Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 2017
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
 
23-1147939
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification no.)
550 E. Swedesford Rd., Suite 400, Wayne, PA
 
19087
(Address of principal executive offices)
 
(Zip Code)
(610) 225-6800
(Registrant’s telephone number, including area code)
(None)
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   x    No  ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
 
 
Accelerated filer
¨
 
 
 
 
 
Non-accelerated filer
¨
 (Do not check if a smaller reporting company)
 
Smaller reporting company
¨
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
¨
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ¨    No  x
The registrant had 45,037,418 shares of common stock, par value $1.00 per share, outstanding as of July 31, 2017.




TELEFLEX INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JULY 2, 2017
TABLE OF CONTENTS
 
  
Page
  
 
 
 
 
 
 
Item 1:
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
Item 2:
 
  
Item 3:
 
  
Item 4:
 
  
 
 
 
  
 
 
 
 
 
 
Item 1:
 
  
Item 1A:
 
  
Item 2:
 
  
Item 3:
 
  
Item 4:
 
 
Item 5:
 
  
Item 6:
 
  
 
 
 
  


1



PART I FINANCIAL INFORMATION
Item 1. Financial Statements
TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
(Dollars and shares in thousands, except per share)
Net revenues
$
528,613

 
$
473,553

 
$
1,016,494

 
$
898,446

Cost of goods sold
238,329

 
217,154

 
470,650

 
416,900

Gross profit
290,284

 
256,399

 
545,844

 
481,546

Selling, general and administrative expenses
158,934

 
142,983

 
322,903

 
279,331

Research and development expenses
20,278

 
15,472

 
38,105

 
27,825

Restructuring charges
870

 
(119
)
 
13,815

 
9,849

Gain on sale of assets

 
(378
)
 

 
(1,397
)
Income from continuing operations before interest, loss on extinguishment of debt and taxes
110,202

 
98,441

 
171,021

 
165,938

Interest expense
19,894

 
11,907

 
37,620

 
25,691

Interest income
(161
)
 
(129
)
 
(330
)
 
(209
)
Loss on extinguishment of debt
11

 
19,261

 
5,593

 
19,261

Income from continuing operations before taxes
90,458

 
67,402

 
128,138

 
121,195

Taxes on income from continuing operations
12,095

 
8,007

 
9,426

 
10,620

Income from continuing operations
78,363

 
59,395

 
118,712

 
110,575

Operating income (loss) from discontinued operations
(566
)
 
6

 
(848
)
 
(376
)
Benefit on income (loss) from discontinued operations
(206
)
 
(187
)
 
(309
)
 
(257
)
Income (loss) from discontinued operations
(360
)
 
193

 
(539
)
 
(119
)
Net income
78,003

 
59,588

 
118,173

 
110,456

Less: Income from continuing operations attributable to noncontrolling interest

 
285

 

 
464

Net income attributable to common shareholders
$
78,003

 
$
59,303

 
$
118,173

 
$
109,992

Earnings per share available to common shareholders:
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Income from continuing operations
$
1.74

 
$
1.36

 
$
2.64

 
$
2.58

Income (loss) from discontinued operations
(0.01
)
 

 
(0.01
)
 

Net income
$
1.73

 
$
1.36

 
$
2.63

 
$
2.58

Diluted:
 
 
 
 
 
 
 
Income from continuing operations
$
1.67

 
$
1.25

 
$
2.54

 
$
2.29

Loss from discontinued operations

 
0.01

 
(0.01
)
 

Net income
$
1.67

 
$
1.26

 
$
2.53

 
$
2.29

Dividends per share
$
0.34

 
$
0.34

 
$
0.68

 
$
0.68

Weighted average common shares outstanding
 
 
 
 
 
 
 
Basic
44,996

 
43,549

 
44,945

 
42,598

Diluted
46,818

 
47,246

 
46,716

 
48,014

Amounts attributable to common shareholders:
 
 
 
 
 
 
 
Income from continuing operations, net of tax
$
78,363

 
$
59,110

 
$
118,712

 
$
110,111

Income (loss) from discontinued operations, net of tax
(360
)
 
193

 
(539
)
 
(119
)
Net income
$
78,003

 
$
59,303

 
$
118,173

 
$
109,992

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

2



TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
(Dollars in thousands)
Net income
$
78,003

 
$
59,588

 
$
118,173

 
$
110,456

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation, net of tax of $(11,392), $1,526, $(18,481), and $(2,651) for the three and six month periods, respectively
65,685

 
(9,237
)
 
112,667

 
11,218

Pension and other postretirement benefit plans adjustment, net of tax of $(465), $(641), $(997) $(1,270) for the three and six month periods, respectively
704

 
1,246

 
1,594

 
2,484

Derivatives qualifying as hedges, net of tax of $(615), $984, $(1,170), and $605 for the three and six month periods, respectively
3,433

 
(496
)
 
5,161

 
984

Other comprehensive income (loss), net of tax:
69,822

 
(8,487
)
 
119,422

 
14,686

Comprehensive income
147,825

 
51,101

 
237,595

 
125,142

Less: comprehensive income attributable to noncontrolling interest

 
239

 

 
397

Comprehensive income attributable to common shareholders
$
147,825

 
$
50,862

 
$
237,595

 
$
124,745

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

3



TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
July 2, 2017
 
December 31, 2016
 
(Dollars in thousands)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
676,214

 
$
543,789

Accounts receivable, net
303,702

 
271,993

Inventories, net
368,526

 
316,171

Prepaid expenses and other current assets
47,298

 
40,382

Prepaid taxes
11,878

 
8,179

Assets held for sale

 
2,879

Total current assets
1,407,618

 
1,183,393

Property, plant and equipment, net
369,301

 
302,899

Goodwill
1,854,076

 
1,276,720

Intangible assets, net
1,612,904

 
1,091,663

Deferred tax assets
1,963

 
1,712

Other assets
44,162

 
34,826

Total assets
$
5,290,024

 
$
3,891,213

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Current borrowings
$
112,039

 
$
183,071

Accounts payable
81,973

 
69,400

Accrued expenses
85,050

 
65,149

Current portion of contingent consideration
584

 
587

Payroll and benefit-related liabilities
78,951

 
82,679

Accrued interest
5,294

 
10,450

Income taxes payable
3,438

 
7,908

Other current liabilities
8,722

 
8,402

Total current liabilities
376,051

 
427,646

Long-term borrowings
1,887,716

 
850,252

Deferred tax liabilities
468,034

 
271,377

Pension and postretirement benefit liabilities
128,335

 
133,062

Noncurrent liability for uncertain tax positions
18,378

 
17,520

Other liabilities
52,981

 
52,015

Total liabilities
2,931,495

 
1,751,872

Commitments and contingencies

 

Convertible notes - redeemable equity component

 
1,824

Mezzanine equity

 
1,824

Total shareholders' equity
2,358,529

 
2,137,517

Total liabilities and shareholders' equity
$
5,290,024

 
$
3,891,213

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


4



TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
(Dollars in thousands)
Cash flows from operating activities of continuing operations:
 
 
 
Net income
$
118,173

 
$
110,456

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Loss from discontinued operations
539

 
119

Depreciation expense
28,084

 
26,609

Amortization expense of intangible assets
41,375

 
31,397

Amortization expense of deferred financing costs and debt discount
2,825

 
6,554

Loss on extinguishment of debt
5,593

 
19,261

Gain on sale of assets

 
(1,397
)
Fair value step up of acquired inventory sold
10,442

 

Changes in contingent consideration
(237
)
 
1,242

Stock-based compensation
9,534

 
7,949

Deferred income taxes, net
(8,779
)
 
(1,292
)
Other
(3,300
)
 
(1,970
)
Changes in operating assets and liabilities, net of effects of acquisitions and disposals:
 
 
 
Accounts receivable
5,071

 
(10,237
)
Inventories
(12,187
)
 
(3,284
)
Prepaid expenses and other current assets
4

 
238

Accounts payable and accrued expenses
6,541

 
(3,500
)
Income taxes receivable and payable, net
(5,988
)
 
(657
)
   Net cash provided by operating activities from continuing operations
197,690

 
181,488

Cash flows from investing activities of continuing operations:
 
 
 
Expenditures for property, plant and equipment
(36,833
)
 
(19,535
)
Proceeds from sale of assets
6,332

 
3,985

Payments for businesses and intangibles acquired, net of cash acquired
(993,459
)
 
(3,117
)
Net cash used in investing activities from continuing operations
(1,023,960
)
 
(18,667
)
Cash flows from financing activities of continuing operations:
 
 
 
Proceeds from new borrowings
1,194,500

 
665,000

Reduction in borrowings
(228,273
)
 
(656,479
)
Debt extinguishment, issuance and amendment fees
(19,114
)
 
(8,182
)
Net proceeds from share based compensation plans and the related tax impacts
1,305

 
6,593

Payments for contingent consideration
(153
)
 
(133
)
Dividends paid
(30,590
)
 
(28,998
)
Net cash provided by (used in) financing activities from continuing operations
917,675

 
(22,199
)
Cash flows from discontinued operations:
 
 
 
Net cash used in operating activities
(961
)
 
(1,183
)
Net cash used in discontinued operations
(961
)
 
(1,183
)
Effect of exchange rate changes on cash and cash equivalents
41,981

 
(1,315
)
Net increase in cash and cash equivalents
132,425

 
138,124

Cash and cash equivalents at the beginning of the period
543,789

 
338,366

Cash and cash equivalents at the end of the period
$
676,214

 
$
476,490

 
 
 
 
Non cash financing activities of continuing operations:
 
 
 
Settlement and exchange of convertible notes with common or treasury stock                                
$
983

 
$
35,197

Acquisition of treasury stock associated with settlement and exchange of convertible note hedge and warrant agreements                   
$
19,361

 
$
85,895

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

5



TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
 

 
Common Stock
 
Additional
Paid In
Capital
 
Retained
Earnings
 
Accumulated Other Comprehensive Loss
 
Treasury Stock
 
Total
 
Shares
 
Dollars
 
 
 
 
Shares
 
Dollars
 
 
 
Balance at December 31, 2016
45,814

 
$
45,814

 
$
506,800

 
$
2,194,593

 
$
(438,717
)
 
1,741

 
$
(170,973
)
 
$
2,137,517

Net income
 
 
 

 
 

 
118,173

 
 

 
 

 
 

 
118,173

Cash dividends ($0.68 per share)
 

 
 

 
 

 
(30,590
)
 
 

 
 

 
 

 
(30,590
)
Other comprehensive income
 

 
 

 
 

 
 

 
119,422

 
 

 
 

 
119,422

Settlements of convertible notes
928

 
928

 
3,865

 
 

 
 

 
1

 
55

 
4,848

Settlements of note hedges associated with convertible notes and warrants
 
 
 
 
19,361

 
 
 
 
 
119

 
(19,358
)
 
3

Shares issued under compensation plans
80

 
80

 
6,717

 
 

 
 

 
(46
)
 
2,271

 
9,068

Deferred compensation
 

 
 

 
 

 
 

 
 

 
(2
)
 
88

 
88

Balance as of July 2, 2017
46,822

 
$
46,822

 
$
536,743

 
$
2,282,176

 
$
(319,295
)
 
1,813

 
$
(187,917
)
 
$
2,358,529

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

6


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



Note 1 — Basis of presentation
The accompanying unaudited condensed consolidated financial statements of Teleflex Incorporated and its subsidiaries (“we,” “us,” “our,” “Teleflex” and the “Company”) are prepared on the same basis as its annual consolidated financial statements.
In the opinion of management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary for the fair statement of financial statements for interim periods in accordance with accounting principles generally accepted in the United States of America ("GAAP") and with Rule 10-01 of Securities and Exchange Commission ("SEC") Regulation S-X, which sets forth the instructions for financial statements included in Form 10-Q. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the periods reported are not necessarily indicative of those that may be expected for a full year.
In accordance with applicable accounting standards, the accompanying condensed consolidated financial statements do not include all of the information and footnote disclosures that are required to be included in the Company's annual consolidated financial statements. The year-end condensed consolidated balance sheet data was derived from the Company's audited financial statements, but, as permitted by Rule 10-01 of Regulation S-X, does not include all disclosures required by GAAP for complete financial statements. Accordingly, the Company's quarterly condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2016.
Note 2 — New accounting standards
In May 2014, the Financial Accounting Standards Board ("FASB"), in a joint effort with the International Accounting Standards Board ("IASB"), issued new accounting guidance to clarify the principles for recognizing revenue. This new guidance, collectively with related guidance provided by the FASB, is designed to enhance the comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets, and will affect any entity that enters into contracts with customers or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The new guidance establishes principles for reporting information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The core principle of the new guidance is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those years. The Company will adopt this standard in the first quarter 2018 and expects to use the modified retrospective method of adoption by recognizing the cumulative effect of adopting this guidance as an adjustment to the Company's opening balance of retained earnings. Although the Company's evaluation of this guidance is ongoing, the Company's preliminary assessment indicates that the adoption of this guidance will not have a material impact on the Company’s results of operations, cash flows and financial position.
In February 2016, the FASB issued guidance that will change the requirements for accounting for leases. Under the new guidance, lessees (including lessees under both leases classified as finance leases, which are to be classified based on criteria similar to that applicable to capital leases under current guidance, and leases classified as operating leases) will recognize a right-to-use asset and a lease liability on the balance sheet, initially measured as the present value of lease payments under the lease. Under current guidance, operating leases are not recognized on the balance sheet. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements; the guidance provides certain practical expedients. The Company is currently evaluating this guidance to determine its impact on the Company’s results of operations, cash flows and financial position.
In March 2016, the FASB issued new guidance designed to simplify several aspects of the accounting for share-based payment transactions, including, among other things, guidance related to accounting for income taxes,

7


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


modification of the criteria for classification of awards as either equity awards or liability awards where an employer withholds shares from an employee's share-based award for tax withholding purposes, and classification on the statement of cash flows of cash payments to a tax authority by an employer that withholds shares from an employee's award for tax withholding purposes. The Company adopted this guidance as of January 1, 2017. The Company has applied the new guidance requiring recognition of excess tax deficiencies and tax benefits in the income statement, rather than in additional paid-in-capital, as previously required. The adoption of the new standard increased net income and cash flows from operating activities by $1.1 million and $4.5 million ($0.02 and $0.09 diluted earnings per share) for the three and six months ended July 2, 2017, respectively. The Company will continue to estimate forfeitures of share-based awards at the time of grant, rather than recognize actual forfeitures as they occur, as permitted under the new guidance.
In August 2016, the FASB issued new guidance with regard to eight specific issues pertaining to the classification of certain cash receipts and cash payments within the statement of cash flows. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The new guidance should generally be adopted using a retrospective transition method for each period presented. Although the Company's evaluation of this guidance is ongoing, the Company's preliminary assessment indicates that the adoption of this guidance will not have a material impact on the Company's cash flows.
In October 2016, the FASB issued new guidance requiring companies to recognize the income tax effects of intra-entity sales and transfers of assets, other than inventory, in the income statement as income tax expense (or benefit) in the period in which the transfer occurs. Previously, recognition was prohibited until the assets were sold to an outside party or otherwise utilized. The guidance is effective for annual periods beginning after December 15, 2017, and early adoption is permitted as of the beginning of an annual reporting period. The guidance should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the annual period of adoption. The Company is currently evaluating the impact of the adoption of this guidance, but currently does not anticipate the guidance will have a material impact on its consolidated financial position or results of operations.
In January 2017, the FASB issued new guidance to clarify the definition of a “business,” with the objective of assisting entities in evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or as an acquisition of a business. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill and consolidation. The guidance generally defines a business as an integrated set of activities and assets (collectively referred to as a “set”) that is capable of being conducted and managed for the purpose of providing a return to investors or other owners, members, or participants. The guidance further provides that, to be considered a business, a set must meet specified requirements. However, the guidance also states that, if substantially all of the fair value of gross assets acquired (subject to specified exceptions) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business and no further analysis is required. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted under specified circumstances.
In January 2017, the FASB issued guidance to simplify the quantitative test for goodwill impairment. Under current guidance, if a reporting unit’s carrying value exceeds its fair value, the entity must determine the implied value of goodwill. This determination is made 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 the reporting unit had just been acquired. Under the new guidance, a determination of the implied value of goodwill will no longer be required; a goodwill impairment will be equal to the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance is effective for fiscal years, and any interim goodwill impairment tests within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company is currently evaluating the impact of the adoption of this guidance, but currently does not anticipate the guidance will have a material impact on its consolidated financial position or results of operations.
In March 2017, the FASB issued new guidance for employers that sponsor defined benefit pension or other postretirement benefit plans. The new guidance requires that these employers disaggregate specified components of net periodic pension cost and net periodic postretirement benefit cost (collectively, "net benefit cost"). Specifically, the guidance generally requires employers to present in the income statement the service cost component of net benefit cost in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. This guidance

8


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 and generally is required to be applied retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance, but currently does not anticipate the guidance will have a material impact on its consolidated results of operations.
In May 2017, the FASB issued new guidance to provide clarity and reduce diversity of practice as to when an entity should account for the effects of a modification of the terms and conditions of a share-based payment award. The new guidance generally provides that modification accounting is to be applied unless the fair value (or, if applicable, calculated or intrinsic value), vesting conditions and classification as an equity instrument or liability instrument of the award are the same as was the case prior to the modification. The new guidance does not change the guidance regarding the implementation of modification accounting, if required. The new guidance is effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance, but currently does not anticipate the guidance will have a material impact on its consolidated results of operations.
From time to time, new accounting guidance is issued by the FASB or other standard setting bodies that is adopted by the Company as of the effective date or, in some cases where early adoption is permitted, in advance of the effective date. The Company has assessed the recently issued guidance that is not yet effective and, unless otherwise indicated above, believes the new guidance will not have a material impact on the Company’s results of operations, cash flows or financial position.
Note 3 — Acquisitions
The Company made two acquisitions during 2017, both of which were accounted for as business combinations.
Pyng
On April 3, 2017, the Company completed the acquisition of Pyng Medical Corp ("Pyng"), a medical device company that develops and markets sternal intraosseous infusion products, which complement the Company's anesthesia product portfolio. The Company acquired all of the issued and outstanding common shares of Pyng utilizing available cash. The aggregate consideration was approximately $17.9 million, net of cash acquired. The assets acquired include goodwill and finite-lived intangible assets (primarily intellectual property and customer lists) of $13.0 million and $5.5 million, respectively. The goodwill resulting from the acquisition primarily reflects synergies currently expected to be realized from the integration of the acquired business.
Vascular Solutions
On February 17, 2017, the Company completed the acquisition of Vascular Solutions, Inc. (“Vascular Solutions”) pursuant to a merger transaction. Vascular Solutions is a medical device company that develops and markets products for use in minimally invasive coronary and peripheral vascular procedures. In connection with the merger, subject to specified exclusions, each share of common stock of Vascular Solutions (each, a "Share" and collectively, the “Shares”) was converted into the right to receive $56.00 per Share in cash, without interest and subject to applicable withholding tax. In addition, each outstanding option or similar right to purchase Shares issued under the Vascular Solutions’ Stock Option and Stock Award Plan (the "Company Options") was cancelled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the total number of Shares subject to such Company Option immediately prior to the acquisition and (ii) the excess, if any, of $56.00 over the exercise price of such Company Option. The aggregate consideration paid by the Company in connection with the merger was approximately $975.5 million, net of cash acquired.
For the six months ended July 2, 2017 the Company incurred $8.2 million in transaction expenses associated with the Vascular Solutions acquisition, which are included in selling, general and administrative expenses in the condensed consolidated statement of income. For the three months ended July 2, 2017, the Company recorded post acquisition revenue and operating profit of $45.0 million and $3.3 million, respectively, related to Vascular Solutions. For the six months ended July 2, 2017, the Company recorded post acquisition revenue and operating loss of 66.7 million and 11.6 million, respectively. Financial information of Vascular Solutions is presented within the "All Other" category in the Company's presentation of segment information.

9


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


The Vascular Solutions acquisition was financed utilizing borrowings under the Amended and Restated Credit Agreement, dated January 20, 2017 (the "Credit Agreement"), which is described in Note 7.
The following table presents the purchase price allocation among the assets acquired and liabilities assumed with respect to the Vascular Solutions acquisition:
 
(Dollars in thousands)
Assets
 

Current assets
$
63,867

Property, plant and equipment
46,616

Intangible assets
539,250

Goodwill
522,614

Other assets
728

Total assets acquired
1,173,075

Less:
 

Current liabilities
15,079

Deferred tax liabilities
182,472

Liabilities assumed
197,551

Net assets acquired
$
975,524

The Company is continuing to evaluate the initial purchase price allocations, and further adjustments may be necessary as a result of the Company's assessment of additional information related to the fair values of the assets acquired and liabilities assumed, primarily deferred tax liabilities, certain intangible assets and goodwill. The goodwill resulting from the Vascular Solution acquisition primarily reflects synergies currently expected to be realized from the integration of the acquired businesses.
The following table sets forth the components of identifiable intangible assets acquired and the ranges of the useful lives as of the date of the Vascular Solutions acquisition:
 
Fair value
 
Useful life range
 
(Dollars in thousands)
 
(Years)
Intellectual property
248,200

 
10- 20
In-process research and development ("IPR&D")
15,600

 
Indefinite
Trade names
16,650

 
20
Customer lists
258,800

 
25

10


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Pro forma combined financial information 
The following unaudited pro forma combined financial information for the three and six months ended July 2, 2017 and June 26, 2016, respectively, gives effect to the Vascular Solutions acquisition as if it was completed at the beginning of the earliest period presented. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have occurred under the ownership and management of the Company.
 
Three Months Ended
 
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
(Dollars and shares in thousands, except per share)
Net revenue
$
528,613

 
$
514,574

 
$
1,039,318

 
$
978,697

Net income
$
79,221

 
$
59,352

 
$
128,302

 
$
77,252

Basic earnings per common share:
 
 
 
 
 
 
 
Net income
$
1.76

 
$
1.36

 
$
2.85

 
$
1.81

Diluted earnings per common share:
 
 
 
 
 
 
 
Net income
$
1.69

 
$
1.26

 
$
2.75

 
$
1.61

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
44,996

 
43,549

 
44,945

 
42,598

Diluted
46,818

 
47,246

 
46,716

 
48,014

The unaudited pro forma combined financial information presented above includes the accounting effects of the Vascular Solutions business combination, including amortization charges from acquired intangible assets, adjustments for depreciation of property plant and equipment, interest expense, the revaluation of inventory and the related tax effects. The unaudited pro forma financial information includes non-recurring charges specifically related to the Vascular Solutions acquisition and interest expense associated with a bridge loan facility that was put in place to, among other things, assist the Company in financing the acquisition of Vascular Solutions.
The unaudited pro forma combined financial information for the three and six months ended June 26, 2016 reflects the historical results of Vascular Solutions for its three and six month ended June 30, 2016, respectively, and the effects of the pro forma adjustments listed above.
2016 acquisitions
The Company made the following acquisitions during 2016 (the "2016 acquisitions"), which, with the exception of its acquisition of the outstanding noncontrolling interest in Teleflex Medical Private Limited, were accounted for as business combinations:
On September 2, 2016, the Company acquired certain assets of CarTika Medical, Inc., ("CarTika"), an original equipment manufacturer (OEM) of catheters and other medical devices that complement the Company's OEM product portfolio.
On July 1, 2016, the Company, which previously owned a 74% controlling interest in its Indian affiliate, Teleflex Medical Private Limited, acquired the remaining 26% ownership interest from the noncontrolling shareholders. Teleflex Medical Private Limited is part of the Company's Asia reportable operating segment. As this acquisition did not result in a change in the Company's control of the entity, the Company recognized the $7.5 million excess of the purchase price of the noncontrolling interest over its carrying value as equity.
During the second quarter 2016, the Company acquired certain assets of two medical device and supplies distributors in New Zealand.
The aggregate purchase price paid in connection with the 2016 acquisitions was $22.8 million. The results of operations of the acquired businesses and assets are included in the condensed 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.

11


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Note 4 — Restructuring charges
The following tables provide information regarding restructuring charges recognized by the Company for the three and six months ended July 2, 2017 and June 26, 2016: 
Three Months Ended July 2, 2017
 
 
 
 
 
 
 
 
 
 
Termination Benefits
 
Facility Closure Costs
 
Contract Termination Costs
 
Other Exit Costs
 
Total
 
(Dollars in thousands)
2017 Vascular Solutions integration program
$
370

 
$

 
$

 
$
34

 
$
404

2017 EMEA restructuring program
(584
)
 

 

 

 
(584
)
2016 Footprint realignment plan
286

 
10

 
(4
)
 
99

 
391

2014 Footprint realignment plan
(121
)
 
14

 

 
(7
)
 
(114
)
Other restructuring programs (1)
661

 
11

 
79

 
22

 
773

Total restructuring charges
$
612

 
$
35

 
$
75

 
$
148

 
$
870

Three Months Ended June 26, 2016
 
 
 
 
 
 
 
 
 
 
Termination Benefits
 
Facility Closure Costs
 
Contract Termination Costs
 
Other Exit Costs
 
Total
 
(Dollars in thousands)
2016 Footprint realignment plan
$
(279
)
 
$

 
$

 
$
286

 
$
7

2015 Restructuring programs
(442
)
 
55

 
115

 
25

 
(247
)
2014 Footprint realignment plan
112

 

 

 
9

 
121

Total restructuring charges
$
(609
)
 
$
55

 
$
115

 
$
320

 
$
(119
)
Six Months Ended July 2, 2017
 
 
 
 
 
 
 
 
 
 
Termination Benefits
 
Facility Closure Costs
 
Contract Termination Costs
 
Other Exit Costs
 
Total
 
(Dollars in thousands)
2017 Vascular Solutions integration program
$
4,853

 
$

 
$

 
$
34

 
$
4,887

2017 EMEA restructuring program
6,536

 

 

 

 
6,536

2016 Footprint realignment plan
825

 
22

 
(75
)
 
129

 
901

2014 Footprint realignment plan
182

 
14

 

 
1

 
197

Other restructuring programs (1)
965

 
58

 
209

 
62

 
1,294

Total restructuring charges
$
13,361

 
$
94

 
$
134

 
$
226

 
$
13,815

Six Months Ended June 26, 2016
 
 
 
 
 
 
 
 
 
 
Termination Benefits
 
Facility Closure Costs
 
Contract Termination Costs
 
Other Exit Costs
 
Total
 
(Dollars in thousands)
2016 Footprint realignment plan
$
10,068

 
$

 
$

 
$
286

 
$
10,354

2015 Restructuring programs
(399
)
 
178

 
93

 
118

 
(10
)
2014 Footprint realignment plan
(426
)
 

 

 
11

 
(415
)
Other restructuring programs (2)

 

 
(86
)
 
6

 
(80
)
Total restructuring charges
$
9,243

 
$
178

 
$
7

 
421

 
$
9,849


12


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


(1)
Other restructuring programs include the 2017 Pyng Integration program, the 2016 Other Restructuring programs , the 2015 Restructuring programs, and the 2014 European Restructuring plan. The Company committed to the 2017 Pyng Integration program, which relates to the integration of Pyng into Teleflex, during the second quarter 2017. For a description of the 2015 Restructuring programs, see Note 4 to the Company’s consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2016.    
(2) Other restructuring programs includes the 2014 European Restructuring Plan, the Other 2014 restructuring programs, the 2013 Restructuring programs and the LMA restructuring program. For a description of these plans, see Note 4 to the Company’s consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2016.
2017 Vascular Solutions Integration Program
During the first quarter 2017, the Company committed to a restructuring program related to the integration of Vascular Solutions into Teleflex. The Company initiated the program in the first quarter 2017 and expects the program to be substantially completed by the end of the second quarter 2018. The Company estimates that it will record aggregate pre-tax restructuring charges of $6.0 million to $7.5 million related to this program, of which $4.5 million to $5.3 million will constitute termination benefits, while $1.5 million to $2.2 million will relate to other exit costs, including employee relocation and outplacement costs. Additionally, the Company expects to incur $2.5 million to $3.0 million of restructuring related charges consisting primarily of retention bonuses offered to certain employees expected to remain with the Company after completion of the program. All of these charges will result in future cash outlays.
2017 EMEA Restructuring Program
During the first quarter 2017, the Company committed to a restructuring program to centralize certain administrative functions in Europe. The program commenced in the second quarter 2017 and is expected to be substantially completed by the end of 2018. The Company estimates that it will record aggregate pre-tax restructuring charges of $7.1 million to $8.5 million related to this program, almost all of which constitute termination benefits, and all of which will result in future cash outlays.
2016 Other Restructuring Programs
During 2016, the Company committed to programs designed to improve operating efficiencies and reduce costs. The programs involve the consolidation of certain global administrative functions and manufacturing operations. The programs commenced in the second half of 2016 and are expected to be substantially complete by the end of the first quarter 2018. The Company estimates that it will record aggregate pre-tax charges of $3.8 million to $4.7 million related to these programs, substantially all of which constitute termination benefits that will result in future cash outlays. Additionally, the Company expects to incur approximately $1.5 million of accelerated depreciation and other costs directly related to these programs and anticipates these costs will be recognized in cost of goods sold, of which approximately $1.0 million is expected to result in future outlays.
As of July 2, 2017, the Company has a restructuring reserve of $1.2 million related to these programs.
2016 Footprint Realignment Plan
In 2016, the Company initiated a restructuring plan (the “2016 footprint realignment plan") designed to reduce costs, improve operating efficiencies and enhance the Company’s long term competitive position.  The plan involves the relocation of certain manufacturing operations, the relocation and outsourcing of certain distribution operations and a related workforce reduction at certain of the Company's facilities. These actions commenced in the first quarter of 2016 and are expected to be substantially completed by the end of 2018. The Company estimates that it will incur aggregate pre-tax restructuring and restructuring related charges in connection with the 2016 footprint realignment 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, and the related cash outlays, are expected to be made prior to the end of 2018.
In addition to the restructuring charges shown in the tables above, the Company recorded restructuring related charges of $2.0 million and $4.1 million for the three and six months ended July 2, 2017, respectively, and $1.8 million and $2.4 million for the three and six months ended June 26, 2016, respectively, related to the 2016 footprint realignment plan. The majority of charges in both periods constituted accelerated depreciation and other costs, principally as a result of the transfer of manufacturing operations to the new locations.

13


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


As of July 2, 2017, the Company has incurred net aggregate restructuring charges related to the 2016 footprint realignment plan of $13.4 million. Additionally, as of July 2, 2017, the Company has incurred net aggregate accelerated depreciation and certain other costs, principally as a result of the transfer of manufacturing operations to new locations, of $10.5 million. These costs primarily were included in cost of goods sold. As of July 2, 2017, the Company has a restructuring reserve of $8.7 million related to this plan, the majority of which relates to termination benefits.
2014 Footprint Realignment Plan
In 2014, the Company initiated a restructuring plan (“the 2014 footprint realignment plan”) involving the consolidation of operations and a related reduction in workforce at certain facilities, and the relocation of manufacturing 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 the first half of 2020.The Company estimates that it will incur aggregate pre-tax restructuring and restructuring related charges in connection with the 2014 footprint realignment plan of approximately $43 million to $48 million, of which an estimated $33 million to $38 million are expected to result in future cash outlays. The Company expects to incur $24 million to $30 million in aggregate capital expenditures under the plan.

In addition to the restructuring charges set forth in the tables above, the Company recorded restructuring related charges of $0.5 million and $2.1 million for the three and six months ended July 2, 2017, respectively, and $2.3 million and $4.4 million for the three and six months ended June 26, 2016, respectively, related to the 2014 footprint realignment plan. The majority of charges in both periods constituted accelerated depreciation and other costs principally resulting from the transfer of manufacturing operations to new locations.

As of July 2, 2017, the Company has incurred net aggregate restructuring charges related to the 2014 footprint realignment plan of $11.3 million. Additionally, as of July 2, 2017, the Company has incurred net aggregate accelerated depreciation and certain other costs of $25.0 million, principally resulting from the transfer of manufacturing operations from the existing locations to the new locations in connection with the plan. These costs primarily were included in cost of goods sold. As of July 2, 2017, the Company has a restructuring reserve of $4.5 million in connection with the plan, all of which relates to termination benefits.

For additional information regarding the Company's restructuring programs, see Note 4 to the Company's consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2016.
Restructuring charges by reportable operating segment for the three and six months ended July 2, 2017 and June 26, 2016 are set forth in the following table:   
 
Three Months Ended
 
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
(Dollars in thousands)
 
(Dollars in thousands)
Restructuring charges
 
 
 
 
 
 
 
Vascular North America
$
361

 
$
351

 
$
1,109

 
$
4,514

Anesthesia North America
564

 
364

 
811

 
2,239

Surgical North America

 

 

 
(20
)
EMEA
(365
)
 
(949
)
 
7,135

 
2,923

Asia

 
(2
)
 

 

OEM

 
(1
)
 

 
4

All other
310

 
118

 
4,760

 
189

Total restructuring charges
$
870

 
$
(119
)
 
$
13,815

 
$
9,849


14


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Note 5 — Inventories, net
Inventories as of July 2, 2017 and December 31, 2016 consisted of the following:
 
July 2, 2017
 
December 31, 2016
 
(Dollars in thousands)
Raw materials
$
94,924

 
$
65,319

Work-in-process
61,561

 
54,555

Finished goods
212,041

 
196,297

Inventories, net
$
368,526

 
$
316,171

Note 6 — Goodwill and other intangible assets, net
The following table provides information relating to changes in the carrying amount of goodwill by reportable operating segment for the six months ended July 2, 2017:
 
Vascular
North America

Anesthesia
North America

Surgical
North America

EMEA

Asia
 
OEM

All
Other

Total
 
(Dollars in thousands)
Balance as of December 31, 2016
$
345,546


$
141,253


$
250,912


$
290,041


$
138,185

 
$
4,883


$
105,900


$
1,276,720

Goodwill related to acquisitions


5,426




6,010


1,559

 


522,614


535,609

Currency translation and other adjustments
(1,590
)

215




24,729


6,217

 


12,176


41,747

Balance as of July 2, 2017
$
343,956

 
$
146,894

 
$
250,912

 
$
320,780

 
$
145,961

 
$
4,883

 
$
640,690

 
$
1,854,076

The following table provides information as of July 2, 2017 and December 31, 2016 regarding the gross carrying amount of, and accumulated amortization relating to intangible assets:
 
Gross Carrying Amount
 
Accumulated Amortization
 
July 2, 2017
 
December 31, 2016
 
July 2, 2017
 
December 31, 2016
 
(Dollars in thousands)
Customer relationships
$
892,574

 
$
622,428

 
$
(259,002
)
 
$
(239,055
)
In-process research and development
33,595

 
16,532

 

 

Intellectual property
774,980

 
519,962

 
(226,354
)
 
(203,390
)
Distribution rights
23,452

 
23,021

 
(16,208
)
 
(15,239
)
Trade names
405,283

 
379,724

 
(16,862
)
 
(13,974
)
Non-compete agreements
2,900

 
2,692

 
(1,454
)
 
(1,038
)
 
$
2,132,784

 
$
1,564,359

 
$
(519,880
)
 
$
(472,696
)
 

15


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Note 7 — Borrowings
The Company's borrowings at July 2, 2017 and December 31, 2016 were as follows:
 
July 2, 2017
 
December 31, 2016
 
(Dollars in thousands)
Senior Credit Facility:
 
 
 
Revolving credit facility, at a rate of 3.22% at July 2, 2017, due 2022
$
547,000

 
$
210,000

Term loan facility, at a rate of 3.22% at July 2, 2017, due 2022
721,000

 

3.875% Convertible Senior Subordinated Notes due 2017
44,303

 
136,076

4.875% Senior Notes due 2026
400,000

 
400,000

5.25% Senior Notes due 2024
250,000

 
250,000

Securitization program, at a rate of 1.97% at July 2, 2017
50,000

 
50,000


2,012,303

 
1,046,076

Less: Unamortized debt discount on 3.875% Convertible Senior Subordinated Notes due 2017
(126
)
 
(2,707
)
Less: Unamortized debt issuance costs
(12,422
)
 
(10,046
)
 
1,999,755


1,033,323

Current borrowings
(112,039
)
 
(183,071
)
Long-term borrowings
$
1,887,716

 
$
850,252

Amended and restated senior credit facility
On January 20, 2017, the Company entered into the Credit Agreement, which provides for a five year revolving credit facility of $1.0 billion and a term loan facility of $750.0 million. The obligations under the Credit Agreement are guaranteed (subject to certain exceptions and limitations) by substantially all of the material domestic subsidiaries of the Company and are secured by a lien on substantially all of the assets owned by the Company and each guarantor. The maturity date of the revolving credit facility under the Credit Agreement is January 20, 2022 and the term loan facility will mature on February 17, 2022.
At the Company’s option, loans under the Credit Agreement will bear interest at a rate equal to adjusted LIBOR plus an applicable margin ranging from 1.25% to 2.50% or at an alternate base rate, which is defined as the highest of (i) the publicly announced prime rate of JPMorgan Chase Bank, N.A., the administrative agent under the Credit Agreement, (ii) 0.5% above the federal funds rate and (iii) 1% above adjusted LIBOR for a one month interest period on such day, plus an applicable margin ranging from 0.25% to 1.50%, in each case subject to adjustment based on the Company’s consolidated total leverage ratio (generally, Consolidated Total Funded Indebtedness, as defined in the Credit Agreement, on the date of determination to Consolidated EBITDA, as defined in the Credit Agreement, for the four most recent fiscal quarters ending on or preceding the date of determination). Overdue loans will bear interest at the rate otherwise applicable to such loans plus 2.00%.
The Company is required to maintain a maximum total consolidated leverage ratio of 4.50 to 1.00 and a maximum consolidated senior secured leverage ratio (generally, Consolidated Senior Secured Funded Indebtedness, as defined in the Credit Agreement, on the date of determination to Consolidated EBITDA for the four most recent quarters ending on or preceding the date of determination) of 3.50 to 1.00. The Company is further required to maintain a consolidated interest coverage ratio (generally, Consolidated EBITDA for the four most recent fiscal quarters ending on or preceding the date of determination to Consolidated Interest Expense, as defined in the Credit Agreement, paid in cash for such period) of not less than 3.50 to 1.00.
The Company capitalized $12.0 million related to transaction fees, including underwriters’ discounts and commissions, incurred in connection with the Credit Agreement. In addition, because the Company's entry into the Credit Agreement was considered a partial extinguishment of the indebtedness under its previously outstanding credit agreement, the Company recognized a loss on extinguishment of debt of $0.4 million during the first quarter 2017.

16


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


3.875% Convertible Senior Subordinated Notes
Exchange Transactions
On January 5, 2017, pursuant to separate, privately negotiated agreements between the Company and certain holders (the "Holders") of its 3.875% Convertible Senior Subordinated Notes due 2017 (the "Convertible Notes"), the Company paid cash and common stock (the "Exchange Consideration") to the Holders in exchange for $91.7 million aggregate principal amount of the Convertible Notes (the "Exchange Transactions"). The Exchange Consideration paid to each of the Holders per $1,000 principal amount of Convertible Notes was equal to: (i) $1,000 in cash, (ii) a number of shares of the Company's common stock equal to the amount of the conversion value of the Convertible Notes in excess of the $1,000 principal amount (the "Conversion Shares"), calculated on the basis of the average daily volume weighted average price per share of Company common stock over a specified period (the "Average Daily VWAP"), (iii) an inducement payment in additional shares of common stock (the "Inducement Shares") calculated based on the Average Daily VWAP; and (iv) cash in an amount equal to accrued and unpaid interest to, but not including, the closing date. As a result of the Exchange Transactions, the Company paid the Holders aggregate cash consideration of approximately $93.2 million (which includes approximately $1.5 million in accrued but previously unpaid interest) and issued and delivered to the Holders approximately 0.93 million shares of Company common stock (including both Conversion Shares and Inducement Shares). The Company funded the $93.2 million cash payment constituting part of the Exchange Consideration through borrowings under its revolving credit facility. As a result of the Exchange Transactions, the Company recognized a loss on extinguishment of debt of $5.2 million during the first quarter 2017.
In connection with its entry into the Exchange Transactions, the Company also entered into bond hedge unwind agreements (the "Hedge Unwind Agreements") and warrant unwind agreements (the "Warrant Unwind Agreements") with the dealer counterparties to the convertible note hedge transactions and warrant transactions that were effected at the time of the initial issuance of the Convertible Notes. Under the Hedge Unwind Agreements, the number of then-outstanding call options issued to the Company under the Convertible Note hedge transactions (the "Call Options") was reduced to reflect proportionately the reduction in the outstanding principal amount of the Convertible Notes following the Exchange Transactions. Under the Warrant Unwind Agreements, the number of warrants then held by the dealer counterparties also was reduced. On a net basis, after giving effect to the Hedge Unwind Agreements and Warrant Unwind Agreements, the Company received 0.12 million shares of Company common stock from the dealer counterparties.
Settlement and Conversions Upon Maturity
The Convertible Notes matured on August 1, 2017 (the "Maturity Date"). On the Maturity Date, the Company repaid the remaining $44.3 million in aggregate principal amount of the Convertible Notes outstanding, together with unpaid interest due and owing on the Convertible Notes (the “Cash Payment”). In connection with the maturity of the Convertible Notes, $44.2 million in aggregate principal amount of the Convertible Notes were tendered to the Company for conversion (the "Converted Notes"). On the Maturity Date, in addition to the Cash Payment, the Company delivered to the holders of the Converted Notes, in the aggregate, 0.5 million shares of Company common stock.
In connection with the conversions described above, the Company exercised the outstanding Call Options, and the counterparties to the Convertible Note hedge transactions delivered to the Company 0.5 million shares of Company common stock.


17


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Fair Value of Long-Term Borrowings
The following table provides information regarding the fair value of the Company’s debt as of July 2, 2017 and December 31, 2016, categorized by the level of inputs within the fair value hierarchy used to measure fair value:
 
July 2, 2017
 
December 31, 2016
 
(Dollars in thousands)
Level 1
$
149,676

 
$
344,765

Level 2
1,983,816

 
929,362

Total
$
2,133,492

 
$
1,274,127

To determine the fair value of the debt categorized as Level 2 in the table above, 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. See Note 10, “Fair value measurement,” to the Company’s consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016 for further information regarding the fair value hierarchy.
Note 8 — Financial instruments
Foreign Currency Forward Contracts
The Company uses derivative instruments for risk management purposes. Foreign currency forward contracts designated as cash flow hedges are used to manage exposure related to foreign currency transactions. Foreign currency forward contracts not designated as hedges for accounting purposes are used to manage near term foreign currency denominated monetary assets and liabilities. For the three and six months ended July 2, 2017, the Company recognized a loss related to non-designated foreign currency forward contracts of $2.3 million and $3.1 million, respectively. For the three and six months ended June 26, 2016, the Company recognized a loss related to non-designated foreign currency forward contracts of $1.3 million and $1.6 million, respectively.
The following table presents the locations in the condensed consolidated balance sheet and fair value of derivative financial instruments as of July 2, 2017 and December 31, 2016:
 
July 2, 2017
 
December 31, 2016
 
Fair Value
 
(Dollars in thousands)
Asset derivatives:
 
 
 
Designated foreign currency forward contracts
$
2,590

 
$
667

Non-designated foreign currency forward contracts
290

 
490

Prepaid expenses and other current assets
$
2,880

 
$
1,157

Total asset derivatives
$
2,880

 
$
1,157

Liability derivatives:
 
 
 
Designated foreign currency forward contracts
$
323

 
$
2,139

Non-designated foreign currency forward contracts
166

 
118

Other current liabilities
$
489

 
$
2,257

Total liability derivatives
$
489

 
$
2,257

The total notional amount for all open foreign currency forward contracts designated as cash flow hedges as of July 2, 2017 and December 31, 2016 was $73.6 million and $101.8 million, respectively. The total notional amount for all open non-designated foreign currency forward contracts as of July 2, 2017 and December 31, 2016 was $92.2 million and $73.4 million, respectively. All open foreign currency forward contracts as of July 2, 2017 have durations of twelve months or less.
There was no ineffectiveness related to the Company’s cash flow hedges during the three and six months ended July 2, 2017 and June 26, 2016.
Concentration of Credit Risk

18


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Concentrations of credit risk with respect to trade accounts receivable are generally limited due to the Company’s large number of customers and their diversity across many geographic areas. A portion of the Company’s trade accounts receivable outside the United States, however, include sales to government-owned or supported healthcare systems in several countries, which are subject to payment delays. Payment is dependent upon the creditworthiness of those countries and the financial stability of their economies. Certain of the Company’s customers, particularly in Greece, Italy, Spain and Portugal, have extended or delayed payments for products and services already provided, raising collectability concerns regarding the Company’s accounts receivable from these customers. As a result, the Company continues to closely monitor the allowance for doubtful accounts with respect to these customers. The following table provides information regarding the Company's allowance for doubtful accounts, the aggregate net current and long-term trade accounts receivable related to customers in Greece, Italy, Spain and Portugal and the percentage of the Company’s total net current and long-term trade accounts receivable represented by these customers' trade accounts receivable at July 2, 2017 and December 31, 2016:

July 2, 2017

December 31, 2016

(Dollars in thousands)
Allowance for doubtful accounts(1)
$
9,813

 
$
8,630

Current and long-term trade accounts receivable in Greece, Italy, Spain and Portugal (2)
$
51,896


$
51,098

Percentage of total net current and long-term trade accounts receivable - Greece, Italy, Spain and Portugal
17.5
%

19.3
%
(1)
The current portion of the allowance for doubtful accounts was $2.7 million and $2.0 million as of July 2, 2017 and December 31, 2016, respectively, and was recognized in accounts receivable, net.
(2)
The long-term portion of trade accounts receivable, net from customers in Greece, Italy, Spain and Portugal at July 2, 2017 and December 31, 2016 was $3.0 million and $2.7 million, respectively In January 2017, the Company sold $16.1 million of receivables outstanding with respect to publicly funded hospitals in Italy for $16.0 million.
For the six months ended July 2, 2017 and June 26, 2016, net revenues from customers in Greece, Italy, Spain and Portugal were $64.5 million and $63.7 million, respectively.
Note 9 — Fair value measurement
For a description of the fair value hierarchy, see Note 10 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2016.
The following tables provide information regarding the Company's financial assets and liabilities that are measured at fair value on a recurring basis as of July 2, 2017 and December 31, 2016:
 
Total carrying
value at
July 2, 2017
 
Quoted prices in active
markets (Level 1)
 
Significant other
observable
Inputs (Level 2)
 
Significant
unobservable
Inputs (Level 3)
 
(Dollars in thousands)
Investments in marketable securities
$
8,252

 
$
8,252

 
$

 
$

Derivative assets
2,880

 

 
2,880

 

Derivative liabilities
489

 

 
489

 

Contingent consideration liabilities (1)
6,712

 

 

 
6,712

 
Total carrying
value at
December 31, 2016
 
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
$
7,660

 
$
7,660

 
$

 
$

Derivative assets
1,157

 

 
1,157

 

Derivative liabilities
2,257

 

 
2,257

 

Contingent consideration liabilities (1)
7,102

 

 

 
7,102


19


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


(1)
As of July 2, 2017 and December 31, 2016, (a) $0.6 million of contingent consideration liabilities were recognized in the current portion of contingent consideration, and (b) $6.1 million and $6.5 million of contingent consideration liabilities, respectively, were recognized in other liabilities in the condensed consolidated balance sheet.
There were no transfers of financial assets or liabilities reported at fair value among Level 1, Level 2 or Level 3 within the fair value hierarchy during the six months ended July 2, 2017.
The following table provides information regarding changes, during the six months ended July 2, 2017, in Level 3 financial liabilities related to contingent consideration, which are described below in this Note 9 under "Valuation Techniques":
 
Contingent consideration
 
2017
 
(Dollars in thousands)
Balance - December 31, 2016
$
7,102

Payment
(153
)
Revaluations
(237
)
Balance - July 2, 2017
$
6,712


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 as of the measurement date, 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 determines the fair value of the liabilities for contingent consideration based on discounted cash flow analysis. This fair value measurement is based on significant inputs unobservable in the market, primarily estimated sales royalties and the discount rate and, therefore, constitutes a Level 3 measurement within the fair value hierarchy.
Note 10 — Shareholders’ equity
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in the same manner except that the weighted average number of shares is increased to include dilutive securities. The following table provides a reconciliation of basic to diluted weighted average number of common shares outstanding:
 
Three Months Ended
 
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
(Shares in thousands)
Basic
44,996

 
43,549

 
44,945

 
42,598

Dilutive effect of share-based awards
866

 
566

 
843

 
543

Dilutive effect of 3.875% Convertible Notes and warrants (1)
956

 
3,131

 
928

 
4,873

Diluted
46,818

 
47,246

 
46,716

 
48,014

(1)
The reduction in the dilutive effect of the Convertible Notes and warrants during the three and six months ended July 2, 2017 as compared to three and six months ended June 26, 2016 is due principally to the Company’s repurchase of Convertible Notes and conversions by holders of the Convertible Notes during and subsequent to the three month period ended June 26, 2016.

20


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


The weighted average number of shares that were antidilutive and therefore excluded from the calculation of earnings per share were 0.7 million and 0.6 million for the three and six months ended July 2, 2017, respectively, and 5.0 million and 5.1 million for the three and six months ended June 26, 2016, respectively.
In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge and warrant agreements. The convertible note hedge, consisting of call options held by the Company, economically reduces the dilutive impact of the Convertible Notes. However, applicable accounting guidance requires the Company to separately address the dilutive impact of the warrants issued under the warrant agreements in computing diluted weighted average number of common shares outstanding, without giving effect to the anti-dilutive impact of the call options. The reduction in the weighted average number of diluted shares that would result from giving effect to the anti-dilutive impact of the call options would have been 0.5 million for the three and six months ended July 2, 2017, and 1.7 million and 2.6 million for the three and six months ended June 26, 2016, respectively. The treasury stock method is applied to the warrants because the average market price of the Company's common stock during the reporting periods presented exceeds the warrant exercise price of $74.65 per share, and assumes the proceeds from the exercise of the warrants are used by the Company to repurchase shares based on such average market price. Shares issuable upon exercise of the warrants that were included in the total diluted shares outstanding were 0.5 million and 0.4 million for the three and six months ended July 2, 2017, respectively, and 1.5 million and 2.2 million for the three and six months ended June 26, 2016, respectively.
The following tables provide information relating to the changes in accumulated other comprehensive loss, net of tax, for the six months ended July 2, 2017 and June 26, 2016:
 
Cash Flow Hedges
 
Pension and Other Postretirement Benefit Plans
 
Foreign Currency Translation Adjustment
 
Accumulated Other Comprehensive (Loss) Income
 
(Dollars in thousands)
Balance as of December 31, 2016
$
(2,424
)
 
$
(136,596
)
 
$
(299,697
)
 
$
(438,717
)
Other comprehensive income (loss) before reclassifications
2,684

 
(669
)
 
112,667

 
114,682

Amounts reclassified from accumulated other comprehensive income
2,477

 
2,263

 

 
4,740

Net current-period other comprehensive income
5,161

 
1,594

 
112,667

 
119,422

Balance as of July 2, 2017
$
2,737

 
$
(135,002
)
 
$
(187,030
)
 
$
(319,295
)
 
Cash Flow Hedges
 
Pension and Other Postretirement Benefit Plans
 
Foreign Currency Translation Adjustment
 
Accumulated Other Comprehensive (Loss) Income
 
(Dollars in thousands)
Balance at December 31, 2015
$
(2,491
)
 
$
(138,887
)
 
$
(229,746
)
 
$
(371,124
)
Other comprehensive (loss) before reclassifications
(1,684
)
 
375

 
11,285

 
9,976

Amounts reclassified from accumulated other comprehensive loss
2,668

 
2,109

 

 
4,777

Net current-period other comprehensive income
984

 
2,484

 
11,285

 
14,753

Balance at June 26, 2016
$
(1,507
)
 
$
(136,403
)
 
$
(218,461
)
 
$
(356,371
)
  

21


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


The following table provides information relating to the location in the statements of operations and amount of reclassifications of losses/(gains) in accumulated other comprehensive (loss) income into expense/(income), net of tax, for the three and six months ended July 2, 2017 and June 26, 2016:
 
Three Months Ended
 
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
(Dollars in thousands)
Losses on foreign exchange contracts:
 
 
 
 
 
 
 
Cost of goods sold
$
1,303

 
$
1,501

 
$
2,948

 
$
3,372

Total before tax
1,303

 
1,501

 
2,948

 
3,372

Tax benefit
(204
)
 
(363
)
 
(471
)
 
(704
)
Net of tax
$
1,099

 
$
1,138

 
$
2,477

 
$
2,668

Amortization of pension and other postretirement benefit items:
Actuarial losses (1)
$
1,727

 
$
1,620

 
$
3,453

 
$
3,242

Prior-service costs(1)
30

 
14

 
59

 
28

Total before tax
1,757

 
1,634

 
3,512

 
3,270

Tax benefit
(625
)
 
(581
)
 
(1,249
)
 
(1,161
)
Net of tax
$
1,132

 
$
1,053

 
$
2,263

 
$
2,109

 
 
 
 
 
 
 
 
Total reclassifications, net of tax
$
2,231

 
$
2,191

 
$
4,740

 
$
4,777

(1) These accumulated other comprehensive (loss) income components are included in the computation of net benefit expense for pension and other postretirement benefit plans (see Note 12 for additional information).
Mezzanine Equity
As of December 31, 2016, the Company reclassified $1.8 million from additional paid-in capital to convertible notes in the mezzanine equity section of the Company's consolidated balance sheet. The reclassified amount represents the aggregate difference between the principal amount and the carrying value of the Convertible Notes purchased by the Company pursuant to the Exchange Transactions (see "3.875% Convertible Senior Subordinated Notes - Exchange Transactions" within Note 7) under agreements that were entered into prior to December 31,2016, but not consummated until January 5, 2017. No reclassification was required as of July 2, 2017.
Note 11 — Taxes on income from continuing operations
 
Three Months Ended
 
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
Effective income tax rate
13.4%
 
11.9%
 
7.4%
 
8.8%
The effective income tax rate for the three and six months ended July 2, 2017 was 13.4% and 7.4%, respectively, and 11.9% and 8.8% for the three and six months ended June 26, 2016, respectively. The effective income tax rate for the three and six months ended July 2, 2017, as compared to the prior year periods, reflects an excess tax benefit associated with share based payments, recognized under the new FASB guidance adopted as of January 1, 2017. In addition, the effective tax rate for the six months ended July 2, 2017 reflects a tax benefit associated with costs incurred in connection with the Vascular Solutions acquisition. The effective tax rate for the three months ended June 26, 2016 reflects a tax benefit associated with the loss on extinguishment of debt. The effective tax rate for the six months ended June 26, 2016 reflects a tax benefit on the settlement of a foreign tax audit as well as the above mentioned benefit associated with the loss on extinguishment of debt.
Note 12 — Pension and other postretirement benefits
The Company has a number of defined benefit pension and postretirement plans covering eligible U.S. and non-U.S. employees. As of July 2, 2017, 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.
Net pension and other postretirement benefits expense (income) consist of the following:
 
Pension
Three Months Ended
 
Other Postretirement Benefits
Three Months Ended
 
Pension
Six Months Ended
 
Other Postretirement Benefits
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
(Dollars in thousands)
Service cost
$
720

 
$
655

 
$
75

 
$
111

 
$
1,437

 
$
1,307

 
$
149

 
$
222

Interest cost
3,789

 
3,929

 
379

 
407

 
7,574

 
7,849

 
757

 
813

Expected return on plan assets
(6,750
)
 
(6,199
)
 

 

 
(13,493
)
 
(12,397
)
 

 

Net amortization and deferral
1,691

 
1,577

 
66

 
57

 
3,381

 
3,156

 
131

 
114

Net benefits expense (income)
$
(550
)
 
$
(38
)
 
$
520

 
$
575

 
$
(1,101
)
 
$
(85
)
 
$
1,037

 
$
1,149

Note 13 — Commitments and contingent liabilities
Environmental: The Company is subject to contingencies as a result of environmental laws and regulations that in the future may require the Company to take further action to correct the effects on the environment of prior disposal 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

22


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


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 July 2, 2017, the Company has recorded $1.1 million and $5.5 million in accrued liabilities and other liabilities, respectively, relating to these matters. Considerable uncertainty exists with respect to these liabilities and, if adverse changes in circumstances occur, the potential liability may exceed the amount accrued as of July 2, 2017. 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 July 2, 2017, the Company has recorded accrued liabilities of $2.5 million in connection with such contingencies, representing its best estimate of the cost within the range of estimated possible losses that will be incurred to resolve these matters. Of the amount accrued as of July 2, 2017, $1.7 million pertains to discontinued operations.
During the first quarter 2017, Teleflex Medical Trading (Shanghai) Company, Ltd. (“Teleflex Shanghai”), one of the Company’s subsidiaries, eliminated a key distributor within its sales channel in China and undertook a distributor to direct sales conversion within that channel. On March 24, 2017, the distributor submitted an application with the Shanghai International Economy and Trade Arbitration Commission (“SHIAC”) for arbitration alleging, among other things, that Teleflex Shanghai wrongfully terminated its relationship with the distributor. Pursuant to a supplementary submission filed by the distributor with SHIAC in July 2017, the distributor is seeking to recover RMB 51.2 million ($7.5 million) in damages, and is also seeking to compel Teleflex Shanghai to repurchase Teleflex products that the distributor claims it purchased from Teleflex Shanghai at a total price of RMB 97.5 million ($14.4 million). Teleflex Shanghai intends to vigorously contest the distributor’s arbitration claim, and has filed a counterclaim seeking payment from the distributor of RMB 61.2 million ($9.0 million) in respect of outstanding trade receivables owed by the distributor to Teleflex Shanghai. At this time, the Company is unable to make an estimate of the amount of loss, if any, or range of possible loss that the Company could incur as a result of this matter.
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 filed an appeal with the Louisiana Court of Appeal, and the plaintiff filed a cross-appeal, seeking to overturn the trial court’s denial of pre-judgment interest on the punitive damages award. On June 29, 2016, the Louisiana Court of Appeal affirmed the trial court verdict in all respects. The Company and the plaintiff filed applications for a writ of certiorari (a request for review) to the Louisiana Supreme Court. On January 13, 2017, the Louisiana Supreme Court granted the Company's writ application. Following the submission of written briefs, oral arguments were held on May 1, 2017 and the parties currently are awaiting the court’s decision. As of July 2, 2017, the Company has accrued a liability representing its best estimate of 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 that is not covered by the Company's product liability insurance will not exceed $10.0 million.
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.

23


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Tax audits and examinations: The Company and its subsidiaries are routinely subject to tax examinations by various tax authorities. As of July 2, 2017, the most significant tax examinations in process are in Canada and Germany. The Company may establish reserves with respect to its uncertain tax positions, after which it adjusts its reserves to address developments with respect to these uncertain tax positions. Accordingly, developments in tax audits and examinations, including resolution of uncertain tax positions, could result in increases or decreases to the Company’s recorded tax liabilities, which could impact the Company’s financial results.
Other: The Company has various purchase commitments for materials, supplies and other items occurring in the ordinary conduct of its business. On average, such commitments are not at prices in excess of current market prices.
Note 14 — Segment information
The following tables present the Company’s segment results for the three and six months ended July 2, 2017 and June 26, 2016:
 
Three Months Ended
 
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
(Dollars in thousands)
 
(Dollars in thousands)
Revenue
 
 
 
 
 
 
 
Vascular North America
$
93,522

 
$
88,111

 
$
187,371

 
$
169,699

Anesthesia North America
49,081

 
49,194

 
97,288

 
95,151

Surgical North America
44,716

 
43,136

 
90,660

 
82,077

EMEA
131,962

 
131,705

 
262,695

 
253,800

Asia
63,988

 
63,191

 
112,941

 
112,347

OEM
45,132

 
40,298

 
88,478

 
74,275

All other
100,212

 
57,918

 
177,061

 
111,097

Consolidated net revenues
$
528,613

 
$
473,553

 
$
1,016,494

 
$
898,446

 
Three Months Ended
 
Six Months Ended
 
July 2, 2017
 
June 26, 2016
 
July 2, 2017
 
June 26, 2016
 
(Dollars in thousands)
 
(Dollars in thousands)
Operating profit
 
 
 
 
 
 
 
Vascular North America
$
25,258

 
$
21,994

 
$
50,074

 
$
41,650

Anesthesia North America
20,516

 
15,050

 
34,043

 
27,227

Surgical North America
17,287

 
12,348

 
33,667

 
25,604

EMEA
23,250

 
23,944

 
45,490

 
44,987

Asia
18,604

 
21,751

 
29,402

 
34,759

OEM
10,337

 
9,215

 
19,458

 
14,404

All other
11,267

 
7,436

 
4,966

 
13,179

Total segment operating profit (1)
126,519

 
111,738

 
217,100

 
201,810

Unallocated expenses (2)</