UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

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

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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.)
155 South Limerick Road, Limerick, Pennsylvania (Address of principal executive offices)		19468 (Zip Code)

(610) 948-5100
(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 þ No o

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 þ No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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

The registrant had 39,927,082 shares of common stock, $1.00 par value, outstanding as of July 14, 2010.

 

 

TELEFLEX INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 27, 2010

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed Consolidated Statements of Income for the three and six months ended June 27, 2010 and June 28, 2009			2
Condensed Consolidated Balance Sheets as of June 27, 2010 and December 31, 2009			3
Condensed Consolidated Statements of Cash Flows for the six months ended June 27, 2010 and June 28, 2009			4
Condensed Consolidated Statements of Changes in Equity for the six months ended June 27, 2010 and June 28, 2009			5
Notes to Condensed Consolidated Financial Statements			6
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3: Quantitative and Qualitative Disclosures About Market Risk			27
Item 4: Controls and Procedures			27
PART II — OTHER INFORMATION
Item 1: Legal Proceedings			28
Item 1A: Risk Factors			28
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 3: Defaults Upon Senior Securities			28
Item 5: Other Information			28
Item 6: Exhibits			29
SIGNATURES			30
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TELEFLEX INCORPORATED AND SUBSIDIARIES

		Three Months Ended								Six Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
		(Dollars and shares in thousands, except per share)
Net revenues		$	461,675			$	439,237			$	882,874			$	854,280
Cost of goods sold			252,874				241,185				479,724				471,897
Gross profit			208,801				198,052				403,150				382,383
Selling, general and administrative expenses			118,506				117,614				233,794				232,535
Research and development expenses			10,867				8,420				20,427				15,985
Net loss on sales of businesses and assets			—				—				—				2,597
Goodwill impairment			—				6,728				—				6,728
Restructuring and other impairment charges			75				6,166				538				8,629
Income from continuing operations before interest and taxes			79,353				59,124				148,391				115,909
Interest expense			19,585				21,999				38,619				47,396
Interest income			(176	)			(1,459	)			(394	)			(1,668	)
Income from continuing operations before taxes			59,944				38,584				110,166				70,181
Taxes on income from continuing operations			17,563				5,448				32,566				13,640
Income from continuing operations			42,381				33,136				77,600				56,541
Operating income (loss) from discontinued operations (including gain on disposal of $28,825 and $38,562 for the three and six month periods in 2010, respectively and $275,787 for the six month period in 2009)			30,476				(25,104	)			41,301				278,386
Taxes on income from discontinued operations			12,331				1,260				20,417				102,548
Income (loss) from discontinued operations			18,145				(26,364	)			20,884				175,838
Net income			60,526				6,772				98,484				232,379
Less: Net income attributable to noncontrolling interest			378				302				664				538
Income from discontinued operations attributable to noncontrolling interest			—				—				—				9,860
Net income attributable to common shareholders		$	60,148			$	6,470			$	97,820			$	221,981
Earnings per share available to common shareholders:
Basic:
Income from continuing operations		$	1.05			$	0.83			$	1.93			$	1.41
Income (loss) from discontinued operations		$	0.45			$	(0.66	)		$	0.52			$	4.18
Net income		$	1.51			$	0.16			$	2.45			$	5.59
Diluted:
Income from continuing operations		$	1.04			$	0.82			$	1.91			$	1.40
Income (loss) from discontinued operations		$	0.45			$	(0.66	)		$	0.52			$	4.16
Net income		$	1.49			$	0.16			$	2.43			$	5.56
Dividends per share		$	0.34			$	0.34			$	0.68			$	0.68
Weighted average common shares outstanding:
Basic			39,913				39,717				39,852				39,704
Diluted			40,356				39,921				40,277				39,899
Amounts attributable to common shareholders:
Income from continuing operations, net of tax		$	42,003			$	32,834			$	76,936			$	56,003
Income (loss) from discontinued operations, net of tax			18,145				(26,364	)			20,884				165,978
Net income		$	60,148			$	6,470			$	97,820			$	221,981

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

TELEFLEX INCORPORATED AND SUBSIDIARIES

		June 27,				December 31,
		2010				2009
		(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents		$	287,129			$	188,305
Accounts receivable, net			291,386				265,305
Inventories, net			337,363				360,843
Prepaid expenses and other current assets			21,277				21,872
Income taxes receivable			34,418				100,733
Deferred tax assets			55,774				58,010
Assets held for sale			8,037				8,866
Total current assets			1,035,384				1,003,934
Property, plant and equipment, net			290,761				317,499
Goodwill			1,409,197				1,459,441
Intangible assets, net			925,992				971,576
Investments in affiliates			14,007				12,089
Deferred tax assets			—				336
Other assets			68,403				74,130
Total assets		$	3,743,744			$	3,839,005
LIABILITIES AND EQUITY
Current liabilities
Current borrowings		$	41,464			$	4,008
Accounts payable			82,119				94,983
Accrued expenses			76,414				97,274
Payroll and benefit-related liabilities			66,732				70,537
Derivative liabilities			15,108				16,709
Accrued interest			21,330				22,901
Income taxes payable			11,216				30,695
Deferred tax liabilities			6,926				—
Total current liabilities			321,309				337,107
Long-term borrowings			1,128,200				1,192,491
Deferred tax liabilities			400,334				398,923
Pension and postretirement benefit liabilities			162,788				164,726
Other liabilities			149,371				160,684
Total liabilities			2,162,002				2,253,931
Commitments and contingencies
Total common shareholders’ equity			1,577,232				1,580,241
Noncontrolling interest			4,510				4,833
Total equity			1,581,742				1,585,074
Total liabilities and equity		$	3,743,744			$	3,839,005

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

TELEFLEX INCORPORATED AND SUBSIDIARIES

		Six Months Ended
		June 27, 2010				June 28, 2009
		(Dollars in thousands)
Cash Flows from Operating Activities of Continuing Operations:
Net income		$	98,484			$	232,379
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Income from discontinued operations			(20,884	)			(175,838	)
Depreciation expense			24,444				27,573
Amortization expense of intangible assets			22,261				21,525
Amortization expense of deferred financing costs			1,890				3,610
Impairment of long-lived assets			—				2,474
Impairment of goodwill			—				6,728
Stock-based compensation			4,901				4,000
Net loss on sales of businesses and assets			—				2,597
Deferred income taxes, net			23,120				27,141
Other			427				2,932
Changes in operating assets and liabilities, net of effects of acquisitions and disposals:
Accounts receivable			(56,797	)			568
Inventories			(4,392	)			(11,228	)
Prepaid expenses and other current assets			921				1,341
Accounts payable and accrued expenses			(20,169	)			(31,260	)
Income taxes receivable and payable, net			25,948				(142,297	)
Net cash provided by (used in) operating activities from continuing operations			100,154				(27,755	)
Cash Flows from Investing Activities of Continuing Operations:
Expenditures for property, plant and equipment			(15,315	)			(14,197	)
Proceeds from sales of businesses and assets, net of cash sold			74,734				300,000
Payments for businesses and intangibles acquired, net of cash acquired			(81	)			(541	)
Net cash provided by investing activities from continuing operations			59,338				285,262
Cash Flows from Financing Activities of Continuing Operations:
Proceeds from long-term borrowings			—				10,000
Reduction in long-term borrowings			(64,170	)			(249,178	)
Increase (decrease) in notes payable and current borrowings			39,700				(651	)
Proceeds from stock compensation plans			8,032				367
Payments to noncontrolling interest shareholders			(637	)			(295	)
Dividends			(27,120	)			(27,014	)
Net cash used in financing activities from continuing operations			(44,195	)			(266,771	)
Cash Flows from Discontinued Operations:
Net cash (used in) provided by operating activities			(680	)			26,126
Net cash used in investing activities			(189	)			(1,984	)
Net cash used in financing activities			—				(11,075	)
Net cash (used in) provided by discontinued operations			(869	)			13,067
Effect of exchange rate changes on cash and cash equivalents			(15,604	)			3,192
Net increase in cash and cash equivalents			98,824				6,995
Cash and cash equivalents at the beginning of the period			188,305				107,275
Cash and cash equivalents at the end of the period		$	287,129			$	114,270

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

TELEFLEX INCORPORATED AND SUBSIDIARIES

																		Accumulated
										Additional								Other				Treasury
		Common Stock								Paid in				Retained				Comprehensive				Stock								Noncontrolling				Total				Comprehensive
		Shares				Dollars				Capital				Earnings				Income				Shares				Dollars				Interest				Equity				Income
		(Dollars and shares in thousands, except per share)
Balance at December 31, 2008			41,995			$	41,995			$	268,263			$	1,182,906			$	(108,202	)			2,311			$	(138,507	)		$	39,428			$	1,285,883
Net income															221,981																10,398				232,379			$	232,379
Cash dividends ($0.68 per share)															(27,014	)																			(27,014	)
Financial instruments marked to market, net of tax of $5,690																			13,787																13,787				13,787
Cumulative translation adjustment																			727												(5	)			722				722
Pension liability adjustment, net of tax of $826																			1,524																1,524				1,524
Distributions to noncontrolling interest shareholders																															(295	)			(295	)
Disposition of noncontrolling interest																															(45,019	)			(45,019	)
Comprehensive income																																						$	248,412
Shares issued under compensation plans			10				10				3,277												(15	)			961								4,248
Deferred compensation																							(9	)			343								343
Balance at June 28, 2009			42,005			$	42,005			$	271,540			$	1,377,873			$	(92,164	)			2,287			$	(137,203	)		$	4,507			$	1,466,558
Balance at December 31, 2009			42,033			$	42,033			$	277,050			$	1,431,878			$	(34,120	)			2,278			$	(136,600	)		$	4,833			$	1,585,074
Net income															97,820																664				98,484			$	98,484
Cash dividends ($0.68 per share)															(27,120	)																			(27,120	)
Financial instruments marked to market, net of tax of $243																			469																469				469
Cumulative translation adjustment																			(89,986	)											15				(89,971	)			(89,971	)
Pension liability adjustment, net of tax of $910																			2,449																2,449				2,449
Distributions to noncontrolling interest shareholders																															(637	)			(637	)
Deconsolidation of VIE															253																(365	)			(112	)
Comprehensive income																																						$	11,431
Shares issued under compensation plans			158				158				12,269												(8	)			439								12,866
Deferred compensation																							(6	)			240								240
Balance at June 27, 2010			42,191			$	42,191			$	289,319			$	1,502,831			$	(121,188	)			2,264			$	(135,921	)		$	4,510			$	1,581,742

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

TELEFLEX INCORPORATED AND SUBSIDIARIES

Note 1 — Basis of presentation

We prepared the accompanying unaudited condensed consolidated financial statements of Teleflex Incorporated on the same basis as our annual consolidated financial statements, with the exception of changes resulting from the adoption of new accounting guidance during the first six months of 2010 as described in Note 2 below. Captions for certain financial statement line items have changed to correspond with the XBRL taxonomy; however, composition of these line items has not changed.

In the opinion of management, our financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of financial statements for interim periods in accordance with U.S. generally accepted accounting principles (GAAP) and with Rule 10-01 of SEC Regulation S-X, which sets forth the instructions for financial statements included in Form 10-Q. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

In accordance with applicable accounting standards, the accompanying condensed consolidated financial statements do not include all of the information and footnote disclosures that are required to be included in our annual consolidated financial statements. The year-end condensed balance sheet data was derived from audited financial statements, but, as permitted by Rule 10-01 of SEC Regulation S-X, does not include all disclosures required by GAAP for complete financial statements. Accordingly, our quarterly condensed financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009.

As used in this report, the terms “we,” “us,” “our,” “Teleflex” and the “Company” mean Teleflex Incorporated and its subsidiaries, unless the context indicates otherwise. The results of operations for the periods reported are not necessarily indicative of those that may be expected for a full year.

Note 2 — New accounting standards

The Company adopted the following amendments to accounting standards as of January 1, 2010, the first day of its 2010 fiscal year:

Accounting for Transfers of Financial Assets — an amendment to Transfers and Servicing: In June 2009, the Financial Accounting Standards Board (“FASB”) issued guidance to improve the information that is reported in financial statements about the transfer of financial assets and the effects of transfers of financial assets on financial position, financial performance and cash flows and a transferor’s continuing involvement, if any, with transferred financial assets. In addition, the guidance limits the circumstances in which a financial asset or a portion of a financial asset should be derecognized in the financial statements of the transferor when the transferor has not transferred the entire original financial asset. Upon the adoption of this guidance on January 1, 2010, the trade receivables under the Company’s accounts receivable securitization program (the “Securitization Program”) that were previously treated as sold and removed from the balance sheet are now included in accounts receivable, net, and the amounts outstanding under the Securitization Program are accounted for as a secured borrowing and reflected as short-term debt on the Company’s balance sheet. As of June 27, 2010 the trade receivables and secured borrowing is $39.7 million. In addition, while there has been no change in the arrangement under the Securitization Program, the adoption of this amendment impacts the cash flow statement as a reduction in cash flow from operations by approximately $39.7 million with a corresponding increase in cash flow from financing activities.

Amendment to Consolidation: In June 2009, the FASB issued guidance that requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity (which would result in the enterprise being deemed the primary beneficiary of that entity and, therefore, obligated to consolidate the variable interest entity in its financial statements); to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to revise guidance for determining whether an entity is a variable interest entity; and to require enhanced disclosures that will provide more transparent information about an enterprise’s involvement with a variable interest entity. As a result of the adoption of this guidance, the Company deconsolidated a variable interest entity, which had revenue of approximately $10 million during 2009, because the Company did not have a controlling financial interest. Refer to the Company’s condensed consolidated statements of changes in equity for the impact of the deconsolidation.

TELEFLEX INCORPORATED AND SUBSIDIARIES

Amendment to Fair Value Measurements and Disclosures: In January 2010, the FASB issued an update that amends disclosures about recurring or nonrecurring fair value measurements. The amendment requires new disclosures about transfers in and out of Level 1 and Level 2 and to provide a reconciliation of the activity in Level 3 fair value measurements presenting purchases, sales, issuances and settlements on a gross basis. In addition the amendment clarifies existing disclosures with respect to the level of disaggregation that an entity should provide for fair value measurement and it clarifies the disclosures surrounding the valuation techniques and the inputs used to measure fair value. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures related to Level 3 fair value measurement activity which is effective for fiscal years beginning after December 15, 2010. The amendment did not have an impact on our current disclosures of fair value. We will provide the additional disclosures related to Level 3 pension plan assets, if any, upon the effective date for Level 3.

The Company will adopt the following new accounting standards as of January 1, 2011, the first day of its 2011 fiscal year:

Amendment to Software: In October 2009, the FASB changed the accounting model for revenue arrangements for certain tangible products containing software components and nonsoftware components. The guidance provides direction on how to determine which software, if any, relating to the tangible product is excluded from the scope of the software revenue guidance. The amendment will be effective prospectively for fiscal years beginning on or after June 15, 2010. The Company is currently evaluating this guidance to determine the impact on the Company’s results of operations, cash flows, and financial position.

Amendment to Revenue Recognition: In October 2009, the FASB revised the criteria for multiple-deliverable revenue arrangements by establishing new guidance on how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. Additionally, the guidance requires vendors to expand their disclosures regarding multiple-deliverable revenue arrangements and will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company is currently evaluating the guidance to determine the impact on the Company’s results of operations, cash flows, and financial position.

Note 3 — Integration

Integration of Arrow

In connection with the acquisition of Arrow International, Inc. (“Arrow”) in October 2007, the Company formulated a plan related to the integration of Arrow and the Company’s Medical businesses. The integration plan focuses on the closure of Arrow corporate functions and the consolidation of manufacturing, sales, marketing and distribution functions in North America, Europe and Asia. The Company finalized its estimate of the costs to implement the plan in the fourth quarter of 2008. The Company has accrued estimates for certain costs, related primarily to personnel reductions and facility closures and the termination of certain distribution agreements, at the date of acquisition.

The following table provides information relating to changes in the accrued liability associated with the Arrow integration plan during the six months ended June 27, 2010:

		Balance at												Balance at
		December 31,												June 27,
		2009				Payments				Translation				2010
		(Dollars in thousands)
Termination benefits		$	0.4			$	—			$	(0.3	)		$	0.1
Facility closure costs			0.5				(0.1	)			(0.1	)			0.3
Contract termination costs			2.7				—				—				2.7
		$	3.6			$	(0.1	)		$	(0.4	)		$	3.1

Contract termination costs represent the termination of a European distributor agreement that is currently in litigation but is expected to be paid in 2011.

In conjunction with the plan for the integration of Arrow and the Company’s Medical businesses, the Company has taken actions that affect employees and facilities of Teleflex. This aspect of the integration plan is explained in Note 4, “Restructuring and other impairment charges.” Costs that affect employees and facilities of Teleflex are charged to earnings and included in restructuring and other impairment charges within the condensed consolidated statement of operations for the periods in which the costs are incurred.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 4 — Restructuring and other impairment charges

The amounts included in restructuring and other impairment charges in the condensed consolidated statements of income for the three and six months ended June 27, 2010 and June 28, 2009 consisted of the following:

		Three Months Ended								Six Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
		(Dollars in thousands)
2008 Commercial Segment Program		$	—			$	917			$	—			$	2,055
2007 Arrow Integration Program			75				2,775				538				4,100
Impairment charges — intangibles and fixed assets			—				2,474				—				2,474
Restructuring and other impairment charges		$	75			$	6,166			$	538			$	8,629

2008 Commercial Segment Restructuring Program

In December 2008, the Company began certain restructuring initiatives with respect to the Company’s Commercial Segment. The initiatives involved the consolidation of operations and a related reduction in workforce at certain of the Company’s facilities in North America and Europe. The Company determined to undertake these initiatives as a means to improve operating performance and to better leverage its resources due to weakness in the marine and industrial markets.

By December 31, 2009, the Company had completed the 2008 Commercial Segment restructuring program, and all costs associated with the program were fully paid during 2009. No charges have been recorded under this program in 2010.

The charges associated with the 2008 Commercial Segment restructuring program that were included in restructuring and other impairment charges in the condensed consolidated statements of income during the three and six months ended June 28, 2009 were as follows:

		Commercial
		Three Months Ended				Six Months Ended
		June 28, 2009				June 28, 2009
		(Dollars in thousands)
Termination benefits		$	789			$	1,927
Facility closure costs			128				128
		$	917			$	2,055

Termination benefits were comprised of severance-related payments for all employees terminated in connection with the 2008 Commercial Segment restructuring program.

2007 Arrow Integration Program

The charges associated with the 2007 Arrow integration program that were included in restructuring and other impairment charges for the three and six months ended June 27, 2010 and June 28, 2009, were as follows:

		Three Months Ended								Six Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
		(Dollars in thousands)
Termination benefits		$	90			$	1,467			$	320			$	2,564
Facility closure costs			161				165				586				216
Contract termination costs			282				829				87				891
Other restructuring costs			—				314				3				429
Gain on sale of assets			(458	)			—				(458	)			—
		$	75			$	2,775			$	538			$	4,100

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At June 27, 2010, the accrued liability associated with the 2007 Arrow integration program consisted of the following:

		Balance at																Balance at
		December 31,				Subsequent												June 27,
		2009				Accruals				Payments				Translation				2010
		(Dollars in thousands)
Termination benefits		$	2,183			$	320			$	(1,636	)		$	32			$	899
Facility closure costs			302				586				(870	)			(18	)			—
Contract termination costs			687				87				(2	)			(25	)			747
Other restructuring costs			23				3				(3	)			(3	)			20
		$	3,195			$	996			$	(2,511	)		$	(14	)		$	1,666

Termination benefits are comprised of severance-related payments for all employees terminated in connection with the 2007 Arrow integration program. Facility closure costs relate primarily to costs to prepare a facility for closure. Contract termination costs relate primarily to the termination of a European distributor agreement and leases in conjunction with the consolidation of facilities. The gain on sale of assets included in restructuring and other impairment charges reflects the sale of one of the properties with a zero net book value associated with the 2007 Arrow integration program in its Medical Segment.

As of June 27, 2010, the Company expects to incur the following restructuring expenses associated with the 2007 Arrow integration program in its Medical Segment for the last six months of 2010:

		(Dollars in millions)
Termination benefits		$	0.5 – 1.0
Facility closure costs			0.3 – 0.5
Contract termination costs			0.1 – 0.2
		$	0.9 – 1.7

Impairment Charges

During the second quarter of 2009, the Company recorded a $2.3 million impairment charge with respect to an intangible asset in the Marine reporting unit. See Note 5, “Impairment of goodwill and intangible assets.”

Note 5 — Impairment of goodwill and intangible assets

The Company performed an interim review of goodwill and intangible assets in the Marine and Cargo Container reporting units during the second quarter of 2009 and determined that $6.7 million of goodwill in the Cargo Container operations and $2.3 million of indefinite lived tradenames in the Marine reporting unit were impaired. The Company performed this interim review as a result of the difficult market conditions in which these reporting units were operating and the significant deterioration in the operating performance of these reporting units, which accelerated in the second quarter of 2009.

In performing the goodwill impairment test, the Company estimated the fair values of these two reporting units by a combination of (i) estimation of the discounted cash flows of each of the reporting units based on projected earnings in the future (the income approach) and (ii) analysis of sales of similar assets in actual transactions (the market approach). Using this methodology, the Company determined that the entire $6.7 million of goodwill in the Cargo Container reporting unit was impaired, but that goodwill in the Marine reporting unit was not impaired. In performing the impairment test for the indefinite lived intangibles, the Company estimated the direct cash flows associated with the applicable intangible assets using a “relief from royalty” methodology associated with revenues projected to be generated from these intangibles. Under this methodology, the owner of an intangible asset must determine the arms length royalty that likely would have been charged if the owner had to license that asset from a third party. This analysis indicated that certain tradenames in the Marine reporting unit were impaired by $2.3 million.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 6 — Inventories

Inventories consisted of the following:

		June 27,				December 31,
		2010				2009
		(Dollars in thousands)
Raw materials		$	136,631			$	150,508
Work-in-process			57,788				53,847
Finished goods			176,362				191,747
			370,781				396,102
Less: Inventory reserve			(33,418	)			(35,259	)
Inventories		$	337,363			$	360,843

Note 7—Goodwill and other intangible assets

Changes in the carrying amount of goodwill, by operating segment, for the six months ended June 27, 2010 are as follows:

		Medical				Commercial				Total
		(Dollars in thousands)
Balance as of December 31, 2009		$	1,444,354			$	15,087			$	1,459,441
Goodwill related to dispositions			(9,224	)			(7,597	)			(16,821	)
Translation adjustment			(33,423	)			—				(33,423	)
Balance as of June 27, 2010		$	1,401,707			$	7,490			$	1,409,197

As of June 27, 2010, there have been no goodwill impairment losses recorded against these carrying values for goodwill.

Intangible assets consisted of the following:

		Gross Carrying Amount								Accumulated Amortization
		June 27, 2010				December 31, 2009				June 27, 2010				December 31, 2009
		(Dollars in thousands)
Customer lists		$	546,227			$	559,207			$	84,616			$	74,047
Intellectual property			204,755				208,247				67,509				59,824
Distribution rights			21,010				22,094				17,077				17,066
Trade names			326,304				336,673				3,102				3,708
		$	1,098,296			$	1,126,221			$	172,304			$	154,645

Amortization expense related to intangible assets was approximately $11.3 million and $10.7 million for the three months ended and $22.3 million and $21.5 million for the six months ended June 27, 2010 and June 28, 2009, respectively. Estimated annual amortization expense for each of the five succeeding years is as follows (dollars in thousands):

2010		$	44,100
2011			43,900
2012			43,600
2013			42,700
2014			39,800

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 8 — Financial instruments

The Company uses derivative instruments for risk management purposes. Forward rate contracts are used to manage foreign currency transaction exposure and interest rate swaps are used to reduce exposure to interest rate changes. 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 are reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. See Note 9, “Fair value measurement” for additional information.

The location and fair values of derivative instruments designated as hedging instruments in the condensed consolidated balance sheet are as follows:

		June 27, 2010				December 31, 2009
		Fair Value				Fair Value
		(Dollars in thousands)
Asset derivatives:
Foreign exchange contracts:
Other assets — current		$	2,462			$	1,356
Total asset derivatives		$	2,462			$	1,356
Liability derivatives:
Interest rate contracts:
Derivative liabilities — current		$	14,318			$	15,849
Other liabilities — noncurrent			14,069				12,258
Foreign exchange contracts:
Derivative liabilities — current			790				860
Total liability derivatives		$	29,177			$	28,967

The location and amount of the gains and losses for derivatives in cash flow hedging relationships that were reported in other comprehensive income (“OCI”), accumulated other comprehensive income (“AOCI”) and the condensed consolidated statement of income for the three and six months ended June 27, 2010 and June 28, 2009 are as follows:

		After Tax Gain/(Loss)
		Recognized in OCI
		Three Months Ended								Six Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
		(Dollars in thousands)
Interest rate		$	161			$	6,164			$	(151	)		$	9,262
Foreign exchange			(527	)			2,842				620				4,525
Total		$	(366	)		$	9,006			$	469			$	13,787

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Pre-Tax (Gain)/Loss Reclassified
		from AOCI into Income
		Three Months Ended								Six Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
		(Dollars in thousands)
Interest rate contracts:
Interest expense		$	4,584			$	4,754			$	9,164			$	9,111
Foreign exchange contracts:
Net revenues			33				(25	)			22				774
Cost of goods sold			(1,120	)			506				(1,855	)			2,122
Selling, general and administrative expenses			46				—				46				—
Income from discontinued operations			—				(134	)			—				203
Total		$	3,543			$	5,101			$	7,377			$	12,210

For the three and six months ended June 27, 2010 and June 28, 2009, there was no ineffectiveness related to the Company’s derivatives.

The following table provides financial instruments activity included as part of accumulated other comprehensive income, net of tax:

		2010				2009
		(Dollars in thousands)
Balance at beginning of year		$	(17,343	)		$	(33,331	)
Dispositions			—				467
Additions and revaluations			(3,897	)			4,228
Clearance of hedge results to income			4,343				8,036
Tax rate adjustment			23				1,056
Balance at end of period		$	(16,874	)		$	(19,544	)

Note 9 — Fair value measurement

The following tables provide the financial assets and liabilities carried at fair value measured on a recurring basis as of June 27, 2010 and June 28, 2009:

		Total carrying				Quoted prices in				Significant other				Significant
		value at June 27,				active markets				observable inputs				unobservable inputs
		2010				(Level 1)				(Level 2)				(Level 3)
		(Dollars in thousands)
Cash and cash equivalents		$	60,000			$	60,000			$	—			$	—
Deferred compensation assets		$	3,079			$	3,079			$	—			$	—
Derivative assets		$	2,462			$	—			$	2,462			$	—
Derivative liabilities		$	29,177			$	—			$	29,177			$	—

		Total carrying				Quoted prices in				Significant other				Significant
		value at June 28,				active markets				observable inputs				unobservable inputs
		2009				(Level 1)				(Level 2)				(Level 3)
		(Dollars in thousands)
Deferred compensation assets		$	2,595			$	2,595			$	—			$	—
Derivative assets		$	1,764			$	—			$	1,764			$	—
Derivative liabilities		$	33,972			$	—			$	33,972			$	—

The carrying amount reported in the condensed consolidated balance sheet as of June 27, 2010 for long-term debt is $1,128.2 million. Using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality, and risk profile, the Company has determined the fair value of its debt to be $1,131.2 million at June 27, 2010. The Company’s implied credit rating is a factor in determining the market interest yield curve.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Valuation Techniques

The Company’s cash and cash equivalents valued based upon Level 1 inputs are comprised of overnight investments in money market funds. The funds invest in obligations of the U.S. Treasury, including Treasury bills, bonds and notes. The funds seek to maintain a net asset value of $1.00 per share.

The Company’s financial assets valued based upon Level 1 inputs are comprised of investments in marketable securities held in trusts which are used to pay benefits under certain deferred compensation plan benefits. Under these deferred compensation plans, participants designate investment options to serve as the basis for measurement of the notional value of their accounts. The investment assets of the trust are valued using quoted market prices multiplied by the number of shares held in the trust.

The Company’s financial assets valued based upon Level 2 inputs are comprised of foreign currency forward contracts. The Company’s financial liabilities valued based upon Level 2 inputs are comprised of an interest rate swap contract and foreign currency forward contracts. The Company has taken into account the creditworthiness of the counterparties in measuring fair value. The Company uses forward rate contracts to manage currency transaction exposure and interest rate swaps to manage exposure to interest rate changes. The fair value of the interest rate swap contract is developed from market-based inputs under the income approach using cash flows discounted at relevant market interest rates. The fair value of the foreign currency forward exchange contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. See Note 8, “Financial instruments” for additional information.

Note 10 —Changes in shareholders’ equity

In 2007, the Company’s Board of Directors authorized the repurchase of up to $300 million of outstanding Company common stock. Repurchases of Company stock under the Board authorization may be made from time to time in the open market and may include privately-negotiated transactions as market conditions warrant and subject to regulatory considerations. The stock repurchase program has no expiration date and the Company’s ability to execute on the program will depend on, among other factors, cash requirements for acquisitions, cash generation from operations, debt repayment obligations, market conditions and regulatory requirements. In addition, the Company’s senior loan agreements limit the aggregate amount of share repurchases and other restricted payments the Company may make to $75 million per year in the event the Company’s consolidated leverage ratio exceeds 3.5 to 1. Accordingly, these provisions may limit the Company’s ability to repurchase shares under this Board authorization. Through June 27, 2010, no shares have been purchased under this Board authorization.

The following table provides a reconciliation of basic to diluted weighted average shares outstanding:

		Three Months Ended								Six Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
		(Shares in thousands)
Basic			39,913				39,717				39,852				39,704
Dilutive shares assumed issued			443				204				425				195
Diluted			40,356				39,921				40,277				39,899

Weighted average stock options that were anti-dilutive and therefore not included in the calculation of earnings per share were approximately 1,004 thousand and 871 thousand for the three and six month periods ended June 27, 2010 and approximately 2,015 thousand and 1,749 thousand for the three and six month periods ended June 28, 2009, respectively.

Note 11 — Stock compensation plans

The Company has two stock-based compensation plans under which equity-based awards may be made. The Company’s 2000 Stock Compensation Plan (the “2000 plan”) provides for the granting of incentive and non-qualified stock options and restricted stock awards to directors, officers and key employees. Under the 2000 plan, the Company is authorized to issue up to 4 million shares of common stock, but no more than 800,000 of those shares may be issued as restricted stock. Options granted under the 2000 plan have an exercise price equal to the average of the high and low sales prices of the Company’s common stock on the date of the grant, rounded to the nearest $0.25. Generally, options granted under the 2000 plan are exercisable three to five years after the date of the grant and expire no more than ten years after the grant date. Restricted stock awards generally vest in one to three years. During the first six months of 2010, the Company granted restricted stock awards representing 161,301 shares of common stock under the 2000 plan. The unrecognized compensation expense for these awards as of the grant date was $9.2 million, which will be recognized over the vesting period of the awards.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s 2008 Stock Incentive Plan (the “2008 plan”) provides for the granting of various types of equity-based awards to directors, officers and key employees. These awards include incentive and non-qualified stock options, stock appreciation rights, stock awards and other stock-based awards. Under the 2008 plan, the Company is authorized to issue up to 2.5 million shares of common stock, but grants of awards other than stock options and stock appreciation rights may not exceed 875,000 shares. Options granted under the 2008 plan have an exercise price equal to the closing price of the Company’s common stock on the date of grant. Generally, options granted under the 2008 plan are exercisable three years after the date of the grant and expire no more than ten years after the grant date. During the first six months of 2010, the Company granted incentive and non-qualified options to purchase 590,042 shares of common stock under the 2008 plan. The unrecognized compensation expense for these awards as of the grant date was $7.3 million, which will be recognized over the vesting period of the awards.

Note 12 — Pension and other postretirement benefits

The Company has a number of defined benefit pension and postretirement plans covering eligible U.S. and non-U.S. employees. The defined benefit pension plans are noncontributory. The benefits under these plans are based primarily on years of service and employees’ pay near retirement. The Company’s funding policy for U.S. plans is to contribute annually, at a minimum, amounts required by applicable laws and regulations. Obligations under non-U.S. plans are systematically provided for by depositing funds with trustees or by book reserves.

In 2009, a number of qualifying individuals accepted the Company’s offer of an early retirement program. As a result, the Company recognized special termination benefits of $402 thousand in pension expense and $395 thousand in postretirement expense in the second quarter of 2009.

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

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

		Pension								Other Benefits								Pension								Other Benefits
		Three Months Ended								Three Months Ended								Six Months Ended								Six Months Ended
		June 27,				June 28,				June 27,				June 28,				June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009				2010				2009				2010				2009
		(Dollars in Thousands)
Service cost		$	715			$	709			$	235			$	284			$	1,435			$	1,417			$	470			$	567
Interest cost			4,648				4,527				769				900				9,326				9,029				1,539				1,800
Expected return on plan assets			(4,356	)			(3,694	)			—				—				(8,722	)			(7,377	)			—				—
Net amortization and deferral			1,073				1,243				215				220				2,158				2,478				429				441
Settlement gain			—				—				—				—				(35	)			—				—				—
Special termination costs			—				402				—				395				—				402				—				395
Net benefit cost		$	2,080			$	3,187			$	1,219			$	1,799			$	4,162			$	5,949			$	2,438			$	3,203

Note 13 — Commitments and contingent liabilities

Product warranty liability: The Company warrants to the original purchasers of certain of its products that it will, at its option, repair or replace such products, without charge, if they fail due to a manufacturing defect. Warranty periods vary by product. The Company has recourse provisions for certain products that would enable recovery from third parties for amounts paid under the warranty. The Company accrues for product warranties when, based on available information, it is probable that customers will make claims under warranties relating to products that have been sold, and a reasonable estimate of the costs (based on historical claims experience relative to sales) can be made. The following table provides information regarding changes in the Company’s product warranty liability accruals for the six months ended June 27, 2010 (dollars in thousands):

Balance — December 31, 2009		$	12,085
Accruals for warranties issued in 2010			1,755
Settlements (cash and in kind)			(2,862	)
Accruals related to pre-existing warranties			106
Effect of translation			(602	)
Balance — June 27, 2010		$	10,482

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Operating leases: The Company uses various leased facilities and equipment in its operations. The terms for these leased assets vary depending on the lease agreement. In connection with these operating leases, the Company had residual value guarantees in the amount of approximately $8.6 million at June 27, 2010. The Company’s future payments under the operating leases cannot exceed the minimum rent obligation plus the residual value guarantee amount. The residual value guarantee amounts are based upon the unamortized lease values of the assets under lease, and are payable by the Company if the Company declines to renew the leases or to exercise its purchase option with respect to the leased assets. At June 27, 2010, the Company had no liabilities recorded for these obligations. Any residual value guarantee amounts paid to the lessor may be recovered by the Company from the sale of the assets to a third party.

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 (“CERCLA”), often referred to as Superfund, the U.S. Resource Conservation and Recovery Act (“RCRA”) 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, diverse regulatory agencies and enforcement policies, as well as the presence or absence of other potentially responsible parties. At June 27, 2010, the Company’s condensed consolidated balance sheet included an accrued liability of approximately $8.3 million relating to these matters. Considerable uncertainty exists with respect to these costs and, if adverse changes in circumstances occur, potential liability may exceed the amount accrued as of June 27, 2010. The time frame over which the accrued amounts may be paid out, based on past history, is estimated to be 15-20 years.

Regulatory matters: On October 11, 2007, the Company’s subsidiary, Arrow International, Inc. (“Arrow”), received a corporate warning letter from the U.S. Food and Drug Administration (FDA). The letter expressed concerns with Arrow’s quality systems, including complaint handling, corrective and preventive action, process and design validation, inspection and training procedures. It also advised that Arrow’s corporate-wide program to evaluate, correct and prevent quality system issues had been deficient.

The Company developed a comprehensive plan to correct these previously-identified regulatory issues and further improve overall quality systems and has substantially implemented the measures outlined in the plan. From the end of 2009 to the beginning of 2010, the FDA reinspected the Arrow facilities covered by the corporate warning letter and Arrow has responded to the observations issued by the FDA as a result of those inspections. In the third quarter of 2010, Arrow began submitting requests for certificates to foreign governments, or CFGs, to the FDA for review, and recently received approval on one of its requests. The Company believes that the FDA’s approval of the CFG is a clear indication that Arrow has substantially corrected the quality system issues identified in the corporate warning letter. The Company has now submitted all of its currently eligible CFG requests to the FDA for review and currently anticipates receiving the FDA’s approval with respect to most of these requests in the third quarter of 2010.

While the Company continues to believe it has substantially remediated the issues raised in the corporate warning letter through the corrective actions taken to date, the corporate warning letter remains in place pending final resolution of all outstanding issues, which the Company is actively working with the FDA to resolve. If the Company’s remedial actions are not satisfactory to the FDA, the Company may have to devote additional financial and human resources to its efforts, and the FDA may take further regulatory actions against the Company.

Litigation: The Company is a party to various lawsuits and claims arising in the normal course of business. These lawsuits and claims include actions involving product liability, intellectual property, employment and environmental matters. Based on information currently available, advice of counsel, established reserves and other resources, the Company does not believe that any such actions are 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 expense in the period incurred.

TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Tax audits and examinations: In an April 12, 2010 notice to our subsidiary Arrow International CR, the taxing authority in the Czech Republic has questioned the transfer pricing Arrow International CR utilized for certain products sold during 2006. The notice requests additional information and states that if the tax authority is not satisfied with our response, it intends to challenge certain tax incentives received by Arrow International CR for the 2001-2006 years in their entirety. We have consulted with external advisors and believe the transfer pricing policy of Arrow International CR met the essential requirements of the tax incentive program. If the taxing authority were to ultimately prevail in disallowing the entire tax incentive benefit, the cost, including penalties and interest, would not have a material adverse effect on the Company. The tax incentive program expired in 2006 in accordance with its intended term, therefore any loss of the tax incentives benefit would not have an impact on current or future operations.

In addition, the Company and its subsidiaries are routinely subject to income tax examinations by various taxing authorities. As of June 27, 2010, the most significant tax examinations in process are in the United States, Czech Republic, Germany, Italy and France. The timing of completion and ultimate outcome of such examinations is uncertain. As a result of the uncertain outcome of these ongoing examinations, future examinations, or the expiration of statutes of limitation for certain jurisdictions, it is reasonably possible that the related unrecognized tax benefits for tax positions taken could materially change from those recorded as liabilities at June 27, 2010. Due to the potential for resolution of certain foreign and U.S. examinations, and the expiration of various statutes of limitation, it is reasonably possible that the Company’s unrecognized tax benefits may change within the next twelve months by a range of zero to $23 million.

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.

Note 14 — Business segment information

Information about continuing operations by business segment is as follows:

		Three Months Ended								Six Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
		(Dollars in thousands)
Segment data:
Medical		$	358,427			$	358,278			$	701,964			$	693,063
Aerospace			47,995				36,961				84,868				80,690
Commercial			55,253				43,998				96,042				80,527
Segment net revenues		$	461,675			$	439,237			$	882,874			$	854,280
Medical		$	73,467			$	77,792			$	146,965			$	147,204
Aerospace			7,561				1,020				9,305				4,057
Commercial			7,487				3,286				9,461				3,636
Segment operating profit			88,515				82,098				165,731				154,897
Less: Corporate expenses			9,465				10,382				17,466				21,572
Net loss on sales of businesses and assets			—				—				—				2,597
Goodwill impairment			—				6,728				—				6,728
Restructuring and other impairment charges			75				6,166				538				8,629
Noncontrolling interest			(378	)			(302	)			(664	)			(538	)
Income from continuing operations before interest and taxes		$	79,353			$	59,124			$	148,391			$	115,909