2015
an n u a l re pOr t
C a p t u r i n g O p pOr t u n i t y
Strength. innovation. Diversification.
Capturing Opportunity
Strength. innovation. Diversification.
today’s global healthcare market offers exceptional
growth opportunities for medical device providers
who can improve patient outcomes, reduce healthcare
costs and create efficiencies. teleflex is capturing
these opportunities across a wide range of medical
specialties on a global scale. We move forward
focused on leveraging our powerful combination of
strength, innovation and diversification to fortify our
industry leadership position, increase our market
share and deliver increasing value to our shareholders.
the teleflex portfolio comprises many trusted medical technology brands, including
arrow®, Deknatel®, Hudson rCi®, lMa®, pilling®, rüsch® and Weck®. Diverse in focus and
unique in approach, these brands are united by a common sense of purpose: to leverage
best-in-class technologies to enable effective clinical solutions for patients and healthcare
providers around the world.
FINANCIAL HIGHLIGHTS
FROM CONTINUING OPERATIONS
(Dollars in millions, except per share data)
2015 NET REVENUES
BY REPORTING SEGMENT
1
8
.
9
3
8
,
1
$
7
.
9
0
8
,
1
$
3
.
6
9
6
,
1
$
0
.
1
5
5
,
1
$
5
.
2
9
4
,
1
$
2
.
3
8
2
$
2
.
1
5
2
$
6
.
1
1
2
$
2
.
2
8
1
$
3
.
6
5
1
$
11
12
13
14
15
11
12
13
14
15
NET REVENUES
ADJUSTED INCOME FROM
CONTINUING OPERATIONS,
NET OF TAX1
-1.6%
Variance
12.7%
Variance
3
3
.
6
$
4
7
.
5
$
3
0
.
5
$
3
4
.
4
$
3
8
.
3
$
2
.
0
9
2
$
.
4
3
0
3
$
3
.
1
3
2
$
6
.
4
9
1
$
.
4
4
9
$
11
12
13
14
15
11
12
13
14
15
ADJUSTED
EARNINGS
PER SHARE1
10.3%
Variance
NET CASH PROVIDED BY
OPERATING ACTIVITIES
4.5%
Variance
19% Vascular
North America
10% Anesthesia
North America
9% Surgical
North America
28% Europe,
Middle East and Africa
13% Asia Pacific
8% OEM
12% All Other
2015 NET REVENUES
BY END MARKET
85% Hospitals and
Healthcare Providers
9% Medical Device
Manufacturers
6% Home Care
1 A table reconciling adjusted income from continuing operations, net of tax and adjusted earnings per share to the most directly comparable
GAAP measures can be found on the next to last page of this Annual Report. A table reconciling our 2015 constant currency revenue growth,
which is discussed on page 2, can be found on the next to last page of this Annual Report.
2
TO OUR
SHAREHOLDERS
In 2015, Teleflex delivered another strong year of
growth and progress, despite facing formidable
market challenges, including significant
pressure from foreign currency exchange rates
and increased political and economic volatility
across key world markets. But, just as a ship is
best tested in rough waters, a company’s true
strength is only revealed during times of adversity,
and ultimately these challenges enabled us to
showcase our ability to capture opportunity in
virtually any environment.
During the year, we advanced our mission of
improving health outcomes for patients and
clinicians around the world, while continuing to
meet our core financial targets and to invest in
our future. We also took decisive steps to position
Teleflex for continued success:
We completed seven acquisitions that diversified
our product portfolio, strengthened our R&D,
expanded our distribution network and advanced
our distributor-to-direct conversion strategy.
We drove innovation, launching 20 new products
and line extensions.
We broadened our client base, extending
31 existing agreements and entering 23 new
relationships with healthcare purchasing groups
and independent delivery groups.
We improved margins, implementing our
restructuring plan and introducing measures to
drive further operating efficiency.
We also delivered strong 2015 financial results,
including constant currency revenue growth
and adjusted earnings per share growth of 5.4%
and 10.3%, respectively. This performance
is a testament to the strong foundation our
management team has built over the last five
years, as well as a proof of the exceptional
drive of our employees.
CAPITAlIzING ON GlOBAl
DEMOGRAPHICS
Over the past decade, global healthcare growth
has largely been driven by shifts in emerging
markets, but in the years ahead, we expect
this growth to come from changing global
demographics, including an aging world
population and higher life expectancy. By 2050,
an estimated 88.5 million Americans will be 65
or older, and over the next 40 years, the number
of Americans over 85 is expected to grow by
more than 300%.1 Individuals over the age of
65 represent the majority of all healthcare costs,
typically generating consistent annual medical
expenses that increase with age. We see these
same trends in Japan and in many Western
European countries, and we believe they will soon
result in a larger portion of the world’s population
having a greater need for healthcare than ever
before. Medical providers around the globe are
looking for ways to manage the costs of this
care, and Teleflex offers solutions to help achieve
this goal. Our products and programs improve
precision and reduce complications, speeding
patient recovery and reducing overall medical
costs. As a result, they represent an attractive
value proposition to today’s healthcare providers.
Moreover, Teleflex is solidly positioned to
manage the challenges in the current healthcare
environment. We are strong, with an established
management team, a robust balance sheet and a
position of industry leadership. We are diverse,
with a broad product portfolio that spans multiple
healthcare segments and serves customers
around the world. And we are innovative, with a
powerful R&D engine, an entrepreneurial outlook
and a nimble business approach that enables
us to leverage emerging opportunities. We are
committed to using these strengths to continue
to increase our market share, drive margins and
strengthen our competitive position.
MAKING STRATEGIC ACqUISITIONS
Over the past five years, we have made several
strategic acquisitions that have enabled us to
expand and diversify our product portfolio,
deliver above-market revenue growth, improve
our margins and earnings, and extend our reach.
We target four specific types of opportunities:
Late-stage technology companies with products
on the verge of regulatory approval;
Established companies with products that align
with our existing business;
Product distributors in key geographic regions that
allow us to convert to a direct sales model; and
Third-party manufacturers with key capabilities
that strengthen our vertically integrated structure.
3
We also adhere to established criteria, seeking
companies that are a strategic fit with our existing
business units and have strong, differentiated
products. In 2015, we completed several
acquisitions that met these standards, including
Nostix, LLC, a creator of affordable, differentiated
tip navigation products; Atsina Surgical, LLC, a
developer of proprietary surgical clips; TrinTris
Medical Inc., an original equipment manufacturer
(OEM) of balloons and catheters; and Truphatek
Holdings Limited, an OEM of disposable and
reusable laryngoscope devices. In addition to
broadening our product capability, the Truphatek
acquisition positions us to strengthen our supply
chain in the U.S. where Teleflex has long been
Truphatek’s primary distributor.
We also made several distributor-to-direct
conversions that position us to drive margins and
gain a better understanding of customers in key
markets. These include N. Stenning & Co. Pty.
Ltd., a distributor of Teleflex surgical products
in Australia, and Human Medics Co., Ltd., a
distributor of Teleflex surgical and respiratory
products in Korea. We also acquired the exclusive
North American distribution rights to AutoFuser®
Disposable Pain Pumps, along with a 10-year
distribution agreement with the manufacturer
of these products.
FUElING MARGIN EXPANSION
In addition to driving margins through
acquisitions, distributor-to-direct conversions
and pricing improvements, we generate
efficiencies by making continuous refinements
to our operational structure. In 2015, we
implemented the facility restructuring plan we
announced in 2014, consolidating operations from
three of our higher cost locations to existing lower
cost locations. By the fourth quarter of 2015, this
initiative began to improve our operating leverage,
streamline our logistics and expedite our product
delivery. We expect that when this plan is complete
at year-end 2017, it will generate annual savings
of between $28 million and $35 million. We are
also working to trim our operating expenses, and
in 2015, we unveiled a plan to realign some of our
businesses and consolidate additional facilities in
North America, as well as to implement additional
expense control measures. When these initiatives
are fully implemented, we expect them to generate
annualized savings of approximately $15 million
to $18 million, helping us to deliver between 350
and 400 basis points of adjusted operating margin
growth by the close of 2018, as compared with
full-year 2015 levels.
CAPTURING OPPORTUNITY
Teleflex faces the future with a complete focus on
capturing the many opportunities for growth in our
dynamic market. During 2015, we demonstrated
that our company has the strengths required to
meet the challenges within our global landscape.
As we move forward, we will continue to execute
our business strategy, working to drive revenues,
increase margins, improve our operational
framework and strengthen our overall business
platform. As always, we will remain committed
to rewarding you – our shareholders – with the
increasing value you have come to expect.
BENSON F. SMITH
Chairman, President and
Chief Executive Officer
lIAM J. KEllY
Executive Vice President
and Chief Operating Officer
THOMAS E. POwEll
Executive Vice President
and Chief Financial Officer
4
VASCULAR -
NORTH AMERICA
The Right Line for the Right Patient
at the Right Time™
JAY wHITE
President and General Manager,
Vascular Division
wHAT ARE THE CURRENT GROwTH
PROSPECTS FOR YOUR VASCUlAR
ACCESS BUSINESS?
There is enormous global demand
for improved vascular access devices
(VADs). More than 90% of hospital
admissions require a VAD2, but approximately
one-third of these incur a complication3, and
up to 20% are improperly positioned4. As a
result, an estimated half of all hospital-acquired
conditions are related to VADs5 – a factor that
represents significant preventable healthcare
complications and approximately $33 billion
in unnecessary annual expenses related to
superbugs6. Teleflex is addressing these issues
through innovative products and programs
that are designed to improve patient outcomes
and lower healthcare costs. We are reducing
catheter-related complications through coatings
like Chlorag+ard® Technology, which helps
prevent microbial colonization and thrombus
accumulation on surfaces for up to 30 days. Our
Arrow® JACC with Chlorag+ard® Technology and
Arrow® PICC with Chlorag+ard® Technology are
the world’s first central venous catheters that can
help to significantly reduce the risk of microbial
colonization and thrombus accumulation on
catheter surfaces, as compared with traditional
uncoated catheters. We are reducing the need for
chest X-rays and improving catheter positioning
with our Arrow® VPS® Vascular Positioning
System, which guides clinicians to place a given
catheter tip within the precise zone recommended
by professional medical association guidelines.
In December of 2015, we strengthened this
platform by acquiring Nostix, LLC, a developer of
innovative tip confirmation systems that increase
the accuracy of VAD placement, providing an
alternative to X-rays in adult patients. Finally, we
are working to speed the delivery of medications,
intravenous fluids and blood products through
our Arrow® EZ-IO® Intraosseous Vascular Access
System, which enables immediate vascular access
through the bone marrow when intravenous
access is difficult or impossible to obtain in urgent,
emergent and medically necessary situations.
Collectively, these innovations are driving our
growth by presenting healthcare providers with new
ways to increase patient safety and lower costs.
ADVANCING OUR CORPORATE INITIATIVES
Flexing our Financial Muscle
THOMAS E. POwEll
Executive Vice President and
Chief Financial Officer
We manage changing market cycles by maintaining a flexible financial model that can drive earnings growth
through multiple strategies. This approach helps us to deliver steady earnings growth regardless of the economic
climate. As we move forward, we are focused on acquiring promising companies with value-added technologies and
products, converting select distributors to direct sales models, and continuing to invest in our business by funding
R&D, building our presence in key world markets, and capitalizing on past acquisitions.
5
ANESTHESIA -
NORTH AMERICA
Purpose-Driven Innovation
JUSTIN MCMURRAY
President and General Manager,
Anesthesia Division
wHAT IS YOUR STRATEGY FOR
INCREASING MARKET SHARE IN
THE ANESTHESIA BUSINESS?
Our Anesthesia division is committed
to uniting clinicians with innovative
technologies that improve patient
outcomes and reduce healthcare costs.
The foundation for this is our unwavering
commitment to purpose-driven innovation,
which guides every aspect of our business
– from product development to employee
interaction, to customer service. We support
our product innovation with clinical research
and education, focusing on the long-term goal
of enabling clinicians to expand the usage of
our products into additional procedures.
One of our recent hallmark achievements is
the launch of the LMA ProtectorTM Airway,
which demonstrates our ability to transform
customer insights into practical solutions
that advance patient care. We developed this
highly versatile single-use laryngeal mask in
collaboration with airway experts from around
the world, incorporating our most advanced
airway management innovations, including
Cuff PilotTM, an integrated cuff
pressure indicator that provides
constant at-a-glance feedback to reduce
the risk of patient trauma due to cuff
over-inflation. We view the LMA ProtectorTM
Airway as a significant advance in our
quest to provide physicians with technology
designed to help reduce the risk of
complications, while giving them the flexibility
to expand laryngeal mask usage into additional
procedures. Our other innovative solutions
include the LMA® MAD
NasalTM Device, which
eliminates the use of
needles by atomizing
approved medications into
a fine mist that can be
administered intranasally,
enabling safe, painless
and rapid absorption into
the bloodstream. We also
deliver a range of pain
management solutions,
including our Arrow®
AutoFuser® Disposable
Pain Pumps and Arrow®
Peripheral Nerve Block
Catheters. Together,
these solutions can help physicians to improve
a patient’s post-operative pain experience
during a variety of procedures. Moving
forward, we will continue to leverage advanced
technologies to broaden our strong portfolio of
differentiated anesthesia products and to drive
expanded usage of our acute pain management
devices into additional procedures, thereby
enabling healthcare providers to deliver
improved patient satisfaction.
ADVANCING OUR CORPORATE INITIATIVES
Building a Best-in-Class Employee Team
CAMERON HICKS
Vice President of Global Human
Resources and Employee Communications
As a best-in-class company, we are committed to maintaining a best-in-class employee team. Our Core Values provide the
foundation for this by reinforcing the qualities that set Teleflex apart, including an emphasis on people, a commitment to
building trust, a focus on maintaining an enjoyable work environment, and an entrepreneurial spirit that encourages innovation.
We actively promote these values across our global workforce, and we integrate them into our performance review process,
ensuring that every Teleflex employee is consistently working toward our common purpose. As we plan our future growth,
we are also planning the continued development of our market-leading team by methodically identifying the most qualified
candidates for each position and providing our employees with attractive opportunities for training and advancement.
6
SURGICAL -
NORTH AMERICA
From Open to Close
JOHN TUSHAR
President and General Manager,
Surgical Division
HOw IS YOUR SURGICAl
BUSINESS POSITIONED TO
CAPTURE EMERGING GROwTH
OPPORTUNITIES?
Our Surgical business is a leading
global provider of single-use disposable
and reposable devices for minimally invasive
general surgery. We have achieved this status by
developing a suite of innovative solutions that
deliver improved patient outcomes at virtually
every point in the surgical process – from open to
close. Today, the fields of robotics and minimally
invasive surgery are growing rapidly, and we are
developing next-generation products optimized
for these specialties in three primary areas:
ligation and closure, access and port closure,
and minimally invasive surgery. In ligation
and closure, we are capturing market share
by promoting specialized products like our
Hem-o-lok® Clips, while driving the penetration
of our manual and automatic ligation platforms,
which command high gross margins. In access,
we are supporting the robotics segment through
products like our Weck Vista® Bladeless Access
Ports. In mechanical port closure, our Weck
EFx® Fascial Closure System is a port site closure
platform for laparoscopic surgical procedures
that provides uniform closure of fascial tissue
layers. The only product in its category that
provides total sharps control combined with
easy, reproducible port site fascial closure in
varying body types, Weck® EFx Shield® was
selected as an innovation of the year by the
Society of Laparoendoscopic Surgeons in 2015.
In minimally invasive surgery, we are leveraging
our acquisitions of Eon Surgical and Mini-Lap
Technologies to transform the standard of care
in general surgery from traditional laparoscopic
methods to less invasive, percutaneous
laparoscopic surgery. Recently, we passed
a milestone in this process, launching our
PercuvanceTM Percutaneous Surgical System,
which significantly reduces scarring and pain
and improves patient recovery when compared
with traditional multi-port laparoscopic surgery.
As we move ahead, we are
committed to leveraging
our innovation expertise
to create a new category
of surgical products that
enhance patient experiences
and lower healthcare costs.
ADVANCING OUR CORPORATE INITIATIVES
Delivering Superior quality on a Global Scale
KAREN BOYlAN
Vice President, Global Regulatory Affairs
and Quality Assurance
As a global market leader, Teleflex designs and develops an extensive range of high-quality medical devices, each of
which meets the diverse regulatory requirements set by the many different countries we serve. Our team achieves this
task by continuously researching global regulatory requirements and enforcing compatible standards in every area of
our business – from product design, manufacturing, packaging and labeling, to employee training, marketing, and vendor
management. We diligently track our progress in every phase of production, leveraging our global technology platform to
ensure that our processes, data and reporting are standardized across the company. Collectively, these initiatives help to
reinforce Teleflex’s reputation for product quality.
TELEFLEx
MEDICAL OEM
Work With the Experts™
TIM KEllEHER
President and
General Manager, OEM
HOw IS YOUR OEM DIVISION
DRIVING PROGRESS IN TODAY’S
HEAlTHCARE MARKET?
Teleflex Medical OEM leverages our
company’s industry expertise to provide
high-quality medical components
and finished devices to medical device
manufacturers around the world. Like our other
business units, our OEM division is known for
delivering industry-leading innovation, next-
generation solutions and superior quality.
One way we meet these standards is by being
a complete, single-source solution. This
starts with forging true partnerships with our
customers that position us to take their ideas
from the drawing board through production and
into global distribution. Our vertically integrated
business encompasses a highly qualified team
of engineers, material and polymer experts,
scientists, and technicians, as well as the full
scope of in-house capabilities required to
manage each phase of the production process
– from concept development, engineering,
design for manufacturability and prototyping,
to regulatory support, testing, production
7
process development, manufacturing, finishing,
packaging, and labeling. Our customers
seek our guidance at all stages in their
development process, from initial concept
to the creation of a particular component.
Whatever the need, we collaborate with their
R&D and operations teams to create tailor-
made solutions that fill product gaps, resolve
existing problems and leverage emerging
medical innovations. We offer everything
from raw materials to components to finished
medical devices across a wide range of custom-
engineered applications, including extrusions,
diagnostic and interventional catheters,
balloons and balloon catheters, sheath and
dilator sets, specialty sutures and fibers, and
bioresorbable sutures, yarns and resins. All of
our OEM products are developed to the exacting
specifications of our customers and comply with
relevant regulatory standards. As global demand
for medical care continues to grow, Teleflex
Medical OEM is well positioned to help medical
device manufacturers stay in front of the needs
of their customers.
ADVANCING OUR CORPORATE INITIATIVES
Driving Stronger Margins through Operational Efficiencies
TONY KENNEDY
Senior Vice President,
Global Operations
Our vast global supply chain sets the standard for quality and efficiency within our industry, and we continuously leverage this
platform to drive both gross and operating margins. For example, we are currently implementing a restructuring plan to relocate
three of our manufacturing facilities in higher cost areas to our lower cost locations. When this plan is complete at year-end 2017,
we expect to realize annual savings of between $28 million and $35 million. We are also reducing operating costs by realigning
some of our businesses and consolidating facilities in North America, as well as by enforcing strict expense controls. When these
initiatives are fully implemented, we expect them to generate additional savings of between $15 million and $18 million annually,
keeping us on track to deliver adjusted operating margin expansion of between 350 and 400 basis points by year-end 2018.
8
INTERNATIONAL
Improving Healthcare Outcomes Worldwide
OTHER
Latin America, Cardiac Care, Respiratory
JEAN-lUC DIANDA
President, Europe,
Middle East and Africa
JAN VERSTREKEN
President, Asia Pacific
JAMES FERGUSON
President and General Manager,
Respiratory Division and Latin America
HOwARD MIllER
President and General Manager,
Cardiac Care Division
HOw ARE YOUR INTERNATIONAl
BUSINESSES COMPETING IN THE
GlOBAl MARKETPlACE?
HOw ARE THE BUSINESSES
IN YOUR “OTHER” CATEGORY
POSITIONED FOR GROwTH?
Our International businesses include
EMEA (Europe, Middle East and
Africa), and APAC, (Asia Pacific), which
deliver innovative products and programs
designed to improve patient health and reduce
healthcare costs. We are fueling the growth of
these businesses by driving adoption of highly
differentiated products, releasing new products
that fill unmet needs, and increasing the average
selling prices of our products in key regions.
We are also executing our go-direct program in
Japan and making distributor conversions that
bring us closer to our customers, particularly in
APAC, where we completed the acquisitions of N.
Stenning & Co. Pty. Ltd., in Australia and Human
Medics in Korea in 2015. Collectively, these efforts
are strengthening Teleflex’s position as a global
leader, while enabling us to raise care standards
for patients and clinicians around the world.
We report three businesses within
our “Other” category: Latin America,
Respiratory and Cardiac Care. Like EMEA
and APAC, our Latin America division provides
specialized medical devices for critical care and
surgery that fill unmet needs within the healthcare
market. Our Respiratory business offers practical
solutions that make breathing easier for patients
while helping to lower overall healthcare costs
for medical providers. We market our Respiratory
products under our Hudson RCI® brand, which
has been a trusted name in respiratory care for
more than 65 years. Our Cardiac Care division
engineers, develops, manufactures, sells and
supports a family of technologically advanced left
heart products for critically ill cardiac patients,
and it manages and markets a line of right
heart catheters, vascular access catheters and
angiographic diagnostic catheters.
ADVANCING OUR CORPORATE INITIATIVES
Cultivating Purpose-Driven Innovation
At Teleflex, we cultivate innovation for a distinct purpose – to promote healthy outcomes for patients and clinicians,
while reducing the overall cost of healthcare. As a result, we approach innovation as a broad and deep process that
starts with in-depth research to identify opportunities for improvement across a wide range of medical procedures,
and spans investments in emerging technologies that can be applied in life-altering ways. We focus on innovations
that increase precision, decrease pain, reduce the risk of infection, and enable the use of advanced medical techniques.
As a result, our products help speed patient recovery times, and in the process, they reduce healthcare operational
costs, including expenses related to hospital stays, such as staffing and administrative work.
FORM 10K
FOR THE FISCAl YEAR ENDED
DECEMBER 31, 2015
Endnotes for Shareholder letter and Business Highlights
1 U.S. Bureau of the Census
2 Zimlichman E, et al. Health care-associated infections: a meta-analysis of cost and financial impact on the US health care system. JAMA Intern Med.
2013;173(22):2039-2046. doi:10.1001/jamainternmed.2013.9763.
3 Hadaway LC. Reopen the pipeline. Nursing. 2005;35:54-61
4 Deitcher SR, et al. Safety and efficacy of Alteplase for restoring function in occluded central venous catheters: results of the cardiovascular thrombolytic
to open occluded lines trial. J Clin Oncol. 2002;20:317-324. (Note: Supports that 81.1% of all catheters requiring occlusion clearance are cleared with first
dose after 120 minutes, 92.9% with second dose after 120 minutes. This suggests 18.9% require a second dose and 7.1% of lines need replacement.)
5 O’Grady NP, Alexander M, Burns LA, et al., and Healthcare Infection Control Practices Advisory Committee (HICPAC). Guidelines for the prevention of
intravascular catheter-related infections, 2011. Centers for Disease Control and Prevention. 2002;51(RR10):7-8. Available at: http://www.cdc.gov/hicpac/
BSI/BSI-guidelines-2011.html. Accessed January 21, 2015.
6 National Action Plan to Prevent Healthcare-Associated Infections: Roadmap to Elimination. Washington, DC: U.S. Department of Health and Human
Services; 2013. www.hhs.gov/ash/initiatives/hai/exec_summary.html
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, 2015 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
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
No
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 (30,717,872 shares) on June 28,
2015 (the last business day of the registrant’s most recently completed fiscal second quarter) was $4,200,976,174 (1) . The aggregate
market value was computed by reference to the closing price of the Common Stock on such date.
The registrant had 41,621,869 Common Shares outstanding as of February 19, 2016.
DOCUMENT INCORPORATED BY REFERENCE:
Certain provisions of the registrant’s definitive proxy statement in connection with its 2015 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 YEAR ENDED DECEMBER 31, 2015
TABLE OF CONTENTS
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
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
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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:
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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.
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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 25 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. During
2015, we completed several acquisitions of businesses that complement our anesthesia, surgical and vascular
product portfolios, as well as our Asia segment. See Note 3 to the consolidated financial statements included in
this Annual Report on Form 10-K for additional information.
Our research and development capabilities, commitment to engineering excellence and focus on low-cost
manufacturing enable us to bring cost effective, innovative products to market that improve the safety, efficacy and
quality of healthcare. Our research and development initiatives focus on developing these products for both existing
and new therapeutic applications, as well as enhancements to, and line extensions of, existing products. We introduced
20 new products and line extensions during 2015. 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 ("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.
OUR SEGMENTS
Effective April 1, 2015, we reorganized certain of our North American businesses to better leverage our resources.
As a result, we realigned our operating segments. Specifically, our Anesthesia/Respiratory North America operating
segment was divided into two operating segments, Anesthesia North America and Respiratory North America.
Additionally, the businesses comprising our former Specialty operating segment (which was not a reportable segment
and, therefore, was included in the "All other" category in our presentation of segment information) were transferred
to the Anesthesia North America, Vascular North America and Respiratory North America operating segments.
As a result of the operating segment changes described above, we have the following six reportable operating
segments: Vascular North America, Anesthesia North America, Surgical North America, EMEA (Europe, Middle East
and Africa), Asia and OEM. In connection with the presentation of segment information, we will continue to present in
the "All other" category certain operating segments, which, effective April 1, 2015, include, among others, the Respiratory
North America operating segment. All prior comparative periods presented in this report have been restated to reflect
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these changes. The following charts depict our net revenues by reportable operating segment as a percentage of our
total consolidated net revenues for the years ended December 31, 2015, 2014 and 2013.
Vascular North America: Our Vascular North America segment is comprised of our North American vascular and
interventional access businesses, which offer products that facilitate a variety of critical care therapies and other
applications.
Vascular Access Products
Our vascular access products primarily consist of our Arrow branded catheters and related devices that are used
in a wide range of procedures, including the administration of intravenous medications and other therapies, the
measurement of blood pressure and the withdrawal of blood samples through a single puncture site. The vascular
access product portfolio principally consists of the following products:
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Arrow Central Venous Catheters (CVCs): 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 Intraosseous Vascular Access System: The Arrow EZ-IO system provides vascular access for the
delivery of medications and fluids via intraosseous, or in the bone, infusion when traditional vascular access is
difficult or impossible. Sales of the Arrow EZ-IO system to our hospital customers are included in our Vascular
North America segment results. As discussed below, sales of the Arrow EZ-IO to pre-hospital care customers,
such as emergency medical service providers, are included in our Anesthesia North America segment results.
Arrow Peripherally Inserted Central Catheters (PICCs): 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 Jugular Axillo-subclavian Central Catheters (JACCs): Arrow JACCs are designed to be inserted in the
neck or shoulder area and provide an alternative to traditional CVCs and PICCs for acute care. Arrow JACCs
may be used short or long term to treat patients who may have poor peripheral circulation.
VPS G4 Vascular Positioning System: Our VPS G4 system is an advanced vascular positioning system designed
to facilitate precise placement of central venous catheters within the heart. Indicated as an alternative to chest
x-ray confirmation for CVC tip placement confirmation in adult patients, the system analyzes multiple metrics, in
real time, to help clinicians navigate through the circulatory system and identify the correct catheter tip placement
in the heart.
Arrow Arterial Catheterization Sets: Our Arrow arterial catheterization 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: Our Arrow percutaneous sheath introducers are used to insert
cardiovascular and other catheterization devices into the vascular system during critical care procedures.
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The large majority of our CVCs are treated with our ARROWg+ard or ARROWg+ard Blue Plus antimicrobial surface
treatments, which have been shown to reduce the risk of catheter related bloodstream infection. Our PICCs and JACCs
are available with our Chlorag+ard technology, which is an antimicrobial treatment applied to the external surface of
the catheter body, as well as the entire fluid pathway of the catheter, that has been shown to be effective in reducing
microbial colonization and thrombus accumulation on catheter surfaces.
We also offer many of our vascular access catheters in Maximal Barrier Precautions trays, which are designed to
assist healthcare providers in complying with clinical guidelines for reducing catheter-related bloodstream infections.
These trays are available for CVCs, PICCs and multi access catheters and include a full body drape, coated or non-
coated catheters and other accessories. In addition, our ErgoPACK system offers clinicians a broad range of tray
configurations with components packaged in the tray in the order in which they will be needed during the procedure,
and incorporates features designed to promote ease of use and patient and provider safety.
Interventional Access Products
Our interventional access products are used in a wide range of applications, including dialysis, oncology and critical
care therapies. Our interventional access portfolio also includes several Arrow branded products, such as diagnostic
and drainage kits, embolectomy balloons, and reinforced percutaneous sheath introducers. Our interventional access
products include:
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Arrow OnControl® Powered Bone Marrow / Bone Access System: The Arrow OnControl powered bone access
system enables access for hematology and oncology diagnostic practices. The system is used to obtain bone
marrow, aspirate the bone and access bone lesions.
Arrow Trerotola™ Percutaneous Thrombectomy Device ("PTD"): The Arrow Trerotola PTD is used for declotting
of dialysis grafts and fistulas.
Arrow Chronic Hemodialysis Catheters: The Arrow chronic hemodialysis catheters include both antegrade and
retrograde insertion options for split, step and symmetrical tip configurations.
Arrow Acute Hemodialysis Catheters: Similar to the Arrow CVC portfolio, the Arrow Acute hemodialysis catheters
are offered with or without ARROWg+ard antimicrobial surface treatment
Anesthesia North America: Our Anesthesia North America segment is comprised of our North American airway
management and pain management businesses.
Airway Management Products
Our airway management products and related devices consist principally of the following:
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LMA Airways: Our 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 Protector™
Airway, our latest airway management device, is the first single-use laryngeal mask with a dual gastric drainage
channel and pharyngeal chamber designed specifically to channel high volume, high pressure gastric contents
away from the airway. It also integrates our Second Seal™ technology to isolate the respiratory tract from the
digestive tract, reducing the risk of aspiration of gastric contents. The LMA Protector™ Airway also includes our
Cuff Pilot™ technology, which enables clinicians to confirm that the inserted cuff is properly inflated and to monitor
pressure levels.
LMA Atomization: Our LMA atomization portfolio includes products designed to facilitate atomized delivery of
certain medications. Included in the portfolio is our LMA MAD Nasal™, an intranasal mucosal atomization device
that is designed to provide a safe and painless way to deliver medications approved for intranasal delivery to a
patient's blood stream without an intravenous line or needle.
RUSCH Endotracheal Tubes and Laryngoscopes: We offer a broad portfolio of products to facilitate and support
endotracheal intubation to administer oxygen, and anesthetic gases in multiple settings (surgery, critical care and
emergency settings). We also 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"). Among these products is the RUSCH DispoLED Laryngoscope Handle, a single-use handle
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designed to help facilities comply with standards designed to reduce the potential for patient cross-contamination
associated with reusable devices during intubation.
Pain Management Products
Our pain management products, which are designed for use in a broad range of surgical and obstetric procedures,
consist principally of the following:
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Arrow Epidural Catheters, Needles and Kits: We offer a broad range of Arrow epidural products, including the
Arrow FlexTip Plus epidural catheter, 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.
Arrow Peripheral Nerve Block ("PNB") Catheters, Pumps, Needles and Kits: Our portfolio of Arrow PNB products,
which includes the Arrow Stimucath and FlexBlock catheters, are designed to be 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.
AutoFuser Disposable Pain Pumps: Our AutoFuser Disposable Pain Pumps are designed for general infusion
use, which includes regional anesthesia and pain management, intra-operative (soft tissue/body cavity) sites,
percutaneous, subcutaneous, epidural administration. The AutoFuser offers multiple reservoir sizes and
configurations to meet a variety of clinical demands.
Arrow EZ-IO System: The EZ-IO system, as described in the Vascular North America segment summary above,
complements our pain management product portfolio when administered in pre-hospital emergency settings.
Surgical North America: Our surgical products are designed to provide surgeons with a comprehensive range
of devices for use in a variety of surgical procedures. Our portfolio, which consists of both single-use and reusable
products, include the following:
• Weck®Ligation Systems: Our Weck Ligation Systems features the Weck Ligating Clips and Hem-o-lok® Ligating
Clips. The Weck Ligating Clips are intended for use in procedures involving vessels or anatomic structures and
are sold in various sizes, types and materials. Our Hem-o-lok Ligating Clips are intended for use in procedures
involving ligation of vessels or tissue structures and are sold in various sizes.
• Weck EFx Fascial Closure System: Our Weck EFx endo fascial closure system is a port site closure device used
in laparoscopic surgical procedures that is designed to minimize complications and costs associated with port-
site herniation. We recently expanded this product line to include the EFx Shield fascial closure system. The
Weck Facial Closure Systems are intended to facilitate placement and withdrawal of suture loops to repair port
site defects following laparoscopic surgery.
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Percutaneous Surgical Systems: Our Mini-Lap surgical instruments, which we added to our product portfolio
through our December 2014 acquisition of Mini-Lap Technologies, Inc. ("Mini-Lap"), are designed to be inserted
percutaneously (through the skin) to enable surgeons to perform laparoscopic surgery while reducing the need
for multiple trocars (access ports). In addition, we have developed our PercuvanceTM percutaneous surgical
system with 5 mm attachments, which is indicated for the means to penetrate soft tissue to access certain areas
of the human abdomen and used to grasp, hold and manipulate tissue. We received 510(k) clearance for this
product in January 2015 and initiated a controlled launch of the product in the United States and Europe in 2015.
Our other branded surgical products include our Weck Vista bladeless access ports, Deknatel sutures and
our Pilling® and Kmedic® surgical instruments.
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 offered by our EMEA segment are most
widely used in acute care settings for a range of diagnostic and therapeutic procedures and in general and specialty
surgical applications, such as urology.
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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 offered by our Asia segment are most widely used in acute care settings for a range of diagnostic and
therapeutic procedures and in general and specialty surgical applications.
OEM: Our 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. As a result of our acquisition of Trintris Medical, Inc. in 2015, the OEM segment expanded its
product portfolio to include balloons and balloon catheters.
All other businesses: Our other operating segments do not meet the threshold for separate disclosure under
applicable accounting guidance and are therefore included in the “All other” line item in tabular presentations of segment
information. Products offered by these operating segments include single-use respiratory, urology and cardiac care
products, as well as capital equipment, which are provided to hospitals and other alternative channels of care. Also
included in the "All other" line item is our Latin American business.
Respiratory/Urology Product Portfolio
As a result of the business reorganization discussed previously, we combined our respiratory and urology
businesses. 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 prominent name in respiratory care for over 65 years.
Our urology product portfolio 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.
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.
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 and Asia segments.
OUR MARKETS
We generally serve three end-markets: hospitals and healthcare providers, medical device manufacturers and
home care. These markets are affected 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, 2015, 2014
and 2013 derived from each of our end markets.
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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 expanded 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.
We expect to continue to increase the size of our business through a combination of acquisitions and organic
growth initiatives. In recent years, we expanded our product portfolio through select acquisitions, including our 2012
acquisition of substantially all of the assets of LMA International N.V, a global provider of laryngeal masks whose
products are used in anesthesia and emergency care, which complements our anesthesia product portfolio, and our
2013 acquisition of Vidacare Corporation ("Vidacare"), a provider of intraosseous, or inside the bone, access devices,
which complements our vascular access and anesthesia product portfolios. We continue to complete conversions
from distributor sales to direct sales ("distributor-to-direct sales conversions") in certain countries, including Australia,
Korea and Japan. Additionally, we continue to execute restructuring programs to improve efficiencies in our sales and
marketing and research and development structures and in our manufacturing and distribution facilities.
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.
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
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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)
clearance. 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 ("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 and malfunction 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 require or 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.
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.
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. If the FDA were to find that
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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.
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.
11
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 plc and Becton, Dickinson and Company.
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, independent representatives and 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.
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 $52.1 million, $61.0 million and $65.0 million for the years ended December 31, 2015, 2014 and
2013, 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.
12
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 12,200 full-time and temporary employees at December 31, 2015. Of these
employees, approximately 2,900 were employed in the United States and 9,300 in countries other than the United
States. Approximately 4% 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 will not 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.
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 J. Kelly
Thomas E. Powell
Thomas A. Kennedy
Karen T. Boylan
Cameron P. Hicks
James J. Leyden
Age
68
49
54
53
44
51
49
Positions and Offices with Company
Chairman, President, Chief Executive Officer and Director
Executive Vice President and Chief Operating Officer
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
13
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. Previously,
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 and Chief Operating Officer since April 2015. From April 2014 to
April 2015, Mr. Kelly served as Executive Vice President and President, Americas. From June 2012 to April 2014 Mr.
Kelly served as Executive Vice President and President, International. He also 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 April 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, Chief Financial Officer 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 also has 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 Corporation, a developer, manufacturer and marketer of medical devices, from
April 1996 to December 2012.
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,
Inc., 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.
14
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 we will be able to successfully develop new
products, enhance existing products or achieve market acceptance of our products, due to, among other things, our
inability to:
•
•
•
•
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 a material adverse effect
on our business, financial condition and results of operations.
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.
15
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 facility consolidations, organizational realignments 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 from a separate ERP system to 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, financial condition and cash flows.
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.
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:
•
•
•
•
•
•
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;
16
•
•
•
•
•
•
•
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 and performance claims must
be adequately substantiated. Promoting a device for an off-label use or making misleading or unsubstantiated claims
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. In addition, any facilities assembling
convenience kits that include drug components and are registered as drug repackaging establishments are also subject
to current good manufacturing practices requirements for drugs. The FDA also requires the reporting of certain adverse
events and product malfunctions 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.
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:
•
•
•
•
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 prohibits 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.
17
Further, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act (collectively, the “Affordable Care Act”), imposed annual reporting and disclosure requirements on
device manufacturers for any “transfer of value” made or distributed to physicians or teaching hospitals. 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.
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, results of operations and
cash flows.
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 cancellations of purchases
of our products and services and continues to cause disruption in the financial markets, including diminished liquidity
and credit availability. 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. 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,
financial condition and liquidity.
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
18
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, the ongoing uncertainty in the European financial markets, combined with a continuation of constrained
European credit markets creates a risk that some of our European customers and suppliers may be unable to access
liquidity. As of December 31, 2015 and 2014, our net current and long term accounts receivable in Italy, Spain, Portugal
and Greece were $62.3 million and $76.2 million, respectively. In 2015, 2014 and 2013, net revenues from these
countries were approximately 7%, 8% and 8% of total net revenues, respectively, and average days that accounts
receivable from these countries were outstanding were 204, 223 and 260 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.
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:
•
•
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, although this tax has been suspended for 2016
and 2017 as a result of the enactment of the Consolidated Appropriations Act of 2016;
established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct
comparative clinical effectiveness research;
19
•
•
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 2015, 2014 and 2013, we recorded expenses of $10.2 million, $12.7 million and $11.5 million, respectively, with
respect to the medical device excise tax. While the excise tax has been suspended in 2016 and 2017, unless the
suspension is extended, we will again be subject to the excise tax in 2018. 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 flows.
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, 2015, 76% of our
full-time and temporary employees were employed in countries outside of the United States. As of December 31, 2015,
2014 and 2013, approximately 43%, 45% and 37%, respectively, of our net property, plant and equipment was located
outside the United States. In addition, for the years ended December 31, 2015, 2014 and 2013 approximately 47%,
50% and 50%, respectively, of our net revenues (based on the Teleflex facility generating the sale) were derived from
operations outside the United States.
Our international operations are subject to risks inherent in doing business outside the United States, including:
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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.
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
20
disrupt our operations, involve significant management distraction and have a material adverse effect on our business,
financial condition, results of operations and cash flows. 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, financial condition and cash flows.
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 the remeasurement of assets and liabilities as well as transactions
denominated in currencies other than the primary currency of the country in which the entity operates, which we refer
to as "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 our monetary assets and liabilities and 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 financial condition, results of operations and cash flows.
Fluctuations in our effective tax rate and changes to tax laws may adversely affect us.
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.
21
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, financial condition and cash flows.
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 business,
results of operations, financial condition and cash flows.
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, as a result, no longer have the benefit 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, results of operations and cash flows.
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. We cannot assure that current and former employees, contractors and other parties will not breach their
22
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, financial condition, results of
operations and cash flows. Moreover, there can be no assurance that others will not independently develop know-how
and trade secrets comparable to ours 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.
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, results of
operations or cash flows.
Our substantial indebtedness could adversely affect our business, financial condition or results of
operations.
As of December 31, 2015, we had total consolidated indebtedness of $1,066 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.
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We may not be able to effect 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 indenture governing our 5.25% senior notes due 2024 (the "2024 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;
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; 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 of our debt. 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 since the fourth quarter 2013, 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. As of February 15, 2016, we have received conversion notices with respect to
approximately $44.7 million in aggregate principal amount of the Convertible Notes. 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.
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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
an exercise price of $74.65, 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 exercise 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 2015, 2.7 million shares issuable upon exercise of the warrants were included in the total diluted
shares outstanding for the year ended December 31, 2015. 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.
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, 2015, we had outstanding approximately 41.6 million shares of our common
stock, options to purchase approximately 1.4 million shares of our common stock (of which approximately 0.8 million
were vested as of that date), restricted stock units covering approximately 0.3 million shares of our common stock
(which are expected to vest over the next three years) and approximately 14,000 shares of our common stock to be
distributed from our deferred compensation plan. As of December 31, 2015, 19.9 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.
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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, our issuance of shares
following the exercise of some or all of the outstanding stock options and warrants, the vested of restricted stock units
and the conversion of some or all of the Convertible Notes will dilute the ownership interests of existing stockholders,
and any sales in the public market of such shares of our common stock could adversely affect prevailing market prices
of our common stock. In addition, the issuance and sale of substantial amounts of our common stock, including common
stock issued as a result of the exercise of stock options and warrants, vesting of restricted stock units or conversion
of the Convertible Notes, could depress the price of our common stock.
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, financial condition or cash flows.
Regulations related to conflict minerals may increase our costs and adversely affect our business.
In 2012, the SEC 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, if so, whether such minerals helped finance
armed conflict in the DRC or an adjoining country. We filed conflict minerals report in June 2014 and June 2015. As
discussed in the most recent report, we have determined that certain of our products contain the specified minerals,
and we have undertaken, and continue to undertake, efforts 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. 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. Moreover, we may
be adversely affected if we are unable to pass through any increased costs associated with meeting customer demands
that we provide DRC conflict free products. 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.
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These laws and regulations are complex, change frequently and have tended to become more stringent over time.
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.
Our workforce covered by collective bargaining and similar agreements could cause interruptions in our
provision of products and services.
As of December 31, 2015, approximately 4% of our employees in the United States and in other countries were
covered by union contracts or collective bargaining arrangements. In addition, for the year ended December 31, 2015,
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 and the 2024
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, 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 and the 2024 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 80 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) at December 31, 2015 are as follows:
Location
Olive Branch, MS
Nuevo Laredo, Mexico
Asheboro, NC
Reading, PA
Morrisville, NC
Research Triangle Park, NC
Kernan, Germany
Zdar nad Sazavou, Czech Republic
Tongeren, Belgium
Kamunting, Malaysia
Chihuahua, Mexico
Tecate, Mexico
Hradec Kralove, Czech Republic
Chelmsford, MA
Kulim, Malaysia
Arlington Heights, IL
Wayne, PA
Kamunting, Malaysia
Jaffrey, NH
Kernan, Germany
Chihuahua, Mexico
Chihuahua, Mexico
Limerick, Ireland
Everett, MA
Bad Liebenzell, Germany
Square
Footage
656,000
277,000
204,000
166,000
162,000
147,000
112,000
108,000
108,000
102,000
100,000
96,000
92,000
91,000
90,000
86,000
84,000
82,000
81,000
73,000
68,000
63,000
59,000
56,000
53,000
Owned or
Leased
Leased
Leased
Owned
Owned
Leased
Owned
Lease
Owned
Leased
Owned
Leased
Leased
Owned
Leased
Owned
Leased
Leased
Leased
Owned
Owned
Leased
Owned
Leased
Leased
Leased
Operations in each of our business segments are conducted at locations both in and outside of the United States.
Of the facilities listed above, with the exception of Jaffrey, NH and Limerick, Ireland, 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 590,000 square feet of additional
warehousing, manufacturing and office space in the United States, Canada, Mexico, South America, Europe, Asia and
Africa. We also own or lease properties that are no longer used in our operations, which we are actively marketing for
sale or sublease.
28
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, 2015 and 2014, we have accrued liabilities of approximately $2.5 million
and $6.0 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 $2.5 million accrued at
December 31, 2015, $1.5 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 cash flows. 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.
29
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 2015 and 2014 are shown below.
Price Range and Dividends of Common Stock
2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
$
$
$
$
$
$
High
123.09 $
137.29 $
140.50 $
135.00 $
Low
107.45 $
118.83 $
122.13 $
122.14 $
Dividends
0.34
0.34
0.34
0.34
Low
Dividends
High
106.70 $
109.73 $
90.15 $
99.56 $
111.24 $
103.37 $
119.99 $
101.95 $
0.34
0.34
0.34
0.34
The terms of our senior credit facility 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 $681.7 million
of retained earnings was available for dividends and stock repurchases at December 31, 2015. On February 23, 2016,
the Board of Directors declared a quarterly dividend of $0.34 per share on our common stock, which is payable on
March 15, 2016 to holders of record on March 4, 2016. As of February 23, 2016, we had approximately 568 holders
of record of our common stock.
As previously disclosed, in 2007, our Board of Directors authorized the repurchase of up to $300 million of our
outstanding common stock. On February 23, 2016, our Board of Directors terminated this authorization. No shares
were purchased under this authorization.
30
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, 2010 and that all dividends were reinvested.
MARKET PERFORMANCE
Company / Index
Teleflex Incorporated
S&P 500 Index
S&P 500 Healthcare Equipment &
Supply Index
2010
100
100
100
2011
117
102
99
2012
138
118
116
2013
185
157
148
2014
229
178
187
2015
266
181
199
31
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(4)
Long-term borrowings
Common 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
Supplemental Data:
Free cash flow(5)
2015(2)
2014(2)
2013(2)
2012(2)
2011(2)
(Dollars in thousands, except per share)
$
1,809,690
$
1,839,832
$
1,696,271
$
1,551,009
$
1,492,528
$
$
$
$
$
$
$
$
$
$
$
$
$
315,891
236,808
$
$
284,862
191,460
$
$
233,261
152,183
$
$
(97,375)
(181,782)
235,958
$
190,388
$
151,316
$
(182,737)
5.68
4.91
1.36
3,878,516
646,000
2,009,272
$
$
$
$
$
$
4.60
4.10
1.36
3,922,787
700,000
1,911,309
$
$
$
$
$
$
3.68
3.46
1.36
4,159,148
930,000
1,913,527
$
$
$
$
$
$
(4.47)
(4.47)
1.36
3,685,438
965,280
1,778,950
303,446
$
290,241
$
231,299
$
194,618
(154,848) $
(108,137) $
(372,638) $
(368,258)
(85,583) $
(287,703) $
231,170
$
(65,653)
241,998
$
222,670
$
167,719
$
129,224
(3)
(3)
(3)
$
$
$
$
$
$
$
$
$
$
$
$
$
229,570
119,322
118,301
2.92
2.90
1.36
3,884,839
954,809
1,980,588
94,357
306,670
(11,106)
49,775
Certain financial information is presented on a rounded basis, which may cause minor differences.
(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)
(4)
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.
Includes the impact of adopting the accounting standard related to deferred tax classification issued in November 2015. See Note 2 to the
consolidated financial statements included in this Annual Report on Form 10-K.
(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
2015
2014
2013
2012
2011
(Dollars in thousands)
$ 303,446
$ 290,241
$ 231,299
$ 194,618
$ 94,357
61,448
67,571
63,580
65,394
44,582
$ 241,998
$ 222,670
$ 167,719
$ 129,224
$ 49,775
32
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 worldwide through a combination of our direct
sales force and distributors. Because our products are used in numerous markets and for a variety of procedures, we
are not dependent upon any one end-market or procedure. We are focused on achieving consistent, sustainable and
profitable growth by increasing our market share and improving our operating efficiencies.
We evaluate our portfolio of products and businesses on an ongoing basis to ensure alignment with our overall
objectives. Based on our evaluation, we may identify opportunities to expand our margins through strategic divestitures
of existing businesses and product lines that do not meet our objectives. In addition, we may seek to optimize utilization
of our facilities through restructuring initiatives designed to further reduce our cost base and enhance our competitive
position.
On February 23, 2016, our Board of Directors approved a restructuring plan that involves the consolidation of
operations and a related reduction in workforce. We estimate that we will incur aggregate pre-tax charges in connection
with these restructuring activities of approximately $34 million to $44 million, of which, we expect approximately $21
million to $23 million to be incurred in 2016 and most of the balance will be incurred prior to the end of 2018. We
estimate that $27 million to $31 million of the aggregate pre-tax charges will result in future cash outlays, of which, we
expect approximately $6 million to $8 million will be made in 2016 and most of the balance will be made prior to the
end of 2018. Additionally, we expect to incur aggregate capital expenditures of approximately $13 million to $17 million,
of which, $3 million to $5 million will be made in 2016. We currently expect to achieve annualized savings of $12 million
to $16 million once the plan is fully implemented, and currently expect to realize plan-related savings beginning in
2017. See Note 19 to the consolidated financial statements included in this Annual Report on Form 10-K for additional
information.
For a discussion of our ongoing restructuring programs, see "Restructuring and other impairment charges" under
“Results of Operations” below.
During 2015, we completed several acquisitions of businesses that complement our anesthesia, surgical and
vascular product portfolios, as well as our Asia segment. In 2014, we completed acquisitions of businesses to
complement our Asia segment and our surgical product portfolio. The total fair value of consideration for the 2015 and
2014 acquisitions was $96.5 million and $66.3 million, respectively. See Note 3 to the consolidated financial statements
included in this Annual Report on Form 10-K for additional information regarding the acquisitions.
Change in Reporting Segments
Effective April 1, 2015, we reorganized certain of our businesses to better leverage our resources. As a result, we
realigned our operating segments. Specifically, the Anesthesia/Respiratory North America operating segment was
divided into two operating segments, Anesthesia North America and Respiratory North America. Additionally, the
businesses comprising the former Specialty operating segment (which was not a reportable segment and, therefore,
was included in the "All other" category in the presentation of segment information) were transferred to the Anesthesia
North America, Vascular North America and Respiratory North America operating segments. As a result of the operating
segment changes described above, we have the following six reportable operating segments: Vascular North America,
Anesthesia North America, Surgical North America, EMEA, Asia and OEM. In connection with the presentation of
segment information, we will continue to present certain operating segments, which, effective April 1, 2015, include,
among others, the Respiratory North America operating segment, in the “All other” category. All prior comparative
periods have been restated to reflect these changes. Additionally, because this change affected our reporting units,
we performed goodwill impairment analyses as of the April 1, 2015 effective date for the new reporting units by comparing
the fair value of the reporting units, including goodwill, to their carrying values. The impairment analyses performed
included the reallocation of the goodwill balances among the reporting units to reflect the changes described above.
We did not record any goodwill impairment charges as a result of these analyses.
33
Health Care Reform
In 2010, the Patient Protection and Affordable Care Act (as amended, the "Affordable Care Act") was signed into
law. The legislation is far-reaching and is intended to expand access to health insurance coverage and improve the
quality and reduce the costs of healthcare. For medical device companies such as Teleflex, the expansion of medical
insurance coverage should lead to greater utilization of the products we manufacture, but the provisions of the legislation
designed to contain the cost of healthcare could negatively affect pricing of our products and encourages patient
outcome driven results. 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, 2015, 2014 and 2013, we recorded medical device excise taxes of $10.2 million,
$12.7 million and $11.5 million, respectively, which is included are selling, general and administrative expenses. As
a result of the enactment of the Consolidated Appropriations Act of 2016, the excise tax has been suspended for 2016
and 2017.
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 consequences of economic conditions, other than
fluctuations in foreign currency exchange rates, 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.
In recent years, 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 95% 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.
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
a number of European countries resulting in delays in elective surgeries. 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, governments are making additional efforts to manage the cost of healthcare, as economic conditions
weaken somewhat in the region as a result of slowing growth rates in China. We are experiencing an increasing trend
of government driven price management and reimbursement controls, particularly in China, Japan and Indonesia. In
China, there is also a governmental initiative to help local manufacturers access a bigger share of the local market.
Moreover, many countries, including China, have become more proactive with respect to regulatory requirements, and
as a result, we expect longer, more costly, and more complicated, regulatory approval processes in these countries.
34
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 Latin America does not represent a significant portion of our
business, our operations in this region may be adversely affected by these factors.
Results of Operations
As used in this discussion, "new products" are products that we have sold for 36 months or less, and “existing
products” are products that we have sold for more than 36 months. Discussion of results of operations items that
reference the effect of one or more acquired businesses (except as noted below with respect to acquired distributors)
generally reflects the impact of the acquisitions within the first 12 months following the date of the acquisition. In addition
to increases and decreases in the per unit selling prices of our products to our customers, our discussion of the impact
of product price increases and decreases also reflects, for the first 12 months following the acquisition of a distributor,
the impact on the pricing of our products resulting from the elimination of the distributor from the sales channel. To the
extent an acquired distributor had pre-acquisition sales of products other than ours, the impact of the post-acquisition
sales of those products on our results of operations is included within our discussion of the impact of acquired
businesses.
Certain financial information is presented on a rounded basis, which may cause minor differences.
Revenues
Net Revenues
2015
2014
2013
(Dollars in millions)
$
1,809.7
$
1,839.8
$
1,696.3
Comparison of 2015 and 2014
Net revenues for the year ended December 31, 2015 decreased 1.6%, or $30.1 million, compared to the prior
year. The decrease is primarily attributable to unfavorable fluctuations in foreign currency exchange rates of $129.1
million, primarily in the EMEA and Asia segments. The decrease in net revenues was partially offset by a net increase
in sales volumes of existing products in most of our segments of $51.9 million, and a net increase in new product sales
in most of our segments of $19.4 million. In addition, the decrease was further offset by sales by acquired businesses,
primarily Human Medics Co., Ltd. (“Human Medics”), a distributor of medical devices and supplies primarily in the
Korean market, Mini-Lap, a developer of micro-laparoscopic instrumentation, Mayo Healthcare Pty Limited, ("Mayo
Healthcare"), a distributor of medical devices and supplies, primarily in the Australian market, N. Stenning & Co. Pty.
Ltd. ("Stenning"), a distributor of medical devices and supplies primarily in the Australian market, and Truphatek Holdings
(1993) Limited ("Truphatek"), a manufacturer of a broad range of disposable and reusable laryngoscope devices, which
generated $14.8 million, and net price increases, primarily in the Asia and Surgical North America segments, which
generated $12.8 million.
Comparison of 2014 and 2013
Net revenues for the year ended December 31, 2014 increased 8.5%, or $143.5 million, compared to the prior
year. The increase in net revenues is primarily attributable to the businesses acquired during 2013 and 2014 (including
Vidacare; Mayo Healthcare; and Ultimate Medical Pty. Ltd. and its affiliates (collectively, "Ultimate"), a supplier of airway
management devices), 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 across most of our segments, and a net increase in sales volumes of existing products of $12.3 million,
primarily in the OEM, EMEA and Vascular North America segments. These increases were partially offset by the
unfavorable impact of foreign currency exchange rates of $6.2 million, lower sales volumes in the Asia segment as
well as in certain of the operating segments included in the "All other" category, and price reductions in the OEM
segment.
35
Gross profit
Gross profit
Percentage of revenues
Comparison of 2015 and 2014
2015
2014
2013
(Dollars in millions)
$
944.4
$
942.4
$
838.9
52.2%
51.2%
49.5%
For the year ended December 31, 2015, gross profit as a percentage of revenues increased 100 basis points, or
2.0%, compared to the prior year. The increase in gross margin is primarily attributable to the 70 basis point impact
of a net increase in sales of higher margin products, primarily in the Surgical North America and OEM segments, the
60 basis point impact of a net increase in sales volumes of existing products, primarily in the Vascular North America,
EMEA and Asia segments and the 30 basis point impact of net price increases, primarily in the Asia and Surgical North
America segments. Gross margin was negatively impacted by the 80 basis point impact of net unfavorable fluctuations
in foreign currency exchange rates and costs associated with product recalls and quality issues first identified during
the second quarter 2015 partially offset by lower manufacturing costs resulting from cost improvement initiatives.
Comparison of 2014 and 2013
For the year ended December 31, 2014, gross profit as a percentage of revenues increased 170 basis points, or
3.4%, compared to the prior year. The increase in gross margin 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 products, primarily in the EMEA and certain
of the operating segments included in the "All other" category. These improvements in gross profit were partially offset
by costs associated with the 2014 Manufacturing footprint realignment plan, an increase in logistics and distribution
costs and the net unfavorable impact of foreign currency exchange rates.
Selling, general and administrative
Selling, general and administrative
Percentage of revenues
Comparison of 2015 and 2014
2015
2014
2013
(Dollars in millions)
$
569.0
$
578.7
$
502.2
31.4%
31.5%
29.6%
Selling, general and administrative expenses decreased $9.7 million during the year ended December 31, 2015
compared to the prior year. The decrease is due to the favorable impact of foreign currency exchange rate fluctuations
of $28.5 million and a reduction in medical device excise tax of $2.5 million. These declines were partially offset by
expenses associated with the 2015 acquisitions and distributors-to-direct sales conversions of $11.4 million, an increase
in selling expenses of $5.4 million, primarily related to higher sales commissions, a reduction in the benefit resulting
from contingent consideration liability reversals of $2.9 million and higher amortization expense of $2.6 million.
Comparison of 2014 and 2013
Selling, general and administrative expenses increased $76.5 million during the year ended December 31, 2014
compared to the prior year. 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
36
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 year ended December 31, 2014 was $4.9 million lower
than the benefit realized in the year ended December 31, 2013.
Research and development
Research and development
Percentage of revenues
Comparison of 2015 and 2014
2015
2014
2013
(Dollars in millions)
$
52.1
$
61.0
$
2.9%
3.3%
65.0
3.8%
The decrease in research and development expenses for the year ended December 31, 2015 resulted from
efficiencies realized through our integration of research and development projects commenced by certain businesses
acquired in 2013 that were reflected in research and development expenses for the year ended December 31, 2014.
The decrease is also attributable to the late stage technology acquisitions made in 2015, which supplement our organic
research and development initiatives.
Comparison of 2014 and 2013
The decrease in research and development expenses for the year ended December 31, 2014 resulted from
efficiencies realized through our integration of research and development projects commenced by certain businesses
acquired in 2012, including LMA International N.V., Hotspur Technologies and Semprus BioSciences Corp, that were
reflected in research and development expenses for the year ended December 31, 2013.
Restructuring and other impairment charges
2015 Restructuring programs
2014 Manufacturing footprint realignment plan
2014 European restructuring plan
Other 2014 restructuring programs
2013 Restructuring programs
LMA restructuring program
Other restructuring programs - prior years
Impairment charges
2015
2014
2013
(Dollars in millions)
$
6.3
1.7
(0.1)
—
(0.1)
—
—
—
$
— $
9.3
7.8
3.6
0.8
(3.3)
(0.3)
—
Restructuring and other impairment charges
$
7.8
$
17.9
$
—
—
—
—
10.2
12.2
5.2
10.9
38.5
2015 Restructuring Programs
During 2015, we committed to programs associated with the reorganization of certain of our businesses, as
discussed in Note 16 to the consolidated financial statements included in this Annual Report on Form 10-K, and shared
service functions as well as the consolidation of certain of our North American facilities. We estimate that we will record
aggregate pre-tax charges of $6.5 million to $8.0 million related to these programs, which represent employee
termination benefits, contract termination costs and facility closure and other exit costs, and will result in future cash
outlays. We began to realize savings related to these plans in 2015, and expect to achieve annualized savings of $15
million to $18 million once the restructuring plans are fully implemented. For the year ended December 31, 2015, we
recorded charges of $6.3 million and had a reserve of $3.3 million related to these programs.
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
37
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 future cash outlays to constitute an estimated $26
million to $31 million. Additionally, we expect to incur aggregate capital expenditures of approximately $24 million to
$30 million under the restructuring plan. We began to realize savings related to this plan beginning in 2015, and we
expect to achieve annualized savings of $28 million to $35 million once the plan is fully implemented.
For the year ended December 31, 2015, expenses related to the 2014 Manufacturing Footprint Realignment Plan
decreased $3.0 million as compared to the prior year. The decrease was attributable to lower restructuring costs,
primarily termination benefits, of $7.6 million (as shown above), which was partially offset by an increase in charges
recorded to cost of sales, primarily for the transfer of manufacturing operations from the existing locations to the new
locations of $4.6 million. In addition, for the year ended December 31, 2015, we incurred $7.8 million of capital
expenditures and had cash outlays of $10.6 million, of which, $2.7 million related termination benefit payments,
associated with this plan. As of December 31, 2015, we had a reserve of $7.4 million in connection with this plan, the
majority of which is recorded as a current liability.
2014 European Restructuring Plan
In 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. As of December 31, 2015, we incurred net aggregate restructuring expenses of
$7.7 million in connection with the 2014 European Restructuring Plan. We expect to complete this plan in 2016.
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 of December 31, 2015 we incurred aggregate restructuring charges of
$3.6 million as a result of these actions. These programs include employee termination benefits, contract termination
costs and other exit costs. We completed these programs in 2015.
2013 Restructuring Programs
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. As of December 31, 2015, we incurred net aggregate restructuring charges of $10.9 million. 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. We completed these 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, we commenced a program related to the integration of the LMA business with our other businesses. The
program 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. As a result of these actions, we incurred
net aggregate restructuring charges of $11.3 million as of December 31, 2015. Of this amount, $5.5 million related to
employee termination costs, $4.9 million related to termination of certain distributor agreements and $0.9 million related
to facility closure and other costs.
For the year 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. We completed this
program in 2015.
Other Restructuring Programs - Prior Years
For the year ended December 31, 2013, we recorded restructuring charges of $5.2 million, which were primarily
attributable to our 2012 Restructuring Program. This program was initiated in 2012 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. As of December 31, 2015, we incurred aggregate
restructuring charges of $6.3 million under this program, all of which were incurred prior to 2015. As of December 31,
38
2015, we had a reserve of $0.5 million related to the 2012 Restructuring Program. We expect to complete the program
in 2016.
Impairment Charges
There were no impairment charges for the years ended December 31, 2015 or 2014.
In 2013, we recorded $7.3 million of in-process research and development (“IPR&D”) charges and $3.5 million in
impairment charges related to assets held for sale that had a carrying value in excess of their appraised fair value.
There were no impairment charges in the years ended December 31, 2015 or 2014.
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.
Interest expense
Interest expense
Average interest rate on debt during the year
2015
2014
2013
(Dollars in millions)
$
61.3
$
65.5
$
3.84%
4.10%
56.9
3.92%
The decrease in interest expense for the year ended December 31, 2015 compared to the prior year reflects the
benefit of the redemption, on June 1, 2015, of our 6.875% Senior Subordinated Notes due 2019, which had a fixed
interest rate. Proceeds from our revolving credit facility, which bear a lower variable interest rate, were utilized to
redeem the 2019 Notes.
The increase in interest expense for the year ended December 31, 2014 compared to the prior year was the result
of 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.
Loss on extinguishment of debt
Loss on extinguishment of debt
$
10.5
$
— $
1.3
2015
2014
2013
(Dollars in millions)
On June 1, 2015, we prepaid the $250 million aggregate outstanding principal amount under our 6.875% Senior
Subordinated Notes due 2019 (the “2019 Notes”). In addition to our prepayment of principal, we paid to the holders
of the 2019 Notes an $8.6 million prepayment make-whole amount plus accrued and unpaid interest. We recorded
the prepayment make-whole amount and a $1.9 million write-off of unamortized debt issuance costs as a loss on
extinguishment of debt.
During 2013, we refinanced our $775 million senior credit facility, which was 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 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 million term loan.
Taxes on income from continuing operations
Effective income tax rate
2015
2014
2013
3.2%
13.0%
13.4%
The effective income tax rate in 2015 was 3.2% compared to 13.0% in 2014. Taxes on income from continuing
operations in 2015 were $7.8 million compared to $28.7 million in 2014. The effective tax rate for 2015 was impacted
by a tax benefit associated with U.S. federal tax return filings, a benefit associated with legislative tax rate changes,
a benefit resulting from a reduction in our U.S. reserves as a result of the conclusion of an audit and a benefit associated
39
with a reduction in the estimated deferred tax with respect to non-permanently reinvested income due to an increase
in the estimated foreign tax credits available to reduce the U.S. tax on a future repatriation.
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 in 2013, the realization of net tax
benefits resulting from the expiration of statutes of limitation for U.S. state and foreign matters.
Segment Results
Segment Net Revenues
Vascular North America
Anesthesia North America
Surgical North America
EMEA
Asia
OEM
All other
Year Ended December 31
% Increase/(Decrease)
2015
2014
2013
2015 vs 2014
2014 vs 2013
(Dollars in millions)
$
334.9
$
311.1
$
189.2
161.3
514.5
241.7
149.4
218.7
183.9
150.1
593.1
237.7
144.0
219.9
272.3
155.8
146.1
557.4
207.2
131.2
226.3
7.6
2.9
7.4
(13.3)
1.7
3.8
(0.6)
(1.6)
14.2
18.0
2.8
6.4
14.7
9.8
(2.8)
8.5
Segment Net Revenues
$
1,809.7
$
1,839.8
$
1,696.3
Segment Operating Profit
Year Ended December 31,
% Increase/(Decrease)
2015
2014
2013
2015 vs 2014
2014 vs 2013
Vascular North America
Anesthesia North America
Surgical North America
EMEA
Asia
OEM
All other
$
(Dollars in millions)
$
73.3
48.3
52.5
92.3
67.9
33.2
20.4
$
53.8
34.6
49.6
114.6
62.2
30.6
19.8
28.8
19.5
50.4
87.9
63.8
27.3
24.6
Segment Operating Profit(1)
$
387.9
$
365.2
$
302.3
36.2
39.8
5.9
(19.5)
9.2
8.2
3.0
6.2
86.8
77.4
(1.5)
30.4
(2.6)
12.1
(19.5)
20.8
(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 from continuing operations before interest, loss on extinguishment of debt and taxes.
Comparison of 2015 and 2014
Vascular North America
Vascular North America net revenues for the year ended December 31, 2015 increased $23.8 million, or 7.6%,
compared to the prior year. The increase is primarily attributable to an increase in sales volumes of existing products
of $26.9 million, which was partially offset by unfavorable fluctuations in foreign currency exchange rates of $1.9 million
and a reduction in new product sales of $1.5 million.
Vascular North America operating profit for the year ended December 31, 2015 increased $19.5 million, or 36.2%,
compared to the prior year. The increase is primarily attributable to the $17.2 million impact of increased sales volumes
40
of existing products, a $2.3 million reduction with respect to the medical excise tax, a $2.6 million reduction in
manufacturing costs, a $2.1 million reduction in research and development costs, including employee related costs,
and the impact of increased sales of higher margin products. The increases to operating profit were partially offset by
a $4.2 million net increase in non-research and development employee related costs, including higher sales
commissions and healthcare benefits, net of restructuring savings and unfavorable fluctuations in foreign currency
exchange rates.
Anesthesia North America
Anesthesia North America net revenues for the year ended December 31, 2015 increased $5.3 million, or 2.9%,
compared to the prior year. The increase is primarily attributable to an increase in sales volumes of existing products
of $3.9 million and an increase in new product sales of $2.7 million, which were partially offset by unfavorable fluctuations
in foreign currency exchange rates of $1.1 million.
Anesthesia North America operating profit for the year ended December 31, 2015 increased $13.7 million, or
39.8%, compared to the prior year. The increase is primarily attributable to a $7.5 million net decrease in selling,
general and administrative expenses, which was primarily the result of lower amortization, selling and regulatory
expenses, the $2.3 million impact of an increase in sales volumes of existing products, a $1.4 million reduction in
manufacturing costs and the $1.4 million impact of an increase in new product sales.
Surgical North America
Surgical North America net revenues for the year ended December 31, 2015 increased $11.2 million, or 7.4%,
compared to the prior year. The increase is primarily attributable to net revenues generated by Mini-Lap products of
$4.3 million, an increase in new product sales of $4.3 million and price increases of $3.9 million. The increase in net
revenues was partially offset by unfavorable fluctuations in foreign currency exchange rates of $2.0 million.
Surgical North America operating profit for the year ended December 31, 2015 increased $2.9 million, or 5.9%,
compared to 2014. The increase is primarily attributable to the $3.9 million impact of price increases, the $3.1 million
impact of increased sales of higher margin products, the impact of an increase in new product sales and income
generated by Mini-Lap. These increases were partially offset by higher selling, general and administrative expenses,
which was primarily caused by a $5.6 million increase in amortization expense that resulted from the commencement
of amortization of certain intellectual property assets and a $1.6 million increase in employee related costs.
EMEA
EMEA net revenues for the year ended December 31, 2015 decreased $78.6 million, or 13.3%, compared to the
prior year. The decrease is primarily attributable to unfavorable fluctuations in foreign currency exchange rates of
$91.4 million and price decreases of $1.6 million. The decrease in net revenues was partially offset by an increase in
sales volumes of existing products of $8.4 million, an increase in new product sales of $4.7 million and net revenues
generated by acquired businesses, primarily Truphatek, of $1.2 million.
EMEA operating profit for the year ended December 31, 2015 decreased $22.3 million, or 19.5%, compared to
the prior year. The decrease is primarily attributable to the $25.8 million impact of unfavorable fluctuations in foreign
currency exchange rates, a $7.8 million increase in raw material costs due to United States dollar sourced raw materials,
an increase in marketing expenses, primarily related to clinical education activities, and price decreases, partially offset
by the $6.9 million impact of an increase in sales volumes of existing products, a $3.3 million reduction in research
and development expenses, the impact of an increase in new product sales and increased sales of higher margin
products.
Asia
Asia net revenues for the year ended December 31, 2015 increased $4.0 million, or 1.7%, compared to the prior
year. The increase is primarily attributable to prices increases of $9.7 million, an increase in sales volumes of existing
products of $7.6 million, net revenues generated by acquired businesses, including Human Medics, Mayo Healthcare,
Truphatek and Stenning, of $8.4 million and an increase in new product sales of $2.2 million. The increase in net
revenues was partially offset by unfavorable fluctuations in foreign currency exchange rates of $23.8 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.
41
Asia operating profit for the year ended December 31, 2015 increased $5.7 million, or 9.2%, compared to the
prior year. The increase is primarily attributable to the $9.7 million impact of price increases, the $7.6 million impact
of increase in sales volumes of existing products, the $4.5 million impact of income generated by the businesses
acquired in 2015, the impact of increased sales of higher margin products and the impact of an increase in new product
sales. These increases were partially offset by the $14.4 million impact of unfavorable fluctuations in foreign currency
exchange rates, $3.1 million in expenses associated with distributor-to-direct sales conversions and higher logistics
and distribution costs.
OEM
OEM net revenues for the year ended December 31, 2015 increased $5.4 million, or 3.8%, compared to the prior
year. The increase is primarily attributable to an increase in sales volumes of existing products of $5.6 million, an
increase in new product sales of $3.8 million and net revenues generated by the acquisition of Trintris, which were
partially offset by unfavorable fluctuations in foreign currency exchange rates of $4.6 million.
OEM operating profit for the year ended December 31, 2015 increased $2.6 million, or 8.2%, compared to the
prior year. The increase is primarily attributable to the $3.1 million impact of an increase in sales of higher margin
products, the $2.8 million impact of increases in sales volumes of existing products and an increase in new product
sales of $1.9 million, which were partially offset by a $1.9 million increase in selling expenses, the $1.2 million impact
of unfavorable fluctuations in foreign currency exchange rates and an increase in research and development expenses.
All other
Net revenues for the other businesses for the year ended December 31, 2015 decreased $1.2 million, or 0.6%,
compared to the prior year. The decrease was primarily attributable to unfavorable fluctuations in foreign currency
exchange rates of $4.2 million and a decrease in sales volumes of existing products of $1.0 million, which were partially
offset by an increase in new product sales of $3.2 million.
Operating profit for the other businesses for the year ended December 31, 2015 increased $0.6 million, or 3.0%,
compared to the prior year. The increase in operating profit is primarily attributable to lower research and development
expense, the impact of an increase in new product sales and sales of higher margin products and reduced manufacturing
costs. These increases were partially offset by a reduction in the benefit resulting from contingent consideration liability
reversals and the unfavorable impact of foreign currency exchange rate fluctuations.
Comparison of 2014 and 2013
Vascular North America
Vascular North America net revenues for the year ended December 31, 2014 increased $38.8 million, or 14.2%,
compared to the prior year. The increase was primarily due to Vidacare product sales of $33.0 million, an increase in
sales volumes of existing products of $3.2 million, an increase in new product sales of $2.6 million and price increases
of $1.0 million.
Vascular North America operating profit for the year ended December 31, 2014 increased $25.0 million, or 86.8%,
compared to the prior year. The increase was primarily due to operating profit generated by Vidacare product sales
and to a lesser extent, the impact of an increase in sales volumes of existing products, an increase in sales of higher
margin products, an increase in new product sales and lower research and development expenses, which were partially
offset by higher selling expenses as well as other general and administrative expenses.
Anesthesia North America
Anesthesia North America net revenues for the year ended December 31, 2014 increased $28.1 million, or 18.0%,
compared to the prior year. The increase was primarily due to Vidacare product sales of $25.7 million and an increase
in new product sales of $2.4 million.
Anesthesia North America operating profit for the year ended December 31, 2014 increased $15.1 million, or
77.4%, compared to the prior year. The increase was primarily due to operating profit generated by Vidacare product
sales and, to a lesser extent, by lower manufacturing costs, partially offset by a decrease in sales of higher margin
products.
42
Surgical North America
Surgical North America net revenues for the year ended December 31, 2014 increased $4.0 million, or 2.8%,
compared to the prior year. The increase is primarily attributable to price increases of $3.4 million as well as increased
sales volumes of existing products and new product sales, partially offset by unfavorable fluctuations in foreign currency
exchange rates of $1.0 million.
Surgical North America operating profit for the year ended December 31, 2014 decreased $0.8 million, or 1.5%,
compared to the prior year. The decrease is primarily due to higher marketing and sales expenses and a lower benefit
from reductions in contingent consideration, partially offset by price increases, increased sales of higher margin products
and lower manufacturing costs.
EMEA
EMEA net revenues for the year ended December 31, 2014 increased $35.7 million, or 6.4%, compared to the
prior year. 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, the favorable impact of distributor-to-direct sales
conversions of $3.7 million and the favorable impact of foreign currency exchange rate fluctuations of $1.8 million.
EMEA segment operating profit for the year ended December 31, 2014 increased $26.7 million, or 30.4%,
compared to the prior year. 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, 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 year ended December 31, 2014 increased $30.5 million, or 14.7%, compared to the
prior year. The increase is primarily attributable to new revenues generated from recently acquired businesses, including
$16.6 million, $2.2 million and $2.0 million generated by sales of Mayo Healthcare, Vidacare and Ultimate products,
respectively. The increase 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.
Asia operating profit for the year ended December 31, 2014 decreased $1.6 million, or 2.6%, compared to the
prior year. 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 increased sales of higher margin products.
OEM
OEM net revenues for the year ended December 31, 2014 increased $12.8 million, or 9.8%, compared to the
prior year. The increase is primarily attributable to increased sales volumes of existing products of $14.8 million, which
was partially offset by price decreases of $2.8 million.
OEM segment operating profit for the year ended December 31, 2014 increased $3.3 million, or 12.1%, compared
to the prior year. 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
Net revenues for the other businesses for the year ended December 31, 2014 decreased $6.4 million, or 2.8%,
compared to the prior year. The decrease in net revenues for our other businesses for the year ended December 31,
2014 compared to the prior year was primarily due to a decrease in sales volumes of existing products and unfavorable
43
fluctuations in foreign currency exchange rates, which were partially offset by an increase in the sale of new products
and price increases.
Operating profit for the other businesses for the year ended December 31, 2014 decreased $4.8 million, or 19.5%,
compared to the prior year. The decrease in operating profit for our other businesses for the year ended December
31, 2014 compared to the prior year was primarily due to higher general and administrative expenses including a
reduction in the benefit resulting from contingent consideration liability reversals and an increase in legal fees, and
higher research and development expenses, partially offset by an increase in sales of higher margin products within
the respiratory product portfolio.
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 and borrowings under our revolving
credit and accounts receivable securitization facilities will enable us to fund our operating requirements, capital
expenditures and debt obligations for the next 12 months and the foreseeable future.
Approximately $147.4 million of our $303.4 million of net cash provided by operating activities in 2015 was
generated in the United States, and approximately $118.6 million of our $290.2 million of net cash provided by operating
activities in 2014 was generated in the United States. Of our $338.4 million of cash and cash equivalents at December
31, 2015, $316.0 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 because
taxes have been provided for on unremitted foreign earnings that we do not consider permanently reinvested.
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 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 with respect to customers
in Europe. As of December 31, 2015 and 2014, our net receivables from publicly funded hospitals in Italy, Spain,
Portugal and Greece were $37.4 million and $46.9 million, respectively. For the years ended December 31, 2015,
2014 and 2013, net revenues from customers in these countries were approximately 7%, 8% and 8%, respectively,
of total net revenues, and average days that current and long-term accounts receivable were outstanding were 204,
223 and 260 days, respectively. As of December 31, 2015 and 2014, net current and long-term accounts receivable
from these countries were approximately 24% and 27%, respectively, of our consolidated net current and long-term
accounts receivable. 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 2016 and future
years. See "Critical Accounting Policies and Estimates" below for additional information regarding the critical accounting
estimates related to our accounts receivable.
The aggregate total fair value of consideration for the acquisitions we made in 2015 and 2014 was $96.5 million
and $66.3 million, respectively. See Note 3 to the consolidated financial statements included in this Annual Report on
Form 10-K for additional information regarding our acquisitions.
During 2015, we prepaid the $250 million aggregate principal outstanding on our 6.875% Senior Subordinated
Notes due 2019 (the "2019 Notes"), but increased the outstanding borrowings under our revolving credit facility and
securitization program by $196 million and $38.6 million, respectively. During 2014, we issued $250 million of 5.25%
44
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. See Note 8 to the consolidated financial statements included in this Annual
Report on Form 10-K for additional information regarding our borrowings.
We have no scheduled principal payments under our borrowings until 2017. We anticipate our aggregate domestic
interest payments on our borrowings for 2016 will approximate $39.3 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 conversion event related to the achievement of a specified market price threshold with respect to
our common stock has occurred and is continuing.
We may at any time, from time to time, repurchase our outstanding debt securities in open market purchases or
by tender at any price or in privately negotiated transactions, exchange transactions or otherwise. Such purchases
or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions
and other factors and may be commenced or suspended at any time.
See "Financing Arrangements" below for further information relating to our debt obligations, including the
Convertible Notes.
Cash Flows
The following table provides a summary of our cash flows for the periods presented:
Year Ended December 31,
2015
2014
2013
(Dollars in millions)
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
$
303.4
$
290.2
$
(154.8)
(85.6)
(2.6)
(25.3)
(108.1)
(287.7)
(3.7)
(19.4)
Increase (decrease) in cash and cash equivalents
$
35.1
$
(128.7) $
231.3
(372.6)
231.2
(3.3)
8.3
94.9
Comparison of 2015 and 2014
Cash Flow from Operating Activities
Net cash provided by operating activities from continuing operations was $303.4 million during 2015 compared to
$290.2 million during 2014. The $13.2 million increase is primarily due to improved operating results partially offset by
an increase in contributions to pension plans of $3.3 million, an increase in income tax payments, net of refunds, of
$3.2 million, an increase in payments associated with restructuring programs and other unfavorable working capital
items.
The net cash outflow from the other working capital items is primarily the result of cash outflows for inventories
and accounts payable and accrued expenses partially offset by a cash inflow for accounts receivable. The net cash
outflow for the purchase of inventories was $8.4 million in 2015 as compared to a $15.5 million net cash outflow in
2014. The reduction in the cash outflow is primarily due to service level improvements and the consolidation of
distribution facilities associated with restructuring initiatives as well as fewer inventory builds in support of distributor
to direct conversions. The accounts payable and accrued expenses net cash outflow was $0.1 million in 2015 as
compared to cash outflow of $9.8 million in 2014. The decrease in the cash outflow is primarily a result of the timing
45
of vendor and employee related benefit payments as well as a $4.0 million decrease in interest payments year-over-
year. The net cash inflow for accounts receivable was $0.4 million during 2015 as compared to a cash inflow of $9.4
million in 2014, which was primarily the result of increased collections in the EMEA region in 2014.
Cash Flow from Investing Activities
Net cash used in investing activities from continuing operations was $154.8 million during 2015, primarily due to
net payments of $93.8 million for the businesses acquired in 2015, which included Nostix, LLC, a developer of catheter
tip confirmation systems, Truphatek Holdings Limited and Atsina Surgical, LLC, a developer of surgical clips, among
others, and capital expenditures of $61.4 million.
Cash Flow from Financing Activities
Net cash used in financing activities from continuing operations was $85.6 million during 2015, primarily resulting
from repayments of outstanding debt totaling $303.8 million, including the redemption of the entire $250 million
outstanding principal amount of the 2019 Notes and the repayment of $50 million and $3.5 million under our revolving
credit facility and accounts receivable securitization facility, respectively. Additionally, we paid $56.5 million in dividends
and $8.0 million in contingent consideration related to our acquisition of Mini-Lap Technologies, Inc. We also incurred
$9.0 million of debt extinguishment, issuance and amendment fees, primarily as a result of a make whole payment in
connection with the redemption of the 2019 Notes. These cash outflows were partially offset by $288.1 million of
proceeds from borrowings, including $246.0 million of borrowings under our revolving credit facility and $42.1 million
of borrowings under our accounts receivable securitization facility. In addition, we realized net cash inflows of $5.0
million from share-based compensation activity, which included proceeds from the exercise and vesting of share-based
awards under our stock compensation plans and the related tax benefits, partially offset by tax withholdings that we
remitted on behalf of employees who have elected to have shares withheld by us to satisfy their minimum tax withholding
obligations arising from the exercise and vesting of their share-based awards.
Comparison of 2014 to 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.
The factors contributing to the increase in net cash flow from operating activities discussed above 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 include 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.
46
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.
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
Common shareholders’ equity
Total capital
Percent of net debt to total capital
2015
2014
(Dollars in millions)
$
$
$
$
$
419.9
646.0
23.0
368.4
700.0
36.2
1,088.9
1,104.6
338.4
750.5
750.5
2,009.3
2,759.8
303.2
801.4
801.4
1,911.3
2,712.7
$
$
$
27.2%
29.5%
Fixed rate borrowings comprised 59.7% and 81.5% of total borrowings at December 31, 2015 and 2014,
respectively. The reduction in fixed rate borrowings as of December 31, 2015 compared to the prior year is primarily
due to our redemption of the 2019 Notes and the increase in variable rate borrowings under our senior credit facility.
Our senior credit agreement, which relates to our $850 million revolving credit facility, 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,
2015, our consolidated leverage ratio was 2.43:1 and our interest coverage ratio was 9.77:1, 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, 2015, we had $396.0 million in borrowings outstanding and approximately $3.8 million in
outstanding standby letters of credit under our $850 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
47
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, 2015, we would
have been permitted $681.7 million of additional debt beyond the levels outstanding at December 31, 2015. 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.
As of December 31, 2015, the outstanding principal of the 2024 Notes was $250.0 million. The indenture governing
the 2024 Notes 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, and pay dividends on, repurchase or make distributions in respect of capital stock, subject to specified
conditions. The obligations under the 2024 Notes are fully and unconditionally guaranteed, jointly and severally, by
each of our existing and future 100% owned domestic subsidiaries that are a guarantor or other obligor under our
senior credit agreement and by certain of our other 100% owned domestic subsidiaries.
As of December 31, 2015, we were in compliance with all of the terms of our senior credit agreement and our
2024 Notes.
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 upon conversion of the
Convertible Notes, (ii) the number of shares issuable upon exercise of the warrants subject to the warrant agreements,
(iii) 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"), (iv) the number of shares of common stock deliverable to us upon settlement of the hedge agreements and
(v) the number of shares issuable upon concurrent conversion of the Convertible Notes, exercise of the warrants and
settlement of the convertible note hedge agreements:
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 in thousands)
Incremental
Shares Issuable
upon
Concurrent
Conversion of
Convertible Notes,
Exercise of
Warrants and
Settlement of the
Hedge Agreements
Shares Deliverable
to
Teleflex upon
Settlement of
the Hedge
Agreements
$70
$85
$100
$115
$130
$145
$160
809
1,817
2,523
3,045
3,446
3,765
4,023
—
795
1,654
2,289
2,778
3,165
3,480
48
809
2,612
4,177
5,334
6,224
6,930
7,503
(809)
(1,817)
(2,523)
(3,045)
(3,446)
(3,765)
(4,023)
—
795
1,654
2,289
2,778
3,165
3,480
(1) Represents the number of incremental shares that must be included in the calculation of fully diluted shares under GAAP.
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 preceding 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, 2015, 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,
2015 and 2014. 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 event set forth in the Convertible Notes occurs. As of February 15, 2016, we have received conversion
notices with respect to approximately $44.7 million in aggregate principal amount of the Convertible Notes. 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 the financial covenants
under our debt agreements.
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, 2015,
the maximum amount available for borrowing under this facility was $6.7 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, 2015, we were in compliance with the covenants and none of the termination events had
occurred. As of December 31, 2015 and 2014, we had $43.3 million and $4.7 million, respectively, of outstanding
borrowings under our accounts receivable securitization facility.
For additional information regarding our indebtedness, see Note 8 to the consolidated financial statements included
in this Annual Report on Form 10-K.
Contractual Obligations
Contractual obligations at December 31, 2015 are as follows:
Total borrowings(1)
Interest obligations(2)
Operating lease obligations
Minimum purchase obligations(3)
Pension and other postretirement
benefits
Payments due by period
Total
Less than
1 year
1-3
years
4-5
years
More than
5 years
$ 1,088,941 $
161,751
120,106
1,070
442,941 $
(Dollars in thousands)
396,000 $
— $
250,000
39,279
30,191
979
50,831
45,385
88
26,250
31,020
3
45,391
13,510
37,102
5,705
6,672
6,843
17,882
Total contractual obligations
$ 1,408,970 $
519,095 $
498,976 $
64,116 $
326,783
(1) The Convertible Notes, which mature in 2017, are included in payments due in less than one year because our stock price has exceeded
the amount specified to enable conversion, as described in more detail in the “Financing Arrangements” section above. Total borrowings
also include $43.3 million under our securitization program. See 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, 2015.
(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
49
in effect on a particular date and the approximate timing of the transactions. These obligations relate primarily to material purchase
requirements.
We recorded a noncurrent liability for uncertain tax positions of $40.4 million and $50.9 million as of December 31,
2015 and 2014, 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 that will be required to settle uncertain
income tax positions or the periods in which any such payments will be made and as a result, these amounts are
excluded from the contractual obligations table above.
We recorded contingent consideration liabilities of $20.8 million and $33.4 million as of December 31, 2015 and
2014, respectively, of which, $7.3 million and $11.3 million as of December 31, 2015 and 2014, respectively, were
recorded as the current portion of contingent consideration. Due to uncertainty regarding the timing and amount of
future payments related to these liabilities, these amounts are excluded from the contractual obligations table above.
In 2015, cash contributions to all of our defined benefit pension plans were $12.8 million, and we estimate the
amount of required cash contributions in 2016 will be approximately $2.4 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 2016
and as a result, these contributions are excluded from contractual obligations table shown above.
See Notes 10, 13 and 14 to the consolidated financial statements included in this Annual Report on Form 10-K
for additional information.
Critical Accounting Policies and Estimates
The following discussion supplements the description of our accounting policies contained in Note 1 to the
consolidated financial statements in this Annual Report on Form 10-K. 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 the expected collectability of
the accounts receivable, considering our historical collection experience with respect to the customer, length of time
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. Our allowance for
doubtful accounts was $8.0 million and $8.8 million at December 31, 2015 and 2014, respectively, which constituted
2.9% of gross accounts receivable at December 31, 2015 and 2014.
In light of the volatility in global economic markets in recent years, we have measures in place within countries
where we have collectability concerns to facilitate customer-by-customer risk assessment when estimating the
allowance for doubtful accounts. Such measures include, 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 have measures designed to reduce our risk exposures, including reducing credit limits and requiring
50
that payments accompany orders. 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. Some of our customers, particularly in Europe, have extended or delayed payments for products and
services already provided resulting in collectability concerns regarding our 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.
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 record a reserve with respect to the estimated amount of the rebates
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 $11.1 million and $10.4 million at
December 31, 2015 and 2014, respectively. We expect amounts subject to the reserve as of December 31, 2015 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 in estimating future usage.
Our inventory reserve was $36.5 million and $33.9 million at December 31, 2015 and 2014, respectively, which
represents 10.0% and 9.2% 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,
which we refer to as "triggering events," indicate the carrying value of an asset may not be recoverable. Triggering
events include a current expectation that, more likely than not, the asset will be sold or disposed of significantly before
the end of its useful life or an adverse change will occur in the business employing the related assets. Significant
judgments in this area involve determining whether a triggering event has occurred and determining the appropriate
asset group requiring evaluation. 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.
Accounting for Goodwill and Other Intangible Assets
Intangible assets include indefinite-lived assets (such as goodwill, certain trade names or brands and in-process
research and development), as well as finite-lived intangibles (such as trade names or brands that do not have indefinite
51
lives, customer relationships and intellectual property). 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 other indefinite-lived intangible assets, primarily
certain trade names and trademarks, are not amortized; we test these assets 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, nine of which have 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, we
determine it is 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 2015,
we performed a qualitative assessment on six of our reporting units 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, concluded
that goodwill was not impaired. For the three remaining reporting units with 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 of the reporting unit 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.
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 2015 as compared to the valuations of our reporting units in 2014. The DCF analysis utilized in the fourth
quarter of 2015 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.
52
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. 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 of that reporting unit may decline. In this regard, 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.
No impairment was recorded as a result of the annual goodwill impairment testing performed during the fourth
quarter 2015.
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 intellectual property,
customer relationships, trade names and IPR&D. 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 asset 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 asset to its carrying amount.
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 2015, we performed a qualitative
assessment on two of our indefinite lived assets and determined that their fair values were more likely than not higher
than their carrying values. For the remaining three indefinite-lived intangible assets, 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.
The fair value of IPR&D is estimated using a multi-period excess earnings model, which is a form of the income
approach. This model estimates fair value by using estimated cash flows to be derived from this technology. The
estimated cash flows are generated from a collection of assets, including IPR&D, but also including working capital,
fixed assets and other assets. Therefore, the estimated cash flows generated by these other assets are deducted,
and the remaining amount (the “excess earnings”) are allocated to IPR&D. Key management judgments include making
assumptions about the expected timing to complete the project, future cash flows based on growth rates of revenue
and expense, expectations of erosion rates as a result of future replacement technology, discount rates and working
capital needs.
Discount rates and perpetual growth rates utilized in the impairment test of the trade names during the fourth
quarter 2015 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 4% to 5% and a royalty rate of 4% was
assumed. The discount rate used to determine fair value of IPR&D was 16.5%. 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.
53
No impairment was recorded as a result of the annual indefinite-lived intangibles impairment testing performed
during the fourth quarter 2015. For further details on the assessment of recoverability of finite-lived intangible assets
see "Accounting for Long-Lived Assets" above.
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, 2015, we have recorded IPR&D intangible
assets of $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 that 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) $
(29.5) $
0.4 $
32.8
1.6 $
N/A $
0.2 $
3.8 $
(0.2)
(3.3)
Effective December 31, 2015, the Company changed the method it uses to estimate the service and interest
cost components of net periodic benefit cost for its pension and other postretirement benefits to provide a more
precise estimate. Based on the spot rates that comprise the yield curve as of December 31, 2015, the change in
method is expected to result in a decrease in the service and interest cost components for 2016 when compared to
the estimates determined using the prior methodology.
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.
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 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 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 2015, 2014 and 2013 was $14.5 million, $12.2 million and
$11.9 million, respectively.
54
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 or
achievement of sales targets. 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. 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, 2015, the range of undiscounted amounts
the Company could be required to pay under contingent consideration arrangements is between $7.0 million and $43.8
million. As of December 31, 2015 and 2014, we accrued $20.8 million and $33.4 million of contingent consideration,
respectively. For the years ended December 31, 2015, 2014 and 2013 we recorded reductions to contingent
consideration of $4.4 million, $8.2 million and $12.3 million, respectively, resulting from changes in estimated
probabilities associated with certain regulatory and 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, changes in tax law, 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.
In assessing 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 $103.5 million and $99.1 million at December 31, 2015 and
2014, respectively, relates principally to the uncertainty of the utilization of tax loss and credit carryforwards in various
jurisdictions.
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 we become
aware of facts that necessitate an adjustment. We are currently under examination by the Austrian, Canadian, German
and United States tax authorities with respect to our income tax returns for those countries for various tax years. The
ultimate outcomes of the examinations 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.
55
New Accounting Standards
See Note 2 to the consolidated financial statements included in this Annual Report on Form 10-K for a discussion
of recently issued accounting standards, including estimated effects, if any, of the adoption of those standards 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, 2015 were determined using a base rate
of the one-month LIBOR rate plus the applicable spread.
Year of Maturity
2016
2017
2018
2019
2020
Thereafter
Total
(Dollars in thousands)
Fixed rate debt(1)
Average interest rate
$ 399,641
3.875%
$— $
—%
—
—%
Variable rate debt
$ 43,300
$— $ 396,000
Average interest rate
1.180%
—%
2.174%
$ —
—%
$ —
—%
$— $ 250,000
$ 649,641
—%
5.250%
4.404%
$— $
— $ 439,300
—%
—%
2.076%
(1) The Convertible Notes, which mature in 2017, are shown as maturing in 2016 because our stock price has exceeded the amount specified
to enable conversion. See Note 8 to the consolidated financial statements included in this Annual Report on Form 10-K for additional details
regarding the Convertible Notes.
A change of 1.0% in variable interest rates would increase or decrease annual interest expense by approximately
$2.8 million based on our outstanding debt as of December 31, 2015.
Foreign Currency Risk
We are exposed to currency fluctuations in connection with transactions, as well as monetary assets and liabilities,
denominated in currencies other than the functional currencies of certain subsidiaries. We enter into forward contracts
with several major financial institutions to hedge the risk associated with these exposures, which are primarily contracts
to buy or sell a foreign currency against the U.S. dollar or the euro. The contracts entered into to hedge transactions
denominated in non-functional currencies are designated as cash flow hedges. The contracts to hedge monetary asset
and liabilities denominated in non-functional currencies are not designated as cash flow, fair value or net investment
hedges.
The following table provides information regarding our open foreign currency forward contracts at December 31,
2015, which mature during 2016. As of December 31, 2015, the total notional amount for the designated and non-
designated contracts, expressed in U.S. dollars, is $49.5 million and $69.1 million, respectively. Forward contract
notional amounts presented below are expressed in the stated currencies.
56
Forward Currency Contracts:
Australian dollar
British pound
Canadian dollar
Chinese renminbi
Czech koruna
Euro
Japanese yen
Korean won
Malaysian ringgit
Mexican peso
Singapore dollar
South African rand
Swiss franc
United States dollar
Buy/(Sell)
(in thousands)
Designated
Non-designated
(1,125)
(3,005)
—
(65,660)
170,145
(492)
(8,550)
(2,463)
(3,186)
(87,427)
72,527
49,496
—
—
(2,196,652)
(3,008,613)
27,513
183,335
5,145
(25,625)
(1,455)
(9,177)
9,715
(4,304)
—
(40,193)
—
(10,335)
We had no open forward contracts as of December 31, 2014.
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.
(c) Change in Internal Control over Financial Reporting
57
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.
58
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 Part I, 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 2016 Annual Meeting, which information is incorporated herein by reference. The Proxy Statement for our 2016
Annual Meeting will be filed within 120 days of the close of our year.
For the information required by this Item 10 with respect to our Executive Officers, see Part I, Item 1. of this report.
ITEM 11.
EXECUTIVE COMPENSATION
For the information required by this Item 11, see “Compensation Discussion and Analysis,” “Compensation
Committee Report,” and “Executive Compensation” in the Proxy Statement for our 2016 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 2016 Annual Meeting, which
information is incorporated herein by reference.
The following table sets forth certain information as of December 31, 2015 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)
1,442,912
$86.98
4,446,967
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 2016 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 “Audit Committee Pre-Approval
Procedures” in the Proxy Statement for our 2016 Annual Meeting, which information is incorporated herein by reference.
59
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 of this Annual Report on
Form 10-K.
(b)
Exhibits:
The Exhibits are listed in the Index to Exhibits.
60
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:
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/ Candace H. Duncan
Candace H. Duncan
Director
/s/ W. Kim Foster
W. Kim Foster
Director
Dated: February 25, 2016
/s/ Thomas E. Powell
Thomas E. Powell
Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)
/s/ Jeffrey A. Graves
Jeffrey A. Graves
Director
/s/ Dr. Stephen K. Klasko
Dr. Stephen K. Klasko
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)
By:
By:
By:
By:
By:
61
TELEFLEX INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Income for 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income for 2015, 2014 and 2013
Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014
Consolidated Statements of Cash Flows for 2015, 2014 and 2013
Consolidated Statements of Changes in Equity for 2015, 2014 and 2013
Notes to Consolidated Financial Statements
Quarterly Data
FINANCIAL STATEMENT SCHEDULE
Schedule II Valuation and qualifying accounts
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
62
Page
63
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 by, or under the supervision of our Chief Executive Officer and Chief Financial Officer and effected by the
Company's board of directors, management and other personnel, 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, 2015. 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, 2015, 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, 2015 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
/s/ Thomas E. Powell
Thomas E. Powell
Chairman, President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
February 25, 2016
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 at December 31, 2015 and 2014, and the
results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 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, 2015, 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.
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it
classifies deferred taxes in 2015 and 2014 due to the adoption of Accounting Standards Update 2015-17, Balance
Sheet Classification of Deferred Taxes.
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 25, 2016
F-3
TELEFLEX INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
Net revenues
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Research and development expenses
Restructuring and other impairment charges
Gain on sale of assets
Income from continuing operations before interest, loss on extinguishment of
debt and taxes
Interest expense
Interest income
Loss on extinguishment of debt
Income from continuing operations before taxes
Taxes on income from continuing operations
Income from continuing operations
Operating loss from discontinued operations
Tax (benefit) on loss from discontinued operations
Gain (loss) on discontinued operations
Net income
Less: Income from continuing operations attributable to noncontrolling interest
Year Ended December 31,
2015
2014
2013
(Dollars and shares in thousands, except
per share)
$ 1,809,690
$ 1,839,832
$ 1,696,271
865,287
944,403
568,982
52,119
7,819
(408)
315,891
61,323
(532)
10,454
244,646
7,838
236,808
(1,730)
(10,635)
8,905
245,713
850
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)
151,748
867
Net income attributable to common shareholders
$
244,863
$
187,679
$
150,881
Earnings per share available to common shareholders:
Basic:
Income from continuing operations
Income (loss) on discontinued operations
Net income
Diluted:
Income from continuing operations
Income (loss) on discontinued operations
Net income
Dividends per share
Weighted average common shares outstanding:
Basic
Diluted
Amounts attributable to common shareholders:
Income from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
$
$
$
$
$
$
$
5.68
0.21
5.89
4.91
0.19
5.10
1.36
$
$
$
$
$
4.60
$
(0.06)
4.54
$
4.10
$
(0.06)
4.04
1.36
$
$
3.68
(0.01)
3.67
3.46
(0.01)
3.45
1.36
41,558
48,058
41,366
46,470
41,105
43,693
235,958
$
190,388
$
151,316
8,905
(2,709)
(435)
244,863
$
187,679
$
150,881
The accompanying notes are an integral part of the consolidated financial statements.
F-4
TELEFLEX INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive income, net of tax:
Foreign currency:
Foreign currency translation continuing operations
adjustments, net of tax of $24,150, $24,818 and
$(8,086), 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 and $9 in 2014 and 2013, respectively
Transition obligation recognized in net periodic cost, net
of tax of $(2) in 2013
Unamortized (loss) gain arising during the period, net of
tax of $1,469, $26,624 and $(14,638), respectively
Net loss recognized in net periodic cost, net of tax of
$(2,242), $(1,544) and $(2,446), respectively
Foreign currency translation, net of tax of $(316), $(265)
and $(66), 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 $379, $(111) and $(265),
respectively
Reclassification adjustment on derivatives included in
net income, net of tax of $(196), $111 and $46,
respectively
Derivatives qualifying as hedges, net of tax
Other comprehensive (loss) income, net of tax
Comprehensive income
Less: comprehensive income attributable to
noncontrolling interest
Year Ended December 31,
2015
2014
2013
(Dollars in thousands)
188,751 $
245,713 $
$
151,748
(110,671)
(110,671)
(105,410)
(105,410)
(9,637)
(9,637)
—
—
(12)
—
(12)
3
(2,137)
(48,245)
25,641
4,133
861
2,841
709
4,765
(177)
2,857
(44,707)
30,220
(2,974)
594
(549)
483
(2,491)
(110,305)
135,408
(594)
—
(150,117)
38,634
930
381
20,964
172,712
774
995
638
Comprehensive income attributable to common shareholders
$
134,634 $
37,639 $
172,074
The accompanying notes are an integral part of the consolidated financial statements.
F-5
TELEFLEX INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Prepaid expenses and other current assets
Prepaid taxes
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: 2015 — 43,517 shares; 2014 — 43,420 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,
2015
2014
(Dollars, except per share
amounts, and shares in thousands)
$
338,366
$
262,416
330,275
37,507
30,895
6,972
1,006,431
316,123
1,295,852
1,199,975
152
2,341
57,642
303,236
273,704
335,593
35,697
40,256
7,422
995,908
317,435
1,323,553
1,216,720
1,150
4,011
64,010
$
$
3,878,516
$
3,922,787
419,942
$
368,401
66,305
64,017
7,291
84,658
7,480
8,059
8,960
666,712
646,000
315,983
149,441
40,400
48,887
64,100
72,383
11,276
85,442
9,169
13,768
8,230
632,769
700,000
399,203
167,241
50,884
58,991
1,867,423
2,009,088
43,517
440,127
2,016,176
(371,124)
2,128,696
119,424
2,009,272
1,821
2,011,093
$
3,878,516
$
43,420
422,394
1,827,845
(260,895)
2,032,764
121,455
1,911,309
2,390
1,913,699
3,922,787
The accompanying notes are an integral part of the consolidated financial statements.
F-6
TELEFLEX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities of continuing operations:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
(Income) loss from discontinued operations
Depreciation expense
Amortization expense of intangible assets
Amortization expense of deferred financing costs and debt discount
Loss on extinguishment of debt
Changes in contingent consideration
Impairment of long-lived assets
Stock-based compensation
Net gain on sales of businesses and assets
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
Year Ended December 31,
2015
2014
2013
(Dollars in thousands)
$
245,713
$
188,751
$
151,748
(8,905)
46,013
62,380
16,941
10,454
2,709
50,207
60,926
15,897
—
435
42,368
50,608
14,959
1,250
(4,576)
(7,418)
(12,642)
—
14,467
(408)
(54,413)
(20,775)
398
(8,371)
(3,027)
(117)
7,672
303,446
(61,448)
(93,808)
408
—
—
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)
3,460
11,871
—
(10,182)
(1,319)
(1,294)
(8,931)
(5,926)
2,001
(7,107)
231,299
(63,580)
(309,008)
—
(50)
Net cash used in investing activities from continuing operations
(154,848)
(108,137)
(372,638)
Cash flows from financing activities of continuing operations:
Proceeds from new borrowings
Reduction in borrowings
Debt extinguishment, issuance and amendment fees
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 discontinued operations
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) 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
288,100
250,000
680,000
(303,757)
(480,102)
(375,000)
(9,017)
4,994
(1,343)
(8,028)
(56,532)
(85,583)
(2,636)
(2,636)
(25,249)
35,130
303,236
338,366
45,973
56,079
$
$
$
(4,494)
4,245
(1,094)
—
(56,258)
(287,703)
(3,676)
(3,676)
(19,473)
(128,748)
431,984
303,236
49,797
52,869
$
$
$
(6,400)
6,181
(736)
(16,958)
(55,917)
231,170
(3,327)
(3,327)
8,441
94,945
337,039
431,984
43,581
43,975
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
F-7
867
151,748
(55,917)
(229)
20,964
(736)
(736)
18,374
46
1,916,016
188,751
(56,258)
2,489
1,072
TELEFLEX INCORPORATED
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, 2012
43,102
$43,102
$ 394,384
$1,601,460
$
(132,048)
2,130
$ (127,948) $
2,587
$ 1,781,537
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 loss
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
244,863
(56,532)
(110,229)
Net income
Cash dividends ($1.36 per share)
Other comprehensive loss
Distributions to noncontrolling
interest shareholders
Settlement of convertible notes
Settlement of note hedges
associated with convertible notes
Shares issued under
compensation plans
Deferred compensation
(128)
270
97
97
17,591
850
245,713
(56,532)
(76)
(110,305)
(1,343)
(1,343)
5
1
19,782
73
(2)
2
(70)
(3)
133
(269)
2,094
73
Balance at December 31, 2015
43,517
$43,517
$ 440,127
$2,016,176
$
(371,124)
1,908
$ (119,424) $
1,821
$ 2,011,093
The accompanying notes are an integral part of the consolidated financial statements.
F-8
TELEFLEX INCORPORATED
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 of
which 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 ("GAAP") and reflect management’s estimates and assumptions that affect
the recorded amounts.
Effective April 1, 2015, the Company realigned its operating segments to reflect the reorganization of its businesses
to better leverage its resources. All prior comparative periods have been restated to reflect these changes. See Note
16 to the consolidated financial statements for additional information on the realignment of the Company's operating
segments.
Use of estimates: The preparation of 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 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 the 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 collection experience with respect to the customer, 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 with respect to trade accounts
receivable, as well as the Company's allowance for doubtful accounts.
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 among other factors.
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. 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 indefinite-lived intangible assets 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 for that business and regularly reviewed by segment
F-9
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, the Company determines it is
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 2015, the Company performed a qualitative assessment on six reporting units and determined that
the fair value of each of the reporting units was more likely than not greater than the 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 based on the amount by which 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. As a result of its performance of the quantitative goodwill impairment test on the three
reporting units during the fourth quarter of 2015, the Company determined that the goodwill of the reporting units was
not impaired.
The Company’s intangible assets consist of customer lists, intellectual property, distribution rights, in-process
research and development ("IPR&D") 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 asset 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 asset to its carrying amount. 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 2015, the Company performed a qualitative assessment on two indefinite lived assets and
determined that the fair values were more likely than not higher than the carrying values. For the remaining three
indefinite-lived intangible assets, the Company elected to test impairment through the quantitative method and
determined that no impairment had occurred.
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 remaining amortization period is approximately 15 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
assessment 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.
F-10
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 loss.
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 as other comprehensive income
(loss), if the instrument is designated as part of a hedge transaction. Gains or losses on derivative instruments reported
in other comprehensive income (loss) are reclassified to the consolidated statement of income in the period in which
earnings are affected by the underlying hedged item. Gains or losses on derivative instruments representing hedge
ineffectiveness or hedge components excluded from the assessment of effectiveness, if any, are recognized in the
consolidated statement of income for the period in which such gains and losses occur. 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 instrument are recorded in the consolidated statement of income for the period in which either such
event occurs. For non-designated derivatives, gains and losses are reported in selling, general and administrative
expenses. The settlement of derivative financial instruments are classified as cash flows from operating activities.
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 with
respect to the expected life of the options, volatility, risk-free interest rate and expected dividend yield. 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.
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. 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.
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
F-11
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 used in calculating
the restructuring costs include the terms of, and payments under, agreements 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 or achievement of sales targets (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 remeasures the fair value of its contingent
consideration arrangements each reporting period and, based on new developments, records changes in fair value
until either the contingent consideration obligation is satisfied through payment upon the achievement of the specified
objectives or the obligation no longer exists due to the failure to achieve the specified objectives. The change in the
fair value is recorded in the consolidated statement of income. 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.
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. With respect to 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 the Financial
Accounting Standards Board ("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 $4.9 million and $4.1 million as of December 31, 2015 and 2014, 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 reserve for the customer incentive programs, including distributor rebates, was $11.1 million and
$10.4 million at December 31, 2015 and 2014, respectively. The Company expects the amounts subject to the reserve
as of December 31, 2015 to be paid within 90 days subsequent to year-end.
Note 2 — Recently issued accounting standards
In May 2014, the FASB, in a joint effort with the International Accounting Standards Board ("IASB"), issued
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
F-12
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued an
amendment to the new guidance that defers the effective date. The amendment provides that the new guidance is
effective for annual periods beginning after December 15, 2017 and interim periods within those years; early application
is permitted for annual periods beginning after December 15, 2016. The Company is currently evaluating this guidance
to determine its impact on the Company’s results of operations, cash flows and financial position.
In April 2015, the FASB issued guidance for the reporting of debt issuance costs within the balance sheet.
Under the new guidance, debt issuance costs are to be presented in the balance sheet as a direct deduction from the
associated debt liability, consistent with the presentation of a debt discount. Currently, debt issuance costs are presented
as a deferred charge (i.e., an asset) on the balance sheet. The guidance provides uniform treatment for debt issuance
costs and debt discounts and eliminates inconsistencies that previously existed with other FASB guidance. The new
guidance is effective for years beginning after December 15, 2015 with early adoption permitted, and is required to be
applied on a retrospective basis. The Company does not believe that the adoption of this guidance will have a material
impact on the Company’s financial position.
In September 2015, the FASB issued guidance that will change the requirements for reporting measurement
period adjustments to provisional amounts initially recognized in connection with a business combination. Under GAAP,
an acquiring entity currently is required to retrospectively adjust, in prior period financial statements, the provisional
amounts to reflect new information obtained during the measurement period (a period, which may not exceed one
year from the date of the business combination, during which the acquiring entity may receive information about the
facts and circumstances existing as of the acquisition date that, if known, would have affected the measurement of
the amounts recognized as of the acquisition date). Under the new guidance, adjustments to the provisional amounts
will be reflected in the financial statements for the reporting period in which the adjustments are determined, including
by recognizing in current period earnings the full effect of changes in depreciation, amortization or other income effects.
The guidance requires that the acquiring entity either present separately on the face of the current period income
statement or disclose in the notes to the current period financial statements, by line item, the amount of the adjustments
made during the current period. The new guidance is effective for years beginning after December 15, 2015, and will
be applied prospectively to adjustments to provisional amounts occurring after the effective date of the guidance.
Earlier application is permitted for financial statements that have not been issued. The Company has applied the
provisions of this guidance to any measurement period adjustments occurring after September 27, 2015.The adoption
of this guidance did not have a material impact on the Company’s results of operations, cash flows or financial position.
In November 2015, the FASB issued guidance to simplify the reporting of deferred tax assets and liabilities
within the balance sheet. Currently, an entity is required to separate deferred tax liabilities and assets into a current
amount and a noncurrent amount; any valuation allowance for a particular tax jurisdiction is allocated between current
and noncurrent deferred tax assets related to that tax jurisdiction on a pro rata basis. After offsetting deferred tax
liabilities and assets attributable to the same tax-paying components of the entity and the same tax jurisdiction, the
net current and noncurrent deferred tax assets and liabilities are separately presented on the balance sheet. Under
the new guidance, deferred tax assets and liabilities, along with any related valuation allowances, will be offset to the
extent permitted by the guidance and presented only as noncurrent amounts in the balance sheet (as is the case under
the current guidance, the entity cannot offset deferred tax liabilities and assets attributable to different tax-paying
components of the entity or to different tax jurisdictions). The guidance is effective for years beginning after December
15, 2016 with early adoption permitted, and can be applied prospectively or retrospectively; the guidance prescribes
the content of accompanying disclosures depending on whether the entity chooses to adopt the guidance prospectively
or retroactively. The Company adopted this standard retrospectively as of December 31, 2015.
From time to time, new accounting guidance is issued by the FASB or other standard setting bodies that is adopted
by the Company as of the specified effective date. The Company has assessed recently issued guidance that is not
yet effective and believes the new guidance will not have a material impact on the Company’s results of operations,
cash flows or financial position.
F-13
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 3 — Acquisitions
The Company made the following acquisitions during 2015 (the "2015 acquisitions"), which, with the exception
of Ace Medical, were accounted for as business combinations:
•
•
•
•
•
•
•
On January 20, 2015, the Company acquired all of the common stock of, and voting equity interest in,
Human Medics Co., Ltd., (“Human Medics”), a distributor of medical devices and supplies primarily in the
Korean market.
On March 30, 2015, the Company acquired all of the common stock of, and voting equity interest in, Trintris
Medical, Inc. ("Trintris"), an original equipment manufacturer (OEM) of balloons and catheters that
complement the Company's OEM product portfolio.
On April 8, 2015, the Company acquired all of the common stock of, and voting equity interest in, Truphatek
Holdings (1993) Limited ("Truphatek"), a manufacturer of a broad range of disposable and reusable
laryngoscope devices that complement the Company's anesthesia product portfolio. Previously, the
Company held a noncontrolling, 6% interest in Truphatek.
On June 26, 2015, the Company acquired certain assets of N. Stenning & Co. Pty. Ltd. ("Stenning"), a
distributor of medical devices and supplies primarily in the Australian market.
On June 29, 2015, the Company acquired certain assets, primarily distribution rights, of Ace Medical US,
LLC ("Ace Medical"), a distributor of medical devices and supplies in the United States of America.
On August 26, 2015, the Company acquired certain assets of Atsina Surgical, LLC ("Atsina"), a developer
of surgical clips that complement the Company's surgical ligation portfolio.
On December 22, 2015, the Company acquired all of the membership interests of, and voting equity
interest in, Nostix, LLC, a developer of catheter tip confirmation systems that complement the Company's
vascular product portfolio.
The aggregate total fair value of the 2015 acquisitions was $96.5 million, which included initial payments of $93.8
million in cash, deferred consideration of $1.8 million and the fair value of the Company's previously held noncontrolling
equity interest in Truphatek of $1.2 million, partially offset by $0.3 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 were $1.3 million for the year ended December 31, 2015. The
results of operations and assets of the acquired businesses are included in the consolidated statements of income
from their respective acquisition dates. For the year ended December 31, 2015, the Company recorded post-acquisition
revenue and operating income of $20.9 million and $6.9 million, respectively, related to the businesses acquired in
2015. Pro forma information with respect to the acquired businesses is not presented as the operations of the acquired
businesses are not significant to the overall operations of the Company.
F-14
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the preliminary fair value determination of the assets acquired and liabilities assumed
in the acquisitions that occurred during 2015:
Assets
Current assets
Property, plant and equipment
Intangible assets:
Intellectual property
In-process research and development
Customer relationships
Distribution rights
Noncompete agreements
Goodwill
Other noncurrent assets
Total assets acquired
Less:
Current liabilities
Deferred tax liabilities
Other noncurrent liabilities
Liabilities assumed
Net assets acquired
(Dollars in thousands)
$
$
10,515
2,877
33,017
17,908
8,387
7,738
1,894
19,725
45
102,106
3,018
2,477
138
5,633
96,473
The Company is continuing to evaluate the 2015 acquisitions throughout their respective measurement periods.
Further adjustments may be necessary as a result of the Company's assessment of additional information related to
the fair values of certain of the assets acquired and liabilities assumed, primarily deferred tax liabilities and goodwill.
Among the acquired assets, intellectual property has useful lives ranging from 15 to 20 years, customer lists have
useful lives ranging from 10 to 18 years, distribution rights have useful lives of 10 years and non-compete
arrangements have useful lives of 5 years. The goodwill resulting from the acquisitions primarily reflects synergies
currently expected to be realized from the integration of the acquired businesses. Goodwill and the step-up in basis
of the intangible assets in connection with stock acquisitions are not deductible for tax purposes.
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, that complement the Company's anesthesia
product portfolio.
On December 2, 2014, the Company acquired the assets of Mini-Lap Technologies, Inc. ("Mini-Lap"), a developer
of micro-laparoscopic instrumentation that complements the Company's surgical product portfolio.
The total fair value of consideration for the 2014 acquisitions was $66.3 million. The results of operations of the
acquired businesses and assets are included in the consolidated statements of income from their respective acquisition
dates. Pro forma information is not presented as the operations of the acquired businesses are not significant to the
overall operations of the Company.
Note 4 — Restructuring and other impairment charges
2015 Restructuring Programs
During 2015, the Company committed to programs associated with the reorganization of certain businesses, as
discussed in Note 16, and share service functions as well as the consolidation of certain facilities in North America.
The Company estimates that it will record aggregate pre-tax charges of $6.5 million to $8.0 million related to these
programs, which represent employee termination benefits, contract termination costs and facility closure and other
exit costs, and will result in future cash outlays. For the year ended December 31, 2015, the Company recorded charges
F-15
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of $6.3 million related to these programs. As of December 31, 2015, the Company had a reserve of $3.3 million related
to these programs.
2014 Manufacturing Footprint Realignment Plan
In April 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 the Company expects that an estimated
$26 million to $31 million will relate to 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 aggregate 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 year ended December 31, 2015, the Company recorded expenses of $11.2 million related to the 2014
Manufacturing Footprint Realignment Plan. Of this amount, $1.7 million was included in restructuring expense and
related primarily to termination benefits and $9.5 million was included in cost of goods sold and related to accelerated
depreciation and certain other costs resulting from the plan. As of December 31, 2015, the Company has incurred net
aggregate restructuring expenses related to the plan of $10.9 million. Additionally, as of December 31, 2015, the
Company has incurred net aggregate accelerated depreciation and certain other costs in connection with the plan of
$14.4 million, which were included in cost of goods sold. As of December 31, 2015 and 2014, the Company had a
restructuring reserve, all of which relates to termination benefits, of $7.4 million and $9.1 million, respectively, in
connection with the plan.
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
In February 2014, the Company committed to a restructuring plan (the “2014 European Restructuring Plan”),
which impacts certain administrative functions in Europe and involves the consolidation of operations and a related
reduction in workforce at certain of the Company’s European facilities.
As of December 31, 2015, the Company has incurred net aggregate restructuring charges under the plan of
$7.7 million. The Company expects future restructuring expenses associated with the 2014 European Restructuring
Plan, if any, to be nominal. The Company expects to complete this plan in 2016.
Other 2014 Restructuring Programs
F-16
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 incurred
aggregate restructuring charges of $3.6 million as of December 31, 2015. These programs include costs related to
termination benefits, contract termination costs and other exit costs. The Company completed the programs in 2015.
2013 Restructuring Programs
In 2013, the Company initiated restructuring programs to consolidate administrative and manufacturing facilities
in North America and warehouse facilities in Europe and terminate certain European distributor agreements in an effort
to reduce costs. As of December 31, 2015, the Company incurred net aggregate restructuring charges of $10.9 million
related to these programs. These programs entail costs related to termination benefits, contract termination costs and
charges related to facility closure and other exit costs. The Company completed the programs in 2015
LMA Restructuring Program
In connection with the acquisition of substantially all of the assets of LMA International N.V. (the “LMA business”)
in 2012, the Company commenced a program (the "LMA Restructuring Program") related to the integration of the LMA
business and the Company’s other businesses. The program was focused on the closure of the LMA business’ corporate
functions and the consolidation of manufacturing, sales, marketing, and distribution functions in North America, Europe
and Asia. The Company incurred net aggregate restructuring charges related to the LMA Restructuring Program of
$11.3 million. The Company completed the program in 2015.
For the year ended December 31, 2014, the Company recorded a net credit of $3.3 million, primarily resulting
from the reversal of contract termination costs following the favorable settlement of a terminated distributor agreement.
2012 Restructuring Program
In 2012, the Company identified opportunities to improve its supply chain strategy by consolidating its three North
American warehouses into one centralized warehouse, and 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. As of December 31, 2015, the Company has incurred net aggregate restructuring and impairment charges
of $6.3 million in connection with this program, and expects future restructuring expenses associated with the program,
if any, to be nominal. As of December 31, 2015, the Company has a reserve of $0.5 million in connection with the
program. The Company expects to complete this program in 2016.
Impairment Charges
There were no impairment charges recorded for the years ended December 31, 2015 or 2014. In 2013, the
Company recorded $7.3 million of IPR&D charges and $3.5 million in impairment charges related to assets held for
sale that had a carrying value in excess of their appraised fair value.
The restructuring and other impairment charges recognized for the years ended December 31, 2015, 2014 and
2013 consisted of the following:
(dollars in thousands)
2015 Restructuring programs
2014 Manufacturing footprint realignment plan
Other restructuring programs - prior years(1)
Total restructuring charges
2015
Termination
Benefits
Facility
Closure
Costs
Contract
Termination
Costs
Other Exit
Costs
Total
$
$
$
$
5,009 $
1,007 $
(194) $
5,822 $
231 $
241 $
2 $
1,000 $
389 $
(13) $
64 $
48 $
35 $
6,304
1,685
(170)
474 $
1,376 $
147 $
7,819
(1) Other restructuring programs - prior years includes the 2014 European restructuring plan, the Other 2014 restructuring programs, the
2013 Restructuring programs and the LMA restructuring program.
F-17
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(dollars 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
LMA restructuring program
2013 Restructuring programs
2012 Restructuring program
2011 Restructuring plan
Total restructuring charges
(dollars in thousands)
LMA restructuring program
2013 Restructuring programs
2012 Restructuring program
2011 Restructuring plan
2007 Arrow integration program
Impairment charges
Total restructuring and other impairment charges
9,200 $
7,237
552
(29)
562
(619)
—
— $
— $
60 $
1
—
345
2,754
225
244
Total
9,260
7,808
3,550
(112)
(3,188)
— $ (3,329)
—
354
12
249
—
—
22
—
—
833
(265)
12
$ 16,903 $
255 $
160 $
551 $ 17,869
2013
Termination
Benefits
Facility
Closure
Costs
Contract
Termination
Costs
Other Exit
Costs
$
$
$
3,282 $
4,787
2,993
—
—
11,062 $
—
11,062 $
788 $
7,906 $
—
935
42
230
3,326
296
728
—
176
2,117
5
—
—
Total
12,152
10,230
4,229
770
230
1,995 $
12,256 $
2,298 $ 27,611
—
—
10,841
1,995 $
12,256 $ 13,139
10,841
38,452
Termination benefits include employee retention, severance and benefit payments for terminated employees.
Facility closure costs include general operating costs incurred subsequent to production shutdown as well as equipment
relocation and other associated costs. Contract termination costs include costs associated with terminating existing
leases and distributor agreements. Other costs include legal, outplacement and employee relocation costs and other
employee-related costs.
Restructuring charges by reportable operating segment for the years ended December 31, 2015, 2014, and
2013 are set forth in the following table:
Vascular North America
Anesthesia North America
Surgical North America
EMEA
Asia
OEM
All other
Total restructuring charges
2015
2014
2013
(Dollars in thousands)
3,742 $
384
397
4
313
61
2,918
7,819 $
8,057 $
1,379
—
6,375
1,305
—
753
17,869 $
5,348
2,959
6,525
16,122
603
588
6,307
38,452
$
$
F-18
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 5 — Inventories
Inventories at December 31, 2015 and 2014 consist of the following:
Raw materials
Work-in-process
Finished goods
Less: Inventory reserves
Inventories, net
2015
2014
(Dollars in thousands)
$
76,037 $
60,218
230,536
366,791
(36,516)
68,191
58,526
242,750
369,467
(33,874)
$
330,275 $
335,593
Note 6 — Property, plant and equipment
The major classes of property, plant and equipment, at cost, at December 31, 2015 and 2014 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
2015
2014
(Dollars in thousands)
197,365 $
194,923
$
313,404
99,343
45,945
656,057
320,999
107,743
51,834
675,499
(339,934)
(358,064)
$
316,123 $
317,435
Note 7 — Goodwill and other intangible assets
Changes in the carrying amount of goodwill, by reporting segment, for the years ended December 31, 2015 and
2014 are as follows:
Vascular
North
America
Anesthesia
North
America
Surgical
North
America
EMEA
Asia
OEM
All other
Total
(Dollars in thousands)
Balance as of December 31, 2014
Goodwill
$ 564,177
$ 214,429
$ 250,912
$ 339,029
$144,712
$ — $142,422
$1,655,681
Accumulated impairment losses
(219,527)
(84,531)
—
—
—
— (28,070)
(332,128)
344,650
129,898
250,912
339,029
144,712
— 114,352
1,323,553
Goodwill related to acquisitions
Translation adjustment
896
—
12,398
(1,174)
—
—
1,142
4,095
1,194
— $
19,725
(34,162)
(7,740)
—
(4,350)
(47,426)
Balance as of December 31, 2015 $ 345,546
$ 141,122
$ 250,912
$ 306,009
$141,067
$ 1,194
$110,002
$1,295,852
F-19
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Vascular
North
America
Anesthesia
North
America
Surgical
North
America
EMEA
Asia
All other
Total
(Dollars in thousands)
Balance as of December 31, 2013
Goodwill
$ 564,089
$ 214,898
$ 250,506
$ 373,417
$ 136,946
$ 146,475
1,686,331
Accumulated impairment losses
(219,527)
(84,531)
—
—
—
(28,070)
(332,128)
344,562
130,367
250,506
373,417
136,946
118,405
1,354,203
Goodwill related to acquisitions
Translation adjustment
—
88
—
(469)
406
—
—
(34,388)
15,986
(8,220)
—
16,392
(4,053)
(47,042)
Balance as of December 31, 2014
$ 344,650
$ 129,898
$ 250,912
$ 339,029
$ 144,712
$ 114,352
$1,323,553
Intangible assets at December 31, 2015 and 2014 consisted of the following:
Customer lists
In-process research and development
Intellectual property
Distribution rights
Trade names
Noncompete agreements
Gross Carrying Amount
Accumulated Amortization
2015
2014
2015
2014
$
621,078 $
(Dollars in thousands)
624,574 $ (214,924) $ (192,876)
58,908
522,374
23,279
384,821
2,186
68,694
467,068
16,101
396,269
337
—
—
(173,903)
(146,131)
(14,393)
(8,929)
(522)
(14,243)
(2,764)
(309)
$ 1,612,646 $ 1,573,043 $ (412,671) $ (356,323)
As of December 31, 2015, trade names having a carrying value of $285.5 million and all of the IPR&D are considered
indefinite lived. Acquired IPR&D is indefinite-lived until the completion of the associated efforts, at which point
amortization of the carrying value of the technology will commence.
In May 2012, the Company acquired Semprus BioSciences Corp. ("Semprus"), a biomedical research and
development company that developed a polymer surface treatment technology intended to reduce thrombus related
complications. The Company experienced difficulties with respect to the development of the Semprus technology, and
devoted further research and testing towards attempting to resolve the issue. As a result of these efforts, the Company
believes it has resolved the issue and is focused on seeking regulatory approval and engaging in additional research
and development efforts to achieve commercialization of the technology. Despite this progress, significant challenges
to commercialization of the Semprus technology remain, and the Company ultimately may find it necessary to recognize
impairment charges with respect to the related assets, which could be material. As of December 31, 2015, the Company
has IPR&D intangible assets of $41.0 million related to this investment, which are recorded in intangible assets, net.
Amortization expense related to intangible assets was $62.4 million, $60.9 million, and $50.6 million for the years
ended December 31, 2015, 2014 and 2013, respectively. Estimated annual amortization expense for each of the five
succeeding years is as follows:
2016
2017
2018
2019
2020
(Dollars in thousands)
64,300
$
64,400
64,200
64,000
63,500
F-20
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 8 — Borrowings
The Company's borrowings at December 31, 2015 and 2014 are as follows:
Senior Credit Facility:
Revolving credit facility, at a rate of 2.17% at December 31, 2015 and 1.92% at
December 31, 2014, due 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 1.18% at December 31, 2015 and 0.92% at
December 31, 2014
Less: Unamortized debt discount on 3.875% Convertible Senior Subordinated
Notes due 2017
Current portion of borrowings
Long-term borrowings
Senior Credit Facility
2015
2014
(Dollars in thousands)
$
396,000 $
200,000
399,641
—
250,000
399,898
250,000
250,000
43,300
4,700
1,088,941
1,104,598
(22,999)
(36,197)
1,065,942
1,068,401
(419,942)
(368,401)
$
646,000 $
700,000
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 acquisition of Vidacare. In 2014, the Company used $245.0 million of the proceeds
from the issuance of its 5.25% Senior Notes due 2024 to repay borrowings under its revolving credit facility. In 2015,
the Company used $246.0 million in borrowings under its revolving credit facility to help fund the prepayment of the
2019 Notes.
The $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, 2015,
the interest rate on the $850 million senior credit facility was 2.17% (comprised of the LIBOR rate of 0.42% 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.
Our senior credit agreement, which relates to our $850 million revolving credit facility, 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,
2015, our consolidated leverage ratio was 2.43:1 and our interest coverage ratio was 9.77:1, both of which are in
compliance with the limits described in the preceding sentence. The obligations under the senior credit agreement are
F-21
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 our current level of EBITDA (as defined in the senior credit agreement) for the year ended December 31, 2015,
we would have been permitted $681.7 million of additional debt beyond the levels outstanding at December 31, 2015.
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.
As of December 31, 2015 and 2014, the Company had outstanding irrevocable standby letters of credit of
approximately $3.8 million and $6.0 million, respectively, with various third parties. The letters of credit reduced 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 into shares of the Company's common stock at the option of the holder
upon the occurrence of any of the following circumstances (i) during any fiscal quarter, if the last reported sale price
of the Company’s common stock for at least 20 trading days during a period of 30 consecutive trading days ending
on the last trading day of the immediately preceding fiscal quarter exceeds 130% of the conversion price on each
applicable trading day; or (ii) during the five business day period after any 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 per share. The conversion rate is subject to adjustment upon certain events. Upon
conversion, the Company’s conversion obligation may be satisfied, at the Company’s option, in shares of common
stock, cash or a combination of cash and shares of common stock. The Company has elected a net-settlement method
to satisfy its conversion obligation. Under the net-settlement method, the Company will settle the $1,000 principal
amount of the Convertible Notes in cash and settle the excess conversion value in shares, plus cash in lieu of fractional
shares.
Since the fourth quarter 2013, the Company's last reported sale price has exceeded the 130% threshold described
above and accordingly the Convertible Notes have been classified as a current liability as of December 31, 2015 and
2014. The determination of whether or not the Convertible Notes are convertible as described above is made each
quarter until maturity, conversion or repurchase. Consequently, it is possible that the Convertible Notes may not be
convertible in one or more future quarters, in which case the Convertible Notes would again be classified as long-term
debt, unless one of the other conversion events described above were to occur. While the Company believes it has
sufficient liquidity to repay the principal amount due through a combination of utilizing its existing cash on hand and
accessing its 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.
F-22
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company also entered into privately negotiated warrant transactions with the same counterparties generally
relating to the same number of shares of common stock as are subject to the call options. 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 exercise 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 Company's 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
date upon which the warrants are exercised.
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, 2015, is approximately 1.6 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, 2015
$
15.5 $
Year Ended
December 31, 2014
Year Ended
December 31, 2013
15.5
15.5 $
Interest cost related to amortization of the discount
$
13.2 $
12.2 $
11.3
The following table provides the carrying value of the Convertible Notes as of December 31, 2015 and 2014:
(in millions)
Principal amount of the Convertible Notes
Unamortized discount
Net carrying amount
6.875% Senior Subordinated Notes
December 31, 2015
$
December 31, 2014
399.9
(36.2)
399.6 $
(23.0)
$
376.6 $
363.7
On June 13, 2011, the Company issued $250.0 million of 6.875% Senior Subordinated Notes due 2019 (the “2019
Notes”). The Company paid interest on the 2019 Notes semi-annually on June 1 and December 1. On June 1, 2015,
the Company prepaid the $250 million aggregate outstanding principal amount under the 2019 Notes. In addition to
its prepayment of principal, the Company paid the holders of the 2019 Notes an $8.6 million prepayment make-whole
amount plus accrued and unpaid interest. The Company recorded the prepayment make-whole amount and a $1.9
million write-off of unamortized debt issuance costs as a loss on extinguishment of debt in the condensed consolidated
statement of income in the second quarter 2015. The Company used $246.0 million in borrowings under its revolving
credit facility, $12.1 million in borrowings under its securitization program and available cash to fund the prepayment
of the 2019 Notes.
5.25% Senior Notes
On May 21, 2014, the Company issued $250 million of 5.25% Senior Notes due 2024 (which, as originally issued,
or in the substantially identical form issued April 2015 in exchange for the originally issued notes (as discussed below),
are referred to as the "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
F-23
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 described above, 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 (see Note 17 to the consolidated financial
statements for further information)
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.
On March 30, 2015, the Company commenced an exchange offer with respect to the 5.25% Senior Notes due
2024 that initially were issued in May 2014 (the "Old 2024 Notes"), under which the holders of the Old 2024 Notes,
which were issued in a private placement, were provided an opportunity to exchange the Old 2024 Notes for new notes
(the "New 2024 Notes") issued pursuant to a registration statement under the Securities Act of 1933. Other than the
absence of registration rights for the holders of the New 2024 Notes, the terms of the New 2024 Notes are essentially
identical to the terms of the Old 2024 Notes.The exchange offer was completed on April 24, 2015; all of the holders
of the Old 2024 Notes exchanged their Old 2024 Notes for New 2024 Notes.
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, 2015, the maximum amount
available for borrowing under this facility was $6.7 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 its counterparty to terminate this facility. As of December
31, 2015, the Company was in compliance with the covenants, and none of the termination events had occurred. As
of December 31, 2015 and 2014, the Company had $43.3 million and $4.7 million, respectively, of outstanding
borrowings under its accounts receivable securitization facility.
F-24
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fair Value of Long-Term Debt
The carrying amount of current and long-term borrowings as reported in the consolidated balance sheet as of
December 31, 2015 is $1,065.9 million. To determine the fair value of the Level 2 debt, the Company uses a discounted
cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality and risk
profile. The Company’s implied credit rating is a factor in determining the market interest yield curve. The following
table provides the fair value of the Company’s debt as of December 31, 2015 and 2014, categorized by the level of
inputs within the fair value hierarchy used to measure fair value (see Note 10 to the consolidated financial statements
for further information):
Level 1
Level 2
Total
Debt Maturities
Fair value of debt
December 31, 2015
December 31, 2014
(Dollars in thousands)
858,709 $
1,024,806
687,072
455,222
1,545,781 $
1,480,028
$
$
As of December 31, 2015, 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 years and thereafter were as follows:
2016(1)
2017
2018
2019
2020 and thereafter
(Dollars in thousands)
442,941
$
—
396,000
—
250,000
(1) Convertible Notes are included in amounts that will mature in 2016 because, at December 31, 2015, 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
Foreign Currency Forward Contracts Designated as Cash Flow Hedges
The Company uses derivative instruments for risk management purposes. Foreign currency forward contracts
are used to manage foreign currency transaction exposure. These derivative instruments are designated as cash flow
hedges and are recorded on the 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 (loss) and thereafter is recognized in the
consolidated statement of income in the period or periods during which the hedged transaction affects earnings. Gains
and losses on derivative instruments representing hedge ineffectiveness or hedge components excluded from the
assessment of effectiveness, if any, are recognized in the consolidated statement of income in the period in which
such gains and losses occur.
The following table presents the location and fair value of derivative instruments designated as hedging
instruments in the consolidated balance sheet as of December 31, 2015 and 2014:
F-25
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Asset derivatives:
Foreign currency forward contracts
Prepaid expenses and other current assets
Total asset derivatives
Liability derivatives:
Foreign currency forward contracts
Other current liabilities
Total liability derivatives
December 31,
2015
December 31,
2014
Fair Value
(Dollars in thousands)
$
$
$
$
285 $
285 $
807 $
807 $
—
—
—
—
The total notional amount for all open foreign currency forward contracts designated as cash flow hedges as of
December 31, 2015 is $49.5 million. All open foreign currency forward contracts designated as cash flow hedges as
of December 31, 2015 have durations of six months or less. As of December 31, 2014, the Company had no open
foreign currency forward contracts designated as cash flow hedges.
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 (loss) (“OCI”) for the years ended December 31,
2015, 2014 and 2013:
Foreign currency exchange contracts
Total
After Tax Gain (Loss)
Recognized in OCI
2015
2014
2013
(Dollars in thousands)
— $
(2,491) $
(2,491) $
— $
$
$
381
381
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 (loss) (“AOCI”)
to expense (income), net of tax.
For the years ended December 31, 2015, 2014 and 2013, there was no ineffectiveness related to the Company’s
hedging derivatives.
Non-designated Foreign Currency Forward Contracts
During the third quarter 2015, the Company began using foreign currency forward contracts to manage exposure
related to near term foreign currency denominated monetary assets and liabilities. These currency forward contracts
are not designated as cash flow, fair value or net investment hedges, are marked-to-market (changes in fair value are
reflected in selling, general and administrative expenses) and are entered into for periods consistent with currency
transaction exposures, approximately one month. The total notional amount for all open non-designated foreign
currency forward contracts as of December 31, 2015 is $69.1 million. The non-designated foreign currency forward
contract assets and liabilities are reported in prepaid expenses and other current assets and in other current liabilities
on the consolidated balance sheet as of December 31, 2015. For the year ended December 31, 2015 the Company
recognized a loss related to non-designated foreign currency forward contracts of $1.5 million.
Concentration of Credit Risk
Concentrations of credit risk with respect to trade accounts receivable is generally limited due to the Company’s
large number of customers and their diversity across many geographic areas. A portion of the Company’s trade accounts
receivable outside the United States, however, include sales to government-owned or supported healthcare systems
F-26
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
in several countries which are subject to payment delays. Payment is dependent upon the creditworthiness of the
healthcare systems in those countries and the financial stability of their economies.
In the ordinary course of business, the Company grants non-interest bearing trade credit to its customers on
normal credit terms. In an effort to reduce its credit risk, the Company (i) establishes credit limits for all of its customer
relationships, (ii) performs ongoing credit evaluations of its customers’ financial condition, (iii) monitors the payment
history and aging of its customers’ receivables, and (iv) monitors open orders against an individual customer’s
outstanding receivable balance.
An allowance for doubtful accounts is maintained for accounts receivable based on the expected collectability of
the accounts receivable, considering the Company's historical collection experience with respect to the customer, the
length of time 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 $8.0 million and $8.8 million at December 31, 2015 and 2014, respectively. The current
portion of the allowance for doubtful accounts at December 31, 2015 and 2014 of $2.0 million and $2.4 million,
respectively, are reflected in accounts receivable, net. The allowance for doubtful accounts on receivables outstanding
for greater than one year at December 31, 2015 and 2014 of $6.0 million and $6.4 million, respectively, is presented
as part of other assets.
In light of the volatility in global economic markets in recent years, the Company has taken measures, within
countries where the Company has collectability concerns, to facilitate customer-by-customer risk assessment when
estimating the allowance for doubtful accounts. Such measures include, among others, monthly credit control committee
meetings, at which customer credit risks are identified after review of, among other things, accounts that exceed
specified credit limits, payment delinquencies and other customer issues. In addition, for some of the Company’s non-
government customers, the Company has measures designed to reduce its risk exposures, including issuing dunning
letters, reducing credit limits, requiring that payments accompany orders and initiating legal action with respect to
delinquent accounts. With respect to government customers, the Company evaluates receivables for potential collection
risks associated with the availability of government funding and reimbursement practices.
Certain of the Company’s customers, particularly in Europe, have extended or delayed payments for products
and services already provided, raising collectability concerns regarding the Company's accounts receivable from these
customers, for the most part in Greece, Italy, Spain and Portugal. As a result, the Company continues to closely monitor
the allowance for doubtful accounts in these locations. If the financial condition of these customers or the healthcare
systems in these countries deteriorate to the extent that the ability of an increasing number of customers to satisfy
their payment obligations is uncertain, additional allowances may be required in future periods. The aggregate net
current and long-term accounts receivable for customers in Greece, Italy, Spain and Portugal and the percentage of
the Company’s total net current and long-term accounts receivable represented by the net current and long-term
accounts receivable for customers in those countries at December 31, 2015 and 2014 are as follows:
December 31, 2015
December 31, 2014
(Dollars in thousands)
Current and long-term accounts receivable (net of allowances of $7.2
million and $8.1 million in 2015 and 2014, respectively) in Greece,
Italy, Spain and Portugal (1)
$
62,272
$
Percentage of total net current and long-term accounts receivables
23.9%
76,190
27.3%
(1)
was $8.1 million and $11.3 million, respectively, and is reported on the consolidated balance sheet in other assets.
The long-term portion of accounts receivable, net from customers in Greece, Italy, Spain and Portugal at December 31, 2015 and 2014
For the years ended December 31, 2015, 2014 and 2013, net revenues from customers in Greece, Italy, Spain
and Portugal were $126.2 million, $150.5 million and $142.6 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
F-27
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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. Nevertheless, the objective of a fair value measurement, namely
to arrive at an exit price at the measurement date from the perspective of a market participant that holds the asset or
owes the liability, continues to apply. In making a fair value measurement using Level 3 inputs, a reporting entity may
begin with its own data, but it must adjust that data if reasonably available information indicates that other market
participants would use different data or there is something particular to the reporting entity that is not available to other
market participants.
The following tables provide information regarding the financial assets and liabilities measured at fair value on a
recurring basis as of December 31, 2015 and 2014:
Total carrying
value at
December 31,
2015
Quoted prices in
active markets
(Level 1)
Significant
other
observable
inputs (Level 2)
Significant
unobservable
inputs (Level 3)
(Dollars in thousands)
Investments in marketable securities
$
6,922 $
6,922 $
— $
Derivative assets
Derivative liabilities
Contingent consideration liabilities
329
1,298
20,829
—
—
—
329
1,298
—
—
—
—
20,829
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
Contingent consideration liabilities
$
6,863 $
33,433
6,863 $
—
— $
—
—
33,433
There were no changes in the inputs used to measure fair value of financial assets or liabilities among Level 1,
Level 2 or Level 3 within the fair value hierarchy during the years ended December 31, 2015 or 2014.
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 years ended December 31, 2015 and 2014:
F-28
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Beginning balance – January 1
Initial estimate upon acquisition
Payment
Revaluations
Ending balance – December 31
Contingent consideration
2015
2014
(Dollars in thousands)
$
33,433 $
—
(8,054)
(4,550)
20,313
20,538
—
(7,418)
$
20,829 $
33,433
The Company reduced contingent consideration liabilities and selling, general and administrative expense by $4.4
million and $8.2 million for the years ended December 31, 2015 and 2014, respectively, after determining that relevant
conditions for the payment of certain contingent consideration would not be satisfied. This reduction is included in
revaluations in the above table.
See Note 8 to the consolidated financial statements for a discussion of the fair value of the Company’s borrowings.
Valuation Techniques
The Company’s financial assets valued based upon Level 1 inputs are comprised of investments in marketable
securities held in trust, which are available to satisfy benefit obligations under Company benefit plans and other
arrangements. The investment assets of the trust are valued using quoted market prices.
The Company’s financial assets and liabilities valued based upon Level 2 inputs are comprised of foreign currency
forward contracts. The Company uses foreign currency forward contracts to manage foreign currency transaction
exposure as well as exposure to foreign currency denominated monetary assets and liabilities. The Company measures
the fair value of the foreign currency forward contracts by calculating the amount required to enter into offsetting
contracts with similar remaining maturities, based on quoted market prices, and taking into account the creditworthiness
of the counterparties.
The Company’s financial liabilities valued based upon Level 3 inputs are comprised of contingent consideration
arrangements pertaining to the Company’s acquisitions. The Company accounts for contingent consideration in
accordance with applicable accounting guidance related to business combinations. The Company determines the fair
value of the liabilities for contingent consideration based on a probability-weighted discounted cash flow analysis. This
fair value measurement is based on significant inputs not observable in the market and, therefore, constitutes a Level
3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with
future payments under contingent consideration arrangements is based on several factors, including:
•
•
•
•
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.
In connection with the Company's contingent consideration arrangements in effect at December 31, 2015, the Company
estimates that it will make payments from 2016 through 2029. As of December 31, 2015, the range of undiscounted
amounts the Company could be required to pay under contingent consideration arrangements is between $7.0 million
and $43.8 million. The Company reevaluates the fair value of contingent consideration arrangements each reporting
period and, based on new developments, records changes in fair value until either the contingent consideration
obligation is satisfied through payment upon the achievement of the specified objectives or the obligation no longer
exists due to failure to achieve the specified objectives.
The following table provides information regarding the valuation techniques and inputs used in determining the
fair value of assets or liabilities measured by use of Level 3 inputs as of December 31, 2015:
F-29
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Contingent consideration
Discounted cash flow Discount rate
Valuation Technique
Unobservable Input
Range (Weighted Average)
2.6% - 10% (8.3%)
Probability of payment
0% - 100% (69.6%)
As of December 31, 2015, the Company recorded $20.8 million of total liabilities for contingent consideration, of
which $7.3 million was recorded as the current portion of contingent consideration and $13.5 million was recorded as
other liabilities 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 three years.
Basic earnings per share is computed by dividing net income by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed in the same manner except that the weighted
average number of shares is increased to include dilutive securities. The following table provides a reconciliation of
basic to diluted weighted average shares outstanding:
Basic
Dilutive effect of share based awards
Dilutive effect of 3.875% Convertible Notes and warrants
Diluted
2015
2014
2013
(Shares in thousands)
41,558
488
6,012
48,058
41,366
450
4,654
46,470
41,105
410
2,178
43,693
Weighted average shares that were antidilutive and therefore not included in the calculation of earnings per share
were approximately 5.6 million, 6.3 million and 7.7 million for the years ended December 31, 2015, 2014 and 2013,
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 described in Note
8, the Company has elected the net settlement method of accounting for these conversions, under which the Company
will settle the principal amount of the Convertible Notes in cash, and settle the excess conversion value in shares. As
a result, in periods where the average market price of the Company's common stock is above $61.32 per share, under
the treasury stock method, the Company calculates the number of shares issuable under the terms of the Convertible
Notes based on the average market price of the stock during the period, and includes that number in the total diluted
shares outstanding for the period.
In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge and
warrant agreements. The convertible note hedge agreements economically reduce the dilutive impact of the Convertible
Notes. However, applicable accounting guidance requires the Company to separately analyze the impact of the warrant
agreements on diluted weighted average shares outstanding, without giving effect to the anti-dilutive impact of the
convertible note hedge agreements. The reductions in diluted shares that would result from giving effect to the anti-
dilutive impact of the convertible note hedge agreements would have been 3.3 million, 2.7 million, and 1.6 million for
the years ended December 31, 2015, 2014 and 2013, respectively. The treasury stock method is applied when the
warrants are in the money and assumes the proceeds from the exercise of the warrants are used to repurchase shares
based on the average stock price during the period. The exercise price of the warrants is approximately $74.65 per
share of common stock. Shares issuable upon exercise of the warrants that were included in the total diluted shares
outstanding were 2.7 million, 1.9 million and 0.6 million for the years ended December 31, 2015, 2014 and 2013,
respectively. 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 years ended December 31, 2015 and 2014:
F-30
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cash Flow
Hedges
Pension and
Other
Postretirement
Benefit Plans
Foreign
Currency
Translation
Adjustment
Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2013
$
— $
(Dollars in thousands)
(97,037) $
(13,818) $
(110,855)
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income (loss)
Net current-year other comprehensive income (loss)
Balance at December 31, 2014
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income
Net current-year other comprehensive (loss) income
594
(47,536)
(105,333)
(152,275)
(594)
—
—
2,829
—
(44,707)
(105,333)
(141,744)
(119,151)
2,235
(150,040)
(260,895)
(2,974)
(1,276)
(110,595)
(114,845)
483
(2,491)
4,133
2,857
—
4,616
(110,595)
(110,229)
Balance at December 31, 2015
$
(2,491) $
(138,887) $ (229,746) $
(371,124)
The following table provides information relating to the reclassifications of losses/(gains) in accumulated other
comprehensive (loss) income into expense/(income), net of tax, for the years ended December 31, 2015, 2014 and
2013 :
Losses (gains) on foreign exchange contracts:
Cost of goods sold
Total before tax
Taxes
Net of tax
Amortization of pension and other postretirement benefits items:
Actuarial losses (1)
Prior-service credits (1)
Transition obligation
Total before tax
Tax benefit
Net of tax
Total reclassifications, net of tax
December 31,
2015
December 31,
2014
December 31,
2013
(Dollars in thousands)
$
$
$
$
$
679 $
(705) $
679
(196)
(705)
111
483 $
(594) $
884
884
46
930
6,375 $
4,385 $
7,211
—
—
6,375
(2,242)
(21)
—
4,364
(1,535)
4,133 $
4,616 $
2,829 $
2,235 $
(21)
5
7,195
(2,439)
4,756
5,686
(1)
These accumulated other comprehensive (loss) income components are included in the computation of net benefit cost of pension and
other postretirement benefit plans (see Note 14 to the consolidated financial statements for additional information).
As previously disclosed, in 2007, the Company’s Board of Directors authorized the repurchase of up to $300 million
of outstanding Company common stock. On February 23, 2016, the Company's Board of Directors terminated this
authorization. No shares were purchased under this authorization.
F-31
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 canceled, 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 2015, the Company granted incentive and non-qualified options to purchase 353,688 shares
of common stock and granted restricted stock units relating to 105,239 shares of common stock under the 2014 Plan.
The unrecognized compensation expense for these awards as of the grant date was $20.0 million, which will be
recognized over the vesting period of the awards. As of December 31, 2015, 4,446,967 shares were available for future
grants under the 2014 Plan.
Share-based compensation expense for 2015, 2014 and 2013 was $14.5 million, $12.2 million and $11.9 million,
respectively, and is included in selling, general and administrative expenses. The total income tax benefit recognized
for share-based compensation arrangements for 2015, 2014 and 2013 was $4.4 million, $3.3 million and $3.8 million,
respectively.
The fair value of options granted in 2015, 2014 and 2013 was estimated at the date of grant using a 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
2015
2014
2013
1.44%
1.45%
0.75%
4.87 years
4.89 years
4.87 years
1.12%
20.68%
1.34%
21.44%
1.73%
24.65%
The fair value for non-vested equity awards granted in 2015, 2014 and 2013 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
2015
2014
2013
0.94%
1.12%
0.65%
1.34%
0.36%
1.71%
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 2015:
F-32
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
1,233,672 $
Granted
Exercised
Forfeited or expired
Outstanding, end of the year
353,688
(112,941)
(31,507)
1,442,912
Exercisable, end of the year
839,149 $
75.93
121.10
68.53
103.42
86.98
71.65
7.0 $
6.0 $
63,480
50,180
The weighted average grant date fair value for options granted during 2015, 2014 and 2013 was $21.44, $18.01
and $14.30, respectively. The total intrinsic value of options exercised during 2015, 2014 and 2013 was $6.3 million,
$15.4 million and $4.1 million, respectively.
The Company recorded $5.7 million of expense related to the portion of the shares underlying options that vested
during 2015, which is included in selling, general and administrative expenses. As of December 31, 2015, the
unamortized share-based compensation cost related to non-vested stock options, net of expected forfeitures, was
$6.6 million, which is expected to be recognized over a weighted-average period of 1.8 years. Authorized but unissued
shares of the Company’s common stock are issued upon exercises of options.
The following table summarizes the non-vested restricted stock unit activity during 2015:
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
313,703 $
Granted
Vested
Forfeited
Outstanding, end of the year
105,239
(106,667)
(30,867)
281,408
76.80
118.00
61.79
88.73
96.59
1.2 $
36,818
The Company issued 105,239, 116,258 and 148,191 of non-vested restricted stock units in 2015, 2014 and 2013,
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 2015, 2014 and 2013 was $118.00, $97.87
and $75.60, respectively.
The Company recorded $8.8 million of expense related to the portion of the restricted stock units that vested
during 2015, which is included in selling, general and administrative expenses. The unamortized share-based
compensation cost related to non-vested restricted stock units, net of expected forfeitures, was $11.2 million, which
is expected to be recognized over a weighted-average period of 1.7 years. The Company uses treasury stock to provide
shares of common stock in connection with vesting of the restricted stock units.
F-33
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
2015
2014
2013
(Dollars in thousands)
$
(4,700) $
12,348 $
(2,996)
2,377
53,151
(37,504)
(3,258)
(2,228)
1,912
30,748
(6,593)
3,435
(13,200)
1,736
36,422
(9,565)
(1,825)
(225)
$
7,838 $
28,650 $
23,547
At December 31, 2015, 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 $481.7 million. At
December 31, 2015, 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
$1,100.6 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.
The following table summarizes the United States and non-United States components of income from continuing
operations before taxes:
United States
Other
2015
2014
2013
(Dollars in thousands)
(23,875) $
(19,550) $
264,196
243,985
(3,323)
179,053
244,646 $
220,110 $
175,730
$
$
Reconciliations between the statutory federal income tax rate and the effective income tax rate are as follows:
Federal statutory rate
Tax effect of international items
State taxes, net of federal benefit
Uncertain tax contingencies
Contingent consideration reversals
Other, net
2015
35.00%
(28.41)
(0.68)
(1.89)
(0.66)
(0.16)
2014
35.00%
(22.54)
2.10
(0.83)
(1.18)
0.47
2013
35.00%
(14.83)
(0.32)
(4.06)
(2.04)
(0.35)
3.20%
13.02%
13.40%
The effective income tax rate for 2015 was 3.2% compared to 13.0% for 2014. The effective income tax rate for
2015 was impacted by a tax benefit associated with U.S. federal tax return filings, a benefit associated with legislative
tax rate changes, a benefit resulting from a reduction in our U.S. reserves as a result of the conclusion of an audit and
a benefit associated with a reduction in the estimated deferred tax with respect to non-permanently reinvested income
due to an increase in the estimated foreign tax credits available to reduce the U.S. tax on a future repatriation.
F-34
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 the realization of net tax
benefits resulting from the expiration of statutes of limitation for U.S. state and foreign matters.
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 $4.6 million in 2015 as a result of reducing its reserves with respect to uncertain tax positions. The
decrease principally resulted from a reduction in our U.S. reserves as a result of the conclusion of an audit, offset by
an increase in our foreign reserves with respect to developments in the ongoing tax examination in Germany. The
Company realized a net benefit of approximately $1.8 million and $7.1 million in 2014 and 2013, 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.
The following table summarizes significant components of the Company’s deferred tax assets and liabilities at
December 31, 2015 and 2014:
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
2015
2014
(Dollars in thousands)
$
123,328 $
112,796
57,610
47,755
34,568
(103,475)
159,786
33,824
361,132
78,019
453
473,428
63,669
43,482
28,820
(99,141)
149,626
32,329
384,734
116,595
11,160
544,818
Net deferred tax liability
$
(313,642) $
(395,192)
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, 2015, the tax effect of such carryforwards
approximated $123.3 million. Of this amount, $10.5 million has no expiration date, $0.8 million expires after 2015 but
before the end of 2020 and $112.0 million expires after 2020. 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 ultimately 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 $103.5 million and $99.1 million at December 31, 2015 and 2014,
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-35
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, 2015, 2014 and 2013:
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
2015
2014
2013
(Dollars in thousands)
55,771 $
51,084 $
$
2,077
(15,372)
647
—
—
—
910
(132)
62,108
—
—
1,838
—
(2,337)
(3,235)
(8,433)
(1,718)
(2,230)
258
$
34,381 $
51,084 $
55,771
The total liabilities associated with the unrecognized tax benefits that, if recognized would impact the effective tax
rate for continuing operations, were $17.7 million at December 31, 2015.
The Company accrues interest and penalties associated with unrecognized tax benefits in income tax expense
in the consolidated statements of income, and the corresponding liability is included in the consolidated balance sheets.
The net interest expense (benefit) and penalties reflected in income from continuing operations for the year ended
December 31, 2015 was $1.6 million and $(0.4) million, respectively; for the year ended December 31, 2014 was $1.0
million and $(0.8) million, respectively; and for the year ended December 31, 2013 was $1.3 million and $(0.8) million,
respectively. The corresponding liabilities in the consolidated balance sheets for interest and penalties at December
31, 2015 were $6.5 million and $3.2 million, respectively, and at December 31, 2014 were $6.2 million and $5.0 million,
respectively.
The taxable years for which the applicable statute of limitations remains open by major tax jurisdictions are as
follows:
United States
Canada
China
Czech Republic
France
Germany
India
Ireland
Italy
Malaysia
Singapore
Beginning
Ending
2010
2005
2010
2011
2013
2007
2008
2011
2011
2011
2011
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
The Company and its subsidiaries are routinely subject to income tax examinations by various taxing authorities. As
of December 31, 2015, the most significant tax examinations in process are in Austria, Canada, Germany and the
United States. The date at which these examinations may be concluded and the ultimate outcome of the 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, 2015. 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 year by a range of zero to $7.4 million.
F-36
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 14 — Pension and other postretirement benefits
The Company has a number of defined benefit pension and postretirement plans covering eligible U.S. and non-
U.S. employees. The defined benefit pension plans are noncontributory. The benefits under these plans are based
primarily on years of service and employees’ pay near retirement. The Company’s funding policy for U.S. plans is to
contribute annually, at a minimum, amounts required by applicable laws and regulations. Obligations under non-U.S.
plans are systematically provided for by depositing funds with trustees or by book reserves. As of December 31, 2015,
no further benefits are being accrued under the Company’s U.S. defined benefit pension plans and the Company’s
other postretirement benefit plans, other than certain postretirement benefit plans covering employees subject to a
collective bargaining agreement.
The Company and certain of its subsidiaries provide medical, dental and life insurance benefits to pensioners or
their survivors. The associated plans are unfunded and approved claims are paid from Company funds.
The following table provides information regarding the components of the net benefit expense (income) of the
Company's pension and postretirement benefit plans:
2015
Pension
2014
Other Benefits
2013
2015
2014
2013
(Dollars in thousands)
Service cost
Interest cost
$
1,880 $
1,794 $
1,819 $
495 $
424 $
17,948
18,000
16,842
1,967
2,169
Expected return on plan assets
Net amortization and deferral
(25,940)
6,159
Net benefit expense (income)
$
47 $
(25,006)
4,371
(841) $
(23,122)
5,847
—
216
—
(7)
1,386 $
2,678 $
2,586 $
663
2,707
—
1,348
4,718
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
2015
4.1%
8.1%
Pension
2014
2013
2015
2014
2013
Other Benefits
5.0%
8.3%
4.3%
8.3%
4.0%
4.7%
3.8%
7.3%
5.0%
7.5%
5.0%
8.2%
5.0%
F-37
TELEFLEX INCORPORATED
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, 2015 and 2014:
Benefit obligation, beginning of year
$
447,964 $
367,731 $
53,154 $
52,448
Pension
Other Benefits
2015
2014
2015
2014
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
495
1,967
(3,914)
—
424
2,169
1,273
—
(3,216)
(3,287)
130
—
127
—
48,616
53,154
1,880
17,948
(22,880)
(2,721)
(18,682)
—
1,794
18,000
82,922
(2,973)
(17,988)
—
(1,773)
(1,522)
421,736
328,830
(4,460)
12,797
447,964
305,481
34,332
9,539
(18,682)
(17,988)
—
(1,773)
(761)
—
(1,522)
(1,012)
Fair value of plan assets, end of year
315,951
328,830
Funded status, end of year
$ (105,785) $ (119,134) $
(48,616) $
(53,154)
The following table sets forth the amounts recognized in the consolidated balance sheet with respect to the
Company's pension and postretirement plans:
Pension
Other Benefits
2015
2014
2015
2014
(Dollars in thousands)
Payroll and benefit-related liabilities
$
(1,653) $
(1,779) $
(3,307) $
(3,268)
Pension and postretirement benefit liabilities
(104,132)
(117,355)
(45,309)
(49,886)
Accumulated other comprehensive loss
213,301
213,117
4,223
8,353
$
107,516 $
93,983 $
(44,393) $
(44,801)
F-38
TELEFLEX INCORPORATED
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, 2013
$
182 $ 144,684 $ (52,480) $
92,386
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, 2014
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)
(4,337)
1,539
(2,832)
—
—
73,596
(26,131)
(974)
265
47,465
(709)
148
212,969
(76,807)
136,310
(35)
(6,124)
2,164
(3,995)
—
—
7,520
(1,177)
(2,928)
316
4,592
(861)
Balance at December 31, 2015
$
113 $ 213,188 $ (77,255) $
136,046
Balance at December 31, 2013
$
17 $
7,056 $ (2,422) $
4,651
Other Benefits
Prior Service
Cost (Credit)
Net (Gain) or
Loss
Deferred
Taxes
(Dollars in thousands)
Accumulated
Other
Comprehensive
(Income) Loss,
Net of Tax
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, 2014
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
—
72
35
—
(48)
(4)
3
1,273
8,281
(493)
(2,919)
780
5,434
(251)
78
(138)
(3,914)
1,459
(2,455)
2,841
Balance at December 31, 2015
$
107 $
4,116 $ (1,382) $
F-39
TELEFLEX INCORPORATED
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
2015
2014
2015
2014
4.5%
2.8%
4.1%
3.0%
4.3%
8.4%
5.0%
4.0%
7.3%
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 4.63% and 4.31%, respectively, were established by
comparing the projection of expected benefit payments to the AA Above Median yield curve as of December 31, 2015.
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.
Effective December 31, 2015, the Company changed the method it uses to estimate the service and interest
cost components of net periodic benefit cost for its pension and other postretirement benefits. Previously, the
Company used a single equivalent discount rate to estimate the interest and service cost components of net
periodic benefit cost. The single discount rate represented the constant annual rate that would be required to
discount all future benefit payments related to past service from the date of expected future payment to the
measurement date. Under the new method, these components are estimated by applying specific spot rates along
the yield curve used by the Company in determining the benefit obligation to their underlying projected cash flow.
This change in method provides a more precise estimate of service and interest costs by improving the correlation
between projected cash flows and their corresponding spot rates and will not affect the measurement of the
Company’s pension and postretirement benefit obligations. The Company accounted for this change as a change in
accounting estimate, which is applied prospectively. Therefore, adoption of this change had no impact on the results
for the year ended December 31, 2015.
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.
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.
An increase in the assumed healthcare trend rate of 1% would increase the benefit obligation at December 31,
2015 by $3.8 million and would increase the 2015 benefit expense by $0.2 million. Decreasing this assumed rate by
1% would decrease the benefit obligation at December 31, 2015 by $3.3 million and would decrease the 2015 benefit
expense by $0.2 million.
F-40
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The accumulated benefit obligation for all United States and foreign defined benefit pension plans was $421.2
million and $447.4 million for 2015 and 2014, respectively. All of the Company's pension plans had accumulated benefit
obligations in excess of their respective plan assets as of December 31, 2015 and 2014.
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 primarily comprised of 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 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 with respect 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, 2015 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
$
664 $
(Dollars in thousands)
664
184
184
80,052
18,549
29,632
15,366
845
2,948
1,055
80,855
2,467
4,838
10,702
10,060
75
655
29,591
22,599
1,654
3,155
5
80,052
18,549
29,632
15,366
845
2,948
1,055
80,855
2,467
4,838
10,702
$ 10,060
75
655
1,654
3,155
$
29,591
22,599
5
$ 315,951 $
251,312 $ 12,444 $
52,195
F-41
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
$
8,531
81
782
1,549
2,986
$
31,176
23,171
5
$ 328,830 $
263,535 $ 10,943 $
54,352
(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, 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 than35% of its assets in the common stocks or other equity securities
of issuers located in emerging market countries.
F-42
TELEFLEX INCORPORATED
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, 2015
and 2014:
•
approximately 41% and 33%, 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 12% and 10%, respectively, of the assets were held in tactical/directional based funds,
including global macro, long/short equity, commodity and systematic quantitative strategies;
approximately 19% and 24%, respectively, of the assets were held in relative value based funds,
including convertible and fixed income arbitrage, credit long/short and volatility arbitrage strategies;
and
approximately 28% and 33%, respectively, of the assets were held in funds with an event driven
strategy.
(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 and bonds.
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, 2013 through December 31, 2015:
Balance at December 31, 2013
Unrealized gain on assets
Balance at December 31, 2014
Unrealized gain on assets
Balance at December 31, 2015
(Dollars in thousands)
51,654
$
2,698
54,352
(2,157)
52,195
$
The Company’s contributions to United States and foreign pension plans during 2016 are required to be
approximately $2.4 million. Contributions to postretirement healthcare plans during 2016 are expected to be
approximately $3.3 million.
The following table provides information about the Company’s expected benefit payments under its 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-43
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2016
2017
2018
2019
2020
Years 2021 — 2025
Pension
Other Benefits
(Dollars in thousands)
$
18,580 $
19,394
20,139
20,957
21,602
3,307
3,349
3,323
3,387
3,456
119,017
17,882
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
$12.6 million, $11.5 million and $12.1 million for 2015, 2014 and 2013, 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, 2015, the
Company had no residual value guarantees related to its operating leases.
Future minimum lease payments as of December 31, 2015 under noncancelable operating leases are as follows:
2016
2017
2018
2019
2020
2021 and thereafter
$
Future Lease Payments
(Dollars in thousands)
30,191
26,299
19,087
15,746
15,274
13,510
Rental expense under operating leases was $34.6 million, $29.4 million and $26.4 million in 2015, 2014 and 2013,
respectively.
Environmental: The Company is subject to contingencies as a result of environmental laws and regulations that
in the future may require the Company to take further action to correct the effects on the environment of prior disposal
practices or releases of chemical or petroleum substances by the Company or other parties. Much of this liability results
from the U.S. Comprehensive Environmental Response, Compensation and Liability Act, often referred to as Superfund,
the U. S. Resource Conservation and Recovery Act and similar state laws. These laws require the Company to undertake
certain investigative and remedial activities at sites where the Company conducts or once conducted operations or at
sites where Company-generated waste was disposed.
Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated
costs, depend on the mix of unique site characteristics, evolving remediation technologies, the regulatory agencies
involved and their enforcement policies, as well as the presence or absence of other potentially responsible parties.
At December 31, 2015 and 2014, the Company has recorded $1.2 million and $1.3 million, respectively, in accrued
liabilities and $6.1 million and $6.5 million, respectively, in other liabilities relating to these matters, in each case
discounted. 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, 2015. The time frame over which the
accrued amounts may be paid out, based on past history, is estimated to be 15-20 years.
Litigation: The Company is a party to various lawsuits and claims arising in the normal course of business. These
lawsuits and claims include actions involving product liability, intellectual property, employment, environmental and
other matters. As of December 31, 2015 and 2014, the Company has recorded accrued liabilities of approximately
F-44
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
$2.5 million and $6.0 million, respectively, in connection with such contingencies, representing its best estimate of the
cost within the range of estimated possible losses that will be incurred to resolve these matters. Of the amounts accrued
as of December 31, 2015 and 2014, $1.5 million and $2.4 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 $0.1 million in
compensatory damages and $23.0 million in punitive damages, plus pre- and post-judgment interest on the
compensatory damages and post-judgment interest on the punitive damages. The Company's post-trial motions
seeking to overturn the verdict or reduce the amount of damages were denied in June 2015. The Company has
appealed to the Louisiana Court of Appeal. The plaintiff has filed a cross-appeal, seeking to overturn the trial court’s
denial of pre-judgment interest on the punitive damages award. As of December 31, 2015, the Company has accrued
a liability representing its best estimate of any probable loss associated with this matter, which is included in the
Company’s accrued liabilities for litigation matters relating to discontinued operations discussed in the preceding
paragraph. The Company believes that any liability arising from this matter in excess of $10.0 million will be covered
by the Company’s product liability insurance.
Based on information currently available, advice of counsel, established reserves and other resources, the
Company does not believe that the outcome of any outstanding litigation and claims is likely to be, individually or in
the aggregate, material to its business, financial condition, results of operations or liquidity. However, in the event of
unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters,
if unfavorable, may be materially adverse to the Company’s business, financial condition, results of operations or
liquidity. Legal costs such as outside counsel fees and expenses are charged to selling, general and administrative
expenses in the period incurred.
Tax audits and examinations: The Company and its subsidiaries are routinely subject to tax examinations by
various tax authorities. As of December 31, 2015, the most significant tax examinations in process are in Austria,
Canada, Germany and the United States. The Company may establish reserves with respect to uncertain tax positions,
after which it adjusts the reserves to address developments with respect to its uncertain tax positions, including
developments in these examinations. Accordingly, developments in tax audits and examinations, including resolution
of uncertain tax positions, could result in increases or decreases to the Company’s recorded tax liabilities, which could
impact the Company’s financial results.
Other: The Company has various purchase commitments for materials, supplies and 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.
Effective April 1, 2015, the Company reorganized certain of its businesses to better leverage the Company’s
resources. As a result, the Company realigned its operating segments. Specifically, the Company's Anesthesia/
Respiratory North America operating segment was divided into two operating segments, Anesthesia North America
and Respiratory North America. Additionally, the businesses comprising the Company's former Specialty operating
segment (which was not a reportable segment and, therefore, was included in the "All other" category in the Company's
presentation of segment information) were transferred to the Anesthesia North America, Vascular North America and
Respiratory North America operating segments.
As a result of the operating segment changes described above, the Company has the following six reportable
operating segments: Vascular North America, Anesthesia North America, Surgical North America, EMEA, Asia and
OEM. In connection with the presentation of segment information, the Company will continue to present certain operating
segments, which, effective April 1, 2015, include, among others, the Respiratory North America operating segment,
F-45
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
in the “All other” category because they are not material. All prior comparative periods presented in this report have
been restated to reflect these changes.
The Company’s reportable segments, other than the Original Equipment Manufacturer and Development Services
("OEM") segment, design, manufacture and distribute medical devices primarily used in critical care, surgical
applications and cardiac care and generally serve two end markets: hospitals and healthcare providers, and home
health. The products of these segments are most widely used in the acute care setting for a range of diagnostic and
therapeutic procedures and in general and specialty surgical applications. The Company’s OEM segment designs,
manufactures and supplies devices and instruments for other medical device manufacturers.
The following tables present the Company’s segment results for the years ended December 31, 2015, 2014 and
2013:
Revenue
Vascular North America
Anesthesia North America
Surgical North America
EMEA
Asia
OEM
All other
Year Ended December 31,
2015
2014
2013
(Dollars in thousands)
$
334,938 $
189,297
311,163 $
183,909
161,230
514,443
241,726
149,399
218,657
150,121
593,065
237,696
143,966
219,912
272,270
155,844
146,058
557,427
207,207
131,173
226,292
Consolidated net revenues
$ 1,809,690 $ 1,839,832 $ 1,696,271
Operating Profit
Vascular North America
Anesthesia North America
Surgical North America
EMEA
Asia
OEM
All other
Total segment operating profit (1)
Unallocated expenses (2)
Year Ended December 31,
2015
2014
2013
(Dollars in thousands)
$
73,284 $
53,807 $
48,311
52,529
92,326
67,887
33,162
20,356
387,855
(71,964)
34,566
49,592
114,650
62,152
30,635
19,762
365,164
(80,302)
28,809
19,525
50,334
87,902
63,822
27,328
24,565
302,285
(69,024)
Income from continuing operations before interest, loss on
extinguishment of debt and taxes
$
315,891 $
284,862 $
233,261
(1) Segment operating profit includes segment net revenues from external customers reduced by its standard cost of goods sold, adjusted
for fixed manufacturing cost absorption variances, selling, general and administrative expenses, research and development expenses
and an allocation of corporate expenses. Corporate expenses are allocated among the segments in proportion to the respective amounts
of one of several items (such as sales, numbers of employees, and amount of time spent), depending on the category of expense involved.
(2) Unallocated expenses primarily include manufacturing variances, with the exception of fixed manufacturing cost absorption variances,
restructuring charges and gain on sale of assets.
F-46
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended December 31,
2015
2014
2013
(Dollars in thousands)
Depreciation and Amortization
Vascular North America
Anesthesia North America
Surgical North America
EMEA
Asia
OEM
All other
$
37,159 $
35,701 $
7,089
12,289
32,178
11,382
6,834
18,403
11,815
6,316
38,062
8,515
6,175
20,446
Consolidated depreciation and amortization
$
125,334 $
127,030 $
32,644
10,339
10,549
29,947
4,960
4,876
14,620
107,935
Geographic data
The following tables provide total net revenues and total net property, plant and equipment by geographic region
for the years ended December 31, 2015, 2014 and 2013:
Net revenues (based on the Company's selling location):
United States
Other Americas
Europe
All other
Net property, plant and equipment:
United States
Malaysia
Ireland
Czech Republic
All other
Year Ended December 31,
2015
2014
2013
(Dollars in thousands)
$
967,819 $
916,619 $
844,884
56,500
570,672
214,699
60,736
664,982
197,495
57,098
568,559
225,730
$ 1,809,690 $ 1,839,832 $ 1,696,271
$
178,895 $
174,893 $
203,985
33,777
33,219
32,305
37,927
36,427
29,746
35,655
40,714
29,313
15,927
41,607
35,068
$
316,123 $
317,435 $
325,900
Note 17 — Condensed consolidating guarantor financial information
In April 2015, pursuant to an exchange offer registered under the Securities Act of 1933, Teleflex Incorporated
(referred to below as “Parent Company”) exchanged $250 million of its 5.25% Senior Notes due 2024 for a like principal
amount of substantially identical notes that it issued in a private placement in May 2014. The notes are guaranteed,
jointly and severally, by certain of the Parent Company’s subsidiaries (each, a “Guarantor Subsidiary” and collectively,
the “Guarantor Subsidiaries”). The guarantees are full and unconditional, subject to certain customary release
provisions. Each Guarantor Subsidiary is directly or indirectly 100% owned by the Parent Company. The Company’s
condensed consolidating statements of income and comprehensive income and condensed consolidating statements
of cash flows for the years ended December 31, 2015, 2014 and 2013 and condensed consolidating balance sheets
as of December 31, 2015 and 2014 provide consolidated information for:
F-47
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
a.
b.
c.
d.
Parent Company, the issuer of the guaranteed obligations;
Guarantor Subsidiaries, on a combined basis;
Non-Guarantor Subsidiaries, on a combined basis; and
Parent Company and its subsidiaries on a consolidated basis.
The same accounting policies as described in Note 1 are used by the Parent Company and each of its subsidiaries
in connection with the condensed consolidating financial information, except for the use by the Parent Company and
Guarantor Subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are
eliminated upon consolidation.
Consolidating entries and eliminations in the following condensed consolidated financial statements represent
adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the Guarantor
Subsidiaries and the Non-Guarantor Subsidiaries, (b) eliminate the investments in subsidiaries and (c) record
consolidating entries.
The condensed consolidating statement of cash flows for the Non-Guarantor Subsidiaries and eliminations for
the years ended December 31, 2014 and 2013 have been revised to properly reflect the intercompany dividends paid
and intercompany dividends received between Non-Guarantor Subsidiaries. Previously, intercompany dividends paid
and received among Non-Guarantor Subsidiaries were presented on a gross basis resulting in the overstatement or
understatement of cash flows from operations, investing and financing activities. To correct this error, the condensed
consolidating statement of cash flows for the year ended December 31, 2014 has been revised as follows: In the Non-
Guarantor Subsidiaries column, net cash provided by (used in) operating activities from continuing operations has
been changed from $123,545 to $52,634, intercompany dividends received (within cash flows from investing activities
of continuing operations) has been changed from $229,782 to $0 (and the intercompany dividends received line item
was removed) and intercompany dividends paid (within cash flows from financing activities of continuing operations)
changed from $(305,122) to $(4,429). In the eliminations column, net cash provided by (used in) operating activities
from continuing operations changed from $(75,340) to $(4,429), intercompany dividends received, which is included
in cash flows from investing activities of continuing operations, changed from $(229,782) to $0 (and the intercompany
dividends received line item was removed) and intercompany dividends paid, which is included in cash flows from
financing activities of continuing operations, changed from $305,122 to $4,429.
The condensed consolidating statement of cash flows for the year ended December 31, 2013 has been revised
as follows: In the Non-Guarantor Subsidiaries column, net cash provided by (used in) operating activities from continuing
operations has been changed from $304,278 to $240,640 and intercompany dividends paid (within cash flows from
financing activities of continuing operations) changed from $(130,502) to $(66,866). In the eliminations column, net
cash provided by (used in) operating activities from continuing operations changed from $(147,902) to $(66,866) and
intercompany dividends paid, which is included in cash flows from financing activities of continuing operations changed
from $147,902 to $66,866.
The Company also made revisions to the classification of certain balances related to intercompany transactions
in the condensed consolidating statements of income and comprehensive income for the year ended December 31,
2014 and the condensed consolidating balance sheet at December 31, 2014 as well as the condensed consolidating
statement of cash flows for the year ended December 31, 2014.
These revisions, individually and in the aggregate, had no impact on the consolidated results of the Company
and are not material to the condensed consolidating guarantor financial information for any of the periods subject to
previously filed condensed consolidating guarantor financial information.
The Company will revise its condensed consolidated guarantor financial information for the interim period
ended March 29, 2015 in its quarterly report on Form 10-Q to be filed for the fiscal quarter ending March 27, 2016.
F-48
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Net revenues
Cost of goods sold
Gross profit
Selling, general and administrative expenses
42,435
Research and development expenses
Restructuring charges
Gain on sale of assets
(Loss) income from continuing operations before
interest, loss on extinguishment of debt and taxes
Interest, net
Loss on extinguishment of debt
(Loss) income from continuing operations before
taxes
(Benefit) taxes on (loss) income from continuing
operations
Equity in net income of consolidated subsidiaries
Income from continuing operations
Year Ended December 31, 2015
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$
— $ 1,079,180
$ 1,107,565
$ (377,055) $ 1,809,690
—
—
—
—
—
646,427
432,753
336,049
30,359
6,731
593,855
513,710
191,029
21,760
1,088
—
(408)
(374,995)
(2,060)
(531)
—
—
—
865,287
944,403
568,982
52,119
7,819
(408)
(42,435)
132,711
10,454
59,614
(76,873)
—
300,241
(1,529)
315,891
4,953
—
—
—
60,791
10,454
(185,600)
136,487
295,288
(1,529)
244,646
(66,264)
355,138
235,802
27,260
235,810
345,037
46,804
1,086
249,570
4
160
(156)
38
(592,034)
(593,601)
—
—
—
7,838
—
236,808
(1,730)
(10,635)
8,905
Operating (loss) income from discontinued operations
(1,734)
(Benefit) taxes on (loss) income from discontinued
operations
Income (loss) from discontinued operations
(10,795)
9,061
—
—
—
Net income
244,863
345,037
249,414
(593,601)
245,713
Less: Income from continuing operations attributable
to noncontrolling interest
—
—
850
—
850
Net income attributable to common shareholders
244,863
345,037
248,564
(593,601)
244,863
Other comprehensive loss attributable to common
shareholders
Comprehensive income attributable to common
shareholders
(110,229)
(110,604)
(120,439)
231,043
(110,229)
$ 134,634
$
234,433
$
128,125
$ (362,558) $
134,634
F-49
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
Net revenues
Cost of goods sold
Gross profit
Selling, general and administrative expenses
42,829
Research and development expenses
Restructuring charges
(Loss) income from continuing operations before
—
—
interest and taxes
Interest, net
(42,829)
144,869
49,092
(85,886)
—
—
652,742
426,109
326,282
40,546
10,189
608,256
523,896
209,930
20,494
7,680
285,792
5,769
(363,594)
(7,577)
(384)
—
—
(7,193)
—
897,404
942,428
578,657
61,040
17,869
284,862
64,752
(Loss) income from continuing operations before
taxes
(Benefit) taxes on (loss) income from continuing
operations
Equity in net income of consolidated subsidiaries
Income from continuing operations
Operating loss from discontinued operations
(Benefit) taxes on loss from discontinued operations
Loss from discontinued operations
Net income
Less: Income from continuing operations attributable
to noncontrolling interests
(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)
(105,872)
(126,317)
232,189
(150,040)
$
37,639
$
194,243
$
123,344
$ (317,587) $
37,639
F-50
TELEFLEX INCORPORATED
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
(Loss) income from continuing operations before
interest, loss on extinguishment of debt and taxes
Interest, net
Loss on extinguishment of debt
(Loss) income from continuing operations before
taxes
(Benefit) taxes on (loss) income from continuing
operations
Equity in net income of consolidated subsidiaries
Income from continuing operations
Operating loss from discontinued operations
(Benefit) taxes on loss from discontinued operations
(Loss) income 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)
134,864
1,250
582,110
419,294
284,960
55,694
15,288
63,352
(85,063)
—
543,717
419,467
178,358
9,351
22,229
209,529
6,480
—
(176,225)
148,415
203,049
(268,501)
184
(307)
—
—
491
—
—
491
857,326
838,945
502,187
65,045
38,452
233,261
56,281
1,250
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 (loss) attributable to
common shareholders
Comprehensive income attributable to common
shareholders
21,193
(5,304)
5,442
(138)
21,193
$ 172,074
$
242,250
$
162,173
$ (404,423) $
172,074
F-51
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2015
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net
$
$
21,612
2,538
— $
4,326
316,754
251,166
$
— $
4,386
338,366
262,416
Accounts receivable from consolidated
subsidiaries
Inventories, net
Prepaid expenses and other current assets
Prepaid taxes
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
5,276
—
13,103
16,686
2,901
62,116
2,931
—
—
5,724,226
91,432
2,412,079
205,163
4,702
—
—
2,626,270
174,674
705,753
762,084
1,360,045
—
289,697
149,705
16,037
14,622
4,071
1,042,052
138,518
590,099
437,891
23,065
8,042
(2,707,052)
(24,593)
3,665
(413)
—
(2,724,007)
—
—
—
(7,107,184)
(97,133)
—
330,275
37,507
30,895
6,972
1,006,431
316,123
1,295,852
1,199,975
152
2,341
1,358,446
26,752
$ 7,265,903
1,658,092
6,615
$ 7,293,533
—
24,275
$ 2,263,942
(3,016,538)
—
—
57,642
$(12,944,862) $ 3,878,516
$
— $
27,527
201,400
22,281
7,291
29,305
—
—
2,679
290,483
—
376,738
32,274
17,722
43,300
36,833
27,543
26,337
—
33,736
25
8,144
4,981
180,899
—
36,378
16,812
21,527
$
— $
—
(2,707,052)
—
—
—
—
(85)
—
(2,707,137)
—
(97,133)
—
—
419,942
66,305
—
64,017
7,291
84,658
7,480
8,059
8,960
666,712
646,000
315,983
149,441
40,400
1,253,189
15,685
1,986,091
5,307,442
—
5,307,442
$ 7,293,533
177,622
12,271
445,509
1,816,612
1,821
1,818,433
$ 2,263,942
(3,016,538)
—
(5,820,808)
(7,124,054)
—
(7,124,054)
—
48,887
1,867,423
2,009,272
1,821
2,011,093
$(12,944,862) $ 3,878,516
$ 376,642
1,945
2,478,109
15,399
—
21,617
7,455
—
1,300
2,902,467
646,000
—
100,355
1,151
1,585,727
20,931
5,256,631
2,009,272
—
2,009,272
$ 7,265,903
F-52
TELEFLEX INCORPORATED
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
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, 2014
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$
27,996
2,346
$
— $
2,422
275,240
265,081
$
— $
3,855
303,236
273,704
35,996
—
14,301
23,493
2,901
107,033
3,489
—
—
5,680,328
82,492
2,303,284
204,335
4,786
—
—
2,514,827
170,054
703,663
743,222
1,359,661
—
272,810
154,544
13,102
16,763
4,521
1,002,061
143,892
619,890
473,498
21,253
6,867
(2,612,090)
(23,286)
3,508
—
—
(2,628,013)
—
—
—
(7,060,092)
(85,348)
—
335,593
35,697
40,256
7,422
995,908
317,435
1,323,553
1,216,720
1,150
4,011
1,009,686
27,999
$ 6,911,027
1,489,994
6,801
$ 6,988,222
—
29,210
$ 2,296,671
(2,499,680)
—
—
64,010
$(12,273,133) $ 3,922,787
$ 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
$
— $
32,692
188,908
21,479
11,276
27,228
—
—
3,065
284,648
—
444,887
35,074
15,569
4,700
29,959
163,291
33,755
—
37,521
17
13,634
5,160
288,037
—
39,663
21,337
23,884
$
— $
—
(2,612,090)
—
—
—
—
134
—
(2,611,956)
—
(85,347)
—
—
368,401
64,100
—
72,383
11,276
85,442
9,169
13,768
8,230
632,769
700,000
399,203
167,241
50,884
915,163
24,900
1,720,241
5,267,981
—
5,267,981
$ 6,988,222
100,533
12,658
486,112
1,808,169
2,390
1,810,559
$ 2,296,671
(2,499,680)
—
(5,196,983)
(7,076,150)
—
(7,076,150)
—
58,991
2,009,088
1,911,309
2,390
1,913,699
$(12,273,133) $ 3,922,787
F-53
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2015
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$ (147,704) $
134,817
$
320,145
$
(3,812) $
303,446
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
(124)
(32,797)
(28,527)
Payments for businesses and intangibles
acquired, net of cash acquired
Proceeds from sale of assets
Investments in affiliates
Net cash provided by (used in) investing
activities from continuing operations
Cash flows from financing activities of continuing
operations:
Proceeds from new borrowings
Reduction in borrowings
Debt extinguishment, issuance and amendment
fees
Proceeds from share based compensation plans
and the related tax impacts
Payments to noncontrolling interest shareholders
Payments for contingent consideration
Proceeds from issuance of shares
Dividends paid
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
year
—
408
—
284
288,100
(303,757)
(9,017)
4,994
—
—
—
(56,532)
(60,336)
(33,472)
—
—
—
(121,850)
121,850
—
—
—
(61,448)
(93,808)
408
—
(93,133)
(183,849)
121,850
(154,848)
—
—
—
—
—
(8,028)
121,850
—
—
—
—
—
(1,343)
—
—
—
—
—
—
—
—
—
(121,850)
—
—
3,812
288,100
(303,757)
(9,017)
4,994
(1,343)
(8,028)
—
(56,532)
—
—
219,035
(155,506)
—
—
(63,529)
(3,812)
142,823
(41,684)
(68,684)
(118,038)
(85,583)
(1,787)
(1,787)
—
(6,384)
27,996
—
—
—
—
—
(849)
(849)
(25,249)
41,514
275,240
—
—
—
—
—
(2,636)
(2,636)
(25,249)
35,130
303,236
Cash and cash equivalents at the end of the year
$
21,612
$
— $
316,754
$
— $
338,366
F-54
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended December 31, 2014
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$ (105,467) $
347,503
$
52,634
$
(4,429) $
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
(2,273)
(30,586)
(34,712)
Payments for businesses and intangibles
acquired, net of cash acquired
Proceeds from sale of assets and investments
Investments in affiliates
Net cash used in investing activities from
continuing operations
Cash flows from financing activities of continuing
operations:
Proceeds from new borrowings
Reduction in borrowings
Debt issuance and amendment fees
Proceeds from share based compensation plans
and the related tax impacts
Payments to noncontrolling interest shareholders
Dividends paid
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
—
1,669
(60)
(17,241)
(28,536)
3,421
20
161
—
(664)
(44,386)
(63,087)
250,000
(480,102)
(4,494)
4,245
—
(56,258)
—
—
—
—
—
—
381,663
(317,617)
—
—
—
—
—
—
(1,094)
—
(64,046)
(4,429)
(3,676)
(3,676)
—
—
—
—
—
—
(19,473)
(99,495)
—
—
—
—
—
—
—
—
—
—
—
—
4,429
(67,571)
(45,777)
5,251
(40)
(108,137)
250,000
(480,102)
(4,494)
4,245
(1,094)
(56,258)
—
—
—
—
—
—
—
(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
year
42,749
14,500
374,735
Cash and cash equivalents at the end of the year
$
27,996
$
— $
275,240
$
— $
303,236
F-55
95,054
(317,617)
(69,569)
4,429
(287,703)
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended December 31, 2013
Parent
Company
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Eliminations
Condensed
Consolidated
(Dollars in thousands)
$ (123,765) $
181,290
$
240,640
$
(66,866) $
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
Reduction in borrowings
Debt extinguishment, issuance and amendment
fees
Proceeds from share based compensation plans
and the related tax impacts
Payments to noncontrolling interest shareholders
Payments for contingent consideration
Dividends paid
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
year
—
(50)
(250,912)
(58,096)
—
—
(1,603)
(298,545)
(72,490)
680,000
(375,000)
(6,400)
6,181
—
—
(55,917)
—
—
—
—
—
(14,802)
—
(148,880)
144,568
—
—
—
—
(736)
(2,156)
—
4,312
—
—
—
—
—
—
—
—
—
—
—
—
(63,580)
(309,008)
(50)
(372,638)
680,000
(375,000)
(6,400)
6,181
(736)
(16,958)
(55,917)
—
—
—
(66,866)
66,866
99,984
129,766
(65,446)
66,866
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 year
$
42,749
$
14,500
$
374,735
$
— $
431,984
F-56
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 18 — Divestiture-related activities
Assets Held for Sale
The table below provides information regarding assets held for sale at December 31, 2015 and 2014. At
December 31, 2015, these assets consisted of two buildings, which the Company is actively marketing.
Assets held for sale:
Property, plant and equipment
Total assets held for sale
Discontinued Operations
2015
2014
(Dollars in thousands)
$
$
6,972 $
6,972 $
7,422
7,422
The Company has recorded $1.7 million, $3.4 million and $2.2 million of expense during 2015, 2014 and 2013,
respectively, associated with retained liabilities related to businesses that have been divested. The tax benefit on loss
from discontinued operations in 2015 was impacted by a reduction in U.S. reserves as a result of the conclusion of
an audit.
The results of the Company’s discontinued operations for the years ended December 31, 2015, 2014 and 2013
were as follows:
Costs and other expenses
Loss from discontinued operations before income taxes
Tax (benefit) on loss from discontinued operations
Income (loss) from discontinued operations
2015
2014
2013
(Dollars in thousands)
3,407 $
1,730 $
(1,730)
(10,635)
(3,407)
(698)
8,905 $
(2,709) $
$
$
2,205
(2,205)
(1,770)
(435)
F-57
TELEFLEX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 19 — Subsequent event
2016 Manufacturing Footprint Realignment Plan
On February 23, 2016, the Board of Directors of the Company approved a restructuring plan (the “Plan")
designed to reduce costs, improve operating efficiencies and enhance the Company’s long term competitive
position. The Plan, which was developed in response to continuing cost pressures in the healthcare industry,
involves the consolidation of operations and a related reduction in workforce at certain of the Company’s facilities,
and will primarily include the relocation of certain manufacturing locations and relocation and outsourcing of certain
distribution operations. These actions will commence in the second quarter 2016 and are expected to be
substantially completed by the end of 2018.
The Company estimates that it will incur aggregate pre-tax charges in connection with the Plan of between
approximately $34 million to $44 million, of which an estimated $27 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 2018.
The following table provides a summary of the Company's current cost estimates by major type of expense
associated with the Plan:
Type of expense
Total estimated amount expected to be incurred
Employee termination benefits
Facility closure and other exit costs (1)
Accelerated depreciation charges
Other (2)
$14 million to $18 million
$2 million to $3 million
$10 million to $13 million
$8 million to $10 million
$34 million to $44 million
Includes costs to transfer product lines among facilities and outplacement and employee relocation costs.
(1)
(2) Consists of other costs directly related to the Plan, including project management, legal and other regulatory costs.
As the Plan is implemented, management will reevaluate the estimated expenses and charges set forth above,
and may revise its estimates, as appropriate, consistent with generally accepted accounting principles.
F-58
QUARTERLY DATA (UNAUDITED)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(Dollars in thousands, except per share)
2015:
Net revenues
Gross profit
Income from continuing operations before interest, loss on
extinguishment of debt 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
2014:
Net revenues
Gross profit
$ 429,430 $ 452,045 $ 443,714 $ 484,501
260,316
233,237
222,637
228,213
65,608
39,273
(703)
38,570
218
38,352
76,986
45,199
(190)
45,009
446
44,563
76,550
61,571
(719)
60,852
28
60,824
96,747
90,765
10,517
101,282
158
101,124
$
$
$
$
0.94 $
(0.02)
0.92 $
1.08 $
(0.01)
1.07 $
1.48 $
(0.02)
1.46 $
0.83 $
(0.02)
0.81 $
0.93 $
—
0.93 $
1.27 $
(0.02)
1.25 $
2.18
0.25
2.43
1.88
0.21
2.09
$ 438,546 $ 468,105 $ 457,173 $ 476,008
241,015
221,159
244,088
236,166
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):
59,020
35,269
(125)
35,144
186
34,958
74,752
48,830
(1,125)
47,705
453
47,252
81,935
55,228
(271)
54,957
126
54,831
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
$
$
$
$
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 $
69,155
52,133
(1,188)
50,945
307
50,638
1.25
(0.03)
1.22
1.10
(0.03)
1.07
(1) Each quarter is calculated as a discrete period; the sum of the four quarters may not equal the calculated full year amount.
62
December 31, 2015
December 31, 2014
December 31, 2013
December 31, 2015
Raw material
Work-in-process
Finished goods
December 31, 2014
Raw material
Work-in-process
Finished goods
December 31, 2013
Raw material
Work-in-process
Finished goods
December 31, 2015
December 31, 2014
December 31, 2013
TELEFLEX INCORPORATED
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Balance at
Beginning of
Year
Additions
Charged to
Income
Accounts
Receivable
Write-offs
Translation
and Other
Balance at
End of
Year
$
$
$
8,783 $
10,722 $
7,818 $
1,618 $
(1,387) $
(988) $
1,882 $
(2,738) $
(1,083) $
8,026
8,783
4,414 $
(1,446) $
(64) $
10,722
INVENTORY RESERVE
Balance at
Beginning of
Year
Additions
Charged to
Income
Inventory
Write-offs
Translation
and Other
Balance at
End of
Year
$
6,891 $
4,102 $
(1,611) $
(1,805) $
509
26,474
33,874 $
579
(554)
15,060
(13,653)
2,605
(2,081)
19,741 $ (15,818) $
(1,281) $
36,516
7,577
3,139
25,800
5,687 $
1,840 $
(2,391) $
1,755 $
6,891
1,729
24,957
32,373 $
1,239
10,135
(1,720)
(7,317)
(739)
(1,301)
509
26,474
13,214 $ (11,428) $
(285) $
33,874
9,394 $
1,931 $
(5,774) $
136 $
1,646
20,663
31,703 $
855
(340)
11,440
(11,663)
(432)
4,517
14,226 $ (17,777) $
4,221 $
32,373
5,687
1,729
24,957
$
$
$
$
$
DEFERRED TAX ASSET VALUATION ALLOWANCE
$
Balance at
Beginning of
Year
99,141 $
86,510 $
69,527 $
$
$
Additions
Charged to
Expense
Reductions
Credited to
Expense
5,681 $
(190) $
Translation
and Other
Balance at
End of Year
(1,157) $ 103,475
13,331 $
(3,741) $
3,041 $
99,141
21,118 $
(1,553) $
(2,582) $
86,510
63
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 — 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).
*4.1.5 — 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).
*10.1 — Teleflex Incorporated Retirement Income Plan, as amended and restated effective January 1,
2014.
+*10.2.1 — 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).
+10.2.2 — First Amendment to the Teleflex Incorporated Deferred Compensation Plan, dated December 11,
2015.
*10.3.1 — Amended and Restated Teleflex 401(k) Savings Plan, effective as of January 1, 2014.
10.3.2 — Special Amendment to Teleflex 401(k) Savings Plan, dated August 12, 2015.
+*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).
*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 (incorporated by reference to Exhibit 10.5.3 to the
Company's Form 10-K filed on February 24, 2014).
*10.5.4 — Form of Restricted Stock Award Agreement for restricted stock awards granted on or after
January 1, 2013 under the Company’s 2008 Stock Incentive Plan (incorporated by reference to
Exhibit 10.5.4 to the Company's Form 10-K filed on February 24, 2014).
+*10.5.5 — Restricted Stock Award Agreement between the Company and Benson F. Smith for restricted
stock award granted on March 14, 2013 (incorporated by reference to Exhibit 10.5.5 to the
Company's Form 10-K filed on February 24, 2014).
+10.5.6 — Form of Stock Option Agreement for stock options granted to Benson F. Smith under the
Company's 2014 Stock Incentive Plan.
+10.5.7 — Form of Restricted Stock Award Agreement for restricted stock awards granted to Benson F.
Smith under the Company's 2014 Stock Incentive Plan.
Exhibit No.
Description
+*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 May 1, 2015, between the Company and Liam
Kelly (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed on July 30,
2015).
+*10.11 — Senior Executive Officer Severance Agreement, dated May 1, 2015, between the Company and
Liam Kelly (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed on July
30, 2015).
+*10.12.1 — Letter Agreement, dated as of May 1, 2015, 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 Chief Operating Officer (incorporated by reference to Exhibit 10.1
to the Company's Form 10-Q filed on July 30, 2015).
+*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 (incorporated by reference to Exhibit 10.15.1 to the Company’s Form 10-K
filed on February 20, 2015).
+*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 (incorporated
by reference to Exhibit 10.15.2 to the Company’s Form 10-K filed on February 20, 2015).
+*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 (incorporated by reference
to Exhibit 10.16 to the Company’s Form 10-K filed on February 20, 2015).
+*10.17 — Contract of Employment, dated November 26, 2012, between the Company and Karen Boylan
(incorporated by reference to Exhibit 10.17 to the Company’s Form 10-K filed on February 20,
2015).
+10.18 — Senior Executive Officer Severance Agreement, dated February 17, 2016, between the
Company and James J. Leyden.
+10.19 — Executive Change In Control Agreement, dated February 17, 2016, between the Company and
James J. Leyden.
+10.20 — Senior Executive Officer Severance Agreement, dated February 17, 2016, between the
Company and Cameron P. Hicks.
+10.21 — Executive Change In Control Agreement, dated February 17, 2016, between the Company and
Cameron P. Hicks.
*10.22.1 — 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).
*10.22.2 — 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).
Exhibit No.
Description
*10.23 — 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).
*10.24 — 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).
*10.25 — 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).
*10.26 — 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, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the
Consolidated Statements of Income for the years ended December 31, 2015, December 31,
2014 and December 31, 2013; (ii) the Consolidated Statements of Comprehensive Income for
the years ended December 31, 2015, December 31, 2014 and December 31, 2013; (iii) the
Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014; (iv) the
Consolidated Statements of Cash Flows for the years ended December 31, 2015, December 31,
2014 and December 31, 2013; (v) the Consolidated Statements of Changes in Equity for the
years ended December 31, 2015, December 31, 2014 and December 31, 2013; 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
2015 GAAP Revenue Growth
Foreign Currency
2015 Constant Currency Revenue Growth
-1.6%
7.0%
5.4%
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
2011
2012
2013
2014
2015
$ 118.3
$ 2.90
$ (182.7)
$ (4.47)
$ 0.0
$ 0.00
$ 315.1
$ 7.71
$ 2.3
$ 0.06
$
2.5
$ 0.06
$ 151.3
$ 3.46
$ 0.0
$ 0.00
$ 30.7
$ 0.71
$ 190.4
$ 4.10
$ 236.0
$ 4.91
$ 0.0
$ 0.00
$ 0.0
$ 0.00
$ 12.7
$ 0.27
$ 4.9
$ 0.10
$ 0.0
$ 0.00
(0.3)
$
$ (0.01)
$ 0.0
$ 0.00
$ 0.0
$ 0.00
$ 0.0
$ 0.00
$ 0.0
$ 0.00
$
0.0
$ 0.00
$ 0.8
$ 0.02
$ 0.0
$ 0.00
$ 6.6
$ 0.14
$ 15.1
$ 0.37
$ 14.6
$ 0.36
$ (0.6)
$ (0.02)
$ 0.9
$ 0.02
$ 0.4
$ 0.01
$ (7.0)
$ (0.17)
7.0
$
$ 0.17
$ 6.2
$ 0.15
$
6.7
$ 0.16
$ 27.0
$ 0.66
$ 28.3
$ 0.69
$ 0.0
$ 0.00
$
0.0
$ (0.06)
$ 0.0
$ 0.00
$ 7.2
$ 0.16
$ 33.4
$ 0.76
$ 0.0
$ 0.00
$ 0.0
$ 0.00
$ 0.0
$ 0.00
$ 7.7
$ 0.17
$ 8.4
$ 0.17
$ 43.5
$ 0.94
$ 45.8
$ 0.95
$ 0.0
$ 0.00
$ 0.0
$ 0.00
$ (5.5)
$ (0.13)
$
(9.0)
$ (0.22)
$ (11.1)
$ (0.25)
$ (4.0)
$ (0.09)
$ (19.0)
$ (0.39)
$ 0.0
$ 0.00
$
0.0
$ 0.03
$ 0.0
$ 0.19
$ 0.0
$ 0.33
$ 0.0
$ 0.44
Adjusted income from continuing operations, net of tax
$ 156.3
$ 182.2
$ 211.6
$ 251.2
$ 283.2
Adjusted earnings per share from continuing operations
$ 3.83
$ 4.43
$ 5.03
$ 5.74
$ 6.33
Note: GAAP results represent amounts per Form 10K for the year referenced.
BOARD OF DIRECTORS
EXECUTIVE
LEADERSHIP
LISTED IN ORDER OF ELECTION
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
GEORGE BABICH, JR. *2
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 *1,2
Chief Executive Officer
Ivenix, Inc.
W. KIM FOSTER *3
Retired Executive Vice President
and Chief Financial Officer
FMC Corporation
CANDACE H. DUNCAN *3
Retired Managing Partner
KPMG LLP
*Board Committees
1 Compensation
2 governance
3 audit
BENSON F. SMITH
Chairman, President and
Chief Executive Officer
LIAM J. KELLY
Executive Vice President and
Chief Operating Officer
THOMAS E. POWELL
Executive Vice President and
Chief Financial Officer
KAREN BOYLAN
Vice President, Global Regulatory
Affairs and Quality Assurance
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
CAMERON HICKS
Vice President of Global
Human Resources and
Employee Communications
TIM KELLEHER
President and
General Manager, OEM
TONY KENNEDY
Senior Vice President,
Global Operations
JAMES J. LEYDEN
Vice President, General
Counsel and Secretary
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 2015
Annual Report on Form 10-K. In
addition, in May 2015, 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, Global Corporate
Development and Strategy
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
April 29, 2016 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 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