TELEFLEX INC - Quarter Report: 2015 September (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended September 27, 2015



¨	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 incorporation or organization)		(I.R.S. employer identification no.)



550 E. Swedesford Rd., Suite 400, Wayne, PA		19087
(Address of principal executive offices)		(Zip Code)

(610) 225-6800

(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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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 filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The registrant had 41,601,863 shares of common stock, $1.00 par value, outstanding as of October 19, 2015.

TELEFLEX INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 27, 2015

TABLE OF CONTENTS



		Page
PART I — FINANCIAL INFORMATION

Item 1:	Financial Statements (Unaudited):	2
	Condensed Consolidated Statements of Income for the three and nine months ended September 27, 2015 and September 28, 2014	2
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 27, 2015 and September 28, 2014	3
	Condensed Consolidated Balance Sheets as of September 27, 2015 and December 31, 2014	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 27, 2015 and September 28, 2014	5
	Condensed Consolidated Statements of Changes in Equity for the nine months ended September 27, 2015 and September 28, 2014	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4:	Controls and Procedures	50

PART II — OTHER INFORMATION

Item 1:	Legal Proceedings	51
Item 1A:	Risk Factors	51
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3:	Defaults Upon Senior Securities	51
Item 4:	Mine Safety Disclosures	51
Item 5:	Other Information	51
Item 6:	Exhibits	52

SIGNATURES		53

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 27, 2015			September 28, 2014			September 27, 2015			September 28, 2014
	(Dollars and shares in thousands, except per share)
Net revenues	$	443,714		$	457,173		$	1,325,189		$	1,363,824
Cost of goods sold	215,501			221,007			641,102			662,411
Gross profit	228,213			236,166			684,087			701,413
Selling, general and administrative expenses	138,840			138,252			420,765			425,392
Research and development expenses	12,571			14,871			38,898			43,803
Restructuring charges	660			1,108			5,688			16,511
Gain on sale of assets	(408		)	—			(408		)	—
Income from continuing operations before interest, extinguishment of debt and taxes	76,550			81,935			219,144			215,707
Interest expense	14,306			17,184			47,685			48,650
Interest income	(130		)	(161		)	(453		)	(494		)
Loss on extinguishment of debt	—			—			10,454			—
Income from continuing operations before taxes	62,374			64,912			161,458			167,551
Taxes on income from continuing operations	803			9,684			15,415			28,224
Income from continuing operations	61,571			55,228			146,043			139,327
Operating loss from discontinued operations	(788		)	(247		)	(1,432		)	(1,866		)
(Benefit) taxes on loss from discontinued operations	(69		)	24			180			(345		)
Loss from discontinued operations	(719		)	(271		)	(1,612		)	(1,521		)
Net income	60,852			54,957			144,431			137,806
Less: Income from continuing operations attributable to noncontrolling interest	28			126			692			765
Net income attributable to common shareholders	$	60,824		$	54,831		$	143,739		$	137,041
Earnings per share available to common shareholders:
Basic:
Income from continuing operations	$	1.48		$	1.33		$	3.50		$	3.35
Loss from discontinued operations	(0.02		)	(0.01		)	(0.04		)	(0.04		)
Net income	$	1.46		$	1.32		$	3.46		$	3.31
Diluted:
Income from continuing operations	$	1.27		$	1.18		$	3.03		$	3.00
Loss from discontinued operations	(0.02		)	—			(0.03		)	(0.04		)
Net income	$	1.25		$	1.18		$	3.00		$	2.96
Dividends per share	$	0.34		$	0.34		$	1.02		$	1.02
Weighted average common shares outstanding
Basic	41,597			41,399			41,542			41,347
Diluted	48,532			46,628			47,969			46,256
Amounts attributable to common shareholders:
Income from continuing operations, net of tax	$	61,543		$	55,102		$	145,351		$	138,562
Loss from discontinued operations, net of tax	(719		)	(271		)	(1,612		)	(1,521		)
Net income	$	60,824		$	54,831		$	143,739		$	137,041

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

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 27, 2015			September 28, 2014			September 27, 2015			September 28, 2014
	(Dollars in thousands)
Net income	$	60,852		$	54,957		$	144,431		$	137,806
Other comprehensive (loss) income, net of tax:
Foreign currency translation, net of tax of $2,750, $12,721, $20,854 and $13,252 for the three and nine month periods, respectively	(29,329		)	(46,395		)	(91,216		)	(41,105		)
Pension and other postretirement benefit plans adjustment, net of tax of $(609), $(526), $(1,894) and $(1,235) for the three and nine month periods, respectively	1,185			1,094			3,622			2,336
Derivatives qualifying as hedges, net of tax of $420, $(34), $856 and $(117) for the three and nine month periods, respectively	(730		)	60			(1,489		)	203
Other comprehensive loss, net of tax:	(28,874		)	(45,241		)	(89,083		)	(38,566		)
Comprehensive income	31,978			9,716			55,348			99,240
Less: comprehensive (loss) income attributable to non-controlling interest	(57		)	86			613			793
Comprehensive income attributable to common shareholders	$	32,035		$	9,630		$	54,735		$	98,447

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

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	September 27, 2015		December 31, 2014
	(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents	$	276,463	$	303,236
Accounts receivable, net	272,996		273,704
Inventories, net	345,899		335,593
Prepaid expenses and other current assets	33,798		35,697
Prepaid taxes	43,966		40,256
Deferred tax assets	55,981		57,301
Assets held for sale	7,044		7,422
Total current assets	1,036,147		1,053,209
Property, plant and equipment, net	313,244		317,435
Goodwill	1,303,175		1,323,553
Intangible assets, net	1,192,364		1,216,720
Investments in affiliates	324		1,150
Deferred tax assets	940		1,178
Other assets	61,507		64,010
Total assets	$	3,907,701	$	3,977,255
LIABILITIES AND EQUITY
Current liabilities
Current borrowings	$	416,685	$	368,401
Accounts payable	67,906		64,100
Accrued expenses	67,027		72,383
Current portion of contingent consideration	545		11,276
Payroll and benefit-related liabilities	77,435		85,442
Accrued interest	7,490		9,169
Income taxes payable	9,728		13,768
Other current liabilities	10,655		10,360
Total current liabilities	657,471		634,899
Long-term borrowings	646,000		700,000
Deferred tax liabilities	406,101		451,541
Pension and postretirement benefit liabilities	148,514		167,241
Noncurrent liability for uncertain tax provisions	50,817		50,884
Other liabilities	57,737		58,991
Total liabilities	1,966,640		2,063,556
Commitments and contingencies
Total common shareholders' equity	1,938,891		1,911,309
Noncontrolling interest	2,170		2,390
Total equity	1,941,061		1,913,699
Total liabilities and equity	$	3,907,701	$	3,977,255

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

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended
	September 27, 2015			September 28, 2014
	(Dollars in thousands)
Cash Flows from Operating Activities of Continuing Operations
Net income	$	144,431		$	137,806
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations	1,612			1,521
Depreciation expense	34,035			37,409
Amortization expense of intangible assets	45,278			47,053
Amortization expense of deferred financing costs and debt discount	12,662			11,792
Loss on extinguishment of debt	10,454			—
Gain on sale of assets	(408		)	—
Changes in contingent consideration	(3,260		)	(7,670		)
Stock-based compensation	10,379			9,125
Deferred income taxes, net	(21,960		)	(2,808		)
Other	(18,329		)	(4,310		)
Changes in operating assets and liabilities, net of effects of acquisitions and disposals:
Accounts receivable	(8,714		)	2,442
Inventories	(19,904		)	(23,084		)
Prepaid expenses and other current assets	1,636			(4,087		)
Accounts payable and accrued expenses	(2,855		)	14,258
Income taxes receivable and payable, net	(8,297		)	(10,649		)
Net cash provided by operating activities from continuing operations	176,760			208,798
Cash Flows from Investing Activities of Continuing Operations:
Expenditures for property, plant and equipment	(45,566		)	(48,220		)
Proceeds from sale of assets	408			5,251
Payments for businesses and intangibles acquired, net of cash acquired	(63,451		)	(28,535		)
Investment in affiliates	—			(40		)
Net cash used in investing activities from continuing operations	(108,609		)	(71,544		)
Cash Flows from Financing Activities of Continuing Operations:
Proceeds from new borrowings	288,100			250,000
Reduction in borrowings	(303,627		)	(480,009		)
Debt extinguishment, issuance and amendment fees	(9,017		)	(3,689		)
Net proceeds from share based compensation plans and the related tax impacts	4,815			2,936
Payments to noncontrolling interest shareholders	(833		)	(1,094		)
Payments for contingent consideration	(7,974		)	—
Dividends paid	(42,382		)	(42,174		)
Net cash used in financing activities from continuing operations	(70,918		)	(274,030		)
Cash Flows from Discontinued Operations:
Net cash used in operating activities	(1,954		)	(1,946		)
Net cash used in discontinued operations	(1,954		)	(1,946		)
Effect of exchange rate changes on cash and cash equivalents	(22,052		)	(6,880		)
Net decrease in cash and cash equivalents	(26,773		)	(145,602		)
Cash and cash equivalents at the beginning of the period	303,236			431,984
Cash and cash equivalents at the end of the period	$	276,463		$	286,382

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

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)



										Accumulated Other Comprehensive Loss
	Common Stock			Additional Paid In Capital			Retained Earnings						Treasury Stock					Noncontrolling Interest			Total Equity
	Shares	Dollars		Additional Paid In Capital			Retained Earnings						Shares		Dollars			Noncontrolling Interest			Total Equity
	(Dollars and shares in thousands, except per share)
Balance at December 31, 2013	43,243	$	43,243	$	409,338		$	1,696,424		$	(110,855	)	2,064		$	(124,623	)	$	2,489		$	1,916,016
Net income							137,041											765			137,806
Cash dividends ($1.02 per share)							(42,174		)												(42,174		)
Other comprehensive (loss) income										(38,594		)						28			(38,566		)
Distributions to noncontrolling interest shareholders																		(1,094		)	(1,094		)
Settlements of convertible notes				4											(4		)				—
Settlements of note hedges associated with convertible notes				(7		)									6						(1		)
Shares issued under compensation plans	158	158		9,001									(75	)	2,684						11,843
Deferred compensation													(2	)	86						86
Balance at September 28, 2014	43,401	$	43,401	$	418,336		$	1,791,291		$	(149,449	)	1,987		$	(121,851	)	$	2,188		$	1,983,916



										Accumulated Other Comprehensive Loss
	Common Stock			Additional Paid In Capital			Retained Earnings						Treasury Stock					Noncontrolling Interest			Total Equity
	Shares	Dollars		Additional Paid In Capital			Retained Earnings						Shares		Dollars			Noncontrolling Interest			Total Equity
	(Dollars and shares in thousands, except per share)
Balance at December 31, 2014	43,420	$	43,420	$	422,394		$	1,827,845		$	(260,895	)	1,981		$	(121,455	)	$	2,390		$	1,913,699
Net income							143,739											692			144,431
Cash dividends ($1.02 per share)							(42,382		)												(42,382		)
Other comprehensive loss										(89,004		)						(79		)	(89,083		)
Distributions to noncontrolling interest shareholders																		(833		)	(833		)
Settlements of convertible notes				(59		)									62						3
Settlements of note hedges associated with convertible notes				126											(125		)				1
Shares issued under compensation plans	95	95		13,379									(63	)	1,678						15,152
Deferred compensation													(3	)	73						73
Balance at September 27, 2015	43,515	$	43,515	$	435,840		$	1,929,202		$	(349,899	)	1,915		$	(119,767	)	$	2,170		$	1,941,061

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

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Basis of presentation

The accompanying unaudited condensed consolidated financial statements of Teleflex Incorporated and its subsidiaries are prepared on the same basis as the annual consolidated financial statements.

In the opinion of management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary for the fair statement of financial statements for interim periods in accordance with accounting principles generally accepted in the United States of America ("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 condensed 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 the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

In accordance with applicable accounting standards, the accompanying condensed consolidated financial statements do not include all of the information and footnote disclosures that are required to be included in the Company's annual consolidated financial statements. The year-end condensed consolidated balance sheet data was derived from the Company's audited financial statements, but, as permitted by Rule 10-01 of SEC Regulation S-X, does not include all disclosures required by GAAP for complete financial statements. Accordingly, the Company's quarterly condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.

Effective April 1, 2015, the Company reorganized certain of its businesses to better leverage the Company’s resources. As a result, the Company realigned its operating segments, and segment data included in Notes 4, 6 and 14 has been restated to reflect these changes. See Note 14 for additional information, including information regarding changes in the composition of certain of the Company's reportable operating segments.

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

In May 2014, the Financial Accounting Standards Board ("FASB"), in a joint effort with the International Accounting Standards Board ("IASB"), issued new accounting guidance to clarify the principles for recognizing revenue. The new guidance is designed to enhance the comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets, and will affect any entity that enters into contracts with customers or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The new guidance establishes principles for reporting information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The core principle of the new guidance is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued an amendment to the new guidance that defers the effective date. The amendment provides that the new guidance is effective prospectively for annual periods beginning after December 15, 2017 and interim periods within those years; early application is permitted for annual periods beginning after December 15, 2016. The Company is currently evaluating this guidance to determine its impact on the Company’s results of operations, cash flows and financial position.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

In April 2015, the FASB issued guidance for the reporting of debt issuance costs within the balance sheet. Under the new guidance, debt issuance costs are to be presented in the balance sheet as a direct deduction from the associated debt liability, consistent with the presentation of a debt discount. Currently, debt issuance costs are presented as a deferred charge (i.e., an asset) on the balance sheet. The guidance provides uniform treatment for debt issuance costs and debt discounts and eliminates inconsistencies that previously existed with other FASB guidance. The new guidance is effective for fiscal years beginning after December 15, 2015 with early adoption permitted, and is required to be applied on a retrospective basis. The Company does not believe that the adoption of this guidance will have a material impact on the Company’s financial position.

In September 2015, the FASB issued guidance that will change the requirements for reporting measurement period adjustments to provisional amounts initially recognized in connection with a business combination. Under GAAP, an acquiring entity currently is required to retrospectively adjust, in prior period financial statements, the provisional amounts to reflect new information obtained during the measurement period (a period, which may not exceed one year from the date of the business combination, during which the acquiring entity may receive information about the facts and circumstances existing as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of the acquisition date). Under the new guidance, adjustments to the provisional amounts will be reflected in the financial statements for the reporting period in which the adjustments are determined, including by recognizing in current period earnings the full effect of changes in depreciation, amortization or other income effects. The guidance requires that the acquiring entity either present separately on the face of the current period income statement or disclose in the notes to the current period financial statements, by line item, the amount of the adjustments made during the current period. The new guidance will be effective for fiscal years beginning after December 15, 2015, and will be applied prospectively to adjustments to provisional amounts occurring after the effective date of the guidance. Earlier application is permitted for financial statements that have not been issued. The Company will apply the provisions of this guidance to any measurement period adjustments occurring after September 27, 2015.

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date or, in some cases where early adoption is permitted, in advance of the specified effective date. The Company has assessed the recently issued standards that are not yet effective and, unless otherwise discussed above, believes these standards will not have a material impact on the Company’s results of operations, cash flows or financial position.

Note 3 — Acquisitions

The Company made the following acquisitions during 2015 (the "2015 acquisitions"), which, with the exception of Ace Medical, were accounted for as business combinations:


•	On January 20, 2015, the Company acquired Human Medics Co., Ltd., (“Human Medics”), a distributor of medical devices and supplies primarily in the Korean market.


•	On March 30, 2015, the Company acquired Trintris Medical, Inc. ("Trintris"), an original equipment manufacturer (OEM) of balloons and catheters that complement the Company's OEM product portfolio.


•	On April 8, 2015, the Company acquired Truphatek Holdings (1993) Limited ("Truphatek"), a manufacturer of a broad range of disposable and reusable laryngoscope devices that complement the Company's anesthesia product portfolio. Previously, the Company held a noncontrolling, 6% interest in Truphatek.


•	On June 26, 2015, the Company acquired certain assets of N. Stenning & Co. Pty. Ltd. ("Stenning"), a distributor of medical devices and supplies primarily in the Australian market.


•	On June 29, 2015, the Company acquired certain assets, primarily distribution rights, of Ace Medical US, LLC ("Ace Medical"), a distributor of medical devices and supplies in the United States of America.


•	On August 26, 2015, the Company acquired certain assets of Atsina Surgical, LLC ("Atsina"), a company that developed surgical clips that complement the Company's surgical ligation portfolio.

As a result of the above transactions, the Company acquired all of the common stock and voting equity interest in Human Medics, Trintris and Truphatek.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The aggregate total fair value of the 2015 acquisitions is estimated to be $66.4 million, which includes initial payments of $63.8 million, deferred consideration of $1.8 million and the fair value of the Company's previously held noncontrolling equity interest in Truphatek of $1.2 million, partially offset by a favorable working capital adjustment of $0.4 million. As a result of the Company's remeasurement, at the acquisition date, of the fair value of the noncontrolling equity interest the Company previously held in Truphatek, the Company recognized a gain of $1.0 million that reduced selling, general and administrative expenses in the condensed consolidated statements of income. Transaction expenses associated with the 2015 acquisitions, which are included in selling, general and administrative expenses in the condensed consolidated statement of income, were $0.2 million and $1.0 million for the three and nine months ended September 27, 2015, respectively. The results of operations of the acquired businesses and assets are included in the condensed consolidated statements of income from their respective acquisition dates. For the three months ended September 27, 2015, the Company recorded revenue and income from continuing operations before taxes related to the acquired businesses of $4.6 million and $1.1 million, respectively. For the nine months ended September 27, 2015, the Company recorded revenue and income from continuing operations before taxes related to the acquired businesses of $9.9 million and $2.0 million, respectively. Pro forma information is not presented, as the operations of the acquired businesses are not significant to the overall operations of the Company.

The following table presents the preliminary fair value determination of the assets acquired and liabilities assumed in the 2015 acquisitions:



	(Dollars in thousands)
Assets
Current assets	$	10,353
Property, plant and equipment	2,817
Intangible assets:
Intellectual property	4,067
Distribution rights	7,738
Non-compete agreements	1,894
In-process research and development	17,908
Customer list	8,337
Goodwill	18,915
Other assets	45
Total assets acquired	72,074
Less:
Current liabilities	3,048
Deferred tax liabilities	2,477
Other liabilities	138
Liabilities assumed	5,663
Net assets acquired	$	66,411

The Company is continuing to evaluate the 2015 acquisitions throughout their respective measurement periods. Further adjustments may be necessary as a result of the Company's assessment of additional information related to the fair values of the assets acquired and liabilities assumed, primarily deferred tax liabilities and goodwill.

Among the acquired assets, intellectual property has useful lives ranging from 15 to 20 years, customer lists have useful lives ranging from 10 to 18 years, distribution rights have useful lives of 10 years and non-compete arrangements have useful lives of 5 years. The goodwill resulting from the acquisitions primarily reflects synergies currently expected to be realized from the integration of the acquired businesses. Goodwill and the step-up in basis of the intangible assets in connection with stock acquisitions are not deductible for tax purposes.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The Company made the following acquisitions during 2014 (the "2014 acquisitions"), which were accounted for as business combinations:


•	On February 3, 2014, the Company acquired Mayo Healthcare Pty Limited, ("Mayo Healthcare"), a distributor of medical devices and supplies primarily in the Australian market.


•	On December 2, 2014, the Company acquired the assets of Mini-Lap Technologies, Inc. ("Mini-Lap"), a developer of micro-laparoscopic instrumentation that complement the Company's surgical product portfolio.

The total fair value of consideration for the 2014 acquisitions was $66.3 million. The results of operations of the acquired businesses and assets are included in the consolidated statements of income from their respective acquisition dates. Pro forma information is not presented, as the operations of the acquired businesses are not significant to the overall operations of the Company.

Note 4 — Restructuring charges

2015 Restructuring Plans

During 2015, the Company committed to programs associated with the reorganization of certain of its businesses, as discussed in Note 14, and the consolidation of certain of its facilities in North America. The Company estimates that it will record aggregate pre-tax charges of $6 million to $7 million related to these programs, which represent employee termination benefits, contract termination costs and facility closure and other exit costs, and will result in future cash outlays. For the three and nine months ended September 27, 2015, the Company recorded charges of $(0.1) million and $4.3 million, respectively, related to these programs. As of September 27, 2015, the Company has a reserve of $2.9 million related to these programs.

2014 Manufacturing Footprint Realignment Plan

On April 28, 2014, the Board of Directors approved a restructuring plan (the “2014 Manufacturing Footprint Realignment Plan”) involving the consolidation of operations and a related reduction in workforce at certain of the Company’s facilities, and the relocation of manufacturing operations from certain higher-cost locations to existing lower-cost locations. These actions commenced in the quarter ended June 29, 2014 and are expected to be substantially completed by the end of 2017.

The Company estimates that it will incur aggregate pre-tax charges in connection with these restructuring activities of approximately $37 million to $44 million, of which an estimated $26 million to $31 million are expected to result in future cash outlays. Most of these charges are expected to be incurred prior to the end of 2016.

The following table provides a summary of the Company's current cost estimates by major type of expense associated with the 2014 Manufacturing Footprint Realignment Plan:



Type of expense	Total estimated amount expected to be incurred

Employee termination benefits	$11 million to $13 million
Facility closure and other exit costs	$2 million to $3 million
Accelerated depreciation charges	$10 million to $11 million
Other	$14 million to $17 million
	$37 million to $44 million

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The Company recorded expenses of $3.2 million and $9.1 million for the three and nine months ended September 27, 2015, respectively, related to the 2014 Manufacturing Footprint Realignment Plan. Of this amount, $0.8 million and $1.5 million were recorded as restructuring expense for the three and nine months ended September 27, 2015, respectively, and $2.4 million and $7.6 million, related to accelerated depreciation and certain other transfer related costs resulting from the plan, were included in cost of goods sold for the three and nine months ended September 27, 2015, respectively. As of September 27, 2015, the Company has incurred net aggregate restructuring charges related to the plan of $10.8 million. Additionally, as of September 27, 2015, the Company has incurred net aggregate accelerated depreciation and certain other costs in connection with the plan of $12.4 million, which were included in cost of sales. As of September 27, 2015, the Company has a restructuring reserve of $7.5 million in connection with the plan, all of which relates to termination benefits.

As the 2014 Manufacturing Footprint Realignment Plan progresses, management will reevaluate the estimated expenses set forth above, and may revise its estimates, as appropriate, consistent with generally accepted accounting principles.

2014 European Restructuring Plan

In February 2014, the Company committed to a restructuring plan (the “2014 European Restructuring Plan”), which impacts certain administrative functions in Europe and involves the consolidation of operations and a related reduction in workforce at certain of the Company’s European facilities.

The Company recorded nominal charges for the three and nine months ended September 27, 2015 with respect to this plan. As of September 27, 2015, the Company has incurred net aggregate restructuring charges under the plan of $7.8 million. As of September 27, 2015, the Company had a reserve of $0.3 million in connection with the 2014 European Restructuring Plan. The Company expects to complete this plan in 2015.

Other 2014 Restructuring Programs

In June 2014, the Company initiated programs to consolidate locations in Australia and terminate certain distributor agreements in an effort to reduce costs. As a result of these actions, the Company expects to incur aggregate restructuring charges over the term of these programs of approximately $4 million, of which, $3.6 million was incurred through September 27, 2015. These programs include costs related to termination benefits, contract termination costs and other exit costs. As of September 27, 2015, the Company had a reserve of $0.3 million in connection with these programs. The Company expects to complete the programs in 2015.

LMA Restructuring Program

In connection with the acquisition of substantially all of the assets of LMA International N.V. (the “LMA business”) in 2012, the Company commenced a program (the "LMA Restructuring Program") related to the integration of the LMA business and the Company’s other businesses. The program was focused on the closure of the LMA business’ corporate functions and the consolidation of manufacturing, sales, marketing, and distribution functions in North America, Europe and Asia.

The Company has incurred net aggregate restructuring charges related to the LMA Restructuring Program of $11.3 million, and as of September 27, 2015, the program is complete.

2013 Restructuring Programs

In 2013, the Company initiated restructuring programs to consolidate administrative and manufacturing facilities in North America and warehouse facilities in Europe and terminate certain European distributor agreements in an effort to reduce costs. As of September 27, 2015, the Company has incurred an aggregate of $11.0 million in restructuring charges related to these restructuring programs. These programs entail costs related to termination benefits, contract termination costs and charges related to post-closing obligations associated with its acquired businesses. As of September 27, 2015, these programs have been completed.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Impairment Charges

There were no impairment charges recorded for the three and nine months ended September 27, 2015 and September 28, 2014, respectively.

The restructuring charges recognized for the three and nine months ended September 27, 2015 and September 28, 2014 consisted of the following:



Three Months Ended September 27, 2015
(in thousands)	Termination Benefits			Facility Closure Costs			Contract Termination Costs		Other Exit Costs		Total
2015 Restructuring plans	$	(198	)	$	37		$	78	$	9	$	(74	)
2014 Manufacturing footprint realignment plan	619			(3		)	163		52		831
2014 European restructuring plan	(97		)	—			—		—		(97		)
Total restructuring charges	$	324		$	34		$	241	$	61	$	660



Three Months Ended September 28, 2014
(in thousands)	Termination Benefits			Facility Closure Costs		Contract Termination Costs		Other Exit Costs		Total
2014 Manufacturing footprint realignment plan	$	129		$	—	$	—	$	42	$	171
2014 European restructuring plan	537			1		1		27		566
Other 2014 restructuring programs	25			—		202		62		289
LMA restructuring program	—			—		20		—		20
2013 Restructuring programs	(124		)	—		186		—		62
Total restructuring charges	$	567		$	1	$	409	$	131	$	1,108



Nine Months Ended September 27, 2015
(in thousands)	Termination Benefits			Facility Closure Costs		Contract Termination Costs			Other Exit Costs		Total
2015 Restructuring programs	$	3,361		$	166	$	723		$	56	$	4,306
2014 Manufacturing footprint realignment plan	831			241		389			36		1,497
2014 European restructuring plan	(87		)	—		—			34		(53		)
Other 2014 restructuring programs	—			—		49			—		49
LMA restructuring program	—			2		(20		)	1		(17		)
2013 Restructuring programs	(94		)	—		—			—		(94		)
Total restructuring charges	$	4,011		$	409	$	1,141		$	127	$	5,688

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)



Nine Months Ended September 28, 2014
(in thousands)	Termination Benefits			Facility Closure Costs			Contract Termination Costs			Other Exit Costs		Total
2014 Manufacturing footprint realignment	$	8,706		$	—		$	—		$	42	$	8,748
2014 European restructuring plan	8,289			1			306			76		8,672
Other 2014 restructuring programs	501			—			1,376			193		2,070
LMA restructuring program	(29		)	(112		)	(3,211		)	—		(3,352		)
2013 Restructuring programs	361			—			243			22		626
2012 Restructuring charges	(619		)	354			—			—		(265		)
2011 Restructuring plan	—			12			—			—		12
Total restructuring charges	$	17,209		$	255		$	(1,286	)	$	333	$	16,511

Termination benefits include estimated employee retention, severance and benefit payments for terminated employees.

Facility closure costs include general operating costs incurred subsequent to production shutdown as well as equipment relocation and other associated costs.

Contract termination costs include costs associated with terminating existing leases and distributor agreements.

Other costs include legal, outplacement and employee relocation costs and other employee-related costs.

Restructuring charges by reportable operating segment for the three and nine months ended September 27, 2015 and September 28, 2014 are set forth in the following table:



	Three Months Ended						Nine Months Ended
	September 27, 2015			September 28, 2014			September 27, 2015			September 28, 2014
	(Dollars in thousands)
Restructuring charges
Vascular North America	$	232		$	(15	)	$	2,466		$	6,748
Anesthesia North America	(250		)	15			284			1,193
Surgical North America	36			—			282			—
EMEA	(64		)	849			(139		)	7,164
Asia	2			111			3			708
All other	704			148			2,792			698
Total restructuring charges	$	660		$	1,108		$	5,688		$	16,511

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Note 5 — Inventories, net

Inventories as of September 27, 2015 and December 31, 2014 consisted of the following:



	September 27, 2015			December 31, 2014
	(Dollars in thousands)
Raw materials	$	80,143		$	68,191
Work-in-process	64,691			58,526
Finished goods	237,775			242,750
	382,609			369,467
Less: inventory reserve	(36,710		)	(33,874		)
Inventories, net	$	345,899		$	335,593

Note 6 — Goodwill and other intangible assets, net

The following table provides information relating to changes in the carrying amount of goodwill by reportable segment for the nine months ended September 27, 2015:



	Vascular North America			Anesthesia North America			Surgical North America		EMEA			Asia			OEM		All Other			Total
	(Dollars in thousands)
Balance as of December 31, 2014
Goodwill	$	564,177		$	214,429		$	250,912	$	339,029		$	144,712		$	—	$	142,422		$	1,655,681
Accumulated impairment losses	(219,527		)	(84,531		)	—		—			—			—		(28,070		)	(332,128		)
	344,650			129,898			250,912		339,029			144,712			—		114,352			1,323,553
Goodwill related to acquisitions	—			12,473			—		1,149			4,099			1,194		—			18,915
Currency translation adjustment	88			(825		)	—		(25,875		)	(9,175		)	—		(3,506		)	(39,293		)
Balance at September 27, 2015
Goodwill	564,265			226,077			250,912		314,303			139,636			1,194		138,916			1,635,303
Accumulated impairment losses	(219,527		)	(84,531		)	—		—			—			—		(28,070		)	(332,128		)
	$	344,738		$	141,546		$	250,912	$	314,303		$	139,636		$	1,194	$	110,846		$	1,303,175

The following table provides information as of September 27, 2015 and December 31, 2014 regarding the gross carrying amount of, and accumulated amortization relating to, intangible assets, net:



	Gross Carrying Amount				Accumulated Amortization
	September 27, 2015		December 31, 2014		September 27, 2015			December 31, 2014
	(Dollars in thousands)
Customer relationships	$	623,211	$	624,574	$	(209,262	)	$	(192,876	)
In-process research and development	58,908		68,694		—			—
Intellectual property	494,457		467,068		(166,909		)	(146,131		)
Distribution rights	23,363		16,101		(14,208		)	(14,243		)
Trade names	387,132		396,269		(6,115		)	(2,764		)
Non-compete agreements	2,218		337		(431		)	(309		)
	$	1,589,289	$	1,573,043	$	(396,925	)	$	(356,323	)

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

In May 2012, the Company acquired Semprus BioSciences Corp. ("Semprus"), a biomedical research and development company that developed a polymer surface treatment technology intended to reduce thrombus related complications. The Company experienced difficulties with respect to the development of the Semprus technology, and devoted further research and testing towards attempting to resolve the issue. As a result of these efforts, the Company believes it has resolved the issue and is focused on seeking regulatory approval and engaging in additional research and development efforts to achieve commercialization of this technology. Despite this progress, significant challenges to commercialization of the Semprus technology remain, and the Company ultimately may find it necessary to recognize impairment charges with respect to the related assets, which could be material. As of September 27, 2015, the Company has in-process research and development intangible assets of $41.0 million related to this investment, which are recorded in intangible assets, net.

Amortization expense related to intangible assets was $15.5 million and $15.0 million for the three months ended September 27, 2015 and September 28, 2014, respectively, and $45.3 million and $47.1 million for the nine months ended September 27, 2015 and September 28, 2014, respectively. Estimated annual amortization expense for the remainder of 2015 and the next five succeeding years is as follows (dollars in thousands):



2015	$	15,600
2016	61,800
2017	62,000
2018	61,700
2019	61,500
2020	61,000

Note 7 — Borrowings

The Company's borrowings at September 27, 2015 and December 31, 2014 are as follows:



	September 27, 2015			December 31, 2014
	(Dollars in thousands)
Senior Credit Facility:
Revolving credit facility, at a rate of 1.95% at September 27, 2015, due 2018	$	396,000		$	200,000
3.875% Convertible Senior Subordinated Notes due 2017	399,771			399,898
6.875% Senior Subordinated Notes due 2019	—			250,000
5.25% Senior Notes due 2024	250,000			250,000
Securitization program, at a rate of 0.94% at September 27, 2015	43,300			4,700
	1,089,071			1,104,598
Less: Unamortized debt discount on 3.875% Convertible Senior Subordinated Notes due 2017	(26,386		)	(36,197		)
	1,062,685			1,068,401
Current borrowings	(416,685		)	(368,401		)
Long-term borrowings	$	646,000		$	700,000

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Classification of 3.875% Convertible Senior Subordinated Notes due 2017 as a Current Liability

The Company's 3.875% Convertible Senior Subordinated Notes due 2017 (the "Convertible Notes") are convertible into shares of the Company's common stock at the option of the holder upon the occurrence of any of the following circumstances (i) during any fiscal quarter, if the last reported sale price of the Company’s common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds 130% of the conversion price on each applicable trading day; or (ii) during the five business day period after any consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Convertible Notes is less than 98% of the product of the last reported sale price of the common stock and the applicable conversion rate on each trading day during the measurement period; or (iii) upon the occurrence of specified corporate events; or (iv) at any time on or after May 1, 2017 up to and including July 28, 2017. The Convertible Notes are convertible at a conversion rate of 16.3084 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of approximately $61.32 per share. The conversion rate is subject to adjustment upon certain events. Upon conversion, the Company’s conversion obligation may be satisfied, at the Company’s option, in shares of common stock, cash or a combination of cash and shares of common stock. The Company has elected a net-settlement method to satisfy its conversion obligation. Under the net-settlement method, the Company will settle the $1,000 principal amount of the Convertible Notes in cash and settle the excess conversion value in shares, plus cash in lieu of fractional shares.

Since the fourth quarter 2013, the Company's last reported sale price has exceeded the 130% threshold described above and accordingly the Convertible Notes have been classified as a current liability as of September 27, 2015 and December 31, 2014. The determination of whether or not the Convertible Notes are convertible as described above is made each quarter until maturity, conversion or repurchase. Consequently, it is possible that the Convertible Notes may not be convertible in one or more future quarters, in which case the Convertible Notes would again be classified as long-term debt, unless one of the other conversion events described above were to occur. While the Company believes it has sufficient liquidity to repay the principal amount due through a combination of utilizing its existing cash on hand and accessing its revolving credit facility, the Company's use of these funds could adversely affect its results of operations and liquidity.

Exchange Offer for the 5.25% Senior Notes due 2024

On March 30, 2015, the Company commenced an exchange offer with respect to the 5.25% Senior Notes due 2024 (the "Old 2024 Notes"), under which the holders of the Old 2024 Notes, which were initially issued in a private placement, were provided an opportunity to exchange the Old 2024 Notes for new notes (the "New 2024 Notes") issued pursuant to a registration statement under the Securities Act of 1933. Other than the absence of registration rights for the holders of the New 2024 Notes, the terms of the New 2024 Notes are essentially identical to the terms of the Old 2024 Notes.The exchange offer was completed on April 24, 2015; all of the holders of the Old 2024 Notes exchanged their Old 2024 Notes for New 2024 Notes.

Redemption of 6.875% Senior Subordinated Notes due 2019

On June 1, 2015, the Company prepaid the $250 million aggregate outstanding principal amount under its 6.875% Senior Subordinated Notes due 2019 (the “2019 Notes”). In addition to its prepayment of principal, the Company paid the holders of the 2019 Notes an $8.6 million prepayment make-whole amount plus accrued and unpaid interest. The Company recorded the prepayment make-whole amount and a $1.9 million write-off of unamortized debt issuance costs as a loss on extinguishment of debt in the condensed consolidated statement of income in the second quarter 2015. The Company used $246.0 million in borrowings under its revolving credit facility, $12.1 million in borrowings under its securitization program and available cash to fund the prepayment of the 2019 Notes.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Fair Value of Long-Term Debt

The carrying amount of current and long-term borrowings as reported in the condensed consolidated balance sheet as of September 27, 2015 is $1,062.7 million. To determine the fair value of its debt, the Company uses a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality and risk profile. The Company’s implied credit rating is a factor in determining the market interest yield curve. The following table provides the fair value of the Company’s debt as of September 27, 2015 and December 31, 2014, categorized by the level of inputs within the fair value hierarchy used to measure fair value (see Note 10, “Fair value measurement,” in the Company’s annual report on Form 10-K for the year ended December 31, 2014 for further information):



	September 27, 2015		December 31, 2014
	(Dollars in thousands)
Level 1	$	844,756	$	1,024,806
Level 2	690,151		455,222
Total	$	1,534,907	$	1,480,028

Note 8 — Financial instruments

Foreign Currency Forward Contracts Designated as Cash Flow Hedges

The Company uses derivative instruments for risk management purposes. Foreign currency forward contracts are used to manage foreign currency transaction exposure. These derivative instruments are designated as cash flow hedges and are recorded on the condensed consolidated balance sheet at fair market value. The effective portion of the gains or losses on derivatives is reported as a component of other comprehensive loss and thereafter is recognized in the condensed consolidated statement of income in the period or periods during which the hedged transaction affects earnings. Gains and losses on the derivatives representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, if any, are recognized in the condensed consolidated statement of income in the period in which such gains and losses occur.

The following table presents the location and fair value of derivative instruments designated as hedging instruments in the condensed consolidated balance sheet as of September 27, 2015 and December 31, 2014:



	September 27, 2015		December 31, 2014
	Fair Value		Fair Value
	(Dollars in thousands)
Asset derivatives:
Foreign currency forward contracts:
Prepaid expenses and other current assets	$	834	$	—
Total asset derivatives	$	834	$	—
Liability derivatives:
Foreign currency forward contracts:
Other current liabilities	$	3,247	$	—
Total liability derivatives	$	3,247	$	—

The total notional amount for all open foreign currency forward contracts designated as cash flow hedges as of September 27, 2015 is $49.8 million. All open foreign currency forward contracts designated as cash flow hedges as of September 27, 2015 have durations of nine months or less. As of December 31, 2014, the Company had no open foreign currency forward contracts designated as cash flow hedges.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following table provides information as to the gains and losses attributable to derivatives in cash flow hedging relationships that were reported in other comprehensive loss (“OCL”) for the three and nine months ended September 27, 2015 and September 28, 2014:



	After Tax Gain (Loss) Recognized in OCL
	Three Months Ended					Nine Months Ended
	September 27, 2015			September 28, 2014		September 27, 2015			September 28, 2014
	(Dollars in thousands)
Foreign currency forward contracts	$	(730	)	$	60	$	(1,489	)	$	203
Total	$	(730	)	$	60	$	(1,489	)	$	203

See Note 10 for information on the location in the condensed consolidated statements of income and amount of gains attributable to derivatives that were reclassified from accumulated other comprehensive loss (“AOCL”) to expense (income), net of tax.

There was no ineffectiveness related to the Company’s hedging derivatives during the three and nine months ended September 27, 2015 and September 28, 2014.

Based on foreign currency exchange rates at September 27, 2015, approximately $0.2 million of unrealized losses, net of tax, within AOCL are expected to be reclassified from AOCL to the condensed consolidated statement of income during the remainder of 2015. However, the actual amount reclassified from AOCL could vary due to future changes in exchange rates.

Non-designated Foreign Currency Forward Contracts

During the third quarter 2015, the Company began using foreign currency forward contracts as a part of its strategy to manage exposure related to near term foreign currency denominated monetary assets and liabilities. These currency forward contracts are not designated as cash flow, fair value or net investment hedges, are marked-to-market (changes in fair value are reflected in selling, general and administrative expenses) and are entered into for periods consistent with currency transaction exposures, approximately one month. The total notional amount for all open non-designated foreign currency forward contracts as of September 27, 2015 is $77.6 million. The non-designated foreign currency forward contract assets and liabilities are reported in prepaid expenses and other current assets and in other current liabilities on the condensed consolidated balance sheet as of September 27, 2015, respectively. For the three and nine months ended September 27, 2015 the Company recognized a loss related to non-designated foreign currency forward contracts of $0.3 million.

Concentration of Credit Risk

Concentrations of credit risk with respect to trade accounts receivable is generally limited due to the Company’s large number of customers and their diversity across many geographic areas. A portion of the Company’s trade accounts receivable outside the United States, however, include sales to government-owned or supported healthcare systems in several countries which are subject to payment delays. Payment is dependent upon the creditworthiness of those countries’ and the financial stability of their economies.

In the ordinary course of business, the Company grants non-interest bearing trade credit to its customers on normal credit terms. In an effort to reduce its credit risk, the Company (i) establishes credit limits for all of its customer relationships, (ii) performs ongoing credit evaluations of its customers’ financial condition, (iii) monitors the payment history and aging of its customers’ receivables, and (iv) monitors open orders against an individual customer’s outstanding receivable balance.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

An allowance for doubtful accounts is maintained for accounts receivable based on the Company’s historical collection experience and expected collectability of the accounts receivable, considering the period an account is outstanding, the financial position of the customer and information provided by credit rating services. The adequacy of this allowance is reviewed each reporting period and adjusted as necessary. The allowance for doubtful accounts was $8.9 million and $8.8 million at September 27, 2015 and December 31, 2014, respectively. The current portion of the allowance for doubtful accounts at September 27, 2015 and December 31, 2014 of $2.3 million and $2.4 million, respectively, are reflected in accounts receivable, net. The allowance for doubtful accounts on receivables outstanding for greater than one year at September 27, 2015 and December 31, 2014 of $6.6 million and $6.4 million, respectively, are reflected in other assets.

In light of the disruptions in global economic markets in recent years, the Company instituted enhanced measures, within countries where the Company has collectability concerns, to facilitate customer-by-customer risk assessment when estimating the allowance for doubtful accounts. Such measures include, among others, monthly credit control committee meetings, at which customer credit risks are identified after review of, among other things, accounts that exceed specified credit limits, payment delinquencies and other customer issues. In addition, for some of the Company’s non-government customers, the Company instituted measures designed to reduce its risk exposures, including issuing dunning letters, reducing credit limits, requiring that payments accompany orders and instituting legal action with respect to delinquent accounts. With respect to government customers, the Company evaluates receivables for potential collection risks associated with the availability of government funding and reimbursement practices.

Certain of the Company’s customers, particularly in Europe, have extended or delayed payments for products and services already provided, raising collectability concerns regarding the Company’s accounts receivable from these customers, for the most part in Greece, Italy, Spain and Portugal. As a result, the Company continues to closely monitor the allowance for doubtful accounts in these locations. If the financial condition of these customers or the healthcare systems in these countries deteriorate to the extent that the ability of an increasing number of customers to satisfy their payment obligations is uncertain, additional allowances may be required in future periods. The aggregate net current and long-term accounts receivable for customers in Greece, Italy, Spain and Portugal and the percentage of the Company’s total net current and long-term accounts receivable represented by the net current and long-term accounts receivable for customers in those countries at September 27, 2015 and December 31, 2014 are as follows:



	September 27, 2015			December 31, 2014
	(Dollars in thousands)
Current and long-term accounts receivable (net of allowances of $7.9 million and $8.1 million at September 27, 2015 and December 31, 2014, respectively) in Greece, Italy, Spain and Portugal (1)	$	72,128		$	76,190
Percentage of total net current and long-term accounts receivable - Greece, Italy, Spain and Portugal	26.1		%	27.3		%

(1) The long-term portion of accounts receivable, net from customers in Greece, Italy, Spain and Portugal at September 27, 2015 and December 31, 2014 was $16.2 million and $11.3 million, respectively, and is reported on the condensed consolidated balance sheet in other assets.

For the nine months ended September 27, 2015 and September 28, 2014, net revenues from customers in Greece, Italy, Spain and Portugal were $94.4 million and $114.8 million, respectively.

Note 9 — Fair value measurement

For a description of the fair value hierarchy, see Note 10 to the Company’s 2014 consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2014.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following tables provide information regarding the financial assets and liabilities measured at fair value on a recurring basis as of September 27, 2015 and December 31, 2014:



	Total carrying value at September 27, 2015		Quoted prices in active markets (Level 1)		Significant other observable Inputs (Level 2)		Significant unobservable Inputs (Level 3)
	(Dollars in thousands)
Investments in marketable securities	$	6,560	$	6,560	$	—	$	—
Derivative assets	914		—		914		—
Derivative liabilities	3,510		—		3,510		—
Contingent consideration liabilities	22,199		—		—		22,199



	Total carrying value at December 31, 2014		Quoted prices in active markets (Level 1)		Significant other observable Inputs (Level 2)		Significant unobservable Inputs (Level 3)
	(Dollars in thousands)
Investments in marketable securities	$	6,863	$	6,863	$	—	$	—
Contingent consideration liabilities	33,433		—		—		33,433

There were no transfers of financial assets or liabilities reported at fair value among Level 1, Level 2 or Level 3 within the fair value hierarchy during the nine months ended September 27, 2015.

The following table provides information regarding changes, during the nine months ended September 27, 2015, in Level 3 financial liabilities related to contingent consideration in connection with various Company acquisitions:



	Contingent consideration
	2015
	(Dollars in thousands)
Balance - December 31, 2014	$	33,433
Payment	(8,000		)
Revaluations	(3,234		)
Balance - September 27, 2015	$	22,199

The Company reduced contingent consideration liabilities and selling, general and administrative expense by $1.3 million and $4.3 million for the three and nine months ended September 27, 2015 after determining that relevant conditions for the payment of certain contingent consideration would not be satisfied. This reduction is included in revaluations in the preceding table.

Valuation Techniques

The Company’s financial assets valued based upon Level 1 inputs are comprised of investments in marketable securities held in trust, which are available to satisfy benefit obligations under Company benefit plans and other arrangements. The investment assets of the trust are valued using quoted market prices.

The Company’s financial assets and liabilities valued based upon Level 2 inputs are comprised of foreign currency forward contracts. The Company uses foreign currency forward contracts to manage foreign currency transaction exposure as well as exposure to foreign currency denominated monetary assets and liabilities. The Company measures the fair value of the foreign currency forward contracts by calculating the amount required to enter into offsetting contracts with similar remaining maturities, based on quoted market prices, and taking into account the creditworthiness of the counterparties.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The Company’s financial liabilities valued based upon Level 3 inputs are comprised of contingent consideration arrangements pertaining to the Company’s acquisitions. The Company accounts for contingent consideration in accordance with applicable accounting guidance related to business combinations. In connection with several of its acquisitions, the Company agreed to pay contingent consideration upon the achievement of specified objectives, including receipt of regulatory approvals, achievement of sales targets and, in some instances, the passage of time, and recorded contingent consideration liabilities at the time of the acquisitions. The Company determines the fair value of the liabilities for contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and, therefore, represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future payments under contingent consideration arrangements is based on several factors, including:



l	estimated cash flows projected from the success of market launches;



l	the estimated time and resources needed to complete the development of acquired technologies;



l	the uncertainty of obtaining regulatory approvals within the required time periods; and



l	the risk adjusted discount rate for fair value measurement.

In connection with the Company's contingent consideration arrangements, the Company estimates that it will make payments from 2015 through 2029. As of September 27, 2015, the range of undiscounted amounts the Company could be required to pay under contingent consideration arrangements is between $7.1 million and $60.0 million. The Company is required to reevaluate the fair value of contingent consideration each reporting period based on new developments and record changes in fair value until such consideration is satisfied through payment upon the achievement of the specified objectives or is no longer payable due to failure to achieve the specified objectives.

The following table provides information regarding the valuation techniques and inputs used in determining the fair value of assets or liabilities categorized as Level 3 measurements as of September 27, 2015:



	Valuation Technique	Unobservable Input	Range (Weighted Average)
Contingent consideration	Discounted cash flow	Discount rate	3.1% - 10% (8.5%)
		Probability of payment	0% - 100% (52.1%)

As of September 27, 2015, the Company recorded $22.2 million of total liabilities for contingent consideration, of which, $0.5 million was recorded as the current portion of contingent consideration and $21.7 million was recorded as other liabilities in the condensed consolidated balance sheet.

Note 10 — Changes in shareholders’ equity

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 to include dilutive securities. The following table provides a reconciliation of basic to diluted weighted average shares outstanding:



	Three Months Ended		Nine Months Ended
	September 27, 2015	September 28, 2014	September 27, 2015	September 28, 2014
	(Shares in thousands)
Basic	41,597	41,399	41,542	41,347
Dilutive effect of share-based awards	511	440	483	441
Dilutive effect of 3.875% Convertible Notes and warrants	6,424	4,789	5,944	4,468
Diluted	48,532	46,628	47,969	46,256

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Weighted average shares that were antidilutive and therefore not included in the calculation of earnings per share were approximately 5.4 million and 5.6 million for the three and nine months ended September 27, 2015, respectively, and approximately 6.3 million and 6.4 million for the three and nine months ended September 28, 2014, respectively.

During periods in which the average market price of the Company's common stock is above the applicable conversion price of the Convertible Notes, or $61.32 per share, the impact of conversion would be dilutive and the dilutive effect of conversion of the Convertible Notes is reflected in diluted earnings per share. As described in Note 7, the Company has elected the net settlement method of accounting for these conversions, under which the Company will settle the principal amount of the Convertible Notes in cash, and settle the excess conversion value in shares. As a result, in these periods, under the treasury stock method, the Company calculates the number of shares issuable under the terms of the Convertible Notes based on the average market price of the stock during the period, and includes that number in the total diluted shares outstanding for the period.

In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge and warrant agreements. The convertible note hedge economically reduces the dilutive impact of the Convertible Notes. However, applicable accounting guidance requires the Company to separately analyze the impact of the warrant agreements on diluted weighted average shares outstanding, while excluding the impact of the convertible note hedge agreements because it would be anti-dilutive. The reductions in diluted shares that would result from including the anti-dilutive impact of the convertible note hedges would have been 3.5 million and 3.3 million for the three and nine months ended September 27, 2015, respectively, and 2.8 million and 2.7 million for the three and nine months ended September 28, 2014, respectively. The treasury stock method is applied when the warrants are in the money and assumes the proceeds from the exercise of the warrants are used to repurchase shares based on the average stock price during the period. The exercise price of the warrants is approximately $74.65 per share of common stock. Shares issuable upon exercise of the warrants that were included in the total diluted shares outstanding were 2.9 million and 2.6 million for the three and nine months ended September 27, 2015, respectively, and 2.0 million and 1.8 million for the three and nine months ended September 28, 2014, respectively.

In 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, under the Company’s senior credit agreement, the Company is subject to certain restrictions relating to its ability to repurchase shares in the event the Company’s consolidated leverage ratio (generally, the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, as defined in the senior credit agreement) exceeds certain levels, which may limit the Company’s ability to repurchase shares under this Board authorization. Through September 27, 2015, no shares have been purchased under this Board authorization.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following tables provide information relating to the changes in accumulated other comprehensive loss, net of tax, for the nine months ended September 27, 2015 and September 28, 2014:



	Cash Flow Hedges			Pension and Other Postretirement Benefit Plans			Foreign Currency Translation Adjustment			Accumulated Other Comprehensive (Loss) Income
	(Dollars in thousands)
Balance as of December 31, 2014	$	—		$	(141,744	)	$	(119,151	)	$	(260,895	)
Other comprehensive income (loss) before reclassifications	(2,599		)	465			(91,137		)	(93,271		)
Amounts reclassified from accumulated other comprehensive (loss) income	1,110			3,157			—			4,267
Net current-period other comprehensive (loss) income	(1,489		)	3,622			(91,137		)	(89,004		)
Balance at September 27, 2015	$	(1,489	)	$	(138,122	)	$	(210,288	)	$	(349,899	)



	Cash Flow Hedges			Pension and Other Postretirement Benefit Plans			Foreign Currency Translation Adjustment			Accumulated Other Comprehensive (Loss) Income
	(Dollars in thousands)
Balance at December 31, 2013	$	—		$	(97,037	)	$	(13,818	)	$	(110,855	)
Other comprehensive loss before reclassifications	641			131			(41,133		)	(40,361		)
Amounts reclassified from accumulated other comprehensive loss	(438		)	2,205			—			1,767
Net current-period other comprehensive (loss) income	203			2,336			(41,133		)	(38,594		)
Balance at September 28, 2014	$	203		$	(94,701	)	$	(54,951	)	$	(149,449	)

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following table provides information relating to the reclassifications of losses/(gains) in accumulated other comprehensive (loss) income into expense/(income), net of tax, for the three and nine months ended September 27, 2015 and September 28, 2014:



	Three Months Ended						Nine Months Ended
	September 27, 2015			September 28, 2014			September 27, 2015			September 28, 2014
	(Dollars in thousands)
Losses (gains) on foreign exchange contracts:
Cost of goods sold	$	1,168		$	(397	)	$	1,431		$	(526	)
Total before tax	1,168			(397		)	1,431			(526		)
Tax benefit	(221		)	49			(321		)	88
Net of tax	$	947		$	(348	)	$	1,110		$	(438	)
Amortization of pension and other postretirement benefit items:
Actuarial losses (1)	$	1,571		$	1,090		$	4,782		$	3,295
Prior-service costs(1)	—			(5		)	—			(16		)
Total before tax	1,571			1,085			4,782			3,279
Tax expense	(551		)	(378		)	(1,625		)	(1,074		)
Net of tax	$	1,020		$	707		$	3,157		$	2,205

Total reclassifications, net of tax	$	1,967		$	359		$	4,267		$	1,767


(1)	These accumulated other comprehensive (loss) income components are included in the computation of net benefit cost of pension and other postretirement benefit plans (see Note 12 for additional information).

Note 11 — Taxes on income from continuing operations



	Three Months Ended		Nine Months Ended
	September 27, 2015	September 28, 2014	September 27, 2015	September 28, 2014
Effective income tax rate	1.3%	14.9%	9.5%	16.8%

The effective income tax rate for the three and nine months ended September 27, 2015 was 1.3% and 9.5%, respectively, and 14.9% and 16.8% for the three and nine months ended September 28, 2014, respectively. The effective income tax rate for the three and nine months ended September 27, 2015 each reflected a tax benefit associated with U.S. federal tax return filings, a benefit associated with legislative tax rate changes and a benefit associated with a reduction in the estimated deferred tax with respect to non-permanently reinvested income due to an increase in the estimated foreign tax credits available to reduce the U.S tax on a future repatriation.

Note 12 — 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. As of September 27, 2015, the Company’s U.S. defined benefit pension plans and the Company’s other postretirement benefit plans, other than certain postretirement benefit plans covering employees subject to a collective bargaining agreement, are frozen.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The Company and certain of its subsidiaries provide medical, dental and life insurance benefits to pensioners or their survivors. The associated plans are unfunded and approved claims are paid from Company funds.

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



	Pension Three Months Ended						Other Postretirement Benefits Three Months Ended					Pension Nine Months Ended						Other Postretirement Benefits Nine Months Ended
	September 27, 2015			September 28, 2014			September 27, 2015		September 28, 2014			September 27, 2015			September 28, 2014			September 27, 2015		September 28, 2014
	(Dollars in thousands)
Service cost	$	470		$	453		$	157	$	42		$	1,410		$	1,350		$	371	$	318
Interest cost	4,492			4,548			$	452	434			13,463			13,517			1,476		1,627
Expected return on plan assets	(6,606		)	(6,240		)	$	—	—			(19,457		)	(18,764		)	—		—
Net amortization and deferral	1,563			1,143			$	8	(58		)	4,620			3,284			162		(5		)
Net benefit expense (income)	$	(81	)	$	(96	)	$	617	$	418		$	36		$	(613	)	$	2,009	$	1,940

The Company’s pension contributions are expected to be approximately $12.9 million during 2015, of which $10.5 million and $12.2 million were contributed during the three and nine months ended September 27, 2015, respectively.

Note 13 — Commitments and contingent liabilities

Operating leases: The Company uses various leased facilities and equipment in its operations.

Environmental: The Company is subject to contingencies as a result of environmental laws and regulations that in the future may require the Company to take further action to correct the effects on the environment of prior disposal practices or releases of chemical or petroleum substances by the Company or other parties. Much of this liability results from the U.S. Comprehensive Environmental Response, Compensation and Liability Act, often referred to as Superfund, the U.S. Resource Conservation and Recovery Act and similar state laws. These laws require the Company to undertake certain investigative and remedial activities at sites where the Company conducts or once conducted operations or at sites where Company-generated waste was disposed.

Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs, depend on the mix of unique site characteristics, evolving remediation technologies, the regulatory agencies involved and their enforcement policies, as well as the presence or absence of other potentially responsible parties. At September 27, 2015 the Company has recorded $1.2 million and $6.2 million, in accrued liabilities and other liabilities, respectively, relating to these matters. Considerable uncertainty exists with respect to these liabilities and, if adverse changes in circumstances occur, the potential liability may exceed the amount accrued as of September 27, 2015. The time frame over which the accrued amounts may be paid out, based on past history, is estimated to be 15-20 years.

Litigation: The Company is a party to various lawsuits and claims arising in the normal course of business. These lawsuits and claims include actions involving product liability, intellectual property, employment, environmental and other matters. As of September 27, 2015, the Company has recorded accrued liabilities of $2.7 million in connection with such contingencies, representing its best estimate of the cost within the range of estimated possible losses that will be incurred to resolve these matters. Of the amount accrued as of September 27, 2015, $1.5 million pertains to discontinued operations.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

In 2006, the Company was named as a defendant in a wrongful death product liability lawsuit filed in the Louisiana State District Court for the Parish of Calcasieu, involving a product manufactured by the Company’s former marine business. In September 2014, the case was tried before a jury, which returned a verdict in favor of the Company. The plaintiff subsequently filed a motion for a new trial, which was granted, and the case was re-tried before a jury in December 2014. On December 5, 2014, the jury returned a verdict in favor of the plaintiff, awarding $0.1 million in compensatory damages and $23.0 million in punitive damages, plus pre- and post-judgment interest on the compensatory damages and post-judgment interest on the punitive damages. The Company's post-trial motions seeking to overturn the verdict or reduce the amount of damages were denied in June 2015. The Company has appealed to the Louisiana Court of Appeal. The plaintiff has filed a cross-appeal, seeking to overturn the trial court’s denial of pre-judgment interest on the punitive damages award. As of September 27, 2015, the Company has accrued a liability representing its best estimate of any probable loss associated with this matter, which is included in the Company’s accrued liabilities for litigation matters relating to discontinued operations discussed in the preceding paragraph. The Company believes that any liability arising from this matter in excess of $10.0 million will be covered by the Company’s product liability insurance.

Based on information currently available, advice of counsel, established reserves and other resources, the Company does not believe that the outcome of any outstanding litigation and claims is likely to be, individually or in the aggregate, material to its business, financial condition, results of operations or liquidity. However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to the Company’s business, financial condition, results of operations or liquidity. Legal costs such as outside counsel fees and expenses are charged to selling, general and administrative expenses in the period incurred.

Tax audits and examinations: The Company and its subsidiaries are routinely subject to tax examinations by various taxing authorities. As of September 27, 2015, the most significant tax examinations in process are in Austria, Canada, Germany and the United States. In conjunction with these examinations and as a regular and routine practice, the Company may establish reserves or adjust existing reserves with respect to uncertain tax positions. Accordingly, developments occurring with respect to these examinations, including resolution of uncertain tax positions, could result in increases or decreases to the Company’s recorded tax liabilities, which could impact the Company’s financial results.

Other: The Company has various purchase commitments for materials, supplies and items of permanent investment incident to the ordinary conduct of its business. On average, such commitments are not at prices in excess of current market prices.

Note 14 — Business segment information

An operating segment is a component of the Company (a) that engages in business activities from which it may earn revenues and incur expenses, (b) whose operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance, and (c) for which discrete financial information is available. The Company does not evaluate its operating segments using discrete asset information.

Effective April 1, 2015, the Company reorganized certain of its businesses to better leverage the Company’s resources. As a result, the Company realigned its operating segments. Specifically, the Company's Anesthesia/Respiratory North America operating segment was divided into two operating segments, Anesthesia North America and Respiratory North America. Additionally, the businesses comprising the Company's former Specialty operating segment (which was not a reportable segment and, therefore, was included in the "All other" category in the Company's presentation of segment information) were transferred to the Anesthesia North America, Vascular North America and Respiratory North America operating segments.

As a result of the operating segment changes described above, the Company has the following six reportable operating segments: Vascular North America, Anesthesia North America, Surgical North America, EMEA, Asia and OEM. In connection with the presentation of segment information, the Company will continue to present certain operating segments, which, effective April 1, 2015, include, among others, the Respiratory North America operating segment, in the “All other” category. All prior comparative periods presented in this report have been restated to reflect these changes.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The Company’s reportable segments, other than the Original Equipment Manufacturer and Development Services ("OEM") segment, design, manufacture and distribute medical devices primarily used in critical care, surgical applications and cardiac care and generally serve two end markets: hospitals and healthcare providers, and home health. The products of these segments are most widely used in the acute care setting for a range of diagnostic and therapeutic procedures and in general and specialty surgical applications. The Company’s OEM segment designs, manufactures and supplies devices and instruments for other medical device manufacturers.

The following tables present the Company’s segment results for the three and nine months ended September 27, 2015 and September 28, 2014:



	Three Months Ended				Nine Months Ended
	September 27, 2015		September 28, 2014		September 27, 2015		September 28, 2014
	(Dollars in thousands)
Revenue
Vascular North America	$	82,675	$	76,662	$	244,606	$	228,724
Anesthesia North America	47,628		47,203		138,656		136,185
Surgical North America	39,591		36,127		118,170		109,327
EMEA	120,854		141,146		379,268		446,061
Asia	61,935		62,035		172,506		174,176
OEM	38,959		39,174		111,592		108,966
All other	52,072		54,826		160,391		160,385
Consolidated net revenues	$	443,714	$	457,173	$	1,325,189	$	1,363,824



	Three Months Ended						Nine Months Ended
	September 27, 2015			September 28, 2014			September 27, 2015			September 28, 2014
	(Dollars in thousands)
Operating profit
Vascular North America	$	18,086		$	15,302		$	50,891		$	41,011
Anesthesia North America	15,178			11,966			36,572			27,330
Surgical North America	12,814			12,394			39,456			37,308
EMEA	19,656			28,810			65,334			85,771
Asia	15,715			14,785			42,812			44,718
OEM	8,865			9,651			25,274			24,551
All other	5,551			6,464			15,499			16,874
Total segment operating profit (1)	95,865			99,372			275,838			277,563
Unallocated expenses (2)	(19,315		)	(17,437		)	(56,694		)	(61,856		)
Income from continuing operations before interest, extinguishment of debt and taxes	$	76,550		$	81,935		$	219,144		$	215,707

(1)

Segment operating profit includes segment net revenues from external customers reduced by its standard cost of goods sold, adjusted for fixed manufacturing cost absorption variances, selling, general and administrative expenses, research and development expenses and an allocation of corporate expenses. Corporate expenses are allocated among the segments in proportion to the respective amounts of one of several items (such as sales, numbers of employees, and amount of time spent), depending on the category of expense involved.


(2)	Unallocated expenses primarily include manufacturing variances, with the exception of fixed manufacturing cost absorption variances, restructuring charges and gain on sale of assets.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)



	Three Months Ended				Nine Months Ended
	September 27, 2015		September 28, 2014		September 27, 2015		September 28, 2014
	(Dollars in thousands)
Depreciation and amortization
Vascular North America	$	9,317	$	8,823	$	27,730	$	26,755
Anesthesia North America	1,992		2,889		5,186		9,244
Surgical North America	2,867		909		7,693		4,944
EMEA	7,848		9,688		24,088		28,298
Asia	2,870		2,003		8,278		6,146
OEM	1,727		1,651		5,098		4,715
All other	4,722		6,476		13,902		16,152
Consolidated depreciation and amortization	$	31,343	$	32,439	$	91,975	$	96,254

Geographic data

The following tables provide total net revenues for the three and nine months ended September 27, 2015 and September 28, 2014 and total net property, plant and equipment by geographic region as of September 27, 2015 and December 31, 2014:



	Three Months Ended				Nine Months Ended
	September 27, 2015		September 28, 2014		September 27, 2015		September 28, 2014
	(Dollars in thousands)
Net revenue (based on selling location)
United States	$	240,558	$	231,278	$	710,282	$	676,088
Other Americas	12,961		14,440		41,524		44,399
Europe	134,939		157,797		419,314		500,763
All other	55,256		53,658		154,069		142,574
	$	443,714	$	457,173	$	1,325,189	$	1,363,824



	September 27, 2015		December 31, 2014
	(Dollars in thousands)
Net property, plant and equipment
United States	$	178,212	$	174,893
Malaysia	33,096		36,427
Czech Republic	33,051		35,655
All other	68,885		70,460
	$	313,244	$	317,435

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Note 15 — Condensed consolidating guarantor financial information

In April 2015, pursuant to an exchange offer registered under the Securities Act of 1933, Teleflex Incorporated (referred to below as “Parent Company”) exchanged $250 million of its 5.25% Senior Notes due 2024 for a like principal amount of substantially identical notes that it issued in a private placement in May 2014. The notes are guaranteed, jointly and severally, by certain of the Parent Company’s subsidiaries (each, a “Guarantor Subsidiary” and collectively, the “Guarantor Subsidiaries”). The guarantees are full and unconditional, subject to certain customary release provisions. Each Guarantor Subsidiary is directly or indirectly 100% owned by the Parent Company. The Company’s condensed consolidating statements of income and comprehensive income (loss) for the three and nine months ended September 27, 2015 and September 28, 2014, condensed consolidating balance sheets as of September 27, 2015 and December 31, 2014 and condensed consolidating statements of cash flows for the nine months ended September 27, 2015 and September 28, 2014, provide consolidated information for:



a.	Parent Company, the issuer of the guaranteed obligations;



b.	Guarantor Subsidiaries, on a combined basis;



c.	Non-Guarantor Subsidiaries, on a combined basis; and



d.	Parent Company and its subsidiaries on a consolidated basis.

The same accounting policies as described in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 are used by the Parent Company and each of its subsidiaries in connection with the condensed consolidated financial information, except for the use by the Parent Company and Guarantor Subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation.

Consolidating entries and eliminations in the following condensed consolidated financial statements represent adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries, (b) eliminate the investments in subsidiaries and (c) record consolidating entries.

The condensed consolidating statement of cash flows for the Non-Guarantor Subsidiaries and eliminations for the nine months ended September 28, 2014 have been revised to properly reflect the intercompany dividends paid and intercompany dividends received were between Non-Guarantor Subsidiaries. Previously, intercompany dividends paid and received among Non-Guarantor Subsidiaries were presented on a gross basis resulting in the overstatement or understatement of cash flows from operations, investing and financing activities. To correct this error, the condensed consolidating statement of cash flows for the nine months ended September 28, 2014 have been revised as follows: In the Non-Guarantor Subsidiaries column, net cash provided by (used in) operating activities from continuing operations has been changed from $63,715 to $(20,446), intercompany dividends received (within cash flows from investing activities of continuing operations) has been changed from $229,782 to $0 (and the intercompany dividends received line item was removed) and intercompany dividends paid (within cash flows from financing activities of continuing operations) changed from $(305,122) to $(4,429). In the eliminations column, net cash provided by (used in) operating activities from continuing operations changed from $(75,340) to $(4,429), intercompany dividends received, which is included in Cash Flows from Investing Activities of Continuing Operations, changed from $(229,782) to $0 (and the intercompany dividends received line item was removed) and intercompany dividends paid, which is included in Cash Flows from Financing Activities of Continuing Operations changed from $305,122 to $4,429.

The Company also made revisions to the classification of certain balances related to intercompany transactions in the condensed consolidating statements of income and comprehensive (loss) income for the three and nine months ended September 28, 2014 and the condensed consolidating balance sheet at December 31, 2014 as well as the condensed consolidating statement of cash flows for the nine months ended September 28, 2014.

These revisions, individually and in the aggregate, had no impact on the consolidated results of the Company and are not material to the condensed consolidating guarantor financial information for any of the periods subject to previously filed condensed consolidating guarantor financial information.

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The Company will revise its condensed consolidated guarantor financial information for the interim period ended March 29, 2015 in its quarterly report on Form 10-Q to be filed for the fiscal quarter ending March 27, 2016, and will revise its condensed consolidated guarantor financial information for the annual periods ended December 31, 2014 and 2013 in its annual report on Form 10-K to be filed for the fiscal year ending December 31, 2015.

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)



	Three Months Ended September 27, 2015
	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Condensed Consolidated
	(Dollars in thousands)
Net revenues	$	—		$	269,620		$	270,084		$	(95,990	)	$	443,714
Cost of goods sold	—			159,567			153,207			(97,273		)	215,501
Gross profit	—			110,053			116,877			1,283			228,213
Selling, general and administrative expenses	9,891			82,372			46,471			106			138,840
Research and development expenses	—			6,006			6,565			—			12,571
Restructuring charges	—			602			58			—			660
Gain on sale of assets	—			—			(408		)	—			(408		)
(Loss) income from continuing operations before interest, extinguishment of debt and taxes	(9,891		)	21,073			64,191			1,177			76,550
Interest, net	32,439			(19,457		)	1,194			—			14,176
(Loss) income from continuing operations before taxes	(42,330		)	40,530			62,997			1,177			62,374
(Benefit) taxes on income from continuing operations	(15,102		)	7,582			8,053			270			803
Equity in net income of consolidated subsidiaries	88,728			49,885			211			(138,824		)	—
Income from continuing operations	61,500			82,833			55,155			(137,917		)	61,571
Operating loss from discontinued operations	(784		)	—			(4		)	—			(788		)
(Benefit) taxes on loss from discontinued operations	(108		)	—			39			—			(69		)
Loss from discontinued operations	(676		)	—			(43		)	—			(719		)
Net income	60,824			82,833			55,112			(137,917		)	60,852
Less: Income from continuing operations attributable to noncontrolling interest	—			—			28			—			28
Net income attributable to common shareholders	60,824			82,833			55,084			(137,917		)	60,824
Other comprehensive income attributable to common shareholders	(28,789		)	(32,855		)	(26,073		)	58,928			(28,789		)
Comprehensive income attributable to common shareholders	$	32,035		$	49,978		$	29,011		$	(78,989	)	$	32,035

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)



	Three Months Ended September 28, 2014
	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Condensed Consolidated
	(Dollars in thousands)
Net revenues	$	—		$	261,346		$	272,083		$	(76,256	)	$	457,173
Cost of goods sold	—			161,298			136,526			(76,817		)	221,007
Gross profit	—			100,048			135,557			561			236,166
Selling, general and administrative expenses	8,978			77,352			52,002			(80		)	138,252
Research and development expenses	—			12,871			2,000			—			14,871
Restructuring charges	—			148			960			—			1,108
(Loss) income from continuing operations before interest and taxes	(8,978		)	9,677			80,595			641			81,935
Interest, net	37,913			(22,346		)	1,456			—			17,023
(Loss) income from continuing operations before taxes	(46,891		)	32,023			79,139			641			64,912
(Benefit) taxes on (loss) income from continuing operations	(16,761		)	13,984			10,505			1,956			9,684
Equity in net income of consolidated subsidiaries	85,187			60,295			96			(145,578		)	—
Income from continuing operations	55,057			78,334			68,730			(146,893		)	55,228
Operating loss from discontinued operations	(247		)	—			—			—			(247		)
(Benefit) taxes on loss from discontinued operations	(21		)	—			45			—			24
Loss from discontinued operations	(226		)	—			(45		)	—			(271		)
Net income	54,831			78,334			68,685			(146,893		)	54,957
Less: Income from continuing operations attributable to noncontrolling interest	—			—			126			—			126
Net income attributable to common shareholders	54,831			78,334			68,559			(146,893		)	54,831
Other comprehensive loss attributable to common shareholders	(45,201		)	(58,947		)	(56,159		)	115,106			(45,201		)
Comprehensive income attributable to common shareholders	$	9,630		$	19,387		$	12,400		$	(31,787	)	$	9,630

TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)



	Nine Months Ended September 27, 2015
	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Condensed Consolidated
	(Dollars in thousands)
Net revenues	$	—		$	803,484		$	805,243		$	(283,538	)	$	1,325,189
Cost of goods sold	—			476,611			443,180			(278,689		)	641,102
Gross profit	—			326,873			362,063			(4,849		)	684,087
Selling, general and administrative expenses	30,006			249,484			141,252			23			420,765
Research and development expenses	—			22,027			16,871			—			38,898
Restructuring charges	—			4,932			756			—			5,688
Gain on sale of assets	—			—			(408		)	—			(408		)
(Loss) income from continuing operations before interest, and taxes	(30,006		)	50,430			203,592			(4,872		)	219,144
Interest, net	100,157			(56,591		)	3,666			—			47,232
Loss on extinguishment of debt	10,454			—			—			—			10,454
(Loss) income from continuing operations before taxes	(140,617		)	107,021			199,926			(4,872		)	161,458
(Benefit) taxes on (loss) income from continuing operations	(48,336		)	33,491			31,260			(1,000		)	15,415
Equity in net income of consolidated subsidiaries	237,512			161,539			430			(399,481		)	—
Income from continuing operations	145,231			235,069			169,096			(403,353		)	146,043
Operating loss from discontinued operations	(1,432		)	—			—