2014 AnnuAl RepoR t
Focusing on the Future
Strong. Diversified. Resourceful.
Focusing on the Future
Strong. Diversified. Resourceful.
As the global healthcare market continues to evolve,
it holds more challenges and more opportunities than
ever before. teleflex is well positioned to capitalize
on these dynamics: We are strong, with an established
industry leadership position, a powerful R&D engine and
an efficient global supply chain. We are diversified, with
an extensive product portfolio and a broad geographic
reach. And we are resourceful, with a flexible balance
sheet, a forward-thinking mindset and a commitment
to cultivating innovation. our team moves ahead with a
sharp focus on the future, backed by a clear strategy
to drive long-term growth.
About Teleflex
teleflex is a leading provider of innovative specialty medical devices that assist clinicians
at virtually every point in critical care and surgery. to fully capitalize on our breadth
of technology, we also operate an original equipment manufacturer (oeM) division,
which provides device manufacturers with custom-engineered extrusions, catheters,
introducers, sutures and fibers. teleflex is headquartered in Wayne, pennsylvania.
We employ more than 11,000 people and serve healthcare providers worldwide.
FINANCIAL HIGHLIGHTS
FROM CONTINUING OPERATIONS
(Dollars in thousands, except per share data)
1
7
2
,
6
9
6
,
1
$
2
3
8
,
9
3
8
,
1
$
9
0
0
,
1
5
5
,
1
$
5
4
0
,
5
6
$
0
4
0
,
1
6
$
8
7
2
,
6
5
$
12
13
14
12
13
14
NET REVENUES
8.5%
Variance
4
7
5
$
.
3
0
.
5
$
3
4
.
4
$
RESEARCH AND
DEVELOPMENT
EXPENSE
-6.2%
Variance
1
4
2
,
0
9
2
$
9
9
2
,
1
3
2
$
8
1
6
,
4
9
1
$
TELEFLEX TODAY
Diversified and well positioned
across clinical areas, healthcare
markets and geographic regions
13%
14%
8%
13%
12%
8%
32%
Vascular North America 14%
Anesthesia / Respiratory North America 12%
Surgical North America 8%
Europe, Middle East and Africa (“EMEA”) 32%
Asia 13%
OEM 8%
All Other 13%
6%
8%
86%
12
13
14
12
13
14
ADJUSTED
EARNINGS
PER SHARE1
14.1%
Variance
NET CASH PROVIDED BY
OPERATING ACTIVITIES
FROM CONTINUING
OPERATIONS
25.5%
Variance
Hospitals/Healthcare Providers 86%
Medical Device Manufacturers 8%
Home Care 6%
1 A table reconciling adjusted earnings per share to the most directly comparable GAAP measures can be found on the final page of this Annual Report.
A table reconciling our 2014 constant currency revenue growth, which is discussed on page 2, can be found on the next to last page of this Annual Report.
1
TO OUR SHAREHOLDERS
At Teleflex, we are dedicated to delivering improved
patient care while managing the cost of healthcare
around the world. We believe this commitment will
steadily increase shareholder value. We measure our
progress against our ability to meet three financial goals:
To grow revenues faster than the markets we serve, to
increase our adjusted gross and operating margins, and
to invest in our future. In 2014, we met these goals,
while expanding our global market share and creating
efficiencies across our business.
OUR HIGHLIGHTS FOR THE YEAR:
We executed our acquisition strategy,
acquiring Mayo Healthcare, and integrating
and leveraging the Vidacare acquisition we
completed in 2013.
We fueled our R&D engine, launching 16 new
products and line extensions.
We expanded our reach, extending 23 existing
agreements and forging 6 new relationships
with healthcare purchasing groups worldwide.
We developed a multi-year facility
restructuring plan to drive operational
efficiency and lower costs.
We also delivered strong 2014 financial results,
including constant currency growth of 8.8
percent. Collectively, our 2014 accomplishments
fortified our business platform, positioning
Teleflex to meet the near-term demands of our
marketplace and achieve continued growth in the
future. The credit for our progress belongs to our
employees who are the front line in connecting
with our customers around the world. I want to
thank all of our team members for their hard
work and commitment.
EXECUTING OUR ACqUISITION STRATEGY
Acquisitions have played an important role in our
growth, enabling us to achieve scale, diversify
our product portfolio, strengthen our R&D, and
broaden our reach. We follow a strict acquisition
protocol that targets select opportunities,
including:
Late-stage technology companies with
promising products on the cusp of
regulatory approval;
Established companies with differentiated
products that align with our existing
business; and
Product distributors in key geographic regions
that allow us to convert to a direct sales model.
Our 2014 acquisition of Mayo Healthcare
falls into the third category and represents an
excellent margin growth opportunity for Teleflex.
Mayo is a provider of products, services and
customer support to healthcare institutions
across Australia. Through this acquisition,
we have forged a direct link to our customers
in this region, enabling us to increase sales
volume and improve pricing. This transaction
was immediately accretive, and during 2014,
Mayo contributed 160 basis points to Teleflex’s
constant currency revenue growth. We are
continuing to evaluate additional distributor-to-
direct conversion opportunities, especially in
Asia and Europe.
2
We also demonstrated our commitment to
swift and careful execution during the year
by re-branding Vidacare’s products under the
Arrow® brand, integrating these products into
our business, and building a franchise in the
area of intraosseous (IO), or inside the bone,
access devices. Customer response to the
Arrow® EZ-IO® Vascular Access System and
the Arrow® OnControl® Powered Bone Marrow
Biopsy System has been extremely positive,
and these products contributed approximately
$87 million in revenue and 4.7 percent of
constant currency revenue growth to Teleflex
during 2014. We believe our intraosseous
business offers significant opportunity for
gross margin and revenue growth, and we are
dedicating additional resources to developing
it in the future.
DRIVING MARGIN GROwTH
We are constantly seeking to capture margin
expansion opportunities, and we have many to
pursue. During 2014, we began to implement a
multi-year restructuring plan, which will relocate
our manufacturing facilities in relatively high-
cost areas to our existing facilities in lower cost
areas. We expect to complete this program by
year-end 2017, enabling us to improve operating
leverage, streamline logistics and expedite
product delivery.
This restructuring offers clear financial and
logistical advantages, but also requires us
to reduce our workforce at certain facilities.
These are not decisions we make lightly. After a
careful review of current and future healthcare
dynamics, we are convinced that this relocation
is a necessary step. Moreover, we are confident
that our restructuring will enable us to manage
growing competitive pressures and pave
the way for growth in an increasingly cost-
sensitive market. We have also identified other
opportunities for margin improvement, including
consolidating raw materials purchases, exploring
cost-effective packaging options and increasing
automation. We expect these initiatives to enable
us to meet our long-term financial objectives.
Even more importantly, we see opportunities
for continued margin expansion over the next
several years, and we are committed to realizing
these improvements.
LEVERAGING MARkET DYNAMICS
The global healthcare market is continuously
evolving. At any given time and place, healthcare
utilization is influenced by regional shifts
in regulatory policy, economic strength and
political status that can create significant short-
term challenges in individual markets. Teleflex
is well equipped to meet these challenges.
Our product portfolio addresses the needs of
multiple healthcare segments, and our customer
base spans the world. This diversity helps us to
offset temporary regional business declines and
generate steady revenue growth, regardless of
the market environment.
Moreover, the long-term growth prospects for
healthcare remain excellent, largely due to global
demographics. Specifically, an aging population
in industrialized nations and the emergence of
a middle class in many developing nations are
driving a greater need for medical care. Societies
around the world are seeking ways to manage
the costs of this care, and they are turning to
leading medical device companies like Teleflex
to help. Our products increase precision, reduce
pain and minimize the risk of complications,
helping to speed patient recovery times and
decrease the overall costs associated with a
range of surgical and critical care procedures.
As a result, our portfolio offers a compelling
value proposition to healthcare providers even in
today’s cost-conscious market.
FOCUSING ON THE FUTURE
Teleflex moves forward with confidence. During
the past year, we continued to prove that we
have a strong, stable business that is positioned
to manage short-term market challenges and
capitalize on long-term opportunities. In the
months ahead, we will continue our momentum,
executing our strategies to drive revenues,
improve margins and strengthen our business
platform. In the process, we will continue to
reinforce our dedication to rewarding you
– our shareholders − with the attention and
commitment to value you deserve.
BENSON F. SMITH
Chairman, President and
Chief Executive Officer
3
ENABLING
HEALTHy
OUTCOMES
Minimizing Pain
Pain is a major concern for
most patients facing a medical
procedure or surgery. Teleflex is
dedicated to developing devices
that help minimize procedural pain
and manage post-operative pain.
The Arrow® OnControl® Powered
Bone Marrow Biopsy System is
designed to reduce both the time
and pain involved in effectively
and safely obtaining large,
high-quality samples.
Increasing Comfort
Arrow® AutoFuser® Disposable
Pain Pumps provide a combination
of continuous hands-free infusion
along with an optional patient-
controlled bolus, giving patients the
ability to address breakthrough pain
on demand.
MAINTAINING A
WORLD-CLASS SUPPLy CHAIN
“ We are committed to maintaining
a world-class supply chain
that efficiently delivers high-
quality products to patients and
clinicians around the globe.”
TONY kENNEDY
Senior Vice President, Global Operations
HOw DO YOU ENSURE THAT YOUR OPERATIONS
FUNCTION kEEPS PACE wITH THE NEEDS OF
YOUR INDUSTRY?
At Teleflex, our commitment is to stay well in front of the
needs of our market. Our Global Operations team leads
this effort by working to maintain a highly efficient, fully
integrated supply chain that sets the standard within
the medical device industry. This is a huge task that
encompasses more than 1,600 suppliers and 26 major
production facilities, which employ more than 9,000
people and manufacture approximately 47,000 distinct
SKUs for customers around the world.
We are continuously developing our people to deliver
quality, service and value to our customers and to
Teleflex. We are also pursuing several opportunities to
improve our operational structure and increase both
gross margins and operating margins. One of these is
the restructuring plan we developed in 2014, which
involves relocating some of our manufacturing facilities
in high-cost areas to our established low-cost locations.
This is an important strategic effort for Teleflex that will
not only reduce our costs, but also improve our logistical
efficiencies, providing the framework for our future
growth in key regions of the world. We are also evaluating
ways to consolidate our raw materials needs among
common suppliers, improve our product packaging, and
increase our reliance on automation. We expect these
efforts to enable us to achieve our longer term financial
objectives while effectively meeting the diverse demands
of our customers.
4
ENABLING
HEALTHy
OUTCOMES
Delivering Rapid Care
In emergent situations, time is
often a critical factor in achieving
healthy outcomes. Our product
portfolio includes devices that are
designed to safely and efficiently
deliver formulations to patients in
time-sensitive situations.
The LMA® MAD Nasal™ Device
atomizes approved medications
into a fine mist that can be
administered intranasally. This
enables rapid absorption across
mucosal membranes into the
bloodstream in a safe, painless
way that eliminates the use of
invasive needles.
Enabling Efficient Procedures
The Arrow® EZ-IO® Intraosseous
Vascular Access System gives medical
professionals efficient vascular
access to the central circulation,
enabling the rapid delivery of vital
medications, intravenous fluids and
blood products.
SETTING UNCOMPROMISING
STANDARDS
“ Every Teleflex employee views
maintaining quality assurance
and regulatory compliance as
a personal responsibility.”
kAREN BOYLAN
Vice President, Regulatory Affairs
and Quality Assurance, International
wHAT STEPS ARE YOU TAkING TO MAINTAIN
COMPLIANCE wITH THE VARIOUS qUALITY AND
REGULATORY STANDARDS AROUND THE wORLD?
Teleflex takes an aggressive approach to providing
compliant, high-quality medical devices that support
healthcare providers and enhance patient outcomes.
This perspective starts at the top and permeates our
organization, effectively assigning personal accountability
to every one of our employees. Our Regulatory Affairs
and Quality Assurance teams spearhead these efforts by
continuously researching global requirements and setting
compatible standards for every aspect of our business.
This encompasses the way we design, manufacture,
package and label our products, as well as the way
we train our employees, market to our customers, and
oversee our vendors and suppliers. We employ strict
protocols for communicating and enforcing these
standards throughout Teleflex, as well as for tracking our
progress and making continuous improvements. These
protocols are backed by regular investments in our global
technology platform, which standardizes processes, data
and reporting across our organization.
These efforts are vital to our success. We currently
operate in 140 countries, many of which have unique
regulatory requirements and expectations. Moreover,
these requirements are subject to change, especially
in high-growth markets like China, which is rapidly
developing new regulatory standards in response to rising
consumer demand for medical care. Teleflex is committed
to maintaining our leadership position and capturing
attractive growth opportunities by remaining vigilant,
flexible and focused on delivering the exceptional
standards our industry demands.
5
ENABLING
HEALTHy
OUTCOMES
Preventing Infection
Every year, approximately two
million patients around the
world contract hospital-acquired
infections, some of which are fatal.
Teleflex is working to reduce the
incidence of hospital-acquired
infections through innovative
antimicrobial products.
Arrow® JACC (Jugular
Axillo-subclavian Central
Catheter) with Chlorag+ard®
Technology is the first and only
long-term antimicrobial and
antithrombogenic central venous
catheter, and it can be used for
the entire length of a patient’s
treatment from ICU through
outpatient care.
CULTIVATING
PURPOSE-DRIVEN INNOVATION
“ Our innovation team is proving
that technology is one of the
most important tools available to
help patients recover quickly.”
LIAM kELLY
Executive Vice President
and President, Americas
HOw DO YOU REMAIN CONNECTED TO THE
NEEDS OF YOUR GLOBAL CUSTOMER BASE?
Our primary tool for serving our customers is innovation,
and at Teleflex, innovation has a distinct purpose – to
enable healthy outcomes for patients and healthcare
providers. In today’s cost-sensitive medical environment,
healthcare providers are seeking to reduce expenses. We
support this process by continuously conducting in-depth
market research to identify opportunities for improvement
in a wide range of critical care and surgical procedures.
Many of these opportunities focus on improving patient
outcomes while decreasing the overall cost of procedures
by, for example, reducing the length of patient hospital
stays through infection reduction. Once we pinpoint these
opportunities, we leverage our advanced technologies to
develop unique medical devices that make a meaningful
difference. Our innovations increase precision, decrease
pain, reduce the risk of infection and enable the use of
advanced techniques, such as minimally invasive surgery
and robotics. These benefits help to expedite patient
recovery times, decreasing overall operational costs for
today’s healthcare providers – including “hidden” expenses
such as staffing, administrative work and equipment.
Since innovation is our primary differentiator, we actively
cultivate this practice throughout Teleflex. This involves
amassing market intelligence, investing in emerging
technologies, and consistently rewarding employees who
demonstrate creativity and initiative. Our commitment
to innovation is evident in the quality of our product
portfolio, which includes precision devices that are on the
forefront of the market. We pride ourselves on being an
innovative company with a robust new product pipeline to
fuel our future growth goals.
6
ENABLING
HEALTHy
OUTCOMES
Applying
Antimicrobial
Technology
The proprietary SustainTM
Technology is a durable, multi-
functional surface modification
that is useful for a wide array of
medical device applications. The
SustainTM Technology is designed
to reduce complications and costs
by inhibiting the accumulation of
proteins, platelets and bacteria
on the surface of medical devices
that have been modified with it.
In 2014, the U.S. Army’s
Telemedicine and Advanced
Technology Research Center
awarded Teleflex a $2.1 million
research grant to support the
development of a surface-
modified tibial intramedullary
nail that combines Sustain™
Technology with antimicrobial
technology. We expect this
partnership to yield a valuable
clinical solution that will reduce
the risk of infections related to
battleground injuries.
BUILDING A
MARkET-LEADING TEAM
“ We are a market leader because
we are extremely proactive in
building a market leading team
to drive our progress.”
CAMERON HICkS
Vice President,
Global Human Resources
HOw DO YOU MAINTAIN A COMMON SENSE OF
PURPOSE AMONG YOUR GLOBAL EMPLOYEE BASE?
Our success is founded on a strong employee team,
and we are committed to attracting, retaining and
developing the finest individuals in our industry. Our
core values are central to our culture. These values
revolve around people and reinforce the traits that
define Teleflex, including a commitment to building
trust, a focus on maintaining a rewarding and enjoyable
work environment, and an entrepreneurial spirit that
nurtures innovation. We consistently communicate these
values to our global workforce, and we integrate them
into our review process, ensuring that every one of our
employees is working toward our common purpose.
As we grow, our demand for high-caliber people is
also growing. We are staying in front of this need by
providing our employees with professional development
through formal classes and experiences, as well as by
promoting from within whenever possible. We support
this goal by creating detailed succession plans for
positions at all levels of our company, which enable us to
identify the skill sets we need for specific roles both now
and in the future. This process positions us to select the
best potential candidates from our existing employee
pool for advancement and growth. In cases where we
conduct a broader search, our succession planning
enables us to zero in on strong outside candidates and
to attract best-in-class professionals by offering them
long-term career opportunities.
7
ENABLING
HEALTHy
OUTCOMES
Delivering Minimally
Invasive Solutions
Teleflex plays a vital role in
reducing the negative impact of
medical procedures by developing
products for applications such as
robotics, bladeless laparoscopy,
non-invasive ventilation and
minimally invasive surgery.
We are currently developing the
PercuvanceTM Percutaneous
Surgical System, a minimally
invasive platform that is designed
to enable surgeons to make smaller
incisions and use fewer trocars,
reducing the trauma associated with
select laparoscopic procedures.
In late 2014, we acquired the assets
of MiniLap Technologies, Inc.,
a manufacturer of devices for
minimally invasive surgery.
We plan to position the MiniLap®
Instruments alongside our
Percuvance System to create a
new category of advanced
percutaneous laparoscopic
surgery solutions.
Supporting Robotics
In 2014, we partnered with
Intuitive Surgical, the global
leader in robotic-assisted minimally
invasive surgery, to create access
solutions for the da Vinci xi®
Surgical System, which offers
precise alternatives to large-incision
abdominal surgeries. Through this
agreement, we will manufacture
Weck® Disposable Trocar Seals and
Obturators for exclusive use in the
da Vinci xi® platform.
LEVERAGING OUR FLExIBLE
FINANCIAL STRUCTURE
“ We are leveraging our
diversified business model to
drive growth through multiple
products, geographic regions
and financial strategies.”
THOMAS E. POwELL
Executive Vice President and
Chief Financial Officer
wHAT STEPS ARE YOU TAkING TO MAINTAIN
THE FINANCIAL STRENGTH TO MEET NEAR-TERM
CHALLENGES AND INVEST IN THE FUTURE?
We believe the key to managing market shifts is
diversification. As a result, we have built a flexible
financial model that drives earnings growth through
multiple strategies, including many that are not tied to
our top-line performance. This approach helps to insulate
Teleflex from the macroeconomic influences that impact
our markets, enabling us to deliver steady earnings
growth regardless of the economic climate.
Our current financial growth strategies include converting
select distributors to direct sales models, improving
product pricing, and investing in both high-growth
markets and value-added new products. We are also
reducing expenses by improving our manufacturing
processes and expanding our use of shared service
centers. In addition, we are taking steps to fully leverage
our tax-efficient business structure. Finally, we are
working to capitalize on our Vidacare acquisition. In
2014, we integrated Vidacare into our business and
invested in marketing Vidacare’s portfolio of high-margin
products, which are growing at an annual rate of more
than 20 percent. We are confident that these initiatives
will enable Teleflex to continue to deliver earnings
momentum, while maintaining the financial flexibility to
invest in attractive growth opportunities.
8
FORM 10K
FOR the Fiscal yeaR ended
deceMbeR 31, 2014
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________
FORM 10-K
_________________________________________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2014 or
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
(State or other jurisdiction of
incorporation or organization)
23-1147939
(I.R.S. employer identification no.)
550 East Swedesford Road, Suite 400, Wayne, Pennsylvania
(Address of principal executive offices)
19087
(Zip Code)
Registrant’s telephone number, including area code: (610) 225-6800
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange On Which Registered
Common Stock, par value $1 per share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
_________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
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 and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant (32,782,693 shares) on
June 27, 2014 (the last business day of the registrant’s most recently completed fiscal second quarter) was $3,447,755,823 (1) . The
aggregate market value was computed by reference to the closing price of the Common Stock on such date.
The registrant had 41,442,707 Common Shares outstanding as of February 13, 2015.
DOCUMENT INCORPORATED BY REFERENCE:
Certain provisions of the registrant’s definitive proxy statement in connection with its 2014 Annual Meeting of Stockholders, to be filed
within 120 days of the close of the registrant’s fiscal year, are incorporated by reference in Part III hereof.
(1) For the purposes of this definition only, the registrant has defined “affiliate” as including executive officers and directors of the
registrant and owners of more than five percent of the common stock of the registrant, without conceding that all such persons are
“affiliates” for purposes of the federal securities laws.
TELEFLEX INCORPORATED
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014
TABLE OF CONTENTS
PART I
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
PART II
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
PART III
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
PRINCIPAL ACCOUNTING FEES AND SERVICES
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
Page
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Item 1:
Item 1A:
Item 1B:
Item 2:
Item 3:
Item 4:
Item 5:
Item 6:
Item 7:
Item 7A:
Item 8:
Item 9:
Item 9A:
Item 9B:
Item 10:
Item 11:
Item 12:
Item 13:
Item 14:
Item 15:
SIGNATURES
Subsidiaries of the Company
Consent of Independent Registered Public Accounting Firm
CERTIFICATION OF CHIEF EXECUTIVE OFFICER, PURSUANT TO RULE 13a-14(a) UNDER THE
EXCHANGE ACT
CERTIFICATION OF CHIEF FINANCIAL OFFICER, PURSUANT TO RULE 13a-14(a) UNDER THE
EXCHANGE ACT
CERTIFICATION OF CHIEF EXECUTIVE OFFICER, PURSUANT TO RULE 13a-14(b) UNDER THE
EXCHANGE ACT
CERTIFICATION OF CHIEF FINANCIAL OFFICER, PURSUANT TO RULE 13a-14(b) UNDER THE
EXCHANGE ACT
2
Information Concerning Forward-Looking Statements
All statements made in this Annual Report on Form 10-K, 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, uncertainties and
assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is
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, including delays
or cancellations in shipments;
demand for and market acceptance of new and existing products;
our ability to integrate acquired businesses into our operations, realize planned synergies and operate such
businesses profitably in accordance with expectations;
our ability to effectively execute our restructuring programs;
our inability to realize savings resulting from restructuring plans and programs at anticipated levels;
the impact of recently passed healthcare reform legislation and changes in Medicare, Medicaid and third-party
coverage and reimbursements;
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 and sovereign debt issues;
difficulties entering new markets; and
general economic conditions.
For a further discussion of the risks relating to our business, see Item 1A “Risk Factors” in this Annual Report on
Form 10-K. 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.
3
ITEM 1.
BUSINESS
PART I
Teleflex Incorporated is referred to herein as “we,” “us,” “our,” “Teleflex” and the “Company.”
THE COMPANY
Teleflex is a global provider of medical technology products that enhance clinical benefits, improve patient and
provider safety and reduce 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 to hospitals and healthcare providers 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 manufacture our
products at 26 manufacturing sites, with major manufacturing operations located in the Czech Republic, Germany,
Malaysia, Mexico and the United States.
We are focused on achieving consistent, sustainable and profitable growth and improving our financial performance
by increasing our market share and improving our operating efficiencies through:
•
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•
•
•
development of new products and product line extensions;
investment in new technologies and broadening their applications;
expansion of the use of our products in existing markets and introduction of our products into new geographic
markets;
achievement of economies of scale as we continue to expand by leveraging our direct sales force and distribution
network for new products, as well as increasing efficiencies in our sales and marketing and research and
development structures and our manufacturing and distribution facilities; and
expansion of our product portfolio through select acquisitions, licensing arrangements and business partnerships
that enhance, extend or expedite our development initiatives or our ability to increase our market share.
Our research and development capabilities, commitment to engineering excellence and focus on low-cost
manufacturing enable us to consistently bring cost effective, innovative products to market that improve the safety,
efficacy and quality of healthcare. Our research and development initiatives focus on developing new, innovative
products for existing and new therapeutic applications as well as enhancements to, and line extensions of, existing
products. We introduced 16 new products and line extensions during 2014. Our portfolio of existing products and
products under development consists primarily of Class I and Class II devices, which require 510(k) clearance by the
United States Food and Drug Administration, or FDA, for sale in the United States. We believe that 510(k) clearance
reduces our research and development costs and risks, and typically results in a shorter timetable for new product
introductions as compared to the premarket approval, or PMA, process that would be required for Class III devices.
See "Government Regulation" below.
During 2014, we completed the following acquisitions, which were accounted for as business combinations:
• Mayo Healthcare Pty Limited, ("Mayo Healthcare"), a distributor of medical devices and supplies primarily in the
Australian market, which complements our anesthesia product portfolio, and
•
the assets of Mini-Lap Technologies, Inc. ("Mini-Lap"), a developer of micro-laparoscopic instrumentation, which
complements our surgical product portfolio.
OUR SEGMENTS
Effective January 1, 2014, we realigned our operating segments due to changes in the Company’s internal financial
reporting structure. The Vascular North America, Anesthesia/Respiratory North America and Surgical North America
businesses, which previously comprised much of our former Americas reportable segment, are now separate reportable
segments. The results of all prior comparative periods presented in this Annual Report on Form 10-K have been
restated to reflect the new reporting structure. We conduct our operations through six reportable segments: Vascular
North America, Anesthesia/Respiratory North America, Surgical North America, EMEA (Europe, the Middle East and
Africa), Asia and OEM. The following charts depict our net revenues by segment as a percentage of our total
consolidated net revenues for the years ended December 31, 2014, 2013 and 2012.
4
Vascular North America: Our vascular access products facilitate a variety of critical care therapies, including
the administration of intravenous medications and other therapies and the measurement of blood pressure and taking
of blood samples through a single puncture site. Our vascular access devices, which are primarily catheters and
related devices, principally consist of the following products:
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ARROW central venous catheters, or CVCs: The ARROW CVCs are inserted in the neck or shoulder area and
come in multiple lengths and up to four channels, or lumens. The ARROW CVC has a pressure injectable option
which gives clinicians who perform contrast-enhanced CT scans the ability to use an indwelling (in the body)
pressure injectable ARROW CVC to inject contrast dye for the scan without having to insert a second catheter.
Arrow EZ-IO system: EZ IO, which was added to our vascular product portfolio through our acquisition of Vidacare
Corporation in December 2013, provides immediate vascular access for the delivery of medications and fluids
via the intraosseous, or in the bone, route when traditional vascular access is difficult or impossible. In emergency
situations, EZ IO enables fast access to deliver lifesaving therapies to help stabilize a patient until a traditional
catheter can be inserted.
ARROW jugular axillo-subclavian central catheters, or JACCs, with Chlorag+ard® technology: JACCs are inserted
in the neck or shoulder area and provide an alternative to traditional acute CVCs and peripheral central venous
access. Introduced in 2013, this CVC for acute or long-term use combines antimicrobial and antithrombogenic
protection with smaller external diameter sizes. This product is well suited for patients with renal issues, chronic
patients with poor peripheral access or those with a history of or risk for venous thrombosis.
ARROW peripherally inserted central catheters, or PICCs: The ARROW PICCs are soft, flexible catheters that
are inserted in the upper arm and advanced into a vein that carries blood to the heart to administer various types
of intravenous medications and therapies. ARROW PICCs have a pressure injectable option that can withstand
the higher pressures required by the injection of contrast media for CT scans.
ARROW VPS: The ARROW VPS is an advanced vascular positioning system that facilitates precise placement
of a PICC or CVC within the heart. The ARROW VPS analyzes multiple metrics, in real time, from its biosensor
to help clinicians navigate through the circulatory system and precisely identify the correct catheter tip placement
in the heart. Cleared by the FDA as an alternative to chest x-ray confirmation, the ARROW VPS can help to
shorten hospital stays while lowering costs associated with catheter insertion procedures. In 2013, we launched
the next generation of our ARROW VPS, the ARROW VPS G4, which provides further enhancements to our VPS
technology, such as the ability to provide information as to the final catheter position, improved sterile field capability
and integration with hospital data management systems.
ARROW arterial catheterization sets: These sets facilitate arterial pressure monitoring and blood withdrawal for
glucose, blood-gas and electrolyte measurement in a wide variety of critical care and intensive care settings.
ARROW percutaneous sheath introducers: These introducers are used to insert cardiovascular and other
catheterization devices into the vascular system during critical care procedures.
5
The large majority of our CVCs are treated with the ARROWg+ard or ARROWg+ard Blue Plus antimicrobial surface
treatments to reduce the risk of catheter related bloodstream infection. ARROWg+ard Blue Plus provides antimicrobial
treatment of certain parts of a catheter. The Chlorag+ard technology, an option on our PICC and JACC catheters,
provides both antimicrobial and antithrombogenic protection for up to 30 days, reducing the risk of catheter-related
infection, thrombosis and occlusion. These surface treatments help reduce healthcare acquired conditions, such as
Catheter Related Blood Stream Infection (CRBSI), potentially saving hospitals significant costs under pay for
performance standards, which are standards that provide incentives to clinicians for better health outcomes.
We also offer many of our vascular access catheters in a Maximal Barrier Precautions Tray. The tray is available
for CVCs, PICCs and multi access catheters (MAC) and includes a full body drape, coated or non-coated catheter and
other accessories. These kits are designed to assist healthcare providers in complying with guidelines for reducing
catheter-related bloodstream infections that have been established by a variety of health regulatory agencies, such
as the Centers for Disease Control and Prevention and the Joint Commission on the Accreditation of Healthcare
Organizations. Our ErgoPACK system provides components which are packaged in the tray in the order in which they
will be needed during the procedure and incorporates features intended to enhance ease of use and patient and
provider safety.
We believe that our vascular product portfolio is well-positioned to enable hospitals to effectively address the
financial and clinical issues associated with vascular access. Our products can reduce injuries to the healthcare provider,
expedite placement of a central venous catheter, reduce patient exposure to x-rays, expedite infusion of medication
and reduce the risk of catheter related infection, thrombosis and occlusion for the patient. Moreover, we believe our
products can help hospitals achieve reduced costs, improved quality and patient outcomes, decreased length of stay
and increased satisfaction.
Anesthesia/Respiratory North America: Our anesthesia/respiratory segment provides products for clinicians
working primarily in emergency rooms, surgery and critical care settings. The product portfolio includes a variety of
airway management, pain management and respiratory care products that are designed to help eliminate complications
and improve procedural efficiencies. Our airway management products and related devices consist principally of the
following:
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LMA Airways: LMA laryngeal masks are used by anesthesiologists and emergency responders to establish an
airway to channel anesthesia gas or oxygen to a patient's lungs during surgery or trauma. The LMA Supreme
Airway is a second generation airway that features an integrated drain tube to channel fluid and gas safely away
from the airway, enabling physicians to use an LMA laryngeal mask in more advanced procedures.
LMA Atomization: The LMA Atomization portfolio includes products to facilitate intranasal delivery of medications.
The inner cavities of the nose provide an absorptive surface that is highly vascular with direct access to the central
nervous system. The advantages of intranasal administration include rapid onset, safety and patient comfort.
The LMA MAD Nasal is an intranasal atomization device that is designed to be a safe and painless way to deliver
medication to a patient's blood stream without an intravenous line or needle.
RUSCH Endotracheal Tubes and RUSCH Laryngoscopy: We offer a broad range of RUSCH products to facilitate
and support endotracheal intubation in multiple settings (surgery, critical care and emergency settings).
Endotracheal intubation is commonly used to open the airway to administer oxygen, medication or anesthesia.
We provide a broad range of products for laryngoscopy, a procedure that is primarily used to obtain a view of the
airway to facilitate tracheal intubation during general anesthesia or cardiopulmonary resuscitation (CPR). In 2014,
we introduced the RUSCH DispoLED Laryngoscope Handle. This single-use handle helps facilities comply with
standards designed to reduce the risk of patient cross-contamination during intubation.
ISO-Gard Caregiver Safety: The ISO-Gard Mask with ClearAir Technology helps to reduce clinician exposure to
hazardous waste anesthetic gases (WAG), which are commonly used in surgical procedures. The ISO-Gard
Mask is designed to reduce WAG within a caregiver's breathing zone to minimize the cumulative effect of low-
level exposure to these hazardous gases in the post anesthesia care unit. By providing a means to reduce the
amount of WAG within the breathing zone of the caregiver, hospitals can better comply with OSHA requirements
and the National Institute for Occupational Safety and Health’s recommendations for workplace safety.
6
Our pain management products are designed to provide pain control during a broad range of surgical and
obstetric procedures, thereby helping clinicians better manage each patient’s individual pain while reducing
complications and associated costs. Our pain management portfolio consists principally of the following:
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ARROW Epidural Catheters, Needles and Kits: We offer a broad range of ARROW epidural products to facilitate
epidural analgesia. Epidural analgesia may be used separately for pain management, as an adjunct to general
anesthesia, as a sole technique for surgical anesthesia and for post-operative pain management. The ARROW
FlexTip Plus epidural catheter is clinically proven to significantly reduce complications commonly associated with
epidural catheters.
ARROW Peripheral Nerve Block (PNB) Catheters, Pumps, Needles and Kits: The ARROW PNB products are
used by anesthesiologists to provide localized pain relief by injecting anesthetics to deliberately interrupt the
signals traveling along a nerve. Nerve blocks are used in a variety of different procedures, including orthopedics,
and can last for hours or days. The ARROW Stimucath and FlexBlock catheters allow for location of the nerves
and delivery of the anesthetic. The ARROW Autofuser Ambulatory Pain Pump is a disposable anesthetic pump
used in conjunction with the ARROW PNB catheters that facilitates multiple days of post-operative pain
management.
Our respiratory products are used in a variety of care settings and include oxygen therapy products, aerosol
therapy products, spirometry products, and ventilation management products. Our Hudson RCI brand has been
a leader in respiratory care for more than 65 years. In 2014, for the third consecutive year, we were among the
six companies to receive the Zenith Award awarded by the American Association for Respiratory Care in recognition
of the quality products, programs and support provided to the respiratory community. Our respiratory products
consist principally of the following:
• Hudson RCI Oxygen Therapy: Supplemental oxygen is one of the most widely used therapies for people admitted
to the hospital. It is also frequently used for patients with chronic lung disease who live at home. Oxygen is
administered to treat hypoxemia (low oxygen levels in the blood) and to decrease symptoms associated with
hypoxemia. We offer a broad range of Hudson RCI Oxygen Therapy products to facilitate the delivery of oxygen,
including nasal cannulas, nasal catheters, masks and tubing.
• Hudson RCI Aerosol Therapy: Aerosol therapy is used in the treatment of bronchopulmonary disease and allows
the delivery of medications, humidity or both to the mucosa (mucous lining) of the respiratory tract and pulmonary
alveoli (tiny air sacks in the lungs that allow oxygen and carbon dioxide to move between the lungs and bloodstream).
We offer a broad range of aerosol therapy products, including small volume nebulizers, large volume nebulizers,
masks and tubing. These aerosol therapy products are designed to deliver agents that may relieve spasm of the
bronchial muscles and reduce edema of the mucous membranes, liquefy bronchial secretions so that they are
more easily removed, humidify the respiratory tract and administer antibiotics locally by depositing them in the
respiratory tract.
• Hudson RCI Passive Humidification and Filtration: We offer a broad portfolio of Hudson RCI and Gibeck passive
humidification and filtration products catering to patients on mechanical ventilation in both the intensive care unit
and operating room. When an artificial airway is in place, the respiratory system’s natural processes are bypassed,
necessitating the need to heat, humidify and filter the air delivered to the patient. Our passive humidification
devices conserve the patient’s exhaled heat and moisture during expiration and return them to gas being delivered
during inspiration. This mimics the action of the “normal” upper airways.
• Hudson RCI Active Humidification and Ventilation Management: Active humidification provides patients in
respiratory distress or with lung failure with heated and humidified gases in order to promote gas exchange, maintain
secretion clearance and decrease the risk of infection. Our ConchaTherm Neptune System is a heated humidifier
designed to heat and humidify respiratory gases delivered via endotracheal tubes, nasal cannulas or facemasks
to adult, pediatric, infant and neonatal patients. The system features a reusable, electronic piece of equipment
and a full range of disposables, including breathing (or ventilator) circuits, humidification chambers and patient
interfaces.
7
Surgical North America: Our surgical products are predominantly comprised of single-use products, including
ligation clips and closure products; appliers and sutures used in a variety of surgical procedures; access ports used
in minimally invasive laparoscopic surgical procedures, including robotic surgery, and fluid management products used
for chest drainage. Our product portfolio also includes reusable hand-held instruments for general and specialty surgical
procedures. Our surgical products, which we market under the Deknatel, Pilling, Pleur-evac, Taut and Weck brands
names, include the following:
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Hem-o-lok, a significant part of the Weck portfolio, is a locking polymer ligation clip that combines the security of
a suture with the speed of a metal clip for open and laparoscopic surgery. Hem-o-lok clips have special applications
in urologic, gynecologic and general surgery.
• Weck EFx Endo Fascial Closure System is a port site closure device used in laparoscopic surgical procedures.
The Weck EFx System encompasses a design for port site closure that enables reproducible fascial closure in
varying body types with a controlled suture delivery. This approach to port site closure is designed to minimize
complications and costs associated with port-site herniation.
In addition, we have developed the Percuvance percutaneous surgical system, which is a percutaneous
approach (where access to inner organs or other tissue is achieved via needle puncture) to laparoscopic surgery. The
percutaneous approach reduces the number of trocars (a medical device that functions as a portal for the subsequent
placement of other instruments), and provides better angles for the surgeon to address the surgical site, while minimizing
trauma to patients. We received 510(k) clearance for this product in January 2015, and expect to initiate a controlled
launch of the product in the United States and Europe in 2015. With our 2014 acquisition of the Mini-Lap assets, the
combined portfolio of Mini-Lap instruments with our Percuvance percutaneous surgical system will enable us to create
and build a new category of percutaneous laparoscopic surgery.
Europe, the Middle East and Africa (“EMEA”): Our EMEA segment designs, manufactures and distributes
medical devices primarily used in critical care, surgical applications and cardiac care and generally serves two end
markets: hospitals and healthcare providers, and home health. The products of the EMEA segment are most widely
used in the acute care setting for a range of diagnostic and therapeutic procedures and in general and specialty surgical
applications, including urology.
Asia: Our Asia segment, like our EMEA segment, designs, manufactures and distributes medical devices primarily
used in critical care, surgical applications and cardiac care and generally serves hospitals and healthcare providers.
The products of the Asia segment are most widely used in the acute care setting for a range of diagnostic and therapeutic
procedures and in general and specialty surgical applications.
OEM: The OEM segment designs, manufactures and supplies devices and instruments for other medical device
manufacturers. Our OEM division, which includes the TFX OEM ® and Deknatel ® OEM brands, provides custom-
engineered extrusions, diagnostic and interventional catheters, sheath/dilator sets (introducers) and kits, sutures,
performance fibers, and bioresorbable resins and fibers. We offer an extensive portfolio of integrated capabilities,
including engineering, material selection, regulatory affairs, prototyping, testing and validation, manufacturing,
assembly and packing.
All other businesses: Certain operating segments are not material to our operations and are therefore included
in the “All other” line item in tabular presentations of segment information. Our "All other" line item includes specialty
products such as interventional access products, which focus on dialysis, oncology and critical care at hospitals. We
also provide urology, respiratory, anesthesia and cardiac care products such as diagnostic and intra-aortic balloon
catheters, as well as capital equipment, which is provided to specialty market customers including home care, pre-
hospital (typically addressing emergencies) and other alternative channels of care as well as to hospitals. Also included
in the "All Other" line item is our Latin American business.
Specialty Product Portfolio
Our specialty product line of urology products provides bladder management for patients in the hospital and
individuals in the home care markets. The product portfolio consists principally of a wide range of catheters (including
Foley, intermittent, external and suprapubic), urine collectors, catheterization accessories and products for operative
endourology marketed under the Rusch brand name.
8
Over the past few years, we have continued to expand our urology product offerings to include a wider range of
intermittent catheters, catheter insertion kits and accessories used mainly for people with spinal cord injury, spina
bifida, and multiple sclerosis. Many of these products are designed to support user safety and infection prevention
efforts. For example, an intermittent catheter with hydrophilic coating (a coating that readily interacts with water), an
ergothan tip (a flexible catheter tip that gently adjusts to the anatomy of the urethra), protective sleeve and sterile saline
solution is marketed in our EMEA region. In the United States, we recently expanded our hydrophilic coated intermittent
catheter line to include FloCath Quick™ coudés (slightly curved tip) for difficult catheterizations as well as Rusch®
MMG H2O® Closed Systems without insertion supplies.
Our interventional access products are used in a wide range of applications, including dialysis, oncology and critical
care. Dialysis products include the ARROW branded long term hemodialysis catheters, antimicrobial acute hemodialysis
catheters and the ARROW-Trerotola™ Percutaneous Thrombectomy Device. Our long term hemodialysis catheter
portfolio offers both antegrade and retrograde insertion options for split, step and symmetrical tip configurations. In
addition, our symmetrical tip ARROW-Clark™ VectorFlow™ Chronic Hemodialysis catheter was launched in November
2014 after receiving FDA 510(k) clearance. The ARROW acute hemodialysis catheters are available with
ARROWg+ard™ antimicrobial technology, which reduces the risk of catheter related infection.
The ARROW Polysite Low Profile Hybrid Port was introduced to the US market in March 2014. Available with or
without pressure injection capability, the hybrid design combines a lightweight plastic body for patient comfort and a
strong titanium reservoir for durability.
Interventional access products also include several ARROW branded products for critical care applications,
including diagnostic and drainage kits, embolectomy balloons, and reinforced percutaneous sheath introducers.
In addition, our acquisition of Vidacare expanded our specialty products portfolio by adding the Vidacare EZ-IO
Intraosseous Vascular Access (described above in the Vascular North America product portfolio summary), OnControl®
Bone Marrow and OnControl Bone Access systems to the products we offer to our interventional access and specialty
markets customers. Vidacare’s OnControl Bone Marrow System enables rapid and safe access for hematology and
oncology diagnostic practices. The Vidacare OnControl Bone Access System provides rapid and safe access for
surgical bone applications, such as vertebroplasty (a spinal procedure in which bone cement is injected through a
small hole in the skin into a fractured vertebra with the goal of relieving back pain caused by vertebral compression
fractures) and the biopsy of the vertebral body (the thick oval segment of bone forming the front of the vertebra) and
bone lesions.
The pre-hospital care products also include several of the Rusch, Hudson-RCI and LMA branded products for pre-
hospital care applications, including airway management and support along with medication delivery.
Cardiac Care Product Portfolio
Products in this portfolio include diagnostic and intra-aortic balloon catheters and capital equipment. Our diagnostic
catheters include thermodilution and wedge pressure catheters; specialized catheters used during the x-ray
examination of blood vessels, such as Berman and Reverse Berman catheters; therapeutic delivery catheters, such
as temporary pacing catheters; sheaths for femoral and trans-radial aortic access used in diagnostic and therapeutic
procedures; and intra-aortic balloon, or IAB, catheters. Capital equipment includes our intra-aortic balloon pump, or
IABP, consoles. IABP products are used to augment oxygen delivery to the cardiac muscle and reduce the oxygen
demand after cardiac surgery, serious heart attack or interventional procedures. We market our cardiac care products
under the Arrow brand name.
The IAB and IABP product lines feature the AutoCAT 2 WAVE console and the FiberOptix catheter, which together
utilize fiber optic technology for arterial pressure signal acquisition and enable the patented WAVE timing algorithm to
support the broadest range of patient heart rhythms, including severely arrhythmic patients.
Latin America
Our Latin America business generally engages in the same type of operations, and serves the same type of end
markets, as the EMEA segment.
9
OUR MARKETS
We generally serve three end-markets: hospitals and healthcare providers, medical device manufacturers and
home care. These markets are influenced by a number of factors, including demographics, utilization and
reimbursement patterns. The following charts depict the percentage of net revenues for the years ended December 31,
2014, 2013 and 2012 derived from each of our end markets.
HISTORY AND RECENT DEVELOPMENTS
Teleflex was founded in 1943 as a manufacturer of precision mechanical push/pull controls for military aircraft.
From this original single market, single product orientation, we have grown and evolved through entries into new
businesses, development of new products, introduction of products into new geographic or end-markets and
acquisitions and dispositions of businesses. Throughout our history, we have continually focused on providing
innovative, technology-driven, specialty-engineered products that help our customers meet their business
requirements.
Beginning in 2007, we significantly changed the composition of our portfolio of businesses, expanding our presence
in the medical device industry, while divesting all of our other businesses, which served the aerospace, automotive,
industrial and marine markets. Following the divestitures of our marine business and cargo container and systems
businesses in 2011, we became exclusively a medical device company.
GOVERNMENT REGULATION
We are subject to comprehensive government regulation both within and outside the United States relating to the
development, manufacture, sale and distribution of our products.
Regulation of Medical Devices in the United States
All of our medical devices manufactured or sold in the United States are subject to the Federal Food, Drug, and
Cosmetic Act (“FDC Act”), as implemented and enforced by the FDA. The FDA and, in some cases, other government
agencies administer requirements for the design, testing, safety, effectiveness, manufacturing, labeling, storage, record
keeping, clearance, approval, advertising and promotion, distribution, post-market surveillance, import and export of
our medical devices.
10
Unless an exemption or pre-amendment grandfather status applies, each medical device that we market must
first receive either clearance as a Class I or Class II device (by submitting a premarket notification (“510(k)”)) or approval
as a Class III device (by filing a premarket approval application (“PMA”)) from the FDA pursuant to the FDC Act. To
obtain 510(k) clearance, a manufacturer must demonstrate that the proposed device is substantially equivalent to a
legally marketed 510(k)-cleared device (or pre-amendment device for which FDA has not called for PMAs), referred
to as the "predicate device." Substantial equivalence is established by the applicant showing that the proposed device
has the same intended use as the predicate device, and it either has the same technological characteristics or has
been shown to be equally safe and effective and does not raise different questions of safety and effectiveness as
compared to the predicate device. The FDA’s 510(k) clearance process usually takes from four to twelve months, but
it can last longer. A device that is not eligible for the 510(k) process because there is no predicate device may be
reviewed through the de novo process (the process for approval when no substantially equivalent device exists) if the
FDA agrees it is a low to moderate risk device eligible for Class I or Class II designation. A device not eligible for 510
(k) clearance or de novo clearance is categorized as Class III and must follow the PMA approval pathway, which
requires proof of the safety and effectiveness of the device to the FDA’s satisfaction. The process of obtaining PMA
approval is much more costly, lengthy and uncertain than the 510(k) process. It generally takes from one to three years
or even longer. Our portfolio of existing products and pipeline of potential new products consist primarily of Class I and
Class II devices that require 510(k) clearance. In addition, modifications made to devices after they receive clearance
or approval may require a new 510(k) clearance or approval of a PMA or PMA supplement. We cannot be sure that
510(k) clearance or PMA approval will be obtained for any device that we propose to market.
A clinical trial is almost always required to support a PMA application and is sometimes required for a 510(k). The
sponsor of a clinical study must comply with and conduct the study in accordance with the applicable federal regulations,
including FDA’s investigational device exemption (“IDE”) requirements, and good clinical practice (“GCP”). Clinical
trials must also be approved by an institutional review board, or IRB, which is an appropriately constituted group that
has been formally designated to review and monitor biomedical research involving human subjects and which has the
authority to approve, require modifications in, or disapprove research to protect the rights, safety, and welfare of the
human research subject. The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any
time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA
requirements or presents an unacceptable risk to the clinical trial patients. An IRB may also require the clinical trial
at the site to be halted for failure to comply with the IRB’s requirements, or may impose other conditions.
After a device is placed on the market, numerous regulatory requirements continue to apply. Those regulatory
requirements include the following:
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device listing and establishment registration;
adherence to the Quality System Regulation (“QSR”) which requires stringent design, testing, control,
documentation, complaint handling and other quality assurance procedures;
labeling requirements;
FDA prohibitions against the promotion of off-label uses or indications;
adverse event reporting;
post-approval restrictions or conditions, including post-approval clinical trials or other required testing;
post-market surveillance requirements;
the FDA’s recall authority, whereby it can ask for the recall of products from the market; and
voluntary corrections or removals reporting and documentation.
In September 2013, the FDA issued final regulations and draft guidance documents regarding the Unique Device
Identification (“UDI”) System, which will require manufacturers to mark certain medical devices with unique identifiers.
While the FDA expects that the UDI System will help track products during recalls and improve patient safety, it will
require us to make changes to our manufacturing and labeling, which could increase our costs. The UDI System is
being implemented in stages based on device risk, with the first requirements having taken effect in September 2014
and the last taking effect in September 2020.
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Our manufacturing facilities, as well as those of certain of our suppliers, are subject to periodic and for-cause
inspections to verify compliance with the QSR as well as other regulatory requirements. For example, in March 2014,
we received a warning letter from the FDA alleging certain violations of the Quality System Regulation observed during
a September 2013 inspection of our Arlington Heights, Illinois manufacturing facility. FDA’s concerns relate to failure
to appropriately establish and maintain certain manufacturing, corrective and preventive action, and process validation
procedures. In May 2014, the FDA returned to the Arlington Heights facility and re-issued its inspectional observations
from the March 2014 warning letter and also required that we report to the FDA a field corrective action we took with
respect to a product manufactured at our Arlington Heights facility, which we did. We have provided detailed responses
and updates to the FDA as to our corrective actions, and continue to work to address the issues identified by the FDA.
Until the violations are corrected, and those corrective actions are accepted and verified by FDA’ s re-inspection, we
may be subject to additional enforcement action by the FDA. Additionally, the warning letter states that requests for
Certificates to Foreign Governments related to products manufactured at the Arlington Heights facility will not be granted
until the violations have been corrected.
Certain of our medical devices are sold in convenience kits that include a drug component, such as lidocaine.
These types of kits are generally regulated as combination products within the Center for Devices and Radiological
Health under the device regulations because the device generates the primary mode of action of the kit. Although the
kit as a whole is regulated as a medical device, it may be subject to certain drug requirements such as current good
manufacturing practices (“cGMPs”) to the extent applicable to the drug-component repackaging activities and subject
to inspection to verify compliance with cGMPs as well as other regulatory requirements.
If the FDA were to find that we or certain of our suppliers have failed to comply with applicable regulations, it could
institute a wide variety of enforcement actions, ranging from issuance of a warning or untitled letter to more severe
sanctions, such as product recalls or seizures, civil penalties, consent decrees, injunctions, criminal prosecution,
operating restrictions, partial suspension or total shutdown of production, refusal to permit importation or exportation,
refusal to grant, or delays in granting, clearances or approvals or withdrawal or suspension of existing clearances or
approvals. The FDA also has the authority to request repair, replacement or refund of the cost of any medical device
manufactured or distributed by us. Any of these actions could have an adverse effect on our business.
Regulation of Medical Devices Outside of the United States
Medical device laws also are in effect in many of the markets outside of the United States in which we do business.
These laws range from comprehensive device approval requirements for some or all of our products to requests for
product data or certifications. Inspection of and controls over manufacturing, as well as monitoring of device-related
adverse events, are components of most of these regulatory systems.
Healthcare Laws
We are subject to various federal, state and local laws in the United States targeting fraud and abuse in the
healthcare industry. These laws prohibit us from, among other things, soliciting, offering, receiving or paying any
remuneration to induce the referral or use of any item or service reimbursable under Medicare, Medicaid or other
federally or state financed healthcare programs. Violations of these laws are punishable by imprisonment, criminal
fines, civil monetary penalties and exclusion from participation in federal healthcare programs. In addition, we are
subject to federal and state false claims laws in the United States that prohibit the submission of false payment claims
under Medicare, Medicaid or other federally or state funded programs. Certain marketing practices, such as off-label
promotion, and violations of federal anti-kickback laws may also constitute violations of these laws.
We are also subject to various federal and state reporting and disclosure requirements related to the healthcare
industry. Recent rules issued by the Centers for Medicare & Medicaid Services (CMS) require us to collect and report
information on payments or transfers of value to physicians and teaching hospitals, as well as investment interests
held by physicians and their immediate family members. The reported data is available to the public on the CMS
website. Failure to submit required information may result in civil monetary penalties. In addition, several states now
require medical device companies to report expenses relating to the marketing and promotion of device products and
to report gifts and payments to individual physicians in these states. Other states prohibit various other marketing-
related activities. The federal government and still other states require the posting of information relating to clinical
studies and their outcomes. The shifting commercial compliance environment and the need to build and maintain
robust and expandable systems to comply with the different compliance and/or reporting requirements among a number
of jurisdictions increases the possibility that a healthcare company may violate one or more of the requirements,
resulting in increased compliance costs that could adversely impact our results of operations.
12
Other Regulatory Requirements
We are also subject to the United States Foreign Corrupt Practices Act and similar anti-bribery laws applicable in
jurisdictions outside the United State that generally prohibit companies and their intermediaries from improperly offering
or paying anything of value to non-United States government officials for the purpose of obtaining or retaining business.
Because of the predominance of government-sponsored healthcare systems around the world, most of our customer
relationships outside of the United States are with governmental entities and are therefore subject to such anti-bribery
laws. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have
experienced governmental corruption to some degree, and in certain circumstances strict compliance with anti-bribery
laws may conflict with local customs and practices. In the sale, delivery and servicing of our medical devices and
software outside of the United States, we must also comply with various export control and trade embargo laws and
regulations, including those administered by the Department of Treasury’s Office of Foreign Assets Control (“OFAC”)
and the Department of Commerce’s Bureau of Industry and Security (“BIS”) which may require licenses or other
authorizations for transactions relating to certain countries and/or with certain individuals identified by the United States
government. Despite our global trade and compliance program, our internal control policies and procedures may not
always protect us from reckless or criminal acts committed by our employees, distributors or other agents. Violations
of these requirements are punishable by criminal or civil sanctions, including substantial fines and imprisonment.
COMPETITION
The medical device industry is highly competitive. We compete with many companies, ranging from small start-
up enterprises to companies that are larger and more established than us and have access to significantly greater
financial resources. Furthermore, extensive product research and development and rapid technological advances
characterize the market in which we compete. We must continue to develop and acquire new products and technologies
for our businesses to remain competitive. We believe that we compete primarily on the basis of clinical superiority and
innovative features that enhance patient benefit, product reliability, performance, customer and sales support, and
cost-effectiveness. Our major competitors include C. R. Bard, Inc., Medtronic and CareFusion.
SALES AND MARKETING
Our product sales are made directly to hospitals, healthcare providers, distributors and to original equipment
manufacturers of medical devices through our own sales forces through independent representatives and through
independent distributor networks.
BACKLOG
Most of our products are sold to hospitals or healthcare providers on orders calling for delivery within a few days
or weeks, with longer order times for products sold to medical device manufacturers. Therefore, our backlog of orders
is not indicative of revenues to be anticipated in any future 12-month period.
PATENTS AND TRADEMARKS
We own a portfolio of patents, patents pending and trademarks. We also license various patents and trademarks.
Patents for individual products extend for varying periods according to the date of patent filing or grant and the legal
term of patents in the various countries where patent protection is obtained. Trademark rights may potentially extend
for longer periods of time and are dependent upon national laws and use of the marks. All product names throughout
this document are trademarks owned by, or licensed to, us or our subsidiaries. Although these have been of value and
are expected to continue to be of value in the future, we do not consider any single patent or trademark, except for
the Teleflex and Arrow brands, to be essential to the operation of our business.
SUPPLIERS AND MATERIALS
Materials used in the manufacture of our products are purchased from a large number of suppliers in diverse
geographic locations. We are not dependent on any single supplier for a substantial amount of the materials used or
components supplied for our overall operations. Most of the materials and components we use are available from
multiple sources, and where practical, we attempt to identify alternative suppliers. Volatility in commodity markets,
particularly aluminum, steel and plastic resins, can have a significant impact on the cost of producing certain of our
products. We may not be able to successfully pass cost increases through to all of our customers, particularly original
equipment manufacturers.
13
RESEARCH AND DEVELOPMENT
We are engaged in both internal and external research and development. Our research and development costs
principally relate to our efforts to bring innovative new products to the markets we serve, and our efforts to enhance
the clinical value, ease of use, safety and reliability of our existing product lines. Our research and development efforts
support our strategic objectives to provide safe and effective products that reduce infections, improve patient and
clinician safety, enhance patient outcomes and enable less invasive procedures. Our research and development
expenditures were $61.0 million, $65.0 million and $56.3 million for the years ended December 31, 2014, 2013 and
2012, respectively.
We also acquire or license products and technologies that are consistent with our strategic objectives and enhance
our ability to provide a full range of product and service options to our customers.
SEASONALITY
Portions of our revenues are subject to seasonal fluctuations. Incidence of flu and other disease patterns as well
as the frequency of elective medical procedures affect revenues related to single-use products. Historically, we have
experienced higher sales in the fourth quarter as a result of these factors.
EMPLOYEES
We employed approximately 11,700 full-time and temporary employees at December 31, 2014. Of these
employees, approximately 3,100 were employed in the United States and 8,600 in countries other than the United
States. Approximately 8% percent of our employees in the United States and in other countries were covered by union
contracts or collective-bargaining arrangements. We believe we have good relationships with our employees.
ENVIRONMENTAL
We are subject to various environmental laws and regulations both within and outside the United States. Our
operations, like those of other medical device companies, involve the use of substances regulated under environmental
laws, primarily in manufacturing and sterilization processes. While we continue to make capital and operational
expenditures relating to compliance with existing environmental laws and regulations, we cannot ensure that our costs
of complying with current or future environmental protection, health and safety laws and regulations will not exceed
our estimates or have a material adverse effect on our business, financial condition, results of operations and cash
flows. Further, we cannot ensure that we will not be subject to additional environmental claims for personal injury or
cleanup in the future based on our past, present or future business activities.
INVESTOR INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Therefore, we file reports, proxy statements and other information with the Securities and Exchange Commission
(SEC). Copies of these reports, proxy statements, and other information may be obtained by visiting the Public
Reference Room of the SEC at 100 F Street, NE, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330.
In addition, the SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC.
You can access financial and other information about us in the Investors section of our website, which can be
accessed at www.teleflex.com. We make available through our website, free of charge, copies of our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with
or furnished to the SEC under Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after
electronically filing or furnishing such material to the SEC. The information on our website is not part of this Annual
Report on Form 10-K. The reference to our website address is intended to be an inactive textual reference only.
We are a Delaware corporation incorporated in 1943. Our executive offices are located at 550 East Swedesford
Road, Suite 400, Wayne, PA 19087.
14
EXECUTIVE OFFICERS
The names and ages of our executive officers and the positions and offices held by each such officer are as
follows:
Name
Benson F. Smith
Liam Kelly
Thomas E. Powell
Thomas Anthony Kennedy
Karen Boylan
Cameron P. Hicks
James J. Leyden
Age
67
48
53
52
43
50
48
Positions and Offices with Company
Chairman, President, Chief Executive Officer and Director
Executive Vice President, President, Americas
Executive Vice President and Chief Financial Officer
Senior Vice President, Global Operations
Vice President, Global RA/QA
Vice President, Global Human Resources
Vice President, General Counsel and Secretary
Mr. Smith has been our Chairman, President and Chief Executive Officer since January 2011, and has served as
a Director since April 2005. Prior to January 2011, Mr. Smith was the managing partner of Sales Research Group, a
research and consulting organization. From 1999 to January 2011, he also served as the Chief Executive Officer of
BFS & Associates LLC, which specialized in strategic planning and venture investing. From 2000 until 2005, Mr. Smith
also served as a speaker and author at The Gallup Organization, a global research-based consultancy firm. Prior to
that, Mr. Smith worked for C.R. Bard, Inc., a company specializing in medical devices, for approximately 25 years,
where he held various executive and senior level positions, most recently as President and Chief Operating Officer
from 1994 to 1998.
Mr. Kelly has been our Executive Vice President, President, Americas since April 2014. From June 2012 to April
2014 Mr. Kelly served as Executive Vice President, President, International and has held several positions with regard
to our EMEA segment, including President from June 2011 to June 2012, Executive Vice President from
November 2009 to June 2011, and Vice President of Marketing from April 2009 to November 2009. Prior to joining
Teleflex, Mr. Kelly held various senior level positions with Hill-Rom Holdings, Inc., a medical device company, from
October 2002 to August 2009, serving as its Vice President of International Marketing and R&D from August 2006 to
February 2009.
Mr. Powell has been our Executive Vice President and Chief Financial Officer since February 2013. From
March 2012 to February 2013, Mr. Powell was Senior Vice President and Chief Financial Officer. He joined Teleflex in
August 2011 as Senior Vice President, Global Finance. Prior to joining Teleflex, Mr. Powell served as Chief Financial
Officer and Treasurer of Tomotherapy Incorporated, a medical device company, from June 2009 until June 2011. In
2008, he served as Chief Financial Officer of Textura Corporation, a software provider. From April 2001 until
January 2008, Mr. Powell was employed by Midway Games, Inc., a software provider, serving as its Executive Vice
President, CFO and Treasurer from September 2001 until January 2008. Mr. Powell has also held leadership positions
with Dade Behring, Inc. (now Siemens Healthcare Diagnostics), PepsiCo, Bain & Company, Tenneco Inc. and Arthur
Andersen & Company.
Mr. Kennedy has been our Senior Vice President, Global Operations since May 2013. He previously held the
position of Vice President, International Operations from December 2012 to May 2013. From July 2007 to December
2012, he held the position of Vice President, EMEA Operations. Prior to joining Teleflex, Mr. Kennedy was a managing
director for Saint Gobain Performance Plastics, a producer of engineered, high-performance polymer products, from
September 2004 to May 2007. Mr. Kennedy has also held leadership positions with Bio-Medical Research Limited,
Marconi Plc, Fore Systems, Inc. and American Power Conversion Corporation.
Ms. Boylan has been our Vice President, Global RA/QA since August 2014. She joined Teleflex in January 2013
as Vice President, International RA/QA. Prior to joining Teleflex, Ms. Boylan served as QA Vice President, Corporate
Quality Systems for Boston Scientific, a developer, manufacturer and marketer of medical devices, from April 1996 to
December 2012.
15
Mr. Hicks has been our Vice President, Global Human Resources since April 2013. Prior to joining Teleflex, Mr.
Hicks served as Executive Vice President of Human Resources & Organizational Effectiveness for Harlan Laboratories,
a private global provider of pre-clinical and non-clinical research services, from July 2010 to March 2013. From April
1990 to January 2010, Mr. Hicks held various leadership roles with MDS Inc., a provider of products and services for
the development of drugs and the diagnosis and treatment of disease, including Senior Vice President of Human
Resources for MDS’ global Pharma Services division from November 2000 to January 2010.
Mr. Leyden has been our Vice President, General Counsel and Secretary since February 2014. He previously
held the positions of Acting General Counsel from November 2013 to February 2014, Deputy General Counsel from
February 2013 to November 2013 and Associate General Counsel from December 2004 to February 2013. Prior to
joining Teleflex, Mr. Leyden served as general counsel of InfraSource Services, Inc., a utility infrastructure construction
company, from April 2004 to December 2004. From February 2002 to April 2004, he served as Associate General
Counsel of Aramark Corporation, a provider of food, facility and uniform services.
Our officers are elected annually by our board of directors. Each officer serves at the discretion of the board.
ITEM 1A.
RISK FACTORS
In addition to the other information set forth in this Annual Report on Form 10-K, you should carefully consider
the following factors which could have a material adverse effect on our business, financial condition, results of operations
or stock price. The risks below are not the only risks we face. Additional risks and uncertainties not currently known
to us or that we currently deem to be immaterial may also adversely affect our business, financial condition, results of
operations or stock price.
We face strong competition. Our failure to successfully develop and market new products could adversely
affect our business.
The medical device industry is highly competitive. We compete with many domestic and foreign medical device
companies ranging from small start-up enterprises that might sell only a single or limited number of competitive products
or compete only in a specific market segment, to companies that are larger and more established than us, have a
broad range of competitive products, participate in numerous markets and have access to significantly greater financial
and marketing resources than we do.
In addition, the medical device industry is characterized by extensive product research and development and
rapid technological advances. The future success of our business will depend, in part, on our ability to design and
manufacture new competitive products and enhance existing products. Our product development efforts may require
us to make substantial investments. There can be no assurance that unforeseen problems will not occur with respect
to the development, performance or market acceptance of new technologies or products, such as our inability to:
•
•
•
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identify viable new products;
obtain adequate intellectual property protection;
gain market acceptance of new products; or
successfully obtain regulatory approvals.
In addition, our competitors currently may be developing, or may develop in the future, products that provide better
features, clinical outcomes or economic value than those that we currently offer or subsequently develop. Our failure
to successfully develop and market new products or enhance existing products could have an adverse effect on our
business, financial condition and results of operations.
16
Our customers depend on third party coverage and reimbursements and the failure of healthcare programs
to provide coverage and reimbursement, or the reduction in reimbursement levels, for our medical products
could adversely affect us.
The ability of our customers to obtain coverage and reimbursement for our products is important to our business.
Demand for many of our existing and new medical products is, and will continue to be, affected by the extent to which
government healthcare programs and private health insurers reimburse our customers for patients’ medical expenses
in the countries where we do business. Even when we develop or acquire a promising new product, demand for the
product may be limited unless reimbursement approval is obtained from private and governmental third party payors.
Internationally, healthcare reimbursement systems vary significantly. In some countries, medical centers are
constrained by fixed budgets, regardless of the extent of their patient treatment. Other countries require application
for, and approval of, government or third party reimbursement. Without both favorable coverage determinations by,
and the financial support of, government and third party insurers, the market for many of our medical products would
be adversely affected. We cannot be sure that third party payors will maintain the current level of coverage and
reimbursement to our customers for use of our existing products. Adverse coverage determinations or any reduction
in the amount of reimbursement could harm our business by reducing customers’ selection of our products and the
prices they are willing to pay.
In addition, as a result of their purchasing power, third party payors are implementing cost cutting measures such
as seeking discounts, price reductions or other incentives from medical products suppliers and imposing limitations
on coverage and reimbursement for medical technologies and procedures. These trends could compel us to reduce
prices for our products and could cause a decrease in the size of the market or a potential increase in competition that
could negatively affect our business, financial condition and results of operations.
We may not be successful in achieving expected operating efficiencies and sustaining or improving
operating expense reductions, and may experience business disruptions associated with restructuring, facility
consolidations, realignment, cost reduction and other strategic initiatives.
Over the past several years we have implemented a number of restructuring, realignment and cost reduction
initiatives, including the realignment of our North American organizational structure, facility consolidations and
reductions in our workforce. While we have realized some efficiencies from these actions, we may not realize the
benefits of these initiatives to the extent we anticipated. Further, such benefits may be realized later than expected,
and the ongoing difficulties in implementing these measures may be greater than anticipated, which could cause us
to incur additional costs or result in business disruptions. In addition, if these measures are not successful or sustainable,
we may be compelled to undertake additional realignment and cost reduction efforts, which could result in significant
additional charges. Moreover, if our restructuring and realignment efforts prove ineffective, our ability to achieve our
other strategic and business plan goals may be adversely affected.
In addition, as part of our efforts to increase operating efficiencies, we have implemented a number of initiatives
over the past several years to consolidate our enterprise resource planning, or ERP, systems. For example, between
2012 and 2013, we migrated our Arrow business onto our principal ERP system. To date, we have not experienced
any significant disruptions to our business or operations in connection with these initiatives. However, as we continue
our efforts to further consolidate our ERP systems, we could experience business disruptions, which could adversely
affect customer relationships and divert the attention of management away from daily operations. In addition, any
delays in the implementation of these initiatives could cause us to incur additional unexpected costs. Should we
experience such difficulties, our business, cash flows and results of operations could be adversely affected.
We are subject to extensive government regulation, which may require us to incur significant expenses
to ensure compliance. Our failure to comply with those regulations could have a material adverse effect on
our business, results of operations and financial condition.
Our products are classified as medical devices and are subject to extensive regulation in the United States by the
FDA and by comparable government agencies in other countries. The regulations govern, among other things, the
development, design, approval, manufacturing, labeling, importing and exporting and sale and marketing of many of
our products. Moreover, these regulations are subject to future change.
17
In the United States, before we can market a new medical device, or a new use of, or claim for, or significant
modification to, an existing product, we generally must first receive either 510(k) or de novo clearance or approval of
a premarket approval application, or PMA, from the FDA. Similarly, most major markets for medical devices outside
the United States also require clearance, approval or compliance with certain standards before a product can be
commercially marketed. The process of obtaining regulatory clearances and approvals to market a medical device,
particularly from the FDA and certain foreign governmental authorities, can be costly and time consuming, and
clearances and approvals might not be granted for new products on a timely basis, if at all. In addition, once a device
has been cleared or approved, a new clearance or approval may be required before the device may be modified or
its labeling changed. Furthermore, the FDA or a foreign governmental authority may make its review and clearance
or approval process more rigorous, which could require us to generate additional clinical or other data, and expend
more time and effort, in obtaining future product clearances or approvals. The regulatory clearance and approval
process may result in, among other things, delayed realization of product revenues, substantial additional costs or
limitations on indicated uses of products, any one of which could have a material adverse effect on our financial
condition and results of operations. Even after a product has received marketing approval or clearance, such product
approval or clearance can be withdrawn or limited due to unforeseen problems with the device or issues relating to
its application.
Failure to comply with applicable regulations could lead to adverse effects on our business, which could include:
•
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•
•
•
•
•
•
partial suspension or total shutdown of manufacturing;
product shortages;
delays in product manufacturing;
warning or untitled letters;
fines or civil penalties;
delays in obtaining new regulatory clearances or approvals;
withdrawal or suspension of required clearances, approvals or licenses;
product seizures or recalls;
injunctions;
criminal prosecution;
advisories or other field actions;
operating restrictions; and
prohibitions against exporting of products to, or importing products from, countries outside the United States.
We could be required to expend significant financial and human resources to remediate failures to comply with
applicable regulations and quality assurance guidelines. In addition, civil and criminal penalties, including exclusion
under Medicaid or Medicare, could result from regulatory violations. Any one or more of these events could have a
material adverse effect on our business, financial condition and results of operations.
Medical devices are cleared or approved for one or more specific intended uses. Promoting a device for an off-
label use could result in government enforcement action.
Furthermore, our facilities are subject to periodic inspection by the FDA and other federal, state and foreign
government authorities, which require manufacturers of medical devices to adhere to certain regulations, including
the FDA’s Quality System Regulation, which requires periodic audits, design controls, quality control testing and
documentation procedures, as well as complaint evaluations and investigation. For example, in March 2014, we
received a warning letter from the FDA with respect to our Arlington Heights, Illinois manufacturing facility. For
information regarding the warning letter, see "Business - Government Regulation" in Item 1 of this report. In addition,
any facilities assembling convenience kits that include drug components and are registered as drug repackaging
establishments are subject to current good manufacturing practices requirements. The FDA also requires the reporting
of certain adverse events and may require the reporting of recalls or other field safety corrective actions. Issues
identified through such inspections and reports may result in FDA enforcement action through any of the actions
discussed above. Moreover, issues identified through such inspections and reports may require significant resources
to resolve.
18
We are subject to healthcare fraud and abuse laws, regulation and enforcement; our failure to comply
with those laws could have a material adverse effect on our results of operations and financial condition.
We are subject to healthcare fraud and abuse regulation and enforcement by the federal government and the
governments of those states and foreign countries in which we conduct our business. The laws that may affect our
ability to operate include:
•
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•
•
the federal healthcare anti-kickback statute, which, among other things, prohibits persons from knowingly and
willfully offering or paying remuneration to induce either the referral of an individual for, or the purchase, order or
recommendation of, any good or service for which payment may be made under federal healthcare programs
such as Medicare and Medicaid, or soliciting payment for such referrals, purchases, orders and recommendations;
federal false claims laws which, among other things, prohibit individuals or entities from knowingly presenting, or
causing to be presented, false or fraudulent claims for payment from the federal government, including Medicare,
Medicaid or other third-party payors;
the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which prohibit schemes to
defraud any healthcare benefit program and false statements relating to healthcare matters; and
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may
apply to items or services reimbursed by any third-party payor, including commercial insurers.
If our operations are found to be in violation of any of these laws or any other government regulations, we may
be subject to penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of our
operations, the exclusion from participation in federal and state healthcare programs and imprisonment of personnel,
any of which could adversely affect our ability to operate our business and our financial results. The risk of our being
found to have violated these laws is increased by the fact that many of them have not been fully interpreted by the
regulatory authorities or the courts, and their provisions are open to a variety of interpretations.
Further, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability
Reconciliation Act (collectively, the “Affordable Care Act”), imposed new reporting and disclosure requirements on
device manufacturers for any “transfer of value” made or distributed to prescribers and other healthcare providers.
Our first report was submitted in 2014, and the reported information was made publicly available in a searchable format
in September 2014. In addition, device manufacturers are required to report and disclose any investment interests
held by physicians and their immediate family members during the preceding calendar year. Failure to submit required
information may result in civil monetary penalties for each payment, transfer of value or ownership or investment
interests not reported in an annual submission, up to an aggregate of $150,000 per year (and up to an aggregate of
$1 million per year for “knowing failures”).
In addition, there has been a recent trend of increased federal and state regulation of payments made to healthcare
providers. Some states, such as California, Connecticut, Nevada and Massachusetts, mandate implementation of
compliance programs that include the tracking and reporting of gifts, compensation for consulting and other services,
and other remuneration to healthcare providers. The shifting commercial compliance environment and the need to
build and maintain robust and expandable systems to comply with the different compliance and/or reporting
requirements among a number of jurisdictions increases the possibility that we may inadvertently violate one or more
of the requirements, resulting in increased compliance costs that could adversely impact our results of operations.
19
We may incur material losses and costs as a result of product liability and warranty claims, as well as
product recalls, any of which may adversely affect our results of operations and financial condition.
Furthermore, as a medical device company, our reputation may be damaged if one or more of our products
are, or are alleged to be, defective.
Our businesses expose us to potential product liability risks that are inherent in the design, manufacture and
marketing of our products. In particular, our medical device products are often used in surgical and intensive care
settings with seriously ill patients. In addition, many of our products are designed to be implanted in the human body
for varying periods of time. Product defects or inadequate disclosure of product-related risks with respect to products
we manufacture or sell could result in patient injury or death. In addition, in connection with the divestitures of our
former non-medical businesses, we agreed to retain certain liabilities related to those businesses, which include,
among other things, liability for products manufactured prior to the date on which we completed the sale of the business.
Product liability and warranty claims often involve very large or indeterminate amounts, including punitive damages.
The magnitude of potential losses from product liability lawsuits may remain unknown for substantial periods of time,
and the related legal defense costs may be significant. We could experience material warranty or product liability losses
in the future and incur significant costs to defend these claims.
In addition, if any of our products are, or are alleged to be, defective, we may voluntarily participate, or be required
by regulatory authorities to participate, in a recall of that product. In the event of a recall, we may lose sales and be
exposed to individual or class-action litigation claims. Moreover, negative publicity regarding a quality or safety issue,
whether accurate or inaccurate, could harm our reputation, decrease demand for our products, lead to product
withdrawals or impair our ability to successfully launch and market our products in the future. Product liability, warranty
and recall costs may have a material adverse effect on our business, financial condition and results of operations
The ongoing volatility in the domestic and global financial markets, combined with a continuation of
constrained global credit markets could adversely impact our results of operations, financial condition and
liquidity.
We are subject to risks arising from adverse changes in general domestic and global economic conditions. The
economic slowdown and disruption of credit markets that occurred in recent years, led to recessionary conditions and
depressed levels of consumer and commercial spending, resulting in reductions, delays or canceled purchases of our
products and services. While recent economic indicators suggest improvement in the global economy, we cannot
predict the duration or extent of any economic recovery or the extent to which our customers will return to more typical
spending behaviors. If the improvement in economic conditions does not continue, our customers may terminate
existing purchase orders or reduce the volume of products or services they purchase from us.
Additionally, our customers, particularly in the European region, have extended or delayed payments for products
and services already provided, which has increased our focus on collectability with respect to our accounts receivable
from these customers. To date, we have not experienced an inordinate amount of payment defaults by our customers,
and we have sufficient lending commitments in place to enable us to fund our foreseeable additional operating needs.
However, in light of the ongoing volatility in the European financial markets, combined with a continuation of constrained
European credit markets there is a risk that our European customers and suppliers may be unable to access liquidity.
As of December 31, 2014 and 2013, our net current and long term accounts receivable in Italy, Spain, Portugal and
Greece were $76.2 million and $97.9 million, respectively. In 2014, 2013 and 2012, net revenues from these countries
were approximately 8%, 8% and 9% of total net revenues, respectively, and average days that accounts receivable
from these countries were outstanding were 223, 260 and 288 days, respectively. Although we maintain allowances
for doubtful accounts to cover the estimated losses which may occur when customers cannot make their required
payments, we cannot be assured that we will continue to experience the same loss rate in the future given the volatility
in the worldwide economy. If our allowance for doubtful accounts is insufficient to address receivables we ultimately
determine are uncollectible, we would be required to incur additional charges, which could materially adversely affect
our results of operations. Moreover, our inability to collect outstanding receivables could adversely affect our financial
condition and cash flow from operations.
In addition, adverse economic and financial market conditions may result in future impairment charges with respect
to our goodwill and other intangible assets, which would not directly affect our liquidity but could have a material adverse
effect on our reported financial results.
20
Our strategic initiatives, including acquisitions, may not produce the intended growth in revenue and
operating income.
Our strategic initiatives include making significant investments designed to achieve revenue growth and margin
improvement targets. If we do not achieve the expected benefits from these investments or otherwise fail to execute
on our strategic initiatives, we may not achieve the growth improvement we are targeting and our results of operations
may be adversely affected.
In addition, as part of our strategy for growth, we have made, and may continue to make, acquisitions and
divestitures and enter into strategic alliances such as joint ventures and joint development agreements. However, we
may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully,
and our strategic alliances may not prove to be successful. In this regard, acquisitions involve numerous risks, including
difficulties in the integration of acquired operations, technologies, services and products and the diversion of
management’s attention from other business concerns. Even if we are successful in making an acquisition, the products
and technologies that we acquire may not be successful or may require significantly greater resources and investments
than we originally anticipated. We could also experience negative effects on our results of operations and financial
condition from acquisition-related charges, amortization of intangible assets and asset impairment charges, and other
issues that could arise in connection with the acquisition of a company or business, including issues related to internal
control over financial reporting, regulatory compliance and short-term effects of increased costs on results of
operations. Although our management will endeavor to evaluate the risks inherent in any particular transaction, there
can be no assurance that we will identify all such risks or the magnitude of the risks. In addition, prior acquisitions
have resulted, and future acquisitions could result, in the incurrence of substantial additional indebtedness and other
expenses. Future acquisitions may also result in potentially dilutive issuances of equity securities. There can be no
assurance that difficulties encountered with acquisitions will not have a material adverse effect on our business, financial
condition and results of operations.
Health care reform may have a material adverse effect on our industry and our business.
Political, economic and regulatory developments have effected fundamental changes in the healthcare industry.
The Affordable Care Act substantially changed the way health care is financed by both government and private insurers.
It also encourages improvements in the quality of health care products and services and significantly impacts the
United States pharmaceutical and medical device industries. Among other things, the Affordable Care Act:
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established a 2.3% excise tax on sales of medical devices with respect to any entity that manufactures or imports
specified medical devices offered for sale in the United States;
established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct
comparative clinical effectiveness research;
implemented payment system reforms, including a national pilot program to encourage hospitals, physicians and
other providers to improve the coordination, quality and efficiency of certain health care services through bundled
payment models; and
created an independent payment advisory board that will submit recommendations to reduce Medicare spending
if projected Medicare spending exceeds a specified growth rate.
In 2014 and 2013, we paid $12.7 million and $11.5 million, respectively, with respect to the medical device excise
tax. However, we cannot predict at this time the full impact of the Affordable Care Act or other healthcare reform
measures that may be adopted in the future on our financial condition, results of operations and cash flow.
We are subject to risks associated with our non-United States operations.
We have significant manufacturing and distribution facilities, research and development facilities, sales personnel
and customer support operations in a number of countries outside the United States, including Canada, Belgium, the
Czech Republic, France, Germany, Ireland, Malaysia, Mexico, and Singapore. As of December 31, 2014, 73% of our
full-time and temporary employees were employed in countries outside of the United States. As of December 31, 2014,
2013 and 2012, approximately 45%, 37% and 39%, respectively, of our net property, plant and equipment was located
outside the United States. In addition, for the years ended December 31, 2014, 2013 and 2012 approximately 50%,
50% and 49%, respectively, of our net revenues (based on the Teleflex facility generating the sale) were derived from
operations outside the United States.
21
Our international operations are subject to risks inherent in doing business outside the United States, including:
exchange controls, currency restrictions and fluctuations in currency values;
trade protection measures;
potentially costly and burdensome import or export requirements;
laws and business practices that favor local companies;
changes in foreign medical reimbursement policies and procedures;
subsidies or increased access to capital for firms that currently are or may emerge as competitors in countries
in which we have operations;
substantial foreign tax liabilities, including potentially negative consequences from changes in tax laws;
restrictions and taxes related to the repatriation of foreign earnings;
differing labor regulations;
additional United States and foreign government controls or regulations;
difficulties in the protection of intellectual property; and
unsettled political and economic conditions and possible terrorist attacks against American interests.
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In addition, the United States Foreign Corrupt Practices Act (the “FCPA”) and similar worldwide anti-bribery laws
in non-United States jurisdictions generally prohibit companies and their intermediaries from making improper
payments to non-United States officials for the purpose of obtaining or retaining business. The FCPA also imposes
accounting standards and requirements on publicly traded United States corporations and their foreign affiliates, which,
among other things, are intended to prevent the diversion of corporate funds to the payment of bribes and other
improper payments, and to prevent the establishment of “off the books” slush funds from which such improper payments
can be made. Because of the predominance of government-sponsored health care systems around the world, many
of our customer relationships outside of the United States are with government entities and are therefore subject to
such anti-bribery laws. Our policies mandate compliance with these anti-bribery laws. However, we operate in many
parts of the world that have experienced government corruption to some degree. Despite meaningful measures that
we undertake to facilitate lawful conduct, which include training and compliance programs and internal control policies
and procedures, we may not always prevent reckless or criminal acts by our employees, distributors or other agents.
In addition, we may be exposed to liability due to pre-acquisition conduct of employees, distributors or other agents
of businesses or operations we may acquire. Violations of anti-bribery laws, or allegations of such violations, could
disrupt our operations, involve significant management distraction and have a material adverse effect on our business,
financial condition and results of operations. We also could be subject to severe penalties, including criminal and civil
penalties, disgorgement, further changes or enhancements to our procedures, policies and controls, personnel changes
and other remedial actions.
Furthermore, we are subject to the export controls and economic embargo rules and regulations of the United
States, including the Export Administration Regulations and trade sanctions against embargoed countries, which are
administered by the Office of Foreign Assets Control within the Department of the Treasury, as well as other laws and
regulations administered by the Department of Commerce. These regulations limit our ability to market, sell, distribute
or otherwise transfer our products or technology to prohibited countries or persons. While we train our employees and
contractually obligate our distributors to comply with these regulations, we cannot assure that a violation will not occur,
whether knowingly or inadvertently. Failure to comply with these rules and regulations may result in substantial civil
and criminal penalties, including fines and the disgorgement of profits, the imposition of a court-appointed monitor, the
denial of export privileges and debarment from participation in United States government contracts.
The risks relating to our foreign operations may have a material adverse effect on our international operations or
on our business, results of operations and financial condition generally.
22
Foreign currency exchange rate, commodity price and interest rate fluctuations may adversely affect our
results.
We are exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates,
commodity prices and interest rates. Products manufactured in, and sold into, foreign markets represent a significant
portion of our operations. Our consolidated financial statements reflect translation of financial statements denominated
in non-United States currencies to United States dollars, our reporting currency, as well as the foreign currency
exchange gains and losses resulting from transactions denominated in non-functional currencies. When the United
States dollar strengthens or weakens in relation to the foreign currencies of the countries in which we sell or manufacture
our products, such as the euro, our United States dollar-reported revenue and income will fluctuate. Although we have
entered into forward contracts with several major financial institutions to hedge a portion of projected cash flows
denominated in non-functional currencies in order to reduce the effects of currency rate fluctuations, changes in the
relative values of currencies may, in some instances, have a significant effect on our results of operations.
Many of our products have significant plastic resin content. We also use quantities of other commodities, such as
aluminum and steel. Increases in the prices of these commodities could increase the costs of our products and services.
We may not be able to pass on these costs to our customers, particularly with respect to those products we sell under
group purchase agreements, which could have a material adverse effect on our results of operations and cash flows.
Increases in interest rates may adversely affect the financial health of our customers and suppliers and thus
adversely affect their ability to buy our products and supply the components or raw materials we need. In addition,
our borrowing costs could be adversely affected if interest rates increase. Any of these events could have a material
adverse effect on our results of operations and cash flows.
Fluctuations in our effective tax rate and changes to tax laws may adversely affect our results.
As a global company, we are subject to taxation in numerous countries, states and other jurisdictions. Our effective
tax rate is derived from a combination of applicable tax rates in the various countries, states and other jurisdictions in
which we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in
each of these jurisdictions. Our effective tax rate may, however, differ from the estimated amount due to numerous
factors, including a change in the mix of our profitability from country to country and changes in tax laws. Any of these
factors could cause us to experience an effective tax rate significantly different from previous periods or our current
expectations, which could have an adverse effect on our business, financial condition and results of operations and
cash flows.
An interruption in our manufacturing or distribution operations or our supply of raw materials may
adversely affect our business.
Many of our key products are manufactured at or distributed from single locations, and the availability of alternate
facilities is limited. If operations at one or more of our facilities is suspended due to natural disasters or other events,
we may not be able to timely manufacture or distribute one or more of our products at previous levels or at all.
Furthermore, our ability to establish replacement facilities or to substitute suppliers may be delayed due to regulations
and requirements of the FDA and other regulatory authorities regarding the manufacture of our products. In addition,
in the event of delays or cancellations in shipments of raw materials by our suppliers, we may not be able to timely
manufacture or supply the affected products at previous levels or at all. The manufacture of our products is highly
exacting and complex, due in part to strict regulatory requirements. Problems in the manufacturing process, including
equipment malfunction, failure to follow specific protocols and procedures, defective raw materials and environmental
factors, could lead to launch delays, product shortages, unanticipated costs, lost revenues and damage to our
reputation. A failure to identify and address manufacturing problems prior to the release of products to our customers
may also result in quality or safety issues. A reduction or interruption in manufacturing or distribution, or our inability
to secure suitable alternative sources of raw materials or components, could have a material adverse effect on our
business, results of operations and financial condition.
Our ability to attract, train, develop and retain key employees is important to our success.
Our success depends, in part, on our ability to continue to retain our key personnel, including our executive officers
and other members of our senior management team. Our success also depends, in part, on our ability to attract, train,
develop and retain other key employees, including research and development, sales, marketing and operations
personnel. We may experience difficulties in retaining executives and other employees due to many factors, including:
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the intense competition for skilled personnel in our industry;
fluctuations in global economic and industry conditions;
changes in our organizational structure;
our restructuring initiatives;
competitors’ hiring practices; and
the effectiveness of our compensation programs.
Our inability to attract, train, develop and retain such personnel could have an adverse effect on our results of
operations and financial condition.
We depend upon relationships with physicians and other health care professionals.
Research and development for some of our products is dependent on our maintaining strong working relationships
with physicians and other healthcare professionals. We rely on these professionals to provide us with considerable
knowledge and experience regarding the development and use of our products. Physicians assist us as researchers,
product consultants, inventors and public speakers. If we fail to maintain our working relationships with physicians and
receive the benefits of their knowledge and advice, our products may not be developed in a manner that is responsive
to the needs and expectations of the professionals who use and support our products, which could have a material
adverse effect on our business, financial condition and results of operations.
Our technology is important to our success, and our failure to protect our intellectual property rights
could put us at a competitive disadvantage.
We rely on the patent, trademark, copyright and trade secret laws of the United States and other countries to
protect our proprietary rights. Although we own numerous United States and foreign patents and have submitted
numerous patent applications, we cannot be assured that any pending patent applications will issue, or that any patents,
issued or pending, will provide us with any competitive advantage or will not be challenged, invalidated or circumvented
by third parties. In addition, we rely on confidentiality and non-disclosure agreements with employees and take other
measures to protect our know-how and trade secrets. The steps we have taken may not prevent unauthorized use of
our technology by competitors or other persons who may copy or otherwise obtain and use these products or technology,
particularly in foreign countries where the laws may not protect our proprietary rights to the same extent as in the
United States. There is no guarantee that current and former employees, contractors and other parties will not breach
their confidentiality agreements with us, misappropriate proprietary information, copy or otherwise obtain and use our
information and proprietary technology without authorization or otherwise infringe on our intellectual property rights.
Our inability to protect our proprietary technology could adversely affect our business. Moreover, there can be no
assurance that others will not independently develop the know-how and trade secrets or develop better technology
than our own, which could reduce or eliminate any competitive advantage we have developed.
Our products or processes may infringe the intellectual property rights of others, which may cause us to
pay unexpected litigation costs or damages or prevent us from selling our products.
We cannot be certain that our products do not and will not infringe issued patents or other intellectual property
rights of third parties. We may be subject to legal proceedings and claims in the ordinary course of our business,
including claims of alleged infringement of the intellectual property rights of third parties. Any such claims, whether or
not meritorious, could result in litigation and divert the efforts of our personnel. If we are found liable for infringement,
we may be required to enter into licensing agreements (which may not be available on acceptable terms or at all) or
to pay damages or cease making or selling certain products. We may need to redesign some of our products or
processes to avoid future infringement liability. Any of the foregoing events could be detrimental to our business.
24
Other pending and future litigation may involve significant costs and adversely affect our business.
We are party to various lawsuits and claims arising in the normal course of business involving, among other things,
contracts, intellectual property, import and export regulations, employment and environmental matters. The defense
of these lawsuits may divert our management’s attention, and we may incur significant expenses in defending these
lawsuits. In addition, we may be required to pay damage awards or settlements, or become subject to injunctions or
other equitable remedies, that could have a material adverse effect on our financial condition and results of operations.
While we do not believe that any litigation in which we are currently engaged would have such an adverse effect, the
outcome of litigation, including regulatory matters, is often difficult to predict, and we cannot assure that the outcome
of pending or future litigation will not have a material adverse effect on our business, financial condition or results of
operations.
Our substantial indebtedness could adversely affect our business, financial condition or results of
operations.
As of December 31, 2014, we had total consolidated indebtedness of $1,068 million.
Our substantial level of indebtedness increases the risk that we may be unable to generate cash sufficient to
satisfy our debt obligations. It could also have significant effects on our business. For example, it could:
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increase our vulnerability to general adverse economic and industry conditions;
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness,
thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and
development efforts and other general corporate purposes;
limit our ability to borrow additional funds for such general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
restrict us from exploiting business opportunities; and
place us at a competitive disadvantage compared to our competitors that have less indebtedness.
If we do not generate sufficient cash flow from operations or if future borrowings are not available to us in an
amount sufficient to pay our indebtedness or to fund our other liquidity needs, we may be forced to:
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refinance all or a portion of our indebtedness on or before it matures;
sell assets;
reduce or delay capital expenditures; or
seek to raise additional capital.
We may not be able to affect any of these actions on commercially reasonable terms or at all. Our ability to
refinance our indebtedness will depend on our financial condition at the time, the restrictions in the instruments governing
our outstanding indebtedness and other factors, including market conditions.
Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure
our obligations on commercially reasonable terms or at all, could have a material adverse effect on our business,
financial condition and results of operations.
Our debt agreements impose restrictions on our business, which could prevent us from capitalizing on
business opportunities and taking some corporate actions and may adversely affect our ability to respond to
changes in our business and manage our operations.
Our revolving credit agreement and the indentures governing our 5.25% senior notes due 2024 (the "2024 Notes")
and our 6.875% senior subordinated notes due 2019 (the "2019 Notes") contain covenants that, among other things,
impose significant restrictions on our business. The restrictions that these covenants place on us and our restricted
subsidiaries include limitations on our and their ability to, among other things:
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incur additional indebtedness or issue disqualified stock or preferred stock;
create liens;
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pay dividends, make investments or make other restricted payments;
sell assets;
use the proceeds of permitted sales of our assets;
• merge, consolidate, sell or otherwise dispose of all or substantially all of our assets;
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enter into transactions with our affiliates;
permit layering of debt (with regard to the 2019 Notes); and
designate subsidiaries as unrestricted.
In addition, our revolving credit agreement also contains financial covenants, including covenants requiring
maintenance of a consolidated leverage ratio and a consolidated interest coverage ratio, calculated in accordance
with the terms of the revolving credit agreement. A breach of any covenants under any one or more of these debt
agreements could result in a default, which if not cured or waived, could result in the acceleration of all our debts. In
addition, any debt agreements we enter into in the future may further limit our ability to enter into certain types of
transactions.
The contingent conversion features of our convertible notes, if triggered, may adversely affect our financial
condition.
In August 2010, we issued $400 million in aggregate principal amount of 3.875% convertible senior subordinated
notes due 2017 (the “Convertible Notes”). The Convertible Notes are convertible under certain circumstances, including
the attainment of a last reported sale price per share of our common stock equal to 130% of the conversion price
(approximately $79.72) for at least 20 trading days during a period of 30 consecutive trading days ending on the last
trading day of the immediately preceding fiscal quarter. Because our closing stock price has exceeded the 130%
threshold in the fourth quarter of 2014, the Convertible Notes are currently convertible into shares of our common
stock. As a result, the Convertible Notes are classified as a current liability, which, in turn, has resulted in a material
reduction of our net working capital. At this time, we have elected the net settlement method to satisfy the conversion
obligation, under which we will settle the principal amount of the Convertible Notes converted in cash and settle the
excess conversion value in shares, plus cash in lieu of fractional shares. While we believe we have sufficient liquidity
to repay the principal amount due through a combination of our existing cash on hand, amounts available under our
credit facility and, if necessary, amounts provided through the capital markets, our use of these funds could adversely
affect our results of operations and liquidity. See Note 8 to the consolidated financial statements included in this Annual
Report on Form 10-K for a further discussion regarding the conversion terms of the Convertible Notes.
The convertible note hedge transactions and warrant transactions entered into in connection with the
issuance of our Convertible Notes may adversely affect the value of our common stock.
In connection with our issuance of the Convertible Notes, we entered into privately negotiated hedge transactions
with two counterparties, which we refer to as the "hedge counterparties." The hedge transactions cover, subject to
customary anti-dilution adjustments, the number of shares of our common stock that underlie the Convertible Notes
and are expected to reduce the dilution with respect to our common stock and/or cash payments that we may be
required to make upon conversion of the Convertible Notes. Separately, we also entered into privately negotiated
warrant transactions relating to the same number of shares of our common stock with the hedge counterparties with
a strike price of $74.648, subject to customary anti-dilution adjustments, pursuant to which we may be obligated to
issue shares of our common stock. The warrant transactions could have a dilutive effect with respect to our common
stock or, if we so elect, obligate us to make cash payments to the extent that the market price per share of our common
stock exceeds the strike price of the warrants on any expiration date of the warrants. In addition, under applicable
accounting guidance, changes in the share price of our common stock can have a significant impact on the number
of shares that we must include in the fully diluted earnings per share calculation with respect to the Convertible Notes
and warrants, which, in turn, could impact our reported financial results. Based on the average market price of our
common stock during 2014, 1.9 million shares issuable upon exercise of the warrants were included in the total diluted
shares outstanding for the year ended December 31, 2014. For additional information, see “Financing Arrangements”
under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in
this Annual Report on Form 10-K.
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In connection with establishing their positions under the convertible note hedge transactions and the warrant
transactions, the hedge counterparties (and/or their affiliates) entered into various cash-settled over-the-counter
derivative transactions with respect to our common stock concurrently with, or shortly following, the pricing of the
Convertible Notes. The hedge counterparties (and/or their affiliates) may, in their sole discretion, with or without notice,
modify their hedge positions from time to time (and are likely to do so during any conversion period related to the
conversion of the Convertible Notes) by entering into or unwinding various over-the-counter derivative transactions
with respect to shares of our common stock, and/or by purchasing or selling shares of our common stock or Convertible
Notes in privately negotiated transactions and/or open market transactions. The effect, if any, of these transactions
and activities on the market price of our common stock will depend in part on market conditions and cannot be
ascertained at this time, but any of these activities could adversely affect the value of our common stock.
We are subject to counterparty risk with respect to the convertible note hedge transactions.
Each hedge counterparty is a financial institution or the affiliate of a financial institution, and we will be subject to
the risk that one or more hedge counterparties may default under the Convertible Note hedge transactions. Our
exposure to the credit risk of each hedge counterparty is not secured by any collateral. If a hedge counterparty becomes
subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to
our exposure at that time under the Convertible Note hedge transaction with that hedge counterparty. Our exposure
will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in the market
price of our common stock and in the volatility of our common stock. In addition, upon a default by a hedge counterparty,
we may suffer adverse tax consequences and dilution with respect to our common stock. We can provide no assurances
as to the financial stability or viability of the hedge counterparties.
We may issue additional shares of our common stock or instruments convertible into our common stock,
including in connection with conversions of our Convertible Notes, which could lower the price of our common
stock.
We are not restricted from issuing additional shares of our common stock or other instruments convertible into
our common stock. As of December 31, 2014, we had outstanding approximately 41.4 million shares of our common
stock, options to purchase approximately 1.2 million shares of our common stock (of which approximately 0.6 million
were vested as of that date), approximately 0.3 million of restricted stock awards (which are expected to vest over the
next three years) and approximately 20,000 shares of our common stock to be distributed from our deferred
compensation plan. In addition, as of December 31, 2014, 20.4 million shares of our common stock are reserved for
issuance upon the exercise of stock options, upon conversion of the Convertible Notes and upon the exercise of the
warrants issued in connection with the Convertible Notes. We cannot predict the size of future issuances or the effect,
if any, that they may have on the market price for our common stock.
If we issue additional shares of our common stock or instruments convertible into our common stock, such
issuances may materially and adversely affect the price of our common stock. Furthermore, the exercise of some or
all of the outstanding stock options and warrants, and the conversion of some or all of the Convertible Notes may dilute
the ownership interests of existing stockholders, and any sales in the public market of such shares of our common
stock issuable upon any exercise of stock options or warrants, or conversion of the Convertible Notes could adversely
affect prevailing market prices of our common stock. In addition, the issuance and sale, including through exercise of
stock options and warrants, of substantial amounts of common stock or conversion of the Convertible Notes into shares
of our common stock could depress the price of our common stock.
27
Disruption of critical information systems or material breaches in the security of our systems may
adversely affect our business and customer relationships.
We rely on information technology systems to process, transmit, and store electronic information in our day-to-
day operations. We also rely on our technology infrastructure, among other functions, to interact with customers and
suppliers, fulfill orders and bill, collect and make payments, ship products, provide support to customers, fulfill
contractual obligations and otherwise conduct business. Our internal information technology systems, as well as those
systems maintained by third-party providers, may be subjected to computer viruses or other malicious codes,
unauthorized access attempts, and cyber-attacks, any of which could result in data leaks or otherwise compromise
our confidential or proprietary information and disrupt our operations. Cyber-attacks are becoming more sophisticated
and frequent, and there can be no assurance that our protective measures will prevent security breaches that could
have a significant impact on our business, reputation and financial results. If we fail to monitor, maintain or protect our
information technology systems and data integrity effectively or fail to anticipate, plan for or manage significant
disruptions to these systems, we could, among other things, lose customers, have difficulty preventing fraud, have
disputes with customers, physicians and other health care professionals, be subject to regulatory sanctions or penalties,
incur expenses or lose revenues or suffer other adverse consequences. Any of these events could have a material
adverse effect on our business, results of operations or financial condition.
New regulations related to conflict minerals may increase our costs and adversely affect our business.
The SEC has promulgated rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding
disclosure of the use of tin, tantalum, tungsten and gold, known as "conflict minerals," included in components of
products either manufactured by public companies or for which public companies have contracted to manufacture.
These rules require that we undertake due diligence efforts to determine whether such minerals originated from the
Democratic Republic of Congo (the “DRC”) or an adjoining country and whether such minerals helped finance armed
conflict in the DRC. We filed our first conflict minerals report in June 2014. As discussed in the report, we have
determined that certain of our products contain the specified minerals, and we are in the process of attempting to
identify where such minerals originated. We have incurred, and expect to continue to incur, costs associated with
complying with these disclosure requirements, including costs related to determining the sources of the specified
minerals used in our products. In addition, these rules could adversely affect the sourcing, supply and pricing of
materials used in our products. Our customers may require our products be free of conflict minerals, and our revenues
and margins may be adversely affected if we are unable to provide assurances to our customers that our products are
“DRC conflict free” (generally, the product does not contain conflict minerals originating in the DRC or an adjoining
country that directly or indirectly finance or benefit specified armed groups) due to, among other things, our inability
to procure conflict free minerals at a reasonable price, or at all, or if we are unable to pass through any increased costs
associated with meeting these demands. We also may face reputational challenges if our due diligence efforts do not
enable us to verify the origins of all conflict minerals or to determine that any conflict minerals used in products we
manufacture or in products manufactured by others for us are DRC conflict-free.
Our operations expose us to the risk of material environmental liabilities.
We are subject to numerous foreign, federal, state and local environmental protection and health and safety laws
governing, among other things:
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the generation, storage, use and transportation of hazardous materials;
emissions or discharges of substances into the environment; and
the health and safety of our employees.
These laws and regulations are complex, change frequently and have tended to become more stringent over time.
In 2014, our costs related to compliance with, or liabilities under these laws totaled $1.3 million. We cannot provide
assurance that our costs of complying with current or future environmental protection and health and safety laws, or
our liabilities arising from past or future releases of, or exposures to, hazardous substances, which may include claims
for personal injury or cleanup, will not exceed our estimates or will not adversely affect our financial condition and
results of operations.
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Our workforce covered by collective bargaining and similar agreements could cause interruptions in our
provision of products and services.
As of December 31, 2014, approximately 8% of our employees in the United States and in other countries were
covered by union contracts or collective-bargaining arrangements. In addition, for the fiscal year ended December 31,
2014, approximately 7% of our net revenues were generated by operations for which a significant part of our workforce
is covered by collective bargaining agreements and similar agreements. It is likely that a portion of our workforce will
remain covered by collective bargaining and similar agreements for the foreseeable future. Strikes or work stoppages
could occur that would adversely impact our relationships with our customers and our ability to conduct our business.
We may not pay dividends on our common stock in the future.
Holders of our common stock are entitled to receive dividends only as our board of directors may declare out of
funds legally available for such payments. The declaration and payment of future dividends to holders of our common
stock will be at the discretion of our board of directors and will depend upon many factors, including our financial
condition, earnings, compliance with debt instruments, legal requirements and other factors as our board of directors
deems relevant. We cannot assure you that our cash dividend will not be reduced, or eliminated, in the future.
Certain provisions of our corporate governing documents, Delaware law and our Convertible Notes could
discourage, delay, or prevent a merger or acquisition.
Provisions of our certificate of incorporation and bylaws could impede a merger, takeover or other business
combination involving us or discourage a potential acquirer from making a tender offer for our common stock. For
example, our certificate of incorporation authorizes our board of directors to determine the number of shares in a
series, the consideration, dividend rights, liquidation preferences, terms of redemption, conversion or exchange rights
and voting rights, if any, of unissued series of preferred stock, without any vote or action by our stockholders. Thus,
our board of directors can authorize and issue shares of preferred stock with voting or conversion rights that could
adversely affect the voting or other rights of holders of our common stock. We are also subject to Section 203 of the
Delaware General Corporation Law, which imposes restrictions on mergers and other business combinations between
us and any holder of 15% or more of our common stock. These provisions could have the effect of delaying or deterring
a third party from acquiring us even if an acquisition might be in the best interest of our stockholders, and accordingly
could reduce the market price of our common stock.
Certain provisions in the Convertible Notes and the indentures governing the Convertible Notes, the 2024 Notes
and the 2019 Notes could make it more difficult or more expensive for a third party to acquire us. For example, if an
acquisition event constitutes a “fundamental change,” as defined in the indenture governing the Convertible Notes,
holders of the Convertible Notes will have the right to require us to purchase their notes in cash. Similarly, if an acquisition
event constitutes a “change of control” as defined in the indenture governing the 2024 Notes and the 2019 Notes,
holders of such notes will have the right to require us to purchase their notes in cash. In addition, if an acquisition
event constitutes a “make-whole fundamental change,” as defined in the indenture governing the Convertible Notes,
we may be required, under certain circumstances, to increase the conversion rate for holders who convert their notes
in connection with such acquisition event. In either case, and in other cases, our obligations under the Convertible
Notes, the 2024 Notes and the 2019 Notes could increase the cost of acquiring us or otherwise discourage a third
party from acquiring us or removing incumbent management, and accordingly could reduce the market price of our
common stock.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 2.
PROPERTIES
We own or lease approximately 82 properties consisting of plants, engineering and research centers, distribution
warehouses, offices and other facilities. We believe that the properties are maintained in good operating condition and
are suitable for their intended use. In general, our facilities meet current operating requirements for the activities
currently conducted within the facilities.
Our major facilities (those with 50,000 or greater square feet) are as follows:
Location
Olive Branch, MS
Nuevo Laredo, Mexico
Asheboro, NC
Reading, PA
Morrisville, NC
Research Triangle Park, NC
Kernen, Germany
Zdar nad Sazavou, Czech Republic
Tongeren, Belgium
Kamunting, Malaysia
Tecate, Mexico
Chihuahua, Mexico
Hradec Kralove, Czech Republic
Chelmsford, MA
Kulim, Malaysia
Arlington Heights, IL
Wayne, PA
Kamunting, Malaysia
Kernan, Germany
Nuevo Laredo, Mexico
Jaffrey, NH
Chihuahua, Mexico
Everett, MA
Limerick, Ireland
Bad Liebenzell, Germany
Ramseur, NC
Square
Footage
627,000
277,000
204,000
166,000
162,000
147,000
112,000
108,000
108,000
102,000
96,000
95,000
92,000
91,000
90,000
86,000
84,000
82,000
73,000
71,000
65,000
63,000
56,000
55,000
53,000
52,000
Owned or
Leased
Leased
Leased
Owned
Owned
Leased
Owned
Leased
Owned
Leased
Owned
Leased
Leased
Owned
Leased
Owned
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Operations in each of our business segments are conducted at locations both in and outside of the United States.
With the exception of our Jaffrey, NH and Limerick, Ireland facilities, which are used solely for the OEM segment, our
facilities generally serve more than one business segment and are often used for multiple purposes, such as
administrative/sales, manufacturing and/or warehousing/distribution.
In addition to the properties listed above, we own or lease approximately 630,000 square feet of additional
warehousing, manufacturing and office space located in the United States, Canada, Mexico, South America, Europe,
Asia and Africa. We also own or lease properties that are no longer being used in our operations, which we are actively
marketing for sale or sublease. At December 31, 2014, two unused owned properties were classified as held for sale.
30
ITEM 3.
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, intellectual property, contracts, employment and
environmental matters. As of December 31, 2014 and 2013, we have accrued liabilities of approximately $6.0 million
and $6.8 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. Of the $6.0 million accrued at
December 31, 2014, $2.4 million pertains to discontinued operations. Based on information currently available, advice
of counsel, established reserves and other resources, we do not believe that any such actions are 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. See
Note 15 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
31
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the New York Stock Exchange, Inc. under the symbol “TFX.” Our quarterly high
and low stock prices and dividends for 2014 and 2013 are shown below.
Price Range and Dividends of Common Stock
2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
106.70 $
109.73 $
111.24 $
119.99 $
Low
Dividends
90.15 $
99.56 $
103.37 $
101.95 $
0.34
0.34
0.34
0.34
High
Low
Dividends
84.58 $
87.46 $
71.84 $
73.83 $
82.41 $
74.42 $
99.13 $
81.05 $
0.34
0.34
0.34
0.34
$
$
$
$
$
$
$
$
The terms of our senior credit facility, 6.875% senior subordinated notes due 2019 and 5.25% senior notes due
2024 limit our ability to repurchase shares of our stock and pay cash dividends. Under the most restrictive of these
provisions, on an annual basis $133.3 million of retained earnings was available for dividends and stock repurchases
at December 31, 2014. On February 18, 2015, the Board of Directors declared a quarterly dividend of $0.34 per share
on our common stock, which is payable on March 16, 2015 to holders of record on March 3, 2015. As of February 18,
2015, we had approximately 595 holders of record of our common stock.
On June 14, 2007, our Board of Directors authorized the repurchase of up to $300 million of our outstanding
common stock. Through December 31, 2014, no shares have been purchased under this Board authorization. See
“Stock Repurchase Programs” contained in “Management Discussion and Analysis of Financial Condition and Results
of Operations” in Item 7 of this report for more information.
32
Stock Performance Graph
The following graph provides a comparison of five year cumulative total stockholder returns of Teleflex common
stock, the Standard & Poor’s (S&P) 500 Stock Index and the S&P 500 Healthcare Equipment & Supply Index. The
annual changes for the five-year period shown on the graph are based on the assumption that $100 had been invested
in Teleflex common stock and each index on December 31, 2009 and that all dividends were reinvested.
MARKET PERFORMANCE
Company / Index
Teleflex Incorporated
S&P 500 Index
S&P 500 Healthcare Equipment &
Supply Index
2009
100
100
100
2010
102
115
97
2011
119
117
97
2012
142
136
113
2013
190
180
144
2014
235
205
182
33
ITEM 6.
SELECTED FINANCIAL DATA
The selected financial data in the following table includes the results of operations for acquired companies from
the respective dates of acquisition.
Statement of Income Data(1):
Net revenues
Income (loss) from continuing operations
before interest, loss on extinguishments
of debt and taxes
Income (loss) from continuing operations
Amounts attributable to common
shareholders for income (loss) from
continuing operations
Per Share Data(1):
Income (loss) from continuing
operations — basic
Income (loss) from continuing
operations — diluted
Cash dividends
Balance Sheet Data:
Total assets
Long-term borrowings, less current portion
Shareholders’ equity
Statement of Cash Flows Data(1):
Net cash provided by operating activities
from continuing operations
Net cash (used in) provided by investing
activities from continuing operations
Net cash (used in) provided by financing
activities from continuing operations
$
$
$
$
$
$
$
$
$
$
$
$
2014(2)
2013(2)
2012(2)
2011(2)
2010
(Dollars in thousands, except per share)
$
1,839,832
$
1,696,271
$
1,551,009
$
1,492,528
$
1,397,722
284,862
191,460
$
$
233,261
152,183
$
$
(97,375) (3) $
(181,782) (3) $
229,570
119,322
$
$
230,290
87,672 (4)
190,388
$
151,316
$
(182,737) (3) $
118,301
$
86,811 (4)
4.60
4.10
1.36
3,977,255
700,000
1,911,309
$
$
$
$
$
$
3.68
3.46
1.36
4,209,007
930,000
1,913,527
$
$
$
$
$
$
(4.47)
(4.47)
1.36
3,733,687
965,280
1,778,950
290,241
$
231,299
$
194,618
(108,137) $
(372,638) $
(368,258)
(287,703) $
231,170
$
(65,653)
$
$
$
$
$
$
$
$
$
$
2.92
2.90
1.36
3,924,103
954,809
1,980,588
94,357
306,670
$
$
$
$
$
$
$
$
2.18 (4)
2.16 (4)
1.36
3,643,155
813,409
1,783,376
143,834 (6)
152,138
(11,106) $
(335,499)
49,775
$
114,504
Supplemental Data:
Free cash flow(5)
Certain financial information is presented on a rounded basis, which may cause minor differences.
167,719
222,670
129,224
$
$
$
(1) Amounts exclude the impact of businesses presented in our consolidated financial results as discontinued operations.
(2) Amounts include the impact of businesses acquired during the period. See Note 3 to the consolidated financial statements included in this
(3)
Annual Report on Form 10-K for additional information.
Includes a pretax goodwill impairment charge of $332.1 million, or $315.1 million net of tax. See Note 7 to the consolidated financial
statements included in this Annual Report on Form 10-K for additional information.
Includes a $29.7 million, net of tax, or a $0.74 per share loss (basic and diluted) on extinguishments of debt.
(4)
(5) Free cash flow is calculated by subtracting capital expenditures from cash provided by operating activities from continuing operations.
Free cash flow is considered a non-GAAP financial measure. This financial measure is used in addition to and in conjunction with results
presented in accordance with generally accepted accounting principles in the United States, or GAAP, and should not be considered a
substitute for net cash provided by operating activities from continuing operations, the most comparable GAAP financial measure.
Management believes that free cash flow is a useful measure to investors because it facilitates an assessment of funds available to
satisfy current and future obligations, pay dividends and fund acquisitions. We also use this financial measure for internal managerial
purposes and to evaluate period-to-period comparisons. Free cash flow is not a measure of cash available for discretionary expenditures
since we have certain non-discretionary obligations, such as debt service, that are not deducted from the measure. We strongly
encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial
measure. The following is a reconciliation of free cash flow to the most comparable GAAP measure.
Net cash provided by operating activities from continuing
operations
Less: Capital expenditures
Free cash flow
2014
2013
2012
2011
2010
(Dollars in thousands)
$ 290,241
$ 231,299
$ 194,618
$ 94,357
67,571
63,580
65,394
44,582
$ 143,834 (6)
29,330
$ 222,670
$ 167,719
$ 129,224
$ 49,775
$ 114,504
(6) 2010 cash flow reflects the impact of a refund of $59.5 million of previously submitted estimated tax payments.
34
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
We are a global provider of medical technology products that enhance clinical benefits, improve patient and
provider safety and reduce 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 to hospitals and healthcare providers 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.
Effective January 1, 2014, we realigned our operating segments due to changes in our internal financial reporting
structure. The North American Vascular, Anesthesia/Respiratory and Surgical businesses, which previously comprised
much of the Americas operating segment, are now separate reportable segments. As a result, we now conduct our
operations through six reportable segments: Vascular North America, Anesthesia/Respiratory North America, Surgical
North America, EMEA, Asia and OEM. Certain operating segments are not material and are therefore included in the
"All other" line item in tabular presentations of segment information. Additionally, we made changes to the allocation
methodology for certain costs, including manufacturing variances and research and development costs, among the
businesses to improve accountability, which resulted in changes to the previously reported segment profitability. All
prior comparative periods have been restated to reflect these changes.
Since we became exclusively a medical device company in 2011, we have continued to expand our presence in
the medical technology industry through strategic acquisitions. The following is a listing of the more significant
acquisitions we completed in 2014 and 2013.
During 2014, we acquired:
Mayo Healthcare Pty Limited, ("Mayo Healthcare"), a distributor of medical devices and supplies primarily for
the Australian market; and
the assets of Mini-Lap Technologies, Inc. ("Mini-Lap"), a developer of micro-laparoscopic instrumentation,
which complements our surgical product portfolio.
During 2013, we acquired:
Vidacare Corporation (“Vidacare”), a provider of intraosseous, or inside the bone, access devices, which
complements the vascular access and specialty product portfolios;
the assets of Ultimate Medical Pty. Ltd. and its affiliates (“Ultimate”), a supplier of airway management devices
with a variety of laryngeal mask airways and other related products, which complement our anesthesia product
portfolio; and
Eon Surgical, Ltd., a developer of a minimally invasive microlaparoscopy surgical platform technology designed
to enhance a surgeon’s ability to perform scarless surgery while producing better patient outcomes, which
complements our surgical product portfolio.
We may be required to pay contingent consideration in connection with some of the acquisitions listed above. The
amount of contingent consideration we ultimately will pay will be based upon the achievement of specified objectives,
including regulatory approvals, sales targets and the passage of time. For additional information on these acquisitions
and the related contingent consideration arrangements, see Note 3 to the consolidated financial statements included
in this Annual Report on Form 10-K.
35
Health Care Reform
On March 23, 2010 the Patient Protection and Affordable Care Act (as amended, the "Affordable Care Act") was
signed into law. This legislation significantly impacts our business. For medical device companies such as Teleflex,
the expansion of medical insurance coverage should lead to greater utilization of the products we manufacture, but
this legislation also contains provisions designed to contain the cost of healthcare, which could negatively affect pricing
of our products. The overall impact of the Affordable Care Act on our business is yet to be determined, mainly due to
uncertainties around future customer behaviors, which we believe will be affected by reimbursement factors such as
insurance coverage statistics, patient outcomes and patient satisfaction.
In addition, the Affordable Care Act imposed a 2.3% excise tax on sales of medical devices, beginning in 2013.
For the years ended December 31, 2014 and 2013, we paid medical device excise taxes of $12.7 million and $11.5
million, respectively, which is included in selling, general and administrative expenses.
Global Economic Conditions
Global economic conditions in recent years have had adverse impacts on market activities including, among other
things, failure of financial institutions, falling asset values, diminished liquidity, reduced demand for products and
services and significant fluctuations in foreign currency exchange rates. In response, we adjusted production levels
and engaged in new restructuring activities. We continue to review and evaluate our manufacturing, warehousing and
distribution processes to maximize efficiencies through the elimination of redundancies in our operations and the
consolidation of facilities. Although, on a consolidated basis, the economic conditions did not have a significant adverse
impact on our financial position, results of operations or liquidity, healthcare policies and practice trends vary by country,
and the impact of the global economic downturn was felt to varying degrees in each of our regional markets over the
last several years. The continuation of the present broad economic trends of weak economic growth, constricted credit,
public sector austerity measures in response to public budget deficits and foreign currency volatility, particularly the
euro, could have a material adverse effect on our results of operations and our liquidity.
Hospitals in some regions of the United States experienced a decline in admissions, a weaker payor mix, and a
reduction in elective procedures. Consequently, hospitals took actions to reduce their costs, including limiting their
capital spending. More recently, the economic environment has improved somewhat, but has not returned to pre-
recession levels, and challenges persist, particularly in some European countries, as discussed below. Approximately
94% of our net revenues come from single-use products primarily used in critical care and surgical applications, and
our sales volume could be negatively impacted if hospital admission rates or payor mix change as a result of continuing
higher than normal unemployment rates (and subsequent loss of insurance coverage by consumers). Conversely, our
sales volume could be positively impacted due to increases in the number of insured individuals as a result of the
Affordable Care Act, which has had the effect of facilitating medical insurance coverage for many persons who previously
were not covered.
Europe continues to contend with considerable government debt and annual deficits, high levels of unemployment
and the risk of deflation. These factors have resulted in austerity programs that have affected the healthcare sector in
European countries. These austerity programs have resulted in delays in elective surgeries in a number of countries
and reductions in health budgets. It is likely that funding for publicly funded healthcare institutions will continue to be
affected if governments make further spending adjustments and enact healthcare reform measures to lower overall
healthcare costs. The public healthcare systems in certain countries in Western Europe, most notably Greece, Spain,
Portugal and Italy, have experienced significantly reduced liquidity due to recessionary conditions, which has resulted
in a slowdown in payments to us. The slowdown has continued to affect the timing of collections from these customers.
In Asia, recovery from the global recession has varied by country. China announced plans for major healthcare
investment directed to second tier cities (newer cities resulting from China's urbanization of the north and west regions
of the country) and hospitals, which may provide future growth opportunities for us. Despite these growth opportunities,
distributor sales to third parties slowed in 2014, particularly in China, which could have an impact on this future growth.
Additionally, slow economic growth and continued pursuit of reimbursement cuts by the public hospital sector in Japan
is expected to limit growth in that market.
In Latin America, some highly regulated economies such as Argentina and Venezuela have experienced unusually
high inflation rates and weakening currencies. This has impacted the budgets of the public healthcare systems resulting
in delays in the importation of medical devices. Although not a significant portion of our business, our operations in
this region may be impacted by these factors.
36
Results of Operations
The following comparisons exclude the impact of discontinued operations (see Note 18 to the consolidated financial
statements included in this Annual Report on Form 10-K for discussion of discontinued operations). Certain financial
information is presented on a rounded basis, which may cause minor differences.
Revenues
Net Revenues
2014
2013
2012
(Dollars in millions)
$
1,839.8
$
1,696.3
$
1,551.0
Comparison of 2014 and 2013
Net revenues for the twelve months ended December 31, 2014 increased 8.5% to $1,839.8 million from $1,696.3
million in the twelve months ended December 31, 2013. The $143.5 million increase in net revenues is largely due to
the businesses acquired during 2013 and 2014, which generated net revenues of $98.6 million, including $79.9 million,
$16.6 million and $2.2 million generated by Vidacare, Mayo Healthcare and Ultimate, respectively. Net revenues further
benefited from price increases of $23.9 million, primarily in the Asia, EMEA and Surgical North America segments,
new product sales of $14.8 million, primarily in the EMEA, Anesthesia/Respiratory North America, Vascular North
America and Asia segments and higher sales volume of $12.3 million, primarily in the OEM and EMEA segments.
These increases were partially offset by the unfavorable impact of foreign currency exchange rates of $6.2 million,
lower sales volumes in Anesthesia/Respiratory North America and Asia segments and price reductions in the OEM
segment.
Comparison of 2013 and 2012
Net revenues for the twelve months ended December 31, 2013 increased 9.4% to $1,696.3 million from $1,551.0
million in the twelve months ended December 31, 2012. The $145.3 million increase in net revenues is largely due to
the businesses acquired during 2012 and 2013, which generated net revenues of approximately $121.1 million in
2013, including approximately $110.3 million generated by the assets we acquired in 2012 from LMA International,
N.V. (referred to below as "LMA" or the "LMA business"). Net revenues further benefited from new products of $19.2
million, primarily in the Vascular North America, Anesthesia/Respiratory North America, EMEA and OEM segments,
price increases of $15.2 million in the Surgical North America, Vascular North America, EMEA and Asia segments,
higher sales volume of $9.3 million and $1.3 million in Asia and EMEA, respectively, and the $5.7 million favorable
impact of foreign currency exchange rates. These increases were partly offset by aggregate lower sales volume of
$14.7 million primarily in Anesthesia/Respiratory North America, Surgical North America and Vascular North America
and lower OEM sales volumes of $11.8 million, primarily due to lower sales of catheters and performance fibers.
Gross profit
Gross profit
Percentage of revenues
2014
2013
2012
(Dollars in millions)
$
942.4
$
838.9
$
748.2
51.2%
49.5%
48.2%
Comparison of 2014 and 2013
For the twelve months ended December 31, 2014, gross profit as a percentage of revenues increased 170 basis
points compared to the corresponding prior year period. The increase is primarily due to increased sales from higher
margin Vidacare products, margin increases in Asia resulting from sales of Mayo Healthcare products, price increases
in Asia, EMEA and Surgical North America, and increased sales of higher margin new products, primarily in the EMEA,
Vascular North America and Anesthesia/Respiratory North America segments. These improvements in gross profit
were partially offset by higher raw materials and manufacturing costs and the unfavorable impact of foreign currency
exchange rates.
37
Comparison of 2013 and 2012
For the twelve months ended December 31, 2013, gross profit as a percentage of revenues increased 130 basis
points compared to the corresponding prior year period. The increase is principally due to the inclusion of higher margin
sales from the LMA and Vidacare businesses, price increases in Surgical North America, Vascular North America,
EMEA and Asia, new products in Vascular North America, Anesthesia/Respiratory North America, Surgical North
America, EMEA and OEM, manufacturing efficiencies in EMEA and OEM and the favorable impact of foreign currency
exchange rates. These benefits were partly offset by higher warehousing and freight costs in Vascular North America,
EMEA and Asia and lower sales volumes in Anesthesia/Respiratory North America, Surgical North America, Vascular
North America and OEM. In addition, gross profit in the 2012 period was adversely affected by inventory write-offs for
excess, slow moving and damaged product in Asia.
Selling, general and administrative
Selling, general and administrative
Percentage of revenues
Comparison of 2014 and 2013
2014
2013
2012
(Dollars in millions)
$
578.7
$
502.2
$
454.5
31.5%
29.6%
29.3%
Selling, general and administrative expenses increased $76.5 million during the twelve months ended December
31, 2014 compared to the twelve months ended December 31, 2013. The increase is primarily due to $35.4 million of
expenses associated with acquired businesses, primarily Vidacare, Mayo Healthcare and Ultimate, $13.8 million of
higher sales expense, primarily related to an increase in sales commissions, higher amortization expense of $10.5
million, the majority of which relates to the amortization of Vidacare intangibles, $5.4 million of higher general and
administrative costs primarily due to increases in employee related expenses, higher depreciation expense of $2.2
million, resulting from a reduction in the estimated useful life of an administrative building and certain related assets,
$1.7 million of higher IT related costs primarily associated with the ongoing maintenance of enterprise resource planning
software systems, partially offset by the $3.2 million favorable impact of foreign currency exchange rates which caused
a reduction of expenses. In addition, the benefit from contingent consideration reserve reductions for the twelve months
ended December 31, 2014 was $4.9 million lower than the benefit realized in the twelve months ended December 31,
2013.
Comparison of 2013 and 2012
Selling, general and administrative expenses increased $47.7 million during the twelve months ended
December 31, 2013 compared to the twelve months ended December 31, 2012. The increase is largely due to $36.4
million of expenses associated with acquired businesses, including $29.6 million in expenses associated with the LMA
business, $11.5 million in excise taxes on the sale of medical devices imposed by the Affordable Care Act, higher
employee related expenses, $4.2 million in increased costs associated with the conversion of several of our locations
to a new ERP system, acquisition costs of $3.2 million primarily related to the acquisition of Vidacare, $5.8 million of
higher legal costs due to the accrual for loss contingencies to reflect litigation developments, including a verdict against
us with respect to a non-operating joint venture, and professional fees and a $1.1 million unfavorable impact of foreign
currency exchange rates. The increases were partly offset by an aggregate of $12.3 million in reversals of contingent
consideration related to the acquisitions of Hotspur Technologies Inc. ("Hotspur") ($8.5 million), Semprus BioSciences
Corp. (“Semprus”) ($2.4 million) and the assets of Axiom Technology Partners LLP (“Axiom”) ($1.4 million) after
determining that conditions for the payment of certain contingent consideration would not be satisfied. Selling, general
and administrative expenses in 2012 also reflected the loss of $7.6 million from foreign currency forward exchange
contracts entered into in connection with the acquisition of the LMA business.
38
Research and development
Research and development
Percentage of revenues
Comparison of 2014 and 2013
2014
2013
2012
(Dollars in millions)
$
61.0
$
65.0
$
3.3%
3.8%
56.3
3.6%
For the twelve months ended December 31, 2014, research and development expenses decreased 6.2% compared
to the corresponding prior year period. The decrease is primarily due to higher research and development expenses
for the year ended December 31, 2013 resulting from new activity with respect to businesses acquired in 2012 as well
as efficiencies obtained through integrating certain projects into our existing structure.
Comparison of 2013 and 2012
The increase in research and development expenses for the twelve months ended December 31, 2013 as
compared to the corresponding prior year period is primarily due to the new activity with respect to businesses acquired
in 2012.
Goodwill impairment
In the first quarter of 2012, we changed our former North America reporting unit structure from a single reporting
unit to five reporting units comprised of Vascular, Anesthesia/Respiratory, Cardiac, Surgical and Specialty. We allocated
the assets and liabilities of our former North America segment among the new reporting units based on their respective
operating activities, and then allocated goodwill among the reporting units using a relative fair value approach, as
required by FASB Accounting Standards Codification (“ASC”) Topic 350.
Following this allocation, we performed goodwill impairment tests on these new reporting units. As a result of
these tests, we determined that three of the reporting units in our former North America segment were impaired, and,
in the first quarter of 2012, we recorded aggregate goodwill impairment charges of $332 million, consisting of $220
million in our Vascular reporting unit, $107 million in our Anesthesia/Respiratory reporting unit and $5 million in our
Cardiac reporting unit in the first quarter of 2012.
We did not record any goodwill impairment charges for the years ended December 31, 2014 and 2013.
Restructuring and other impairment charges
2014 Manufacturing footprint realignment plan
$
2014 European restructuring plan
Other 2014 restructuring programs
2013 restructuring charges
LMA restructuring program
2012 restructuring charges
2011 restructuring program
2007 Arrow integration program
In-process research and development impairment
Long-lived asset impairment
Total
2014
2013
2012
(Dollars in millions)
9.3
7.8
3.6
0.8
(3.3)
(0.3)
—
—
—
—
$
— $
—
—
10.2
12.2
4.2
0.8
0.2
7.4
3.5
—
—
—
—
2.5
2.4
—
(1.9)
—
—
3.0
$
17.9
$
38.5
$
39
2014 Manufacturing Footprint Realignment Plan
In April 2014, our Board of Directors approved a restructuring plan (the "2014 Manufacturing Footprint Realignment
Plan") that involves the consolidation of operations and a related reduction in workforce at certain facilities, and the
relocation of manufacturing 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 2017. We
estimate that we will incur aggregate pre-tax charges in connection with the 2014 Manufacturing Footprint Realignment
Plan of approximately $37 million to $44 million, of which we expect $26 million to $31 million will result in cash outlays.
Additionally, we expect to incur aggregate capital expenditures of approximately $24 million to $30 million under the
restructuring plan. Our prior estimate with respect to the amount of charges we expected to incur was $42 million to
$53 million and our prior estimate of cash outlays we expect to make was $32 million to $40 million. The reduction in
expected costs and cash outlays was based on our incurrence of lower than anticipated costs in connection with the
initial phases of the program and the refinement, based on experrience to date, of our estimates with respect to future
costs to be incurred in connection with the transfer of operations under the program.
For the twelve months ended December 31, 2014, we recorded expenses of $14.2 million related to the 2014
Manufacturing Footprint Realignment Plan. Of this amount, $9.3 million related to termination benefits and was recorded
as restructuring expense and $4.9 million related to accelerated depreciation and certain other costs resulting from
the plan and was recorded as cost of sales. As of December 31, 2014, we have a reserve of $9.1 million in connection
with this program. Additionally, we incurred $6.4 million of capital expenditures and expended $3.1 million in cash
outlays for the twelve months ended December 31, 2014 related to this plan.
We currently expect that we will begin to realize savings related to this plan beginning in 2015, and expect that
we will achieve annualized savings of $28 million to $35 million once the restructuring plan is fully implemented.
2014 European Restructuring Plan
In February 2014, we committed to a restructuring plan (the "2014 European Restructuring Plan"), which impacts
certain administrative functions in Europe and involves the consolidation of operations and a related reduction in
workforce at certain of our European facilities. We recorded charges of $7.8 million for the twelve months ended
December 31, 2014 related to this program, primarily pertaining to termination benefits. We expect future restructuring
expenses associated with the 2014 European Restructuring Plan, if any, to be nominal. As of December 31, 2014, we
have a reserve of $0.4 million in connection with this program. We expect to realize annual pre-tax savings in the
range of $8 million to $9 million by the end of 2015 when these restructuring actions are complete.
Other 2014 Restructuring Programs
In June 2014, we initiated programs to consolidate locations in Australia and terminate certain European distributor
agreements in an effort to reduce costs. As a result of these programs, we estimate that we will incur an aggregate of
approximately $4 million in restructuring charges over the term of these restructuring programs, of which $3.6 million
was incurred through December 31, 2014. These programs include employee termination benefits, contract termination
costs and other exit costs. We expect to realize annual pre-tax savings in the range of $4 to $5 million by the end of
2015 when these restructuring actions are complete. As of December 31, 2014, we have a reserve of $0.9 million in
connection with these programs.
2013 Restructuring Charges
In 2013, we initiated restructuring programs to consolidate administrative and manufacturing facilities in North
America and warehouse facilities in Europe and terminate certain European distributor agreements in an effort to
reduce costs. We estimate that we will incur between $11 million and $12 million in aggregate restructuring charges
over the term of these programs, of which $11 million was incurred through December 31, 2014. Of this amount, $5.3
million relates to employee termination costs, $3.5 million relates to termination of certain distributor agreements and
$2.1 million relates to facility closure and other exit costs. As of December 31, 2014, we had a reserve of $0.9 million
in connection with these projects. We expect to realize annual pre-tax savings in the range of $11 million to $13 million
by the end of 2015, when we anticipate that these programs will have been completed.
40
LMA Restructuring Program
In connection with the acquisition of all of the assets of LMA International N.V. (the "LMA business") in 2012, we
formulated a plan related to the future integration of LMA with our businesses. The integration plan, which commenced
in 2012, focused on the closure of the LMA business' corporate functions and the consolidation of manufacturing,
sales, marketing, and distribution functions in North America, Europe and Asia. $11.4 million has been charged to
restructuring and other impairment charges over the term of this program. Of this amount, $5.5 million related to
employee termination costs, $5.0 million related to termination of certain distributor agreements and $0.9 million related
to facility closure and other costs. During the twelve months ended December 31, 2014, we recorded a net credit of
$3.3 million primarily resulting from the reversal of contract termination costs due to the favorable settlement of a
terminated distributor agreement. During the twelve months ended December 31, 2013, we incurred restructuring
charges of $12.2 million under this program primarily related to employee termination benefits and contract termination
costs. As of December 31, 2014, we had a reserve of $0.2 million in connection with this program. We expect future
restructuring expenses associated with the LMA restructuring program, if any, to be nominal. We anticipate realizing
annual pre-tax savings of approximately $20 million by the end of 2015, when we expect this program to be completed.
2012 Restructuring Charges
In 2012, we initiated a program to improve the effectiveness of our supply chain by consolidating our three North
American warehouses into one centralized warehouse, and to lower costs and improve operating efficiencies through
the termination of certain distributor agreements in Europe, the closure of certain North American facilities and workforce
reductions. We have incurred an aggregate of approximately $6.3 million over the term of this program. We expect
future restructuring expenses associated with this restructuring program, if any, to be nominal. As of December 31,
2014, we had a reserve of $0.6 million in connection with these projects. We expect to complete this program in 2015.
2011 Restructuring Program
In 2011, we initiated a restructuring program at three facilities to consolidate operations and reduce costs. Over
the term of this program, which was completed in 2013, we recorded restructuring costs of $3.8 million related to
contract termination costs, employee termination benefits, and facility closure costs.
2007 Arrow Integration Program
In connection with the acquisition of Arrow International, Inc. (“Arrow”) in 2007, we formulated a plan to integrate
Arrow's business with our other businesses. Costs related to actions that affected legacy Teleflex employees and
facilities were charged to earnings and included in restructuring and other impairment charges within the consolidated
statement of operations. In 2012 we reversed approximately $2.0 million of contract termination costs primarily as a
result of a settlement of a dispute involving the termination of a European distributor agreement that was established
in connection with our acquisition of Arrow. The integration program was completed during 2013.
Impairment Charges
In-process research and development impairments
In the fourth quarter of 2013, we recorded a $2.9 million in-process research and development (“IPR&D”) charge
after we made the decision to abandon a research and development project associated with our vascular business.
In the first quarter of 2013, we recorded a $4.5 million IPR&D charge pertaining to a research and development
project associated with our acquisition of substantially all of the assets of Axiom Technology Partners LLC because
technological feasibility had not yet been achieved and we determined that the subject technology had no future
alternative use.
Long-lived asset impairment
In the third quarter of 2013, we recorded $3.5 million in impairment charges related to assets held for sale that
had a carrying value in excess of their appraised fair value.
For additional information regarding our restructuring programs and impairment charges, see Note 4 to the
consolidated financial statements included in this Annual Report on Form 10-K.
41
Interest income and expense
Interest expense
Average interest rate on debt during the year
Interest income
2014
2013
2012
(Dollars in millions)
$
$
65.5
4.10%
(0.7)
$
$
56.9
3.92%
(0.6)
$
$
69.6
4.15%
(1.6)
Interest expense increased for the twelve months ended December 31, 2014, compared to the corresponding
period in 2013, due to an increase of $96 million in average outstanding debt and an increase of 18 basis points in
the average interest rate on outstanding debt during 2014.
Interest expense decreased for the twelve months ended December 31, 2013, compared to the corresponding
period in 2012, primarily because 2012 interest expense included amortization expense related to our termination of
an interest rate swap (approximately $11.1 million for the twelve months ended December 31, 2012). We terminated
our agreement related to the interest rate swap, covering a notional amount of $350 million, in 2011. The unrealized
losses within accumulated other comprehensive income associated with our interest rate swap were reclassified into
our statement of income (loss) during 2012.
Loss on extinguishments of debt
Loss on extinguishments of debt
$
— $
1.3
$
—
2014
2013
2012
(Dollars in millions)
During the third quarter of 2013, we refinanced our $775.0 million senior credit facility, which was comprised of a
$375.0 million term loan and a $400.0 million revolving credit facility with a new $850.0 million senior credit facility
consisting solely of a revolving credit facility. In connection with the refinancing, we recognized debt extinguishment
costs of $1.3 million related to unamortized debt issuance costs resulting from the early repayment of the $375.0 million
term loan. See Note 8 to the consolidated financial statements included in this Annual Report on Form 10-K for further
information.
Taxes on income from continuing operations
Effective income tax rate
2014
2013
2012
13.0%
13.4%
(9.9)%
The effective income tax rate in 2014 was 13.0% compared to 13.4% in 2013. Taxes on income from continuing
operations in 2014 were $28.7 million compared to $23.5 million in 2013. The effective income tax rate for 2014 was
impacted by a benefit from a shift in the mix of income to jurisdictions with lower statutory tax rates, tax benefits
associated with U.S. federal tax return filings and, although to a lesser extent than 2013, the realization of net tax
benefits resulting from the expiration of statutes of limitation for U.S. state and foreign matters.
The effective income tax rate in 2013 was 13.4% compared to (9.9)% in 2012. Taxes on income from continuing
operations in 2013 were $23.5 million compared to $16.4 million in 2012. The effective income tax rate for 2013 was
impacted by the realization of net tax benefits resulting from the expiration of statutes of limitation for U.S. federal and
state and for foreign matters, tax benefits associated with U.S. and foreign tax return filings and the realization of tax
benefits resulting from the resolution of a foreign tax matter. The effective income tax rate for 2012 was impacted by
a $332 million goodwill impairment charge recorded in the first quarter 2012, for which only $45 million was tax
deductible.
42
Segment Results
Segment Net Revenues
Year Ended December 31,
% Increase/(Decrease)
2014
2013
2012
2014 vs 2013
2013 vs 2012
(Dollars in millions)
Vascular North America
$
259.2
$
231.1
$
Anesthesia/Respiratory North America
Surgical North America
EMEA
Asia
OEM
All other
222.6
150.1
593.1
237.7
144.0
233.1
228.5
146.1
557.4
207.2
131.2
194.8
222.7
180.4
143.9
510.3
173.7
140.2
179.8
Segment Net Revenues
$
1,839.8
$
1,696.3
$
1,551.0
12.2
(2.6)
2.8
6.4
14.7
9.8
19.7
8.5
3.8
26.7
1.5
9.2
19.3
(6.5)
8.3
9.4
Segment Operating Profit
Year Ended December 31,
% Increase/(Decrease)
2014
2013
2012
2014 vs 2013
2013 vs 2012
Vascular North America
$
Anesthesia/Respiratory North America
Surgical North America
EMEA
Asia
OEM
All other
(Dollars in millions)
$
41.1
26.6
49.6
114.6
62.2
30.6
40.5
$
23.8
21.9
50.4
87.9
63.8
27.3
27.2
26.1
14.0
50.6
65.8
52.5
31.7
18.8
Segment Operating Profit(1)
$
365.2
$
302.3
$
259.5
72.6
21.3
(1.5)
30.4
(2.6)
12.1
48.9
20.8
(8.6)
56.0
(0.6)
33.5
21.5
(13.7)
44.9
16.5
(1) See Note 16 to the consolidated financial statements included in this Annual Report on Form 10-K for a reconciliation of segment operating
profit to our consolidated income/(loss) from continuing operations before interest, loss on extinguishments of debt and taxes.
Comparison of 2014 and 2013
Vascular North America
Vascular North America net revenues for the twelve months ended December 31, 2014 increased $28.1 million
compared to the corresponding period in 2013, an increase of 12.2%. The increase is primarily due to Vidacare product
sales of $23.5 million, increases in sales volumes of existing products of $2.8 million and new product sales of $2.5
million, which were partially offset by the unfavorable impact of foreign currency exchange rates of $0.8 million.
Vascular North America operating profit for the twelve months ended December 31, 2014 increased $17.3 million
compared to the corresponding period in 2013, an increase of 72.6%. The increase was primarily due to operating
profit generated by Vidacare product sales, higher sales volume of existing products, increases in sales of higher
margin existing and new products and lower research and development expenses. These increases were partially
offset by higher sales commissions and administrative expenses.
43
Anesthesia/Respiratory North America
Anesthesia/Respiratory North America net revenues for the twelve months ended December 31, 2014 decreased
$5.9 million compared to the corresponding period in 2013, a decrease of 2.6%. The decrease is primarily attributable
to declines in sales volumes of existing products of $9.7 million and the unfavorable impact of foreign currency exchange
rates of $0.6 million, which were partially offset by new product sales of $3.5 million and price increases of $0.9 million.
Anesthesia/Respiratory North America operating profit for the twelve months ended December 31, 2013 increased
$4.7 million compared to the corresponding period in 2013, an increase of 21.3%. The increase is primarily attributable
to sales of higher margin existing and new products, price increases, lower manufacturing costs including warehouse
and freight charges and lower general and administrative expenses as a result of the continued integration of our LMA
business. The increase was partially offset by lower sales volume of existing products.
Surgical North America
Surgical North America net revenues for the twelve months ended December 31, 2014 increased $4.0 million
compared to the corresponding period in 2013, an increase of 2.8%. The increase is primarily attributable to price
increases of $3.4 million, increased sales volumes of existing products of $0.9 million and new product sales of $0.8
million, partially offset by an unfavorable impact of foreign currency of $1.0 million.
Surgical North America operating profit for the twelve months ended December 31, 2014 decreased $0.8 million
compared to the corresponding period in 2013, a decrease of 1.5%. The decrease is primarily due to higher marketing
and sales expenses and a lower benefit from reductions in contingent consideration as compared to the prior period,
partially offset by improved pricing, increased sales of higher margin products and lower manufacturing costs.
EMEA
EMEA net revenues for the twelve months ended December 31, 2014 increased $35.7 million compared to the
corresponding period in 2013, an increase of 6.4%. The increase is primarily attributable to Vidacare product sales of
$18.4 million, increases in sales volumes of existing products of $7.1 million, new product sales of $4.6 million, $3.7
million resulting from our conversions from distributor sales to direct sales conversions (referred to below as "distributor-
to-direct conversions") in several countries and the favorable impact foreign currency exchange rate fluctuations of
$1.8 million.
EMEA operating profit for the twelve months ended December 31, 2014 increased $26.7 million compared to the
corresponding period in 2013, an increase of 30.4%. The increase is primarily attributable to higher margin Vidacare
product sales, lower manufacturing costs, higher sales volume of existing products, sales margin increases resulting
from our distributor-to-direct sales conversions in several countries as well increased sales of higher margin new and
existing products, lower research and development and marketing expenses resulting from the 2014 European
Restructuring Plan and the favorable impact of foreign currency exchange rates, which were partially offset by higher
information technology and general and administrative expenses.
Asia
Asia net revenues for the twelve months ended December 31, 2014 increased $30.5 million compared to the
corresponding period in 2013, an increase of 14.7%. The increase is primarily attributable to new revenues generated
from recent acquisitions, including $16.6 million, $2.2 million and $2.0 million generated by sales of Mayo Healthcare,
Vidacare and Ultimate products, respectively. The change in net revenues also reflects price increases of $16.8 million,
primarily related to our distributor-to-direct sales conversions, and new product sales of $1.5 million. These increases
in net revenues were partially offset by a $5.2 million decline in sales volume of existing products, and unfavorable
foreign exchange rate fluctuations of $3.8 million. We continue to monitor the inventory levels at some of our Asian
distributors, particularly in China, due to a recent decline in their sales to third parties, which could adversely impact
our future results.
Asia operating profit for the twelve months ended December 31, 2014 decreased $1.6 million compared to the
corresponding period in 2013, a decrease of 2.6%. The decrease is primarily attributable to higher marketing and
general and administrative expenses, principally due to an increase in personnel to support growth within the segment
and lower sales volume of existing products, higher manufacturing costs and the unfavorable impact of foreign currency
exchange rate fluctuations, partially offset by operating profit generated by the acquired businesses including, Mayo
Healthcare, Ultimate and Vidacare, price increases and increase sales of higher margin products.
44
OEM
OEM net revenues for the twelve months ended December 31, 2014 increased $12.8 million compared to the
corresponding period in 2013, an increase of 9.8%. The increase is primarily attributable to increased sales volume
of existing products of $14.8 million and new product sales of $0.9 million, which were partially offset by price declines
of $2.8 million.
OEM operating profit for the twelve months ended December 31, 2014 increased $3.3 million compared to the
corresponding period in 2013, an increase of 12.1%. The increase is primarily attributable to higher sales volume of
existing products and lower manufacturing costs, partially offset by price reductions, lower sales of higher margin
existing products and higher general and administrative expenses.
All Other
The increase in net revenues for our other businesses for the twelve months ended December 31, 2014 compared
to the corresponding period in 2013 primarily reflects sales of Vidacare products, and to a lesser extent, increases in
price and sales volume of existing products in Latin America partially offset by unfavorable foreign currency exchange
rate fluctuations.
The increase in operating profit for our other businesses for the twelve months ended December 31, 2014 compared
to the corresponding period in 2013 was primarily due to Vidacare product sales. The operating profit increase was
partially offset by higher sales expense and lower benefits from the reduction of contingent consideration compared
to prior period.
Comparison of 2013 and 2012
Vascular North America
Vascular North America net revenues for the twelve months ended December 31, 2013 increased $8.4 million
compared to the corresponding period in 2012, an increase of 3.8% . The increase was primarily due to new product
sales of $7.7 million, businesses acquired in 2013, which added $2.4 million and price increases of $2.3 million. These
increases in net revenues were partly offset by decreases in sales volume of existing products of $3.7 million and the
unfavorable impact of foreign currency exchange rates of $0.3 million.
Vascular North America operating profit for the twelve months ended December 31, 2013 decreased $2.2 million
compared to the corresponding period in 2012, a decrease of 8.6%. The decrease was primarily due to the decline in
sales volume of existing products, higher warehouse and freight costs, a decrease in sales of higher margin products
and the excise tax associated with the Affordable Care Act, partially offset by an increase in sales of new products,
price increases and operating profit generated from businesses acquired in 2013.
Anesthesia/Respiratory North America
Anesthesia/Respiratory North America net revenues for the twelve months ended December 31, 2013 increased
$48.1 million compared to the corresponding period in 2012, an increase of 26.7%. The increase was primarily due
to LMA product sales of $52.0 million and new product sales of $3.0 million, partially offset by lower sales volume of
$6.9 million.
Anesthesia/Respiratory North America operating profit for the twelve months ended December 31, 2013 increased
$7.9 million compared to the corresponding period in 2012, an increase of 56.0%. The increase was primarily due to
operating profit generated by LMA product sales and an increase in sales of new products, partially offset by the decline
in sales volume of existing products, higher raw material and manufacturing costs and the excise tax associated with
the Affordable Care Act.
Surgical North America
Surgical North America net revenues for the twelve months ended December 31, 2013 increased $2.2 million
compared to the corresponding period in 2012, an increase of 1.5%. The increase was primarily due to price increases
of $4.4 million and sales of new products of $1.3 million, partially offset by a decline in sales volume of existing products
of $2.7 million and the unfavorable impact of foreign currency exchange rates of $0.5 million.
45
Surgical North America operating profit for the twelve months ended December 31, 2013 decreased $0.2 million
compared to the corresponding period in 2012, a decrease of 0.6%. The decrease was primarily due to a decline in
volume of sales of existing products and the excise tax associated with the Affordable Care Act, partially offset by
improved pricing, sales of higher margin products and the favorable impact from the reversal of contingent consideration
related to our Axiom acquisition.
EMEA
EMEA net revenues for the twelve months ended December 31, 2013 increased $47.1 million compared to the
corresponding period in 2012, an increase of 9.2%. The increase was primarily due to businesses acquired in 2012
and 2013, which added net revenues of $25.6 million, including $24.2 million generated by the LMA business; the
favorable impact of foreign currency exchange rates of $11.6 million, price increases of $5.7 million, including increases
resulting from distributor-to-direct conversions, new product sales of $2.9 million and higher sales volume of existing
products of $1.3 million.
EMEA segment operating profit for the twelve months ended December 31, 2013 increased $22.1 million compared
to the corresponding period in 2012, an increase of 33.5%. The increase in operating profit reflects lower manufacturing
costs due to improved absorption and lower overhead costs as a result of process improvements, margin improvements
driven by price increases resulting from distributor-to-direct conversions, as well as other price increases, the operating
profit generated by the businesses acquired, primarily the LMA business, partially offset by higher research and
development costs related to the Semprus acquisition, the favorable impact of foreign currency exchange rates and
lower material costs. These increases in operating profit were partly offset by higher warehousing and freight costs,
including costs to consolidate a distribution facility in France. In 2012, EMEA segment operating profit was adversely
impacted by a loss from foreign currency forward exchange contracts entered into in anticipation of the acquisition of
the LMA business.
Asia
Asia net revenues for the twelve months ended December 31, 2013 increased $33.5 million compared to the
corresponding period in 2012, an increase of 19.3%. The increase was primarily due to $28.3 million of net revenues
generated by the businesses acquired in 2012 and 2013, including $25.6 million generated by the LMA business,
volume increases of $9.3 million (volume increases in China and Southeast Asia were largely offset by lower volumes
in Japan), price increases of $1.1 million and new product sales of $0.3 million. These increases were partly offset by
the $5.5 million unfavorable impact of foreign currency exchange rates.
Asia segment operating profit for the twelve months ended December 31, 2013 increased $11.3 million compared
to the corresponding period in 2012, an increase of 21.5%. The increase in segment operating profit for the twelve
months ended December 31, 2013 was due to the operating profit generated by the businesses acquired in 2012 and
2013, primarily the LMA business, higher sales volume and price increases, partly offset by higher warehouse and
freight costs associated with the volume gains in China and Southeast Asia, higher raw material costs in Japan and
an unfavorable impact from foreign currency exchange rates. In addition, during the twelve months ended December
31, 2012, Asia segment operating profit was adversely affected by inventory write-offs for excess, slow moving and
damaged product.
OEM
OEM net revenues for the twelve months ended December 31, 2013 decreased $9.0 million compared to the
corresponding period in 2012, a decrease of 6.5%. The decrease was due to a decline in sales volume of $11.8 million,
primarily due to a decline in sales of catheter and performance fiber products, and price decreases of $0.4 million
offset by new product sales of $2.4 million and the favorable impact of foreign currency exchange rates of $0.8 million.
OEM segment operating profit for the twelve months ended December 31, 2013 decreased $4.3 million compared
to the corresponding period in 2012. a decrease of 13.7%. The decrease is due to lower volumes partly offset by lower
manufacturing and operating costs.
46
All Other
The increases in net revenues for our other businesses for the twelve months ended December 31, 2013 compared
to the corresponding period in 2012 was primarily due to sales of LMA products, sales from businesses acquired in
2013, price increases and new product sales, partially offset by lower sales volume of existing products.
The increases in operating profit for our other businesses for the twelve months ended December 31, 2013
compared to the corresponding period in 2012 was primarily due to operating profit generated by the LMA business
and businesses acquired in 2013, improved pricing and an increase in sales of higher margin products, partially offset
by higher manufacturing costs and lower sales volume of existing products.
Liquidity and Capital Resources
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing
activities. Our principal source of liquidity is operating cash flows. In addition to operating cash flows, other significant
factors that affect our overall management of liquidity include: capital expenditures, acquisitions, pension funding,
dividends, taxes, scheduled principal and interest payments with respect to outstanding indebtedness, adequacy of
available bank lines of credit and access to capital markets.
We believe our cash flow from operations, available cash and cash equivalents, borrowings under our revolving
credit facility and sales of accounts receivable under our securitization program will enable us to fund our operating
requirements, capital expenditures and debt obligations for the next twelve months and the foreseeable future.
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. However, as discussed above
in Global Economic Conditions, although there have been recent improvements in certain countries, global financial
markets remain volatile and the global credit markets are constrained, which creates risk that our customers and
suppliers may be unable to access liquidity. Consequently, we continue to monitor our credit risk, particularly related
to customers in Europe. As of December 31, 2014, our net receivables from publicly funded hospitals in Italy, Spain,
Portugal and Greece were $46.9 million compared to $63.1 million as of December 31, 2013. For the twelve months
ended December 31, 2014, 2013 and 2012, net revenues from customers in these countries was approximately 8%,
8% and 9%, respectively, of total net revenues, and average days that current and long-term accounts receivable were
outstanding were 223, 260 and 288 days, respectively. As of December 31, 2014 and 2013, net current and long-term
accounts receivables from these countries were approximately 27% and 31%, respectively, of our consolidated net
current and long-term accounts receivables. If economic conditions in these countries deteriorate, we may experience
significant credit losses related to the public hospital systems in these countries. Moreover, if global economic conditions
generally deteriorate, we may experience further delays in customer payments, reductions in our customers’ purchases
and higher credit losses, which could have a material adverse effect on our results of operations and cash flows in
2015 and future years. See "Critical Accounting Estimates" below for additional information regarding the critical
accounting estimates related to our accounts receivable.
During 2014, we acquired Mayo Healthcare Pty Limited, a distributor of medical devices and supplies primarily
in the Australian market which provides distribution for our Asia segment. Additionally, the acquisition of the assets of
Mini-Lap Technologies, Inc., a developer of micro-laparoscopic instrumentation, provides new products for our Surgical
North America segment. The aggregate total fair value of consideration for these acquisitions is estimated at $66.3
million. See Note 3 to the consolidated financial statements included in this Annual Report on Form 10-K for additional
information regarding our acquisitions.
During 2013, we completed the acquisitions of Vidacare Corporation and Ultimate Medical Pty. Ltd., whose products
complement our vascular, anesthesia and specialty product portfolios, and Eon Surgical, Ltd, whose technology
complements the surgical product portfolio. The aggregate consideration paid for these acquisitions was $307.0 million.
We funded these acquisitions through borrowings under our senior credit facility. See Note 3 to the consolidated
financial statements included in this Annual Report on Form 10-K for additional information regarding our acquisitions.
47
During 2014, we issued $250 million of 5.25% Senior Notes due 2024 (the "2024 Notes"), and used the $245.0
million net proceeds of the sale of the 2024 Notes to repay borrowings under our senior credit facility. We pay interest
on the 2024 Notes semi-annually on June 15 and December 15, at a rate of 5.25% per year. We incurred transaction
fees of approximately $4.5 million, including underwriters' discounts and commissions, in connection with the offering
of the 2024 Notes. See Note 8 to the consolidated financial statements included in this Annual Report on Form 10-K
for additional information regarding the notes.
During 2013, we refinanced our senior credit facility, replacing our $375.0 million term loan and $400.0 million
revolving credit facility with an $850.0 million dollar revolving credit facility. We used borrowings under the new revolving
credit facility to pay down the $375 million principal on the term loan and to fund the related refinancing costs of $6.4
million. The new $850 million senior credit facility bears interest at an applicable rate elected by us equal to either the
“base rate” (the greater of either the federal funds effective rate plus 0.5%, the prime rate or one month LIBOR plus
1.0%) plus an applicable margin of 0.25% to 1.00%, or a “LIBOR rate” for the period corresponding to the applicable
interest period of the borrowings plus an applicable margin of 1.25% to 2.00%. As of December 31, 2014, the interest
rate on the $850 million senior credit facility was 1.92% (comprised of the LIBOR rate of 0.17% plus a spread of 1.75%).
Approximately $118.6 million of our $290.2 million of net cash provided by operating activities in 2014 was
generated in the United States, and approximately $94.1 million of our $231.3 million of net cash provided by operating
activities in 2013 was generated in the United States. Of our $303.2 million of cash and cash equivalents at December
31, 2014, $274.6 million was held at foreign subsidiaries. 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. We are not aware of any restrictions on repatriation of these funds and, subject to cash payment of
additional United States income taxes or foreign withholding taxes, these funds could be repatriated, if necessary. Any
additional taxes could be offset, at least in part, by foreign tax credits. The amount of any taxes required to be paid,
which could be significant, and the application of tax credits would be determined based on income tax laws in effect
at the time of such repatriation. We do not expect any such repatriation to result in additional tax expense as taxes
have been provided for on unremitted foreign earnings that we do not consider permanently reinvested.
We repatriated approximately $237.1 million and $67.0 million in 2014 and 2013, respectively, of cash from our
foreign subsidiaries to help fund debt service and other cash requirements.
We have no scheduled principal payments under our senior credit facility until 2018. We anticipate our aggregate
domestic interest payments under our senior credit facility, our 2024 Notes, our 6.875% Senior Subordinates Notes
due 2019 (the "2019 Notes") and our accounts receivable securitization facility for 2015 will be approximately $51.8
million. We plan to utilize cash from operations, generated from both in and outside of the United States, and our
revolving credit facility to meet quarterly debt service or other requirements.
Our 3.875% Convertible Senior Subordinated Notes due 2017 (the "Convertible Notes") are classified as a current
liability because a contingent conversion feature related to our stock price was triggered. Refer to the “Financing
Arrangements” section below for additional details.
See "Financing Arrangements" below for further information relating to our debt obligations, including the
Convertible Notes.
48
Cash Flows
The following table provides a summary of our cash flows for the periods presented:
Cash flows from continuing operations provided by (used in):
Operating activities
Investing activities
Financing activities
Cash flows used in discontinued operations
Effect of exchange rate changes on cash and cash equivalents
Year Ended December 31,
2014
2013
2012
(Dollars in millions)
$
290.2
$
231.3
$
(108.1)
(287.7)
(3.7)
(19.4)
(372.6)
231.2
(3.3)
8.3
194.6
(368.3)
(65.7)
(10.2)
2.6
(Decrease) increase in cash and cash equivalents
$
(128.7) $
94.9
$
(247.0)
Comparison of 2014 and 2013
Cash Flow from Operating Activities
Net cash provided by operating activities from continuing operations was $290.2 million during 2014 compared
to $231.3 million during 2013. The $58.9 million increase is primarily due to improved operating results and favorable
net changes in working capital items, principally reflecting changes in accounts receivable, accounts payable and
accrued expenses and prepaid expenses and other current assets, as well as an $8.0 million decrease in contributions
to domestic pension plans. Accounts receivable decreased $9.4 million during 2014 as compared to a $1.3 million
increase during 2013, primarily due to increased collections from the Spanish and Portuguese government and Spanish
regional health authorities in 2014 and increased collections in Italy and Greece due to government financing.
Additionally, there was an overall improvement in days receivables outstanding in 2014. Accounts payable and accrued
expenses increased $9.8 million in 2014 compared to an increase of $2.0 million in 2013 primarily due to timing of
vendor and employee related benefit payments and increased compensation accruals in 2014. Prepaid expenses and
other current assets decreased $1.4 million in 2014 compared to an increase of $5.9 million in 2013 due to timing of
payments of and reductions in insurance premiums as well as fewer insurance deposits and maintenance contract
payments in 2014.
These favorable impacts to net cash flow from operating activities were partially offset by increased inventories
of $15.5 million during 2014 as compared to an increase of $8.9 million in 2013, primarily due to increased inventory
purchases to support sales growth internationally and our distributor-to-direct sales conversions in several countries,
and an $8.9 million increase in tax payments, net of refunds, in 2014 as compared to 2013 primarily due to timing of
tax payments and improved operating results.
Cash Flow from Investing Activities
Net cash used in investing activities from continuing operations was $108.1 million during 2014, reflecting net
payments for businesses acquired of $45.8 million and capital expenditures of $67.6 million. The net payments for
businesses acquired includes the acquisition of Mayo Healthcare and the assets of Mini-Lap Technologies Inc. These
payments were partly offset by $5.3 million in proceeds related to the sale of certain assets that were held for sale.
49
Cash Flow from Financing Activities
Net cash used in financing activities from continuing operations was $287.7 million during 2014, which included
repayments of $480.1 million of indebtedness principally under our revolving credit facility, partially offset by proceeds
from additional borrowings of $250.0 million from the sale of our 2024 Notes. Net cash used in financing activities also
included dividend payments of $56.3 million and underwriters' discount and commission fees of $4.5 million, which
were paid in connection with the sale of the 2024 Notes. Net cash used in financing activities were reduced by cash
inflows of $7.1 million associated with proceeds from the exercise of share-based awards issued under our stock
compensation plans and $5.8 million of excess tax benefits related to the exercise or vesting of those awards, which
were partially offset by tax withholdings of $8.7 million remitted by the Company on behalf of employees who elect to
have shares withheld by the Company to satisfy their minimum tax withholding obligations arising from the exercise
and vesting of their share-based awards. See Note 1 to the condensed consolidated financial statements included in
this Annual Report on Form 10-K for a discussion of the reclassification of tax withholding payments related to share-
based awards from a cash outflow from operating activities to a cash outflow from financing activities.
Comparison of 2013 and 2012
Cash Flow from Operating Activities
Net cash provided by operating activities from continuing operations was $231.3 million during 2013 compared
to $194.6 million during 2012. The $36.7 million increase is primarily due to improved operating results, partially offset
by net unfavorable year-over-year changes in working capital items, primarily reflecting changes in inventories and
prepaid expenses and other current assets. Inventories increased $8.9 million during 2013, as compared to a $2.0
million increase during 2012, due to sales volume growth, primarily in Asia. Prepaid expenses and other current assets
increased $5.9 million during 2013, as compared to a $9.6 million decrease during 2012, primarily due to the collection
of outstanding VAT claims in 2012.
Cash Flow from Investing Activities
Net cash used in investing activities from continuing operations was $372.6 million during 2013, reflecting net
payments for businesses acquired of $309.0 million and capital expenditures of $63.6 million. The net payments for
businesses acquired included an aggregate of approximately $307.0 million paid for the acquisitions of Vidacare, EON
Surgical, Ltd. and Ultimate; and $3.5 million paid for in-process research and development related to the EON Surgical
technology, partly offset by a $1.5 million working capital adjustment with respect to the consideration paid in connection
with the LMA acquisition.
Cash Flow from Financing Activities
Net cash provided by financing activities from continuing operations was $231.2 million during 2013. During 2013,
we refinanced our senior credit facility, which was comprised of a $375.0 million term loan and $400.0 million revolving
credit facility, and replaced it with a new $850.0 million senior credit facility consisting solely of a revolving credit facility.
We used borrowings under the new facility to repay the outstanding $375.0 million term loan and to pay costs of $6.4
million associated with the refinancing. During 2013, we borrowed an additional $298.0 million under the revolving
credit facility to finance the acquisition of Vidacare. In addition, net cash used in financing activities included dividend
payments of $55.9 million, contingent consideration payments of $17.0 million related to our acquisitions of VasoNova
Inc. (“VasoNova”), Axiom, LMA, Hotspur and the guided imaging business of MEPY Benelux BVBA and payments to
noncontrolling interest shareholders of $0.7 million. These outflows were partially offset by $6.2 million net inflows
resulting from share based compensation activity, which included proceeds from the exercise and vesting of share-
based awards issued under our stock compensation plans and the related excess tax benefits partially offset by tax
withholdings remitted by the Company on behalf of employees who elect to have shares withheld by the Company to
satisfy their minimum tax withholding obligations arising from the exercise and vesting of their share-based awards.
50
Financing Arrangements
The following table provides our net debt to total capital ratio:
Net debt includes:
Current borrowings
Long-term borrowings
Unamortized debt discount
Total debt
Less: Cash and cash equivalents
Net debt
Total capital includes:
Net debt
Shareholders’ equity
Total capital
Percent of net debt to total capital
2014
2013
(Dollars in millions)
$
$
$
$
$
368.4
700.0
36.2
356.3
930.0
48.4
1,104.6
1,334.7
303.2
801.4
801.4
1,911.3
2,712.7
432.0
902.7
902.7
1,913.5
2,816.2
$
$
$
30%
32%
Fixed rate borrowings comprised 81% and 49% of total borrowings at December 31, 2014 and 2013, respectively.
The increase in fixed rate borrowings as of December 31, 2014 compared to December 31, 2013 is primarily due to
the issuance of the 2024 Notes in 2014 and the $245.0 million repayment of variable rate borrowings under our senior
credit facility.
Our senior credit agreement contains covenants that, among other things, limit or restrict our ability, and the ability
of our subsidiaries, to incur debt, create liens, consolidate, merge or dispose of certain assets, make certain investments,
engage in acquisitions, pay dividends on, repurchase or make distributions in respect of capital stock and enter into
swap agreements. Our senior credit agreement also requires us to maintain a consolidated leverage ratio (generally,
the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, each as defined in the senior credit agreement)
of not more than 4.0:1 and a consolidated interest coverage ratio (generally, Consolidated EBITDA to Consolidated
Interest Expense, each as defined in the senior credit agreement) of not less than 3.50:1 as of the last day of any
period of four consecutive fiscal quarters calculated in accordance with the definitions and methodology set forth in
the senior credit agreement and, during the six month period prior to the maturity of our Convertible Notes, a minimum
liquidity of $400.0 million. At December 31, 2014, our consolidated leverage ratio was 2.71:1 and our interest coverage
ratio was 8.31:1, both of which are in compliance with the limits described in the preceding sentence. The obligations
under the senior credit agreement are guaranteed (subject to certain exceptions) by substantially all of the material
domestic subsidiaries of the Company and (subject to certain exceptions and limitations) secured by a pledge on
substantially all of the equity interests owned by the Company and each guarantor.
At December 31, 2014, we had $200.0 million in borrowings outstanding and approximately $6.0 million in
outstanding standby letters of credit under our $850.0 million revolving credit facility. This facility is used principally for
working capital needs and, at certain times, to help fund acquisitions. The availability of loans under our revolving
credit facility is dependent upon our ability to maintain our financial condition and our continued compliance with the
covenants contained in our senior credit agreement. Moreover, additional borrowings would be prohibited if a Material
Adverse Effect (as defined in the senior credit agreement) were to occur. Notwithstanding these restrictions, we believe
our revolving credit facility provides us with significant flexibility to meet our foreseeable working capital needs. At our
current level of EBITDA (as defined in the senior credit agreement) for the year ended December 31, 2014, we would
have been permitted $533.1 million of additional debt beyond the levels outstanding at December 31, 2014. Moreover,
additional capacity would be available if borrowed funds were used to acquire a business or businesses through the
purchase of assets or controlling equity interests so long as the aforementioned leverage and interest coverage ratios
are met after calculating EBITDA on a proforma basis to give effect to the acquisition.
51
As of December 31, 2014, the aggregate outstanding principal amount of the 2019 Notes and 2024 Notes was
$500.0 million. The indentures governing the 2019 Notes and 2024 Notes contain negative covenants that, among
other things, limit or restrict our ability, and the ability of our subsidiaries, to incur debt, create liens, consolidate, merge
or dispose of certain assets, make certain investments, engage in acquisitions, and pay dividends on, repurchase or
make distributions in respect of capital stock, subject to specified conditions. The obligations under the 2019 Notes
and 2024 Notes are fully and unconditionally guaranteed, jointly and severally, by each of our existing and future 100%
owned domestic subsidiaries that is a guarantor or other obligor under our senior credit agreement and by certain of
our other 100% owned domestic subsidiaries.
As of December 31, 2014, we were in compliance with all of the terms of our senior credit agreement and our
2019 Notes and 2024 Notes.
In addition, we have an accounts receivable securitization facility under which we sell a security interest in domestic
accounts receivable for consideration of up to $50.0 million to a commercial paper conduit. As of December 31, 2014,
the maximum amount available for borrowing under this facility was $45.3 million. This facility is utilized from time to
time to provide increased flexibility in funding short term working capital requirements. The agreement governing the
accounts receivable securitization facility contains certain covenants and termination events. An occurrence of an
event of default or a termination event under this facility may give rise to the right of our counterparty to terminate this
facility. As of December 31, 2014 and 2013, we had $4.7 million of outstanding borrowings under our accounts receivable
securitization facility.
Our Convertible Notes are included in the dilutive earnings per share calculation using the treasury stock method.
Under the treasury stock method, we must calculate the number of shares of common stock issuable under the terms
of the Convertible Notes based on the average market price of our common stock during the applicable reporting
period, and include that number in the total diluted shares figure for the period. At the time we issued the Convertible
Notes, we entered into convertible note hedge and warrant agreements that together are intended to have the economic
effect of reducing the net number of shares that will be issued upon conversion of the Convertible Notes by, in effect,
increasing the conversion price of the Convertible Notes, from our economic standpoint, to $74.65. However, under
accounting principles generally accepted in the United States of America ("GAAP”), since the impact of the convertible
note hedge agreements is anti-dilutive, we exclude from the calculation of fully diluted shares the number of shares
of our common stock that we would receive from the counterparties to these agreements upon settlement.
Under the treasury stock method, changes in the price per share of our common stock can have a significant
impact on the number of shares that we must include in the fully diluted earnings per share calculation. The following
table illustrates how changes in our stock price would affect (i) the number of shares issuable issuable upon conversion
of the Convertible Notes, (ii) the number of additional shares deemed outstanding with respect to the Convertible
Notes, after applying the treasury stock method, for purposes of calculating diluted earnings per share ("Total Treasury
Stock Method Incremental Shares") and (iii) the number of shares issuable upon concurrent settlement of the
Convertible Notes, the warrant and the convertible note hedge ("Incremental Shares Issued by Teleflex upon
Conversion"):
Market Price Per
Share
Shares Issuable
Upon Conversion of
Convertible Notes
Shares
Issuable Upon
Exercise of
Warrants
Total Treasury
Stock Method
Incremental
Shares(1)
Shares Due to
Teleflex under
Note Hedge
Incremental
Shares Issuable by
Teleflex upon
Conversion(2)
$70
$85
$100
$115
$130
$145
(Shares in thousands)
809
1,817
2,523
3,045
3,446
3,765
—
795
1,654
2,289
2,778
3,165
809
2,612
4,177
5,334
6,224
6,930
(809)
(1,817)
(2,523)
(3,045)
(3,446)
(3,765)
—
795
1,654
2,289
2,778
3,165
(1) Represents the number of incremental shares that must be included in the calculation of fully diluted shares under GAAP.
(2) Represents the number of incremental shares to be issued by us upon conversion of the convertible notes, assuming
concurrent settlement of the convertible note hedges and warrants.
52
Our Convertible Notes are convertible under certain circumstances, including in any fiscal quarter following an
immediately preceding fiscal quarter in which the last reported sales price of our common stock for at least 20 days
during a period of 30 consecutive trading days ending on the last day of such fiscal quarter exceeds 130% of the
conversion price of the Convertible Notes (approximately $79.72). Since the fourth quarter of 2013 and in all subsequent
periods through December 31, 2014, the last reported sale price of our common stock exceeded the 130% threshold
described above and, accordingly, the Convertible Notes are classified as a current liability as of December 31, 2014
and 2013. The determination of whether or not the Convertible Notes are convertible under such circumstances is
made each quarter until their maturity, conversion or repurchase. Consequently, the Convertible Notes may not be
convertible in one or more future quarters if the common stock price-based conversion contingency is not satisfied in
such quarters, in which case the Convertible Notes would again be classified as long-term debt unless another
conversion contingency set forth in the Convertible Notes has been satisfied. We have elected a net settlement method
to satisfy our conversion obligation, under which we will settle the principal amount of the Convertible Notes in cash
and settle the excess conversion value in shares, plus cash in lieu of fractional shares. While we believe we have
sufficient liquidity to repay the principal amounts due through a combination of cash on hand and amounts available
under our credit facility, our use of these funds could adversely affect our results of operations and liquidity. The
classification of the Convertible Notes as a current liability had no impact on our financial covenants.
For additional information regarding our indebtedness, please see Note 8 to the consolidated financial statements
included in this Annual Report on Form 10-K.
Stock Repurchase Programs
In 2007, our Board of Directors authorized the repurchase of up to $300 million of outstanding our common stock.
Repurchases of our stock under the Board authorization may be made from time to time in the open market and may
include privately-negotiated transactions as market conditions warrant and subject to regulatory considerations. The
stock repurchase program has no expiration date and our ability to execute on the program will depend on, among
other factors, cash requirements for acquisitions, cash generation from operations, debt repayment obligations, market
conditions and regulatory requirements. In addition, under our senior credit agreements, we are subject to certain
restrictions relating to its ability to repurchase shares in the event our consolidated leverage ratio (generally, the ratio
of Consolidated Total Indebtedness to Consolidated EBITDA, as defined in the senior credit agreement) exceeds
certain levels, which may limit our ability to repurchase shares under this Board authorization. Through December 31,
2014, no shares have been purchased under this Board authorization.
Contractual Obligations
Contractual obligations at December 31, 2014 are as follows:
Total
Less than
1 year
1-3
years
4-5
Years
More than
5 years
Payments due by period
Total borrowings(1)
Interest obligations(2)
Operating lease obligations
Minimum purchase obligations(3)
Other postretirement benefits
$ 1,104,598 $
260,669
117,499
3,754
34,976
404,598 $
(Dollars in thousands)
— $
450,000 $
51,773
27,706
3,312
3,268
96,686
42,138
442
6,696
53,694
30,050
—
6,783
250,000
58,516
17,605
—
18,229
Total contractual obligations
$ 1,521,496 $
490,657 $
145,962 $
540,527 $
344,350
(1) The Convertible Notes, which mature in 2017, are included in payment due in less than 1 year due to the satisfaction of the stock price
conversion contingency, which is described in more detail in the “Financing Arrangements” section above. Total borrowings also include
$4.7 million under the securitization program. See to Note 8 to the consolidated financial statements included in this Annual Report on
Form 10-K for additional details regarding this program.
Interest payments on floating rate debt are based on the interest rate in effect on December 31, 2014.
(2)
(3) Purchase obligations are defined as agreements to purchase goods or services that are enforceable and legally binding and that specify
all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable pricing provisions based on prices
in effect on a particular date and the approximate timing of the transactions. These obligations relate primarily to material purchase
requirements.
53
We recorded a noncurrent liability for uncertain tax positions of $50.9 million and $55.2 million as of December 31,
2014 and December 31, 2013, respectively. Due to uncertainties regarding the ultimate resolution of ongoing or future
tax examinations, we are not able to reasonably estimate the amount of any income tax payments to settle uncertain
income tax positions or the periods in which any such payments will be made.
In 2014, cash contributions to all defined benefit pension plans were $9.5 million, and we estimate the amount of
required cash contributions in 2015 will be approximately $2.9 million. Due to the potential impact of future plan
investment performance, changes in interest rates, changes in other economic and demographic assumptions and
changes in legislation in the United States and other foreign jurisdictions, we are not able to reasonably estimate the
timing and amount of contributions that may be required to fund our defined benefit plans for periods beyond 2015
and as a result, these contributions have been excluded from contractual obligations shown above.
See Notes 13 and 14 to the consolidated financial statements included in this Annual Report on Form 10-K for
additional information.
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.
We have identified the following as critical accounting estimates, which are defined as those that are reflective of
significant judgments and uncertainties, are the most pervasive and 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.
Accounting for Allowance for Doubtful Accounts
In the ordinary course of business, we grant non-interest bearing trade credit to our customers on normal credit
terms. In an effort to reduce our credit risk, we (i) establish credit limits for all of our customer relationships, (ii) perform
ongoing credit evaluations of our customers’ financial condition, (iii) monitor the payment history and aging of our
customers’ receivables, and (iv) monitor open orders against an individual customer’s outstanding receivable balance.
An allowance for doubtful accounts is maintained for accounts receivable based on our historical collection
experience and expected collectability of the accounts receivable, considering the period an account is outstanding,
the financial position of the customer and information provided by credit rating services. The adequacy of this allowance
is reviewed each reporting period and adjusted as necessary.
In light of the volatility in global economic markets during the past several years, we instituted enhanced measures
to facilitate customer-by-customer risk assessment when estimating the allowance for doubtful accounts. Such
measures included, monthly credit control committee meetings, at which customer credit risks are identified after review
of, among other things, accounts that exceed specified credit limits, payment delinquencies and other customer
issues. In addition, with respect to certain of our non-government customers, we instituted measures designed to
reduce our risk exposures, including issuing dunning letters, reducing credit limits, requiring that payments accompany
orders and instituting legal action with respect to delinquent accounts. With respect to government customers, we
evaluate receivables for potential collection risks associated with any limitations on the availability of government
funding and reimbursement practices.
54
Some of our customers, particularly in Europe, have extended or delayed payments for products and services
already provided resulting in potential collectability concerns regarding our accounts receivable from these customers,
for the most part in Greece, Italy, Spain and Portugal. At December 31, 2014, these countries accounted for 27.3% of
our total net current and long-term accounts receivable. Net long-term receivables of $11.3 million and $17.6 million
are included in other assets on the balance sheet at December 31, 2014 and 2013, respectively. If the financial
condition of these customers or the healthcare systems in these countries deteriorate to the extent that the ability of
an increasing number of customers to make payments is uncertain, additional allowances may be required in future
periods. Our allowance for doubtful accounts was $8.8 million and $10.7 million at December 31, 2014 and 2013,
respectively, which was 2.9% and 3.3% of gross accounts receivable at December 31, 2014 and 2013, respectively.
Although we maintain allowances for doubtful accounts to cover the estimated losses which may occur when
customers cannot make their required payments, we cannot be assured that we will continue to experience the same
loss rate in the future given the volatility in the worldwide economy. If our allowance for doubtful accounts is insufficient
to address receivables we ultimately determine are uncollectible, we would be required to incur additional charges,
which could materially adversely affect our results of operations. Moreover, our inability to collect outstanding
receivables could adversely affect our financial condition and cash flow from operations.
Distributor Rebates
We offer rebates to certain distributors and reserve an estimate for the rebate as a reduction of revenues at the
time of sale. In estimating rebates, we consider the lag time between the point of sale and the payment of the distributor’s
rebate claim, distributor-specific trend analyses, contractual commitments, including stated rebate rates, historical
experience and other relevant information. We adjust reserves to reflect differences between estimated and actual
experience, and record the adjustment as a reduction of sales in the period of adjustment. Historical adjustments to
recorded reserves have not been significant and we do not expect significant revisions of these estimates in the future.
The reserve for estimated rebates was $10.4 million and $7.8 million at December 31, 2014 and 2013, respectively.
We expect the reserve as of December 31, 2014 to be paid within 90 days subsequent to year-end.
Inventory Utilization
Inventories are valued at the lower of cost or market. We maintain a reserve for excess and obsolete inventory
that reduces the carrying value of our inventories to reflect the diminution of value resulting from product obsolescence,
damage or other issues affecting marketability by an amount equal to the difference between the cost of the inventory
and its estimated market value. Factors utilized in the determination of estimated market value include (i) current sales
data and historical return rates, (ii) estimates of future demand, (iii) competitive pricing pressures, (iv) new product
introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.
The adequacy of this reserve is reviewed each reporting period and adjusted as necessary. We regularly compare
inventory quantities on hand against historical usage or forecasts related to specific items in order to evaluate
obsolescence and excessive quantities. In assessing historical usage, we also qualitatively assess business trends
to evaluate the reasonableness of using historical information as an estimate of future usage.
Our inventory reserve was $33.9 million and $32.4 million at December 31, 2014 and 2013, respectively, which
equaled 9.2% and 8.9% of gross inventories at those respective dates.
Accounting for Long-Lived Assets
We assess the remaining useful life and recoverability of long-lived assets whenever events or circumstances
indicate the carrying value of an asset may not be recoverable (a triggering event). Triggering events include the likely
(i.e. more likely than not) disposal of a portion of such assets or the occurrence of an adverse change in the market
involving the business employing the related assets. Significant judgments in this area involve determining whether a
triggering event has occurred. The recoverability evaluation is based on various analyses, including undiscounted
cash flow projections, which involves significant management judgment. Any impairment loss, if indicated, equals the
amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
55
Accounting for Goodwill and Other Intangible Assets
Intangible assets include indefinite-lived assets (such as goodwill and certain trade names or brands), as well as
finite-lived intangibles (such as trade names or brands that do not have indefinite lives, customer relationships, patents
and other technologies). The costs of finite-lived intangibles are amortized to expense over their estimated life.
Determining the useful life of an intangible asset requires considerable judgment as different types of intangible assets
will have different useful lives. Goodwill and indefinite-lived intangible assets, primarily certain trade names and
trademarks, are not amortized but are tested annually for impairment during the fourth quarter, using the first day of
the quarter as the measurement date, or earlier upon the occurrence of certain events or substantive changes in
circumstances that indicate an impairment may have occurred. Such conditions may include an economic downturn
in a geographic market or a change in the assessment of future operations. Our impairment testing for goodwill is
performed separately from our impairment testing of indefinite-lived intangibles.
Considerable management judgment is necessary in making the assumptions used in the impairment analysis
including evaluating the impact of operating and macroeconomic changes and estimating future cash flows, which are
key elements in determining fair value. Assumptions used in our impairment evaluations, such as forecasted growth
rates and cost of capital, are consistent with internal projections and operating plans. We believe such assumptions
and estimates are also comparable to those that would be used by other marketplace participants.
Goodwill
Goodwill impairment assessments are performed at a reporting unit level. For purposes of this assessment, a
reporting unit is an operating segment, or a business one level below that operating segment. We have a total of ten
reporting units, eight of whose assets include goodwill. In applying the goodwill impairment test, we may assess
qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its
carrying value. Qualitative factors may include, but are not limited to, macroeconomic conditions, industry conditions,
the competitive environment, changes in the market for our products and services, regulatory and political
developments, and entity specific factors such as strategies and financial performance. If, after completing the
qualitative assessment, it is determined more likely than not that the fair value of a reporting unit is less than its carrying
value, we proceed to a two-step quantitative impairment test, described below. Alternatively, we may proceed directly
to testing goodwill for impairment through the two-step impairment test without conducting the qualitative analysis. In
the fourth quarter 2014, we performed a qualitative assessment on five of our reporting units whose assets include
goodwill and determined, based on our assessment, that the fair value of each reporting unit was more likely than not
higher than its carrying value and, therefore, that their goodwill is not impaired. For the three remaining reporting units
whose assets include goodwill, we elected to forgo the qualitative assessment and test each of those reporting units
through the two-step quantitative impairment test.
The first step of the two-step impairment test is to quantitatively compare the fair value of a reporting unit, including
goodwill, with its carrying value. In performing the first step, we calculate the fair value of the reporting unit using equal
weighting of two methods; one which estimates the discounted cash flows (DCF) of the reporting unit based on projected
earnings in the future (the Income Approach) and one which is based on sales of similar businesses to those of the
reporting unit in actual transactions (the Market Approach). If the fair value exceeds the carrying value, there is no
impairment. If the reporting unit carrying value exceeds the fair value, we recognize an impairment loss based on the
amount by which the carrying value of goodwill exceeds its implied fair value, which we determine in the second step
of the two-step test. The implied fair value of goodwill is determined by deducting the fair value of a reporting unit's
identifiable assets and liabilities from the fair value of the reporting unit as a whole, as if that reporting unit had just
been acquired and the fair value of the individual assets acquired and liabilities assumed were being determined
initially.
56
Determining fair value requires the exercise of significant judgment. The more significant judgments and
assumptions used in the Income Approach include (1) the amount and timing of expected future cash flows which are
based primarily on our estimates of future sales, operating income, industry trends and the regulatory environment of
the individual reporting units, (2) the expected long-term growth rates for each of our reporting units, which approximate
the expected long-term growth rate of the global economy and of the medical device industry, and (3) discount rates
that are used to discount future cash flows to their present values, which are based on an assessment of the risk
inherent in the future cash flows of the respective reporting units along with various market based inputs. The more
significant judgments and assumptions used in the Market Approach include (1) determination of appropriate revenue
and EBITDA multiples used to estimate a reporting unit’s fair value and (2) the selection of appropriate comparable
companies to be used for purposes of determining those multiples. There were no changes to the underlying methods
used in 2014 as compared to the prior year valuations of our reporting units. The DCF analysis utilized in the fourth
quarter of 2014 impairment test was performed over a ten year time horizon for each reporting unit. The discount rate
was 10.0% for all reporting units. A perpetual growth rate of 2.5% was assumed for all reporting units.
We determined that no impairment in the carrying value of any of our reporting units had occurred, based on our
assessment of their respective fair values in the fourth quarter 2014, using the methodology described above.
Our expected future growth rates estimated for purposes of the goodwill impairment test are based on our estimates
of future sales, operating income and cash flow and are consistent with our internal budgets and business plans, which
reflect a modest amount of core revenue growth coupled with the successful launch of new products each year; the
effect of these growth indicators more than offset volume losses from products that are expected to reach the end of
their life cycle. Under the Income Approach, changes in assumptions could cause a reporting unit's carrying value to
exceed its fair value. For example, an increase of over 2.0% in the discount rate or a decrease of over 25% percent
in the compound annual growth rate of operating income would indicate impairment for the reporting units. While we
believe the assumed growth rates of sales and cash flows are reasonable, the possibility remains that the revenue
growth of a reporting unit may not be as high as expected, and, as a result, the estimated fair value may decline. If
our strategy and new products are not successful and we do not achieve anticipated core revenue growth in the future
with respect to a reporting unit, the goodwill in the reporting unit may become impaired and, in such case, we may
incur material impairment charges.
Other Intangible Assets
Intangible assets are assets acquired that lack physical substance and that meet the specified criteria for recognition
apart from goodwill. Intangible assets we obtained through acquisitions are comprised mainly of technology, customer
relationships, and trade names. Management tests indefinite-lived intangible assets for impairment annually, and more
frequently if events or changes in circumstances indicate that an impairment may have occurred. Similar to the goodwill
impairment test process, we may assess qualitative factors to determine whether it is more likely than not that the fair
value of an indefinite-lived intangible asset is less than its carrying value. If, after completing the qualitative assessment,
we determine it is more likely than not that the fair value of the indefinite-lived intangible asset is greater than its carrying
amount, the asset is not impaired. If we conclude it is more likely than not that the fair value of the indefinite-lived
intangible assets is less than the carrying value, we then proceed to a quantitative impairment test, which consists of
a comparison of the fair value of the intangible assets to their carrying amounts. Alternatively, we may elect to forgo
the qualitative analysis and proceed directly to testing the indefinite-lived intangible asset for impairment through the
quantitative impairment test. In the fourth quarter 2014, we performed a qualitative assessment on all of our indefinite
lived assets, except for two trade names, and determined based on the assessment, that their fair values were more
likely than not higher than their carrying values. For the remaining two trade names, we elected to test impairment
through the quantitative method.
In connection with the quantitative impairment test, since quoted market prices are seldom available for intangible
assets, we utilize present value techniques to estimate fair value. The fair value of trade names is estimated by the
use of a relief from royalty method, which values an intangible asset by estimating the royalties saved through the
ownership of an asset. Under this method, an owner of an intangible asset determines the arm’s length royalty that
likely would have been charged if the owner had to license the asset from a third party. The royalty, which is based on
the estimated rate applied against forecasted sales, is tax-effected and discounted to present value using a discount
rate commensurate with the relative risk of achieving the cash flow attributable to the asset. Management must estimate
the hypothetical royalty rate, discount rate, and terminal growth rate to estimate the forecasted cash flows associated
with the asset.
57
Discount rates and perpetual growth rates utilized in the impairment test of the trade names during the fourth
quarter of 2014 are comparable to the rates utilized in the impairment test of goodwill. The compound annual growth
rate in revenues projected to be generated from the trade names ranged from 2% to 5% and a royalty rate of 4% was
assumed. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows generated
from the respective intangible assets. Assumptions about royalty rates are based on the rates at which similar trade
names are being licensed in the marketplace.
We determined that no impairment in the carrying value of our indefinite-lived intangible assets had occurred,
based on our assessment of their respective fair values as determined under the methodology described above.
We are not required to perform an annual impairment test for finite-lived intangible assets (e.g. customer
relationships). For further details on the assessment of recoverability of finite-lived intangible assets see "Accounting
for Long-Lived Assets."
In May 2012, we acquired Semprus BioSciences, a biomedical research and development company that
developed a polymer surface treatment technology intended to reduce thrombus related complications. As
previously disclosed, we experienced difficulties with respect to the development of the Semprus technology and
were devoting further research and testing towards attempting to resolve the issue. As a result of these efforts, we
believe we have resolved the issue and are focused on seeking regulatory approval and engaging in additional
research and development efforts to achieve commercialization of this technology. Despite this progress, significant
challenges to commercialization of the Semprus technology remain, and we ultimately may find it necessary to
recognize future impairment charges with respect to the related assets, which could be material. As of
December 31, 2014, we have recorded IPR&D intangible assets of approximately $41.0 million related to Semprus.
Accounting for Pensions and Other Postretirement Benefits
We provide a range of benefits to eligible employees and retired employees, including pensions and postretirement
healthcare benefits. Several statistical and other factors which are designed to project future events are used in
calculating the expense and liability related to these plans. These factors include actuarial assumptions about discount
rates, expected rates of return on plan assets, compensation increases, turnover rates and healthcare cost trend rates.
We review the actuarial assumptions on an annual basis and make modifications to the assumptions based on current
rates and trends when appropriate.
Significant differences in our actual experience or significant changes in our assumptions may materially affect
our pension and other postretirement obligations and our future expense. The following table shows the sensitivity of
plan expenses and benefit obligations to changes in the weighted average assumptions:
Assumed Discount Rate
Expected Return
on Plan Assets
Assumed Healthcare Trend Rate
50 Basis Point
Increase
50 Basis Point
Decrease
50 Basis Point
Change
1.0% Increase
1.0% Decrease
(Dollars in millions)
Net periodic pension and
postretirement healthcare expense
Projected benefit obligation
$
$
(0.4) $
(33.7) $
0.4
$
37.7
1.5
$
N/A $
0.2
4.4
$
$
(0.2)
(3.8)
For additional information on assumptions pertaining to pension and other postretirement benefit plans, refer to
Note 14 to the consolidated financial statements included in this Annual Report on Form 10-K.
58
Share-based Compensation
We estimate the fair value of share-based awards on the date of grant using an option pricing model. The value
of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service
periods. Share-based compensation expense related to stock options is measured using a Black-Scholes option pricing
model that takes into account highly subjective and complex assumptions with respect to expected life of options,
volatility, risk-free interest rate and expected dividend yield. The expected life of options granted represents the period
of time that options granted are expected to be outstanding, which is derived from the vesting period of the award, as
well as historical exercise behavior. Expected volatility is based on a blend of historical volatility and implied volatility
derived from publicly traded options to purchase our common stock, which we believe is more reflective of the market
conditions and a better indicator of expected volatility than solely using historical volatility. The risk-free interest rate
is the implied yield currently available on United States Treasury zero-coupon issues with a remaining term equal to
the expected life of the option. Share based compensation expense for 2014, 2013 and 2012 was $12.2 million, $11.9
million and $8.6 million, respectively.
Accounting for Contingent Consideration Liabilities
In connection with an acquisition, we may be required to pay future consideration that is contingent upon the
achievement of specified objectives, such as receipt of regulatory approval, commercialization of a product,
achievement of sales targets, or the passage of time. As of the acquisition date, we record a contingent liability
representing the estimated fair value of the contingent consideration we expect to pay. The fair value of the contingent
consideration is calculated based on a probability-weighted discounted cash flow analysis. We remeasure this liability
each reporting period and record the change in the liability's fair value in our consolidated statement of income (loss).
An increase or decrease in the fair value can result from changes in the discount rate, timing, estimated probability of
achievement of the specified objectives and revenue estimates, among other factors. As of December 31, 2014, the
range of undiscounted amounts the Company could be required to pay under contingent consideration arrangements
is between $15.0 million and $83.0 million. As of December 31, 2014 and 2013, we accrued $33.4 million and $20.3
million of contingent consideration, respectively. For the twelve months ended December 31, 2014 and 2013, we
recorded reductions to contingent consideration of $8.2 million and $12.3 million, respectively. These reductions were
the result of changes in estimated probabilities associated with certain regulatory sales milestones.
Accounting for Income Taxes
Our annual provision for income taxes and determination of the deferred tax assets and liabilities require
management to assess uncertainties, make judgments regarding outcomes and utilize estimates. We conduct a broad
range of operations around the world, subjecting us to complex tax regulations in numerous international jurisdictions,
resulting at times in tax audits, disputes with tax authorities and potential litigation, the outcome of which is uncertain.
Management must make judgments about such uncertainties and determine estimates of our tax assets and liabilities.
Deferred tax assets and liabilities are measured and recorded using currently enacted tax rates, which we expect will
apply to taxable income in the years in which differences between the financial statement carrying amounts of existing
assets and liabilities and their tax bases are recovered or settled. The likelihood of a material change in our expected
realization of these assets is dependent on future taxable income, our ability to use foreign tax credit carryforwards
and carrybacks, final United States and foreign tax settlements, and the effectiveness of our tax planning strategies
in the various relevant jurisdictions. While management believes that its judgments and interpretations regarding
income taxes are appropriate, significant differences in actual experience may require future adjustments to our tax
assets and liabilities, which could be material.
We are also required to assess the realizability of our deferred tax assets. We evaluate all positive and negative
evidence and use judgments regarding past and future events, including results of operations and available tax planning
strategies that could be implemented to realize the deferred tax assets. Based on this assessment, we determine
when it is more likely than not that all or some portion of our deferred tax assets may not be realized, in which case
we apply a valuation allowance to offset the amount of such deferred tax assets. To the extent facts and circumstances
change in the future, adjustments to the valuation allowances may be required.
The valuation allowance for deferred tax assets of $99.1 million and $86.5 million at December 31, 2014 and
December 31, 2013, respectively, relates principally to the uncertainty of the utilization of tax loss and credit
carryforwards in various jurisdictions.
59
Significant judgment is required in determining income tax provisions and in evaluating tax positions. We establish
additional provisions for income taxes when, despite the belief that tax positions are supportable, there remain certain
positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be
sustained upon examination by the applicable taxing authority. In the normal course of business, we are examined by
various federal, state and foreign tax authorities. We regularly assess the potential outcomes of these examinations
and any future examinations for the current or prior years in determining the adequacy of our provision for income
taxes. We adjust the income tax provision, the current tax liability and deferred taxes in any period in which facts that
necessitate an adjustment become known. Specifically, we are currently in the midst of examinations by the Austrian,
Canadian, German, and the United States taxing authorities with respect to our income tax returns for those countries
for various tax years. The ultimate outcomes of the examinations of these returns could result in increases or decreases
to our recorded tax liabilities, which would affect our financial results.
See Note 13 to the consolidated financial statements in this Annual Report on Form 10-K for additional information
regarding our uncertain tax positions.
New Accounting Standards
See Note 2 to the consolidated financial statements included in this Annual Report on Form 10-K for a discussion
on recently issued accounting standards, including estimated effects, if any, on our consolidated financial statements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
We are exposed to certain financial risks, specifically fluctuations in market interest rates, foreign currency
exchange rates and, to a lesser extent, commodity prices. We use derivative financial instruments to manage or reduce
the impact of some of these risks. We do not enter into derivative instruments for trading purposes. We are also exposed
to changes in the market traded price of our common stock as it influences the valuation of stock options and their
effect on earnings.
Interest Rate Risk
We are exposed to changes in interest rates as a result of our borrowing activities and our cash balances. The
table below provides information regarding the amortization and related interest rates by year of maturity for our fixed
and variable rate debt obligations. Variable interest rates on December 31, 2014 were determined using a base rate
of the one-month LIBOR rate plus the applicable spread.
Year of Maturity
2015
2016
2017
2018
2019
Thereafter
Total
(Dollars in thousands)
Fixed rate debt
Average interest rate
$ 399,898
3.875%
Variable rate debt
$
4,700
$
$
— $
— $
— $ 250,000
$ 250,000
$ 899,898
—%
—%
—%
6.875%
5.250%
5.090%
— $
— $ 200,000
$
— $
— $ 204,700
Average interest rate
0.921%
—%
—%
1.915%
—%
—%
1.893%
A change of 1.0% in variable interest rates would increase or decrease annual interest expense by approximately
$1.3 million based on our outstanding debt as of December 31, 2014.
60
Foreign Currency Risk
We are exposed to currency fluctuations in connection with transactions denominated in currencies other than
the functional currencies of certain subsidiaries. We had no open forward contracts as of December 31, 2014 or 2013.
In January 2015 and 2014, we entered into forward contracts with several major financial institutions to hedge a portion
of the projected cash flows from these exposures. These are primarily contracts to buy or sell a foreign currency against
the U.S. dollar or the euro. The following table provides information regarding our open forward currency contracts
entered into in January 2015, which mature during 2015. Forward contract notional amounts presented below are
expressed in the stated currencies. The total notional amount for all contracts is approximately $142.0 million.
Forward Currency Contracts:
United States dollars
Euros
British pound
Mexican peso
Czech koruna
South African rand
Malaysian ringgits
Canadian dollars
Australian dollars
Singapore dollars
Buy/(Sell)
(in thousands)
(8,143)
(15,673)
(8,064)
342,063
391,385
(53,892)
107,723
(19,847)
(13,071)
(13,284)
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item are included herein, commencing on
page F-1.
ITEM 9.
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 9A.
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, however, 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) Management’s Report on Internal Control Over Financial Reporting
Our management’s report on internal control over financial reporting is set forth on page F-2 of this Annual Report
on Form 10-K and is incorporated by reference herein.
61
(c) Change in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None.
62
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
For the information required by this Item 10, other than information with respect to our Executive Officers contained
at the end of Item 1 of this report, see “Election Of Directors,” “Nominees for Election to the Board of Directors,”
“Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance,” in the Proxy Statement for
our 2015 Annual Meeting, which information is incorporated herein by reference. The Proxy Statement for our 2015
Annual Meeting will be filed within 120 days of the close of our fiscal year.
For the information required by this Item 10 with respect to our Executive Officers, see Part I of this report on
pages 11 - 12.
ITEM 11.
EXECUTIVE COMPENSATION
For the information required by this Item 11, see “Executive Compensation,” “Compensation Committee Report
on Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in the Proxy
Statement for our 2015 Annual Meeting, which information is incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
For the information required by this Item 12 with respect to beneficial ownership of our common stock, see “Security
Ownership of Certain Beneficial Owners and Management” in the Proxy Statement for our 2015 Annual Meeting, which
information is incorporated herein by reference.
The following table sets forth certain information as of December 31, 2014 regarding our equity plans :
Plan Category
Equity compensation plans
approved by security
holders
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in Column
(A))
(A)
(B)
(C)
1,233,672
$75.93
4,903,018
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
For the information required by this Item 13, see “Certain Transactions” and “Corporate Governance” in the Proxy
Statement for our 2015 Annual Meeting, which information is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
For the information required by this Item 14, see “Audit and Non-Audit Fees” and “Policy on Audit Committee Pre-
Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm” in the Proxy Statement
for our 2015 Annual Meeting, which information is incorporated herein by reference.
63
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
Consolidated Financial Statements:
PART IV
The Index to Consolidated Financial Statements and Schedule is set forth on page F-1 hereof.
(b)
Exhibits:
The Exhibits are listed in the Index to Exhibits.
64
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized as of the date
indicated below.
SIGNATURES
TELEFLEX INCORPORATED
By:
/s/ Benson F. Smith
Benson F. Smith
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and as of the date indicated below.
By:
By:
By:
By:
/s/ George Babich, Jr.
George Babich, Jr.
Director
/s/ Patricia C. Barron
Patricia C. Barron
Director
/s/ William R. Cook
William R. Cook
Director
/s/ W. Kim Foster
W. Kim Foster
Director
By:
/s/ Jeffrey A. Graves
Jeffrey A. Graves
Director
Dated: February 20, 2015
/s/ Thomas E. Powell
Thomas E. Powell
Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)
/s/ Dr. Stephen K. Klasko
Dr. Stephen K. Klasko
Director
/s/ Sigismundus W.W. Lubsen
Sigismundus W.W. Lubsen
Director
/s/ Stuart A. Randle
Stuart A. Randle
Director
/s/ Benson F. Smith
Benson F. Smith
Chairman, President, Chief Executive Officer &
Director
(Principal Executive Officer)
/s/ Harold L. Yoh III
Harold L. Yoh III
Director
By:
By:
By:
By:
By:
By:
65
TELEFLEX INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
Management’s Report on Internal Control Over Financial Reporting
Report on Independent Registered Public Accounting Firm
Consolidated Statements of Income (Loss) for 2014, 2013 and 2012
Consolidated Statements of Comprehensive Income (Loss) for 2014, 2013 and 2012
Consolidated Balance Sheets as of December 31, 2014 and December 31, 2013
Consolidated Statements of Cash Flows for 2014, 2013 and 2012
Consolidated Statements of Changes in Equity for 2014, 2013 and 2012
Notes to Consolidated Financial Statements
Quarterly Data
FINANCIAL STATEMENT SCHEDULE
II Valuation and qualifying accounts
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
59
Page
60
F-1
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Teleflex Incorporated and its subsidiaries (the “Company”) is responsible for establishing and
maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2014. In making this assessment, management used the framework established in Internal Control —
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). As a result of this assessment and based on the criteria in the COSO framework, management has concluded
that, as of December 31, 2014, the Company’s internal control over financial reporting was effective.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 has been
audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report
which appears herein.
/s/ Benson F. Smith
Benson F. Smith
Chairman, President and Chief Executive Officer
/s/ Thomas E. Powell
Thomas E. Powell
Executive Vice President and
Chief Financial Officer
February 20, 2015
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Teleflex Incorporated:
In our opinion, the consolidated financial statements listed in the accompanying index appearing on page F-1 present
fairly, in all material respects, the financial position of Teleflex Incorporated and its subsidiaries at December 31, 2014
and 2013, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the accompanying index appearing on page F-1
presents fairly, in all material respects, the information set forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control —
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company’s management is responsible for these financial statements and financial statement schedule,
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in “Management’s Report on Internal Control over Financial Reporting”
appearing on page F-2. Our responsibility is to express opinions on these financial statements, on the financial statement
schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted
our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 20, 2015
F-3
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Net revenues
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Research and development expenses
Goodwill impairment
Restructuring and other impairment charges
Net gain on sales of businesses and assets
Income (loss) from continuing operations before interest, loss on
extinguishments of debt and taxes
Interest expense
Interest income
Loss on extinguishments of debt
Income (loss) from continuing operations before taxes
Taxes on income (loss) from continuing operations
Income (loss) from continuing operations
Operating loss from discontinued operations (including gain on disposal of
$2,205 for 2012)
Tax benefit on loss from discontinued operations
Loss from discontinued operations
Net income (loss)
Less: Income from continuing operations attributable to noncontrolling interest
Year Ended December 31,
2014
2013
2012
(Dollars and shares in thousands, except
per share)
$ 1,839,832
$ 1,696,271
$ 1,551,009
897,404
942,428
578,657
61,040
—
17,869
—
284,862
65,458
(706)
—
220,110
28,650
191,460
(3,407)
(698)
(2,709)
188,751
1,072
857,326
838,945
502,187
65,045
—
38,452
—
233,261
56,905
(624)
1,250
175,730
23,547
152,183
(2,205)
(1,770)
(435)
802,784
748,225
454,489
56,278
332,128
3,037
(332)
(97,375)
69,565
(1,571)
—
(165,369)
16,413
(181,782)
(9,207)
(1,887)
(7,320)
151,748
(189,102)
867
955
Net income (loss) attributable to common shareholders
$
187,679
$
150,881
$
(190,057)
Earnings per share available to common shareholders:
Basic:
Income (loss) from continuing operations
Loss from discontinued operations
Net income (loss)
Diluted:
Income (loss) from continuing operations
Loss from discontinued operations
Net income (loss)
Dividends per share
Weighted average common shares outstanding:
Basic
Diluted
Amounts attributable to common shareholders:
Income (loss) from continuing operations, net of tax
Loss from discontinued operations, net of tax
Net income (loss)
$
$
$
$
$
$
$
4.60
$
3.68
$
(0.06)
(0.01)
4.54
$
3.67
$
4.10
$
3.46
$
(0.06)
4.04
1.36
$
$
(0.01)
3.45
1.36
$
$
(4.47)
(0.18)
(4.65)
(4.47)
(0.18)
(4.65)
1.36
41,366
46,470
41,105
43,693
40,859
40,859
190,388
$
151,316
$
(182,737)
(2,709)
(435)
(7,320)
187,679
$
150,881
$
(190,057)
The accompanying notes are an integral part of the consolidated financial statements.
F-4
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)
Other comprehensive income (loss), net of tax:
Foreign currency:
Foreign currency translation continuing operations
adjustments, net of tax of $24,818, $(8,086) and
$(1,210), respectively
Foreign currency translation, net of tax
Pension and other postretirement benefits plans:
Prior service cost recognized in net periodic cost, net of
tax of $9, $9 and $8, respectively
Transition obligation recognized in net periodic cost, net
of tax of $(2) and $(35) in 2013 and 2012,
respectively
Unamortized (loss) gain arising during the period, net of
tax of $26,624, $(14,638) and $(2,399), respectively
Net loss recognized in net periodic cost, net of tax of
$(1,544), $(2,446) and $(2,537), respectively
Settlement, net of tax of $(40) in 2012
Curtailment, net of tax of $44 in 2012
Foreign currency translation, net of tax of $(265), $(66)
and $58, respectively
Pension and other postretirement benefits plans adjustment,
net of tax
Derivatives qualifying as hedges:
Unrealized gain (loss) on derivatives arising during the
period, net of tax $(111), $(265) and $(102),
respectively
Reclassification adjustment on derivatives included in
net income, net of tax of $111, $46 and $(3,832),
respectively
Derivatives qualifying as hedges, net of tax
Other comprehensive (loss) income, net of tax
Comprehensive income (loss)
Less: comprehensive income attributable to
noncontrolling interest
Comprehensive income (loss) attributable to common
shareholders
Year Ended December 31,
2014
2013
2012
(Dollars in thousands)
151,748 $
188,751 $
$
(189,102)
(105,410)
(105,410)
(9,637)
(9,637)
13,071
13,071
(12)
—
(12)
3
(48,245)
25,641
2,841
4,765
—
—
—
—
709
(12)
62
2,796
4,621
66
(74)
(177)
(168)
(44,707)
30,220
7,291
594
(549)
515
(594)
—
(150,117)
38,634
930
381
20,964
172,712
6,361
6,876
27,238
(161,864)
995
638
888
$
37,639 $
172,074 $
(162,752)
The accompanying notes are an integral part of the consolidated financial statements.
F-5
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Prepaid expenses and other current assets
Prepaid taxes
Deferred tax assets
Assets held for sale
Total current assets
Property, plant and equipment, net
Goodwill
Intangibles assets, net
Investments in affiliates
Deferred tax assets
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Current borrowings
Accounts payable
Accrued expenses
Current portion of contingent consideration
Payroll and benefit-related liabilities
Accrued interest
Income taxes payable
Other current liabilities
Total current liabilities
Long-term borrowings
Deferred tax liabilities
Pension and postretirement benefit liabilities
Noncurrent liability for uncertain tax positions
Other liabilities
Total liabilities
Commitments and contingencies (See Note 15)
Common shareholders’ equity
Common shares, $1 par value Issued: 2014 — 43,420 shares; 2013 — 43,243 shares
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less: Treasury stock, at cost
Total common shareholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
December 31,
2014
2013
(Dollars and shares in thousands)
$
303,236
$
273,704
335,593
35,697
40,256
57,301
7,422
1,053,209
317,435
1,323,553
1,216,720
1,150
1,178
64,010
431,984
295,290
333,621
39,810
36,504
52,917
10,428
1,200,554
325,900
1,354,203
1,255,597
1,715
943
70,095
$
$
3,977,255
$
4,209,007
368,401
$
356,287
64,100
72,383
11,276
85,442
9,169
13,768
10,360
634,899
700,000
451,541
167,241
50,884
58,991
71,967
74,868
4,131
73,090
8,725
23,821
22,231
635,120
930,000
514,715
109,498
55,152
48,506
2,063,556
2,292,991
43,420
422,394
1,827,845
(260,895)
2,032,764
121,455
1,911,309
2,390
43,243
409,338
1,696,424
(110,855)
2,038,150
124,623
1,913,527
2,489
1,913,699
1,916,016
$
3,977,255
$
4,209,007
The accompanying notes are an integral part of the consolidated financial statements.
F-6
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2014
2013
2012
(Dollars in thousands)
Cash Flows from Operating Activities of Continuing Operations:
Net income (loss)
$
188,751
$
151,748
$
(189,102)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss from discontinued operations
Depreciation expense
Amortization expense of intangible assets
Amortization expense of deferred financing costs and debt discount
Loss on extinguishments of debt
Changes in contingent consideration
Impairment of long-lived assets
Stock-based compensation
Net gain on sales of businesses and assets
Goodwill impairment
Deferred income taxes, net
Other
Changes in operating assets and liabilities, net of effects of acquisitions and disposals:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Accounts payable and accrued expenses
Income taxes receivable and payable, net
Net cash provided by operating activities from continuing operations
Cash Flows from Investing Activities of Continuing Operations:
Expenditures for property, plant and equipment
Payments for businesses and intangibles acquired, net of cash acquired
Proceeds from sales of businesses and assets
Investments in affiliates
7,320
36,204
44,264
14,416
—
263
—
8,623
(332)
332,128
(39,980)
(3,776)
(2,932)
(1,970)
9,595
155
(20,258)
194,618
2,709
50,207
60,926
15,897
—
435
42,368
50,608
14,959
1,250
(7,418)
(12,642)
3,460
11,871
—
—
(10,182)
(1,319)
(1,294)
(8,931)
(5,926)
2,001
(7,107)
231,299
—
12,227
—
—
(14,153)
(8,968)
9,394
(15,531)
1,422
9,818
(15,040)
290,241
(67,571)
(45,777)
5,251
(40)
(63,580)
(65,394)
(309,008)
(369,444)
—
(50)
66,660
(80)
Net cash used in investing activities from continuing operations
(108,137)
(372,638)
(368,258)
Cash Flows from Financing Activities of Continuing Operations:
Proceeds from long-term borrowings
Repayment of long-term borrowings
Debt extinguishment, issuance and amendment fees
Decrease in notes payable and current borrowings
Proceeds from share based compensation plans and the related tax impacts
Payments to noncontrolling interest shareholders
Payments for contingent consideration
Dividends
Net cash (used in) provided by financing activities from continuing operations
Cash Flows from Discontinued Operations:
Net cash used in operating activities
Net cash used in investing activities
Net cash used in discontinued operations
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Supplemental Cash Flow Information:
Cash interest paid
Income taxes paid, net of refunds
250,000
680,000
(480,102)
(375,000)
(4,494)
—
4,245
(1,094)
—
(56,258)
(287,703)
(6,400)
—
6,181
(736)
(16,958)
(55,917)
231,170
(3,676)
(3,327)
—
(3,676)
(19,473)
(128,748)
431,984
303,236
49,797
52,869
$
$
$
$
$
$
—
(3,327)
8,441
94,945
337,039
431,984
43,581
43,975
$
$
$
—
—
—
(706)
8,238
—
(17,596)
(55,589)
(65,653)
(7,799)
(2,351)
(10,150)
2,394
(247,049)
584,088
337,039
46,683
74,908
The accompanying notes are an integral part of the consolidated financial statements.
F-7
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Common Stock
Shares
Dollars
Additional
Paid in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (loss)
Treasury
Stock
Shares
Dollars
Noncontrolling
Interest
Total
Equity
(Dollars and shares in thousands, except per share)
Balance at December 31, 2011
42,923
$42,923
$ 380,965
$1,847,106
$
(159,353)
2,183
$ (131,053) $
2,195
$ 1,982,783
Net income (loss)
Cash dividends ($1.36 per share)
Other comprehensive income
Distributions to noncontrolling
interest shareholders
Shares issued under
compensation plans
Deferred compensation
(190,057)
(55,589)
27,305
179
179
13,429
(10)
(49)
(4)
2,989
116
955
(189,102)
(55,589)
(67)
27,238
(496)
(496)
16,597
106
Balance at December 31, 2012
43,102
43,102
394,384
1,601,460
(132,048)
2,130
(127,948)
2,587
1,781,537
867
151,748
(55,917)
(229)
20,964
(736)
(736)
18,374
46
1,916,016
188,751
(56,258)
2,489
1,072
Net income
Cash dividends ($1.36 per share)
Other comprehensive income
Distributions to noncontrolling
interest shareholders
Shares issued under
compensation plans
Deferred compensation
150,881
(55,917)
21,193
141
141
14,963
(9)
(65)
(1)
3,270
55
Balance at December 31, 2013
43,243
43,243
409,338
1,696,424
(110,855)
2,064
(124,623)
187,679
(56,258)
Net income
Cash dividends ($1.36 per share)
Other comprehensive income
Distributions to noncontrolling
interest shareholders
Settlement of convertible notes
Settlement of note hedges
associated with convertible notes
Shares issued under
compensation plans
Deferred compensation
(42)
79
177
177
13,019
(150,040)
(77)
(150,117)
(1)
1
(81)
(2)
43
(77)
3,081
121
(1,094)
(1,094)
1
2
16,277
121
Balance at December 31, 2014
43,420
$43,420
$ 422,394
$1,827,845
$
(260,895)
1,981
$ (121,455) $
2,390
$ 1,913,699
The accompanying notes are an integral part of the consolidated financial statements.
F-8
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Summary of significant accounting policies
Consolidation: The consolidated financial statements include the accounts of Teleflex Incorporated and its
subsidiaries (the “Company”). Intercompany transactions are eliminated in consolidation. Investments in affiliates over
which the Company has significant influence but not a controlling equity interest, including variable interest entities
where the Company is not the primary beneficiary, are accounted for using the equity method. Investments in affiliates
over which the Company does not have significant influence are accounted for using the cost method of accounting.
These consolidated financial statements have been prepared in conformity with accounting principles generally
accepted in the United States of America and include management’s estimates and assumptions that affect the recorded
amounts.
Effective January 1, 2014, the Company realigned its operating segments to reflect changes in the Company's
internal financial reporting structure. All prior comparative periods have been restated to reflect these changes. Refer
to Note 16 to the consolidated financial statements for additional information on the Company's changed reporting
structure.
The Company’s share-based compensation plan permits employees to elect to have shares withheld by the
Company to satisfy their minimum statutory tax withholding obligations arising from the exercise or vesting of share-
based awards. The Company then remits, in cash, the withholding taxes to the appropriate tax authorities on behalf
of the employee. For the year ended December 31, 2014, the Company classified such payments as a cash outflow
from financing activities under the line item “Proceeds from share-based compensation plans and the related tax
impacts” within the consolidated statement of cash flows (i.e., the payment by the Company of the withholding taxes
offsets, in part, increases in cash flow from financing activities resulting from the proceeds of the exercise and vesting
of share-based awards and tax benefits related to such exercise and vesting). The Company views the activity as, in
effect, a repurchase of the employee’s shares. The Company's payments were previously reported as a cash outflow
from operating activities; therefore, the Company reclassified the cash outflows of $2.7 million and $1.6 million from
operating to financing activities for the years ended December 31, 2013 and 2012, respectively, to conform to the
presentation for the year ended December 31, 2014 within the consolidated statement of cash flows and within the
condensed consolidating statement of cash flows included in Note 17.
Use of estimates: The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America 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 net revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and cash equivalents: All highly liquid debt instruments with an original maturity of three months or less are
classified as cash equivalents. The carrying value of cash equivalents approximates their current market value.
Accounts receivable: Accounts receivable represents amounts due from customers related to the sale of products
and provision of services. An allowance for doubtful accounts is maintained and represents the Company’s estimate
of the amount of uncollectible receivables. The allowance is provided at such time as management believes reasonable
doubt exists that such balances will be collected within a reasonable period of time. The allowance is based on the
Company’s historical experience, the length of time an account is outstanding, the financial position of the customer
and information provided by credit rating services. In addition, the Company maintains a reserve for returns and
allowances based on its historical experience. See Note 9 to the consolidated financial statements for information on
the Company’s concentration of credit risk.
Inventories: Inventories are valued at the lower of cost or market. The cost of the Company’s inventories is
determined using the average cost method. Elements of cost in inventory include raw materials, direct labor, and
manufacturing overhead. In estimating market value, the Company evaluates inventory for excess and obsolete
quantities based on estimated usage and sales.
F-9
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Property, plant and equipment: Property, plant and equipment are stated at cost, net of accumulated depreciation.
Costs incurred to develop internal-use computer software during the application development stage generally are
capitalized. Costs of enhancements to internal-use computer software are capitalized, provided that these
enhancements result in additional functionality. Other additions and those improvements which increase the capacity
or lengthen the useful lives of the assets are also capitalized. With minor exceptions, composite useful lives for property,
plant and equipment, which are depreciated on a straight-line basis are as follows: land improvements — 5 years;
buildings — 30 years; machinery and equipment — 3 to 10 years; computer equipment and software — 3 to 10 years.
Leasehold improvements are depreciated over the lesser of the useful lives of the leasehold improvements or the
remaining lease periods. Repairs and maintenance costs are expensed as incurred.
Goodwill and other intangible assets: Goodwill and other intangible assets with indefinite lives are not amortized
but are tested for impairment annually during the fourth quarter or more frequently if events or changes in circumstances
indicate that an impairment may exist. Impairment losses, if any, are included in income from operations. The goodwill
impairment test is applied to each of the Company’s reporting units whose assets include goodwill. For purposes of
this assessment, a reporting unit is an operating segment, or a business one level below that operating segment (also
known as a component) if discrete financial information is prepared and regularly reviewed by segment management.
However, separate components are aggregated as a single reporting unit if they have similar economic characteristics.
In applying the goodwill impairment test, the Company may assess qualitative factors to determine whether it is
more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors may include,
but are not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the
market for the Company’s products and services, regulatory and political developments, and entity specific factors
such as strategies and financial performance. If, after completing such assessment, it is determined more likely than
not that the fair value of a reporting unit is less than its carrying value, the Company proceeds to a two-step quantitative
impairment test. Alternatively, the Company may proceed directly to testing goodwill for impairment through the two-
step quantitative impairment test, described below, without conducting the qualitative analysis. In the fourth quarter of
2014, the Company performed a qualitative assessment on five of its reporting units whose assets include goodwill
and determined, based on the assessment, that the fair value of each of the reporting units was more likely than not
higher than its carrying value. For the three remaining reporting units whose assets include goodwill, the Company
elected to forego the qualitative assessment and apply the two-step quantitative impairment test.
The first step of the two-step impairment test is to quantitatively compare the fair value of a reporting unit, including
goodwill, to its carrying value. In performing the first step, the Company calculates the fair value of the reporting unit
using equal weighting of two methods; one which estimates the discounted cash flows of the reporting unit based on
projected earnings in the future (the Income Approach) and one which is based on sales of similar businesses or assets
to those of the reporting unit in actual transactions (the Market Approach). If the reporting unit fair value exceeds the
carrying value, there is no impairment. If the reporting unit carrying value exceeds the fair value, the Company would
perform the second step of the goodwill impairment test, in which the Company would recognize an impairment loss
if the carrying value of goodwill exceeds its implied fair value. The implied fair value of goodwill is determined by
deducting the fair value of a reporting unit's identifiable assets and liabilities from the fair value of the reporting unit as
a whole, as if that reporting unit had just been acquired and the fair value of the individual assets acquired and liabilities
assumed were being determined initially. The Company performed the quantitative goodwill impairment test during
the fourth quarter of 2014, on three of its reporting units whose assets include goodwill, and determined that the fair
value of each of the reporting units exceeded the carrying value. As a result, no impairment in the carrying value of
any of the Company’s reporting units was evident.
F-10
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s intangible assets consist of customer lists, intellectual property, distribution rights and trade names.
The Company tests its indefinite-lived intangible assets for impairment annually, and more frequently if events or
changes in circumstances indicate that an impairment may have occurred. Similar to the goodwill impairment test
process, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value
of an indefinite-lived intangible asset is less than its carrying value. If, after completing the qualitative assessment, the
Company determines it is more likely than not that the fair value of the indefinite-lived intangible asset is greater than
its carrying amount, the asset is not impaired. If the Company concludes it is more likely than not that the fair value of
the indefinite-lived intangible assets is less than the carrying value, the Company then proceeds to a quantitative
impairment test, which consists of a comparison of the fair value of the intangible assets to their carrying amounts.
Alternatively, the Company may elect to forgo the qualitative analysis and proceed directly to testing the indefinite-
lived intangible asset for impairment through the quantitative impairment test. In the fourth quarter of 2014, the Company
performed a qualitative assessment on all of its indefinite lived assets, except for two trade names, and determined,
based on its assessment, that their fair values were more likely than not higher than their carrying values. For the
remaining two trade names, the Company elected to test impairment through the quantitative test and determined that
the fair value of the trade names exceeded the respective carrying values. As a result, no impairment in the carrying
value of any of the Company's intangible assets was evident. The Company recorded in process research and
development (IPR&D) impairment charges of $7.4 million in 2013, following its decision to abandon certain IPR&D
projects. See Note 4 to the consolidated financial statements for further information related to these charges.
Intangible assets consisting of intellectual property, customer lists, distribution rights and trade names that do not
have indefinite lives are being amortized over their estimated useful lives, which are as follows: intellectual property,
3 to 20 years; customer lists, 5 to 30 years; distribution rights, 3 to 22 years; trade names, 1 to 30 years. The weighted
average amortization period is approximately 13 years. The Company periodically evaluates the reasonableness of
the useful lives of these assets.
Long-lived assets: The Company assesses the remaining useful life and recoverability of long-lived assets
whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The
evaluation is based on various analyses, including undiscounted cash flow and profitability projections that incorporate,
as applicable, the impact on the existing business. Therefore, the evaluation involves significant management
judgment. Any impairment loss, if indicated, is measured as the amount by which the carrying amount of the asset
exceeds the estimated fair value of the asset.
Foreign currency translation: Assets and liabilities of subsidiaries with non-United States dollar denominated
functional currencies are translated into United States dollars at the rates of exchange at the balance sheet date;
income and expenses are translated at the average rates of exchange prevailing during the year. The translation
adjustments are reported as a component of accumulated other comprehensive income.
Derivative financial instruments: The Company uses derivative financial instruments primarily for purposes of
hedging exposures to fluctuations in foreign currency exchange rates. All instruments are entered into for other than
trading purposes. All derivatives are recognized on the balance sheet at fair value. Changes in the fair value of
derivatives are recorded in the consolidated statement of comprehensive income (loss) as other comprehensive income,
based on whether the instrument is designated as part of a hedge transaction and, if so, the type of hedge transaction.
Gains or losses on derivative instruments reported in other comprehensive income are reclassified to the consolidated
statement of income (loss) in the period in which earnings are affected by the underlying hedged item. The ineffective
portion of all hedges is recognized in the current period consolidated statement of income (loss). If the hedging
relationship ceases to be highly effective or it becomes probable that an expected transaction will no longer occur,
gains or losses on the derivative are recorded in the current period consolidated statement of income (loss).
Share-based compensation: The Company estimates the fair value of share-based awards on the date of grant
using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized
as expense over the requisite service periods. Share-based compensation expense related to stock options is measured
using a Black-Scholes option pricing model that takes into account highly subjective and complex assumptions. The
expected life of options granted is derived from the vesting period of the award, as well as historical exercise behavior,
and represents the period of time that options granted are expected to be outstanding. Expected volatility is based on
a blend of historical volatility and implied volatility derived from publicly traded options to purchase the Company’s
common stock, which the Company believes is more reflective of the market conditions and a better indicator of
expected volatility than would be the case if the Company only used historical volatility. The risk-free interest rate is
the implied yield currently available on United States Treasury zero-coupon issues with a remaining term equal to the
expected life of the option.
F-11
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Share-based compensation expense recognized is based on the value of the portion of stock-based awards that
is ultimately expected to vest during the period less estimated forfeitures. Forfeitures are required to be estimated at
the time of grant. To minimize fluctuations in share-based compensation expense, management reviews and revises
the estimate of forfeitures for all share-based awards on a quarterly basis based on management’s expectation of the
awards that will ultimately vest.
As previously noted, the Company modified the presentation of payments made by the Company to tax authorities
for employee tax withholding obligations related to share-based compensation.
Income taxes: The provision for income taxes is determined using the asset and liability approach of accounting
for income taxes. Under this approach, deferred tax assets and liabilities are recognized to reflect the future tax
consequences attributable to the differences between the financial statement carrying amounts of existing assets and
liabilities and their tax bases, and to reflect operating loss and tax credit carryforwards. The provision for income taxes
represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Provision
has been made for income taxes on unremitted earnings of subsidiaries and affiliates, except for subsidiaries in which
earnings are deemed to be permanently reinvested.
Significant judgment is required in determining income tax provisions and in evaluating tax positions. The Company
establishes additional provisions for income taxes when, despite the belief that tax positions are supportable, there
remain certain positions that do not meet the minimum probability threshold, which is a tax position that is more likely
than not to be sustained upon examination by the applicable taxing authority. In the normal course of business, the
Company and its subsidiaries are examined by various federal, state and foreign tax authorities. The Company regularly
assesses the potential outcomes of these examinations and any future examinations for the current or prior years in
determining the adequacy of its provision for income taxes. Interest accrued with respect to unrecognized tax benefits
and income tax related penalties are both included in taxes on income from continuing operations. The Company
periodically assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, the
current tax liability and deferred taxes in the period in which the facts that give rise to an adjustment become known.
Pensions and other postretirement benefits: The Company provides a range of benefits to eligible employees and
retired employees, including pensions and postretirement healthcare. The Company records annual amounts relating
to these plans based on calculations which include various actuarial assumptions such as discount rates, expected
rates of return on plan assets, compensation increases, turnover rates and healthcare cost trend rates. The Company
reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on current
rates and trends when appropriate. The effect of the modifications is generally amortized over future periods.
Restructuring costs: Restructuring costs, which include termination benefits, facility closure costs, contract
termination costs and other restructuring costs are recorded at estimated fair value. Key assumptions in calculating
the restructuring costs include the terms and payments that may be negotiated to terminate certain contractual
obligations and the timing of reductions in force.
Contingent consideration related to business acquisitions: In connection with business acquisitions, the Company
may be required to pay future consideration that is contingent upon the achievement of specified objectives such as
receipt of regulatory approval, commercialization of a product, achievement of sales targets, or the passage of time
(collectively, "milestone payments"). As of the acquisition date, the Company records a contingent liability representing
the estimated fair value of the contingent consideration that it expects to pay. The Company is required to reevaluate
the fair value of contingent consideration each reporting period based on new developments and record changes in
fair value until the contingent consideration obligation either is satisfied through payment upon the achievement of the
specified objectives or is no longer payable due to the failure to achieve the specified objectives. The change in the
fair value is recorded in the consolidated statement of income (loss). A contingent payment is classified as a financing
activity in the consolidated statement of cash flows to the extent it was recorded as a liability as of the acquisition date.
Any additional amount paid in excess of the amount initially accrued is classified as an operating activity in the
consolidated statement of cash flows.
Revenue recognition: The Company recognizes revenues from product sales, including sales to distributors, or
services provided when the following revenue recognition criteria are met: persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable and collectability
is reasonably assured. This generally occurs when products are shipped, when services are rendered or upon
customers’ acceptance. Revenues are net of estimated returns and other allowances including rebates.
F-12
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s normal policy is to accept returns only in cases in which the product is defective and covered
under the Company’s standard warranty provisions. However, in the limited cases where an arrangement provides a
right of return to the customer, including a distributor, the Company believes it has the ability to reasonably estimate
the amount of returns based on its substantial historical experience with respect to these arrangements. The Company
accrues any costs or losses that may be expected in connection with any returns in accordance with FASB Accounting
Standards Codification (“ASC”) Topic 450, “Contingencies.” Revenues and cost of goods sold are reduced to reflect
estimated returns. The reserve for returns and allowances was $4.1 million and $3.3 million as of December 31, 2014
and 2013, respectively.
Allowances related to customer incentive programs, which include discounts or rebates, are estimated and provided
for in the period that the related sales are recorded. These allowances are recorded as a reduction of revenue. The
Company also offers rebates to certain distributors and records the estimated rebate as a reduction of revenue at the
time of sale. In estimating rebates, the Company considers the lag time between the point of sale and the payment of
the distributor’s rebate claim, distributor-specific trend analyses, contractual commitments, including stated rebate
rates, historical experience with respect to specific customers and other relevant information. The Company adjusts
estimated rebates based on actual experience and records the adjustment as a reduction of sales in the period of
adjustment. The estimated reserve for the customer incentive programs, including distributor rebates, was $10.4
million and $7.8 million at December 31, 2014 and 2013, respectively. The Company expects the estimated rebates
as of December 31, 2014 to be paid within 90 days subsequent to year-end.
Note 2 — New accounting standards
Recently issued not yet effective
In April 2014, the Financial Accounting Standards Board (FASB) issued guidance for the reporting of discontinued
operations. Under the new guidance, only those disposals of components of an entity that represent a strategic shift
that has or will have a major effect on an entity's operations and financial results will be reported as discontinued
operations in an entity's financial statements. In addition, the new guidance requires additional disclosures for
discontinued operations designed to provide users of financial statements with more information about the assets,
liabilities, revenues and expenses of discontinued operations. The new guidance also requires disclosures regarding
disposals of a significant component of an entity that does not qualify for discontinued operations reporting.This
guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014 with
early adoption permitted. The Company does not believe the adoption of this guidance will have a material impact on
the Company’s results of operations, cash flows or financial position.
In May 2014, the FASB, in a joint effort with the International Accounting Standards Board, issued new accounting
guidance to clarify the principles for recognizing revenue. The new guidance is designed to enhance the comparability
of revenue recognition practices across entities, industries, jurisdictions and capital markets, and will affect any entity
that enters into contracts with customers or enters into contracts for the transfer of nonfinancial assets, unless those
contracts are within the scope of other standards. The new guidance establishes principles for reporting information
to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising
from an entity's contracts with customers. The core principle of the new guidance is that an entity recognizes revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods and services. The new guidance is effective prospectively
for annual periods beginning after December 15, 2016, and interim periods within those years. Early application is
not permitted. The Company is currently evaluating this guidance to determine the impact on the Company’s results
of operations, cash flows, and financial position.
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that
are adopted by the Company as of the specified effective date. The Company has assessed these recently issued
standards that are not yet effective and believes the new standards will not have a material impact on the Company’s
results of operations, cash flows or financial position.
Note 3 — Acquisitions
The Company made the following acquisitions during 2014, which were accounted for as business combinations:
•
On February 3, 2014, the Company acquired Mayo Healthcare Pty Limited, ("Mayo Healthcare"), a distributor of
medical devices and supplies primarily in the Australian market.
F-13
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
•
On December 2, 2014, the Company acquired the assets of Mini-Lap Technologies, Inc. ("Mini-Lap"), a developer
of micro-laparoscopic instrumentation, which complements the Company's surgical product portfolio.
The aggregate total fair value of consideration for the 2014 acquisitions is estimated at $66.3 million, which included
initial payments of $46.3 million in cash and $20.5 million in estimated fair value of contingent consideration (see Note
10 for additional information), partially offset by $0.5 million in favorable working capital adjustments. Transaction
expenses associated with the acquisitions, which are included in selling, general and administrative expenses in the
consolidated statements of income (loss) were $0.5 million for the twelve months ended December 31, 2014. For the
twelve month period ended December 31, 2014, the Company recorded revenue and operating profit of $27.2 million
and $3.6 million, respectively, related to the businesses acquired in 2014. The results of operations and assets of the
acquired businesses are included in the consolidated statements of income (loss) from their respective acquisition
dates. Pro forma information is not presented as the operations of the acquired businesses are not significant to the
overall operations of the Company.
The following table presents the preliminary fair value determination of the assets acquired and liabilities assumed
in the acquisitions that occurred during 2014:
Assets
Current assets
Property, plant and equipment
Intangible assets:
Intellectual property
Trade name
Customer list
Goodwill
Total assets acquired
Less:
Current liabilities
Deferred tax liabilities
Liabilities assumed
Net assets acquired
(Dollars in thousands)
$
$
10,512
344
37,000
300
9,335
16,392
73,883
4,769
2,800
7,569
66,314
The Company is continuing to evaluate the 2014 acquisitions. Further adjustments may be necessary as a result
of the Company’s assessment of additional information related to the fair values of assets acquired and liabilities
assumed, primarily related to deferred tax assets and liabilities and goodwill.
Among the acquired assets, intellectual property and the trade name have useful lives of 15 years and the customer
list has a useful life of 10 years. The goodwill resulting from the acquisitions primarily reflects the synergies expected
to be realized from the integration of the acquired business. Goodwill and the step-up in basis of the intangible assets
in connection with stock acquisitions are not deductible for tax purposes.
The Company made the following acquisitions during 2013, which were accounted for as business combinations:
•
•
•
On December 2, 2013, the Company acquired Vidacare Corporation, a provider of intraosseous, or inside the
bone, access devices. This acquisition complements the Company's vascular access and specialty product
portfolios.
On June 11, 2013, the Company acquired the assets of Ultimate Medical Pty. Ltd. and its affiliates (“Ultimate”),
a supplier of airway management devices with a related portfolio of patented products. This acquisition
complements the Company's anesthesia product portfolio.
On June 6, 2013, the Company acquired Eon Surgical, Ltd. (“Eon”), a developer of a minimally invasive
microlaparoscopy surgical platform technology designed to enhance a surgeon’s ability to perform scarless
surgery while producing better patient outcomes. This technology complements the Company's surgical product
portfolio.
F-14
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The total fair value of consideration for the 2013 acquisitions was estimated at $307.0 million. The results of
operations of the acquired businesses and assets are included in the consolidated statements of income (loss) from
their respective acquisition dates. Pro forma information is not presented as the operations of the acquired businesses
are not significant to the overall operations of the Company.
Note 4 — Restructuring and other impairment charges
2014 Manufacturing Footprint Realignment Plan
On April 28, 2014, the Board of Directors approved a restructuring plan (the “2014 Manufacturing Footprint
Realignment Plan”) involving the consolidation of operations and a related reduction in workforce at certain of the
Company’s facilities, and the relocation of manufacturing operations from certain higher-cost locations to existing
lower-cost locations. These actions commenced in the quarter ended June 29, 2014 and are expected to be substantially
completed by the end of 2017.
The Company estimates that it will incur aggregate pre-tax charges in connection with the 2014 Manufacturing
Footprint Realignment Plan of approximately $37 million to $44 million, of which an estimated $26 million to $31 million
are expected to result in future cash outlays. Most of these charges are expected to be incurred prior to the end of
2016.
The following table provides a summary of the Company’s current cost estimates by major type of expense
associated with the 2014 Manufacturing Footprint Realignment Plan:
Type of expense
Termination benefits
Facility closure and other exit costs (1)
Accelerated depreciation charges
Other (2)
Total estimated amount expected to be incurred
$11 million to $13 million
$2 million to $3 million
$10 million to $11 million
$14 million to $17 million
$37 million to $44 million
(1) Includes costs to transfer product lines among facilities and outplacement and employee relocation costs.
(2) Consists of other costs directly related to the Plan, including project management, legal and regulatory costs.
For the twelve months ended December 31, 2014, the Company recorded expenses of $14.2 million related
to the 2014 Manufacturing Footprint Realignment Plan. Of this amount, $9.3 million related to termination benefits and
was included in restructuring expense and $4.9 million related to accelerated depreciation and certain other costs
resulting from the plan and was included in cost of goods sold. As of December 31, 2014, the Company had a
restructuring reserve of $9.1 million in connection with this plan, all of which relates to termination benefits.
As the 2014 Manufacturing Footprint Realignment Plan progresses, management will reevaluate the estimated
expenses and charges set forth above, and may revise its estimates, as appropriate, consistent with generally accepted
accounting principles.
2014 European Restructuring Plan
On February 27, 2014, the Company committed to a restructuring plan (the “2014 European Restructuring Plan”),
which impacts certain administrative functions in Europe and involves the consolidation of operations and a related
reduction in workforce at certain of the Company’s European facilities.
The Company recorded charges of $7.8 million for the twelve months ended December 31, 2014 related to this
program, primarily pertaining to termination benefits. The Company expects future restructuring expenses associated
with the 2014 European Restructuring Plan, if any, to be nominal. As of December 31, 2014, the Company had a
reserve of $0.4 million in connection with the 2014 European Restructuring Plan. The Company expects to complete
this plan in 2015.
F-15
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other 2014 Restructuring Programs
In June 2014, the Company initiated programs to consolidate locations in Australia and terminate certain
European distributor agreements in an effort to reduce costs. As a result of these actions, the Company expects to
incur an aggregate of approximately $4 million in restructuring and other impairment charges over the term of these
programs, of which $3.6 million has been incurred through December 31, 2014. These programs include costs related
to termination benefits, contract termination costs and other exit costs. As of December 31, 2014, the Company has
a reserve of $0.9 million in connection with these programs. The Company expects to complete the programs in 2015.
2013 Restructuring Charges
In 2013, the Company initiated restructuring programs to consolidate administrative and manufacturing facilities
in North America and warehouse facilities in Europe and terminate certain European distributor agreements in an effort
to reduce costs. As a result of these actions, the Company estimates that it will incur an aggregate of approximately
$11 to $12 million in restructuring and other impairment charges over the term of these programs, of which $11.0 million
was incurred through December 31, 2014. These programs entail costs related to termination benefits, contract
termination costs and post-closing obligations associated with acquired businesses. As of December 31, 2014, the
Company had a reserve of $0.9 million in connection with these projects. The Company expects to complete the
programs in 2015.
LMA Restructuring Program
In connection with the acquisition of substantially all of the assets of LMA International N.V. (the “LMA business”)
in 2012, the Company commenced a program (the "LMA Restructuring Program") related to the integration of the LMA
business and the Company’s other businesses. The program focuses on the closure of the LMA business's corporate
functions and the consolidation of manufacturing, sales, marketing, and distribution functions in North America, Europe
and Asia.
A reconciliation of the changes in accrued liabilities associated with the LMA Restructuring Program from December
31, 2012 through December 31, 2014 is set forth in the following table:
Termination
benefits
Facility
Closure
Costs
Contract
Termination
Costs
Other
Restructuring
Costs
Total
Balance at December 31, 2012
$
1,744 $
Subsequent accruals
Cash payments
Foreign currency translation
Balance at December 31, 2013
Subsequent accruals (reversals)
Cash payments
Foreign currency translation
3,282
(4,461)
(13)
552
(29)
(503)
(20)
(Dollars in thousands)
277 $
— $
788
(362)
1
427
(112)
(317)
2
7,906
(4,560)
63
3,686
(3,188)
(260)
(26)
12 $
176
(164)
(8)
16
—
(4)
—
Balance at December 31, 2014
$
— $
— $
212 $
12 $
2,033
12,152
(9,547)
43
4,681
(3,329)
(1,084)
(44)
224
During the twelve months ended December 31, 2014, the Company reversed $3.2 million in contract termination
costs due to the favorable settlement of a terminated distributor agreement.
As of December 31, 2014, the Company incurred net aggregate restructuring and other impairment charges
over the term of this program of $11.4 million. The Company expects future restructuring expenses associated with
this program, if any, to be nominal. The Company expects to complete the program in 2015.
F-16
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2012 Restructuring Charges
In 2012, the Company initiated a program to improve the effectiveness of its supply chain by consolidating its three
North American warehouses into one centralized warehouse and to lower costs and improve operating efficiencies
through the termination of certain distributor agreements in Europe, the closure of certain North American facilities,
and workforce reductions. The Company has incurred an aggregate of approximately $6.3 million over the term of this
program. The Company expects future restructuring expenses associated with this program, if any, to be nominal. As
of December 31, 2014, the Company had a reserve of $0.6 million in connection with the program. The Company
expects to complete this program in 2015.
2011 Restructuring Program
In 2011, the Company initiated a restructuring program at three facilities to consolidate operations and reduce
costs. In connection with this program, the Company recorded contract termination costs of approximately $2.6 million
associated with a lease termination, as the Company had vacated 50% of the premises during 2011. In addition, the
Company recorded approximately $0.4 million for employee termination benefits in connection with workforce
consolidations. In 2013, the Company recorded an additional $0.8 million in contract termination costs and has
completely exited the leased facility. This program was completed in 2013.
2007 Arrow Integration Program
In connection with the Company’s acquisition of Arrow International, Inc. (“Arrow”) in 2007, the Company
implemented a program in 2007 to integrate Arrow’s businesses into the Company’s other businesses. The aspects
of this program that affected legacy Teleflex employees and facilities were charged to earnings and classified as
restructuring and other impairment charges. A net credit of $1.9 million with respect to the program was recorded
during the year ended December 31, 2012, primarily due to a settlement of a dispute involving the termination of a
European distributor agreement that was established in connection with the Company's acquisition of Arrow. This
program was completed in 2013.
Impairment Charges
The Company incurred the following asset impairment charges during the twelve months ended December 31,
2013. These asset impairments were measured at fair value using significant unobservable inputs that are categorized
as Level 3 under the fair value hierarchy, which is described in Note 10 to the consolidated financial statements.
•
•
•
During the fourth quarter 2013, the Company recorded a $2.9 million IPR&D charge following its decision to
abandon a research and development project associated with the Company’s vascular business.
During the third quarter 2013, the Company recorded $3.5 million in impairment charges related to assets held
for sale that had a carrying value in excess of their appraised fair value.
During the first quarter 2013, the Company recorded a $4.5 million IPR&D charge pertaining to a research and
development project associated with the Company's acquisition of substantially all of the assets of Axiom
Technology Partners LLC because technological feasibility had not yet been achieved and the Company
determined that the subject technology had no future alternative use.
There were no impairment charges recorded for the twelve months ended December 31, 2014 or 2012.
The restructuring and other impairment charges recognized for the twelve months ended December 31, 2014,
2013 and 2012 consisted of the following:
F-17
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(in thousands)
2014
Termination
Benefits
Facility
Closure
Costs
Contract
Termination
Costs
Other Exit
Costs
2014 Manufacturing footprint realignment plan
$
2014 European restructuring plan
Other 2014 restructuring programs
2013 Restructuring programs
LMA restructuring program
2012 Restructuring program
2011 Restructuring program
Total restructuring and other impairment charges
$
9,200 $
7,237
552
562
(29)
(619)
—
16,903 $
— $
— $
60 $
1
—
—
345
2,754
249
(112)
(3,188)
354
12
—
—
225
244
22
—
—
—
Total
9,260
7,808
3,550
833
(3,329)
(265)
12
255 $
160 $
551 $ 17,869
(in thousands)
2013 Restructuring programs
LMA restructuring program
2012 Restructuring program
2011 Restructuring
2007 Arrow integration program
Impairment charges
2013
Termination
Benefits
Facility
Closure
Costs
Contract
Termination
Costs
Other Exit
Costs
4,787
3,282
2,993
—
—
11,062
—
—
788
935
42
230
3,326
7,906
296
728
—
2,117
176
5
—
—
1,995
12,256
—
—
2,298
10,841
Total
10,230
12,152
4,229
770
230
27,611
10,841
Total restructuring and other impairment charges
$ 11,062 $
1,995 $
12,256 $ 13,139 $ 38,452
2012
Termination
Benefits
Facility
Closure
Costs
Contract
Termination
Costs
Other Exit
Costs
(in thousands)
LMA restructuring program
2012 Restructuring program
2007 Arrow integration program
Total restructuring and other impairment charges
$
$
2,229 $
1,681
20
3,930 $
— $
274 $
—
230
758
(2,166)
Total
2,515
2,459
12
20
(21)
(1,937)
230 $
(1,134) $
11 $
3,037
Termination benefits include employee retention payments and severance payments and benefits for terminated
employees. Facility closure costs include general operating costs incurred subsequent to production shut-down as
well as equipment relocation and other associated costs. Contract termination costs include costs associated with
terminating existing leases and distributor agreements. Other costs include legal, outplacement and employee
relocation costs and other employee-related costs.
F-18
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Restructuring and other impairment charges by reportable segment for the twelve months ended December 31,
2014, 2013, and 2012 are set forth in the following table:
Restructuring and other impairment
charges
Vascular North America
Anesthesia/Respiratory North America
Surgical North America
$
EMEA
Asia
OEM
All other
2014
2013
2012
(Dollars in thousands)
7,069 $
1,379
—
6,375
1,305
—
1,741
5,348 $
3,207
6,525
16,122
603
588
6,059
(1,120)
983
278
1,995
442
83
376
Total restructuring and other impairment
charges
$
17,869 $
38,452 $
3,037
Note 5 — Inventories
Inventories at December 31, 2014 and 2013 consisted of the following:
Raw materials
Work-in-process
Finished goods
Less: Inventory reserves
Inventories, net
2014
2013
(Dollars in thousands)
$
68,191 $
58,526
242,750
369,467
(33,874)
70,209
53,672
242,113
365,994
(32,373)
$
335,593 $
333,621
Note 6 — Property, plant and equipment
The major classes of property, plant and equipment, at cost, at December 31, 2014 and 2013 are as follows:
Land, buildings and leasehold improvements
Machinery and equipment
Computer equipment and software
Construction in progress
Less: Accumulated depreciation
Property, plant and equipment, net
2014
2013
(Dollars in thousands)
194,923 $
199,741
$
320,999
107,743
51,834
675,499
322,060
102,527
55,092
679,420
(358,064)
(353,520)
$
317,435 $
325,900
F-19
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 7 — Goodwill and other intangible assets
Changes in the carrying amount of goodwill, by reporting segment, for the twelve months ended December 31,
2014 and 2013 are as follows:
Vascular
North
America
Anesthesia/
Respiratory
North
America
Surgical
North
America
EMEA
Asia
All Other
Total
(Dollars in thousands)
Balance as of December 31, 2013
Goodwill
$ 459,696
$
167,195
$ 250,506
$ 373,417
$ 136,946
$ 298,571
$1,686,331
Accumulated impairment losses
(219,527)
(107,073)
—
—
—
(5,528)
(332,128)
Goodwill related to acquisitions
Translation adjustment
Balance as of December 31, 2014
240,169
60,122
250,506
373,417
136,946
293,043
1,354,203
—
—
—
(681)
406
—
15,986
— $
16,392
(34,388)
(8,220)
(3,753)
(47,042)
Goodwill
459,696
166,514
250,912
339,029
144,712
294,818
1,655,681
Accumulated impairment losses
(219,527)
(107,073)
—
—
—
(5,528)
(332,128)
$ 240,169
$
59,441
$ 250,912
$ 339,029
$ 144,712
$ 289,290
$1,323,553
Vascular
North
America
Anesthesia/
Respiratory
North
America
Surgical
North
America
EMEA
Asia
All Other
Total
(Dollars in thousands)
Balance as of December 31, 2012
Goodwill
$ 407,090
$
167,942
$ 245,794
$ 353,282
$ 139,469
$ 257,003
1,570,580
Accumulated impairment losses
(219,527)
(107,073)
—
—
—
(5,528)
(332,128)
Goodwill related to acquisitions
Translation adjustment
Balance as of December 31, 2013
187,563
52,606
—
60,869
245,794
353,282
139,469
251,475
1,238,452
—
(747)
4,712
—
17,922
2,213
6,394
(8,917)
41,650
123,284
(82)
(7,533)
Goodwill
459,696
167,195
250,506
373,417
136,946
298,571
1,686,331
Accumulated impairment losses
(219,527)
(107,073)
—
—
—
(5,528)
(332,128)
$ 240,169
$
60,122
$ 250,506
$ 373,417
$ 136,946
$ 293,043
$1,354,203
Intangible assets at December 31, 2014 and 2013 consisted of the following:
Customer lists
In-process research and development
Intellectual property
Distribution rights
Trade names
Noncompete agreements
Gross Carrying Amount
Accumulated Amortization
2014
2013
2014
2013
$
624,574 $
(Dollars in thousands)
628,020 $ (192,876) $ (168,223)
68,694
467,068
16,101
396,269
337
68,786
435,869
16,797
407,879
337
—
—
(146,131)
(118,086)
(14,243)
(2,764)
(309)
(14,592)
(1,148)
(42)
$ 1,573,043 $ 1,557,688 $ (356,323) $ (302,091)
As of December 31, 2014, trade names of $359.3 million and all of the IPR&D are considered indefinite lived.
Acquired in-process research and development is indefinite-lived until the completion of the associated efforts, at which
point amortization of the carrying value of the technology will commence.
F-20
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In May 2012, the Company acquired Semprus BioSciences, a biomedical research and development company
that developed a polymer surface treatment technology intended to reduce thrombus related complications. As
previously disclosed, the Company experienced difficulties with respect to the development of the Semprus technology
and was devoting further research and testing towards attempting to resolve the issue. As a result of these efforts, the
Company believes it has resolved the issue and is focused on seeking regulatory approval and engaging in additional
research and development efforts to achieve commercialization of this technology. Despite this progress, significant
challenges to commercialization of the Semprus technology remain, and the Company ultimately may find it necessary
to recognize future impairment charges with respect to the related assets, which could be material. As of December 31,
2014, the Company has recorded IPR&D intangible assets of approximately $41.0 million related to this investment
which are recorded in intangible assets, net.
Amortization expense related to intangible assets was $60.9 million, $50.6 million, and $44.3 million for the
twelve months ended December 31, 2014, 2013 and 2012, respectively. Estimated annual amortization expense for
each of the five succeeding years is as follows:
2015
2016
2017
2018
2019
(Dollars in thousands)
55,750
$
55,400
54,950
54,700
54,500
Note 8 — Borrowings
The Company's debt obligations at December 31, 2014 and 2013 are set forth in the following table:
Senior Credit Facility:
Revolving credit facility, at a rate of 1.92% at December 31, 2014 and 2013, due
July 16, 2018
3.875% Convertible Senior Subordinated Notes due 2017
6.875% Senior Subordinated Notes due 2019
5.25% Senior Notes due 2024
Securitization program, at a rate of 0.92% at December 31, 2014 and 2013
Less: Unamortized debt discount on 3.875% Convertible Senior Subordinated
Notes due 2017
Current borrowings
Long-term borrowings
2014
2013
(Dollars in thousands)
$
200,000 $
680,000
399,898
250,000
250,000
4,700
400,000
250,000
—
4,700
1,104,598
1,334,700
(36,197)
(48,413)
1,068,401
1,286,287
(368,401)
(356,287)
$
700,000 $
930,000
F-21
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Senior Credit Facility
On July 16, 2013, the Company replaced its $775 million senior credit facility comprised of a $375 million term
loan and a $400 million revolving credit facility with a new $850 million senior credit facility consisting solely of a
revolving credit facility. In connection with this transaction, the Company incurred transaction fees of $6.4 million, which
were recorded as a deferred asset and are being amortized over the term of the facility. Additionally, during the third
quarter 2013, in connection with the early repayment of its $375 million term loan, the Company recognized expense
of approximately $1.3 million resulting from the write-off of unamortized debt issuance costs. The Company borrowed
$382.0 million at the inception of the new $850 million senior credit facility and an additional $298.0 million under the
senior credit facility to fund the purchase of the Vidacare business. In 2014, the Company used $245 million of the
proceeds from the issuance of the 5.25% Senior Notes due 2024 (the “2024 Notes”) to repay borrowings under its
revolving credit facility. See Note 3 to the consolidated financial statements.
The new $850 million senior credit facility bears interest at an applicable rate elected by the Company generally
equal to either the “base rate” (the greater of either the federal funds effective rate plus 0.5%, the prime rate or one
month LIBOR plus 1.0%) plus an applicable margin of 0.25% to 1.00%, or a “LIBOR rate” for the period corresponding
to the applicable interest period of the borrowings plus an applicable margin of 1.25% to 2.00%. As of December 31,
2014, the interest rate on the $850 million senior credit facility was 1.92% (comprised of the LIBOR rate of 0.17% plus
a margin of 1.75%). The obligations under the senior credit facility are guaranteed (subject to certain exceptions) by
substantially all of the material domestic subsidiaries of the Company and (subject to certain exceptions and limitations)
secured by a pledge on substantially all of the equity interests owned by the Company and each guarantor.
As of December 31, 2014, the Company had outstanding irrevocable standby letters of credit of approximately $6.0
million with various third parties. The letters of credit, which expire in 2015, reduce the amount of available funds under
our revolving credit facility by an equal amount.
Convertible Notes
On August 9, 2010, the Company issued $400.0 million of its 3.875% Convertible Senior Subordinated Notes due
2017 (the “Convertible Notes”). The Company pays interest on the Convertible Notes semi-annually on February 1
and August 1 of each year at a rate of 3.875% per year. The Convertible Notes mature on August 1, 2017. The
Convertible Notes are the Company’s unsecured senior subordinated obligations and are (i) not guaranteed by any
of the Company’s subsidiaries; (ii) subordinated in right of payment to all of the Company’s existing and future senior
indebtedness; and (iii) junior to the Company’s existing and future secured indebtedness to the extent of the value of
the assets securing such indebtedness.
The Convertible Notes are convertible at the option of the holder upon the occurrence of any of the following
circumstances (i) during any fiscal quarter, if the last reported sale price of the Company’s common stock for at least
20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately
preceding fiscal quarter exceeds 130% of the conversion price on each applicable trading day; or (ii) during the five
business day period after any five consecutive trading day period (the “measurement period”) in which the trading
price per $1,000 principal amount of Convertible Notes is less than 98% of the product of the last reported sale price
of the common stock and the applicable conversion rate on each trading day during the measurement period; or
(iii) upon the occurrence of specified corporate events; or (iv) at any time on or after May 1, 2017 up to and including
July 28, 2017. The Convertible Notes are convertible at a conversion rate of 16.3084 shares of common stock per
$1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of approximately $61.32. The
conversion rate is subject to adjustment upon certain events. Upon conversion, the Company’s conversion obligation
may be satisfied, at the Company’s option, in shares of common stock, cash or a combination of cash and shares of
common stock. The Company has elected a net-settlement method to satisfy its conversion obligation. Under the net-
settlement method, the Company will settle the $1,000 principal amount of the Convertible Notes in cash and settle
the excess conversion value in shares, plus cash in lieu of fractional shares.
F-22
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Since the fourth quarter 2013, the Company's last reported sale price has exceeded the 130% threshold described
above and accordingly the Convertible Notes have been classified as a current liability as of December 31, 2014 and
2013. The determination of whether or not the Convertible Notes are convertible as described above is made each
quarter until maturity, conversion or repurchase. Consequently, it is possible that the Convertible Notes may not be
convertible in one or more future quarters, in which case the Convertible Notes would again be classified as long-term
debt, unless one of the other conversion contingencies described above were to be satisfied. While the Company
believes it has sufficient liquidity to repay the principal amount due through a combination of utilizing its existing cash
on hand and accessing its credit facility, the Company's use of these funds could adversely affect its results of operations
and liquidity.
In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge
transactions with two counterparties pursuant to which it purchased call options for $88.0 million ($56.0 million net of
tax) in private transactions. The call options enable the Company to receive, in effect for no additional consideration,
shares of the Company’s common stock and/or cash from counterparties equal to the amounts of common stock and/
or cash related to the excess value over the conversion price that it would pay to the holders of the Convertible Notes
upon conversion. These call options will terminate upon the earlier of July 28, 2017 or the first day all of the related
Convertible Notes are no longer outstanding due to conversion or otherwise.
The Company also entered into privately negotiated warrant transactions with the same counterparties generally
relating to the same number of shares of common stock with each of the option counterparties. Under certain
circumstances, the Company may be required under the terms of the warrant transactions to issue up to 7,981,422
shares of common stock (subject to adjustments). The warrants have been divided into components that expire ratably
over a 180 day period commencing November 1, 2017. The strike price of the warrants is approximately $74.65 per
share of common stock, subject to customary anti-dilution adjustments. Proceeds received from the issuance of the
warrants totaled approximately $59.4 million.
The convertible note hedge and warrant transactions described above are intended to reduce the potential dilution
with respect to the Company’s common stock and/or reduce the Company’s exposure to potential cash payments that
the Company may be required to make upon conversion of the Convertible Notes by, in effect, increasing the conversion
price, from the Company’s economic standpoint, to $74.65 per share. However, the warrant transactions could have
a dilutive effect with respect to the common stock or, if the Company so elects, obligate the Company to make cash
payments to the extent that the market price per share of common stock exceeds $74.65 per share on any expiration
date of the warrants.
The Company allocated the proceeds of the Convertible Notes between the liability and equity components of the
debt. The initial $316.3 million liability component was determined based on the fair value of a similar debt instrument
excluding the conversion feature. The initial $83.7 million ($53.3 million net of tax) equity component represented the
difference between the fair value or carrying value of $316.3 million of the debt and the $400.0 million of proceeds.
The related debt discount of $83.7 million is being amortized under the interest method over the remaining life of the
Convertible Notes, which, at December 31, 2014, is approximately 2.6 years. An effective interest rate of 7.814% was
used to calculate the debt discount on the Convertible Notes. The following table provides interest expense amounts
related to the Convertible Notes for the periods presented:
(in millions)
Interest cost related to contractual interest coupon
Year Ended
December 31, 2014
$
15.5 $
Year Ended
December 31, 2013
Year Ended
December 31, 2012
15.5
15.5 $
Interest cost related to amortization of the discount
$
12.2 $
11.3 $
10.5
The following table provides the carrying value of the Convertible Notes as of December 31, 2014 and 2013:
(in millions)
Principal amount of the Convertible Notes
Unamortized discount
Net carrying amount
December 31, 2014
$
December 31, 2013
400.0
(48.4)
399.9 $
(36.2)
$
363.7 $
351.6
F-23
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
6.875% Senior Subordinated Notes
On June 13, 2011, the Company issued $250.0 million of 6.875% Senior Subordinated Notes due 2019 (the “2019
Notes”). The Company pays interest on the 2019 Notes semi-annually on June 1 and December 1. The 2019 Notes
will mature on June 1, 2019, unless earlier redeemed by the Company at its option, as described below, or purchased
by the Company at the holder’s option under specified circumstances following a Change of Control or Asset Sale
(each as defined in the indenture relating to the 2019 Notes).
The 2019 Notes constitute the Company’s general unsecured senior subordinated obligations and are
subordinated in right of payment to all of the Company’s existing and future senior indebtedness, including the
Company’s indebtedness under its senior credit facilities, and are equal in right of payment with all of the Company’s
existing and future senior subordinated indebtedness, including the Company’s Convertible Notes. The obligations
under the 2019 Notes are guaranteed, jointly and severally, by each of the Company’s existing and future domestic
subsidiaries that is a guarantor or other obligor under the Company’s senior credit facilities and by certain of the
Company’s other domestic subsidiaries. The guarantees are full and unconditional, subject to certain customary
automatic release provisions. The guarantees of the 2019 Notes are subordinated in right of payment to all of the
existing and future senior indebtedness of such Guarantors and are equal in right of payment with all of the future
senior subordinated indebtedness of such Guarantors. The 2019 Notes and the guarantees are junior to the existing
and future secured indebtedness of the Company and the Guarantors to the extent of the value of the assets securing
such indebtedness and will be structurally subordinated to all of the existing and future indebtedness and other liabilities
of the Company’s non-guarantor subsidiaries.
At any time on or after June 1, 2015, the Company may redeem some or all of the 2019 Notes at a redemption
price of 103.438% of the principal amount of the 2019 Notes subject to redemption, declining, in annual increments
of 1.719%%, to 100% of the principal amount on June 1, 2017, plus accrued and unpaid interest. In addition, at any
time prior to June 1, 2015, the Company may, on one or more occasions, redeem some or all of the 2019 Notes at a
redemption price equal to 100% of the principal amount of the 2019 Notes redeemed plus a “make-whole” premium
and any accrued and unpaid interest. The “make-whole” premium is the greater of (i) 1.0% of the principal amount of
the 2019 Notes subject to redemption or (ii) the excess, if any, over the principal amount of the 2019 Notes of the
present value, on the redemption date, of the sum of (a) the June 1, 2015 optional redemption price, plus (b) all required
interest payments on the 2019 Notes through June 1, 2015 (other than accrued and unpaid interest to the redemption
date), calculated based on a specified Treasury rate for the period most closely corresponding to the period from the
redemption date to June 1, 2015, plus 50 basis points.
The 2019 Notes contain covenants that, among other things, limit or restrict the Company’s ability, and the ability
of its subsidiaries, to incur debt, create liens, consolidate, merge or dispose of certain assets, make certain investments,
engage in acquisitions, and pay dividends on, repurchase or make distributions in respect of capital stock.
5.25% Senior Notes
On May 21, 2014, the Company issued $250 million of its 2024 Notes. The Company pays interest on the 2024
Notes semi-annually on June 15 and December 15, at a rate of 5.25% per year. The 2024 Notes will mature on June 15,
2024, unless earlier redeemed by the Company at its option, as described below, or purchased by the Company at
the holder’s option under specified circumstances following a Change of Control or Asset Sale (each as defined in the
indenture related to the 2024 Notes). The Company incurred transaction fees of approximately $4.5 million, including
underwriters’ discounts and commissions, in connection with the offering of the 2024 Notes, which were recorded as
a deferred asset and are being amortized over the term of the 2024 Notes. As previously mentioned, the Company
used $245.0 million of the proceeds to repay borrowings under its revolving credit facility.
The Company's obligations under the 2024 Notes are fully and unconditionally guaranteed, jointly and severally,
by each of the Company’s existing and future 100% owned domestic subsidiaries that is a guarantor or other obligor
under the Company’s revolving credit facility and by certain of the Company’s other 100% owned domestic subsidiaries.
The guarantees are subject to certain customary automatic release provisions.
F-24
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At any time on or after June 15, 2019, the Company may, on one or more occasions, redeem some or all of the
2024 Notes at a redemption price of 102.625% of the principal amount of the 2024 Notes subject to redemption,
declining, in annual increments of 0.875%, to 100% of the principal amount on June 15, 2022, plus accrued and unpaid
interest. In addition, at any time prior to June 15, 2019, the Company may, on one or more occasions, redeem some
or all of the 2024 Notes at a redemption price equal to 100% of the principal amount of the 2024 Notes redeemed,
plus a “make-whole” premium and any accrued and unpaid interest. The “make-whole” premium is the greater of
(a) 1.0% of the principal amount of the 2024 Notes subject to redemption or (b) the excess, if any, over the principal
amount of the 2024 Notes of the present value, on the redemption date, of the sum of (i) the June 15, 2019 optional
redemption price plus (ii) all required interest payments on the 2024 Notes through June 15, 2019 (other than accrued
and unpaid interest to the redemption date), calculated based on a specified Treasury rate, generally for the period
most nearly equal to the period from the redemption date to June 15, 2019, plus 50 basis points.
In addition, at any time prior to June 15, 2017, the Company may, on one or more occasions, redeem up to 35%
of the aggregate principal amount of the 2024 Notes, using the proceeds of specified types of Company equity offerings
and subject to specified conditions, at a redemption price equal to 105.25% of the principal amount of the Notes
redeemed, plus accrued and unpaid interest.
The indenture relating to the 2024 Notes contains covenants that, among other things, limit or restrict the
Company’s ability, and the ability of its subsidiaries, to incur debt, create liens, consolidate, merge or dispose of certain
assets, make certain investments, engage in acquisitions, and pay dividends on, repurchase or make distributions in
respect of capital stock.
Securitization Program
The Company has an accounts receivable securitization facility under which accounts receivable of certain
domestic subsidiaries are sold on a non-recourse basis to a special purpose entity (“SPE”), which is a bankruptcy-
remote, consolidated subsidiary of Teleflex. Accordingly, the assets of the SPE are not available to satisfy the obligations
of Teleflex or any of its subsidiaries. The SPE sells undivided interests in those receivables to an asset backed
commercial paper conduit for consideration of up to $50.0 million. As of December 31, 2014, the maximum amount
available for borrowing under this facility was $45.3 million. This facility is utilized from time to time for increased
flexibility in funding short term working capital requirements. The agreement governing the accounts receivable
securitization facility contains certain covenants and termination events. An occurrence of an event of default or a
termination event under this facility may give rise to the right of its counterparty to terminate this facility. As of
December 31, 2014 and 2013, the Company had $4.7 million of outstanding borrowings under its accounts receivable
securitization facility.
Fair Value of Long-Term Debt
The carrying amount of long-term debt reported in the consolidated balance sheet as of December 31, 2014 is
$1,068.4 million. The Company uses a discounted cash flow technique that incorporates a market interest yield curve
with adjustments for duration, optionality, and risk profile to determine the fair value of its debt. The Company’s implied
credit rating is a factor in determining the market interest yield curve. The following table provides the fair value of the
Company’s debt by fair value hierarchy level (see Note 10 to the consolidated financial statements for further
information) as of December 31, 2014 and 2013:
Level 1
Level 2
Total
Fair value of debt
December 31, 2014
December 31, 2013
(Dollars in thousands)
$
$
1,024,806 $
455,222
899,390
648,712
1,480,028 $
1,548,102
F-25
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Debt Maturities
As of December 31, 2014, the aggregate amounts of long-term debt, demand loans and debt under the Company’s
securitization program that will mature during each of the next four fiscal years and thereafter were as follows:
2015(1)
2016
2017
2018
2019 and thereafter
(Dollars in thousands)
404,598
$
—
—
200,000
500,000
(1)
The Convertible Notes are included in amounts that will mature in 2015 because, at December 31, 2014, they were convertible in accordance
with their terms, which are described in more detail above in this section under “Convertible Notes.”
Note 9 — Financial instruments
The Company uses derivative instruments for risk management purposes. Foreign currency forward contracts
are used to manage foreign currency transaction exposure. These derivative instruments are designated as cash flow
hedges and are recorded on the balance sheet at fair market value. The effective portion of the gains or losses on
derivatives is reported as a component of other comprehensive income and thereafter is recognized in the consolidated
statement of income (loss) in the period or periods during which the hedged transaction affects earnings. Gains and
losses on the derivatives representing either hedge ineffectiveness or hedge components excluded from the
assessment of effectiveness are recognized in the consolidated statement of income (loss) in the period in which such
gains and losses occur. As of December 31, 2014 and 2013, the Company had no open foreign currency forward
contracts.
The following table provides information as to the gains and losses attributable to derivatives in cash flow hedging
relationships that were reported in other comprehensive income (“OCI”) for the years ended December 31, 2014, 2013
and 2012:
Interest rate swap
Foreign currency exchange contracts
Total
After Tax Gain/(Loss)
Recognized in OCI
2014
2013
2012
$
$
(Dollars in thousands)
— $
— $
—
— $
381
381 $
7,032
(156)
6,876
See Note 11 to the consolidated financial statements for information on the location and amount of gains and
losses attributable to derivatives that were reclassified from accumulated other comprehensive income (“AOCI”) to
expense (income), net of tax.
For the years ended December 31, 2014, 2013 and 2012, there was no ineffectiveness related to the Company’s
derivatives.
During 2012, the Company entered into forward exchange contracts for Singapore dollars and U.S. dollars in
anticipation of its acquisition of the LMA business. In accordance with applicable accounting guidance, a forecasted
transaction is not eligible for hedge accounting if the forecasted transaction involves a business combination. Therefore,
gains and losses relating to this arrangement were recognized as incurred. The Company realized a pre-tax loss of
$7.6 million upon settlement of the forward exchange contracts in 2012.
F-26
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In 2011, the Company terminated its interest rate swap covering a notional amount of $350 million designated as
a hedge against the variability of the cash flows in the interest payments under the Company's previously outstanding
term loan. During 2012, all remaining losses associated with this interest rate swap were reclassified from AOCI to
the consolidated statement of income.
Concentration of Credit Risk
Concentration of credit risk with respect to trade accounts receivable is generally limited due to the Company’s
large number of customers and their diversity across many geographic areas. A portion of the Company’s trade accounts
receivable outside the United States, however, include sales to government-owned or supported healthcare systems
in several countries which are subject to payment delays. Payment is dependent upon the financial stability and
creditworthiness of those countries’ economies.
In the ordinary course of business, the Company grants non-interest bearing trade credit to customers on normal
credit terms. In an effort to reduce its credit risk, the Company (i) establishes credit limits for all of its customer
relationships, (ii) performs ongoing credit evaluations of its customers’ financial condition, (iii) monitors the payment
history and aging of its customers’ receivables, and (iv) monitors open orders against an individual customer’s
outstanding receivable balance.
An allowance for doubtful accounts is maintained for accounts receivable based on the Company’s historical
collection experience and expected collectability of the accounts receivable, considering the period an account is
outstanding, the financial position of the customer and information provided by credit rating services. The adequacy
of this allowance is reviewed each reporting period and adjusted as necessary. The allowance for doubtful accounts
was $8.8 million and $10.7 million at December 31, 2014 and 2013, respectively. The current portion of the allowance
for doubtful accounts at December 31, 2014 and 2013 of $2.4 million and $5.2 million, respectively, is presented as
part of accounts receivable, net. The allowance for doubtful accounts on receivables outstanding for greater than one
year at December 31, 2014 and 2013 of $6.4 million and $5.5 million, respectively, is presented as part of other assets.
In light of the disruptions in global economic markets, the Company instituted enhanced measures, within countries
for which the Company has collectability concerns, to facilitate customer-by-customer risk assessment when estimating
the allowance for doubtful accounts. Such measures included, among others, monthly credit control committee
meetings, at which customer credit risks are identified after review of, among other things, accounts that exceed
specified credit limits, payment delinquencies and other customer issues. In addition, with respect to certain of the
Company’s non-government customers, the Company instituted measures designed to reduce its risk exposures,
including issuing dunning letters, reducing credit limits, requiring that payments accompany orders and instituting legal
action with respect to delinquent accounts. With respect to government customers, the Company evaluates receivables
for potential collection risks associated with any limitations on the availability of government funding and reimbursement
practices.
Certain of the Company’s customers, particularly in Europe, have extended or delayed payments for products
and services already provided, resulting in potential collectability concerns regarding the Company's accounts
receivable from these customers, for the most part in Greece, Italy, Spain and Portugal. If the financial condition of
these customers or the healthcare systems in these countries deteriorate to the extent that the ability of an increasing
number of customers to make payments is uncertain, additional allowances may be required in future periods. The
aggregate net current and long-term accounts receivable for customers in Spain, Italy, Greece and Portugal and the
percentage of the Company’s total net current and long-term accounts receivable represented by the net current and
long-term accounts receivables for customers in those countries at December 31, 2014 and 2013 are as follows:
Current and long-term accounts receivable (net of allowances of $8.1
million and $7.9 million in 2014 and 2013, respectively) in Spain, Italy,
Greece and Portugal (1)
$
Percentage of total net current and long-term accounts receivables
76,190
$
27.3%
97,852
31.0%
(1)
was $11.3 million and $17.6 million, respectively, and is reported in other assets.
The long-term portion of accounts receivable, net from customers in Spain, Italy, Greece and Portugal at December 31, 2014 and 2013
December 31, 2014
December 31, 2013
(Dollars in thousands)
F-27
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
For the years ended December 31, 2014, 2013 and 2012, net revenues from customers in Spain, Italy, Greece
and Portugal were $150.5 million, $142.6 million and $132.5 million, respectively.
Note 10 — Fair value measurement
Fair value is defined as the exit price that would be received from the sale of an asset or paid to transfer a liability,
using assumptions that market participants would use in pricing an asset or liability. The FASB's fair value guidance
establishes a three-level hierarchy of the inputs (i.e., assumptions that market participants would use in pricing an
asset or liability) used to measure fair value, which is designed to maximize the use of observable inputs and minimize
the use of unobservable inputs in measuring fair value. The levels within the hierarchy are as follows:
Level 1 inputs — quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company
has the ability to access at the measurement date.
Level 2 inputs — inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be
observable for substantially the full term of the asset or liability. Level 2 inputs include:
1.
2.
3.
4.
Quoted prices for similar assets or liabilities in active markets.
Quoted prices for identical or similar assets or liabilities in markets that are not active.
Inputs other than quoted prices that are observable for the asset or liability.
Inputs that are derived principally from or corroborated by observable market data by correlation or other
means.
Level 3 inputs — unobservable inputs for the asset or liability. Unobservable inputs may be used to measure fair
value only when observable inputs are not available. Unobservable inputs reflect the Company’s views about the
assumptions market participants would use in pricing the asset or liability in achieving the fair value measurement
objective of an exit price perspective. An exit price is the price that would be received to sell an asset or paid to transfer
a liability.
The following tables provide information regarding the financial assets and liabilities reported at fair value and
measured on a recurring basis as of December 31, 2014 and 2013:
Total carrying
value at
December 31,
2014
Quoted prices in
active markets
(Level 1)
Significant
other
observable
inputs (Level 2)
Significant
unobservable
inputs (Level 3)
(Dollars in thousands)
Investments in marketable securities
$
6,863 $
6,863 $
Contingent consideration liabilities
33,433
—
— $
—
—
33,433
Total carrying
value at
December 31,
2013
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
Contingent consideration liabilities
$
6,150 $
20,313
6,150 $
—
— $
—
—
20,313
There were no transfers of financial assets or liabilities carried at fair value among Level 1, Level 2 or Level 3
inputs within the valuation hierarchy during the twelve months ended December 31, 2014 or 2013.
F-28
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides information regarding changes in financial liabilities, the fair value of which is based
on Level 3 inputs, related to contingent consideration in connection with various Company acquisitions, including those
described in Note 3 to the consolidated financial statements, during the twelve months ended December 31, 2014 and
2013:
Beginning balance – January 1
Initial estimate upon acquisition
Payment
Revaluations
Translation adjustment
Ending balance – December 31
Contingent consideration
2014
2013
(Dollars in thousands)
$
20,313 $
51,196
20,538
—
(7,418)
—
—
(18,880)
(11,982)
(21)
$
33,433 $
20,313
The Company reduced contingent consideration liabilities and selling, general and administrative expense by $8.2
million and $12.3 million for the years ended December 31, 2014 and 2013, respectively. These reductions were the
result of changes in the estimated probability that specified objectives on which the contingent consideration is
conditioned will be achieved.
See Note 8 to the consolidated financial statements for a discussion of the fair value of the Company’s long-term
debt.
Valuation Techniques Used to Determine Fair Value
The Company’s financial assets valued based upon Level 1 inputs are comprised of investments in marketable
securities held in trust, which are available to satisfy benefit obligations under Company benefit plans and other
arrangements. The investment assets of the trust are valued using quoted market prices.
The Company’s financial assets and liabilities valued based upon Level 2 inputs are comprised of foreign currency
forward contracts. The Company uses foreign currency forward contracts to manage currency transaction exposure.
The fair value of the foreign currency forward contracts represents the amount required to enter into offsetting contracts
with similar remaining maturities based on quoted market prices. The Company has taken into account the
creditworthiness of the counterparties in measuring fair value. As of December 31, 2014 and 2013, there are no open
forward contracts. See Note 9 to the consolidated financial statements for additional information.
The Company’s financial liabilities valued based upon Level 3 inputs are contingent consideration arrangements
pertaining to the Company’s acquisitions. The Company estimates that contingent consideration payments will occur
in 2015 and extend until 2029. As of December 31, 2014, the range of undiscounted amounts the Company could be
required to pay under contingent consideration arrangements is between $15.0 million and $83.0 million. The Company
determines the fair value of the liabilities for the contingent consideration based on a probability-weighted discounted
cash flow analysis. This fair value measurement is based on significant inputs not observable in the market, which
therefore constitute Level 3 inputs within the valuation hierarchy. The fair value of the contingent consideration liability
associated with possible future payments of contingent consideration is based on several factors including:
•
•
•
•
estimated cash flows projected from the success of market launches;
the estimated time and resources needed to complete the development of acquired technologies;
the uncertainty of obtaining regulatory approvals within the required time periods; and
the risk adjusted discount rate for fair value measurement.
F-29
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides information regarding the valuation techniques and inputs used in determining the
fair value of the contingent consideration liabilities measured by Level 3 inputs:
Contingent consideration
Discounted cash flow Discount rate
Valuation Technique
Unobservable Input
Range (Weighted Average)
2.3% - 10% (7.0%)
Probability of payment
0% - 100% (52.6%)
As of December 31, 2014, the Company recorded $33.4 million of total liabilities for contingent consideration, of
which $11.3 million and $22.1 million were recorded as the current portion of contingent consideration and Other
liabilities, respectively, in the consolidated balance sheet.
Note 11 — Shareholders' equity
The authorized capital of the Company is comprised of 200 million common shares, $1 par value, and 500,000
preference shares. No preference shares have been outstanding during the last four years.
In 2007, the Company’s Board of Directors authorized the repurchase of up to $300 million of outstanding Company
common stock. Repurchases of Company stock under the Board authorization may be made from time to time in the
open market and may include privately-negotiated transactions as market conditions warrant and subject to regulatory
considerations. The stock repurchase program has no expiration date and the Company’s ability to execute on the
program will depend on, among other factors, cash requirements for acquisitions, cash generation from operations,
debt repayment obligations, market conditions and regulatory requirements. In addition, under the Company’s senior
credit agreements, the Company is subject to certain restrictions relating to its ability to repurchase shares in the event
the Company’s consolidated leverage ratio (generally, the ratio of Consolidated Total Indebtedness to Consolidated
EBITDA, as defined in the senior credit agreement) exceeds certain levels, which may limit the Company’s ability to
repurchase shares under this Board authorization. Through December 31, 2014, no shares have been purchased
under this Board authorization.
Basic earnings per share is computed by dividing net income by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed in the same manner except that the weighted
average number of shares is increased for dilutive securities. The following table provides a reconciliation of basic to
diluted weighted average shares outstanding:
Basic
Dilutive effect of share based awards
Dilutive effect of 3.875% Convertible Notes and warrants
Diluted
2014
2013
2012
(Shares in thousands)
41,366
450
4,654
46,470
41,105
410
2,178
43,693
40,859
—
—
40,859
Weighted average shares that were antidilutive and therefore not included in the calculation of earnings per share
were approximately 6.3 million, 7.7 million and 9.0 million for the twelve months ended December 31, 2014, 2013 and
2012, respectively.
During periods in which the average market price of the Company's common stock is above the applicable
conversion price of the Convertible Notes, or $61.32 per share, the impact of conversion would be dilutive and the
dilutive effect of conversion of the Convertibles Notes is reflected in diluted earnings per share. As previously noted
in Note 8, the Company has elected the net settlement method of accounting for these conversions and as a result,
in these periods, under the treasury stock method, the Company calculates the number of shares issuable under the
terms of these notes based on the average market price of the stock during the period, and includes that number in
the total diluted shares outstanding for the period.
F-30
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge and
warrant agreements. The convertible note hedge economically reduces the dilutive impact of the Convertible Notes.
However, because the Company separately analyzes the impact of the convertible note hedge and the impact of the
warrant agreements on diluted weighted average shares outstanding, the effect of the convertible note hedges are
disregarded because their impact would be anti-dilutive. The reductions in diluted shares that would result from the
convertible note hedges are 2.7 million, 1.6 million, and 0.3 million for the twelve month periods ended December 31,
2014, 2013 and 2012, respectively. The treasury stock method is applied when the warrants are in-the-money, assuming
the proceeds from the exercise of the warrants are used to repurchase shares based on the average stock price during
the period. The strike price of the warrants is approximately $74.65 per share of common stock. Shares issuable upon
exercise of the warrants that were included in the total diluted shares outstanding were 1.9 million and 0.6 million for
the twelve month periods ended December 31, 2014 and 2013, respectively. The warrants had no dilutive impact for
the twelve month period ended December 31, 2012. For additional information regarding the convertible notes and
convertible note hedge and warrant agreements, see Note 8 to the consolidated financial statements.
The following tables provide information relating to the changes in accumulated other comprehensive income
(loss), net of tax, for the twelve months ended December 31, 2014 and 2013:
Cash Flow
Hedges
Pension and
Other
Postretirement
Benefit Plans
Foreign
Currency
Translation
Adjustment
Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2012
$
(381) $
(Dollars in thousands)
(127,257) $
(4,410) $
(132,048)
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income (loss)
Net current-period other comprehensive income (loss)
Balance at December 31, 2013
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income (loss)
Net current-period other comprehensive loss
(549)
25,464
(9,408)
15,507
930
381
—
594
(594)
—
4,756
30,220
(97,037)
—
(9,408)
(13,818)
5,686
21,193
(110,855)
(47,536)
(105,333)
(152,275)
2,829
—
2,235
(44,707)
(105,333)
(150,040)
Balance at December 31, 2014
$
— $
(141,744) $ (119,151) $
(260,895)
F-31
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides information relating to the reclassifications of losses/(gain) in accumulated other
comprehensive income into expense/(income), net of tax, for the twelve months ended December 31, 2014
and 2013:
Gains and losses on foreign exchange contracts:
Cost of goods sold
Total before tax
Taxes
Net of tax
Amortization of pension and other postretirement benefits items (1):
Actuarial losses
Prior-service costs
Transition obligation
Total before tax
Tax benefit
Net of tax
Total reclassifications, net of tax
December 31,
2014
December 31,
2013
(Dollars in thousands)
(705)
(705)
111
(594) $
884
884
46
930
4,385 $
7,211
(21)
—
4,364
(1,535)
2,829 $
2,235 $
(21)
5
7,195
(2,439)
4,756
5,686
$
$
$
$
(1)
These accumulated other comprehensive income components are included in the computation of net benefit cost of pension and other
postretirement benefit plans (see Note 14 to the consolidated financial statements for additional information).
Note 12 — Stock compensation plans
In May of 2014, the shareholders of the Company approved the Teleflex Incorporated 2014 Stock Incentive Plan
(the "2014 Plan") which replaced the Company's 2008 Stock Incentive Plan and 2000 Stock Compensation Plan (the
"Prior Plans"), under which stock options and restricted stock awards previously were granted. The 2014 Plan provides
for several different kinds of awards, including stock options, stock appreciation rights, stock awards and other stock-
based awards to directors, officers and key employees. Under the 2014 Plan, the Company is authorized to issue up
to 5.3 million shares of common stock, subject to adjustment in accordance with special share counting rules in the
2014 Plan that, among other things, (i) count shares underlying a stock option or stock appreciation right (each, an
"option award") as one share and each share underlying any other type of award (a "stock award") as 1.8 shares, (ii)
increases the shares the Company is authorized to issue by one or 1.8 shares for each share underlying an option
award or stock award, respectively, under the Prior Plans that have been cancelled, expired, settled in cash or forfeited
after December 31, 2013 and (iii) decrease the number of shares the Company is authorized to issue by one share
and 1.8 shares for each share underlying an option award or stock award, respectively, granted under the Prior Plans
between January 1, 2014 and the May 2, 2014 adoption of the 2014 Plan by the Company's stockholders. Options
granted under the 2014 Plan have an exercise price equal to the closing price of the Company's common stock on
the date of the grant. In 2014, the Company granted incentive and non-qualified options to purchase 343,580 shares
of common stock and granted restricted stock units representing 116,258 shares of common stock under the 2014
Plan. The unrecognized compensation expense for these awards as of the grant date was $17.6 million, which will be
recognized over the vesting period of the awards. As of December 31, 2014, 4,903,018 shares were available for future
grants under the 2014 Plan.
Share-based compensation expense for 2014, 2013 and 2012 was $12.2 million, $11.9 million and $8.6 million,
respectively, and is included in selling, general and administrative expenses. The total income tax benefit recognized
for share-based compensation arrangements for 2014, 2013 and 2012 was $3.3 million, $3.8 million and $2.7 million,
respectively. The higher share-based compensation expense in 2014 and 2013 is primarily due to the increase in the
market price of the Company’s common stock.
F-32
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The fair value of options granted in 2014, 2013 and 2012 was estimated at the date of grant using a multiple point
Black-Scholes option pricing model. The following weighted-average assumptions were used:
Risk-free interest rate
Expected life of option
Expected dividend yield
Expected volatility
2014
2013
2012
1.45%
0.75%
0.81%
4.89 years
4.87 years
4.85 years
1.34%
21.44%
1.73%
24.65%
2.28%
28.46%
The fair value for non-vested equity awards granted in 2014, 2013 and 2012 was estimated at the date of grant
based on the market price for the underlying stock on the grant date discounted for the risk free interest rate and the
present value of expected dividends over the vesting period. The following weighted-average assumptions were used:
Risk-free interest rate
Expected dividend yield
2014
2013
2012
0.65%
1.34%
0.36%
1.71%
0.37%
2.24%
The Company applied a simplified method to establish the beginning balance of the additional paid-in capital pool
(“APIC Pool”) related to the tax effects of employee stock-based compensation and to determine the subsequent
impact on the APIC Pool and consolidated statements of cash flows of the tax effects of employee stock-based
compensation awards that are outstanding.
The following table summarizes the option activity during 2014:
Shares Subject to
Options
Weighted Average
Exercise Price
Weighted
Average
Remaining
Contractual
Life In Years
Aggregate
Intrinsic
Value
(Dollars in thousands)
Outstanding, beginning of the year
1,279,480 $
Granted
Exercised
Forfeited or expired
Outstanding, end of the year
343,580
(362,719)
(26,669)
1,233,672
Exercisable, end of the year
647,425 $
65.05
101.45
60.86
87.37
75.93
64.82
7.3 $
6.1 $
47,974
32,373
The weighted average grant date fair value for options granted during 2014, 2013 and 2012 was $18.01, $14.30
and $11.78, respectively. The total intrinsic value of options exercised was $15.4 million, $4.1 million and $2.7 million
during 2014, 2013 and 2012, respectively. As of December 31, 2014, the unamortized share-based compensation cost
related to non-vested stock options, net of expected forfeitures, was $5.4 million, which is expected to be recognized
over a weighted-average period of 1.8 years. New shares of the Company’s common stock are issued upon exercises
of options.
The Company recorded $4.6 million of expense related to the portion of the shares underlying options that vested
during 2014, which is included in selling, general and administrative expenses.
F-33
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the non-vested restricted stock unit activity during 2014:
Number of
Non-Vested
Shares
Weighted
Average
Grant-Date
Fair Value
Weighted
Average
Remaining
Contractual
Life In Years
Aggregate
Intrinsic
Value
(Dollars in thousands)
Outstanding, beginning of the year
353,357 $
Granted
Vested
Forfeited
Outstanding, end of the year
116,258
(128,101)
(27,811)
313,703
62.49
97.87
57.57
71.63
76.80
1.2 $
36,019
The Company issued 116,258, 148,191 and 178,690 of non-vested restricted stock units in 2014, 2013 and 2012,
respectively, the majority of which vest on the third anniversary of the grant date (cliff vesting). The weighted average
grant-date fair value for non-vested restricted stock units granted during 2014, 2013 and 2012 was $97.87, $75.60
and $56.95, respectively. The unamortized share-based compensation cost related to non-vested restricted stock
units, net of expected forfeitures, was $10.4 million, which is expected to be recognized over a weighted-average
period of 1.8 years. The Company delivers shares of treasury stock upon vesting of the restricted stock award.
The Company recorded $7.6 million of expense related to the portion of the restricted stock units that vested
during 2014, which is included in selling, general and administrative expenses.
Note 13 — Income taxes
The following table summarizes the components of the provision for income taxes from continuing operations:
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
2014
2013
2012
(Dollars in thousands)
$
12,348 $
(2,996) $
1,912
30,748
(6,593)
3,435
(13,200)
1,736
36,422
(9,565)
(1,825)
(225)
21,046
3,623
30,389
(34,629)
(720)
(3,296)
$
28,650 $
23,547 $
16,413
At December 31, 2014, the cumulative unremitted earnings of subsidiaries outside the United States, which are
considered non-permanently reinvested and for which U.S. taxes have been provided, approximated $545.5 million. At
December 31, 2014, the cumulative unremitted earnings of subsidiaries outside the United States that are considered
permanently reinvested, and, accordingly, for which no income or withholding taxes have been provided, approximated
$966.2 million. Earnings considered permanently reinvested are expected to be reinvested indefinitely and, as a result,
no deferred tax liability has been recognized with regard to these earnings. It is not practical to determine the deferred
income tax liability on these earnings if, in the future, they are remitted to the United States because the income tax
liability to be incurred, if any, is dependent on circumstances existing when remittance occurs.
F-34
The following table summarizes the United States and non-United States components of income from continuing
operations before taxes:
United States
Other
2014
2013
2012
(Dollars in thousands)
(3,323) $
(23,875) $
243,985
179,053
(315,707)
150,338
220,110 $
175,730 $
(165,369)
$
$
Reconciliations between the statutory federal income tax rate and the effective income tax rate are as follows:
Federal statutory rate
Goodwill impairment
Tax effect of International items
State taxes, net of federal benefit
Uncertain tax contingencies
Contingent consideration reversals
Other, net
2014
2013
35.00%
35.00%
—
—
(22.54)
(14.83)
2.10
(0.83)
(1.18)
0.47
(0.32)
(4.06)
(2.04)
(0.35)
2012
35.00 %
(60.84)
11.28
(0.90)
4.85
—
0.68
13.02%
13.40%
(9.93)%
The effective income tax rate for 2014 was 13.0% compared to 13.4% for 2013. The effective income tax rate for
2014 was impacted by a benefit from a shift in the mix of income to jurisdictions with lower statutory tax rates, tax
benefits associated with U.S. federal tax return filings and, although to a lesser extent than 2013, the realization of net
tax benefits resulting from the expiration of statutes of limitation for U.S. state and foreign matters.
The effective income tax rate for 2013 was impacted by the realization of net tax benefits resulting from the
expiration of statutes of limitation for U.S. federal and state and for foreign matters, tax benefits associated with U.S.
and foreign tax return filings and the realization of tax benefits resulting from the resolution of a foreign tax matter.
The Company and its subsidiaries are routinely subject to examinations by various taxing authorities. In conjunction
with these examinations and as a regular practice, the Company establishes and adjusts reserves with respect to its
uncertain tax positions to address developments related to those positions. The Company realized a net benefit of
approximately $1.8 million, $7.1 million and $8.0 million in 2014, 2013 and 2012, respectively, as a result of reducing
its reserves with respect to uncertain tax positions. These reductions principally resulted from the expiration of a number
of applicable statutes of limitations.
F-35
The following table summarizes significant components of the Company’s deferred tax assets and liabilities at
December 31, 2014 and 2013:
Deferred tax assets:
Tax loss and credit carryforwards
Pension
Reserves and accruals
Other
Less: valuation allowances
Total deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Intangibles — stock acquisitions
Unremitted foreign earnings
Other
Total deferred tax liabilities
2014
2013
(Dollars in thousands)
$
112,796 $
104,043
63,669
42,296
28,416
(99,141)
148,036
31,143
384,734
116,595
10,756
543,228
39,310
38,684
27,886
(86,510)
123,413
26,550
400,297
147,326
12,030
586,203
Net deferred tax liability
$
(395,192) $
(462,790)
Under the tax laws of various jurisdictions in which the Company operates, deductions or credits that cannot be
fully utilized for tax purposes during the current year may be carried forward, subject to statutory limitations, to reduce
taxable income or taxes payable in a future tax year. At December 31, 2014, the tax effect of such carryforwards
approximated $112.8 million. Of this amount, $12.6 million has no expiration date, $0.3 million expires after 2014 but
before the end of 2019 and $99.9 million expires after 2019. A portion of these carryforwards consists of tax losses
and credits obtained by the Company as a result of acquisitions; the utilization of these carryforwards are subject to
an annual limitation imposed by Section 382 of the Internal Revenue Code, which limits a company’s ability to deduct
prior net operating losses following a more than 50 percent change in ownership. It is not expected that the Section 382
limitation will prevent the Company from utilizing its loss carryforwards. The determination of state net operating loss
carryforwards is dependent upon the United States subsidiaries’ taxable income or loss, the state’s proportion of taxable
net income and the application of state laws, which can change from year to year and impact the amount of such
carryforward.
The valuation allowance for deferred tax assets of $99.1 million and $86.5 million at December 31, 2014 and 2013,
respectively, relates principally to the uncertainty of the Company’s ability to utilize certain deferred tax assets, primarily
tax loss and credit carryforwards in various jurisdictions. The valuation allowance was calculated in accordance with
applicable accounting standards, which require that a valuation allowance be established and maintained when it is
“more likely than not” that all or a portion of deferred tax assets will not be realized.
F-36
Uncertain Tax Positions: The following table is a reconciliation of the beginning and ending balances for liabilities
associated with unrecognized tax benefits for the twelve month periods ending December 31, 2014, 2013 and 2012:
Balance at January 1
Increase in unrecognized tax benefits related to prior years
Decrease in unrecognized tax benefits related to prior years
Unrecognized tax benefits related to the current year
Reductions in unrecognized tax benefits due to settlements
Reductions in unrecognized tax benefits due to lapse of applicable
statute of limitations
Increase (decrease) in unrecognized tax benefits due to foreign
currency translation
Balance at December 31
2014
2013
2012
(Dollars in thousands)
62,108 $
55,771 $
$
—
—
910
(132)
—
—
1,838
—
75,026
1,110
(6,134)
4,256
(8,816)
(3,235)
(8,433)
(3,503)
(2,230)
258
169
$
51,084 $
55,771 $
62,108
The total liabilities associated with the unrecognized tax benefits that, if recognized would impact the effective tax
rate for continuing operations, were $21.6 million at December 31, 2014.
The Company accrues interest and penalties associated with unrecognized tax benefits in income tax expense
in the consolidated statements of operations, and the corresponding liability is included in the consolidated balance
sheets. The interest (benefit) expense (net of related tax benefits where applicable) and penalties reflected in income
from continuing operations for the year ended December 31, 2014 was $1.0 million and $(0.8) million, respectively;
for the year ended December 31, 2013 was $1.3 million and $(0.8) million, respectively; and for the year ended
December 31, 2012 was $0.8 million and $0.2 million, respectively. The corresponding liabilities in the consolidated
balance sheets for interest and penalties at December 31, 2014 were $6.2 million and $5.0 million, respectively, and
at December 31, 2013 were $5.7 million and $6.0 million, respectively.
The taxable years that remain subject to examination by major tax jurisdictions are as follows:
United States
Canada
China
Czech Republic
France
Germany
India
Ireland
Italy
Malaysia
Singapore
Beginning
Ending
2010
2005
2009
2011
2012
2007
2008
2010
2010
2010
2010
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
The Company and its subsidiaries are routinely subject to income tax examinations by various taxing authorities. As
of December 31, 2014, the most significant tax examinations in process are in the jurisdictions of Austria, Canada,
Germany and the United States. The date at which these examinations may be concluded and the ultimate outcome
of such examinations is uncertain. As a result of the uncertain outcome of these ongoing examinations, future
examinations or the expiration of statutes of limitation, it is reasonably possible that the related unrecognized tax
benefits for tax positions taken could materially change from those recorded as liabilities at December 31, 2014. Due
to the potential for resolution of certain examinations, and the expiration of various statutes of limitation, it is reasonably
possible that the Company’s unrecognized tax benefits may change within the next twelve months by a range of zero
to $2.6 million.
F-37
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 14 — Pension and other postretirement benefits
The Company has a number of defined benefit pension and other postretirement plans covering eligible U.S. and
non-U.S. employees. The defined benefit pension plans are noncontributory. The benefits under these plans are based
primarily on years of service and employees’ pay near retirement. The Company’s funding policy for U.S. plans is to
contribute annually, at a minimum, amounts required by applicable laws and regulations. Obligations under non-U.S.
plans are systematically provided for by depositing funds with trustees or by book reserves. As of December 31, 2014,
the Company’s U.S. defined benefit pension plans and the Company’s other postretirement benefit plans, except
certain postretirement benefit plans covering employees subject to a collective bargaining agreement, are frozen.
The Company and certain of its subsidiaries provide medical, dental and life insurance benefits to pensioners and
survivors. The associated plans are unfunded and approved claims are paid from Company funds.
The following table provides information regarding the net benefit cost of pension and postretirement benefit plans
for continuing operations:
2014
Pension
2013
Other Benefits
2012
2014
2013
2012
(Dollars in thousands)
Service cost
Interest cost
Expected return on plan assets
Net amortization and deferral
Curtailment gain
Settlement loss
Net benefit cost
$
1,794 $
1,819 $
2,331 $
424 $
663 $
18,000
16,842
16,561
2,169
(25,006)
4,371
—
—
$
(841) $
(23,122)
5,847
—
—
1,386 $
(20,245)
6,474
(197)
106
—
(7)
—
—
2,707
—
1,348
—
—
704
2,122
—
761
—
—
5,030 $
2,586 $
4,718 $
3,587
The following table provides the weighted average assumptions for United States and foreign plans used in
determining net benefit cost:
Discount rate
Rate of return
Initial healthcare trend rate
Ultimate healthcare trend rate
2014
Pension
2013
5.0%
8.3%
—%
—%
4.3%
8.3%
—%
—%
Other Benefits
2012
2014
2013
2012
4.3%
8.3%
—%
—%
4.7%
—%
7.5%
5.0%
3.8%
—%
8.2%
5.0%
4.0%
—%
8.5%
5.0%
F-38
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides summarized information with respect to the Company’s pension and postretirement
benefit plans, measured as of December 31, 2014 and 2013:
Benefit obligation, beginning of year
$
367,731 $
397,184 $
52,448 $
55,609
Pension
Other Benefits
2014
2013
2014
2013
Under Funded
Under Funded
(Dollars in thousands)
Service cost
Interest cost
Actuarial loss (gain)
Currency translation
Benefits paid
Medicare Part D reimbursement
Administrative costs
Projected benefit obligation, end of year
Fair value of plan assets, beginning of year
Actual return on plan assets
Contributions
Benefits paid
Settlements paid
Administrative costs
Currency translation
1,794
18,000
82,922
(2,973)
(17,988)
—
—
(1,522)
(1,216)
447,964
305,481
34,332
9,539
367,731
276,863
28,813
17,724
(17,988)
(17,004)
—
(1,522)
(1,012)
—
(1,216)
301
1,819
16,842
(30,755)
861
424
2,169
1,273
—
663
2,707
(3,833)
—
(17,004)
(3,287)
(2,860)
127
—
162
—
53,154
52,448
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Fair value of plan assets, end of year
328,830
305,481
Funded status, end of year
$ (119,134) $
(62,250) $
(53,154) $
(52,448)
The following table sets forth the amounts recognized in the consolidated balance sheet with respect to the plans:
Pension
Other Benefits
2014
2013
2014
2013
(Dollars in thousands)
Payroll and benefit-related liabilities
$
(1,779) $
(1,819) $
(3,268) $
(3,381)
Pension and postretirement benefit liabilities
Accumulated other comprehensive loss
(117,355)
213,117
(60,431)
144,866
(49,886)
(49,067)
8,353
7,073
$
93,983 $
82,616 $
(44,801) $
(45,375)
F-39
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following tables set forth the amounts recognized in accumulated other comprehensive income (loss) with
respect to the plans:
Pension
Prior Service
Cost (Credit)
Net (Gain)
or Loss
Deferred
Taxes
(Dollars in thousands)
Accumulated
Other
Comprehensive
(Income) Loss,
Net of Tax
Balance at December 31, 2012
$
216 $ 186,700 $ (67,567) $
119,349
Reclassification adjustments related to components of
Net Periodic Benefit Cost recognized during the
period:
Net amortization and deferral
Amounts arising during the period:
Actuarial changes in benefit obligation
Impact of currency translation
Balance at December 31, 2013
Reclassification adjustments related to components of
Net Periodic Benefit Cost recognized during the
period:
Net amortization and deferral
Amounts arising during the period:
Actuarial changes in benefit obligation
Impact of currency translation
(34)
(5,813)
1,947
(3,900)
—
—
(36,446)
13,206
243
(66)
182
144,684
(52,480)
(23,240)
177
92,386
(34)
(4,337)
1,539
(2,832)
—
—
73,596
(26,131)
(974)
265
47,465
(709)
Balance at December 31, 2014
$
148 $ 212,969 $ (76,807) $
136,310
Other Benefits
Prior Service
Cost (Credit)
Initial
Obligation
Net (Gain) or
Loss
Deferred
Taxes
Accumulated
Other
Comprehensive
(Income) Loss,
Net of Tax
Balance at December 31, 2012
$
(38) $
(Dollars in thousands)
5 $
12,287 $ (4,346) $
7,908
Reclassification adjustments related to
components of Net Periodic Benefit Cost
recognized during the period:
Net Amortization and deferral
Amounts Arising During the period:
Actuarial changes in benefit obligation
Balance at December 31, 2013
Reclassification adjustments related to
components of Net Periodic Benefit Cost
recognized during the period:
Net Amortization and deferral
Amounts Arising During the period:
Actuarial changes in benefit obligation
55
—
17
55
—
(5)
(1,398)
492
(856)
—
—
—
—
(3,833)
7,056
1,432
(2,422)
(2,401)
4,651
(48)
(4)
3
1,273
(493)
780
5,434
Balance at December 31, 2014
$
72 $
— $
8,281 $ (2,919) $
F-40
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides the weighted average assumptions for United States and foreign plans used in
determining benefit obligations:
Discount rate
Rate of compensation increase
Initial healthcare trend rate
Ultimate healthcare trend rate
Pension
Other Benefits
2014
2013
2014
2013
4.1%
3.0%
—
—
5.0%
3.0%
—
—
4.0%
—
7.3%
5.0%
4.7%
—
7.0%
5.0%
The discount rate represents the interest rate used to determine the present value of future cash flows currently
expected to be required to settle the Company’s pension and other benefit obligations. The weighted average discount
rates for United States pension plans and other benefit plans of 4.24% and 3.97%, respectively, were established by
comparing the projection of expected benefit payments to the AA Above Median yield curve as of December 31, 2014.
The expected benefit payments are discounted by each corresponding discount rate on the yield curve. For payments
beyond 30 years, the Company extends the curve assuming that the discount rate derived in year 30 is extended to
the end of the plan’s payment expectations. Once the present value of the string of benefit payments is established,
the Company determines the single rate on the yield curve that, when applied to all obligations of the plan, will exactly
match the previously determined present value.
As part of the evaluation of pension and other postretirement assumptions, the Company applied assumptions
for mortality and healthcare cost trends that incorporate generational white and blue collar mortality trends. In
determining its benefit obligations, the Company used generational tables that take into consideration increases in
plan participant longevity. During 2014, the Society of Actuaries published new mortality tables (RP-2014), which
generally reflect longer life expectancy than was projected by past tables (RP-2000). The Company used the new
mortality tables when applying mortality assumptions to the calculation of its projected benefit obligations as of
December 31, 2014, which resulted in a 9% increase to the Company’s projected benefit obligation.
The Company’s assumption for the Expected Return on Plan Assets is primarily based on the determination of
an expected return for its current portfolio. This determination is made using assumptions for return and volatility of
the portfolio. Asset class assumptions are set using a combination of empirical and forward-looking analysis. To the
extent historical results have been affected by unsustainable trends or events, the effects of those trends are quantified
and removed. The Company applies a variety of models for filtering historical data and isolating the fundamental
characteristics of asset classes. These models provide empirical return estimates for each asset class, which are then
reviewed and combined with a qualitative assessment of long term relationships between asset classes before a return
estimate is finalized. The qualitative analysis is intended to provide an additional means for addressing the effect of
unrealistic or unsustainable short-term valuations or trends, resulting in return levels and behavior the Company
believes are more likely to prevail over long periods. Effective in 2015, the Company changed its Expected Return on
Plan Assets of the United States pension plans from 8.50% to 8.25% to reflect modifications to assumptions resulting
from the analysis described above. This change had no impact on the results for the year ended December 31, 2014.
Increasing the assumed healthcare trend rate by 1% would increase the benefit obligation at December 31, 2014
by $4.4 million and would increase the 2014 benefit expense by $0.2 million. Decreasing the trend rate by 1% would
decrease the benefit obligation at December 31, 2014 by $3.8 million and would decrease the 2014 benefit expense
by $0.2 million.
The accumulated benefit obligation for all United States and foreign defined benefit pension plans was $447.4
million and $367.3 million for 2014 and 2013, respectively. All of our pension plans had accumulated benefit obligations
in excess of their respective plan assets as of December 31, 2014 and 2013.
F-41
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s investment objective is to achieve an enhanced long-term rate of return on plan assets, subject
to a prudent level of portfolio risk, for the purpose of enhancing the availability of benefits for participants. These
investments are held primarily in equity and fixed income mutual funds. The Company’s other investments are largely
comprised of a hedge fund of funds and a structured credit fund. The equity funds are diversified in terms of domestic
and international equity securities, as well as small, middle and large capitalization stocks. The domestic mutual funds
held in the plans are subject to the diversification standards and industry limitations on concentration of holdings set
forth in the Investment Company Act of 1940, as amended, and SEC staff guidance. The Company’s target allocation
percentage is as follows: equity securities (45%); fixed-income securities (35%) and other securities (20%). Equity
funds are held for their expected return over inflation. Fixed-income funds are held for diversification relative to equities
and as a partial hedge of interest rate risk to plan liabilities. The other investments are held to further diversify assets
within the plans and are designed to provide a mix of equity and bond like return with a bond like risk profile. The plans
may also hold cash to meet liquidity requirements. Actual performance may not be consistent with the respective
investment strategies. Investment risks and returns are measured and monitored on an ongoing basis through annual
liability measurements and investment portfolio reviews to determine whether the asset allocation targets continue to
represent an appropriate balance of expected risk and reward.
The following table provides the fair values of the Company’s pension plan assets at December 31, 2014 by asset
category:
Asset Category (a)
Cash
Money market funds
Equity securities:
Managed volatility (b)
United States small/mid-cap equity (c)
World Equity (excluding United States) (d)
Common Equity Securities – Teleflex Incorporated
Diversified United Kingdom Equity
Diversified Global
Emerging Markets
Fixed income securities:
Long duration bond fund (e)
UK corporate bond fund
UK Government bond fund
High yield bond fund (f)
Emerging markets debt fund (g)
Corporate, government and foreign bonds
Asset backed – home loans
Other types of investments:
Structured credit (h)
Hedge fund of funds (i)
UK Property Fund (j)
Multi asset fund (k)
Other
Total
Fair Value Measurements
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
659 $
(Dollars in thousands)
659 $
— $
31
31
83,068
20,312
26,064
13,422
875
2,884
1,266
92,553
2,719
5,078
11,618
8,531
81
782
31,176
23,171
1,549
2,986
5
83,068
20,312
26,064
13,422
875
2,884
1,266
92,553
2,719
5,078
11,618
2,986
—
—
—
—
—
—
—
—
—
—
—
—
—
8,531
81
782
—
—
1,549
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
31,176
23,171
—
—
5
$ 328,830 $
263,535 $ 10,943 $
54,352
F-42
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides the fair values of the Company’s pension plan assets at December 31, 2013 by asset
category:
Asset Category (a)
Cash
Money market funds
Equity securities:
Managed volatility (b)
United States small/mid-cap equity (c)
World Equity (excluding United States) (d)
Common Equity Securities – Teleflex Incorporated
Diversified United Kingdom Equity
Diversified Global
Emerging Markets
Fixed income securities:
Long duration bond fund (e)
UK corporate bond fund
UK Government bond fund
High yield bond fund (f)
Emerging markets debt fund (g)
Corporate, government and foreign bonds
Asset backed – home loans
Other types of investments:
Structured credit (h)
Hedge fund of funds (i)
UK Property Fund (j)
Multi asset fund (k)
Other
Total
Fair Value Measurements
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
472 $
(Dollars in thousands)
472 $
— $
310
310
77,140
19,760
30,183
10,972
928
2,319
1,270
76,608
2,569
4,455
12,754
9,003
87
847
29,109
22,540
1,402
2,748
5
77,140
19,760
30,183
10,972
928
2,319
1,270
76,608
2,569
4,455
12,754
—
—
—
—
—
—
2,748
—
—
—
—
—
—
—
—
—
—
—
—
—
9,003
87
847
—
—
1,402
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
29,109
22,540
—
—
5
$ 305,481 $
242,488 $ 11,339 $
51,654
(a)
(b)
(c)
(d)
Information on asset categories described in notes (b)-(k) is derived from prospectuses and other material
provided by the respective funds comprising the respective asset categories.
This category comprises mutual funds that invest in securities of United States and non-United States
companies of all capitalization ranges that exhibit relatively low volatility.
This category comprises a mutual fund that invests at least 80% of its net assets in equity securities of small
and mid-sized companies. The fund invests in common stocks or exchange traded funds holding common
stock of United States companies with market capitalizations in the range of companies in the Russell 2500
Index.
This category comprises a mutual fund that invests at least 80% of its net assets in equity securities of foreign
companies. These securities may include common stocks, preferred stocks, warrants, exchange traded funds
based on an international equity index and derivative instruments whose value is based on an international
equity index and derivative instruments whose value is based on an underlying equity security or a basket of
equity securities. The fund invests in securities of foreign issuers located in developed and emerging market
countries. However, the fund will not invest more than 30% of its assets in the common stocks or other equity
securities of issuers located in emerging market countries.
F-43
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(e)
(f)
(g)
(h)
(i)
This category comprises a mutual fund that invests in instruments or derivatives having economic characteristics
similar to fixed income securities. The fund invests in investment grade fixed income instruments, including
securities issued or guaranteed by the United States Government and its agencies and instrumentalities,
corporate bonds, asset-backed securities, exchange traded funds, mortgage-backed securities and
collateralized mortgage-backed securities. The fund invests primarily in long duration government and corporate
fixed income securities, and uses derivative instruments, including interest rate swap agreements and Treasury
futures contracts, for the purpose of managing the overall duration and yield curve exposure of the Fund’s
portfolio of fixed income securities.
This category comprises a mutual fund that invests at least 80% of its net assets in higher-yielding fixed income
securities, including corporate bonds and debentures, convertible and preferred securities and zero coupon
obligations.
This category comprises a mutual fund that invests at least 80% of its net assets in fixed income securities of
emerging market issuers, primarily in United States dollar-denominated debt of foreign governments,
government-related and corporate issuers in emerging market countries and entities organized to restructure
the debt of those issuers.
This category comprises a fund that invests primarily in collateralized debt obligations (“CDOs”) and other
structured credit vehicles. The fund investments may include fixed income securities, loan participants, credit-
linked notes, medium-term notes, pooled investment vehicles and derivative instruments.
This category comprises a hedge fund that invests in various other hedge funds. As of December 31, 2014
and 2013:
•
approximately 33% and 28%, respectively, of the assets of the hedge fund were invested in equity
hedge based funds, including equity long/short and equity market neutral strategies;
•
•
•
approximately 10% and 18%, respectively, of the assets were held in tactical/directional based funds,
including global macro, long/short equity, commodity and systematic quantitative strategies;
approximately 24% and 25%, respectively, of the assets were held in relative value based funds,
including convertible and fixed income arbitrage, credit long/short and volatility arbitrage strategies;
approximately 33% and 23%, respectively, of the assets were held in funds with an event driven
strategy; and
•
approximately 6% of the assets were held in cash as of December 31, 2013.
(j)
(k)
This category comprises a fund that invests primarily in UK freehold and leasehold property. The fund does not
invest in higher risk activities such as developments. The fund may invest in indirect vehicles and property
derivatives.
This category comprises a mutual fund that invests primarily in equities, bonds and alternatives.
The following table provides a reconciliation of changes in pension assets measured at fair value on a recurring
basis, using Level 3 inputs, from December 31, 2012 through December 31, 2014:
Balance at December 31, 2012
Unrealized gain on assets
Balance at December 31, 2013
Unrealized gain on assets
Balance at December 31, 2014
(Dollars in thousands)
48,198
$
3,456
51,654
2,698
54,352
$
The Company’s contributions to United States and foreign pension plans during 2015 are expected to be
approximately $2.9 million. Contributions to postretirement healthcare plans during 2015 are expected to be
approximately $3.3 million.
The following table provides information about the Company’s expected benefit payments for U.S. and foreign
plans for each of the five succeeding years and the aggregate of the five years thereafter, net of the annual average
Medicare Part D subsidy of approximately $0.2 million:
F-44
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2015
2016
2017
2018
2019
Years 2020 — 2024
Pension
Other Benefits
(Dollars in thousands)
$
17,841 $
18,449
19,023
19,653
20,472
3,268
3,362
3,334
3,367
3,416
114,185
18,229
The Company maintains a number of defined contribution savings plans covering eligible United States and non-
United States employees. The Company partially matches employee contributions. Costs related to these plans were
$11.5 million, $12.1 million and $10.1 million for 2014, 2013 and 2012, respectively.
Note 15 — Commitments and contingent liabilities
Operating leases: The Company uses various leased facilities and equipment in its operations. The lease terms
for these leased assets vary depending on the terms of the applicable lease agreement. At December 31, 2014, the
Company had no residual value guarantees related to its operating leases.
Future minimum lease payments as of December 31, 2014 under noncancelable operating leases are as follows:
2015
2016
2017
2018
2019 and thereafter
$
Future Lease Payments
(Dollars in thousands)
27,706
23,292
18,846
15,474
32,182
Rental expense under operating leases was $29.4 million, $26.4 million and $24.0 million in 2014, 2013 and 2012,
respectively.
The Company entered into a build-to-suit lease pertaining to a U.S. operating facility in August 2013, and
construction on the facility commenced in September 2013. The estimated fair value of the Company’s percentage of
the construction costs to complete the build-to-suit lease was approximately $28.3 million. For accounting purposes,
the Company was deemed the owner of the asset during the construction period and was required to record the
estimated fair value of the Company’s percentage of the construction costs as construction in progress during the
construction period and a related liability in the same amount. This noncash activity is not reflective of the Company’s
cash obligations, but represents the landlord’s costs to construct the Company’s portion of the building and tenant
improvements. The construction pertaining to the build-to-suit leased facility was completed in the fourth quarter 2014,
at which point the Company derecognized the assets and related liabilities pertaining to the leased operating facility.
Environmental: The Company is subject to contingencies as a result of environmental laws and regulations that
in the future may require the Company to take further action to correct the effects on the environment of prior disposal
practices or releases of chemical or petroleum substances by the Company or other parties. Much of this liability results
from the United States Comprehensive Environmental Response, Compensation and Liability Act, often referred to
as Superfund, the United States 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.
F-45
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 December 31, 2014 and 2013, the Company has recorded discounted liabilities of $1.3 million and $2.5 million,
respectively, in accrued liabilities and $6.5 million and $5.8 million, respectively, in other liabilities relating to these
matters. Considerable uncertainty exists with respect to these liabilities and, if adverse changes in circumstances
occur, potential liability may exceed the amount accrued as of December 31, 2014. The time frame over which the
accrued amounts may be paid out, based on past history, is estimated to be 15-20 years.
Litigation: The Company is a party to various lawsuits and claims arising in the normal course of business. These
lawsuits and claims include actions involving product liability, intellectual property, employment and environmental
matters. As of December 31, 2014 and 2013, the Company has accrued liabilities of approximately $6.0 million and
$6.8 million, respectively, in connection with these matters, representing its best estimate of the cost within the range
of estimated possible loss that will be incurred to resolve these matters. Of the amounts accrued as of December 31,
2014 and 2013, $2.4 million and $1.4 million, respectively, pertain to discontinued operations.
In 2006, the Company was named as a defendant in a wrongful death product liability lawsuit filed in the Louisiana
State District Court for the Parish of Calcasieu, involving a product manufactured by the Company’s former marine
business. In September 2014, the case was tried before a jury, which returned a verdict in favor of the Company. The
plaintiff subsequently filed a motion for a new trial, which was granted, and the case was re-tried before a jury in
December 2014. On December 5, 2014, the jury returned a verdict in favor of the plaintiff, awarding $125,000 in
compensatory damages and $23 million in punitive damages, plus pre- and post-judgment interest on the compensatory
damages and post-judgment interest on the punitive damages. The Company has filed post-trial motions seeking to
overturn the verdict or reduce the amount of damages, which the Company believes are excessive. If the Court denies
the motions, the Company intends to pursue an appeal. As of December 31, 2014, the Company has accrued a liability
representing its best estimate of any probable loss associated with this matter which, is included in the Company’s
accrued liabilities relating to discontinued operations discussed in the preceding paragraph. The Company believes
that any liability arising from this matter in excess of $10 million will be covered by the Company’s product liability
insurance.
Based on information currently available, advice of counsel, established reserves and other resources, the
Company does not believe that the outcome of any outstanding litigation and claims is likely to be, individually or in
the aggregate, material to its business, financial condition, results of operations or liquidity. However, in the event of
unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters,
if unfavorable, may be materially adverse to the Company’s business, financial condition, results of operations or
liquidity. Legal costs such as outside counsel fees and expenses are charged to selling, general and administrative
expenses in the period incurred.
Tax audits and examinations: The Company and its subsidiaries are routinely subject to tax examinations by
various taxing authorities. As of December 31, 2014, the most significant tax examinations in process were in Austria,
Canada, Germany and the United States. In conjunction with these examinations and as a regular and routine practice,
the Company may establish reserves or adjust existing reserves with respect to uncertain tax positions. Accordingly,
developments occurring with respect to these examinations, including resolution of uncertain tax positions, could result
in increases or decreases to the Company’s recorded tax liabilities, which could impact the Company’s financial results.
Other: The Company has various purchase commitments for materials, supplies and items of permanent
investment incident to the ordinary conduct of business. On average, such commitments are not at prices in excess
of current market prices.
Note 16 — Business segments and other information
An operating segment is a component of the Company (a) that engages in business activities from which it may
earn revenues and incur expenses, (b) whose operating results are regularly reviewed by the Company’s chief operating
decision maker to make decisions about resources to be allocated to the segment and to assess its performance, and
(c) for which discrete financial information is available. The Company does not evaluate its operating segments using
discrete asset information.
F-46
Effective January 1, 2014, the Company realigned its operating segments due to changes in the Company’s
internal financial reporting structure. The Company’s North American Vascular, Anesthesia/Respiratory and Surgical
businesses, which previously comprised much of the former Americas reportable segment, are now separate reportable
segments. As a result, the Company now has six reportable segments: Vascular North America, Anesthesia/
Respiratory North America, Surgical North America, EMEA, Asia and OEM. Certain operating segments are not material
and are therefore included in the “All other” line item in tabular presentations of segment information. Additionally, the
Company changed the allocation methodology for certain corporate costs, including manufacturing variances and
research and development costs, among its businesses to improve accountability, which resulted in changes to the
previously reported segment operating profit. All prior comparative periods have been restated to reflect these changes.
The Company’s reportable segments other than the OEM segment design, manufacture and distribute medical
devices primarily used in critical care, surgical applications and cardiac care and generally serve two end markets:
hospitals and healthcare providers, and home health. The products of these segments are most widely used in the
acute care setting for a range of diagnostic and therapeutic procedures and in general and specialty surgical
applications. The Company’s OEM segment designs, manufactures and supplies devices and instruments for other
medical device manufacturers.
The following tables present the Company’s segment results for the twelve months ended December 31,
2014, 2013 and 2012:
Revenue
Vascular North America
Anesthesia/Respiratory North America
Surgical North America
EMEA
Asia
OEM
All other
Year Ended December 31:
2014
2013
2012
(Dollars in thousands)
$
259,227 $
231,112 $
222,749
222,650
150,121
593,065
237,696
143,966
233,107
228,485
146,058
557,427
207,207
131,173
194,809
180,363
143,875
510,248
173,721
140,230
179,823
Consolidated net revenues
$ 1,839,832 $ 1,696,271 $ 1,551,009
F-47
Operating Profit
Vascular North America
Anesthesia/Respiratory North America
Surgical North America
EMEA
Asia
OEM
All other
Total segment operating profit (1)
Unallocated expenses (2)
Year Ended December 31:
2014
2013
2012
(Dollars in thousands)
$
41,079 $
23,798 $
26,574
49,592
114,650
62,152
30,635
40,482
365,164
(80,302)
21,910
50,334
87,902
63,822
27,328
27,191
26,048
14,048
50,615
65,822
52,541
31,664
18,759
302,285
(69,024)
259,497
(356,872)
Income from continuing operations before interest, loss on
extinguishments of debt and taxes
$
284,862 $
233,261 $
(97,375)
(1) Segment operating profit includes segment net revenues from external customers reduced by its standard cost of goods sold, adjusted
for certain manufacturing variances, selling, general and administrative expenses, research and development expenses and an allocation
of corporate expenses. Corporate expenses are allocated among the segments in proportion to the respective amounts of one of several
items (such as sales, numbers of employees, and amount of time spent), depending on the category of expense involved.
(2) Unallocated expenses primarily include manufacturing variances and fixed manufacturing costs, with the exception of certain manufacturing
variances allocated to the segments as noted above, as well as net gain on sales of assets, goodwill impairment and restructuring and
other impairment charges.
Depreciation and Amortization
Vascular North America
Anesthesia/Respiratory North America
Surgical North America
EMEA
Asia
OEM
All other
Year Ended December 31:
2014
2013
2012
(Dollars in thousands)
$
31,782 $
28,719 $
23,063
17,109
6,316
38,062
8,515
6,175
19,071
13,162
10,549
29,947
4,960
4,876
15,722
7,955
3,646
22,975
3,653
4,083
29,509
94,884
Consolidated depreciation and amortization
$
127,030 $
107,935 $
F-48
The following table provides total net revenues and total net property, plant and equipment by geographic region
for the years ended December 31, 2014, 2013 and 2012:
Net revenues (based on the Company's selling location):
United States
Other Americas
Europe
All Other
Net property, plant and equipment:
United States
Malaysia
Czech Republic
All Other
Year Ended
2014
2013
2012
(Dollars in thousands)
$
916,619 $
844,884 $
789,771
60,736
664,982
197,495
57,098
568,559
225,730
53,665
516,982
190,591
$ 1,839,832 $ 1,696,271 $ 1,551,009
$
174,893 $
203,985 $
180,833
36,427
35,655
70,460
29,313
41,607
50,995
27,764
45,884
43,464
$
317,435 $
325,900 $
297,945
Note 17 — Condensed consolidating guarantor financial information
In June 2011, Teleflex Incorporated (referred to below as “Parent Company”) issued $250 million of 6.875% senior
subordinated notes through a registered public offering. The notes are guaranteed, jointly and severally, by certain of
the Parent Company’s subsidiaries (each, a “Guarantor Subsidiary” and collectively, the “Guarantor Subsidiaries”).
The guarantees are full and unconditional, subject to certain customary release provisions. Each Guarantor Subsidiary
is directly or indirectly 100% owned by the Parent Company. The Company’s condensed consolidating statements of
income (loss) and comprehensive income (loss) and condensed consolidating statements of cash flows for the years
ended December 31, 2014, 2013 and 2012 and condensed consolidating balance sheets as of December 31, 2014
and 2013, each of which are set forth below, provide condensed consolidating information for:
a. Parent Company, the issuer of the guaranteed obligations;
b. Guarantor Subsidiaries, on a combined basis;
c. Non-guarantor subsidiaries, on a combined basis; and
d. Parent Company and its subsidiaries on a consolidating basis.
The same accounting policies as described in Note 1 to the consolidated financial statements are used by the
Parent Company and each of its subsidiaries in connection with the condensed consolidating financial information set
forth below, with the exception that the Parent Company and Guarantor Subsidiaries use the equity method of
accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation.
Consolidating entries and eliminations in the following condensed consolidating 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.
F-49
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
Net revenues
Cost of goods sold
Gross profit
Selling, general and administrative expenses
42,829
Research and development expenses
Restructuring and other impairment charges
Income (loss) from continuing operations before
interest and taxes
Interest expense
Interest income
Income (loss) from continuing operations before
taxes
Taxes (benefit) on income (loss) from continuing
operations
Equity in net income of consolidated subsidiaries
Income from continuing operations
Operating loss from discontinued operations
Taxes (benefit) on loss from discontinued operations
Loss from discontinued operations
Net income
Less: Income from continuing operations attributable
to noncontrolling interests
Year Ended December 31, 2014
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$
— $ 1,078,851
$ 1,132,152
$ (371,171) $ 1,839,832
—
—
—
—
(42,829)
144,869
—
652,742
426,109
326,282
40,546
10,189
49,092
(85,885)
(1)
608,256
523,896
209,930
20,494
7,680
(363,594)
(7,577)
(384)
—
—
285,792
(7,193)
6,474
(705)
—
—
897,404
942,428
578,657
61,040
17,869
284,862
65,458
(706)
(187,698)
134,978
280,023
(7,193)
220,110
(68,307)
308,396
189,005
(2,196)
(870)
(1,326)
68,690
233,827
300,115
—
—
—
28,159
252
252,116
(1,211)
172
(1,383)
108
28,650
(542,475)
(549,776)
—
—
—
—
191,460
(3,407)
(698)
(2,709)
187,679
300,115
250,733
(549,776)
188,751
—
—
1,072
—
1,072
Net income attributable to common shareholders
187,679
300,115
249,661
(549,776)
187,679
Other comprehensive loss attributable to common
shareholders
Comprehensive income attributable to common
shareholders
(150,040)
(130,691)
(126,317)
257,008
(150,040)
$
37,639
$
169,424
$
123,344
$ (292,768) $
37,639
F-50
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net revenues
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Research and development expenses
Restructuring and other impairment charges
Income (loss) from continuing operations before
interest, loss on extinguishments of debt and taxes
Interest expense
Interest income
Loss on extinguishments of debt
Income (loss) from continuing operations before
taxes
Taxes (benefit) on income (loss) from continuing
operations
Equity in net income of consolidated subsidiaries
Income from continuing operations
Operating loss from discontinued operations
Taxes (benefit) on loss from discontinued operations
Income (loss) from discontinued operations
Year Ended December 31, 2013
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$
— $ 1,001,404
$
963,184
$ (268,317) $ 1,696,271
—
—
39,176
—
935
(40,111)
134,879
(15)
1,250
582,110
419,294
284,960
55,694
15,288
63,352
(85,058)
(5)
—
543,717
419,467
178,358
9,351
22,229
209,529
7,084
(604)
—
(268,501)
184
(307)
—
—
491
—
—
—
857,326
838,945
502,187
65,045
38,452
233,261
56,905
(624)
1,250
(176,225)
148,415
203,049
491
175,730
(63,857)
263,469
151,101
(1,947)
(1,727)
(220)
42,804
141,773
247,384
—
(170)
170
45,354
288
157,983
(258)
127
(385)
(754)
23,547
(405,530)
(404,285)
—
—
—
—
152,183
(2,205)
(1,770)
(435)
Net income
150,881
247,554
157,598
(404,285)
151,748
Less: Income from continuing operations attributable
to noncontrolling interests
—
—
867
—
867
Net income attributable to common shareholders
150,881
247,554
156,731
(404,285)
150,881
Other comprehensive income attributable to common
shareholders
Comprehensive income attributable to common
shareholders
21,193
1,960
5,442
(7,402)
21,193
$ 172,074
$
249,514
$
162,173
$ (411,687) $
172,074
F-51
802,784
748,225
454,489
56,278
332,128
3,037
(332)
(97,375)
69,565
(1,571)
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended December 31, 2012
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$
— $
950,888
$
833,903
$ (233,782) $ 1,551,009
Net revenues
Cost of goods sold
Gross profit
Selling, general and administrative expenses
34,657
Research and development expenses
Goodwill impairment
Restructuring and other impairment charges
—
—
—
—
—
552,726
398,162
259,476
48,649
331,779
598
482,881
351,022
160,089
7,629
349
2,439
(232,823)
(959)
267
—
—
—
Net gain on sales of businesses and assets
(116,193)
(149,240)
(332)
265,433
Income (loss) from continuing operations before
interest and taxes
Interest expense
Interest income
Income (loss) from continuing operations before
taxes
Taxes (benefit) on income (loss) from continuing
operations
Equity in net income (loss) of consolidated
subsidiaries
Income (loss) from continuing operations
Tax benefit on income (loss) from discontinued
operations
Income (loss) from discontinued operations
Net income (loss)
Less: Income from continuing operations attributable
to noncontrolling interests
Net income (loss) attributable to common
shareholders
Other comprehensive income attributable to common
shareholders
Comprehensive income (loss) attributable to common
81,536
143,653
(372)
(93,100)
(81,328)
(23)
180,848
(266,659)
7,240
(1,176)
—
—
(61,745)
(11,749)
174,784
(266,659)
(165,369)
(63,806)
45,068
35,670
(519)
16,413
(190,742)
(188,681)
(1,271)
(1,376)
(190,057)
124,918
68,101
(9,179)
(129)
(9,050)
59,051
—
65,824
—
139,114
(200,316)
(181,782)
2,619
(487)
3,106
—
—
—
(9,207)
(1,887)
(7,320)
142,220
(200,316)
(189,102)
—
—
955
—
955
(190,057)
59,051
141,265
(200,316)
(190,057)
27,305
10,475
8,907
(19,382)
27,305
Operating income (loss) from discontinued operations
(2,647)
shareholders
$ (162,752) $
69,526
$
150,172
$ (219,698) $
(162,752)
F-52
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2014
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net
$
$
27,996
2,346
— $
2,422
275,240
265,081
$
— $
3,855
303,236
273,704
Accounts receivable from consolidated
subsidiaries
Inventories, net
Prepaid expenses and other current assets
Prepaid taxes
Deferred tax assets
Assets held for sale
Total current assets
Property, plant and equipment, net
Goodwill
Intangibles assets, net
Investments in affiliates
Deferred tax assets
Notes receivable and other amounts due from
consolidated subsidiaries
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Current borrowings
Accounts payable
Accounts payable to consolidated subsidiaries
Accrued expenses
Current portion of contingent consideration
Payroll and benefit-related liabilities
Accrued interest
Income taxes payable
Other current liabilities
Total current liabilities
Long-term borrowings
Deferred tax liabilities
Pension and other postretirement benefit liabilities
Noncurrent liability for uncertain tax positions
Notes payable and other amounts due to
consolidated subsidiaries
Other liabilities
Total liabilities
Total common shareholders' equity
Noncontrolling interest
Total equity
Total liabilities and equity
37,378
—
14,301
23,493
30,248
2,901
138,663
3,489
—
—
5,662,773
52,244
2,303,284
204,335
4,786
—
17,387
—
2,532,214
170,054
703,663
743,222
1,359,661
—
272,811
154,544
16,610
16,763
9,666
4,521
1,015,236
143,892
619,890
473,498
21,253
5,535
(2,613,473)
(23,286)
—
—
—
—
(2,632,904)
—
—
—
(7,042,537)
(56,601)
—
335,593
35,697
40,256
57,301
7,422
1,053,209
317,435
1,323,553
1,216,720
1,150
1,178
1,025,859
27,999
$ 6,911,027
1,489,994
6,801
$ 7,005,609
—
29,210
$ 2,308,514
(2,515,853)
—
—
64,010
$(12,247,895) $ 3,977,255
$
— $
32,692
188,908
21,479
11,276
27,228
—
—
3,065
284,648
—
462,274
35,074
15,569
4,700
29,959
163,291
33,755
—
37,521
17
13,768
7,290
290,301
—
45,867
21,337
23,884
$
— $
—
(2,612,090)
—
—
—
—
—
—
(2,612,090)
—
(56,600)
—
—
368,401
64,100
—
72,383
11,276
85,442
9,169
13,768
10,360
634,899
700,000
451,541
167,241
50,884
932,718
24,900
1,755,183
5,250,426
—
5,250,426
$ 7,005,609
103,908
12,658
497,955
1,808,169
2,390
1,810,559
$ 2,308,514
(2,520,610)
—
(5,189,300)
(7,058,595)
—
(7,058,595)
—
58,991
2,063,556
1,911,309
2,390
1,913,699
$(12,247,895) $ 3,977,255
$ 363,701
1,449
2,259,891
17,149
—
20,693
9,152
—
5
2,672,040
700,000
—
110,830
11,431
1,483,984
21,433
4,999,718
1,911,309
—
1,911,309
$ 6,911,027
F-53
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net
Accounts receivable from consolidated
subsidiaries
Inventories, net
Prepaid expenses and other current assets
Prepaid taxes
Deferred tax assets
Assets held for sale
Total current assets
Property, plant and equipment, net
Goodwill
Intangibles assets, net
Investments in affiliates
Deferred tax assets
Notes receivable and other amounts due from
consolidated subsidiaries
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Current borrowings
Accounts payable
Accounts payable to consolidated subsidiaries
Accrued expenses
Current portion of contingent consideration
Payroll and benefit-related liabilities
Accrued interest
Income taxes payable
Other current liabilities
Total current liabilities
Long-term borrowings
Deferred tax liabilities
Pension and other postretirement benefit liabilities
Noncurrent liability for uncertain tax positions
Notes payable and other amounts due to
consolidated subsidiaries
Other liabilities
Total liabilities
Total common shareholders' equity
Noncontrolling interest
Total equity
Total liabilities and equity
December 31, 2013
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$
42,749
1,822
$
14,500
10,948
$
374,735
279,048
$
— $
3,472
431,984
295,290
42,865
—
15,200
27,487
20,218
1,669
152,010
14,189
—
—
5,489,676
35,877
2,623,314
211,165
6,870
—
22,472
3,503
2,892,772
188,455
797,671
962,243
1,478,429
—
214,469
138,165
17,740
9,017
10,230
5,256
1,048,660
123,256
556,532
293,354
21,382
4,476
(2,880,648)
(15,709)
—
—
(3)
—
(2,892,888)
—
—
—
(6,987,772)
(39,410)
—
333,621
39,810
36,504
52,917
10,428
1,200,554
325,900
1,354,203
1,255,597
1,715
943
1,049,344
24,574
$ 6,765,670
873,105
7,447
$ 7,200,122
14,169
38,074
$ 2,099,903
(1,936,618)
—
—
70,095
$(11,856,688) $ 4,209,007
$ 351,587
2,194
2,644,296
15,569
—
15,976
8,720
—
9,646
3,047,988
930,000
—
57,406
11,389
785,476
19,884
4,852,143
1,913,527
—
1,913,527
$ 6,765,670
$
— $
45,802
147,957
21,120
4,131
21,818
—
—
7,517
248,345
—
496,228
33,777
17,241
4,700
23,971
88,395
38,179
—
35,296
5
23,821
5,072
219,439
—
57,896
18,315
26,522
$
— $
—
(2,880,648)
—
—
—
—
—
(4)
(2,880,652)
—
(39,409)
—
—
356,287
71,967
—
74,868
4,131
73,090
8,725
23,821
22,231
635,120
930,000
514,715
109,498
55,152
957,451
16,221
1,769,263
5,430,859
—
5,430,859
$ 7,200,122
197,173
12,401
531,746
1,565,668
2,489
1,568,157
$ 2,099,903
(1,940,100)
—
(4,860,161)
(6,996,527)
—
(6,996,527)
—
48,506
2,292,991
1,913,527
2,489
1,916,016
$(11,856,688) $ 4,209,007
F-54
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2014
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$
(80,651) $
322,687
$
123,545
$
(75,340) $
290,241
Net cash (used in) provided by operating activities
from continuing operations
Cash Flows from Investing Activities of Continuing
Operations:
Expenditures for property, plant and equipment
Proceeds from sale of assets and investments
(2,273)
1,669
(30,586)
(34,712)
3,421
161
—
(60)
—
(17,241)
(28,536)
—
20
—
229,782
(229,782)
—
—
—
—
(67,571)
5,251
(45,777)
(40)
—
(664)
(44,386)
166,695
(229,782)
(108,137)
250,000
(480,102)
(4,494)
4,245
(56,258)
—
—
—
—
—
—
356,847
(292,801)
—
—
—
—
—
(1,094)
(64,046)
—
—
—
—
—
—
—
—
—
(305,122)
305,122
250,000
(480,102)
(4,494)
4,245
(56,258)
(1,094)
—
—
70,238
(292,801)
(370,262)
305,122
(287,703)
Payments for businesses and intangibles
acquired, net of cash acquired
Investments in affiliates
Intercompany dividends received
Net cash (used in) provided by investing
activities from continuing operations
Cash Flows from Financing Activities of Continuing
Operations:
Proceeds from new borrowings
Repayment of long-term borrowings
Debt extinguishment, issuance and amendment
fees
Proceeds from stock compensation plans and
related tax impacts
Dividends
Payments to noncontrolling shareholders
Intercompany transactions
Intercompany dividends paid
Net cash provided by (used in) financing
activities from continuing operations
Cash Flows from Discontinued Operations:
Net cash used in operating activities
Net cash used in discontinued operations
Effect of exchange rate changes on cash and cash
equivalents
(3,676)
(3,676)
—
—
—
—
—
—
(19,473)
(99,495)
—
—
—
—
—
(3,676)
(3,676)
(19,473)
(128,748)
431,984
Net decrease in cash and cash equivalents
(14,753)
(14,500)
Cash and cash equivalents at the beginning of the
period
42,749
14,500
374,735
Cash and cash equivalents at the end of the period
$
27,996
$
— $
275,240
$
— $
303,236
F-55
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended December 31, 2013
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$ (131,031) $
205,954
$
304,278
$
(147,902) $
231,299
Net cash (used in) provided by operating activities
from continuing operations
Cash Flows from Investing Activities of Continuing
Operations:
Expenditures for property, plant and equipment
(1,553)
(47,633)
(14,394)
Payments for businesses and intangibles
acquired, net of cash acquired
Investments in affiliates
Net cash used in investing activities from
continuing operations
Cash Flows from Financing Activities of Continuing
Operations:
Proceeds from new borrowings
Repayment of long-term borrowings
Debt extinguishment, issuance and amendment
fees
Proceeds from share based compensation plans
and the related tax impacts
Dividends
Payments to noncontrolling shareholders
Payments for contingent consideration
Intercompany transactions
Intercompany dividends paid
Net cash provided by (used in) financing
activities from continuing operations
Cash Flows from Discontinued Operations:
Net cash used in operating activities
Net cash used in discontinued operations
Effect of exchange rate changes on cash and cash
equivalents
Net (decrease) increase in cash and cash
equivalents
Cash and cash equivalents at the beginning of the
period
—
(50)
(250,912)
(58,096)
—
—
(1,603)
(298,545)
(72,490)
680,000
(375,000)
(6,400)
6,181
(55,917)
—
—
—
—
—
—
—
—
(14,802)
(141,614)
137,304
—
—
—
—
—
(736)
(2,156)
4,310
—
—
—
—
—
—
—
—
—
—
—
—
(63,580)
(309,008)
(50)
(372,638)
680,000
(375,000)
(6,400)
6,181
(55,917)
(736)
(16,958)
—
—
—
(17,400)
(130,502)
147,902
107,250
105,102
(129,084)
147,902
231,170
(2,727)
(2,727)
—
—
—
—
(600)
(600)
8,441
(28,111)
12,511
110,545
70,860
1,989
264,190
—
—
—
—
—
(3,327)
(3,327)
8,441
94,945
337,039
Cash and cash equivalents at the end of the period
$
42,749
$
14,500
$
374,735
$
— $
431,984
F-56
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended December 31, 2012
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$ (178,017) $
310,736
$
160,802
$
(98,903) $
194,618
Net cash (used in) provided by operating activities
from continuing operations
Cash Flows from Investing Activities of Continuing
Operations:
Expenditures for property, plant and equipment
(7,352)
(39,118)
(18,924)
Proceeds from sales of businesses and assets,
net of cash sold
Payments for businesses and intangibles
acquired, net of cash acquired
Investments in affiliates
Net cash used in investing activities from
continuing operations
Cash Flows from Financing Activities of Continuing
Operations:
Decrease in notes payable and current
borrowings
Proceeds from share based compensation plans
and the related tax impacts
Dividends
Payments for contingent consideration
Intercompany transactions
Intercompany dividends paid
Net cash provided by (used in) financing
activities from continuing operations
Cash Flows from Discontinued Operations:
4,301
45,204
17,155
—
(80)
(105,195)
(264,249)
—
—
(3,131)
(99,109)
(266,018)
—
(421)
(285)
8,238
(55,589)
—
—
—
(16,289)
196,850
(177,900)
—
(16,900)
—
—
(1,307)
(18,950)
(82,003)
—
—
—
—
—
—
—
—
—
—
98,903
(65,394)
66,660
(369,444)
(80)
(368,258)
(706)
8,238
(55,589)
(17,596)
—
—
149,499
(211,510)
(102,545)
98,903
(65,653)
Net cash (used in) provided by operating activities
(12,022)
Net cash used in investing activities
—
4,223
(2,351)
Net cash (used in) provided by discontinued
operations
(12,022)
1,872
—
—
—
Effect of exchange rate changes on cash and cash
equivalents
Net (decrease) increase in cash and cash
equivalents
Cash and cash equivalents at the beginning of the
period
—
—
2,394
(43,671)
1,989
(205,367)
114,531
—
469,557
—
—
—
—
—
—
(7,799)
(2,351)
(10,150)
2,394
(247,049)
584,088
Cash and cash equivalents at the end of the period
$
70,860
$
1,989
$
264,190
$
— $
337,039
F-57
Note 18 — Divestiture-related activities
Assets Held for Sale
The table below provides information regarding assets held for sale at December 31, 2014 and 2013. At
December 31, 2014, these assets consisted of two buildings and other assets, which the Company is actively marketing.
Assets held for sale:
Property, plant and equipment
Total assets held for sale
Discontinued Operations
2014
2013
(Dollars in thousands)
$
$
7,422 $
7,422 $
10,428
10,428
The Company has recorded $3.4 million, $2.2 million and $2.7 million of expense during 2014, 2013 and 2012,
respectively, associated with retained liabilities related to businesses that have been divested.
On August 26, 2012, the Company completed the sale of the orthopedic business of its OEM segment for $45.2
million in cash and realized a loss of $39 thousand, net of tax, from the sale of this business.
The results of the Company’s discontinued operations for the years 2014, 2013 and 2012 were as follows:
2014
2013
2012
Net revenues
Costs and other expenses
Goodwill impairment(1)
Gain on disposition(2)
Loss from discontinued operations before income taxes
Tax benefit on loss from discontinued operations
$
(Dollars in thousands)
— $
— $
3,407
2,205
—
—
(3,407)
(698)
—
—
(2,205)
(1,770)
Loss from discontinued operations
$
(2,709) $
(435) $
16,616
18,328
9,700
2,205
(9,207)
(1,887)
(7,320)
(1)
(2)
During 2012, the Company recognized a non-cash goodwill impairment charge of $9.7 million to adjust the carrying value of its former
orthopedic business to its estimated fair value.
The $2.2 million pre-tax gain on disposition during 2012 primarily reflects the gain recognized on the working capital adjustment related to
the sale of the Company's former cargo systems and cargo container businesses.
F-58
QUARTERLY DATA (UNAUDITED)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(Dollars in thousands, except per share)
2014:
Net revenues
Gross profit
Income from continuing operations before interest and taxes
Income from continuing operations
Loss from discontinued operations
Net income
Less: Income from continuing operations attributable to
noncontrolling interest
Net income attributable to common shareholders
Earnings per share available to common shareholders —
basic(1):
Income from continuing operations
Loss from discontinued operations
Net income
Earnings per share available to common shareholders —
diluted(1):
Income from continuing operations
Loss from discontinued operations
Net income
2013:
Net revenues
Gross profit
Income from continuing operations before interest, loss on
extinguishment of debt and taxes
Income from continuing operations
(Loss) income from discontinued operations
Net income
Less: Income from continuing operations attributable to
noncontrolling interest
Net income attributable to common shareholders
Earnings per share available to common shareholders —
basic(1):
Income from continuing operations
(Loss) income from discontinued operations
Net income
Earnings per share available to common shareholders —
diluted(1):
Income from continuing operations
(Loss) income from discontinued operations
Net income
$ 438,546 $ 468,105 $ 457,173 $ 476,008
241,015
69,155
52,133
(1,188)
50,945
244,088
74,752
48,830
(1,125)
47,705
221,159
59,020
35,269
(125)
35,144
236,166
81,935
55,228
(271)
54,957
186
34,958
453
47,252
126
54,831
307
50,638
$
$
$
$
0.85 $
—
0.85 $
1.17 $
(0.03)
1.14 $
1.33 $
(0.01)
1.32 $
0.77 $
(0.01)
0.76 $
1.04 $
(0.02)
1.02 $
1.18 $
—
1.18 $
1.25
(0.03)
1.22
1.10
(0.03)
1.07
$ 411,877 $ 420,059 $ 413,796 $ 450,539
224,943
200,520
209,490
203,992
49,404
27,701
(462)
27,239
201
27,038
63,751
43,401
(766)
42,635
194
42,441
66,042
45,779
1,029
46,808
234
46,574
54,064
35,302
(236)
35,066
238
34,828
$
$
$
$
0.67 $
(0.01)
0.66 $
1.05 $
(0.02)
1.03 $
1.11 $
0.02
1.13 $
0.85
—
0.85
0.64 $
(0.01)
0.63 $
0.99 $
(0.01)
0.98 $
1.05 $
0.03
1.08 $
0.78
(0.01)
0.77
(1) Each quarter is calculated as a discrete period; the sum of the four quarters may not equal the calculated full year amount.
59
December 31, 2014
December 31, 2013
December 31, 2012
December 31, 2014
Raw material
Work-in-process
Finished goods
December 31, 2013
Raw material
Work-in-process
Finished goods
December 31, 2012
Raw material
Work-in-process
Finished goods
December 31, 2014
December 31, 2013
December 31, 2012
TELEFLEX INCORPORATED
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
$
Balance at
Beginning of
Year
10,722 $
7,818 $
6,452 $
$
$
Dispositions
Additions
Charged to
Income
Accounts
Receivable
Write-offs
Translation
and Other
Balance at
End of
Year
— $
— $
— $
1,882 $
(2,738) $
(1,083) $
8,783
4,414 $
(1,446) $
(64) $
10,722
1,730 $
(483) $
119 $
7,818
INVENTORY RESERVE
Balance at
Beginning of
Year
Dispositions
Additions
Charged to
Income
Inventory
Write-offs
Translation
and Other
Balance at
End of
Year
$
5,687 $
1,729
24,957
— $
1,840 $
(2,391) $
1,755 $
6,891
—
—
1,239
10,135
(1,720)
(7,317)
(739)
(1,301)
509
26,474
$
32,373 $
— $
13,214 $ (11,428) $
(285) $
33,874
$
$
$
9,394 $
1,646
20,663
— $
1,931 $
(5,774) $
136 $
—
—
855
(340)
11,440
(11,663)
(432)
4,517
5,687
1,729
24,957
31,703 $
— $
14,226 $ (17,777) $
4,221 $
32,373
9,095 $
2,742
21,082
(504) $
5,206 $
(4,346) $
(57) $
—
—
1,107
13,175
(2,204)
(12,183)
9,394
1,646
1
(1,411)
20,663
$
32,919 $
(504) $
19,488 $ (18,733) $
(1,467) $
31,703
DEFERRED TAX ASSET VALUATION ALLOWANCE
$
Balance at
Beginning of
Year
86,510 $
69,527 $
66,305 $
$
$
Additions
Charged to
Expense
Reductions
Credited to
Expense
Translation
and Other
13,331 $
(3,741) $
3,041 $
21,118 $
(1,553) $
(2,582) $
86,510
6,103 $
(4,888) $
2,007 $
69,527
Balance at
End of Year
99,141
60
The following exhibits are filed as part of, or incorporated by reference into, this report:
Exhibit No.
Description
*3.1.1 — Articles of Incorporation of the Company are incorporated by reference to Exhibit 3(a) to the
Company’s Form 10-Q for the period ended June 30, 1985.
*3.1.2 — Amendment to Article Thirteenth of the Company’s Articles of Incorporation is incorporated by
reference to Exhibit 3 of the Company’s Form 10-Q for the period ended June 28, 1987.
*3.1.3 — Amendment to the first paragraph of Article Fourth of the Company’s Articles of Incorporation is
incorporated by reference to Proposal 2 of the Company’s Proxy Statement filed on March 29,
2007.
*3.2 — Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the
Company’s Form 8-K filed on May 7, 2009).
*4.1.1 — Indenture, dated August 2, 2010, between the Company and Wells Fargo Bank, N.A., as trustee
(incorporated by reference to Exhibit 4.4 to the Company’s registration statement on Form S-3
(Registration No. 333-168464) filed on August 2, 2010).
*4.1.2 — First Supplemental Indenture, dated August 9, 2010, between the Company and Wells Fargo
Bank, N.A., as trustee, relating to the Company’s 3.875% Convertible Subordinated Debentures
due 2017 (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed on August 9,
2010).
*4.1.3 — Form of 3.875% Convertible Senior Subordinated Notes due 2017 (incorporated by reference to
Exhibit A in Exhibit 4.2 to the Company’s Form 8-K filed on August 9, 2010).
*4.1.4 — Second Supplemental Indenture, dated June 13, 2011, between the Company and Wells Fargo
Bank, N.A., as trustee, relating to the Company’s 6.875% Senior Subordinated Notes due 2019
(incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed on June 13, 2011).
*4.1.5 — Form of 6.875% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit A in
Exhibit 4.2 to the Company’s Form 8-K filed on June 13, 2011).
*4.1.6 — Third Supplemental Indenture, dated October 28, 2013, among the Company, the Guaranteeing
Subsidiaries party thereto and Wells Fargo Bank, N.A., as trustee, relating to the Company’s 6.875%
Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.1.6 to the Company's
Form 10-K filed on February 24, 2014).
*4.1.7 — Fourth Supplemental Indenture, dated April 18, 2014, among the Company, Vidacare LLC, the other
Guarantors party thereto and Wells Fargo Bank, N.A., as trustee, relating to the Company’s 6.875%
Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.1 to the Company
Form 10-Q filed on April 30, 2014).
*4.1.8 — Indenture, dated as of May 21, 2014, among the Company, the Guarantors party thereto and
Wells Fargo Bank, N.A., as trustee, relating to the Company's 5.25% Senior Notes due 2024
(incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed on May 22, 2014).
*4.1.9 — Form of 5.25% Senior Notes due 2024 (incorporated by reference to Exhibit A in Exhibit 4.1 to the
Company’s Form 8-K filed on May 22, 2014).
*4.1.10 — Registration Rights Agreement, dated May 21, 2014, among the Company, the guarantors
named therein and the other parties thereto relating to the Company's 5.25% Senior Notes due
2024 (incorporated by reference to Exhibit 4.3 to the Company's Form 8-K filed on May 22,
2014).
10.1 — Teleflex Incorporated Retirement Income Plan, as amended and restated effective January 1,
2014.
+*10.2 — Amended and Restated Teleflex Incorporated Deferred Compensation Plan, dated December 26,
2012 (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-K filed on February
22, 2013).
10.3 — Amended and Restated Teleflex 401(k) Savings Plan, effective as of January 1, 2014.
+*10.4.1 — 2000 Stock Compensation Plan (incorporated by reference to the Company’s registration
statement on Form S-8 (Registration No. 333-38224), filed on May 31, 2000).
+*10.4.2 — Amendment dated March 28, 2012, to 2000 Stock Compensation Plan (incorporated by
reference to Exhibit 10.2 to the Company’s Form 10-Q filed on May 1, 2012).
+*10.5.1 — 2008 Stock Incentive Plan (incorporated by reference to Appendix A to the Company’s definitive
Proxy Statement for the 2008 Annual Meeting of Stockholders filed on March 21, 2008).
+*10.5.2 — Amendment dated March 28, 2012, to 2008 Stock Incentive Plan (incorporated by reference to
Exhibit 10.3 to the Company’s Form 10-Q filed on May 1, 2012).
Exhibit No.
Description
*10.5.3 — Form of Stock Option Agreement for stock options granted on or after January 1, 2013 under the
Company’s 2008 Stock Incentive Plan.
*10.5.4 — Form of Restricted Stock Award Agreement for restricted awards granted on or after January 1,
2013 under the Company’s 2008 Stock Incentive Plan.
*10.5.5 — Restricted Stock Award Agreement between the Company and Benson F. Smith for restricted
stock award granted on March 14, 2013.
+*10.6 — Teleflex Incorporated 2011 Executive Incentive Plan (incorporated by reference to Appendix A to
the Company’s definitive Proxy Statement for the 2011 Annual Meeting of Stockholders filed on
March 25, 2011).
+*10.7 — Teleflex Incorporated 2014 Stock Incentive Plan (incorporated by reference to Appendix A to the
Company's definitive Proxy Statement for the 2014 Annual Meeting of Stockholders filed on
March 28, 2014).
+*10.8 — Executive Change In Control Agreement, dated December 15, 2011, between the Company and
Benson F. Smith (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on
December 16, 2011).
+*10.9 — Senior Executive Officer Severance Agreement, dated March 25, 2011, between the Company
and Benson F. Smith (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q
filed on April 26, 2011).
+*10.10 — Executive Change In Control Agreement, dated July 30, 2012, between the Company and Liam
Kelly (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed on July 31,
2012).
+*10.11 — Senior Executive Officer Severance Agreement, dated July 30, 2012, between the Company and
Liam Kelly (incorporated by reference to Exhibit 10.13 to the Company’s Form 10-K filed on
February 22, 2013).
+*10.12.1 — Executive Employment Agreement, dated July 30, 2012, between Teleflex Medical Europe
Limited and Liam Kelly (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q
filed on July 31, 2012).
+*10.12.2
Letter Agreement, dated as of April 1, 2014, between the Company and Liam Kelly, relating to
compensation and benefits to be provided to Mr. Kelly in connection with his appointment as
Executive Vice President and President, Americas (incorporated by reference to Exhibit 10.1 to
the Company's Form 10-Q filed on April 30, 2014).
+*10.13 — Senior Executive Officer Severance Agreement, dated March 26, 2013, between the Company
and Thomas E. Powell (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q
filed on April 30, 2013).
+*10.14 — Executive Change In Control Agreement, dated March 26, 2013, between the Company and
Thomas E. Powell (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed
on April 30, 2013).
+10.15.1 — Contract of Employment, dated September 27, 2011, between the Company and Thomas
Anthony Kennedy.
+10.15.2 — Letter Agreement, dated April 29, 2013, between the Company and Thomas Anthony Kennedy,
relating to Mr. Kennedy's appointment as Senior Vice President, Global Operations.
+10.16 — Letter Agreement, dated March 8, 2013, between the Company and Cameron Hicks relating to
Mr. Hicks' employment as Vice President, Global Human Resources.
+10.17 — Contract of Employment, dated November 26, 2012, between the Company and Karen Boylan.
*10.18.1 — Credit Agreement, dated July 16, 2013, among the Company, JPMorgan Chase Bank, N.A., as
administrative agent, Bank of America, N.A., as syndication agent, 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 July 22, 2013).
*10.18.2 — Consent and Amendment No. 1, dated March 27, 2014, to Credit Agreement dated as of July 16,
2013 among the Company, the Guarantors party thereto, the Lenders party thereto and
JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1
to the Company's Form 8-K filed on April 2, 2014).
*10.19 — Convertible Bond Hedge Transaction Confirmation, dated August 3, 2010, between the Company
and Bank of America, National Association, as dealer (incorporated by reference to Exhibit 10.1
to the Company’s Form 8-K filed on August 9, 2010).
Exhibit No.
Description
*10.20 — Convertible Bond Hedge Transaction Confirmation, dated August 3, 2010, between the Company
and J.P. Morgan Securities Inc., as agent for JPMorgan Chase Bank, National Association, as
dealer (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on August 9,
2010).
*10.21 — Issuer Warrant Transaction Confirmation, dated August 3, 2010, between the Company and
Bank of America, National Association, as dealer (incorporated by reference to Exhibit 10.3 to
the Company’s Form 8-K filed on August 9, 2010).
*10.22 — Issuer Warrant Transaction Confirmation, dated August 3, 2010, between the Company and J.P.
Morgan Securities Inc., as agent for JPMorgan Chase Bank, National Association, as dealer
(incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on August 9, 2010).
*14 — Code of Ethics policy applicable to the Company’s Chief Executive Officer and senior financial
officers (incorporated by reference to Exhibit 14 of the Company’s Form 10-K filed on March 11,
2004).
21 — Subsidiaries of the Company.
23 — Consent of Independent Registered Public Accounting Firm.
31.1 — Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act.
31.2 — Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act.
32.1 — Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act.
32.2 — Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act.
101.1 — The following materials from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the
Consolidated Statements of Income (Loss) for the years ended December 31, 2014, December
31, 2013 and December 31, 2012; (ii) the Consolidated Statements of Comprehensive Income
(Loss) for the years ended December 31, 2014, December 31, 2013 and December 31, 2012;
(iii) the Consolidated Balance Sheets as of December 31, 2014 and December 31, 2013; (iv) the
Consolidated Statements of Cash Flows for the years ended December 31, 2014, December 31,
2013 and December 31, 2012; (v) the Consolidated Statements of Changes in Equity for the
years ended December 31, 2014, December 31, 2013 and December 31, 2012; and (vi) Notes to
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.
Indicates management contract or compensatory plan or arrangement required to be filed pursuant to
Item 15(b) of this report.
+
Teleflex IncorporaTed
non-Gaap reconcIlIaTIons
ReVenUe GROWth
2014 GAAP Revenue Growth
Foreign Currency
2014 Constant Currency Revenue Growth
8.5%
0.3%
8.8%
GROss MaRGin
$ millions
Teleflex gross profit as-reported
Teleflex gross margin as-reported
Losses, other charges and charge reversals
Adjusted Teleflex gross profit
Adjusted Teleflex gross margin
Teleflex revenue as-reported
OPeRatinG MaRGin
$ millions
twelve Months ended
31-dec-2014
31-dec-2013
$
942.4
$
838.9
51.2%
4.9
49.5%
2.3
$
947.3
$
841.2
51.5%
49.6%
$ 1,839.8
$ 1,696.3
twelve Months ended
31-dec-2014
31-dec-2013
Teleflex income from continuing operations before interest and taxes
$
284.9
$
233.3
Restructuring and other impairment charges
Losses, other charges and charge reversals
Intangible amortization expense
17.9
3.9
60.9
38.5
4.3
50.6
Adjusted Teleflex income from continuing operations before interest,
taxes and intangible amortization expense
$
367.6
$
326.6
Adjusted Teleflex income from continuing operations before interest,
taxes and intangible amortization expense margin
20.0%
19.3%
Teleflex revenue as-reported
$ 1,839.8
$ 1,696.3
Note: GAAP results represent amounts per Form 10K for the year referenced.
Teleflex IncorporaTed
non-Gaap reconcIlIaTIons (continued)
adjUsted eaRninGs PeR shaRe
(dollars in millions, except per share)
Amounts attributable to common shareholders:
income (loss) from continuing operations, net of tax
Goodwill impairment, net of tax
Restructuring and other impairment charges, net of tax
Gain/(loss) on sales of businesses and assets, net of tax
Loss on extinguishment of debt, net of tax
Losses and other charges, net of tax
Early termination of interest rate swap, net of tax
Amortization of debt discount on convertible notes, net of tax
Intangible amortization expense, net of tax
Anti-dilutive effect on EPS
Tax Adjustment, net of tax
Shares due to Teleflex under note hedge
Adjusted income from continuing operations, net of tax
Adjusted earnings per share from continuing operations
2012
2013
2014
(182.7)
(4.47)
315.1
7.71
2.5
0.06
(0.3)
(0.01)
0.0
0.00
14.6
0.36
7.0
0.17
6.7
0.16
28.3
0.69
0.0
(0.06)
(9.0)
(0.22)
0.0
0.03
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
151.3
3.46
0.0
0.00
30.7
0.71
0.0
0.00
0.8
0.02
(0.6)
(0.02)
0.0
0.00
7.2
0.16
33.4
0.76
0.0
0.00
(11.1)
(0.25)
0.0
0.19
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
190.4
4.10
0.0
0.00
12.7
0.27
0.0
0.00
0.0
0.00
0.9
0.02
0.0
0.00
7.7
0.17
43.5
0.94
0.0
0.00
(4.0)
(0.09)
0.0
0.33
182.2
$
211.6
$
251.2
4.43
$
5.03
$
5.74
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Note: GAAP results represent amounts per Form 10K for the year referenced.
BOARD OF DIRECTORS
EXECUTIVE
LEADERSHIP
LISTED IN ORDER OF ELECTION
SIGISMUNDUS W. W. LUBSEN *2
Retired Member
of the Executive Board
Heineken N.V.
PATRICIA C. BARRON *2
Retired Clinical Professor
Stern School of Business
New York University
Lead Director
Governance Committee Chair
WILLIAM R. COOK *1
Retired President and CEO
Severn Trent Services, Inc.
BENSON F. SMITH
Chairman, President and
Chief Executive Officer
Teleflex Incorporated
HAROLD L. YOH III *2
Chairman of the Board and CEO
The Day & Zimmermann Group, Inc.
GEORGE BABICH, JR. *3
President and Chief Executive
Officer Checkpoint Systems, Inc.
DR. JEFFREY A. GRAVES *1
President and
Chief Executive Officer
MTS Systems Corporation
DR. STEPHEN K. KLASKO *3
Chief Executive Officer
Thomas Jefferson University
Hospitals System
STUART A. RANDLE *1
Retired President and
Chief Executive Officer
GI Dynamics
W. KIM FOSTER *3
Retired Executive Vice President
and Chief Financial Officer
FMC Corporation
*Board Committees
1 Compensation
2 Governance
3 Audit
BENSON F. SMITH
Chairman, President and
Chief Executive Officer
THOMAS E. POWELL
Executive Vice President and
Chief Financial Officer
LIAM KELLY
Executive Vice President and
President, Americas
JAMES J. LEYDEN
Vice President, General
Counsel and Secretary
TONY KENNEDY
Senior Vice President,
Global Operations
CAMERON HICKS
Vice President, Global
Human Resources
KAREN BOYLAN
Vice President, Global Regulatory
Affairs and Quality Assurance
LINDA BENEZE
President and General Manager,
Specialty Division
JOHN DEREN
Vice President of Finance
and Corporate Controller
JEAN-LUC DIANDA
President, Europe, Middle East
and Africa
TIMOTHY DUFFY
Vice President and
Chief Information Officer
JAKE ELGUICZE
Treasurer and Vice President,
Investor Relations
SCOTT ETLINGER
Vice President, Strategic
Manufacturing
JAMES FERGUSON
President and General Manager,
Respiratory Division and
Latin America
MICHELLE FOX
Vice President, Clinical
and Medical Affairs
TIM KELLEHER
Vice President and General
Manager, OEM
JUSTIN MCMURRAY
President and General Manager,
Anesthesia Division
HOWARD MILLER
President and General Manager,
Cardiac Care Division
DIVIDEND REINVESTMENT
Teleflex Incorporated offers a
dividend reinvestment and direct
stock purchase and sale plan.
For enrollment information,
please contact American Stock
Transfer & Trust Company,
Dividend Reinvestment Department,
1-877-842-1572 (toll free).
CODE OF ETHICS AND
BUSINESS GUIDELINES
All Teleflex businesses around
the world share a common Code
of Ethics, which guides the way
we conduct business. The Code
is available on the Teleflex website
at www.teleflex.com.
CERTIFICATIONS
The certifications by the Chief
Executive Officer and the Chief
Financial Officer of Teleflex
Incorporated required under Section
302 of the Sarbanes-Oxley Act
of 2002 have been filed as exhibits
to Teleflex Incorporated’s 2014
Annual Report on Form 10-K. In
addition, in May 2014, the Chief
Executive Officer of Teleflex
Incorporated certified to the New
York Stock Exchange (“NYSE”)
that he is not aware of any violation
by the Company of NYSE corporate
governance listing standards, as
required by Section 303A.12(a)
of the NYSE Corporate Governance
Rules.
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
FORWARD-LOOKING
STATEMENTS
In accordance with the safe harbor
provisions of the Private Securities
Litigation Reform Act of 1995,
the company notes that certain
statements contained in this report
are forward-looking in nature.
These forward-looking statements
include matters such as business
strategies, market potential,
product deployment, future financial
performance and other future
oriented matters. Such matters
inherently involve many risks and
uncertainties. For additional
information, please refer to the
company’s Securities and Exchange
Commission filings and the Form
10-K included in the Annual Report.
DAN PRICE
Vice President, Finance
JOHN TUSHAR
President and General Manager,
Surgical Division
JAN VERSTREKEN
President, Asia Pacific
GWEN WATANABE
Vice President, Business
Development and Technical
Resources
ED WEIDNER
Vice President, Strategic Accounts,
Commercial Operations and
Customer Support
JAY WHITE
President and General Manager,
Vascular Division
GREGG WINTER
Vice President, Tax
INVESTOR
INFORMATION
ANNUAL MEETING
The annual meeting of shareholders
will take place at 11:00 a.m. on
May 1, 2015 at:
Teleflex Incorporated
550 East Swedesford Road
Wayne, PA 19087
INVESTOR INFORMATION
Market and Ownership
of Common Stock
New York Stock Exchange
Trading Symbol: TFX
INVESTOR RELATIONS
Investors, analysts and others
seeking information about
the company should contact:
Jake Elguicze
Teleflex Incorporated
(610) 948-2836
e-mail: jake.elguicze@teleflex.com
www.teleflex.com
A copy of the Annual Report as filed
with the Securities and Exchange
Commission on Form 10-K, interim
reports on Form 10-Q, and current
reports on Form 8-K can be
accessed on the Investor’s page of
the company’s website or can be
mailed upon request.
TRANSFER AGENT
AND REGISTRAR
Questions concerning transfer
requirements, lost certificates,
dividends, duplicate mailings,
change of address, or other
stockholder matters should be
addressed to:
American Stock Transfer
& Trust Company
6201 15th Ave
Brooklyn, NY 11219
(800) 937-5449 (toll free)
CORPORATE HEADQUARTERS
550 e. Swedesford Road, Suite 400, Wayne, pA 19087
610.225.6800 • www.teleflex.com