information systems implementation program in our Medical Segment, delayed shipments and costs associated with restructuring activities in our Medical Segment during the first half of 2006 and the impact of expensing stock options under SFAS No. 123(R).
 
Interest expense declined in the third quarter and first nine months of 2006 principally as a result of lower debt balances. Interest income increased in the third quarter of 2006 primarily due to more favorable interest rates compared to the prior year quarter and increased in the first nine months of 2006 primarily due to higher average cash balances and more favorable interest rates compared to the prior period. The effective income tax rate was 26.99% and 25.40% in the third quarter and first nine months of 2006, respectively, compared with 20.16% and 22.61% in the third quarter and first nine months of 2005, respectively. These increases in the effective income tax rate were primarily the result of a higher proportion of income in the third quarter and first nine months of 2006 earned in countries with relatively higher tax rates. Minority interest in consolidated subsidiaries increased $1.3 million and $3.0 million in the third quarter and first nine months of 2006, respectively, due to increased profits from our entities that are not wholly-owned. Net income for the third quarter of 2006 was $36.0 million, an increase of 7% from the third quarter of 2005, due primarily to increased operating profits in the third quarter of 2006. Net income for the first nine months of 2006 was $101.7 million compared to $101.3 million in the first nine months of 2005. Diluted earnings per share increased 11% to $0.91 for the third quarter of 2006 and increased 2% to $2.53 for the first nine months of 2006.
 
On December 26, 2005, we adopted the provisions of SFAS No. 123(R), “Share-Based Payment,” which requires the measurement and recognition of compensation expense for all stock-based awards made to employees based on estimated fair values. SFAS No. 123(R) supersedes previous accounting under Accounting Principles Board, or APB, Opinion No. 25, “Accounting for Stock Issued to Employees,” for periods beginning in fiscal 2006. In March 2005, the SEC issued Staff Accounting Bulletin, or SAB, No. 107, providing supplemental implementation guidance for SFAS 123(R). We have applied the provisions of SAB No. 107 in our adoption of SFAS No. 123(R).
 
SFAS No. 123(R) requires companies to estimate the fair value of stock-based awards on the date of grant using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods. We adopted SFAS No. 123(R) using the modified prospective application method, which requires the application of the standard starting from December 26, 2005, the first day of our 2006 fiscal year. Our condensed consolidated financial statements for the third quarter and first nine months of 2006 reflect the impact of SFAS No. 123(R).
 
Stock-based compensation expense related to employee stock options recognized under SFAS No. 123(R) for the third quarter and first nine months of 2006 was $1.8 million and $5.1 million, respectively, and is included in selling, engineering and administrative expenses. The total income tax benefit recognized for share-based compensation arrangements for the third quarter and first nine months of 2006 was $0.4 million and $1.1 million, respectively. As of September 24, 2006, total unamortized stock-based compensation cost related to non-vested stock options, net of expected forfeitures, was $10.5 million, which is expected to be recognized over a weighted-average period of 2.0 years.
 
Additional information regarding stock-based compensation and our stock compensation plans is presented in Notes 1 and 9 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 
In June 2006, we began certain restructuring initiatives that affect all three of our operating segments. These initiatives involve the consolidation of operations and a related reduction in workforce at several of our facilities in Europe and North America. We have determined to undertake these initiatives as a means to improving operating performance and to better leverage our existing resources. The charges associated with the 2006 restructuring program that are included in restructuring and impairment charges during the third quarter and first nine months of


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2006 totaled $0.8 million and $2.6 million, respectively. Of the $0.8 million, 21% and 79% were attributable to our Medical and Aerospace segments, respectively. Of the $2.6 million, 18%, 57% and 25% were attributable to our Commercial, Medical and Aerospace segments, respectively. As of September 24, 2006, we expect to incur future restructuring costs associated with our 2006 restructuring program of between $5.5 million and $7.5 million in our Commercial, Medical and Aerospace segments over the next three quarters.
 
During the first quarter of 2006, we began a restructuring activity in our Aerospace Segment. The planned actions relate to the closure of a manufacturing facility, termination of employees and relocation of operations. The charges associated with this activity that are included in restructuring and impairment charges during the third quarter and first nine months of 2006 totaled $0.3 million and $0.6 million, respectively. We expect to incur future restructuring costs associated with this activity of approximately $0.9 million during the remainder of 2006.
 
During the fourth quarter of 2004, we announced and commenced implementation of a restructuring and divestiture program designed to improve future operating performance and position us for future earnings growth. The actions have included exiting or divesting non-core or low performing businesses, consolidating manufacturing operations and reorganizing administrative functions to enable businesses to share services. The charges, including changes in estimates, associated with the 2004 restructuring and divestiture program for continuing operations that are included in restructuring and impairment charges during the third quarter and first nine months of 2006 totaled $2.1 million and $9.1 million, respectively, and were attributable to our Medical Segment. The charges, including changes in estimates, associated with the 2004 restructuring and divestiture program for continuing operations that are included in restructuring and impairment charges during the third quarter and first nine months of 2005 totaled $5.8 million and $19.7 million, respectively. Of the $5.8 million, 23% and 77% were attributable to our Commercial and Medical segments, respectively. Of the $19.7 million, 17%, 67% and 16% were attributable to our Commercial, Medical and Aerospace segments, respectively. As of September 24, 2006, we expect to incur future restructuring costs associated with our 2004 restructuring and divestiture program of between $2.8 million and $5.0 million in our Medical Segment over the next three quarters.
 
For a more complete discussion of our restructuring programs, see Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 
This excerpt taken from the TFX 10-Q filed Aug 1, 2006.
Results of Operations
 
Discussion of growth from acquisitions reflects the impact of a purchased company up to 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 and the comparable activity of divested companies within the most recent twelve-month period. The following comparisons exclude the impact of the automotive pedal systems business, Sermatech International business, European medical product sterilization business and small medical business, which have been presented in our condensed consolidated financial results as discontinued operations.
 
Comparison of the three and six months ended June 25, 2006 and June 26, 2005
 
Revenues increased 4% in the second quarter of 2006 to $682.6 million from $657.0 million in the second quarter of 2005. This increase was due principally to core growth. Revenues increased 3% in the first six months of 2006 to $1.31 billion from $1.28 billion in the first six months of 2005. This increase was due to an increase of 4% from core growth, offset, in part, by a decrease of 1% from currency. The Commercial, Medical and Aerospace segments comprised 49%, 32% and 19% of our revenues, respectively, for both the second quarter and first six months of 2006.


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Materials, labor and other product costs as a percentage of revenues improved slightly to 70.3% in the second quarter of 2006 from 71.0% in the second quarter of 2005. Materials, labor and other product costs as a percentage of revenues improved to 70.6% in the first six months of 2006 from 71.6% in the first six months of 2005, due primarily to the benefits of our restructuring initiatives and other cost reduction efforts and the impact in the first six months of 2005 of certain inventory adjustments resulting from the 2004 restructuring and divestiture program. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues increased to 19.0% and 19.2% in the second quarter and first six months of 2006, respectively, compared with 17.7% and 18.2% in the second quarter and first six months of 2005, respectively, due primarily to costs associated with the initial phases of an information systems implementation program in our Medical Segment, the impact of $1.0 million of legal and accounting costs related to a proposed acquisition that we decided not to pursue, a slower than expected recovery in our Medical Segment performance and the impact of expensing stock options under SFAS No. 123(R).
 
Interest expense declined in the second quarter and first six months of 2006 principally as a result of lower debt balances. Interest income increased in the second quarter and first six months of 2006 primarily due to higher average cash balances and more favorable interest rates compared to the prior periods. The effective income tax rate was 21.20% and 24.48% in the second quarter and first six months of 2006, respectively, compared with 23.73% and 23.93% in the second quarter and first six months of 2005, respectively. During the second quarter of 2006, we decreased taxes on income from continuing operations by $7.3 million, of which $6.4 million related to tax balance sheet accounts that were incorrectly stated as a result of discrete errors in our tax accounting analyses and computations in prior periods. For a more complete discussion, see Note 1 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Minority interest in consolidated subsidiaries increased $0.8 million and $1.7 million in the second quarter and first six months of 2006, respectively, due to increased profits from our entities that are not wholly-owned. Net income for the second quarter of 2006 was $36.6 million, an increase of 26% from the second quarter of 2005, due primarily to the lower effective tax rate in the second quarter of 2006 and the loss from discontinued operations in the second quarter of 2005. Net income for the first six months of 2006 was $65.7 million, a decline of 3% from the first six months of 2005, due primarily to the impact of the gain on the sale of the Sermatech business in the first six months of 2005, offset, in part, by the lower effective tax rate in the first six months of 2006. Diluted earnings per share increased 27% to $0.90 for the second quarter of 2006 and declined 2% to $1.62 for the first six months of 2006.
 
On December 26, 2005, we adopted the provisions of SFAS No. 123(R), “Share-Based Payment,” which requires the measurement and recognition of compensation expense for all stock-based awards made to employees based on estimated fair values. SFAS No. 123(R) supersedes previous accounting under Accounting Principles Board, or APB, Opinion No. 25, “Accounting for Stock Issued to Employees” for periods beginning in fiscal 2006. In March 2005, the SEC issued Staff Accounting Bulletin, or SAB, No. 107, providing supplemental implementation guidance for SFAS 123(R). We have applied the provisions of SAB No. 107 in our adoption of SFAS No. 123(R).
 
SFAS No. 123(R) requires companies to estimate the fair value of stock-based awards on the date of grant using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods. We adopted SFAS No. 123(R) using the modified prospective application method, which requires the application of the standard starting from December 26, 2005, the first day of our 2006 fiscal year. Our condensed consolidated financial statements for the second quarter and first six months of 2006 reflect the impact of SFAS No. 123(R).
 
Stock-based compensation expense related to employee stock options recognized under SFAS No. 123(R) for the second quarter and first six months of 2006 was $1.7 million and $3.3 million, respectively, and is included in selling, engineering and administrative expenses. The total income tax benefit recognized for share-based compensation arrangements for the second quarter and first six months of 2006 was $0.3 million and $0.6 million, respectively. As of June 25, 2006, total unamortized stock-based compensation cost related to non-vested stock options was $11.9 million, net of expected forfeitures, which is expected to be recognized over a weighted-average period of 2.2 years.
 
Additional information regarding stock-based compensation and our stock compensation plans is presented in Notes 1 and 9 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.


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In June 2006, we began certain restructuring initiatives that affect all three of our operating segments. These initiatives involve the consolidation of operations and a related reduction in workforce at several of our facilities in Europe and North America. We have determined to undertake these initiatives as a means to improving operating performance and to better leverage our existing resources. The charges associated with the 2006 restructuring program that are included in restructuring and impairment charges during the second quarter of 2006 totaled $1.8 million, of which 27% and 73% were attributable to our Commercial and Medical segments, respectively. As of June 25, 2006, we expect to incur future restructuring costs associated with our 2006 restructuring program of between $6.4 million and $8.3 million in our Commercial, Medical and Aerospace segments over the next four quarters. During the second quarter of 2006, we determined that a minority held investment was impaired and recorded a charge of $3.9 million, which is included in restructuring and impairment charges.
 
During the first quarter of 2006, we began a restructuring activity in our Aerospace Segment. The planned actions relate to the closure of a manufacturing facility, termination of employees and relocation of operations. For the second quarter and first six months of 2006, we recorded $0.1 million and $0.3 million, respectively, of termination benefits that are included in restructuring and impairment charges. We expect to incur future restructuring costs associated with this activity of approximately $1.2 million during the remainder of 2006.
 
During the fourth quarter of 2004, we announced and commenced implementation of a restructuring and divestiture program designed to improve future operating performance and position us for future earnings growth. The actions have included exiting or divesting non-core or low performing businesses, consolidating manufacturing operations and reorganizing administrative functions to enable businesses to share services. The charges, including changes in estimates, associated with the 2004 restructuring and divestiture program for continuing operations that are included in restructuring and impairment charges during the second quarter and first six months of 2006 totaled $2.7 million and $7.0 million, respectively, and were attributable to our Medical Segment. The charges, including changes in estimates, associated with the 2004 restructuring and divestiture program for continuing operations that are included in restructuring and impairment charges during the second quarter and first six months of 2005 totaled $6.7 million and $13.9 million, respectively. Of the $6.7 million and $13.9 million, 25%, 69% and 6% and 15%, 63% and 22% were attributable to our Commercial, Medical and Aerospace segments, respectively. As of June 25, 2006, we expect to incur future restructuring costs associated with our 2004 restructuring and divestiture program of between $6.0 million and $8.0 million in our Medical Segment during the remainder of 2006.
 
For a more complete discussion of our restructuring programs, see Note 4 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 
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