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WIKI ANALYSIS
Teleflex is a manufacturing conglomerate that earns most of its money making disposable medical supplies like catheters and oxygen masks. Although medical devices made up 77% of 2009 revenue of $1.89 billion,[1] the company makes a host of other industrial products, from jet engine blades and airline baggage systems, to boat and commercial truck engine parts.
Revenue from Teleflex's aerospace products is dependent on the commercial airline industry demand for aircraft parts. The FAA predicts new commercial aircraft construction will slow in the future[2] because of weakness in the overall economy and among passenger airlines specifically. However, the Aerospace segment only made up 10% of Teleflex's 2009 revenues.[1]
Business Financials
The company's revenue decreased from $2.1 billion in 2008 to $1.89 billion in 2009.[3] However, its operating profit remained relatively flat, as its operating revenue in 2009 was $336 million in 2009, compared to $340 million in 2008.
Medical (77%% of 2009 Revenue)
Teleflex’s Medical segment businesses produce devices used in surgeries, critical care, and cardiac care, as well as parts and instruments for other companies’ medical devices. The largest revenue source in this segment is Critical Care Products, which sells under the names Arrow, Rüsch, HudsonRCI, Gibeck and Sheridan. The next largest revenue source in this segment is Surgical Products, which sells under the names Deknatel, Pleur-evac, Pilling, Taut and Weck. The third revenue source in this segment is Devices for Original Equipment Manufacturers, which sells under the names TFX OEM, Beere, Deknatel, KMedic, and SMD.
The products in the Medical segment are manufactured in the Czech Republic, Germany, Malaysia, Mexico and the United States and sold to hospitals and healthcare providers all over the world.
Aerospace (10% of 2009 Revenue)
Revenue in the Aerospace segment comes from engine repair products and cargo handling systemst for commercial aviation. Engine Repair produces parts and services for flight turbines through a majority-owned venture with GE Aircraft Engines called AirFoil Technologies International (ATI). Cargo Handling Systems and Equipment acquired Nordisk Aviation Products in November 2007 to improve global market presence and produces cargo systems and spare parts under both the names Nordisk and Telair. Major sites for the Aerospace segment are in England, Germany, Norway, Singapore and the United States.
Commercial (13% of 2009 Revenue)
The Commercial segment produces driver controls and engine and drive assemblies for boats, as well as fuel management systems for automotive, rail, and industrial vehicles, and rigging products. Manufacturing sites are in Canada, Europe, Singapore, and the United States. The Marine part of this segment sells products under the names Teleflex Marine, SeaStar, BayStar, and Sierra. Fuel Management systems are sold under the names ComfortPro, Proheat, and Teleflex GFI. Rigging systems produces cables and other rigging equipment for applications such as oil drilling and marine transportation.
Key Trends and Forces
Aerospace
Revenue in the Aerospace Segment is Highly Dependent on the Aerospace Industry, Particularly the Commercial Airline Industry
New construction of aircraft from companies like Boeing and Airbus are important sources of revenue for Teleflex because as demand for more aircraft rises, so does demand for more parts. On the other hand, rising costs in the commercial airline industry, driven largely by increases in the price of oil, and the 2007-2008 slowdown of the US economy, led the FAA to predict flat operations growth by airlines for the forseeable future. Such weakness in both operations and consumer demand leads to reduced spending on everything from airplanes and parts to expenditures on airport improvements. This cyclicality of the Aerospace industry affects demand for everything related to the industry, including Teleflex’s airline engine repair parts and cargo handling systems.
Interest Rates impact Teleflex’s ability to pay off its substantial debt load
Teleflex has a significant amount of debt as a result of its acquisition strategy, which amounted to $1.7 billion.[4] This has given the company a debt-to-equity ratio of 123.98, which is significantly higher than the industry average of 25.12. [5]
Competition
Teleflex’s business segments are diverse, so it competes with different companies in each of its segments.
Medical
- Johnson & Johnson (JNJ) Johnson & Johnson is the second largest health care product manufacturer in the world. It competes in wide range of medical devices and diagnostics, however, separating it in this respect from Teleflex’s focus on single-use and disposable devices. [6]
- Vital Signs (VITL) Vital Signs manufactures a variety of medical devices, including single-use and disposable products.
Aerospace
- Barnes Group (B) produces components for industrial and aerospace applications. Its Aerospace segment produces aircraft frames and jet engines, as well as parts. It competes with Teleflex in engine repair products.
Commercial
- Tomkins plc (TKS) is an England-based engineering and manufacturing company. The Fluid Systems branch of its Industrial & Automotive business competes with Teleflex in the production of fuel management systems.
References
- ↑ 1.0 1.1 TFX 10-K 2009 Item 7 Pg. 33
- ↑ "FAA predicts stalling airline demand for FY2008." eTurboNews. March 16, 2008
- ↑ TFX 10-K 2009 Item 7 Pg. 34
- ↑ Teleflex Incorporated 10-K 2007. Section 1 - Risk Factors. pg 13
- ↑ Reuters Report of Teleflex Key Financial Ratios
- ↑ Johnson & Johnson Wikinvest Article
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