TELEFLEX INC - Quarter Report: 2019 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended June 30, 2019



☐	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)



Securities registered pursuant to Section 12(b) of the Act:
	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
	Common Stock, par value $1.00 per share	TFX	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 ☒

The registrant had 46,232,846 shares of common stock, par value $1.00 per share, outstanding as of July 30, 2019.

TELEFLEX INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2019

TABLE OF CONTENTS



		Page
PART I — FINANCIAL INFORMATION

Item 1:	Financial Statements (Unaudited):	2
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Changes in Equity	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4:	Controls and Procedures	40

PART II — OTHER INFORMATION

Item 1:	Legal Proceedings	41
Item 1A:	Risk Factors	41
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3:	Defaults Upon Senior Securities	41
Item 4:	Mine Safety Disclosures	41
Item 5:	Other Information	41
Item 6:	Exhibits	42

SIGNATURES		43

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TELEFLEX INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	Three Months Ended						Six Months Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
	(Dollars and shares in thousands, except per share)
Net revenues	$	652,507		$	609,866		$	1,266,091		$	1,197,096
Cost of goods sold	279,583			265,088			548,425			521,048
Gross profit	372,924			344,778			717,666			676,048
Selling, general and administrative expenses	236,186			229,917			463,879			445,254
Research and development expenses	27,595			26,018			54,745			52,045
Restructuring and impairment charges	1,685			55,353			19,080			58,416
Gain on sale of assets	—			—			(2,739		)	—
Income from continuing operations before interest and taxes	107,458			33,490			182,701			120,333
Interest expense	20,758			26,649			43,450			52,592
Interest income	(472		)	(183		)	(811		)	(456		)
Income from continuing operations before taxes	87,172			7,024			140,062			68,197
Taxes on income from continuing operations	3,844			9,576			14,816			15,818
Income (loss) from continuing operations	83,328			(2,552		)	125,246			52,379
Operating income (loss) from discontinued operations	61			94			(1,282		)	1,329
Tax (benefit) on income (loss) from discontinued operations	14			38			(308		)	20
Income (loss) from discontinued operations	47			56			(974		)	1,309
Net income (loss)	$	83,375		$	(2,496	)	$	124,272		$	53,688
Earnings per share:
Basic:
Income (loss) from continuing operations	$	1.80		$	(0.06	)	$	2.72		$	1.15
Income (loss) from discontinued operations	0.01			0.01			(0.02		)	0.03
Net income (loss)	$	1.81		$	(0.05	)	$	2.70		$	1.18
Diluted:
Income (loss) from continuing operations	$	1.77		$	(0.06	)	$	2.67		$	1.12
Income (loss) from discontinued operations	—			0.01			(0.03		)	0.03
Net income (loss)	$	1.77		$	(0.05	)	$	2.64		$	1.15
Weighted average common shares outstanding
Basic	46,172			45,581			46,111			45,455
Diluted	47,036			45,581			46,989			46,771

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

TELEFLEX INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended					Six Months Ended
	June 30, 2019		July 1, 2018			June 30, 2019		July 1, 2018
	(Dollars in thousands)
Net income (loss)	$	83,375	$	(2,496	)	$	124,272	$	53,688
Other comprehensive income (loss), net of tax:
Foreign currency translation, net of tax of $0, $9,378, $0, and $3,505, for the three and six months periods, respectively	12,568		(125,705		)	12,332		(44,517		)
Pension and other postretirement benefit plans adjustment, net of tax of $(446), $(656), $(836), and $(890) for the three and six months periods, respectively	1,459		2,015			2,688		2,896
Derivatives qualifying as hedges, net of tax of $83, $100, $82, and $(111) for the three and six months periods, respectively	755		(329		)	158		292
Other comprehensive income (loss), net of tax:	14,782		(124,019		)	15,178		(41,329		)
Comprehensive income (loss)	$	98,157	$	(126,515	)	$	139,450	$	12,359

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

TELEFLEX INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	June 30, 2019		December 31, 2018
	(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents	$	303,896	$	357,161
Accounts receivable, net	382,142		366,286
Inventories, net	461,320		427,778
Prepaid expenses and other current assets	78,477		72,481
Prepaid taxes	19,306		12,463
Total current assets	1,245,141		1,236,169
Property, plant and equipment, net	425,475		432,766
Operating lease assets	107,543		—
Goodwill	2,250,219		2,246,579
Intangible assets, net	2,242,267		2,325,052
Deferred tax assets	3,056		2,446
Other assets	40,709		34,979
Total assets	$	6,314,410	$	6,277,991
LIABILITIES AND EQUITY
Current liabilities
Current borrowings	$	50,000	$	86,625
Accounts payable	108,059		106,709
Accrued expenses	87,698		97,551
Current portion of contingent consideration	119,706		136,877
Payroll and benefit-related liabilities	88,888		104,670
Accrued interest	6,009		6,031
Income taxes payable	4,448		5,943
Other current liabilities	29,084		38,050
Total current liabilities	493,892		582,456
Long-term borrowings	2,081,372		2,072,200
Deferred tax liabilities	604,856		608,221
Pension and postretirement benefit liabilities	86,149		92,914
Noncurrent liability for uncertain tax positions	11,029		10,718
Noncurrent contingent consideration	71,965		167,370
Noncurrent operating lease liabilities	96,502		—
Other liabilities	203,801		204,134
Total liabilities	3,649,566		3,738,013
Commitments and contingencies
Total shareholders' equity	2,664,844		2,539,978
Total liabilities and shareholders' equity	$	6,314,410	$	6,277,991

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

TELEFLEX INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six Months Ended
	June 30, 2019			July 1, 2018
	(Dollars in thousands)
Cash flows from operating activities of continuing operations:
Net income	$	124,272		$	53,688
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (income) from discontinued operations	974			(1,309		)
Depreciation expense	31,966			29,527
Amortization expense of intangible assets	75,285			75,008
Amortization expense of deferred financing costs and debt discount	2,249			2,368
Gain on sale of assets	(2,739		)	—
Changes in contingent consideration	25,456			34,618
Impairment of long-lived assets	6,911			1,865
Stock-based compensation	12,700			10,737
Deferred income taxes, net	(5,495		)	4,821
Payments for contingent consideration	(26,092		)	—
Other	(4,527		)	(3,669		)
Changes in assets and liabilities, net of effects of acquisitions and disposals:
Accounts receivable	(19,747		)	(15,886		)
Inventories	(33,970		)	(15,017		)
Prepaid expenses and other assets	(6,381		)	(3,611		)
Accounts payable, accrued expenses and other liabilities	(6,231		)	38,112
Income taxes receivable and payable, net	(17,347		)	(29,668		)
Net cash provided by operating activities from continuing operations	157,284			181,584
Cash flows from investing activities of continuing operations:
Expenditures for property, plant and equipment	(56,107		)	(38,004		)
Proceeds from sale of assets	1,178			—
Payments for businesses and intangibles acquired, net of cash acquired	(1,025		)	(22,450		)
Net interest proceeds on swaps designated as net investment hedges	8,330			—
Net cash used in investing activities from continuing operations	(47,624		)	(60,454		)
Cash flows from financing activities of continuing operations:
Proceeds from new borrowings	25,000			—
Reduction in borrowings	(52,500		)	(18,500		)
Debt extinguishment, issuance and amendment fees	(4,703		)	(188		)
Net proceeds from share based compensation plans and the related tax impacts	7,829			9,800
Payments for contingent consideration	(111,928		)	(62,574		)
Dividends paid	(31,347		)	(30,938		)
Net cash used in financing activities from continuing operations	(167,649		)	(102,400		)
Cash flows from discontinued operations:
Net cash provided by (used in) operating activities	2,799			(464		)
Net cash provided by (used in) discontinued operations	2,799			(464		)
Effect of exchange rate changes on cash and cash equivalents	1,925			(5,520		)
Net (decrease) increase in cash and cash equivalents	(53,265		)	12,746
Cash and cash equivalents at the beginning of the period	357,161			333,558
Cash and cash equivalents at the end of the period	$	303,896		$	346,304

Non cash investing activities of continuing operations:
Property, plant and equipment additions due to build-to-suit lease transaction	$	—		$	28,147

Non cash financing activities of continuing operations:
Acquisition of treasury stock associated with settlement and exchange of convertible note hedge and warrant agreements	$	—		$	36,877

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

TELEFLEX INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)



	Common Stock			Additional Paid In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock					Total
	Shares	Dollars		Additional Paid In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Shares		Dollars			Total
	(Dollars and shares in thousands, except per share)
Balance at December 31, 2018	47,248	$	47,248	$	574,761	$	2,427,599		$	(341,085	)	1,232		$	(168,545	)	$	2,539,978
Cumulative effect adjustment resulting from the adoption of new accounting standards						(1,321		)									(1,321		)
Net income						40,897											40,897
Cash dividends ($0.34 per share)						(15,650		)									(15,650		)
Other comprehensive income									396								396
Shares issued under compensation plans	75	75		3,094								(40	)	2,029			5,198
Deferred compensation				127								(4	)	253			380
Balance at March 31, 2019	47,323	47,323		577,982		2,451,525			(340,689		)	1,188		(166,263		)	2,569,878
Net income						83,375											83,375
Cash dividends ($0.34 per share)						(15,697		)									(15,697		)
Other comprehensive income									14,782								14,782
Shares issued under compensation plans	77	77		12,252								(2	)	177			12,506
Balance as of June 30, 2019	47,400	$	47,400	$	590,234	$	2,519,203		$	(325,907	)	1,186		$	(166,086	)	$	2,664,844



	Common Stock			Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock					Total
	Shares	Dollars		Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Shares		Dollars			Total
	(Dollars and shares in thousands, except per share)
Balance at December 31, 2017	46,871	$	46,871	$	591,721		$	2,285,886		$	(265,091	)	1,704		$	(228,856	)	$	2,430,531
Cumulative effect adjustment resulting from the adoption of new accounting standards							3,076											3,076
Net income							56,184											56,184
Cash dividends ($0.34 per share)							(15,447		)									(15,447		)
Other comprehensive income										82,690								82,690
Settlements of warrants				(17,884		)							(132	)	17,872			(12		)
Shares issued under compensation plans	97	97		992									(43	)	3,033			4,122
Deferred compensation													(8	)	322			322
Balance at April 1, 2018	46,968	46,968		574,829			2,329,699			(182,401		)	1,521		(207,629		)	2,561,466
Net income							(2,496		)									(2,496		)
Cash dividends ($0.34 per share)							(15,491		)									(15,491		)
Other comprehensive income										(124,019		)						(124,019		)
Settlements of warrants				(19,019		)							(140	)	19,005			(14		)
Shares issued under compensation plans	114	114		13,992									(2	)	194			14,300
Deferred compensation				235														235
Balance as of July 1, 2018	47,082	$	47,082	$	570,037		$	2,311,712		$	(306,420	)	1,379		$	(188,430	)	$	2,433,981

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

TELEFLEX INCORPORATED

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 (“we,” “us,” “our,” “Teleflex” and the “Company”) are prepared on the same basis as its 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 presentation of financial statements for interim periods in accordance with accounting principles generally accepted in the United States of America ("GAAP") and Rule 10-01 of Securities and Exchange Commission ("SEC") Regulation S-X, which sets forth the instructions for the form and content of presentation of 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. The results of operations for the periods reported are not necessarily indicative of those that may be expected for a full year.

In accordance with applicable accounting standards and as permitted by Rule 10-01 of Regulation S-X, 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. Therefore, the Company's quarterly condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2018.

Note 2 — Recently issued accounting standards

In February 2016, the FASB issued guidance that changes the requirements for accounting for leases. Under the new guidance, in connection with a lease as to which an entity is a lessee, the entity generally must recognize a right-to-use asset and a lease liability on the balance sheet, initially measured as the present value of lease payments under the lease. Under previous guidance, operating leases were not recognized on the balance sheet. The Company adopted the new standard on January 1, 2019 using a modified retrospective transition approach, which requires leases existing at, or entered into after, January 1, 2019 to be recognized and measured in the condensed consolidated balance sheet. The Company recognized additional net lease assets and lease liabilities of $105.3 million and $106.6 million, respectively, upon adoption of the guidance. The difference between the additional lease assets and lease liabilities was recorded as an adjustment to the Company's opening balance of retained earnings. Prior period amounts have not been adjusted and continue to reflect the Company's historical accounting.

As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the new guidance to short term leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term. In addition, the Company has elected to apply certain practical expedients available under the new guidance. As a result, and in connection with the transition to the new guidance, the Company did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the classification of any expired or existing leases, or (iii) initial direct costs for any existing leases. The Company applied the practical expedients described above to its entire lease portfolio at the January 1, 2019 adoption date. Furthermore, as permitted under the new guidance, the Company has made, as a practical expedient, an accounting policy election to not separate lease and non-lease components and instead will account for each separate lease component and the non-lease components associated with that lease component as a single lease component. Additional information and disclosures required by this standard are contained in Note 8.

In February 2018, the FASB issued new guidance to address a narrow-scope financial reporting issue that arose as a consequence of federal tax legislation commonly referred to as the Tax Cuts and Jobs Act ("the TCJA"). Existing guidance requires that deferred tax liabilities and assets be adjusted for a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. The guidance is applicable even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income (rather than in net income), such as amounts related

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

to benefit plans and hedging activity. As a result, the tax effects of items within accumulated other comprehensive income (referred to as stranded tax effects) do not reflect the appropriate tax rate. The new guidance, which was effective January 1, 2019, permits reclassification of these amounts from accumulated other comprehensive income to retained earnings thereby eliminating the stranded tax effects. The new guidance also requires certain disclosures about the stranded tax effects. The Company elected not to reclassify stranded tax effects from accumulated other comprehensive income to retained earnings.

In June 2016, the FASB issued new guidance that changes the methodology to be used to measure credit losses for certain financial instruments and financial assets, including trade receivables. Under current guidance, an entity reflects credit losses on financial assets measured on an amortized cost basis only when it is probable that losses have been incurred, generally considering only past events and current conditions in determining incurred loss. The new guidance requires the recognition of an allowance that reflects the current estimate of credit losses expected to be incurred over the life of the financial asset, based not only on historical experience and current conditions, but also on reasonable forecasts. The main objective of the new guidance is to provide financial statement users with more useful information in making decisions about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The new guidance will be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the annual period in which the adoption is effective. The Company is currently evaluating the impact the guidance will have on its consolidated financial statements and related disclosures, but it is not expected to have a material effect on the consolidated financial statements.

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

Note 3 - Net revenues

The Company primarily generates revenue from the sale of medical devices including single use disposable devices and, to a lesser extent, reusable devices, instruments and capital equipment. Revenue is recognized when obligations under the terms of a contract with the Company’s customer are satisfied; this occurs upon the transfer of control of the products. Generally, transfer of control to the customer occurs at the point in time when the Company’s products are shipped from the manufacturing or distribution facility. For the Company’s Original Equipment and Development Services ("OEM") segment, most revenue is recognized over time because the OEM segment generates revenue from the sale of custom products that have no alternative use and the Company has an enforceable right to payment to the extent that performance has been completed. The Company markets and sells products through its direct sales force and distributors to customers within the following end markets: (1) hospitals and healthcare providers; (2) other medical device manufacturers; and (3) home care providers such as pharmacies, which comprised 88%, 10% and 2% of consolidated net revenues, respectively, for the six months ended June 30, 2019. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. With respect to the custom products sold in the OEM segment, revenue is measured using the units produced output method. Payment is generally due 30 days from the date of invoice.

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following table disaggregates revenue by global product category for the three and six months ended June 30, 2019 and July 1, 2018.



	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
	(Dollars in thousands)
Vascular access	$	153,647	$	140,149	$	297,544	$	284,177
Anesthesia	85,723		89,311		165,975		174,233
Interventional	104,785		98,189		207,969		188,331
Surgical	95,570		90,517		182,289		176,138
Interventional urology	67,952		47,674		127,683		89,974
OEM	56,428		52,594		110,666		98,448
Other₍₁₎	88,402		91,432		173,965		185,795
Net revenues ₍₂₎	$	652,507	$	609,866	$	1,266,091	$	1,197,096

(1) Revenues in the "Other" category in the table above include revenues generated from sales of the Company’s respiratory and urology products (other than interventional urology products). For the three and six months ended June 30, 2019, the Company reclassified its cardiac products from "Other" to "Interventional". The comparative prior year period has been restated to conform to the current period presentation.

(2)

The product categories listed above are presented on a global basis; in contrast, each of the Company’s reportable segments other than the OEM reportable segment are defined exclusively based on the geographic location of its operations; the OEM reportable segment operates globally. Each of the Company’s geographically based reportable segments include net revenues from each of the non-OEM product categories listed above.

Note 4 — Divestitures

On February 4, 2019, the Company sold substantially all of the assets related to its vein catheter reprocessing business for $12.6 million. The Company recognized a $2.7 million pre-tax gain on the sale of assets, which represents the excess of the $9.7 million fair value of consideration received over the carrying value of the assets sold. In connection with the sale, the purchaser of the assets issued a secured promissory note to the Company in the principal amount of $10.5 million. The purchaser's obligations under the notes are secured by a lien on substantially all of the purchaser's assets. The purchaser is obligated to repay the principal amount of the promissory note in annual installments of $2.1 million through the fifth anniversary of the date of sale. On the date of sale, the fair value of the promissory note was $7.6 million, which the Company calculated by applying a discount rate determined after taking into account the creditworthiness of the purchaser. As of June 30, 2019, the Company had $8.0 million in receivables related to the promissory note, of which $2.0 million and $6.0 million are included in accounts receivable, net and other assets, respectively, within the condensed consolidated balance sheet.

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Note 5 — Restructuring and impairment charges (credits)

The following tables provide information regarding restructuring and impairment charges recognized by the Company for the three and six months ended June 30, 2019 and July 1, 2018:



Three Months Ended June 30, 2019
	Termination benefits			Other costs ₍₁₎		Total
	(Dollars in thousands)
2019 Footprint realignment plan	$	(459	)	$	30	$	(429	)
2018 Footprint realignment plan	(2,275		)	134		$	(2,141	)
Other restructuring programs₍₂₎	62			312		374
Restructuring charges (credits)	(2,672		)	476		(2,196		)
Asset impairment charges	—			3,881		3,881
Restructuring and impairment charges (credits)	$	(2,672	)	$	4,357	$	1,685



Three Months Ended July 1, 2018
	Termination benefits		Other costs ₍₁₎		Total
	(Dollars in thousands)
2018 Footprint realignment plan	$	52,345	$	129	$	52,474
Other restructuring programs ₍₄₎	574		440		1,014
Restructuring charges	52,919		569		53,488
Asset impairment charges	—		1,865		1,865
Restructuring and impairment charges	$	52,919	$	2,434	$	55,353



Six Months Ended June 30, 2019
	Termination Benefits			Other costs ₍₁₎		Total
	(Dollars in thousands)
2019 Footprint realignment plan	$	12,516		$	30	$	12,546
2018 Footprint realignment plan	(1,838		)	708		(1,130		)
Other restructuring programs₍₂₎	188			565		753
Restructuring charges	10,866			1,303		12,169
Asset impairment charges	—			6,911		6,911
Restructuring and impairment charges	$	10,866		$	8,214	$	19,080



Six Months Ended July 1, 2018
	Termination Benefits		Other costs ₍₁₎		Total
	(Dollars in thousands)
2018 Footprint realignment plan	$	52,345	$	129	$	52,474
2016 Footprint realignment plan ₍₃₎	2,199		291		2,490
Other restructuring programs ₍₄₎	1,032		555		1,587
Restructuring charges	55,576		975		56,551
Asset impairment charges	—		1,865		1,865
Restructuring and impairment charges	$	55,576	$	2,840	$	58,416


(1)	Other restructuring costs include facility closure, contract termination and other exit costs.


(2)	Includes the Vascular Solutions integration program (initiated in 2017) as well as the 2016 and 2014 Footprint realignment plans.

(3) The 2016 Footprint realignment plan involved the relocation of certain manufacturing operations, the relocation and outsourcing of certain distribution operations and a related workforce reduction at certain of the Company's facilities. The program is substantially complete and the Company expects future restructuring expenses associated with the program, if any, to be immaterial.

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

(4) Includes the 2014 Footprint realignment plan, the Vascular Solutions integration program and the EMEA restructuring program (initiated in 2017).

2019 Footprint Realignment Plan

In February 2019, the Company initiated a restructuring plan primarily involving the relocation of certain manufacturing operations to existing lower-cost locations and related workforce reductions (the "2019 Footprint realignment plan"). These actions are expected to be substantially completed during 2022. The following table provides a summary of the Company’s cost estimates by major type of expense associated with the 2019 Footprint realignment plan:



Type of expense	Total estimated amount expected to be incurred
Termination benefits	$19 million to $23 million
Other exit costs ₍₁₎	$1 million to $2 million
Restructuring charges	$20 million to $25 million
Restructuring related charges ₍₂₎	$36 million to $45 million
Total restructuring and restructuring related charges	$56 million to $70 million


(1)	Includes facility closure, employee relocation, equipment relocation and outplacement costs.


(2)	Restructuring related charges represent costs that are directly related to the 2019 Footprint realignment plan and principally constitute costs to transfer manufacturing operations to existing lower-cost locations, project management costs and accelerated depreciation. Most of these charges are expected to be recognized within cost of goods sold.

In addition to the restructuring charges shown in the tables above, the Company recorded restructuring related charges with respect to the 2019 Footprint realignment plan of $1.0 million and $1.7 million for the three and six months ended June 30, 2019 within cost of goods sold.

As of June 30, 2019, the Company has a restructuring reserve of $11.8 million in connection with this plan, all of which relate to termination benefits.

2018 Footprint Realignment Plan

On May 1, 2018, the Company initiated a restructuring plan involving the relocation of certain European manufacturing operations to existing lower-cost locations, the outsourcing of certain of the Company’s European distribution operations and related workforce reductions (the “2018 Footprint realignment plan"). These actions are expected to be substantially completed by the end of 2024.

In addition to the restructuring charges shown in the tables above, the Company recorded restructuring related charges with respect to the 2018 Footprint realignment plan of $0.7 million and $1.3 million for the three and six months ended June 30, 2019 and July 1, 2018, respectively and $1.0 million for each of the three and six months ended July 1, 2018. The restructuring related charges were included within cost of goods sold. The majority of the restructuring related charges in both periods constituted costs arising from the transfer of manufacturing operations to new locations.

The Company estimates that is will incur aggregate pre-tax restructuring and restructuring related charges in connection with the 2018 Footprint realignment plan of approximately $102 million to $133 million. As of June 30, 2019, the Company has incurred aggregate restructuring charges in connection with the 2018 Footprint realignment plan of $53.9 million. In addition, as of June 30, 2019, the Company has incurred aggregate restructuring related charges of $5.4 million with respect to the 2018 Footprint realignment plan, consisting of accelerated depreciation and certain other costs that principally resulted from the transfer of manufacturing operations to new locations. The restructuring related charges primarily were included in cost of goods sold. As of June 30, 2019, the Company has a restructuring reserve of $45.0 million in connection with this plan, all of which related to termination benefits.

2014 Footprint Realignment Plan

In 2014, the Company initiated a restructuring plan (“the 2014 Footprint realignment plan”) involving the consolidation of operations and a related reduction in workforce at certain facilities, and the relocation of manufacturing

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

operations from certain higher-cost locations to existing lower-cost locations. These actions commenced in the second quarter 2014 and are expected to be substantially completed by the end of 2020.

The Company recorded restructuring related charges with respect to the 2014 Footprint realignment plan of $0.7 million and $1.3 million for the three and six months ended June 30, 2019, respectively, and $0.6 million and $1.0 million for the three and six months ended July 1, 2018, respectively. The majority of these restructuring related charges in both periods constituted costs arising from the transfer of manufacturing operations to new locations.

The Company estimates that it will incur aggregate pre-tax restructuring and restructuring related charges in connection with the 2014 Footprint realignment plan of $47 million to $52 million. As of June 30, 2019, the Company has incurred aggregate restructuring charges of $12.8 million in connection with the 2014 Footprint realignment plan. Additionally, as of June 30, 2019, the Company has incurred aggregate restructuring related charges of $30.5 million in connection with the 2014 Footprint realignment plan, consisting of accelerated depreciation and certain other costs that principally resulted from the transfer of manufacturing operations from the existing locations to new locations. These restructuring related charges primarily were included in cost of goods sold. As of June 30, 2019, the Company has a restructuring reserve of $3.8 million in connection with the plan, all of which related to termination benefits.

As the restructuring programs progress, management will reevaluate the estimated expenses and charges set forth above, and may revise its estimates, as appropriate, consistent with GAAP. For additional information related to the Company's restructuring programs, see Note 5 to the Company's consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2018.

Note 6 — Inventories, net

Inventories as of June 30, 2019 and December 31, 2018 consisted of the following:



	June 30, 2019		December 31, 2018
	(Dollars in thousands)
Raw materials	$	131,252	$	111,105
Work-in-process	63,465		62,334
Finished goods	266,603		254,339
Inventories, net	$	461,320	$	427,778

Note 7 — Goodwill and other intangible assets, net

The following table provides information relating to changes in the carrying amount of goodwill by reportable operating segment for the six months ended June 30, 2019:



	Americas		EMEA		Asia		OEM		Total
	(Dollars in thousands)
December 31, 2018	$	1,549,534	$	480,615	$	211,547	$	4,883	$	2,246,579
Goodwill related to acquisitions	174		75		476		—		725
Currency translation adjustment	1,221		196		1,498		—		2,915
June 30, 2019	$	1,550,929	$	480,886	$	213,521	$	4,883	$	2,250,219

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The Company's gross carrying amount of, and accumulated amortization relating to, intangible assets as of June 30, 2019 and December 31, 2018 were as follows:



	Gross Carrying Amount				Accumulated Amortization
	June 30, 2019		December 31, 2018		June 30, 2019			December 31, 2018
	(Dollars in thousands)
Customer relationships	$	1,025,516	$	1,030,194	$	(345,715	)	$	(322,972	)
In-process research and development	28,404		28,457		—			—
Intellectual property	1,359,876		1,363,516		(363,396		)	(322,539		)
Distribution rights	23,455		23,465		(18,397		)	(17,860		)
Trade names	565,434		565,070		(43,644		)	(36,379		)
Non-compete agreements	22,981		23,004		(12,247		)	(8,904		)
	$	3,025,666	$	3,033,706	$	(783,399	)	$	(708,654	)

Note 8 — Leases

The Company has operating leases for various types of properties, consisting of manufacturing plants, engineering and research centers, distribution warehouses, offices and other facilities, and equipment used in operations. Some leases provide the Company with an option, exercisable at the Company's sole discretion, to terminate the lease or extend the lease term for one or more years. When measuring assets and liabilities arising from a lease that provides the Company with an option to extend the lease term, the Company takes into account payments to be made in the optional extension period when it is reasonably certain that the Company will exercise the option. Total lease cost (all of which related to operating leases) was $6.6 million and $12.7 million for the three and six months ended June 30, 2019, respectively.

Maturities of lease liabilities



	June 30, 2019
	(Dollars in thousands)
2019	$	14,045
2020	23,992
2021	21,602
2022	19,924
2023	16,363
2024 and thereafter	42,060
Total lease payments	137,986
Less: interest	(21,334		)
Present value of lease liabilities	$	116,652

Supplemental information as of and for the six months ended June 30, 2019 (dollars in thousands)



Total lease liabilities ₍₁₎	$	116,652
Cash paid for amounts included in the measurement of lease liabilities within operating cash flows	$	12,636
Right of use assets obtained in exchange for operating lease obligations	$	19,728
Weighted average remaining lease term	6.8 years
Weighted average discount rate	4.4		%

(1) The current portion of the operating lease liabilities of $20.1 million is included in Other current liabilities.

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

As of December 31, 2018, minimum lease payments under noncancellable operating leases were expected to be as follows:



	December 31, 2018
	(Dollars in thousands)
2019	$	25,294
2020	23,216
2021	21,419
2022	19,460
2023	17,403
2024 and thereafter	41,368

Note 9 — Borrowings

The Company's borrowings at June 30, 2019 and December 31, 2018 were as follows:



	June 30, 2019			December 31, 2018
	(Dollars in thousands)
Senior Credit Facility:
Revolving credit facility, at a rate of 3.90% at June 30, 2019, due 2024	$	276,000		$	293,000
Term loan facility, at a rate of 3.90% at June 30, 2019, due 2024	673,000			683,500
5.25% Senior Notes due 2024	250,000			250,000
4.875% Senior Notes due 2026	400,000			400,000
4.625% Senior Notes due 2027	500,000			500,000
Securitization program, at a rate of 3.15% at June 30, 2019	50,000			50,000
	2,149,000			2,176,500
Less: Unamortized debt issuance costs	(17,628		)	(17,675		)
	2,131,372			2,158,825
Current borrowings	(50,000		)	(86,625		)
Long-term borrowings	$	2,081,372		$	2,072,200

Credit Agreement

On April 5, 2019, the Company amended and restated its existing credit agreement by entering into a Second Amended and Restated Credit Agreement (the "Credit Agreement"), which provides for a five-year revolving credit facility of $1.0 billion and a term loan facility of $700.0 million. The Company's obligations under the Credit Agreement are guaranteed (subject to certain exceptions and limitations) by substantially all of the material domestic subsidiaries of the Company. The obligations under the Credit Agreement are secured, subject to certain exceptions and limitations, by a lien on substantially all of the assets owned by the Company and each guarantor. The maturity date of the revolving credit facility and the term loan facility under the Credit Agreement is April 5, 2024.

At the Company’s option, loans under the Credit Agreement will bear interest at a rate equal to adjusted LIBOR plus an applicable margin ranging from 1.125% to 2.00% or at an alternate base rate, which generally is defined as the highest of (i) the “Prime Rate” in the U.S. last quoted by The Wall Street Journal, (ii) 0.50% above the greater of the federal funds rate and the rate comprised of both overnight federal funds and overnight eurodollar borrowings and (iii) 1.00% above adjusted LIBOR for a one month interest period, plus an applicable margin ranging from 0.125% to 1.00%, in each case subject to adjustments based on the Company’s consolidated total net leverage ratio. Overdue loans will bear interest at the rate otherwise applicable to such loans plus 2.00%.

The Credit Agreement contains customary representations and warranties and covenants that, in each case, subject to certain exceptions, qualifications and thresholds, (a) place limitations on the Company and its subsidiaries regarding the incurrence of additional indebtedness, additional liens, fundamental changes, dispositions of property, investments and acquisitions, dividends and other restricted payments, transactions with affiliates, restrictive

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

agreements, changes in lines of business and swap agreements, and (b) require the Company and its subsidiaries to comply with sanction laws and other laws and agreements, to deliver financial information and certain other information and give notice of certain events, to maintain their existence and good standing, to pay their other obligations, to permit the administrative agent and the lenders to inspect their books and property, to use the proceeds of the Credit Agreement only for certain permitted purposes and to provide collateral in the future. Subject to certain exceptions, the Company is required to maintain a maximum consolidated total net leverage ratio of 4.50 to 1.00. The Company is further required to maintain a minimum consolidated interest coverage ratio of 3.50 to 1.00.

The Company capitalized $3.9 million related to transactions fees, including underwrites' discounts and commissions incurred in connection with the Credit Agreement.

Note 10 — Financial instruments

Foreign currency forward contracts

The Company uses derivative instruments for risk management purposes. Foreign currency forward contracts designated as cash flow hedges are used to manage exposure related to foreign currency transactions. Foreign currency forward contracts not designated as hedges for accounting purposes are used to manage exposure related to near term foreign currency denominated monetary assets and liabilities. The Company enters into the non-designated foreign currency forward contracts for periods consistent with its currency translation exposures, which generally approximate one month. For the three and six months ended June 30, 2019, the Company recognized a gain of $1.5 million and a loss of $1.6 million, respectively, related to non-designated foreign currency forward contracts. For the three and six months ended July 1, 2018, the Company recognized a loss related to non-designated foreign currency forward contracts of $1.4 million and $0.7 million, respectively.

The total notional amount for all open foreign currency forward contracts designated as cash flow hedges as of June 30, 2019 and December 31, 2018 was $118.1 million and $115.3 million, respectively. The total notional amount for all open non-designated foreign currency forward contracts as of June 30, 2019 and December 31, 2018 was $147.5 million and $125.9 million, respectively. All open foreign currency forward contracts as of June 30, 2019 have durations of twelve months or less.

Cross-currency interest rate swaps

On March 4, 2019, the Company entered into cross-currency swap agreements with five different financial institution counterparties to hedge against the effect of variability in the U.S. dollar to euro exchange rate. Under the terms of the cross-currency swap agreements, the Company has notionally exchanged $250 million at an annual interest rate of 4.8750% for €219.2 million at an annual interest rate of 2.4595%. The swap agreements are designed as net investment hedges and expire on March 4, 2024.

On October 4, 2018, the Company entered into cross-currency swap agreements with six different financial institution counterparties to hedge against the effect of variability in the U.S. dollar to euro exchange rate. Under the terms of the cross-currency swap agreements, the Company has notionally exchanged $500 million at an annual interest rate of 4.625% for €433.9 million at an annual interest rate of 1.942%. The swap agreements are designed as net investment hedges and expire on October 4, 2023.

The swap agreements described above require an exchange of the notional amounts upon expiration or earlier termination of the agreements. We and the counterparties have agreed to effect the exchange through a net settlement.

The cross-currency swaps are marked to market at each reporting date and any changes in fair value are recognized as a component of accumulated other comprehensive income (loss) ("AOCI"). For the three and six months ended June 30, 2019, the Company recognized foreign exchange loss of $0.7 million and gain of $9.8 million, respectively, within AOCI related to the cross-currency swaps.

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Balance sheet presentation

The following table presents the locations in the condensed consolidated balance sheet and fair value of derivative financial instruments as of June 30, 2019 and December 31, 2018:



	June 30, 2019		December 31, 2018
	Fair Value
	(Dollars in thousands)
Asset derivatives:
Designated foreign currency forward contracts	$	1,344	$	1,216
Non-designated foreign currency forward contracts	159		106
Cross-currency interest rate swap	21,156		14,728
Prepaid expenses and other current assets	22,659		16,050
Total asset derivatives	$	22,659	$	16,050
Liability derivatives:
Designated foreign currency forward contracts	$	992	$	524
Non-designated foreign currency forward contracts	131		264
Other current liabilities	1,123		788
Cross-currency interest rate swap	6,152		7,793
Other liabilities	6,152		7,793
Total liability derivatives	$	7,275	$	8,581

See Note 12 for information on the location and amount of gains and losses attributable to derivatives that were reclassified from AOCI to expense (income), net of tax.

There was no ineffectiveness related to the Company’s cash flow hedges during the three and six months ended June 30, 2019 and July 1, 2018.

Trade receivables

The allowance for doubtful accounts as of June 30, 2019 and December 31, 2018 was $9.9 million and $9.3 million, respectively. The current portion of the allowance for doubtful accounts, which was $5.2 million and $4.4 million as of June 30, 2019 and December 31, 2018, respectively, was recognized as a reduction of accounts receivable, net.

Note 11 — Fair value measurement

For a description of the fair value hierarchy, see Note 11 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2018.

The following tables provide information regarding the Company's financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018:



	Total carrying value at June 30, 2019		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	$	10,034	$	10,034	$	—	$	—
Derivative assets	22,659		—		22,659		—
Derivative liabilities	7,275		—		7,275		—
Contingent consideration liabilities	191,671		—		—		191,671

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)



	Total carrying value at December 31, 2018		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	$	8,671	$	8,671	$	—	$	—
Derivative assets	16,050		—		16,050		—
Derivative liabilities	8,581		—		8,581		—
Contingent consideration liabilities	304,248		—		—		304,248

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 six months ended June 30, 2019.

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 and cross-currency interest rate swap agreements. The Company uses foreign currency forward contracts and cross-currency interest rate swap agreements to manage foreign currency transaction exposure, exposure to foreign currency denominated monetary assets and liabilities and exposure to the effect of variability in the U.S. dollar to euro exchange rate. The Company measures the fair value of the foreign currency forward and cross-currency swap agreements 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.

The Company’s financial liabilities valued based upon Level 3 inputs (inputs that are not observable in the market) are comprised of contingent consideration arrangements pertaining to the Company’s acquisitions, which are discussed immediately below.

Contingent consideration

Contingent consideration liabilities, which primarily consist of payment obligations that are contingent upon the achievement of revenue-based goals, are remeasured to fair value each reporting period using assumptions including estimated revenues (based on internal operational budgets and long-range strategic plans), discount rates, probability of payment and projected payment dates.

The Company determines the fair value of the contingent consideration liabilities using a Monte Carlo simulation (which involves a simulation of future revenues during the earn out-period using management's best estimates) or a probability-weighted discounted cash flow analysis. Increases in projected revenues, estimated cash flows and probabilities of payment may result in significantly higher fair value measurements; decreases in these items may have the opposite effect. Increases in the discount rates in periods prior to payment may result in significantly lower fair value measurements and decreases in the discount rates may have the opposite effect.

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The table below provides additional information regarding the valuation technique and inputs used in determining the fair value of contingent consideration.



Contingent Consideration Liability	Valuation Technique	Unobservable Input	Range
Milestone-based payments
	Discounted cash flow	Discount rate	3.7% - 4.3%
		Projected year of payment	2019 - 2023
Revenue-based payments
	Monte Carlo simulation	Revenue volatility	19.0% - 24.3%
		Risk free rate	Cost of debt structure
		Projected year of payment	2020 - 2022

	Discounted cash flow	Discount rate	10.0%
		Projected year of payment	2019 - 2029

The following table provides information regarding changes in the Company's contingent consideration liabilities during the six months ended June 30, 2019:



	Contingent consideration
	2019
	(Dollars in thousands)
Balance - December 31, 2018	$	304,248
Payments ₍₁₎	(138,020		)
Revaluations	25,456
Translation adjustment	(13		)
Balance - June 30, 2019	$	191,671

(1) Consists mainly of a $106.8 million payment associated with the Company's acquisition of NeoTract, Inc. and resulting from the achievement of a sales goal for the period from January 1, 2018 to December 31, 2018 and $30.0 million of payments associated with the Company's acquisition of Essential Medical, Inc. and resulting from achievement of a regulatory goal.

Note 12 — 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 number of common shares outstanding:



	Three Months Ended		Six Months Ended
	June 30, 2019	July 1, 2018	June 30, 2019	July 1, 2018
	(Shares in thousands)
Basic	46,172	45,581	46,111	45,455
Dilutive effect of share-based awards	864	—	878	1,052
Dilutive effect of convertible warrants	—	—	—	264
Diluted	47,036	45,581	46,989	46,771

The weighted average number of shares that were antidilutive and therefore excluded from the calculation of earnings per share were 0.2 million for the three and six months ended June 30, 2019 and 2.0 million (inclusive of 1.2 million potentially dilutive shares that were excluded because of the net loss for the three months ended July 1, 2018) and 0.7 million for the three and six months ended July 1, 2018, respectively.

TELEFLEX INCORPORATED

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 six months ended June 30, 2019 and July 1, 2018:



	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, 2018	$	807		$	(131,380	)	$	(210,512	)	$	(341,085	)
Other comprehensive income (loss) before reclassifications	429			(13		)	12,332			12,748
Amounts reclassified from accumulated other comprehensive income	(271		)	2,701			—			2,430
Net current-period other comprehensive income (loss)	158			2,688			12,332			15,178
Balance as of June 30, 2019	$	965		$	(128,692	)	$	(198,180	)	$	(325,907	)



	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, 2017	$	340		$	(138,808	)	$	(126,623	)	$	(265,091	)
Other comprehensive (loss) before reclassifications	1,103			188			(44,517		)	(43,226		)
Amounts reclassified from accumulated other comprehensive loss	(811		)	2,708			—			1,897
Net current-period other comprehensive income	292			2,896			(44,517		)	(41,329		)
Balance as of July 1, 2018	$	632		$	(135,912	)	$	(171,140	)	$	(306,420	)

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following table provides information relating to the location in the statements of operations and amount of reclassifications of losses/(gains) in accumulated other comprehensive (loss) income into expense/(income), net of tax, for the three and six months ended June 30, 2019 and July 1, 2018:



	Three Months Ended						Six Months Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
	(Dollars in thousands)
(Gains) losses on foreign exchange contracts:
Cost of goods sold	$	(179	)	$	(118	)	$	(365	)	$	(951	)
Total before tax	(179		)	(118		)	(365		)	(951		)
Taxes (benefit)	71			27			94			140
Net of tax	(108		)	(91		)	(271		)	(811		)
Losses (gains) on cross-currency swaps (net investment hedge):
Interest expense	(4,917		)	$	—		(8,799		)	$	—
Total before tax	(4,917		)	—			(8,799		)	—
Tax expense	1,111			—			2,040			—
Net of tax	(3,806		)	$	—		(6,759		)	$	—
Amortization of pension and other postretirement benefit items ₍₁₎:
Actuarial losses	1,738			1,734			3,478			3,480
Prior-service costs	22			23			44			47
Total before tax	1,760			1,757			3,522			3,527
Tax benefit	(410		)	(408		)	(821		)	(819		)
Net of tax	1,350			1,349			2,701			2,708
Total reclassifications, net of tax	$	(2,564	)	$	1,258		$	(4,329	)	$	1,897

(1) These accumulated other comprehensive (loss) income components are included in the computation of net benefit expense for pension and other postretirement benefit plans.

Note 13 — Taxes on income from continuing operations



	Three Months Ended		Six Months Ended
	June 30, 2019	July 1, 2018	June 30, 2019	July 1, 2018
Effective income tax rate	4.4%	136.3%	10.6%	23.2%

The effective income tax rate for the three and six months ended June 30, 2019 was 4.4% and 10.6%, respectively and 136.3% and 23.2% for the three and six months ended July 1, 2018, respectively. The effective income tax rates for the three and six months ended June 30, 2019 reflect a net tax benefit related to share-based compensation, partially offset, with respect to the six months ended June 30, 2019, by the effect of non-deductible costs related to the 2019 Footprint realignment plan, as described in Note 5. The effective tax rates for the three and six months ended July 1, 2018, reflect non-deductible costs related to the 2018 Footprint realignment plan, as described in Note 5, and a non-deductible contingent consideration expense recognized in connection with an increase in the fair value of the NeoTract contingent consideration liability.

Effective July 3, 2019, the Company merged two of its non-U.S. subsidiaries. The Company is currently evaluating the tax impact of this merger, but it is likely to result in a reduction of approximately $130 million to deferred tax liabilities within 12 months of the effective date of the merger.

Note 14 — Commitments and contingent liabilities

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

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

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 June 30, 2019, the Company has recorded $0.9 million and $6.4 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 June 30, 2019. The time frame over which the accrued amounts may be paid out, based on past history, is estimated to be 10-15 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, product warranty, commercial disputes, intellectual property, contract, employment, environmental and other matters. As of June 30, 2019, the Company has recorded accrued liabilities of $0.2 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.

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 tax authorities. As of June 30, 2019, the most significant tax examination in process is in Germany. The Company may establish reserves with respect to its uncertain tax positions, after which it adjusts the reserves to address developments with respect to its uncertain tax positions, including developments in this tax examination. Accordingly, developments in tax audits and 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 other items occurring in the ordinary conduct of its business. On average, such commitments are not at prices in excess of current market prices.

Note 15 — Segment information

During the first quarter 2019, the chief operating decision maker, or CODM, (the Company's Chief Executive Officer) changed the manner in which he reviews financial information for purposes of assessing business performance and allocating resources by focusing on the geographic location of all non-OEM operations. As a result, the Company changed its segment presentation. Specifically, the Vascular North America, Interventional North America, Anesthesia North America, Surgical North America, Interventional Urology North America, Respiratory North America and Latin America operating segments were combined into a new Americas segment. The Company now has four segments: Americas, EMEA (Europe, Middle East and Africa), Asia and OEM. All prior comparative periods presented have been restated to reflect these changes.

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following tables present the Company’s segment results for the three and six months ended June 30, 2019 and July 1, 2018:



	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
	(Dollars in thousands)
Americas	$	373,804	$	331,444	$	717,828	$	654,706
EMEA	147,047		153,415		301,592		313,285
Asia	75,228		72,413		136,005		130,657
OEM	56,428		52,594		110,666		98,448
Net revenues	$	652,507	$	609,866	$	1,266,091	$	1,197,096



	Three Months Ended						Six Months Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
	(Dollars in thousands)
Americas	$	82,509		$	47,315		$	148,108		$	106,205
EMEA	20,827			26,535			47,850			58,305
Asia	19,260			20,746			29,239			34,114
OEM	13,884			13,552			27,205			22,568
Total segment operating profit ₍₁₎	136,480			108,148			252,402			221,192
Unallocated expenses ₍₂₎	(29,022		)	(74,658		)	(69,701		)	(100,859		)
Income from continuing operations before interest and taxes	$	107,458		$	33,490		$	182,701		$	120,333

(1)

Segment operating profit includes segment net revenues from external customers reduced by the segment's 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 net revenues, numbers of employees, and amount of time spent), depending on the category of expense involved.


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

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Note 16 — Condensed consolidating guarantor financial information

The Company’s $250 million principal amount of 5.25% Senior Notes due 2024 (the “2024 Notes”), $400 million principal amount of 4.875% Senior Notes due 2026 (the “2026 Notes”) and $500 million principal amount of 4.625% Senior Notes due 2027 (the “2027 Notes," and collectively with the 2024 Notes and the 2026 Notes, the "Senior Notes") are issued by Teleflex Incorporated (the “Parent Company”), and payment of the Parent Company's obligations under the Senior Notes are guaranteed, jointly and severally, by certain of the Parent Company’s subsidiaries (each, a “Guarantor Subsidiary” and collectively, the “Guarantor Subsidiaries”). The 2024 Notes, 2026 Notes and 2027 Notes are guaranteed by the same 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 for the three and six months ended June 30, 2019 and July 1, 2018, condensed consolidating balance sheets as of June 30, 2019 and December 31, 2018 and condensed consolidating statements of cash flows for the six months ended June 30, 2019 and July 1, 2018, provide consolidated information for:



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



b.	Guarantor Subsidiaries, on a combined basis;



c.	Non-Guarantor Subsidiaries (i.e., those subsidiaries of the Parent Company that have not guaranteed payment of the Senior Notes), on a combined basis; and



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

In connection with the Company's entry into the Credit Agreement on April 5, 2019 (as described in Note 9), a subsidiary of the Company (the "Released Subsidiary") that was a guarantor of Parent Company’s obligations under the previously outstanding credit agreement and under the Senior Notes was removed as a guarantor of Parent Company’s obligations under the Credit Agreement. Under the indentures governing the Senior Notes, the removal of the Released Subsidiary as a guarantor under the Credit Agreement automatically resulted in the release of the Released Subsidiary from its guarantees of the Senior Notes. Therefore, as of the date of the Credit Agreement, the Released Subsidiary is no longer a Guarantor Subsidiary. The condensed consolidating statements of income and comprehensive income for the three and six months ended July 1, 2018, the condensed consolidating balance sheet as of December 31, 2018 and the condensed consolidating statement of cash flows for the six months ended July 1, 2018 have been restated to exclude the Released Subsidiary from the information relating to the Guarantor Subsidiaries and to include the Released Subsidiary in the information relating to Non-Guarantor Subsidiaries.

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, 2018 are used by the Parent Company and each of its subsidiaries in connection with the condensed consolidating financial information, except for the use 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.

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME



	Three Months Ended June 30, 2019
	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Condensed Consolidated
	(Dollars in thousands)
Net revenues	$	—		$	439,489		$	327,596	$	(114,578	)	$	652,507
Cost of goods sold	—			244,956			151,423		(116,796		)	279,583
Gross profit	—			194,533			176,173		2,218			372,924
Selling, general and administrative expenses	14,312			141,628			80,512		(266		)	236,186
Research and development expenses	596			20,331			6,668		—			27,595
Restructuring and impairment charges	—			108			1,577		—			1,685
(Loss) income from continuing operations before interest and taxes	(14,908		)	32,466			87,416		2,484			107,458
Interest, net	29,350			(23,439		)	14,375		—			20,286
(Loss) income from continuing operations before taxes	(44,258		)	55,905			73,041		2,484			87,172
(Benefit) taxes on (loss) income from continuing operations	(19,519		)	15,681			7,480		202			3,844
Equity in net income of consolidated subsidiaries	108,067			57,951			—		(166,018		)	—
Income from continuing operations	83,328			98,175			65,561		(163,736		)	83,328
Operating income from discontinued operations	61			—			—		—			61
Tax on income from discontinued operations	14			—			—		—			14
Income from discontinued operations	47			—			—		—			47
Net income	83,375			98,175			65,561		(163,736		)	83,375
Other comprehensive income	14,782			17,107			19,457		(36,564		)	14,782
Comprehensive income	$	98,157		$	115,282		$	85,018	$	(200,300	)	$	98,157

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)



	Three Months Ended July 1, 2018
	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Condensed Consolidated
	(Dollars in thousands)
Net revenues	$	—		$	391,304		$	326,279		$	(107,717	)	$	609,866
Cost of goods sold	—			231,487			143,532			(109,931		)	265,088
Gross profit	—			159,817			182,747			2,214			344,778
Selling, general and administrative expenses	12,430			139,549			77,739			199			229,917
Research and development expenses	489			18,818			6,711			—			26,018
Restructuring and impairment charges	—			2,545			52,808			—			55,353
(Loss) income from continuing operations before interest and taxes	(12,919		)	(1,095		)	45,489			2,015			33,490
Interest, net	24,788			(13,966		)	15,644			—			26,466
(Loss) income from continuing operations before taxes	(37,707		)	12,871			29,845			2,015			7,024
(Benefit) taxes on (loss) income from continuing operations	(13,218		)	11,272			11,459			63			9,576
Equity in net income of consolidated subsidiaries	21,937			13,183			342			(35,462		)	—
(Loss) income from continuing operations	(2,552		)	14,782			18,728			(33,510		)	(2,552		)
Operating income from discontinued operations	94			—			—			—			94
Tax on income from discontinued operations	38			—			—			—			38
Income from discontinued operations	56			—			—			—			56
Net (loss) income	(2,496		)	14,782			18,728			(33,510		)	(2,496		)
Other comprehensive loss	(124,019		)	(114,917		)	(130,725		)	245,642			(124,019		)
Comprehensive loss	$	(126,515	)	$	(100,135	)	$	(111,997	)	$	212,132		$	(126,515	)

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)



	Six Months Ended June 30, 2019
	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Condensed Consolidated
	(Dollars in thousands)
Net revenues	$	—		$	854,632		$	648,589		$	(237,130	)	$	1,266,091
Cost of goods sold	—			479,173			299,280			(230,028		)	548,425
Gross profit	—			375,459			349,309			(7,102		)	717,666
Selling, general and administrative expenses	30,479			273,327			159,981			92			463,879
Research and development expenses	1,080			40,452			13,213			—			54,745
Restructuring and impairment charges	—			6,081			12,999			—			19,080
Gain on sale of assets	—			—			(2,739		)	—			(2,739		)
(Loss) income from continuing operations before interest and taxes	(31,559		)	55,599			165,855			(7,194		)	182,701
Interest, net	33,415			(21,845		)	31,069			—			42,639
(Loss) income from continuing operations before taxes	(64,974		)	77,444			134,786			(7,194		)	140,062
(Benefit) taxes on (loss) income from continuing operations	(28,391		)	27,250			17,190			(1,233		)	14,816
Equity in net income of consolidated subsidiaries	161,829			100,997			—			(262,826		)	—
Income from continuing operations	125,246			151,191			117,596			(268,787		)	125,246
Operating loss from discontinued operations	(1,282		)	—			—			—			(1,282		)
Tax benefit on loss from discontinued operations	(308		)	—			—			—			(308		)
Loss from discontinued operations	(974		)	—			—			—			(974		)
Net income	124,272			151,191			117,596			(268,787		)	124,272
Other comprehensive income	15,178			15,606			14,463			(30,069		)	15,178
Comprehensive income	$	139,450		$	166,797		$	132,059		$	(298,856	)	$	139,450

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)



	Six Months Ended July 1, 2018
	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Condensed Consolidated
	(Dollars in thousands)
Net revenues	$	—		$	770,723		$	646,288		$	(219,915	)	$	1,197,096
Cost of goods sold	—			449,091			285,540			(213,583		)	521,048
Gross profit	—			321,632			360,748			(6,332		)	676,048
Selling, general and administrative expenses	21,611			270,218			153,755			(330		)	445,254
Research and development expenses	716			38,186			13,143			—			52,045
Restructuring and impairment charges	—			3,453			54,963			—			58,416
(Loss) income from continuing operations before interest and taxes	(22,327		)	9,775			138,887			(6,002		)	120,333
Interest, net	46,929			(26,015		)	31,222			—			52,136
(Loss) income from continuing operations before taxes	(69,256		)	35,790			107,665			(6,002		)	68,197
(Benefit) taxes on (loss) income from continuing operations	(26,410		)	21,468			21,863			(1,103		)	15,818
Equity in net income of consolidated subsidiaries	96,504			78,607			635			(175,746		)	—
Income from continuing operations	53,658			92,929			86,437			(180,645		)	52,379
Operating income from discontinued operations	50			—			1,279			—			1,329
Taxes on income from discontinued operations	20			—			—			—			20
Income from discontinued operations	30			—			1,279			—			1,309
Net income	53,688			92,929			87,716			(180,645		)	53,688
Other comprehensive loss	(41,329		)	(44,798		)	(43,498		)	88,296			(41,329		)
Comprehensive income	$	12,359		$	48,131		$	44,218		$	(92,349	)	$	12,359

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS



	June 30, 2019
	Parent Company		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Condensed Consolidated
	(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents	$	29,891	$	3,540	$	270,465	$	—		$	303,896
Accounts receivable, net	1,779		62,569		312,552		5,242			382,142
Accounts receivable from consolidated subsidiaries	32,698		353,336		407,860		(793,894		)	—
Inventories, net	—		276,761		222,603		(38,044		)	461,320
Prepaid expenses and other current assets	36,874		9,477		28,013		4,113			78,477
Prepaid taxes	11,489		—		7,817		—			19,306
Total current assets	112,731		705,683		1,249,310		(822,583		)	1,245,141
Property, plant and equipment, net	3,098		239,415		182,962		—			425,475
Operating lease assets	13,912		59,711		33,920		—			107,543
Goodwill	—		1,255,536		994,683		—			2,250,219
Intangibles assets, net	80		1,235,058		1,007,129		—			2,242,267
Investments in affiliates	5,632,043		2,127,743		924,450		(8,684,236		)	—
Deferred tax assets	14,543		—		5,440		(16,927		)	3,056
Notes receivable and other amounts due from consolidated subsidiaries	1,892,369		3,192,420		287,713		(5,372,502		)	—
Other assets	19,039		11,802		9,868		—			40,709
Total assets	$	7,687,815	$	8,827,368	$	4,695,475	$	(14,896,248	)	$	6,314,410
LIABILITIES AND EQUITY
Current liabilities
Current borrowings	$	—	$	—	$	50,000	$	—		$	50,000
Accounts payable	3,972		62,664		41,423		—			108,059
Accounts payable to consolidated subsidiaries	259,906		328,596		205,392		(793,894		)	—
Accrued expenses	6,376		33,982		47,340		—			87,698
Current portion of contingent consideration	—		112,329		7,377		—			119,706
Payroll and benefit-related liabilities	16,365		31,763		40,760		—			88,888
Accrued interest	5,978		—		31		—			6,009
Income taxes payable	—		—		5,681		(1,233		)	4,448
Other current liabilities	3,988		13,561		11,535		—			29,084
Total current liabilities	296,585		582,895		409,539		(795,127		)	493,892
Long-term borrowings	2,081,372		—		—		—			2,081,372
Deferred tax liabilities	—		354,208		267,575		(16,927		)	604,856
Pension and postretirement benefit liabilities	43,250		26,800		16,099		—			86,149
Noncurrent liability for uncertain tax positions	1,042		7,329		2,658		—			11,029
Notes payable and other amounts due to consolidated subsidiaries	2,458,281		1,800,913		1,113,308		(5,372,502		)	—
Noncurrent contingent consideration	—		42,647		29,318		—			71,965
Noncurrent operating lease liabilities	11,421		59,065		26,016		—			96,502
Other liabilities	131,020		9,341		63,440		—			203,801
Total liabilities	5,022,971		2,883,198		1,927,953		(6,184,556		)	3,649,566
Total shareholders' equity	2,664,844		5,944,170		2,767,522		(8,711,692		)	2,664,844
Total liabilities and shareholders' equity	$	7,687,815	$	8,827,368	$	4,695,475	$	(14,896,248	)	$	6,314,410

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)



	December 31, 2018
	Parent Company		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Condensed Consolidated
	(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents	$	49,523	$	1,701	$	305,937	$	—		$	357,161
Accounts receivable, net	5,885		54,013		301,054		5,334			366,286
Accounts receivable from consolidated subsidiaries	32,036		1,122,107		366,033		(1,520,176		)	—
Inventories, net	—		266,073		192,659		(30,954		)	427,778
Prepaid expenses and other current assets	30,458		9,673		28,237		4,113			72,481
Prepaid taxes	7,029		—		5,434		—			12,463
Total current assets	124,931		1,453,567		1,199,354		(1,541,683		)	1,236,169
Property, plant and equipment, net	3,385		253,037		176,344		—			432,766
Goodwill	—		1,254,848		991,731		—			2,246,579
Intangibles assets, net	90		1,277,462		1,047,500		—			2,325,052
Investments in affiliates	5,984,566		1,625,464		837,899		(8,447,929		)	—
Deferred tax assets	—		—		4,822		(2,376		)	2,446
Notes receivable and other amounts due from consolidated subsidiaries	2,337,737		3,347,815		13,242		(5,698,794		)	—
Other assets	17,180		5,776		12,023		—			34,979
Total assets	$	8,467,889	$	9,217,969	$	4,282,915	$	(15,690,782	)	$	6,277,991
LIABILITIES AND EQUITY
Current liabilities
Current borrowings	$	36,625	$	—	$	50,000	$	—		$	86,625
Accounts payable	3,448		62,764		40,497		—			106,709
Accounts payable to consolidated subsidiaries	1,058,008		292,093		170,075		(1,520,176		)	—
Accrued expenses	5,659		41,873		50,019		—			97,551
Current portion of contingent consideration	—		106,514		30,363		—			136,877
Payroll and benefit-related liabilities	17,156		44,982		42,532		—			104,670
Accrued interest	5,995		—		36		—			6,031
Income taxes payable	—		—		5,943		—			5,943
Other current liabilities	843		34,916		2,291		—			38,050
Total current liabilities	1,127,734		583,142		391,756		(1,520,176		)	582,456
Long-term borrowings	2,072,200		—		—		—			2,072,200
Deferred tax liabilities	87,671		257,522		265,404		(2,376		)	608,221
Pension and postretirement benefit liabilities	49,290		27,454		16,170		—			92,914
Noncurrent liability for uncertain tax positions	801		7,212		2,705		—			10,718
Notes payable and other amounts due to consolidated subsidiaries	2,451,784		2,222,580		1,024,430		(5,698,794		)	—
Noncurrent contingent consideration	—		131,563		35,807		—			167,370
Other liabilities	138,431		8,204		57,499					204,134
Total liabilities	5,927,911		3,237,677		1,793,771		(7,221,346		)	3,738,013
Total shareholders' equity	2,539,978		5,980,292		2,489,144		(8,469,436		)	2,539,978
Total liabilities and shareholders' equity	$	8,467,889	$	9,217,969	$	4,282,915	$	(15,690,782	)	$	6,277,991

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

TELEFLEX INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



	Six Months Ended June 30, 2019
	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Condensed Consolidated
	(Dollars in thousands)
Net cash (used in) provided by operating activities from continuing operations	$	(60,841	)	$	180,717		$	129,863		$	(92,455	)	$	157,284
Cash flows from investing activities of continuing operations:
Expenditures for property, plant and equipment	(327		)	(37,981		)	(17,799		)	—			(56,107		)
Proceeds from sale of assets and investments	2,362			1,178			—			(2,362		)	1,178
Payments for businesses and intangibles acquired, net of cash acquired	—			(1,025		)	—			—			(1,025		)
Net interest proceeds on swaps designated as net investment hedges	8,330			—			—			—			8,330
Net cash provided by (used in) investing activities from continuing operations	10,365			(37,828		)	(17,799		)	(2,362		)	(47,624		)
Cash flows from financing activities of continuing operations:
Proceeds from new borrowings	25,000			—			—			—			25,000
Reduction in borrowings	(52,500		)	—			—			—			(52,500		)
Debt extinguishment, issuance and amendment fees	(4,703		)	—			—			—			(4,703		)
Net proceeds from share based compensation plans and the related tax impacts	7,829			—			—			—			7,829
Payments for contingent consideration	—			(15,044		)	(96,884		)	—			(111,928		)
Dividends paid	(31,347		)	—			—			—			(31,347		)
Intercompany transactions	83,135			(126,062		)	40,565			2,362			—
Intercompany dividends paid	—			—			(92,455		)	92,455			—
Net cash provided by (used in) financing activities from continuing operations	27,414			(141,106		)	(148,774		)	94,817			(167,649		)
Cash flows from discontinued operations:
Net cash provided by (used in) operating activities	3,430			—			(631		)	—			2,799
Net cash provided by (used in) discontinued operations	3,430			—			(631		)	—			2,799
Effect of exchange rate changes on cash and cash equivalents	—			—			1,925			—			1,925
Net (decrease) increase in cash and cash equivalents	(19,632		)	1,783			(35,416		)	—			(53,265		)
Cash and cash equivalents at the beginning of the period	49,523			1,757			305,881			—			357,161
Cash and cash equivalents at the end of the period	$	29,891		$	3,540		$	270,465		$	—		$	303,896

TELEFLEX INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)



	Six Months Ended July 1, 2018
	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Condensed Consolidated
	(Dollars in thousands)
Net cash (used in) provided by operating activities from continuing operations	$	(165,764	)	$	254,769		$	162,952		$	(70,373	)	$	181,584
Cash flows from investing activities of continuing operations:
Expenditures for property, plant and equipment	(795		)	(16,602		)	(20,607		)	—			(38,004		)
Proceeds from sale of assets	22,944			—			—			(22,944		)	—
Payments for businesses and intangibles acquired, net of cash acquired	—			—			(22,450		)	—			(22,450		)
Net cash provided by (used in) investing activities from continuing operations	22,149			(16,602		)	(43,057		)	(22,944		)	(60,454		)
Cash flows from financing activities of continuing operations:
Reduction in borrowings	(18,500		)	—			—			—			(18,500		)
Debt extinguishment, issuance and amendment fees	(188		)	—			—			—			(188		)
Net proceeds from share based compensation plans and the related tax impacts	9,800			—			—			—			9,800
Payments for contingent consideration	—			(170		)	(62,404		)	—			(62,574		)
Dividends paid	(30,938		)	—			—			—			(30,938		)
Intercompany transactions	196,888			(234,304		)	14,472			22,944			—
Intercompany dividends paid	—			—			(70,373		)	70,373			—
Net cash provided by (used in) financing activities from continuing operations	157,062			(234,474		)	(118,305		)	93,317			(102,400		)
Cash flows from discontinued operations:
Net cash used in operating activities	(464		)	—			—			—			(464		)
Net cash used in discontinued operations	(464		)	—			—			—			(464		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(5,520		)	—			(5,520		)
Net increase (decrease) in cash and cash equivalents	12,983			3,693			(3,930		)	—			12,746
Cash and cash equivalents at the beginning of the period	37,803			8,933			286,822			—			333,558
Cash and cash equivalents at the end of the period	$	50,786		$	12,626		$	282,892		$	—		$	346,304

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

All statements made in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “would,” “should,” “guidance,” “potential,” “continue,” “project,” “forecast,” “confident,” “prospects” and similar expressions typically are used to identify forward-looking statements. Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about our business and the industry and markets in which we operate. These statements are not guarantees of future performance and are subject to risks and uncertainties, which are difficult to predict. Therefore, actual outcomes and results may differ materially from those expressed or implied by these forward-looking statements due to a number of factors, including changes in business relationships with and purchases by or from major customers or suppliers; delays or cancellations of shipments; demand for and market acceptance of new and existing products; our inability to provide products to our customers, which may be due to, among other things, events that impact key distributors; our inability to integrate acquired businesses into our operations, realize planned synergies and operate such businesses profitably in accordance with our expectations; our inability to effectively execute our restructuring plans and programs; our inability to realize anticipated savings from restructuring plans and programs; the impact of enacted healthcare reform legislation and proposals to amend, replace or repeal the legislation; changes in Medicare, Medicaid and third party coverage and reimbursements; the impact of tax legislation and related regulations; competitive market conditions and resulting effects on revenues and pricing; increases in raw material costs that cannot be recovered in product pricing; global economic factors, including currency exchange rates, interest rates, trade disputes, sovereign debt issues and the impact of the United Kingdom’s pending departure from the European Union, commonly known as "Brexit" difficulties in entering new markets; and general economic conditions. For a further discussion of the risks relating to our business, see Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2018. We expressly disclaim any obligation to update these forward-looking statements, except as otherwise specifically stated by us or as required by law or regulation.

Overview

Teleflex is a global provider of medical technology products focused on enhancing clinical benefits, improving patient and provider safety and reducing total procedural costs. We primarily design, develop, manufacture and supply single-use medical devices used by hospitals and healthcare providers for common diagnostic and therapeutic procedures in critical care and surgical applications. We market and sell our products worldwide through a combination of our direct sales force and distributors. Because our products are used in numerous markets and for a variety of procedures, we are not dependent upon any one end-market or procedure. We are focused on achieving consistent, sustainable and profitable growth by increasing our market share and improving our operating efficiencies.

We evaluate our portfolio of products and businesses on an ongoing basis to ensure alignment with our overall objectives. Based on our evaluation, we may identify opportunities to divest businesses and product lines that do not meet our objectives. In addition, we may seek to optimize utilization of our facilities through restructuring initiatives designed to further improve our cost structure and enhance our competitive position. We also may continue to explore opportunities to expand the size of our business and improve operating margins through a combination of acquisitions and distributor to direct sales conversions, which generally involve our elimination of a distributor from the sales channel, either by acquiring the distributor or terminating the distributor relationship (in some instances, particularly in Asia, the conversions involve our acquisition or termination of a master distributor and the continued sale of our products through sub-distributors or through new distributors). Distributor to direct sales conversions are designed to facilitate improved product pricing and more direct access to the end users of our products within the sales channel.

On February 19, 2019, we initiated a restructuring plan involving the relocation of certain manufacturing operations to existing lower-cost locations and related workforce reductions (the "2019 Footprint realignment plan"). See "Results of Operations - Restructuring and impairment charges" below and Note 5 to the condensed consolidated financial statements included in this report for additional information.

Change in Reportable Segments

During the first quarter 2019, the chief operating decision maker, or CODM, (our Chief Executive Officer) changed the manner in which he reviews financial information for purposes of assessing business performance and allocating resources by focusing on the geographic location of all non-OEM (Original Equipment and Development Services) segment operations. As a result, the Company changed its segment presentation. Specifically, the former Vascular North America, Interventional North America, Anesthesia North America, Surgical North America, Interventional Urology

North America, Respiratory North America and Latin America operating segments were combined into a new Americas segment. The Company now has four segments: Americas, EMEA (Europe, Middle East and Africa), Asia and OEM. All prior period comparative information has been restated to reflect the change in segment presentation.

Results of Operations

As used in this discussion, "new products" are products for which commercial sales have commenced within the past 36 months, and “existing products” are products for which commercial sales commenced more than 36 months ago. Discussion of results of operations items that reference the effect of one or more acquired and/or divested businesses or assets (except as noted below with respect to acquired distributors) generally reflects the impact of the acquisitions and/or divestitures within the first 12 months following the date of the acquisition and/or divestiture. In addition to increases and decreases in the per unit selling prices of our products to our customers, our discussion of the impact of product price increases and decreases also reflects the impact on the pricing of our products resulting from the elimination of the distributor, either through acquisition or termination of the distributor, from the sales channel.

Certain financial information is presented on a rounded basis, which may cause minor differences.

Net Revenues



	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
	(Dollars in millions)
Net Revenues	$	652.5	$	609.9	$	1,266.1	$	1,197.1

Net revenues for the three months ended June 30, 2019 increased $42.6 million, or 7.0%, compared to the prior year period. The increase is primarily attributable to a $44.9 million increase in sales volumes of existing products and, to a lesser extent, an increase in new product sales. These increases were partially offset by unfavorable fluctuations in foreign currency exchange rates of $14.6 million.

Net revenues for the six months ended June 30, 2019 increased $69.0 million, or 5.8%, compared to the prior year period. The increase is primarily attributable to a $75.0 million increase in sales volumes of existing products and, to a lesser extent, an increase in new product sales. These increases were partially offset by unfavorable fluctuations in foreign currency exchange rates of $31.6 million.

Gross profit



	Three Months Ended						Six Months Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
	(Dollars in millions)
Gross profit	$	372.9		$	344.8		$	717.7		$	676.0
Percentage of sales	57.1		%	56.5		%	56.7		%	56.5		%

Gross margin for the three months ended June 30, 2019 increased 60 basis points, or 1.1%, compared to the prior year period, primarily due to increased sales volumes and favorable product mix partially offset by higher logistics and distribution costs and inflation.

Gross margin for the six months ended June 30, 2019 increased 20 basis points, or 0.4%, compared to the prior year period, which is primarily attributable to increased sales volumes and favorable product mix partially offset by higher logistics and distribution costs, the impact of unfavorable fluctuations in foreign currency exchange rates and incremental tariffs.

Selling, general and administrative



	Three Months Ended						Six Months Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
	(Dollars in millions)
Selling, general and administrative	$	236.2		$	229.9		$	463.9		$	445.3
Percentage of sales	36.2		%	37.7		%	36.6		%	37.2		%

Selling, general and administrative expenses for the three months ended June 30, 2019 increased $6.3 million compared to the prior year period. The increase is primarily attributable to increases in selling and marketing expenses, principally with respect to our interventional urology products, and higher administrative costs. The increases were partially offset by a decrease in contingent consideration expense resulting from a change in the estimated fair value of our contingent consideration liabilities.

Selling, general and administrative expenses for the six months ended June 30, 2019 increased $18.6 million compared to the prior year period. The increase is primarily attributable to expenses incurred by our acquired businesses, an increase in selling and marketing expenses, principally with respect to our interventional urology products, and higher administrative costs. The increases were partially offset by a decrease in contingent consideration expense resulting from a change in the estimated fair value of our contingent consideration liabilities and the impact of favorable fluctuations in foreign currency exchange rates.

Research and development



	Three Months Ended						Six Months Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
	(Dollars in millions)
Research and development	$	27.6		$	26.0		$	54.7		$	52.0
Percentage of sales	4.2		%	4.4		%	4.3		%	4.3		%

The increase in research and development expenses for the three and six months ended June 30, 2019 compared to the prior year period is primarily attributable to expenses incurred in connection with our interventional products.

Restructuring and impairment charges

Anticipated charges and pre-tax savings related to restructuring programs and other similar cost savings initiatives

We have ongoing restructuring programs related to the consolidation of our manufacturing operations (referred to as our 2019, 2018 and 2014 Footprint realignment plans). We also have similar ongoing activities to relocate certain manufacturing operations within our OEM segment (the "OEM initiative") that do not meet the criteria for a restructuring program under applicable accounting guidance; nevertheless, the activities should result in cost savings (we expect only minimal costs to be incurred in connection with the OEM initiative). With respect to our currently ongoing restructuring programs and the OEM initiative, the table below summarizes charges incurred or estimated to be incurred and estimated annual pre-tax savings to be realized as follows: (1) with respect to charges (a) the estimated total charges that will have been incurred once the restructuring programs and OEM initiative are completed; (b) the charges incurred through December 31, 2018; and (c) the estimated charges to be incurred from January 1, 2019 through the last anticipated completion date of the restructuring programs and OEM initiative and (2) with respect to estimated annual pre-tax savings, (a) the estimated total annual pre-tax savings to be realized once the restructuring programs and OEM initiative are completed; (b) the estimated annual pre-tax savings realized based on the progress of the restructuring programs and OEM initiative through December 31, 2018; and (c) the estimated additional annual pre-tax savings to be realized from January 1, 2019 through the last anticipated completion date of the restructuring programs and the OEM initiative.

Estimated charges and pre-tax savings are subject to change based on, among other things, the nature and timing of restructuring activities and similar activities, changes in the scope of restructuring programs and the OEM initiative, unanticipated expenditures and other developments, the effect of additional acquisitions or dispositions, the failure to realize anticipated savings from a supply contract related to a component included in certain kits sold by our Americas segment and other factors that were not reflected in the assumptions made by management in previously estimating restructuring and restructuring related charges and estimated pre-tax savings. Moreover, estimated pre-tax savings constituting efficiencies with respect to increased costs that otherwise would have resulted from business acquisitions involve, among other things, assumptions regarding the cost structure and integration of businesses that previously were not administered by our management, which are subject to a particularly high degree of risk and uncertainty. It is likely that estimates of charges and pre-tax savings will change from time to time, and the table below reflects changes from amounts previously estimated. In addition, the table below does not include estimated charges and pre-tax savings related to substantially completed programs. For example, the 2017 Vascular Solutions integration program, the 2017 EMEA program, the 2016 Footprint realignment plan and other 2016 restructuring programs are excluded from the table below because they were substantially completed during 2019. Additional details including

estimated charges expected to be incurred in connection with the restructuring programs are described in Note 5 to the condensed consolidated financial statements included in this report.

Pre-tax savings also can be affected by increases or decreases in sales volumes generated by the businesses subject to the consolidation of manufacturing operations; such variations in revenues can increase or decrease pre-tax savings generated by the consolidation of manufacturing operations. For example, an increase in sales volumes generated by the affected businesses, although likely increasing manufacturing costs, may generate additional savings with respect to costs that otherwise would have been incurred if the manufacturing operations were not consolidated.



	Ongoing restructuring programs and other similar cost savings initiatives
	Estimated Total	Actuals through December 31, 2018	Estimated remaining from January 1, 2019 through December 31, 2026
	(Dollars in millions)
Restructuring charges	$95 - $114	$68	$27 - $46
Restructuring related charges ₍₁₎	$110 - $141	$34	$76 - $107
Total charges	$205 - $255	$102	$103 - $153

OEM initiative annual pre-tax savings	$6 - $7	$1	$5 - $6
Ongoing restructuring programs annual pre-tax savings₍₂₎	$63 - $73	$21	$42 - $52
Total annual pre-tax savings	$69 - $80	$22	$47 - $58

(1)

Restructuring related charges represent costs that are directly related to the programs and principally constitute costs to transfer manufacturing operations to existing lower-cost locations, project management costs and accelerated depreciation, as well as a charge that is expected to be imposed by a taxing authority as a result of our exit from facilities in the authority's jurisdiction. Most of these charges (other than the tax charge) are expected to be recognized as cost of goods sold.

(2)

Substantially all the pre-tax savings are expected to result in reductions to cost of goods sold. As previously disclosed, during 2016, in connection with our execution of the 2014 Footprint realignment plan, we implemented changes to medication delivery devices included in certain of our kits, which are expected to result in increased product costs (and therefore reduce the annual savings we anticipated at the inception of the program). However, we also expect to achieve improved pricing on these kits that will offset the increased costs, resulting in estimated annual increased revenues of $3 million to $4 million, which is not reflected in the table above. Since 2017, we have realized an aggregate benefit of $2.4 million resulting from this incremental pricing. More recently, during the fourth quarter of 2017, we entered into an agreement with an alternate provider for the development and supply of a component to be included in certain kits sold by our Americas segment. The agreement will result in increased development costs but is expected to reduce the cost of the component supply, once the supply becomes commercially available, as compared to the costs incurred with respect to our current suppliers. Therefore, we anticipate a net savings from the agreement, which is reflected in the table above.

2019 Footprint realignment plan

In February 2019, we initiated a restructuring plan primarily involving the relocation of certain manufacturing operations to existing lower-cost locations and related workforce reductions (the “2019 Footprint realignment plan"). These actions are expected to be substantially completed during 2022.

We estimate that we will incur aggregate pre-tax restructuring and restructuring related charges in connection with the 2019 Footprint realignment plan of $56 million to $70 million, of which, we expect $21 million to $26 million to be incurred in 2019 and most of the balance is expected to be incurred prior to the end of 2021. We estimate that $53 million to $66 million of these charges will result in cash outlays, of which, $8 million to $9 million is expected to be made in 2019 and most of the balance is expected to be made by the end of 2021. Additionally, we expect to incur $29 million to $35 million in aggregate capital expenditures under the plan, of which, $23 million to $25 million is expected to be incurred during 2019 and most of the balance is expected to be incurred by the end of 2021.

We expect to begin realizing plan-related savings in 2021 and expect to achieve annual pre-tax savings of $12 million to $14 million once the plan is fully implemented, which will benefit all of our segments except OEM.

Restructuring and impairment charges incurred



	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
	(Dollars in millions)
Restructuring and impairment charges	$	1.7	$	55.4	$	19.1	$	58.4

Restructuring and impairment charges for the three months ended June 30, 2019 primarily consisted of a $3.9 million impairment charge related to our decision to abandon certain intellectual property and other related assets associated with our interventional product portfolio. The impairment charge was partially offset by net restructuring credits of $2.2 million, which was primarily related to changes in estimates with respect to termination benefits.

Restructuring and impairment charges for the six months ended June 30, 2019 primarily related to $10.9 million in net termination benefit costs and $6.9 million in impairment charges related to our decision to abandon certain intellectual property and other assets associated with our interventional product portfolio.

Interest expense



	Three Months Ended						Six Months Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
	(Dollars in millions)
Interest expense	$	20.8		$	26.6		$	43.5		$	52.6
Average interest rate on debt	3.6		%	4.4		%	3.7		%	4.3		%

The decrease in interest expense for the three and six months ended June 30, 2019 compared to the respective prior year period was primarily due to a reduction in interest rates as a result of our cross-currency swap agreements.

Taxes on income from continuing operations



	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
Effective income tax rate	4.4	%	136.3	%	10.6	%	23.2	%

The effective income tax rate for the three and six months ended June 30, 2019 was 4.4% and 10.6%, respectively, and 136.3% and 23.2% for the three and six months ended July 1, 2018, respectively. The effective income tax rates for the three and six months ended June 30, 2019 reflect a net tax benefit related to share-based compensation, partially offset, with respect to the six months ended June 30, 2019, by the effect of non-deductible costs related to the 2019 Footprint realignment plan described in Note 5 to the condensed consolidated financial statements included in this report. The effective tax rates for the three and six months ended July 1, 2018, reflect non-deductible costs related to the 2018 Footprint realignment plan described in Note 5 to the condensed consolidated financial statements included in this report, and a non-deductible contingent consideration expense recognized in connection with an increase in the fair value of the NeoTract contingent consideration liability.

Effective July 3, 2019, we merged two of our non-U.S. subsidiaries. We are currently evaluating the tax impact of this merger, but it is likely to result in a reduction of approximately $130 million to our deferred tax liabilities within 12 months of the effective date of the merger.

Segment Financial Information



Segment net revenues
	Three Months Ended						Six Months Ended
	June 30, 2019		July 1, 2018		% Increase/ (Decrease)		June 30, 2019		July 1, 2018		% Increase/ (Decrease)
	(Dollars in millions)						(Dollars in millions)
Americas	$	373.8	$	331.5	12.8		$	717.8	$	654.8	9.6
EMEA	147.1		153.4		(4.2	)	301.6		313.3		(3.7	)
Asia	75.2		72.4		3.9		136.0		130.6		4.1
OEM	56.4		52.6		7.3		110.7		98.4		12.4
Segment net revenues	$	652.5	$	609.9	7.0		$	1,266.1	$	1,197.1	5.8

Segment operating profit
	Three Months Ended						Six Months Ended
	June 30, 2019		July 1, 2018		% Increase/ (Decrease)		June 30, 2019		July 1, 2018		% Increase/ (Decrease)
	(Dollars in millions)						(Dollars in millions)
Americas	$	82.5	$	47.3	74.4		$	148.1	$	106.1	39.5
EMEA	20.8		26.5		(21.5	)	47.9		58.3		(17.9	)
Asia	19.3		20.8		(7.2	)	29.2		34.2		(14.3	)
OEM	13.9		13.6		2.4		27.2		22.6		20.5
Segment operating profit ₍₁₎	$	136.5	$	108.2	26.2		$	252.4	$	221.2	14.1


(1)	See Note 15 to our condensed consolidated financial statements included in this report for a reconciliation of segment operating profit to our condensed consolidated income from continuing operations before interest, loss on extinguishment of debt and taxes.

Comparison of the three and six months ended June 30, 2019 and July 1, 2018

Americas

Americas net revenues for the three months ended June 30, 2019 increased $42.3 million, or 12.8%, compared to the prior year period. The increase is primarily attributable to an increase in sales volumes of existing products.

Americas net revenues for the six months ended June 30, 2019 increased $63.0 million, or 9.6%, compared to the prior year period. The increase is primarily attributable to an increase of $51.1 million in sales volumes of existing products and an increase in new products sales.

Americas operating profit for the three months ended June 30, 2019 increased $35.2 million, or 74.4%, compared to the prior year period. The increase was primarily attributable to an increase in gross profit resulting from higher sales and lower contingent consideration expense partially offset by higher selling expenses.

Americas operating profit for the six months ended June 30, 2019 increased $42.0 million, or 39.5%, compared to the prior year period. The increase was primarily attributable to an increase in gross profit resulting from higher sales and lower contingent consideration expense partially offset by higher selling expenses as well as an increase in general and administrative costs.

EMEA

EMEA net revenues for the three months ended June 30, 2019 decreased $6.3 million, or 4.2%, compared to the prior year period. The decrease is primarily attributable to unfavorable fluctuations in foreign currency exchange rates of $9.2 million partially offset by an increase in new product sales and revenues generated by acquired businesses.

EMEA net revenues for the six months ended June 30, 2019 decreased $11.7 million, or 3.7%, compared to the prior year period. The decrease is primarily attributable to unfavorable fluctuations in foreign currency exchange rates of $21.1 million partially offset by an increase in new product sales and an increase in sales volumes of existing products.

EMEA operating profit for the three months ended June 30, 2019 decreased $5.7 million, or 21.5%, compared to the prior year period. The decrease was primarily attributable to unfavorable fluctuations in foreign currency exchange rates and higher operating expenses partially offset by the gross profit generated by higher sales.

EMEA operating profit for the six months ended June 30, 2019 decreased $10.4 million, or 17.9%, compared to the prior year period. The decrease was primarily attributable to higher operating expenses and unfavorable fluctuations in foreign currency exchange rates partially offset by gross profit generated by higher sales.

Asia

Asia net revenues for the three months ended June 30, 2019 increased $2.8 million, or 3.9%, compared to the prior year period. The increase is primarily attributable to a $3.7 million increase in sales volumes of existing products and, to a lesser extent, an increase in new product sales and revenue generated by an acquired business. These increases were partially offset by unfavorable fluctuations in foreign currency exchange rates of $4.0 million.

Asia net revenues for the six months ended June 30, 2019 increased $5.4 million, or 4.1%, compared to the prior year period. The increase is primarily attributable to a $7.0 million increase in sales volumes of existing products and, to a lesser extent, an increase in new product sales and revenue generated by an acquired business. These increases were partially offset by unfavorable fluctuations in foreign currency exchange rates of $7.5 million.

Asia operating profit for the three months ended June 30, 2019 decreased $1.5 million, or 7.2%, compared to the prior year period. The decrease was primarily attributable to unfavorable fluctuations in foreign currency exchange rates and higher operating expenses partially offset by an increase in gross profit resulting from higher sales.

Asia operating profit for the six months ended June 30, 2019 decreased $5.0 million, or 14.3%, compared to the prior year period. The decrease was primarily attributable to higher operating expenses and unfavorable fluctuations in foreign currency exchange rates partially offset by an increase in gross profit resulting from higher sales.

OEM

OEM net revenues for the three and six months ended June 30, 2019 increased $3.8 million, or 7.3%, and $12.3 million, or 12.4%, respectively, compared to the prior year periods. The increases in both periods are primarily attributable to an increase in sales volumes of existing products.

OEM operating profit for the three months ended June 30, 2019 increased $0.3 million, or 2.4%, compared to the prior year period primarily reflecting an increase in gross profit resulting from higher sales.

OEM operating profit for the six months ended June 30, 2019 increased $4.6 million, or 20.5%, compared to the prior year period primarily reflecting an increase in gross profit resulting from higher sales and, to a lesser extent, favorable product mix partially offset by an increase in general and administrative expenses.

Liquidity and Capital Resources

We believe our cash flow from operations, available cash and cash equivalents and borrowings under our revolving credit facility will enable us to fund our operating requirements, capital expenditures and debt obligations for the next 12 months and the foreseeable future. We have net cash provided by United States based operating activities as well as non-United States sources of cash available to help fund our debt service requirements in the United States. We manage our worldwide cash requirements by monitoring the funds available among our subsidiaries and determining the extent to which we can access those funds on a cost effective basis.

To date, we have not experienced significant payment defaults by our customers, and we have sufficient lending commitments in place to enable us to fund our anticipated additional operating needs.

Cash Flows

Cash flows from operating activities from continuing operations provided net cash of approximately $157.3 million for the six months ended June 30, 2019 as compared to $181.6 million for the six months ended July 1, 2018. The $24.3 million decrease is primarily attributable to contingent consideration payments of $26.1 million.

Net cash used in investing activities from continuing operations was $47.6 million for the six months ended June 30, 2019, which included capital expenditures of $56.1 million partially offset by proceeds from swaps designated as net investment hedges of $8.3 million.

Net cash used in financing activities from continuing operations was $167.6 million for the six months ended June 30, 2019, which included contingent consideration payments of $111.9 million, dividend payments of $31.3 million and a net decrease in borrowings of $27.5 million.

Borrowings

On April 5, 2019, we entered into an amended and restated credit agreement (the "Credit Agreement"), which provides for a $1.0 billion revolving credit facility and a $700 million term loan facility, each of which matures on April 5, 2024. The Credit Agreement replaces a previous credit agreement under which we were provided a $1.0 billion credit facility and a $750 million term loan facility, due 2022 (the “prior term loan”). The $700 million term loan facility under the Credit Agreement principally was applied against the remaining $675 million principal balance of the prior term loan.

At our option, loans under the Credit Agreement will bear interest at a rate equal to adjusted LIBOR plus an applicable margin ranging from 1.125% to 2.00% or at an alternate base rate, which is defined as the highest of (i) the “Prime Rate” in the U.S. last quoted by The Wall Street Journal, (ii) 0.50% above the greater of the federal funds rate and the rate comprised of both overnight federal funds and overnight eurodollar borrowings and (iii) 1.00% above adjusted LIBOR for a one month interest period, plus an applicable margin ranging from 0.125% to 1.00%, in each case subject to adjustments based on our consolidated total net leverage ratio (generally, Consolidated Total Funded Indebtedness (which is net of “Qualified Cash”), as defined in the Credit Agreement on the date of determination to Consolidated EBITDA, as defined in the Credit Agreement, for the four most recent fiscal quarters ending on or preceding the date of determination). Overdue loans will bear interest at the rate otherwise applicable to such loans plus 2.00%. The Credit Agreement is described in more detail in Note 9 to the condensed consolidated financial statements included in this report.

The Credit Agreement contains covenants that, among other things and subject to certain exceptions, place limitations on our ability, and the ability of our subsidiaries, to incur additional indebtedness; create additional liens; enter into a merger, consolidation or amalgamation or other defined "fundamental changes," dispose of certain assets, make certain investments or acquisitions, pay dividends, or make other restricted payments, enter into swap agreements or enter into transactions with our affiliates. Additionally, the Credit Agreement contains financial covenants that, subject to specified exceptions, require us to maintain a consolidated total net leverage ratio of not more than 4.50 to 1.00 and a consolidated interest coverage ratio (generally, Consolidated EBITDA for the four most recent fiscal quarters ending on or preceding the date of determination to Consolidated Interest Expense, as defined in the Credit Agreement, paid in cash for such period) of not less than 3.50 to 1.00.

The indentures governing our 5.25% Senior Notes due 2024 (the “2024 Notes”) and 4.875% Senior Notes due 2026 (the "2026 Notes") contain covenants that, among other things and subject to certain exceptions, limit or restrict our ability, and the ability of our subsidiaries, to incur additional debt or issue preferred stock or other disqualified stock, create liens, merge, consolidate, or dispose of certain assets, pay dividends, make investments or make other restricted payments, or enter into transactions with our affiliates.. The indenture governing our 4.625% Senior Notes due 2027 (the “2027 Notes”) contains covenants that, among other things and subject to certain exceptions, limit or restrict our ability, and the ability of our subsidiaries, to create liens; consolidate, merge or dispose of certain assets; and enter into sale leaseback transactions.

As of June 30, 2019, we were in compliance with these requirements. The obligations under the Credit Agreement, the 2024 Notes, the 2026 Notes and the 2027 Notes are guaranteed (subject to certain exceptions) by substantially all of our material domestic subsidiaries, and the obligations under the Credit Agreement are (subject to certain exceptions and limitations) secured by a lien on substantially all of the assets owned by us and each guarantor.

Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.

In our Annual Report on Form 10-K for the year ended December 31, 2018, we provided disclosure regarding our critical accounting estimates, which are reflective of significant judgments and uncertainties, are important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions and conditions.

New Accounting Standards

See Note 2 to the condensed consolidated financial statements included in this report for a discussion of recently issued accounting guidance, including estimated effects, if any, of adoption of the guidance on our financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the information set forth in Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and in Part I, Item 3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are party to various lawsuits and claims arising in the normal course of business. These lawsuits and claims include actions involving product liability and product warranty, commercial disputes, intellectual property, contract, employment, environmental and other matters. As of June 30, 2019 and December 31, 2018, we have accrued liabilities of approximately $0.2 million and $0.6 million, respectively, in connection with these matters, representing our best estimate of the cost within the range of estimated possible loss that will be incurred to resolve these matters. Based on information currently available, advice of counsel, established reserves and other resources, we do not believe that the outcome of any outstanding lawsuits or claims is likely to be, individually or in the aggregate, material to our 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 our business, financial condition, results of operations or liquidity.

Item 1A. Risk Factors

See the information set forth in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. There have been no significant changes in risk factors for the quarter ended June 30, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this report:



Exhibit No.		Description

*10.1	—	Amended and Restated Credit Agreement, dated April 5, 2019, among the Company, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., PNC Bank, National Association, Wells Fargo Bank, National Association and HSBC Securities (USA), as co-syndication agents, the guarantors party thereto, the lenders party thereto and each other party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 10, 2019).
31.1	—	Certification of Chief Executive Officer, pursuant to Rule 13a–14(a) under the Securities Exchange Act of 1934.
31.2	—	Certification of Chief Financial Officer, pursuant to Rule 13a–14(a) under the Securities Exchange Act of 1934.
32.1	—	Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	—	Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	—	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in inline XBRL (eXtensible Business Reporting Language): (i) Cover Page; (ii) the Condensed Consolidated Statements of Income for the three and six months ended June 30, 2019 and July 1, 2018; (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and July 1, 2018; (iv) the Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018; (v) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and July 1, 2018; (vi) the Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, 2019 and July 31, 2018; and (vii) Notes to Condensed Consolidated Financial Statements.

_____________________________________________________

* Each such exhibit has previously been filed with the Securities and Exchange Commission as part of the filing indicated and is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		TELEFLEX INCORPORATED

		By:		/s/ Liam J. Kelly
				Liam J. Kelly President and Chief Executive Officer (Principal Executive Officer)

		By:		/s/ Thomas E. Powell
				Thomas E. Powell Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Dated: August 1, 2019