TELEFLEX INC - Quarter Report: 2009 June (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                     .

Commission file number 1-5353

TELEFLEX INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware		23-1147939
(State or other jurisdiction of		(I.R.S. employer identification no.)
incorporation or organization)
155 South Limerick Road, Limerick, Pennsylvania		19468
(Address of principal executive offices)		(Zip Code)

(610) 948-5100
(Registrant’s telephone number, including area code)

(None)
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filler”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No þ

On July 17, 2009, 39,722,921 shares of the registrant’s common stock, $1.00 par value, were outstanding.

 

 

TELEFLEX INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 28, 2009

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed Consolidated Statements of Income for the three and six months ended June 28, 2009 and June 29, 2008			2
Condensed Consolidated Balance Sheets as of June 28, 2009 and December 31, 2008			3
Condensed Consolidated Statements of Cash Flows for the six months ended June 28, 2009 and June 29, 2008			4
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 28, 2009 and June 29, 2008			5
Notes to Condensed Consolidated Financial Statements			6
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3: Quantitative and Qualitative Disclosures About Market Risk			33
Item 4: Controls and Procedures			33
PART II — OTHER INFORMATION
Item 1: Legal Proceedings			35
Item 1A: Risk Factors			35
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3: Defaults Upon Senior Securities			35
Item 4: Submission of Matters to a Vote of Security Holders			35
Item 5: Other Information			36
Item 6: Exhibits			36
SIGNATURES			37
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TELEFLEX INCORPORATED AND SUBSIDIARIES

		Three Months Ended								Six Months Ended
		June 28,				June 29,				June 28,				June 29,
		2009				2008				2009				2008
		(Dollars and shares in thousands, except per share)
Net revenues		$	483,059			$	559,678			$	952,734			$	1,101,788
Materials, labor and other product costs			277,048				325,362				550,599				654,033
Gross profit			206,011				234,316				402,135				447,755
Selling, engineering and administrative expenses			133,956				157,445				262,720				305,018
Net loss on sales of businesses and assets			—				—				2,597				18
Goodwill impairment			31,873				—				31,873				—
Restructuring and other impairment charges			6,166				2,591				8,629				11,447
Income from continuing operations before interest and taxes			34,016				74,280				96,316				131,272
Interest expense			21,999				31,376				47,401				62,459
Interest income			(1,463	)			(446	)			(1,677	)			(1,407	)
Income from continuing operations before taxes			13,480				43,350				50,592				70,220
Taxes on income from continuing operations			6,889				14,477				17,351				26,139
Income from continuing operations			6,591				28,873				33,241				44,081
Operating income from discontinued operations (including gain on disposal of $275,787 in 2009 and loss on disposal of $4,808 for the three and six month periods in 2008)			—				14,132				297,975				29,327
Taxes (benefit) on income from discontinued operations			(181	)			(1,036	)			98,837				(630	)
Income from discontinued operations			181				15,168				199,138				29,957
Net income			6,772				44,041				232,379				74,038
Less: Net income attributable to noncontrolling interest			302				259				538				446
Income from discontinued operations attributable to noncontrolling interest			—				8,839				9,860				15,706
Net income attributable to common shareholders		$	6,470			$	34,943			$	221,981			$	57,886
Earnings per share available to common shareholders:
Basic:
Income from continuing operations		$	0.16			$	0.72			$	0.82			$	1.10
Income from discontinued operations		$	—			$	0.16			$	4.77			$	0.36
Net income		$	0.16			$	0.88			$	5.59			$	1.47
Diluted:
Income from continuing operations		$	0.16			$	0.72			$	0.82			$	1.10
Income from discontinued operations		$	—			$	0.16			$	4.74			$	0.36
Net income		$	0.16			$	0.88			$	5.56			$	1.46
Dividends per share		$	0.34			$	0.34			$	0.68			$	0.66
Weighted average common shares outstanding:
Basic			39,717				39,562				39,704				39,508
Diluted			39,921				39,831				39,899				39,770
Amounts attributable to common shareholders:
Income from continuing operations, net of tax		$	6,289			$	28,614			$	32,703			$	43,635
Discontinued operations, net of tax			181				6,329				189,278				14,251
Net income		$	6,470			$	34,943			$	221,981			$	57,886

The accompanying notes are an integral part of the condensed consolidated financial statements.

TELEFLEX INCORPORATED AND SUBSIDIARIES

		June 28,				December 31,
		2009				2008
		(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents		$	114,270			$	107,275
Accounts receivable, net			275,320				311,908
Inventories, net			411,231				424,653
Prepaid expenses and other current assets			20,998				21,373
Income taxes receivable			37,621				17,958
Deferred tax assets			60,110				66,009
Assets held for sale			8,689				8,210
Total current assets			928,239				957,386
Property, plant and equipment, net			329,466				374,292
Goodwill			1,444,424				1,474,123
Intangibles and other assets, net			1,060,418				1,090,852
Investments in affiliates			15,951				28,105
Deferred tax assets			265				1,986
Total assets		$	3,778,763			$	3,926,744
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current borrowings		$	5,736			$	108,853
Accounts payable			104,295				139,677
Accrued expenses			106,361				125,183
Payroll and benefit-related liabilities			71,332				83,129
Derivative liabilities			20,005				27,370
Accrued interest			24,103				26,888
Income taxes payable			3,439				12,613
Deferred tax liabilities			5,735				2,227
Total current liabilities			341,006				525,940
Long-term borrowings			1,299,686				1,437,538
Deferred tax liabilities			335,180				324,678
Pension and postretirement benefit liabilities			172,650				169,841
Other liabilities			163,683				182,864
Total liabilities			2,312,205				2,640,861
Commitments and contingencies
Total common shareholders’ equity			1,462,050				1,246,455
Noncontrolling interest			4,508				39,428
Total equity			1,466,558				1,285,883
Total liabilities and equity		$	3,778,763			$	3,926,744

The accompanying notes are an integral part of the condensed consolidated financial statements.

TELEFLEX INCORPORATED AND SUBSIDIARIES

		Six Months Ended
		June 28,				June 29,
		2009				2008
		(Dollars in thousands)
Cash Flows from Operating Activities of Continuing Operations:
Net income		$	232,379			$	74,038
Adjustments to reconcile net income to net cash used in operating activities:
Income from discontinued operations			(199,138	)			(29,957	)
Depreciation expense			29,237				31,115
Amortization expense of intangible assets			22,230				23,503
Amortization expense of deferred financing costs			3,610				2,510
Impairment of long-lived assets			2,474				—
Impairment of goodwill			31,873				—
Stock-based compensation			4,236				4,241
Net loss on sales of businesses and assets			2,597				18
Other			3,024				1,811
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable			11,590				(10,417	)
Inventories			(7,218	)			1,855
Prepaid expenses and other current assets			1,445				5,537
Accounts payable and accrued expenses			(41,163	)			10,653
Income taxes payable and deferred income taxes			(116,493	)			(129,679	)
Net cash used in operating activities from continuing operations			(19,317	)			(14,772	)
Cash Flows from Financing Activities of Continuing Operations:
Proceeds from long-term borrowings			10,000				—
Reduction in long-term borrowings			(249,178	)			(38,983	)
Decrease in notes payable and current borrowings			(651	)			(1,340	)
Proceeds from stock compensation plans			367				5,586
Payments to noncontrolling interest shareholders			(295	)			(442	)
Dividends			(27,014	)			(26,086	)
Net cash used in financing activities from continuing operations			(266,771	)			(61,265	)
Cash Flows from Investing Activities of Continuing Operations:
Expenditures for property, plant and equipment			(15,078	)			(16,782	)
Proceeds from sales of businesses and assets, net of cash sold			300,000				—
Payments for businesses and intangibles acquired, net of cash acquired			(541	)			(6,083	)
Investments in affiliates			—				(250	)
Net cash provided by (used in) investing activities from continuing operations			284,381				(23,115	)
Cash Flows from Discontinued Operations:
Net cash provided by operating activities			17,688				31,111
Net cash used in financing activities			(11,075	)			(24,500	)
Net cash used in investing activities			(1,103	)			(1,023	)
Net cash provided by discontinued operations			5,510				5,588
Effect of exchange rate changes on cash and cash equivalents			3,192				(4,536	)
Net increase (decrease) in cash and cash equivalents			6,995				(98,100	)
Cash and cash equivalents at the beginning of the period			107,275				201,342
Cash and cash equivalents at the end of the period		$	114,270			$	103,242

The accompanying notes are an integral part of the condensed consolidated financial statements.

TELEFLEX INCORPORATED AND SUBSIDIARIES

																		Accumulated
										Additional								Other				Treasury
		Common Stock								Paid in				Retained				Comprehensive				Stock								Noncontrolling				Total				Comprehensive
		Shares				Dollars				Capital				Earnings				Income				Shares				Dollars				Interest				Equity				Income
		(Dollars and shares in thousands, except per share)
Balance at December 31, 2007			41,794			$	41,794			$	252,108			$	1,118,053			$	56,919				2,343			$	(140,031	)		$	42,183			$	1,371,026
Net income															57,886																16,152				74,038			$	74,038
Split-dollar life insurance arrangements adjustment															(1,874	)																			(1,874	)			(1,874	)
Cash dividends ($0.66 per share)															(26,086	)																			(26,086	)
Financial instruments marked to market, net of tax of $(105)																			(170	)															(170	)			(170	)
Cumulative translation adjustment																			24,849												(132	)			24,717				24,717
Pension liability adjustment, net of tax of $1,433																			468																468				468
Distributions to noncontrolling interest shareholders																															(24,942	)			(24,942	)
Disposition of noncontrolling interest																															804				804
Comprehensive income																																						$	97,179
Shares issued under compensation plans			138				138				9,450												(15	)			648								10,236
Deferred compensation																							(8	)			332								332
Balance at June 29, 2008			41,932			$	41,932			$	261,558			$	1,147,979			$	82,066				2,320			$	(139,051	)		$	34,065			$	1,428,549
Balance at December 31, 2008			41,995			$	41,995			$	268,263			$	1,182,906			$	(108,202	)			2,311			$	(138,507	)		$	39,428			$	1,285,883
Net income															221,981																10,398				232,379			$	232,379
Cash dividends ($0.68 per share)															(27,014	)																			(27,014	)
Financial instruments marked to market, net of tax of $5,690																			13,787																13,787				13,787
Cumulative translation adjustment																			727												(5	)			722				722
Pension liability adjustment, net of tax of $826															1,524																				1,524				1,524
Distributions to noncontrolling interest shareholders																															(295	)			(295	)
Disposition of noncontrolling interest																															(45,019	)			(45,019	)
Comprehensive income																																						$	248,412
Shares issued under compensation plans			10				10				3,277												(15	)			961								4,248
Deferred compensation																							(9	)			343								343
Balance at June 28, 2009			42,005			$	42,005			$	271,540			$	1,377,873			$	(92,164	)			2,287			$	(137,203	)		$	4,507			$	1,466,558

The accompanying notes are an integral part of the condensed consolidated financial statements.

TELEFLEX INCORPORATED AND SUBSIDIARIES

Note 1 — Basis of presentation

We prepared the accompanying unaudited condensed consolidated financial statements of Teleflex Incorporated on the same basis as our annual consolidated financial statements, with the exception of changes resulting from the adoption of new accounting guidance during the first six months of 2009. Please see Note 2 for a description of the new guidance. We reclassified certain prior year amounts to conform with our current year presentation.

In the opinion of management, our financial statements reflect all adjustments, which are of a normal recurring nature, necessary for presentation of financial statements for interim periods in accordance with U.S. generally accepted accounting principles (GAAP) and with Rule 10-01 of SEC Regulation S-X, which sets forth the instructions for financial statements included in Form 10-Q. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

We have evaluated the period from June 28, 2009, the date of the financial statements, through July 27, 2009 the date of the issuance and filing of the financial statements for subsequent events. On July 20, 2009 the Company announced that it had entered into a definitive agreement to sell its Power Systems business. See Note 18 — “Subsequent Event” for a further discussion.

In accordance with applicable accounting standards, the accompanying condensed financial statements do not include all of the information and footnote disclosures that are required to be included in our annual consolidated financial statements. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. Accordingly, our quarterly condensed financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008.

As used in this report, the terms “we,” “us,” “our,” “Teleflex” and the “Company” mean Teleflex Incorporated and its subsidiaries, unless the context indicates otherwise. The results of operations for the periods reported are not necessarily indicative of those that may be expected for a full year.

Note 2 — New accounting standards

The financial statements included in this report reflect changes resulting from the recent adoption of several accounting pronouncements. The subject matter of the changes, and the footnotes in which they appear, are as follows:

Evaluation period of subsequent events in Note 1;
Fair value of long-term debt in Note 8;
Disclosure of derivative instruments and hedging activities in Note 9; and
Fair value measurements in Note 10.

We describe below several accounting pronouncements that we either recently adopted (including those reflected in the footnotes referenced above) or we will adopt in the near future.

Fair Value Measurements: In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements.” SFAS No. 157 establishes a common definition of fair value to be applied to US GAAP that requires the use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. Except as noted below, SFAS No. 157 became effective for fiscal years beginning after November 15, 2007.

In February 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-2, “Partial Deferral of the Effective Date of Statement 157.” FSP No. FAS 157-2 delays the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company adopted SFAS No. 157 as of January 1, 2008 with respect to financial assets and financial liabilities. The Company adopted the provisions of FSP No. FAS 157-2 as of January 1, 2009. SFAS No. 157 and the related FSP No. FAS 157-2 did not have a material impact on the Company’s results of operations, cash flows or financial position upon adoption. Refer to Note 10 for additional discussion on fair value measurements.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Business Combinations: In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R) replaces SFAS No. 141, “Business Combinations.” SFAS No. 141(R) retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations and that an acquirer be identified for each business combination. SFAS No. 141(R) defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS No. 141(R)’s scope is broader than that of SFAS No. 141, which applied only to business combinations in which control was obtained by transferring consideration.

SFAS No. 141(R) replaces SFAS No. 141’s cost-allocation process and requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. In addition, SFAS No. 141(R) changes the allocation and treatment of acquisition-related costs, restructuring costs that the acquirer expected but was not obligated to incur, the recognition of assets and liabilities assumed arising from contingencies and the recognition and measurement of goodwill. This statement is effective for fiscal years beginning after December 15, 2008 and is to be applied prospectively to business combinations.

On April 1, 2009, the FASB issued FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.” FSP No. FAS 141(R)-1 amends SFAS No. 141(R) and clarifies issues that arose regarding initial recognition and measurement, subsequent measurement and accounting and disclosure of assets and liabilities arising from contingencies in a business combination. FSP No. FAS 141(R)-1 is effective for fiscal years beginning after December 15, 2008.

SFAS No. 141(R) and the related FSP No. FAS 141(R)-1 did not have an impact on the Company’s results of operations, cash flows or financial position upon adoption; however, future transactions entered into by the Company will be evaluated under the requirements of these standards.

Noncontrolling Interests: In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.” SFAS No. 160 amends Accounting Research Bulletin (“ARB”) No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary, sometimes referred to as minority interest, and for the deconsolidation of a subsidiary. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 requires that a noncontrolling interest in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity, that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, that the changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently as equity transactions and that when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value. This statement is effective for fiscal years beginning after December 15, 2008. The Company adopted SFAS No. 160 as of January 1, 2009. The adoption of SFAS No. 160 has changed the presentation of noncontrolling interests on our income statement, balance sheet and changes in shareholders’ equity.

Disclosures about derivative instruments and hedging activities: In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133,” which requires enhanced disclosures about derivative and hedging activities. Companies are required to provide enhanced disclosures about (a) how and why a company uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and related interpretations, and (c) how derivative instruments and related hedged items affect the company’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal and interim periods beginning after November 15, 2008. The Company adopted SFAS No. 161 as of January 1, 2009. Refer to Note 9 for the enhanced disclosures related to the Company’s derivative instruments.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities: In June 2008, the FASB issued FSP EITF 03-6-1 “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,” which addresses whether unvested instruments granted in share-based payment transactions that contain nonforfeitable rights to dividends or dividend equivalents are participating securities subject to the two-class method of computing earnings per share under SFAS No. 128, “Earnings Per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. The Company adopted FSP EITF 03-6-1 January 1, 2009. FSP EITF 03-6-1 did not result in a change in the Company’s earnings per share or diluted earnings per share upon its adoption.

Determination of the Useful Life of Intangible Assets: In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets,” which amends SFAS No. 142, “Goodwill and Other Intangible Assets” with respect to the factors that should be considered in developing renewal or extension assumptions used to determine the useful lives for intangible assets. FSP No. FAS 142-3 requires an entity to consider its own historical experience in renewing or extending similar arrangements, regardless of whether those arrangements have explicit renewal or extension provisions, when determining the useful life of an intangible asset. In the absence of such experience, an entity shall consider the assumptions that market participants would use about renewal or extension, adjusted for entity-specific factors. FSP No. FAS 142-3 is effective for qualifying intangible assets acquired by the Company on or after January 1, 2009. The application of FSP No. FAS 142-3 did not have a material impact on the Company’s results of operations, cash flows or financial position upon adoption; however, future transactions entered into by the Company will be subject to the requirements of FSP No. FAS 142-3.

Employers’ Disclosures about Postretirement Benefit Plan Assets: In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (FSP No. FAS 132(R)-1), which requires additional disclosures for employers’ pension and other postretirement benefit plan assets. Disclosures regarding fair value measurements of pension and other postretirement benefit plan assets were not included within the scope of SFAS No. 157. FSP No. FAS 132(R)-1 requires employers to disclose information about fair value measurements of plan assets that would be similar to the disclosures about fair value measurements required under SFAS No. 157, the investment policies and strategies for the major categories of plan assets, and significant concentrations of risk within plan assets. FSP No. FAS 132(R)-1 will be effective for the Company as of December 31, 2009. As FSP No. FAS 132(R)-1 provides only disclosure requirements, the adoption of this standard will not have a material impact on the Company’s results of operations, cash flows or financial position.

Fair Value of Financial Instruments: In April 2009, the FASB issued FSP No. FAS 107-1 and Accounting Principles Board (“APB”) No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” which requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. The FSP also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in summarized financial information at interim reporting periods. FSP No. FAS 107-1 requires that an entity disclose in the body or in the accompanying notes of its financial information the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position, as required by SFAS No. 107. In addition, an entity shall also disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments.

FSP No. FAS 107-1 is effective for interim reporting periods ending after June 15, 2009. FSP No. FAS 107-1 does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption. The Company adopted FSP No. FAS 107-1 as of June 28, 2009. Refer to Note 8 for the interim fair value disclosures related to the Company’s financial instruments.

Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly: In April 2009, the FASB issued FSP No. FAS 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” FSP No. FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, “Fair Value Measurements,” when the volume and level of activity for the asset or liability have significantly decreased. FSP No. FAS 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly.

FSP No. FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. FSP No. FAS 157-4 does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, comparative disclosures are required but only for periods ending after initial adoption. The Company adopted FSP No. FAS 157-4 as of June 28, 2009. The adoption of the standard did not have a material impact on the Company’s results of operations, cash flows or financial position.

Subsequent Events: In May 2009, the FASB issued SFAS 165, “Subsequent Events,” which establishes reporting and disclosure requirements based on the existence of conditions at the date of the balance sheet for events or transactions that occurred after the balance sheet date but before the financial statements are issued or are available to be issued. Companies are required to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or were available to be issued. SFAS No. 165 is effective for financial statements issued for fiscal and interim periods ending after June 15, 2009 and is applied prospectively. The Company adopted SFAS 165 as of June 28, 2009.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140: In June 2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140,” to improve the information that is reported in financial statements about the transfer of financial assets and the effects of transfers of financial assets on financial position, financial performance and cash flows and a transferor’s continuing involvement, if any, with transferred financial assets. In addition, SFAS No. 166 eliminates the concept of qualifying special purpose entities. SFAS No. 166 limits the circumstances in which a financial asset or a portion of a financial asset should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. SFAS No. 166 is effective for interim periods as of the beginning of the first annual reporting period beginning after November 15, 2009. The Company is currently evaluating the provisions of SFAS No. 166 to determine the impact on the Company’s results of operations, cash flows or financial position.

Amendments to FASB Interpretation No. 46(R): In June 2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R),” which amends Interpretation 46(R) to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity (which would result in the enterprise being deemed the primary beneficiary of that entity and, therefore, obligated to consolidate the variable interest entity in its financial statements); to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to revise guidance for determining whether an entity is a variable interest entity; and to require enhanced disclosures that will provide more transparent information about an enterprise’s involvement with a variable interest entity. FAS No. 167 is effective for interim periods as of the beginning of the first annual reporting period beginning after November 15, 2009. The Company is currently evaluating the provisions of SFAS No. 167 to determine the impact on the Company’s results of operations, cash flows or financial position.

The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162: In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162.” SFAS No. 168 replaces SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 168 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP in the United States (the GAAP hierarchy). SFAS No. 168 establishes the Codification as the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under federal securities laws are also sources of authoritative GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009.

Note 3 — Integration

Integration of Arrow

In connection with the acquisition of Arrow International, Inc. (“Arrow”) in October 2007, the Company formulated a plan related to the 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. The Company finalized its estimate of the costs to implement the plan in the fourth quarter of 2008. The Company has accrued estimates for certain costs, related primarily to personnel reductions and facility closures and the termination of certain distribution agreements at the date of acquisition, in accordance with EITF Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.”

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table provides information relating to changes in the accrued liability associated with the Arrow integration plan during the six months ended June 28, 2009:

		Balance at																Balance at
		December 31,				Adjustments to												June 28,
		2008				Reserve				Payments				Translation				2009
		(Dollars in millions)
Termination benefits		$	4.3			$	(0.3	)		$	(0.1	)		$	—			$	3.9
Facility closure costs			0.8				—				(0.1	)			(0.1	)			0.6
Contract termination costs			4.8				0.1				(1.9	)			(0.3	)			2.7
Other integration costs			0.7				—				—				—				0.7
		$	10.6			$	(0.2	)		$	(2.1	)		$	(0.4	)		$	7.9

It is anticipated that a majority of these costs will be paid in 2009; however, some portions of the contract termination costs for leased facilities will extend to 2013.

In conjunction with the plan for the integration of Arrow and the Company’s Medical businesses, the Company has taken actions that affect employees and facilities of Teleflex. This aspect of the integration plan is explained in Note 4, “Restructuring,” and costs incurred for this aspect of the plan are charged to earnings and included in “restructuring and other impairment charges” within the condensed consolidated statement of operations for the periods in which the costs are incurred.

Note 4 — Restructuring

The amounts included in restructuring and other impairment charges in the condensed consolidated statement of income for the three and six month periods ended June 28, 2009 and June 29, 2008 consisted of the following:

		Three Months Ended								Six Months Ended
		June 28,				June 29,				June 28,				June 29,
		2009				2008				2009				2008
		(Dollars in thousands)
2008 Commercial Segment Program		$	917			$	—			$	2,055			$	—
2007 Arrow Integration Program			2,775				2,734				4,100				10,780
2006 Restructuring Program			—				(143	)			—				667
Impairment charges — intangibles and fixed assets			2,474				—				2,474				—
Restructuring and other impairment charges		$	6,166			$	2,591			$	8,629			$	11,447

2008 Commercial Segment Program

In December 2008, the Company began certain restructuring initiatives with respect to the Company’s Commercial Segment. These initiatives involve the consolidation of operations and a related reduction in workforce at certain of the Company’s facilities in North America and Europe. The Company determined to undertake these initiatives as a means to address an expected continuation of weakness in the marine and industrial markets.

The charges associated with the 2008 Commercial Segment restructuring program that are included in restructuring and other impairment charges in the condensed consolidated statements of income during the three and six month periods ended June 28, 2009 were as follows:

		Commercial
		Three Months Ended				Six Months Ended
		June 28, 2009				June 28, 2009
		(Dollars in thousands)
Termination benefits		$	789			$	1,927
Facility closure costs			128				128
		$	917			$	2,055

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table provides information relating to changes in the accrued liability associated with the 2008 Commercial Segment restructuring program during the six months ended June 28, 2009:

		Balance at																Balance at
		December 31,				Subsequent												June 28,
		2008				Accruals				Payments				Translation				2009
		(Dollars in thousands)
Termination benefits		$	449			$	1,927			$	(2,137	)		$	7			$	246
Facility closure costs			—				128				(128	)			—				—
		$	449			$	2,055			$	(2,265	)		$	7			$	246

As of June 28, 2009, the Company has completed the 2008 Commercial Segment restructuring program.

Termination benefits are comprised of severance-related payments for all employees terminated in connection with the 2008 Commercial Segment restructuring program. Facility closure costs relate primarily to costs to prepare a facility for closure.

2007 Arrow Integration Program

In connection with the acquisition of Arrow, the Company formulated a plan related to the 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 other impairment charges” within the condensed consolidated statement of operations.

The charges associated with the 2007 Arrow integration program that were included in restructuring and other impairment charges for the three and six month periods ended June 28, 2009 and June 29, 2008, are as follows:

		Three Months Ended								Six Months Ended
		June 28,				June 29,				June 28,				June 29,
		2009				2008				2009				2008
		(Dollars in thousands)
Termination benefits		$	1,467			$	1,792			$	2,564			$	9,838
Facility closure costs			165				—				216				—
Contract termination costs			829				806				891				806
Other restructuring costs			314				136				429				136
		$	2,775			$	2,734			$	4,100			$	10,780

The following table provides information relating to changes in the accrued liability associated with the 2007 Arrow integration program during the six months ended June 28, 2009:

		Balance at																Balance at
		December 31,				Subsequent												June 28,
		2008				Accruals				Payments				Translation				2009
		(Dollars in thousands)
Termination benefits		$	7,815			$	2,564			$	(5,829	)		$	(278	)		$	4,272
Facility closure costs			601				216				(386	)			(16	)			415
Contract termination costs			—				891				(641	)			8				258
Other restructuring costs			159				429				(471	)			(3	)			114
		$	8,575			$	4,100			$	(7,327	)		$	(289	)		$	5,059

Termination benefits are comprised of severance-related payments for all employees terminated in connection with the 2007 Arrow integration program. Facility closure costs related primarily to costs that will be incurred to prepare a facility for closure. Contract termination costs related primarily to the termination of leases in conjunction with the consolidation of facilities.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of June 28, 2009, the Company expects to incur the following restructuring expenses associated with the 2007 Arrow integration program in its Medical Segment over the next two years:

	(Dollars in millions)
Termination benefits	$	3.5 – 4.5
Facility closure costs		0.8 – 1.0
Contract termination costs		5.5 – 6.5
Other restructuring costs		0.1 – 0.3
	$	9.9 – 12.3

2006 Restructuring Program

In June 2006, the Company began certain restructuring initiatives that affected all three of the Company’s reporting segments. These initiatives involved the consolidation of operations and a related reduction in workforce at several of the Company’s facilities in Europe and North America. The Company determined to undertake these initiatives as a means to improving operating performance and to better leverage the Company’s existing resources.

For the three and six month periods ended June 29, 2008, the charges associated with the 2006 restructuring program that are included in restructuring and other impairment charges were as follows:

		Medical
		Three Months Ended				Six Months Ended
		June 29, 2008				June 29, 2008
		(Dollars in thousands)
Termination benefits		$	(182	)		$	589
Contract termination costs			39				78
		$	(143	)		$	667

Termination benefits were comprised of severance-related payments for all employees terminated in connection with the 2006 restructuring program. Contract termination costs related primarily to the termination of leases in conjunction with the consolidation of facilities. As of June 28, 2009 the 2006 restructuring program is complete. The accrued liability at June 28, 2009 and December 31, 2008 was nominal.

Impairment Charges

During the second quarter of 2009, the Company recorded a $2.3 million impairment of an intangible asset in the Commercial Segment. See Note 5 — Impairment of Goodwill and Intangible Assets for a discussion of the charge.

Note 5 — Impairment of Goodwill and Intangible Assets

On July 20, 2009, the Company announced that it had entered into a definitive agreement to sell its Power Systems operations to Fuel Systems Solutions, Inc. for $14.5 million. The sale is expected to be completed in the quarter ended September 27, 2009 at which time we will report the Power Systems operations as a discontinued operation in accordance with SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets. The final sales price for these operations is significantly below their carrying value on the Company’s balance sheet at June 28, 2009. Therefore, considering the guidance of SFAS No. 142 we recognized a non-cash goodwill impairment charge of $25.1 million in the quarter ended June 28, 2009 to adjust the carrying value of these operations to their estimated fair value.

The global recession has had a more significant impact on the Company’s Marine and Cargo Container operations than initially anticipated and it appears recovery in those sectors will begin later and at a slower rate than previously believed. As a result of the difficult market conditions in which these reporting units are currently operating and the significant deterioration in the operating performance of these reporting units which has accelerated in the second quarter of 2009, the Company performed an interim review of goodwill and intangible assets in these two reporting units during the second quarter and determined that $6.7 million of goodwill in the Cargo Container operations and $2.3 million of indefinite lived tradenames in the Marine operations were impaired.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In performing the goodwill impairment test, the Company estimated the fair values of these two reporting units by a combination of (i) estimation of the discounted cash flows of each of the reporting units based on projected earnings in the future (the income approach) and (ii) analysis of sales of similar assets in actual transactions (the market approach). Using this methodology, the Company determined that the entire $6.7 million of goodwill in the Cargo Container reporting unit was impaired, but that goodwill in the Marine reporting unit was not impaired. In performing the impairment test for the indefinite lived intangibles, the Company estimated the direct cash flows associated with the applicable intangible assets using a “relief from royalty” methodology associated with revenues projected to be generated from these intangibles. Under this methodology, the owner of an intangible asset must determine the arms length royalty that likely would have been charged if the owner had to license that asset from a third party. This analysis indicated that certain tradenames in the Marine reporting unit were impaired by $2.3 million.

Note 6 — Inventories

Inventories consisted of the following:

		June 28,				December 31,
		2009				2008
		(Dollars in thousands)
Raw materials		$	185,145			$	185,270
Work-in-process			59,108				55,618
Finished goods			203,978				221,281
			448,231				462,169
Less: Inventory reserve			(37,000	)			(37,516	)
Inventories		$	411,231			$	424,653

Note 7 — Goodwill and other intangible assets

Changes in the carrying amount of goodwill, by operating segment, for the six months ended June 28, 2009 are as follows:

		Medical				Aerospace				Commercial				Total
		(Dollars in thousands)
Goodwill at December 31, 2008		$	1,426,031			$	6,996			$	41,096			$	1,474,123
Acquisitions			214												214
Adjustment to acquisition balance sheet			(525	)			—				—				(525	)
Dispositions			—				(268	)			—				(268	)
Impairment			—				(6,728	)			(25,145	)			(31,873	)
Translation adjustment			1,685				—				1,068				2,753
Goodwill at June 28, 2009		$	1,427,405				—				17,019				1,444,424

Of the $31.9 million of goodwill impairment recognized during the second quarter of 2009, $25.1 is attributed to the Company’s Power Systems reporting unit in the Commercial Segment. The remaining $6.7 million impairment charge represents the impairment of goodwill for the Cargo Container reporting unit in the Aerospace Segment. See Note 5 for further discussion on the goodwill impairment charges.

Intangible assets consisted of the following:

		Gross Carrying Amount								Accumulated Amortization
		June 28,				December 31,				June 28,				December 31,
		2009				2008				2009				2008
		(Dollars in thousands)
Customer lists		$	555,820			$	553,786			$	61,011			$	48,311
Intellectual property			221,847				221,549				62,251				53,437
Distribution rights			23,322				26,833				16,409				16,422
Trade names			333,682				333,495				3,616				875
		$	1,134,671			$	1,135,663			$	143,287			$	119,045

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amortization expense related to intangible assets was approximately $11.1 million and $11.8 million for the three months ended and $22.2 million and $23.5 million for the six months ended June 28, 2009 and June 29, 2008, respectively. Estimated annual amortization expense for each of the five succeeding years is as follows (dollars in thousands):

2009		$	45,100
2010			45,400
2011			45,100
2012			44,200
2013			42,800

Note 8 — Borrowings

The carrying amount reported in the condensed consolidated balance sheet as of June 28, 2009 for long-term debt is $1,301.0 million. Using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality, and risk profile, the Company has determined the fair value of its debt to be $1,192.2 million at June 28, 2009. The Company’s implied credit rating is a factor in determining the market interest yield curve.

Note 9 — Financial instruments

The Company uses derivative instruments for risk management purposes. Forward rate contracts are used to manage foreign currency transaction exposure and interest rate swaps are used to reduce exposure to interest rate changes. In accordance with SFAS No. 133, these derivative instruments are designated as cash flow hedges and are recorded on the balance sheet at fair market value. The effective portion of the gains or losses on derivatives are reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. The fair value of the interest rate swap contracts is developed from market-based inputs under the income approach using cash flows discounted at relevant market interest rates. The fair value of the foreign currency forward exchange contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. See Note 10, “Fair Value Measurement” for additional information.

The location and fair values of derivative instruments designated as hedging instruments under SFAS No. 133 in the condensed consolidated balance sheet are as follows:

		Fair Values of Derivative Instruments
		Asset Derivatives								Liability Derivatives
		As of June 28, 2009
		(Dollars in thousands)
						Fair						Fair
		Balance Sheet Location				Value				Balance Sheet Location		Value
Interest rate contracts			—			$	—			Derivative liabilities — current		$	16,823
Interest rate contracts			—				—			Other liabilities — noncurrent			13,962
Foreign exchange contracts		Other assets — current					1,764			Derivative liabilities — current			3,187
Total derivatives						$	1,764					$	33,972

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The location and amount of the gains and losses for derivatives in SFAS No. 133 cash flow hedging relationships that were reported in other comprehensive income (“OCI”), accumulated other comprehensive income (“AOCI”) and the condensed consolidated statement of income for the three and six months periods ended June 28, 2009 are as follows:

		Three Months Ended June 28, 2009
		Effective Portion
		Gain/(Loss)
		Recognized in
		OCI				(Gain)/Loss Reclassified from AOCI into Income
		After Tax						Pre-Tax
		Amount				Location		Amount
		(Dollars in thousands)
Interest rate contracts		$	6,164			Interest expense		$	4,754
Foreign exchange contracts			2,842			Net revenues			(159	)
Foreign exchange contracts			—			Materials, labor and other product costs			506
Foreign exchange contracts			—			Income from discontinued operations			—
Total		$	9,006					$	5,101

		Six Months Ended June 28, 2009
		Effective Portion
		Gain/(Loss)
		Recognized in
		OCI				Loss Reclassified from AOCI into Income
		After Tax						Pre-Tax
		Amount				Location		Amount
		(Dollars in thousands)
Interest rate contracts		$	9,262			Interest expense		$	9,111
Foreign exchange contracts			4,525			Net revenues			700
Foreign exchange contracts			—			Materials, labor and other product costs			2,122
Foreign exchange contracts			—			Income from discontinued operations			277
Total		$	13,787					$	12,210

For the three months and six months ended June 28, 2009, there was no ineffectiveness related to the Company’s derivatives.

Note 10 — Fair value measurement

The Company adopted SFAS No. 157 for financial assets and financial liabilities as of January 1, 2008, in accordance with the provisions of SFAS No. 157 and the related guidance of FSP 157-1, FSP 157-2, FSP 157-3 and FSP 157-4. The adoption did not have an impact on the Company’s financial position and results of operations. The Company endeavors to utilize the best available information in measuring fair value in accordance with the valuation hierarchy described below. The Company has determined the fair value of its financial assets based on Level 1 and Level 2 inputs and the fair value of its financial liabilities based on Level 2 inputs in accordance with the valuation hierarchy.

Valuation Hierarchy

SFAS No. 157 establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1 inputs — quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has ability to access at the measurement date.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Level 2 inputs — inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include:

1. Quoted prices for similar assets or liabilities in active markets.

2. Quoted prices for identical or similar assets or liabilities in markets that are not active.

3. Inputs other than quoted prices that are observable for the asset or liability.

4. Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 inputs — unobservable inputs for the asset or liability. Unobservable inputs may be used to measure fair value only when observable inputs are not available. Unobservable inputs reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability in achieving the fair value measurement objective of an exit price perspective.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following tables provide the financial assets and liabilities carried at fair value measured on a recurring basis as of June 28, 2009 and June 29, 2008:

		Total carrying				Quoted prices in				Significant other				Significant
		value at June 28,				active markets				observable inputs				unobservable
		2009				(Level 1)				(Level 2)				inputs (Level 3)
		(Dollars in thousands)
Deferred compensation assets		$	2,595			$	2,595			$	—			$	—
Derivative assets		$	1,764			$	—			$	1,764			$	—
Derivative liabilities		$	33,972			$	—			$	33,972			$	—

		Total carrying				Quoted prices in				Significant other				Significant
		value at June 29,				active markets				observable inputs				unobservable
		2008				(Level 1)				(Level 2)				inputs (Level 3)
		(Dollars in thousands)
Deferred compensation assets		$	3,613			$	3,613			$	—			$	—
Derivative assets		$	1,060			$	—			$	1,060			$	—
Derivative liabilities		$	18,712			$	—			$	18,712			$	—

Valuation Techniques

The Company’s financial assets valued based upon Level 1 inputs are comprised of investments in marketable securities held in a rabbi trust, which may be used to fund benefits under certain deferred compensation plans. Under these deferred compensation plans, participants designate investment options to serve as the basis for measurement of the notional value of their accounts. The investment assets of the rabbi trust are valued using quoted market prices multiplied by the number of shares held in the trust.

The Company’s financial assets valued based upon Level 2 inputs are comprised of foreign currency forward contracts. The Company’s financial liabilities valued based upon Level 2 inputs are comprised of an interest rate swap contract and foreign currency forward contracts. The Company takes into account the counterparties or its own creditworthiness in measuring fair value. The Company uses forward rate contracts to manage currency transaction exposure and interest rate swaps to manage exposure to interest rate changes. The fair value of the interest rate swap contract is developed from market-based inputs under the income approach using cash flows discounted at relevant market interest rates which is then adjusted for the Company’s creditworthiness using a credit default swap rate. The fair value of the foreign currency forward exchange contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 11 — Changes in shareholders’ equity

Set forth below is a reconciliation of the Company’s issued common shares:

		Three Months Ended								Six Months Ended
		June 28,				June 29,				June 28,				June 29,
		2009				2008				2009				2008
		(Shares in thousands)
Common shares, beginning of period			42,005				41,870				41,995				41,794
Shares issued under compensation plans			—				62				10				138
Common shares, end of period			42,005				41,932				42,005				41,932
Less: Treasury shares, end of period			2,287				2,320				2,287				2,320
Outstanding shares, end of period			39,718				39,612				39,718				39,612

On June 14, 2007, the Company’s Board of Directors authorized the repurchase of up to $300 million of outstanding Company common stock. Repurchases of Company stock under the Board authorization may be made from time to time in the open market and may include privately-negotiated transactions as market conditions warrant and subject to regulatory considerations. The stock repurchase program has no expiration date and the Company’s ability to execute on the program will depend on, among other factors, cash requirements for acquisitions, cash generation from operations, debt repayment obligations, market conditions and regulatory requirements. In addition, the Company’s senior loan agreements limit the aggregate amount of share repurchases and other restricted payments the Company may make to $75 million per year in the event the Company’s consolidated leverage ratio (generally “consolidated total indebtedness” to “consolidated EBITDA,” as such terms are defined in the senior loan agreements) exceeds 3.5 to 1. Accordingly, these provisions may limit the Company’s ability to repurchase shares under this Board authorization. Through June 28, 2009, no shares have been purchased under this Board authorization.

Basic earnings per share is computed by dividing net income by the weighted 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 share-based payment awards were exercised or vested at the beginning of the period. A reconciliation of basic to diluted weighted average shares outstanding is as follows:

		Three Months Ended								Six Months Ended
		June 28,				June 29,				June 28,				June 29,
		2009				2008				2009				2008
		(Shares in thousands)
Basic			39,717				39,562				39,704				39,508
Dilutive shares assumed issued			204				269				195				262
Diluted			39,921				39,831				39,899				39,770

Weighted average stock options that were anti-dilutive and therefore not included in the calculation of earnings per share were approximately 2,015 thousand and 1,749 thousand for the three and six month periods ended June 28, 2009 and approximately 1,119 thousand and 1,029 thousand for the three and six month periods ended June 29, 2008, respectively.

Note 12 — Stock compensation plans

The Company has two stock-based compensation plans under which equity-based awards may be made. The Company’s 2000 Stock Compensation Plan (the “2000 plan”) provides for the granting of incentive and non-qualified stock options and restricted stock awards to directors, officers and key employees. Under the 2000 plan, the Company is authorized to issue up to 4 million shares of common stock, but no more than 800,000 of those shares may be issued as restricted stock. Options granted under the 2000 plan have an exercise price equal to the average of the high and low sales prices of the Company’s common stock on the date of the grant, rounded to the nearest $0.25. Generally, options granted under the 2000 plan are exercisable three to five years after the date of the grant and expire no more than ten years after the grant. Restricted stock awards generally vest in one to three years. During the first six months of 2009, the Company granted non-qualified options to purchase 5,000 shares of common stock and granted restricted stock awards representing 169,469 shares of common stock under the 2000 plan.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s 2008 Stock Incentive Plan (the “2008 plan”) provides for the granting of various types of equity-based awards to directors, officers and key employees. These awards include incentive and non-qualified stock options, stock appreciation rights, stock awards and other stock-based awards. Under the 2008 plan, the Company is authorized to issue up to 2.5 million shares of common stock, but grants of awards other than stock options and stock appreciation rights may not exceed 875,000 shares. Options granted under the 2008 plan have an exercise price equal to the closing price of the Company’s common stock on the date of grant. During the first six months of 2009, the Company granted incentive and non-qualified options to purchase 452,644 shares of common stock under the 2008 plan.

Note 13 — Income taxes

The effective income tax rate for the three months ended June 28, 2009 was 51.1% compared to 33.4% for the corresponding prior year period. The effective income tax rate for the six months ended June 28, 2009 was 34.3% compared to 37.2% for the corresponding prior year period. The principal factors affecting comparability of the effective income tax rate for the respective periods are the impairment losses on non-deductible goodwill of $31.9 million taken in the second quarter of 2009 for which there was no income tax benefit, partially offset by (i) a beneficial net impact of discrete tax charges in both the first and second quarters of 2009, including a net reduction in income tax reserves related to the expiration of statutes of limitation for various uncertain tax positions, the settlement of tax audits, and adjustments to previously filed tax returns, and (ii) the impact of 2009 foreign income inclusions which will be immediately taxed in the US.

Note 14 — Pension and other postretirement benefits

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 Company’s 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.

In 2009, the Company offered certain qualifying individuals an early retirement program. Based on the individuals that accepted the offer the Company recognized special termination benefits of $402 thousand in pension expense and $395 thousand in postretirement expense during the three and six month periods ended June 28, 2009.

In 2008, the Company took the following actions with respect to its pension benefits:

• Effective August 31, 2008, the Arrow Salaried plan, the Arrow Hourly plan and the Berks plan were merged into the Teleflex Retirement Income Plan (“TRIP”).

• On October 31, 2008, the TRIP was amended to cease future benefit accruals for all employees, other than those subject to a collective bargaining agreement, as of December 31, 2008.

• On December 15, 2008, the Company amended its Supplemental Executive Retirement Plans (“SERP”) for all executives to cease future benefit accruals as of December 31, 2008. In addition, the Company approved a plan to replace the non-qualified defined benefits provided under the SERP with a non-qualified defined contribution arrangement under the Company’s Deferred Compensation Plan, effective January 1, 2009.

In addition, on October 31, 2008, the Company’s postretirement benefit plans were amended to eliminate future benefits for employees, other than those subject to a collective bargaining agreement, who had not attained age 50 or whose age plus service was less than 65.

The Company and certain of its 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.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net benefit cost of pension and postretirement benefit plans consisted of the following:

		Pension								Other Benefits								Pension								Other Benefits
		Three Months Ended								Three Months Ended								Six Months Ended								Six Months Ended
		June 28,				June 29,				June 28,				June 29,				June 28,				June 29,				June 28,				June 29,
		2009				2008				2009				2008				2009				2008				2009				2008
		(Dollars in Thousands)
Service cost		$	709			$	1,330			$	284			$	247			$	1,417			$	2,656			$	567			$	494
Interest cost			4,527				4,661				900				748				9,029				9,311				1,800				1,495
Expected return on plan assets			(3,694	)			(5,821	)			—				—				(7,377	)			(11,642	)			—				—
Net amortization and deferral			1,243				471				220				265				2,478				942				441				531
Special Termination Costs			402				—				395				—				402				—				395				—
Net benefit cost		$	3,187			$	641			$	1,799			$	1,260			$	5,949			$	1,267			$	3,203			$	2,520