UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
¨ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2013
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.) | |
155 South Limerick Road, Limerick, Pennsylvania | 19468 | |
(Address of principal executive offices) | (Zip Code) |
(610) 948-5100
(Registrants 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, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The registrant had 41,125,594 shares of common stock, $1.00 par value, outstanding as of July 19, 2013.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2013
TABLE OF CONTENTS
Page | ||||||
PART I FINANCIAL INFORMATION | ||||||
Item 1: | ||||||
2 | ||||||
3 | ||||||
Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012 |
4 | |||||
5 | ||||||
6 | ||||||
7 | ||||||
Item 2: | Managements Discussion and Analysis of Financial Condition and Results of Operations |
37 | ||||
Item 3: | 47 | |||||
Item 4: | 47 | |||||
PART II OTHER INFORMATION | ||||||
Item 1: | 48 | |||||
Item 1A: | 48 | |||||
Item 2: | 48 | |||||
Item 3: | 48 | |||||
Item 5: | 48 | |||||
Item 6: | 49 | |||||
SIGNATURES | 50 |
1
PART I FINANCIAL INFORMATION
Item 1. | Financial Statements |
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2013 |
July 1, 2012 |
June 30, 2013 |
July 1, 2012 |
|||||||||||||
(Dollars and shares in thousands, except per share) | ||||||||||||||||
Net revenues |
$ | 420,059 | $ | 383,332 | $ | 831,936 | $ | 763,899 | ||||||||
Cost of goods sold |
210,569 | 198,968 | 421,926 | 395,421 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
209,490 | 184,364 | 410,010 | 368,478 | ||||||||||||
Selling, general and administrative expenses |
116,253 | 105,951 | 243,203 | 218,087 | ||||||||||||
Research and development expenses |
16,524 | 13,702 | 31,531 | 25,255 | ||||||||||||
Goodwill impairment |
| | | 332,128 | ||||||||||||
Restructuring and other impairment charges |
12,962 | 321 | 22,121 | (1,004 | ) | |||||||||||
Gain on sales of businesses and assets |
| (332 | ) | | (332 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations before interest and taxes |
63,751 | 64,722 | 113,155 | (205,656 | ) | |||||||||||
Interest expense |
14,425 | 18,240 | 28,618 | 36,451 | ||||||||||||
Interest income |
(157 | ) | (506 | ) | (314 | ) | (984 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations before taxes |
49,483 | 46,988 | 84,851 | (241,123 | ) | |||||||||||
Taxes (benefit) on income (loss) from continuing operations |
6,082 | (278 | ) | 13,749 | (4,276 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations |
43,401 | 47,266 | 71,102 | (236,847 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating loss from discontinued operations (including gain on disposal of $2,264 for the three and six month periods in 2012) |
(1,026 | ) | (8,049 | ) | (1,784 | ) | (7,120 | ) | ||||||||
Tax benefit on loss from discontinued operations |
(260 | ) | (3,682 | ) | (556 | ) | (3,358 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss from discontinued operations |
(766 | ) | (4,367 | ) | (1,228 | ) | (3,762 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
42,635 | 42,899 | 69,874 | (240,609 | ) | |||||||||||
Less: Income from continuing operations attributable to noncontrolling interest |
194 | 286 | 395 | 513 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to common shareholders |
$ | 42,441 | $ | 42,613 | $ | 69,479 | $ | (241,122 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per share available to common shareholders: |
||||||||||||||||
Basic: |
||||||||||||||||
Income (loss) from continuing operations |
$ | 1.05 | $ | 1.15 | $ | 1.72 | $ | (5.82 | ) | |||||||
Loss from discontinued operations |
(0.02 | ) | (0.11 | ) | (0.03 | ) | (0.09 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
$ | 1.03 | $ | 1.04 | $ | 1.69 | $ | (5.91 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted: |
||||||||||||||||
Income (loss) from continuing operations |
$ | 0.99 | $ | 1.14 | $ | 1.64 | $ | (5.82 | ) | |||||||
Loss from discontinued operations |
(0.01 | ) | (0.10 | ) | (0.03 | ) | (0.09 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
$ | 0.98 | $ | 1.04 | $ | 1.61 | $ | (5.91 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Dividends per common share |
$ | 0.34 | $ | 0.34 | $ | 0.68 | $ | 0.68 | ||||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
41,115 | 40,834 | 41,064 | 40,801 | ||||||||||||
Diluted |
43,429 | 41,076 | 43,238 | 40,801 | ||||||||||||
Amounts attributable to common shareholders: |
||||||||||||||||
Income (loss) from continuing operations, net of tax |
$ | 43,207 | $ | 46,980 | $ | 70,707 | $ | (237,360 | ) | |||||||
Loss from discontinued operations, net of tax |
(766 | ) | (4,367 | ) | (1,228 | ) | (3,762 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
$ | 42,441 | $ | 42,613 | $ | 69,479 | $ | (241,122 | ) | |||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
2
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2013 |
July 1, 2012 |
June 30, 2013 |
July 1, 2012 |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net income (loss) |
$ | 42,635 | $ | 42,899 | $ | 69,874 | $ | (240,609 | ) | |||||||
Other comprehensive loss, net of tax: |
||||||||||||||||
Foreign currency translation, net of tax of $4,461, $(13,397), $(1,353) and $(9,184) for the three and six month periods, respectively |
(6,100 | ) | (66,391 | ) | (32,805 | ) | (35,708 | ) | ||||||||
Pension and other postretirement benefits plans adjustment, net of tax of $519, $697, $1,023 and $1,257 for the three and six month periods, respectively |
866 | 1,358 | 1,956 | 2,336 | ||||||||||||
Derivatives qualifying as hedges, net of tax of $(111), $1,057, $(7) and $2,465 for the three and six month periods, respectively |
(192 | ) | 1,846 | (12 | ) | 4,306 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive loss, net of tax |
(5,426 | ) | (63,187 | ) | (30,861 | ) | (29,066 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) |
37,209 | (20,288 | ) | 39,013 | (269,675 | ) | ||||||||||
Less: comprehensive income attributable to noncontrolling interest |
2 | 44 | 244 | 349 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) attributable to common shareholders |
$ | 37,207 | $ | (20,332 | ) | $ | 38,769 | $ | (270,024 | ) | ||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2013 |
December 31, 2012 |
|||||||
(Dollars in thousands) | ||||||||
ASSETS | ||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 281,418 | $ | 337,039 | ||||
Accounts receivable, net |
311,881 | 297,976 | ||||||
Inventories, net |
348,608 | 323,347 | ||||||
Prepaid expenses and other current assets |
27,770 | 28,712 | ||||||
Prepaid taxes |
33,123 | 27,160 | ||||||
Deferred tax assets |
45,971 | 46,882 | ||||||
Assets held for sale |
7,935 | 7,963 | ||||||
|
|
|
|
|||||
Total current assets |
1,056,706 | 1,069,079 | ||||||
Property, plant and equipment, net |
311,464 | 297,945 | ||||||
Goodwill |
1,240,592 | 1,249,456 | ||||||
Intangible assets, net |
1,052,845 | 1,058,792 | ||||||
Investments in affiliates |
1,890 | 2,066 | ||||||
Deferred tax assets |
86 | 296 | ||||||
Other assets |
60,554 | 61,863 | ||||||
|
|
|
|
|||||
Total assets |
$ | 3,724,137 | $ | 3,739,497 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities |
||||||||
Current borrowings |
$ | 4,700 | $ | 4,700 | ||||
Accounts payable |
76,493 | 75,165 | ||||||
Accrued expenses |
78,150 | 65,064 | ||||||
Current portion of contingent consideration |
12,369 | 23,693 | ||||||
Payroll and benefit-related liabilities |
61,115 | 74,586 | ||||||
Accrued interest |
8,960 | 9,418 | ||||||
Income taxes payable |
17,917 | 15,573 | ||||||
Other current liabilities |
3,531 | 6,206 | ||||||
|
|
|
|
|||||
Total current liabilities |
263,235 | 274,405 | ||||||
Long-term borrowings |
970,825 | 965,280 | ||||||
Deferred tax liabilities |
413,546 | 419,266 | ||||||
Pension and postretirement benefit liabilities |
156,423 | 170,946 | ||||||
Noncurrent liability for uncertain tax positions |
67,152 | 68,292 | ||||||
Other liabilities |
51,429 | 59,771 | ||||||
|
|
|
|
|||||
Total liabilities |
1,922,610 | 1,957,960 | ||||||
Commitments and contingencies |
||||||||
Total common shareholders equity |
1,799,432 | 1,778,950 | ||||||
Noncontrolling interest |
2,095 | 2,587 | ||||||
|
|
|
|
|||||
Total equity |
1,801,527 | 1,781,537 | ||||||
|
|
|
|
|||||
Total liabilities and equity |
$ | 3,724,137 | $ | 3,739,497 | ||||
|
|
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended | ||||||||
June 30, 2013 |
July 1, 2012 |
|||||||
(Dollars in thousands) | ||||||||
Cash Flows from Operating Activities of Continuing Operations: |
||||||||
Net income (loss) |
$ | 69,874 | $ | (240,609 | ) | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Loss from discontinued operations |
1,228 | 3,762 | ||||||
Depreciation expense |
19,876 | 17,148 | ||||||
Amortization expense of intangible assets |
24,551 | 21,202 | ||||||
Amortization expense of deferred financing costs and debt discount |
7,533 | 7,098 | ||||||
Stock-based compensation |
5,766 | 4,003 | ||||||
In-process research and development impairment |
4,494 | | ||||||
Gain on sales of businesses and assets |
| (332 | ) | |||||
Goodwill impairment |
| 332,128 | ||||||
Deferred income taxes, net |
(2,439 | ) | (21,480 | ) | ||||
Other |
(20,260 | ) | (2,771 | ) | ||||
Changes in operating assets and liabilities, net of effects of acquisitions and disposals: |
||||||||
Accounts receivable |
(18,084 | ) | (13,225 | ) | ||||
Inventories |
(29,354 | ) | 2,698 | |||||
Prepaid expenses and other current assets |
303 | 8,476 | ||||||
Accounts payable and accrued expenses |
(1,558 | ) | (5,192 | ) | ||||
Income taxes receivable and payable, net |
(7,093 | ) | (23,668 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities from continuing operations |
54,837 | 89,238 | ||||||
|
|
|
|
|||||
Cash Flows from Investing Activities of Continuing Operations: |
||||||||
Expenditures for property, plant and equipment |
(36,897 | ) | (28,893 | ) | ||||
Proceeds from sales of businesses and assets, net of cash sold |
| 17,155 | ||||||
Investments in affiliates |
(50 | ) | | |||||
Payments for businesses and intangibles acquired, net of cash acquired |
(36,954 | ) | (55,697 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities from continuing operations |
(73,901 | ) | (67,435 | ) | ||||
|
|
|
|
|||||
Cash Flows from Financing Activities of Continuing Operations: |
||||||||
Decrease in notes payable and current borrowings |
| (707 | ) | |||||
Proceeds from stock compensation plans |
5,298 | 4,091 | ||||||
Payments for contingent consideration |
(9,487 | ) | (6,930 | ) | ||||
Payments to noncontrolling interest shareholders |
(736 | ) | | |||||
Dividends |
(27,944 | ) | (27,756 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities from continuing operations |
(32,869 | ) | (31,302 | ) | ||||
|
|
|
|
|||||
Cash Flows from Discontinued Operations: |
||||||||
Net cash used in operating activities |
(1,437 | ) | (8,191 | ) | ||||
Net cash used in investing activities |
| (2,121 | ) | |||||
|
|
|
|
|||||
Net cash used in discontinued operations |
(1,437 | ) | (10,312 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
(2,251 | ) | (19,286 | ) | ||||
|
|
|
|
|||||
Net decrease in cash and cash equivalents |
(55,621 | ) | (39,097 | ) | ||||
Cash and cash equivalents at the beginning of the period |
337,039 | 584,088 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at the end of the period |
$ | 281,418 | $ | 544,991 | ||||
|
|
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
Common Stock | Additional Paid in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income |
Treasury Stock |
Noncontrolling Interest |
Total Equity |
||||||||||||||||||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||||||||||||||||||||||
(Dollars and shares in thousands, except per share) | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2011 |
42,923 | $ | 42,923 | $ | 380,965 | $ | 1,847,106 | $ | (159,353 | ) | 2,183 | $ | (131,053 | ) | $ | 2,195 | $ | 1,982,783 | ||||||||||||||||||
Net income (loss) |
(241,122 | ) | 513 | (240,609 | ) | |||||||||||||||||||||||||||||||
Cash dividends ($0.68 per share) |
(27,756 | ) | (27,756 | ) | ||||||||||||||||||||||||||||||||
Comprehensive loss |
(28,902 | ) | (164 | ) | (29,066 | ) | ||||||||||||||||||||||||||||||
Shares issued under compensation plans |
81 | 81 | 4,091 | (39 | ) | 2,384 | 6,556 | |||||||||||||||||||||||||||||
Deferred compensation |
(10 | ) | (4 | ) | 116 | 106 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance at July 1, 2012 |
43,004 | $ | 43,004 | $ | 385,046 | $ | 1,578,228 | $ | (188,255 | ) | 2,140 | $ | (128,553 | ) | $ | 2,544 | $ | 1,692,014 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock | Additional Paid in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income |
Treasury Stock |
Noncontrolling Interest |
Total Equity |
||||||||||||||||||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||||||||||||||||||||||
(Dollars and shares in thousands, except per share) | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2012 |
43,102 | $ | 43,102 | $ | 394,384 | $ | 1,601,460 | $ | (132,048 | ) | 2,130 | $ | (127,948 | ) | $ | 2,587 | $ | 1,781,537 | ||||||||||||||||||
Net income |
69,479 | 395 | 69,874 | |||||||||||||||||||||||||||||||||
Cash dividends ($0.68 per share) |
(27,944 | ) | (27,944 | ) | ||||||||||||||||||||||||||||||||
Other comprehensive loss |
(30,710 | ) | (151 | ) | (30,861 | ) | ||||||||||||||||||||||||||||||
Distributions to noncontrolling interest shareholders |
(736 | ) | (736 | ) | ||||||||||||||||||||||||||||||||
Shares issued under compensation plans |
97 | 97 | 7,007 | (51 | ) | 2,507 | 9,611 | |||||||||||||||||||||||||||||
Deferred compensation |
(9 | ) | (1 | ) | 55 | 46 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance at June 30, 2013 |
43,199 | $ | 43,199 | $ | 401,382 | $ | 1,642,996 | $ | (162,758 | ) | 2,078 | $ | (125,386 | ) | $ | 2,095 | $ | 1,801,527 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
In the opinion of management, our financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement 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 consolidated 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, 2012.
The Company revised its Condensed Consolidated Statement of Cash Flows in the second quarter ended June 30, 2013 to reflect contingent consideration payments related to businesses acquired as a financing cash outflow. Previously, these payments were reflected as an investing cash outflow since 2011. As a result, the company has revised the Condensed Consolidated Statement of Cash Flows for the six months ended July 1, 2012 to reflect $6.9 million of contingent consideration payments as financing activities as the payments were incorrectly reported as an investing activity in previous filings. Additionally, the Company identified $5.9 million during the twelve months ended December 31, 2011, $6.9 million during the six months ended July 1, 2012 and nine months ended September 30, 2012, $17.6 million during the twelve months ended December 31, 2012 and $7.2 million during the three months ended March 31, 2013 of contingent consideration payments related to businesses acquired that were also incorrectly reported as investing activities in the statement of cash flows. There was no impact to the prior year condensed consolidated balance sheet, statement of operations and comprehensive income or statement of changes in stockholders equity as a result of these adjustments. These adjustments were not considered material to any previously issued financial statements. Accordingly, the Company will revise these periods in future filings.
In addition, in the third quarter of 2012, due to changes in the Companys management and internal reporting structure, the Companys Latin America operations were moved from the Companys Asia, Japan and Latin America (AJLA) Segment into the North America Segment. As a result of this change, the North America Segment is now referred to as the Americas Segment and the AJLA Segment is now referred to as the Asia Segment. The change did not affect the Companys reporting unit structure. The prior comparative period has been restated to reflect this change. See Note 14 for a discussion of the Companys segments.
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.
7
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2 New accounting standards
The Company adopted the following new accounting standard as of January 1, 2013, the first day of its 2013 fiscal year:
Amendment to Comprehensive Income: In February 2013, the Financial Accounting Standards Board (FASB) issued an amendment to its accounting guidance on reporting amounts reclassified out of accumulated other comprehensive income. The guidance requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items, on the face of the statement where net income is presented, or in the notes to the financial statements, if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income in the same reporting period For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about the effect of the reclassifications. The guidance is effective prospectively for reporting periods beginning after December 15, 2012. Refer to Note 10, Shareholders Equity, for new disclosures pertaining to the adoption of this amendment.
Amendment to Balance Sheet: In January 2013, the FASB issued an amendment to its accounting guidance to clarify the scope of disclosure requirements pertaining to offsetting assets and liabilities mandated by an earlier accounting pronouncement. The amended guidance limited the scope of the required disclosures to derivatives accounted for in accordance with the FASBs Derivatives and Hedging guidance, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements and certain securities borrowing and securities lending transactions, that are offset in the financial statements in accordance with specified accounting guidance or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are no longer applicable to entities with other types of financial assets and financial liabilities subject to a master netting arrangement or similar agreement. The guidance is effective for reporting periods beginning on or after January 1, 2013. The amendment did not have a material impact on the Companys results of operations, cash flows or financial position.
The Company will adopt the following new accounting standard as of January 1, 2014, the first day of its 2014 fiscal year:
Amendment to Foreign Currency Matters: In March 2013, the FASB issued an amendment which clarified that when a reporting entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity, the reporting entity is required to reclassify cumulative foreign currency translation adjustment from accumulated other comprehensive income into the calculation of gain or loss related to that foreign entity. Additionally, the amendment clarifies that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity (irrespective of any retained investment) and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date (sometimes also referred to as a step acquisition), and that the cumulative translation adjustment should be released into net income upon the occurrence of those events. The guidance is effective prospectively for reporting periods beginning after December 15, 2013. The amendment is not expected to have a material impact on the Companys results of operations, cash flows or financial position.
Amendment to Income Taxes: In July 2013, the FASB issued an amendment which clarifies the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or tax credit carryforward exists. The amendment requires an entity to net its unrecognized tax benefits against the deferred tax assets for all same jurisdiction net operating loss carryforwards, similar tax losses, or tax credit carryforwards. A gross presentation will be required only if such carryforwards are not available or would not be used by the entity to settle any additional income taxes resulting from a disallowance of the uncertain
8
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
tax position. The guidance is effective prospectively for reporting periods beginning after December 15, 2013. The Company is assessing the new guidance, however, the Company does not expect the amendment to have a material impact on the Companys results of operations, cash flows or financial position.
Note 3 Acquisitions
The Company made the following acquisitions during 2013, all of which were accounted for as business combinations:
| On June 11, 2013, the Company acquired the assets of Ultimate Medical Pty. Ltd. and its affiliates, a supplier of airway management devices with a related portfolio of patented products. This acquisition complements the anesthesia product portfolio in the Companys Critical Care division. |
| On June 6, 2013, the Company acquired Eon Surgical, Ltd., a developer of a minimally invasive microlaparoscopy surgical platform technology designed to enhance surgeons ability to perform scarless surgery while producing better patient outcomes, which complements the product portfolio of its Surgical Care division. |
The total fair value of consideration for the 2013 acquisitions is estimated at $38.5 million. Transaction expenses associated with the acquisitions, which are included in selling, general and administrative expenses on the consolidated statements of income (loss) were $0.4 million and $0.5 million for the three and six months ended June 30, 2013, respectively. For the three and six months ended June 30, 2013, the Company has recorded an aggregate segment operating loss of approximately $2.9 million in connection with the businesses acquired in 2013. The results of operations of the acquired businesses and assets are included in the consolidated statements of income (loss) from their respective acquisition date. Pro forma information is not presented as the operations of the acquired businesses are not significant to the overall operations of the Company.
In connection with these acquisitions, the Company recorded a liability of $2.8 million related to expected post-closing obligations associated with the acquired businesses, which expense is reflected in restructuring and impairment charges in the three and six months ended June 30, 2013.
The following table presents the purchase price allocation among the assets acquired and liabilities assumed in the acquisitions that occurred during the second quarter of 2013:
(Dollars in millions) | ||||
Assets |
||||
Current assets |
$ | 2.2 | ||
Property, plant and equipment |
0.5 | |||
Intangible assets: |
||||
Intellectual property |
2.1 | |||
Tradenames |
1.1 | |||
In-process research and development |
19.7 | |||
Customer lists |
8.3 | |||
Goodwill |
10.6 | |||
|
|
|||
Total assets acquired |
44.5 | |||
|
|
|||
Less: |
||||
Current liabilities |
1.1 | |||
Deferred tax liabilities |
4.9 | |||
|
|
|||
Liabilities assumed |
6.0 | |||
|
|
|||
Net assets acquired |
$ | 38.5 | ||
|
|
9
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company is continuing to evaluate the initial purchase price allocation of the 2013 acquisitions. Further adjustments may be necessary as a result of the Companys assessment of additional information related to the fair values of assets acquired and liabilities assumed.
Among the acquired assets, intellectual property has a useful life of 10 years, customer lists have a useful life of 15 years and finite tradenames have useful lives ranging from 1 to 10 years. In-process research and development (IPR&D) has an indefinite life and is not amortized until development of the related project is completed, at which time the IPR&D becomes an amortizable asset. If the related project is not completed in a timely manner, the Company may incur an impairment charge related to the IPR&D, calculated as the excess of the assets carrying value over its fair value. The goodwill resulting from the acquisitions primarily reflects the expected revenue growth attributable to anticipated increased market penetration from acquired and future products and customers. Goodwill and the step-up in basis of the intangible assets in connection with stock acquisitions are not deductible for tax purposes.
The Company made the following acquisitions during 2012, all of which were accounted for as business combinations:
| On October 23, 2012, the Company acquired substantially all of the assets of LMA International N.V. (LMA), a global provider of laryngeal masks whose products are used in anesthesia and emergency care. On October 23, 2012, in a separate transaction, the Company also acquired the LMA branded laryngeal mask supraglottic airway business and certain other products in the United Kingdom, Ireland and Channel Islands from the shareholders of Intravent Direct Limited and affiliates. These acquisitions complement the anesthesia product portfolio in the Companys Critical Care division. |
| On June 22, 2012, the Company acquired Hotspur Technologies Inc., a developer of catheter-based technologies designed to restore blood flow in patients with obstructed vessels. The acquired business complements the dialysis access product line in the Companys Cardiac Care division. |
| On May 22, 2012, the Company acquired Semprus BioSciences Corp., a biomedical company that developed a long-lasting, covalently bonded, non-leaching polymer designed to reduce infections and thrombus related complications. While the Company will explore opportunities to apply this technology to a broad array of its product offerings, the initial focus for the technology will be with respect to vascular devices within the Companys Critical Care division. |
| On May 3, 2012, the Company acquired substantially all of the assets of Axiom Technology Partners, LLC (the Axiom acquisition), constituting its EFx laparoscopic fascial closure system, which is designed for the closure of abdominal trocar defects through which access ports and instruments were used during laparoscopic surgeries. The acquired business complements the surgical closure product line in the Companys Surgical Care division. |
| On April 5, 2012, the Company acquired the EZ-Blocker product line, a single-use catheter used to perform lung isolation and one-lung ventilation. The acquisition of this product line complements the Anesthesia product portfolio in the Companys Critical Care division. |
In connection with the acquisitions, the Company agreed to pay contingent consideration based on the achievement of specified objectives, including obtaining regulatory approvals and achieving sales targets. The total fair value of consideration for the 2012 acquisitions was estimated at $422.2 million at the time of the acquisitions, which included the initial payments of $367.9 million in cash and the estimated fair value of the contingent consideration of $55.8 million, partially offset by a $1.5 million favorable working capital adjustment. Based upon the contingent consideration terms as of the respective acquisition dates, the range of undiscounted contingent consideration the Company could be required to pay is $2.0 million to $90.0 million. For further information on contingent consideration, see Note 9, Fair Value Measurement.
10
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4 Restructuring and other impairment charges
The amounts recognized in restructuring and other impairment charges for the three and six months ended June 30, 2013 and July 1, 2012 consisted of the following:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2013 |
July 1, 2012 |
June 30, 2013 |
July 1, 2012 |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
LMA restructuring program |
$ | 3,941 | $ | | $ | 6,596 | $ | | ||||||||
2013 restructuring charges |
7,350 | | 7,830 | | ||||||||||||
2012 restructuring charges |
1,616 | 265 | 3,066 | 871 | ||||||||||||
2007 Arrow integration program |
55 | 56 | 135 | (1,875 | ) | |||||||||||
In-process research and development impairment |
| | 4,494 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Restructuring and other impairment charges |
$ | 12,962 | $ | 321 | $ | 22,121 | $ | (1,004 | ) | |||||||
|
|
|
|
|
|
|
|
The Company did not incur any expenses related to its 2011 restructuring program during the three and six month periods ended June 30, 2013 or July 1, 2012.
LMA Restructuring Program
In connection with the acquisition of LMA, the Company formulated a plan related to the integration of the LMA business and the Companys businesses. The integration plan focuses on the closure of the LMA business corporate functions and the consolidation of manufacturing, sales, marketing, and distribution functions in North America, Europe and Asia. The charges associated with this restructuring program that are included in restructuring and other impairment charges during the three and six month periods ended June 30, 2013 were as follows:
Three Months Ended June 30, 2013 |
Six Months Ended June 30, 2013 |
|||||||
(Dollars in thousands) | ||||||||
Termination benefits |
$ | 802 | $ | 2,826 | ||||
Facility closure costs |
293 | 374 | ||||||
Contract termination costs |
2,839 | 3,281 | ||||||
Other restructuring costs |
7 | 115 | ||||||
|
|
|
|
|||||
$ | 3,941 | $ | 6,596 | |||||
|
|
|
|
A reconciliation of the changes in accrued liabilities associated with the LMA restructuring program from December 31, 2012 through June 30, 2013 is set forth in the following table:
Termination benefits |
Facility Closure Costs |
Contract Termination Costs |
Other Restructuring Costs |
Total | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Balance at December 31, 2012 |
$ | 1,744 | $ | | $ | 277 | $ | 12 | $ | 2,033 | ||||||||||
Subsequent accruals |
2,826 | 374 | 3,281 | 115 | 6,596 | |||||||||||||||
Cash payments |
(2,766 | ) | (100 | ) | (3,155 | ) | (67 | ) | (6,088 | ) | ||||||||||
Foreign currency translation |
(28 | ) | (2 | ) | (7 | ) | (12 | ) | (49 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at June 30, 2013 |
$ | 1,776 | $ | 272 | $ | 396 | $ | 48 | $ | 2,492 | ||||||||||
|
|
|
|
|
|
|
|
|
|
11
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of June 30, 2013, the Company expects to incur additional restructuring charges of approximately $5 million over the remaining life of the program. Of this amount, $4 million relates to the termination of certain distributor agreements and $1 million relates to employee termination, facility closure and other costs.
2013 Restructuring Charges
The Company regularly evaluates opportunities to consolidate facilities, lower costs and improve operating efficiencies. In 2013, the Company initiated programs to consolidate manufacturing facilities in North America and warehouse facilities in Europe and terminate certain European distributor agreements in an effort to reduce costs. As a result of these actions, the Company will incur costs related to reductions in force, facility closure, contract termination and other costs. For the three and six month periods ended June 30, 2013, the Company incurred restructuring charges of $7.4 million and $7.8 million, respectively, primarily related to reductions in force, contract termination costs and charges related to expected post-closing obligations associated with its acquired businesses. As of June 30, 2013, the Company has a reserve of $3.2 million in connection with these projects.
2012 Restructuring Charges
In 2012, the Company identified opportunities to improve its supply chain strategy by consolidating its three North American warehouses into one centralized warehouse; and lower costs and improve operating efficiencies through the termination of certain distributor agreements in Europe, the closure of certain North American facilities and workforce reductions. These projects will entail costs related to reductions in force, contract terminations related distributor agreements and leases, and facility closure and other costs. For the three and six month periods ended June 30, 2013, the Company incurred restructuring charges of $1.6 million and $3.1 million, respectively, related to the aforementioned cost categories. As of June 30, 2013, the Company has a reserve of $3.3 million in connection with these projects.
2011 Restructuring Program
In 2011, the Company initiated a restructuring program at three facilities to consolidate operations and reduce costs. As of June 30, 2013, in connection with this program, the Company has a reserve of $1.5 million, which primarily relates to contract termination costs associated with a leased facility that the Company has partially vacated. The Company expects to incur additional contract termination costs of approximately $2.7 million associated with the lease termination when it has vacated the remaining portion of the premises in 2014. The payment of the lease contract termination costs will continue until 2015.
12
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2007 Arrow Integration Program
In connection with the Companys acquisition of Arrow International, Inc. (Arrow), the Company implemented a program in 2007 to integrate Arrows businesses into the Companys other businesses. The aspects of this program that affect Teleflex employees and facilities (such aspects being referred to as the 2007 Arrow integration program) are charged to earnings and classified as restructuring and impairment charges. As of June 30, 2013, the Company has a reserve of $0.4 million in connection with this program. The following table provides information relating to the charges associated with the 2007 Arrow integration program that were included in restructuring and other impairment charges in the condensed consolidated statements of income (loss) for the periods presented:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2013 |
July 1, 2012 |
June 30, 2013 |
July 1, 2012 |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Facility closure costs |
$ | 55 | $ | 56 | $ | 135 | $ | 148 | ||||||||
Contract termination costs |
| | | (2,023 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 55 | $ | 56 | $ | 135 | $ | (1,875 | ) | ||||||||
|
|
|
|
|
|
|
|
In 2012, the Company reversed approximately $2.0 million of contract termination costs related to a settlement of a dispute involving the termination of a European distributor agreement that was established in connection with the Companys acquisition of Arrow.
As of June 30, 2013, the Company expects future restructuring expenses associated with the 2007 Arrow integration program, if any, to be nominal.
In-process research and development impairment
During the first quarter of 2013, the Company recorded a $4.5 million IPR&D charge pertaining to a research and development project associated with the Axiom acquisition because technological feasibility had not yet been achieved and the Company determined that such technology had no future alternative use.
Note 5 Impairment of goodwill
In the first quarter of 2012, due to a change in the Companys reporting structure, the Company performed goodwill impairment tests and determined that three of the reporting units in the North America Segment were impaired. The Company recorded goodwill impairment charges of $220 million in the Vascular reporting unit, $107 million in the Anesthesia/Respiratory reporting unit and $5 million in the Cardiac reporting unit. For further information on the goodwill impairment, see Note 5 to the Companys 2012 consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2012.
13
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6 Inventories, net
Inventories as of June 30, 2013 and December 31, 2012 consisted of the following:
June 30, 2013 |
December 31, 2012 |
|||||||
(Dollars in thousands) | ||||||||
Raw materials |
$ | 89,516 | $ | 84,636 | ||||
Work-in-process |
38,889 | 47,440 | ||||||
Finished goods |
249,882 | 222,974 | ||||||
|
|
|
|
|||||
378,287 | 355,050 | |||||||
Less: Inventory reserve |
(29,679 | ) | (31,703 | ) | ||||
|
|
|
|
|||||
Inventories, net |
$ | 348,608 | $ | 323,347 | ||||
|
|
|
|
Note 7 Goodwill and other intangible assets, net
The following table provides information relating to changes in the carrying amount of goodwill, by reportable segment, for the six months ended June 30, 2013:
Americas Segment |
EMEA Segment |
Asia Segment |
OEM Segment |
Total | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Balance as of December 31, 2012 |
||||||||||||||||||||
Goodwill |
$ | 1,086,707 | $ | 353,282 | $ | 141,595 | $ | | $ | 1,581,584 | ||||||||||
Accumulated impairment losses |
(332,128 | ) | | | | (332,128 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
754,579 | 353,282 | 141,595 | | 1,249,456 | ||||||||||||||||
Goodwill related to acquisitions |
5,278 | 5,370 | | | 10,648 | |||||||||||||||
Purchase accounting adjustment |
(1,733 | ) | | | | (1,733 | ) | |||||||||||||
Translation adjustment |
(1,052 | ) | (8,784 | ) | (7,943 | ) | | (17,779 | ) | |||||||||||
Balance as of June 30, 2013 |
||||||||||||||||||||
Goodwill |
1,089,200 | 349,868 | 133,652 | | 1,572,720 | |||||||||||||||
Accumulated impairment losses |
(332,128 | ) | | | | (332,128 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 757,072 | $ | 349,868 | $ | 133,652 | $ | | $ | 1,240,592 | |||||||||||
|
|
|
|
|
|
|
|
|
|
The following table provides information, as of June 30, 2013 and December 31, 2012, regarding the gross carrying amount of, and accumulated amortization relating to, intangible assets, net:
Gross Carrying Amount | Accumulated Amortization | |||||||||||||||
June 30, 2013 |
December 31, 2012 |
June 30, 2013 |
December 31, 2012 |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Customer relationships |
$ | 584,064 | $ | 580,151 | $ | (154,456 | ) | $ | (141,520 | ) | ||||||
In-process research and development (IPR&D) |
68,376 | 53,157 | | | ||||||||||||
Intellectual property |
277,155 | 276,458 | (103,639 | ) | (95,967 | ) | ||||||||||
Distribution rights |
16,532 | 16,567 | (14,093 | ) | (13,880 | ) | ||||||||||
Trade names |
381,367 | 384,131 | (2,461 | ) | (305 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 1,327,494 | $ | 1,310,464 | $ | (274,649 | ) | $ | (251,672 | ) | |||||||
|
|
|
|
|
|
|
|
14
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the first quarter of 2013, the Company recorded a $4.5 million IPR&D charge. See Note 4, Restructuring and other impairment charges for additional information.
At the beginning of 2013, due to a Company rebranding strategy, the Company reassessed the useful life of its Taut tradename, which had a carrying value of $4.5 million at January 1, 2013, and reclassified it from an indefinite lived intangible asset to a finite lived intangible asset with a useful life of eight years.
Amortization expense related to intangible assets was $12.1 million and $10.7 million for the three months ended June 30, 2013 and July 1, 2012, respectively, and $24.6 million and $21.2 million for the six months ended June 30, 2013 and July 1, 2012, respectively. Estimated annual amortization expense for the remainder of 2013 and the next four succeeding years is as follows (dollars in thousands):
2013 |
$ | 25,200 | ||
2014 |
46,700 | |||
2015 |
44,400 | |||
2016 |
44,100 | |||
2017 |
43,700 |
Note 8 Financial instruments
The Company uses derivative instruments for risk management purposes. Forward rate contracts are used to manage foreign currency transaction exposure. These derivative instruments are designated as cash flow hedges and are recorded on the balance sheet at fair market value. The effective portion of the gains or losses on derivatives is reported as a component of other comprehensive income and thereafter is recognized in the statement of income (loss) in the period or periods during which the hedged transaction affects earnings. Gains and losses on the derivatives representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. See Note 9, Fair value measurement for additional information.
The following table presents the location and fair values of derivative instruments designated as hedging instruments in the condensed consolidated balance sheet as of June 30, 2013 and December 31, 2012:
June 30, 2013 Fair Value |
December 31, 2012 Fair Value |
|||||||
(Dollars in thousands) | ||||||||
Asset derivatives: |
||||||||
Foreign exchange contracts: |
||||||||
Prepaid expenses and other current assets |
$ | 466 | $ | 1,279 | ||||
|
|
|
|
|||||
Total asset derivatives |
$ | 466 | $ | 1,279 | ||||
|
|
|
|
|||||
Liability derivatives: |
||||||||
Foreign exchange contracts: |
||||||||
Other current liabilities |
$ | 1,212 | $ | 598 | ||||
|
|
|
|
|||||
Total liability derivatives |
$ | 1,212 | $ | 598 | ||||
|
|
|
|
15
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides information as to the gains and losses attributable to derivatives in cash flow hedging relationships that were reported in other comprehensive income (OCI) for the three and six months ended June 30, 2013 and July 1, 2012:
After Tax Gain/(Loss) Recognized in OCI |
||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2013 |
July 1, 2012 |
June 30, 2013 |
July 1, 2012 |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Interest rate swap |
$ | | $ | 2,317 | $ | | $ | 4,703 | ||||||||
Foreign exchange contracts |
(192 | ) | (471 | ) | (12 | ) | (397 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | (192 | ) | $ | 1,846 | $ | (12 | ) | $ | 4,306 | ||||||
|
|
|
|
|
|
|
|
See Note 10 for information on the location and amount of gains and losses attributable to derivatives that were reclassified from accumulated other comprehensive income (AOCI).
There was no ineffectiveness related to the Companys derivatives for the three and six months ended June 30, 2013 and July 1, 2012.
Based on exchange rates at June 30, 2013, approximately $0.4 million of unrealized losses, net of tax, within AOCI are expected to be reclassified from AOCI to the statement of income (loss) during the next twelve months. However, the actual amount reclassified from AOCI could vary due to future changes in exchange rates.
In 2011, the Company terminated its interest rate swap covering a notional amount of $350 million designated as a hedge against the variability of the cash flows in the interest payments under the Companys term loan. The $11.7 million pre-tax value of the interest rate swap was amortized as interest expense over the remaining term of the hedge agreement. As of the end of the third quarter of 2012, all unrealized losses within AOCI associated with this interest rate swap were reclassified into the statement of income (loss).
Concentration of Credit Risk
Concentrations of credit risk with respect to trade accounts receivable are generally limited due to the Companys large number of customers and their diversity across many geographic areas. A portion of the Companys trade accounts receivable outside the United States, however, include sales to government-owned or supported healthcare systems in several countries which are subject to payment delays. Payment is dependent upon the financial stability and creditworthiness of those countries economies.
In the ordinary course of business, the Company grants non-interest bearing trade credit to its customers on normal credit terms. In an effort to reduce its credit risk, the Company (i) establishes credit limits for all of its customer relationships, (ii) performs ongoing credit evaluations of its customers financial condition, (iii) monitors the payment history and aging of its customers receivables, and (iv) monitors open orders against an individual customers outstanding receivable balance.
An allowance for doubtful accounts is maintained for accounts receivable based on the Companys historical collection experience and expected collectability of the accounts receivable, considering the period an account is outstanding, the financial position of the customer and information provided by credit rating services. The adequacy of this allowance is reviewed each reporting period and adjusted as necessary.
16
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In light of the disruptions in global economic markets, the Company instituted enhanced measures within countries where the Company has collectability concerns to facilitate customer-by-customer risk assessment when estimating the allowance for doubtful accounts. Such measures included, among others, monthly credit control committee meetings, at which customer credit risks are identified after review of, among other things, accounts that exceed specified credit limits, payment delinquencies and other customer problems. In addition, for some of the Companys non-government customers, the Company instituted measures designed to reduce its risk exposures, including issuing dunning letters, reducing credit limits, requiring that payments accompany orders and instituting legal action with respect to delinquent accounts. With respect to government customers, the Company evaluates receivables for potential collection risks associated with the availability of government funding and reimbursement practices.
Some of the Companys customers, particularly in Europe, have extended or delayed payments for products and services already provided. Collectability concerns regarding the Companys accounts receivable from these customers, for the most part in Greece, Italy, Spain and Portugal, resulted in an increase in the allowance for doubtful accounts related to these countries. If the financial condition of these customers or the healthcare systems in these countries continue to deteriorate such that the ability of an increasing number of customers to make payments is uncertain, additional allowances may be required in future periods. The Companys aggregate accounts receivable, net of the allowance for doubtful accounts, in Spain, Italy, Greece and Portugal and the percentage of the Companys total accounts receivable, net of the allowance for doubtful accounts, represented by the net accounts receivable in those countries at June 30, 2013 and December 31, 2012 are as follows:
June 30, 2013 | December 31, 2012 | |||||||
(Dollars in thousands) | ||||||||
Accounts receivable (net of allowances of $7.9 million and $6.3 million at June 30, 2013 and December 31, 2012, respectively) in Spain, Italy, Greece and Portugal |
$ | 113,494 | $ | 101,009 | ||||
Percentage of total accounts receivable, net |
36 | % | 34 | % |
For the six months ended June 30, 2013 and July 1, 2012, net revenues from customers in Spain, Italy, Greece and Portugal were $73.7 million and $72.8 million, respectively.
Note 9 Fair value measurement
For a description of the fair value hierarchy, see Note 11 to the Companys 2012 consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2012.
The following tables provide information regarding the financial assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2013 and December 31, 2012:
Total carrying value at June 30, 2013 |
Quoted prices in active markets (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Investments in marketable securities |
$ | 5,376 | $ | 5,376 | $ | | $ | | ||||||||
Derivative assets |
466 | | 466 | | ||||||||||||
Derivative liabilities |
1,212 | | 1,212 | | ||||||||||||
Contingent consideration liabilities |
32,473 | | | 32,473 |
17
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Total carrying value at December 31, 2012 |
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 |
$ | 4,785 | $ | 4,785 | $ | | $ | | ||||||||
Derivative assets |
1,279 | | 1,279 | | ||||||||||||
Derivative liabilities |
598 | | 598 | | ||||||||||||
Contingent consideration liabilities |
51,196 | | | 51,196 |
There were no transfers of financial assets or liabilities carried at fair value among Level 1, Level 2 or Level 3 within the fair value hierarchy during the six months ended June 30, 2013.
The following table provides information regarding changes in Level 3 financial liabilities related to contingent consideration in connection with various Company acquisitions, including those described in Note 3, during the period ended June 30, 2013:
Contingent consideration | ||||
2013 | ||||
(Dollars in thousands) | ||||
Balance January 1, 2013 |
$ | 51,196 | ||
Payment |
(10,927 | ) | ||
Revaluations |
(7,757 | ) | ||
Translation adjustment |
(39 | ) | ||
|
|
|||
Balance June 30, 2013 |
$ | 32,473 | ||
|
|
The Company reduced contingent consideration liabilities and selling, general and administrative expense by approximately $6.6 million and $8.1 million for the three and six month periods ended June 30, 2013, respectively, after determining that certain conditions for the payment of certain contingent consideration would not be satisfied.
The carrying amount of long-term debt reported in the condensed consolidated balance sheet as of June 30, 2013 is $970.8 million. The Company uses a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality, and risk profile to determine the fair value of its debt. The Companys implied credit rating is a factor in determining the market interest yield curve. The following table provides the fair value of the Companys debt by fair value hierarchy level as of June 30, 2013:
Fair value of debt | ||||
(Dollars in thousands) | ||||
Level 1 |
$ | 808,750 | ||
Level 2 |
378,855 | |||
|
|
|||
Total |
$ | 1,187,605 | ||
|
|
In the third quarter of 2013, the Company refinanced its $375 million term loan. See Note 17 for further discussion on the refinancing.
In the first quarter of 2012, the Company recorded a goodwill impairment charge of $332 million based on Level 3 inputs. See Note 5 for a discussion of the goodwill impairment.
18
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Valuation Techniques
The Companys financial assets valued based upon Level 1 inputs are comprised of investments in marketable securities held in trust, which are available to pay benefits under certain deferred compensation plans and other compensatory arrangements. The investment assets of the trust are valued using quoted market prices.
The Companys financial assets and financial liabilities valued based upon Level 2 inputs are comprised of foreign currency forward contracts. The Company uses forward rate contracts to manage currency transaction exposure. 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. The Company has taken into account the creditworthiness of the counterparties in measuring fair value.
The Companys financial liabilities valued based upon Level 3 inputs are comprised of contingent consideration arrangements pertaining to the Companys acquisitions. The Company accounts for contingent consideration in accordance with applicable guidance related to business combinations. In connection with several of its acquisitions, the Company agreed to pay contingent consideration upon the achievement of specified objectives, including obtaining regulatory approvals, achieving sales targets and, in some instances, the passage of time (collectively, milestone payments), and therefore recorded contingent consideration liabilities at the time of the acquisitions. The Company is required to reevaluate the fair value of contingent consideration each reporting period based on new developments and record changes in fair value until such consideration is satisfied through payment upon the achievement of the specified objectives or is no longer payable due to failure to achieve the specified objectives.
It is estimated that milestone payments will occur in 2013 and may extend until 2018 or later. As of June 30, 2013, the range of undiscounted amounts the Company could be required to pay for contingent consideration arrangements is between $5.0 million and $84.9 million. The Company determines the fair value of the liabilities for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future milestone payments was based on several factors including:
| estimated cash flows projected from the success of market launches; |
| the estimated time and resources needed to complete the development of acquired technologies; |
| the uncertainty of obtaining regulatory approvals within the required time periods; and |
| the risk adjusted discount rate for fair value measurement. |
The following table provides information regarding the valuation techniques and inputs used in determining the fair value of assets or liabilities categorized as Level 3 measurements:
Valuation Technique | Unobservable Input | Range (Weighted Average) | ||||||
Contingent consideration |
Discounted cash flow | Discount rate | 2%-10% (6%) | |||||
Probability of payment | 0%-100% (45%) |
As of June 30, 2013, of the $32.5 million of total recorded liabilities for contingent consideration, the Company has recorded approximately $12.4 million in Current portion of contingent consideration and the remaining $20.1 million in Other liabilities.
Note 10 Changes in shareholders equity
In 2007, the Companys 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
19
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 Companys ability to execute on the program will depend on, among other factors, cash requirements for acquisitions, cash generated from operations, debt repayment obligations, market conditions and regulatory requirements. In addition, under the Companys senior credit agreements, the Company is subject to certain restrictions relating to its ability to repurchase shares in the event the Companys consolidated leverage ratio (generally, the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, as defined in the senior credit agreements) exceeds certain levels, which may limit the Companys ability to repurchase shares under this Board authorization. Through June 30, 2013, 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 30, 2013 |
July 1, 2012 |
June 30, 2013 |
July 1, 2012 |
|||||||||||||
(Shares in thousands) | ||||||||||||||||
Basic |
41,115 | 40,834 | 41,064 | 40,801 | ||||||||||||
Dilutive effect of share based awards |
374 | 221 | 384 | | ||||||||||||
Dilutive effect of 3.875% Convertible Notes and warrants |
1,940 | 21 | 1,790 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
43,429 | 41,076 | 43,238 | 40,801 | ||||||||||||
|
|
|
|
|
|
|
|
The 3.875% Convertible Senior Subordinated Notes due 2017 are included in the dilutive net income per share calculation using the treasury stock method only during periods in which the average market price of our common stock was above the applicable conversion price of the Convertible Notes, or $61.32 per share, and, therefore, the impact of conversion would not be anti-dilutive. In these periods, under the treasury stock method, we calculated the number of shares issuable under the terms of these notes based on the average market price of the stock during the period, and included that number in the total diluted shares outstanding for the period.
In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge and warrant agreements. The convertible note hedge economically reduces the dilutive impact of the Convertible Notes. The Company separately analyzes the impact of the convertible note hedge and the warrant agreements on diluted weighted average shares outstanding. As a result, the purchases of the convertible note hedges are excluded because their impact would be anti-dilutive. The treasury stock method is applied when the warrants are in-the-money, assuming the proceeds from the exercise of the warrant are used to repurchase shares based on the average stock price during the period. The strike price of the warrants is approximately $74.65 per share of common stock. Shares issuable upon exercise of the warrants that were included in the total diluted shares outstanding were 0.4 million and 0.3 million for the three and six month periods ended June 30, 2013. The warrants had no dilutive impact for the three and six month periods ended July 1, 2012. The total number of shares that could potentially be included if the warrants were exercised is approximately 7.8 million at June 30, 2013.
Weighted average stock options that were antidilutive and therefore not included in the calculation of earnings per share was approximately 7.9 million for both the three and six month periods ended June 30, 2013, respectively, and approximately 8.8 million and 9.0 million for the three and six month periods ended July 1, 2012, respectively.
20
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables provide information relating to the changes in accumulated other comprehensive income (loss), net of tax, for the six months ended June 30, 2013 and July 1, 2012:
Cash Flow Hedges |
Pension and Other Postretirement Benefit Plans |
Foreign Currency Translation Adjustment |
Accumulated Other Comprehensive Income (Loss) |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Balance at December 31, 2012 |
$ | (381 | ) | $ | (127,257 | ) | $ | (4,410 | ) | $ | (132,048 | ) | ||||
Other comprehensive income (loss) before reclassifications |
362 | (452 | ) | (32,654 | ) | (32,744 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss) |
(374 | ) | 2,408 | | 2,034 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net current-period other comprehensive income (loss) |
(12 | ) | 1,956 | (32,654 | ) | (30,710 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at June 30, 2013 |
$ | (393 | ) | $ | (125,301 | ) | $ | (37,064 | ) | $ | (162,758 | ) | ||||
|
|
|
|
|
|
|
|
Cash Flow Hedges |
Pension and Other Postretirement Benefit Plans |
Foreign Currency Translation Adjustment |
Accumulated Other Comprehensive Income (Loss) |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Balance at December 31, 2011 |
$ | (7,257 | ) | $ | (134,548 | ) | $ | (17,548 | ) | $ | (159,353 | ) | ||||
Other comprehensive income (loss) before reclassifications |
157 | 33 | (35,544 | ) | (35,354 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income |
4,149 | 2,303 | | 6,452 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net current-period other comprehensive income |
4,306 | 2,336 | (35,544 | ) | (28,902 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at July 1, 2012 |
$ | (2,951 | ) | $ | (132,212 | ) | $ | (53,092 | ) | $ | (188,255 | ) | ||||
|
|
|
|
|
|
|
|
21
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides information relating to the reclassifications of losses/(gain) in accumulated other comprehensive income into expense/(income), net of tax, for the three and six months ended June 30, 2013 and July 1, 2012:
Three Months Ended | Six Months Ended | |||||||||||||||
June
30, 2013 |
July 1, 2012 |
June
30, 2013 |
July 1, 2012 |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Gains and losses on cash flow hedges: |
||||||||||||||||
Interest Rate Contracts: |
||||||||||||||||
Interest expense |
$ | | $ | 3,643 | $ | | $ | 7,394 | ||||||||
Foreign Exchange Contracts: |
||||||||||||||||
Cost of goods sold |
(194 | ) | 130 | (696 | ) | (767 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total before tax |
(194 | ) | 3,773 | (696 | ) | 6,627 | ||||||||||
Tax expense |
95 | (1,391 | ) | 322 | (2,478 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net of tax |
$ | (99 | ) | $ | 2,382 | $ | (374 | ) | $ | 4,149 | ||||||
|
|
|
|
|
|
|
|
|||||||||
Amortization of pension and other postretirement benefits items: |
||||||||||||||||
Actuarial losses/(gains)(1) |
$ | 1,618 | $ | 1,708 | $ | 3,764 | $ | 3,418 | ||||||||
Prior-service costs(1) |
(6 | ) | (6 | ) | (11 | ) | (12 | ) | ||||||||
Transition obligation(1) |
1 | 23 | 2 | 49 | ||||||||||||
Settlement charge(1) |
| 111 | | 111 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total before tax |
1,613 | 1,836 | 3,755 | 3,566 | ||||||||||||
Tax expense |
(660 | ) | (651 | ) | (1,347 | ) | (1,263 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net of tax |
$ | 953 | $ | 1,185 | $ | 2,408 | $ | 2,303 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total reclassifications, net of tax |
$ | 854 | $ | 3,567 | $ | 2,034 | $ | 6,452 | ||||||||
|
|
|
|
|
|
|
|
(1) | These accumulated other comprehensive income components are included in the computation of net benefit cost of pension and other postretirement benefit plans (see Note 12, Pension and other postretirement benefits for additional information). |
Note 11 Taxes on income from continuing operations
Three Months Ended | Six Months Ended | |||||||||||||||
June
30, 2013 |
July 1, 2012 |
June
30, 2013 |
July 1, 2012 |
|||||||||||||
Effective income tax rate |
12.3% | (0.6)% | 16.2% | 1.8% |
The effective income tax rate for the three months and six months ended June 30, 2013 was 12.3% and 16.2%, respectively, compared to (0.6)% and 1.8% for the three months and six months ended July 1, 2012, respectively. The effective tax rate for the three and six months ended June 30, 2013 was impacted by the realization of net tax benefits resulting from the resolution of a foreign tax matter and the expiration of statutes of limitation for a US state matter. The effective tax rate for the three months ended July 1, 2012 was impacted by (i) a $7.7 million tax benefit on the settlement of foreign tax audits and (ii) an approximate $5.0 million reduction in deferred tax liability resulting from a reduction in tax expense associated with potential future repatriation of non-permanently reinvested foreign earnings. In addition to the aforementioned items, the effective tax rate for the six months ended July 1, 2012, was also impacted by a $332 million goodwill impairment charge recorded in the first quarter of 2012, for which only $45 million was tax deductible.
22
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 Companys funding policy for U.S. plans is to contribute annually, at a minimum, amounts required by applicable laws and regulations. Obligations under non-U.S. plans are systematically provided for by depositing funds with trustees or by book reserves. As of June 30, 2013, the Companys U.S. defined benefit pension plans and the Companys other postretirement benefit plans, except certain postretirement benefit plans covering employees subject to a collective bargaining agreement, are effectively frozen.
The Company and certain of its subsidiaries provide medical, dental and life insurance benefits to pensioners and survivors. The associated plans are unfunded and approved claims are paid from Company funds.
Net benefit cost of pension and postretirement benefit plans consisted of the following:
Pension Three Months Ended |
Postretirement Benefits Three Months Ended |
Pension Six Months Ended |
Postretirement Benefits Six Months Ended |
|||||||||||||||||||||||||||||
June
30, 2013 |
July 1, 2012 |
June
30, 2013 |
July 1, 2012 |
June
30, 2013 |
July 1, 2012 |
June
30, 2013 |
July 1, 2012 |
|||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Service cost |
$ | 464 | $ | 711 | $ | 161 | $ | 158 | $ | 929 | $ | 1,389 | $ | 325 | $ | 316 | ||||||||||||||||
Interest cost |
4,142 | 4,125 | 542 | 473 | 8,281 | 8,251 | 1,541 | 946 | ||||||||||||||||||||||||
Expected return on Plan assets |
(5,774 | ) | (5,042 | ) | | | (11,544 | ) | (10,085 | ) | | | ||||||||||||||||||||
Net amortization and deferral |
1,414 | 1,604 | 202 | 122 | 2,824 | 3,210 | 932 | 245 | ||||||||||||||||||||||||
Settlement charge |
| (124 | ) | | | | (124 | ) | | | ||||||||||||||||||||||
Curtailment charge |
| 111 | | | | 111 | | | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net benefit cost |
$ | 246 | $ | 1,385 | $ | 905 | $ | 753 | $ | 490 | $ | 2,752 | $ | 2,798 | $ | 1,507 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys pension contributions are expected to be approximately $17.5 million during 2013, of which $1.9 million and $13.6 million were made during the three and six months ended June 30, 2013, respectively.
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. As of June 30, 2013, the Company has recorded approximately $0.4 million in accrued liabilities related to warranties.
Operating leases: The Company uses various leased facilities and equipment in its operations. The terms for these leased assets vary depending on the terms of the applicable lease agreement. At June 30, 2013, the Company had no residual value guarantees related to its operating leases.
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
23
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
prior disposal practices or releases of chemical or petroleum substances by the Company or other parties. Much of this liability results from the U.S. Comprehensive Environmental Response, Compensation and Liability Act, often referred to as Superfund, the U.S. Resource Conservation and Recovery Act and similar state laws. These laws require the Company to undertake certain investigative and remedial activities at sites where the Company conducts or once conducted operations or at sites where Company-generated waste was disposed.
Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs, depend on the mix of unique site characteristics, evolving remediation technologies, the regulatory agencies involved and their enforcement policies, as well as the presence or absence of other potentially responsible parties. At June 30, 2013, the Company has recorded approximately $2.2 million in accrued liabilities and approximately $6.7 million in other liabilities relating to these matters. Considerable uncertainty exists with respect to these liabilities and, if adverse changes in circumstances occur, potential liability may exceed the amount accrued as of June 30, 2013. The time frame over which the accrued amounts may be paid out, based on past history, is estimated to be 15-20 years.
Litigation: The Company is a party to various lawsuits and claims arising in the normal course of business. These lawsuits and claims include actions involving product liability, intellectual property, employment and environmental matters. 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 Companys 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.
Tax audits and examinations: The Company and its subsidiaries are routinely subject to tax examinations by various taxing authorities. As of June 30, 2013, the most significant tax examinations in process are in the U.S., Canada, the Czech Republic, Germany and Austria. In conjunction with these examinations and as a regular and routine practice, the Company may establish reserves or to adjust existing reserves with respect to uncertain tax positions. Accordingly, developments occurring with respect to these examinations, including resolution of uncertain tax positions, could result in increases or decreases to the Companys recorded tax liabilities, which could impact the Companys financial results.
Other: The Company has various purchase commitments for materials, supplies and items of permanent investment incident to the ordinary conduct of its business. On average, such commitments are not at prices in excess of current market prices.
Note 14 Business segment information
In the third quarter of 2012, due to changes in the Companys management and internal reporting structure, the Companys Latin America operations were moved from the AJLA Segment into the North America Segment. As a result of this change, the North America Segment is now referred to as the Americas Segment and the AJLA Segment is now referred to as the Asia Segment. The change did not affect the Companys reporting unit structure. All prior comparative periods have been restated to reflect this change.
An operating segment is a component of the Company (a) that engages in business activities from which it may earn revenues and incur expenses, (b) whose operating results are regularly reviewed by the Companys chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its
24
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
performance, and (c) for which discrete financial information is available. Based on these criteria, the Company has identified four operating segments, which also comprise its four reportable segments.
Three of the four reportable segments are geographically based: Americas (representing the Companys operations in North America and Latin America), EMEA (representing the Companys operations in Europe, the Middle East and Africa) and Asia. The fourth reportable segment is Original Equipment Manufacturer and Development Services (OEM).
The Companys geographically based segments design, manufacture and distribute medical devices primarily used in critical care, surgical applications and cardiac care and generally serve two end markets: hospitals and healthcare providers, and home health. The products of the geographically based segments are most widely used in the acute care setting for a range of diagnostic and therapeutic procedures and in general and specialty surgical applications. The Companys OEM Segment designs, manufactures and supplies devices and instruments for other medical device manufacturers.
The following tables present the Companys segment results for the three and six months ended June 30, 2013 and July 1, 2012:
Three Months Ended June 30, 2013 | ||||||||||||||||||||
Americas | EMEA | Asia | OEM | Totals | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Segment Results |
||||||||||||||||||||
Segment net revenues from external |
$ | 199,698 | $ | 137,842 | $ | 50,409 | $ | 32,110 | $ | 420,059 | ||||||||||
Segment depreciation and amortization |
16,690 | 6,597 | 1,187 | 1,145 | 25,619 | |||||||||||||||
Segment operating profit(1) |
33,599 | 18,576 | 16,804 | 7,734 | 76,713 | |||||||||||||||
Segment expenditures for property, plant and equipment |
16,408 | 3,270 | 139 | 1,127 | 20,944 | |||||||||||||||
Restructuring and other impairment charges |
4,314 | 7,913 | 147 | 588 | 12,962 | |||||||||||||||
Intersegment revenues |
29,723 | 38,064 | 10,864 | 132 | ||||||||||||||||
Three Months Ended July 1, 2012 | ||||||||||||||||||||
Americas | EMEA | Asia | OEM | Totals | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Segment Results |
||||||||||||||||||||
Segment net revenues from external |
$ | 176,800 | $ | 126,898 | $ | 43,654 | $ | 35,980 | $ | 383,332 | ||||||||||
Segment depreciation and amortization |
15,546 | 5,349 | 826 | 1,057 | 22,778 | |||||||||||||||
Segment operating profit(1) |
24,126 | 19,634 | 12,650 | 8,301 | 64,711 | |||||||||||||||
Segment expenditures for property, plant and equipment |
8,525 | 3,677 | 55 | 3,292 | 15,549 | |||||||||||||||
Restructuring and other impairment charges |
280 | 41 | | | 321 | |||||||||||||||
Intersegment revenues |
35,876 | 17,532 | | 150 |
25
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Six Months Ended June 30, 2013 | ||||||||||||||||||||
Americas | EMEA | Asia | OEM | Totals | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Segment Results |
||||||||||||||||||||
Segment net revenues from external |
$ | 395,451 | $ | 280,260 | $ | 92,777 | $ | 63,448 | $ | 831,936 | ||||||||||
Segment depreciation and amortization |
33,710 | 13,631 | 2,372 | 2,247 | 51,960 | |||||||||||||||
Segment operating profit(1) |
54,377 | 37,684 | 29,121 | 14,094 | 135,276 | |||||||||||||||
Segment assets |
1,976,710 | 1,000,147 | 240,029 | 42,205 | 3,259,091 | |||||||||||||||
Segment expenditures for property, plant and equipment |
28,712 | 5,990 | 173 | 1,704 | 36,579 | |||||||||||||||
Restructuring and other impairment charges |
12,081 | 9,207 | 245 | 588 | 22,121 | |||||||||||||||
Intersegment revenues |
69,322 | 73,290 | 21,547 | 210 | ||||||||||||||||
Six Months Ended July 1, 2012 | ||||||||||||||||||||
Americas | EMEA | Asia | OEM | Totals | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Segment Results |
||||||||||||||||||||
Segment net revenues from external |
$ | 357,137 | $ | 261,498 | $ | 77,613 | $ | 67,651 | $ | 763,899 | ||||||||||
Segment depreciation and amortization |
31,043 | 10,847 | 1,594 | 1,964 | 45,448 | |||||||||||||||
Segment operating profit(1) |
48,852 | 40,644 | 22,110 | 13,530 | 125,136 | |||||||||||||||
Segment assets |
1,841,535 | 748,659 | 202,685 | 37,683 | 2,830,562 | |||||||||||||||
Segment expenditures for property, plant and equipment |
15,755 | 6,372 | 62 | 6,493 | 28,682 | |||||||||||||||
Restructuring and other impairment charges |
(1,650 | ) | 646 | | | (1,004 | ) | |||||||||||||
Intersegment revenues |
75,688 | 35,099 | | 288 |
(1) | Segment operating profit includes a segments net revenues from external customers reduced by its cost of goods sold, selling, general and administrative expenses, research and development expenses and an allocation of corporate expenses. Segment operating profit excludes goodwill impairment charges, restructuring and impairment charges, interest income and expense and taxes on income. |
The following tables present reconciliations of segment results to the Companys condensed consolidated income (loss) from continuing operations before interest and taxes for the three and six months ended June 30, 2013 and July 1, 2012:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2013 |
July 1, 2012 |
June 30, 2013 |
July 1, 2012 |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Reconciliation of Segment Operating Profit to Income (Loss) from Continuing Operations Before Interest and Taxes |
||||||||||||||||
Segment operating profit |
$ | 76,713 | $ | 64,711 | $ | 135,276 | $ | 125,136 | ||||||||
Goodwill impairment |
| | | (332,128 | ) | |||||||||||
Restructuring and other impairment charges |
(12,962 | ) | (321 | ) | (22,121 | ) | 1,004 | |||||||||
Gain on sales of businesses and assets |
| 332 | | 332 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from continuing operations before interest and taxes |
$ | 63,751 | $ | 64,722 | $ | 113,155 | $ | (205,656 | ) | |||||||
|
|
|
|
|
|
|
|
26
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2013 |
July 1, 2012 |
|||||||
(Dollars in thousands) | ||||||||
Reconciliation of Segment Assets to Condensed Consolidated Total Assets |
||||||||
Segment assets |
$ | 3,259,091 | $ | 2,830,562 | ||||
Corporate assets |
457,111 | 722,370 | ||||||
Assets held for sale |
7,935 | 53,890 | ||||||
|
|
|
|
|||||
Total assets |
$ | 3,724,137 | $ | 3,606,822 | ||||
|
|
|
|
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2013 |
July 1, 2012 |
June 30, 2013 |
July 1, 2012 |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Reconciliation of Segment Expenditures for Property, Plant and Equipment to Condensed Consolidated Total Expenditures for Property, Plant and Equipment |
||||||||||||||||
Segment expenditures for property, plant and equipment |
$ | 20,944 | $ | 15,549 | $ | 36,579 | $ | 28,682 | ||||||||
Corporate expenditures for property, plant and equipment |
318 | 14 | 318 | 211 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expenditures for property, plant and equipment |
$ | 21,262 | $ | 15,563 | $ | 36,897 | $ | 28,893 | ||||||||
|
|
|
|
|
|
|
|
Note 15 Condensed consolidated guarantor financial information
In June 2011, Teleflex Incorporated (referred to below as Parent Company) issued $250 million of 6.875% senior subordinated notes through a registered public offering. The notes are guaranteed, jointly and severally, by certain of the Parent Companys subsidiaries (each, a Guarantor Subsidiary and collectively, the Guarantor Subsidiaries). The guarantees are full and unconditional, subject to certain customary release provisions. Each Guarantor Subsidiary is directly or indirectly 100% owned by the Parent Company. The Companys condensed consolidated statements of income (loss) and comprehensive income (loss) for the three and six months ended June 30, 2013 and July 1, 2012, condensed consolidated balance sheets as of June 30, 2013 and December 31, 2012 and condensed consolidated statements of cash flows for the six month periods ended June 30, 2013 and July 1, 2012, each of which are set forth below, provide consolidated information for:
a. | Parent Company, the issuer of the guaranteed obligations; |
b. | Guarantor Subsidiaries, on a combined basis; |
c. | Non-guarantor subsidiaries, on a combined basis; and |
d. | Parent Company and its subsidiaries on a consolidated basis. |
The same accounting policies as described in Note 1 to the consolidated financial statements included in the Companys Annual Report on Form 10-K for the year ended December 31, 2012 are used by the Parent Company and each of its subsidiaries in connection with the condensed consolidated financial information, except for the use by the Parent Company and Guarantor Subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation.
Consolidating entries and eliminations in the following consolidated financial statements represent adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the Guarantor Subsidiaries and the Non-guarantor subsidiaries, (b) eliminate the investments in subsidiaries and (c) record consolidating entries.
27
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
Three Months Ended June 30, 2013 | ||||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Condensed Consolidated |
||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Net revenues |
$ | | $ | 248,012 | $ | 239,147 | $ | (67,100 | ) | $ | 420,059 | |||||||||
Cost of goods sold |
| 143,732 | 136,322 | (69,485 | ) | 210,569 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit |
| 104,280 | 102,825 | 2,385 | 209,490 | |||||||||||||||
Selling, general and administrative expenses |
14,899 | 59,336 | 42,418 | (400 | ) | 116,253 | ||||||||||||||
Research and development expenses |
| 14,082 | 2,442 | | 16,524 | |||||||||||||||
Restructuring and other impairment charges |
| 1,511 | 11,451 | | 12,962 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before interest and taxes |
(14,899 | ) | 29,351 | 46,514 | 2,785 | 63,751 | ||||||||||||||
Interest expense |
33,655 | (21,017 | ) | 1,787 | | 14,425 | ||||||||||||||
Interest income |
3 | | (160 | ) | | (157 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before taxes |
(48,557 | ) | 50,368 | 44,887 | 2,785 | 49,483 | ||||||||||||||
Taxes (benefit) on income (loss) from continuing operations |
(17,287 | ) | 13,729 | 9,515 | 125 | 6,082 | ||||||||||||||
Equity in net income of consolidated subsidiaries |
74,433 | 31,599 | | (106,032 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from continuing operations |
43,163 | 68,238 | 35,372 | (103,372 | ) | 43,401 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating loss from discontinued operations |
(1,026 | ) | | | | (1,026 | ) | |||||||||||||
Taxes (benefit) on loss from discontinued operations |
(304 | ) | | 44 | | (260 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss from discontinued operations |
(722 | ) | | (44 | ) | | (766 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
42,441 | 68,238 | 35,328 | (103,372 | ) | 42,635 | ||||||||||||||
Less: Income from continuing operations attributable to noncontrolling interests |
| | 194 | | 194 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income attributable to common shareholders |
42,441 | 68,238 | 35,134 | (103,372 | ) | 42,441 | ||||||||||||||
Other comprehensive loss attributable to common shareholders |
(5,234 | ) | (1,224 | ) | (3,559 | ) | 4,783 | (5,234 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income attributable to common shareholders |
$ | 37,207 | $ | 67,014 | $ | 31,575 | $ | (98,589 | ) | $ | 37,207 | |||||||||
|
|
|
|
|
|
|
|
|
|
28
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three Months Ended July 1, 2012 | ||||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Condensed Consolidated |
||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Net revenues |
$ | | $ | 235,051 | $ | 204,785 | $ | (56,504 | ) | $ | 383,332 | |||||||||
Cost of goods sold |
| 137,054 | 118,186 | (56,272 | ) | 198,968 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit |
| 97,997 | 86,599 | (232 | ) | 184,364 | ||||||||||||||
Selling, general and administrative expenses |
12,929 | 59,789 | 32,580 | 653 | 105,951 | |||||||||||||||
Research and development expenses |
| 12,012 | 1,690 | | 13,702 | |||||||||||||||
Restructuring and other impairment charges |
| 280 | 41 | | 321 | |||||||||||||||
Gain on sales of businesses and assets |
(116,194 | ) | | (332 | ) | 116,194 | (332 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from continuing operations before interest and taxes |
103,265 | 25,916 | 52,620 | (117,079 | ) | 64,722 | ||||||||||||||
Interest expense |
36,626 | (20,054 | ) | 1,668 | | 18,240 | ||||||||||||||
Interest income |
(128 | ) | | (378 | ) | | (506 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from continuing operations before taxes |
66,767 | 45,970 | 51,330 | (117,079 | ) | 46,988 | ||||||||||||||
Taxes (benefit) on income from continuing operations |
(17,209 | ) | 16,829 | 723 | (621 | ) | (278 | ) | ||||||||||||
Equity in net income of consolidated subsidiaries |
(40,616 | ) | 47,764 | | (7,148 | ) | | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from continuing operations |
43,360 | 76,905 | 50,607 | (123,606 | ) | 47,266 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) from discontinued operations |
(1,037 | ) | (9,265 | ) | 2,253 | | (8,049 | ) | ||||||||||||
Taxes (benefit) on income (loss) from discontinued operations |
(290 | ) | (3,521 | ) | 129 | | (3,682 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from discontinued operations |
(747 | ) | (5,744 | ) | 2,124 | | (4,367 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
42,613 | 71,161 | 52,731 | (123,606 | ) | 42,899 | ||||||||||||||
Less: Income from continuing operations attributable to noncontrolling interests |
| | 286 | | 286 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income attributable to common shareholders |
42,613 | 71,161 | 52,445 | (123,606 | ) | 42,613 | ||||||||||||||
Other comprehensive loss attributable to common shareholders |
(62,945 | ) | (76,659 | ) | (62,453 | ) | 139,112 | (62,945 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive loss attributable to common shareholders |
$ | (20,332 | ) | $ | (5,498 | ) | $ | (10,008 | ) | $ | 15,506 | $ | (20,332 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
29
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Six Months Ended June 30, 2013 | ||||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Condensed Consolidated |
||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Net revenues |
$ | | $ | 502,868 | $ | 469,952 | $ | (140,884 | ) | $ | 831,936 | |||||||||
Cost of goods sold |
| 296,436 | 267,895 | (142,405 | ) | 421,926 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit |
| 206,432 | 202,057 | 1,521 | 410,010 | |||||||||||||||
Selling, general and administrative expenses |
31,827 | 126,492 | 85,090 | (206 | ) | 243,203 | ||||||||||||||
Research and development expenses |
| 27,089 | 4,442 | | 31,531 | |||||||||||||||
Restructuring and other impairment charges |
| 9,278 | 12,843 | | 22,121 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before interest and taxes |
(31,827 | ) | 43,573 | 99,682 | 1,727 | 113,155 | ||||||||||||||
Interest expense |
67,190 | (42,144 | ) | 3,572 | | 28,618 | ||||||||||||||
Interest income |
(3 | ) | | (311 | ) | | (314 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before taxes |
(99,014 | ) | 85,717 | 96,421 | 1,727 | 84,851 | ||||||||||||||
Taxes (benefit) on income (loss) from continuing operations |
(35,746 | ) | 27,980 | 20,739 | 776 | 13,749 | ||||||||||||||
Equity in net income of consolidated subsidiaries |
134,253 | 65,749 | | (200,002 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from continuing operations |
70,985 | 123,486 | 75,682 | (199,051 | ) | 71,102 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) from discontinued operations |
(2,152 | ) | | 368 | | (1,784 | ) | |||||||||||||
Taxes (benefit) on income (loss) from discontinued operations |
(646 | ) | | 90 | | (556 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from discontinued operations |
(1,506 | ) | | 278 | | (1,228 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
69,479 | 123,486 | 75,960 | (199,051 | ) | 69,874 | ||||||||||||||
Less: Income from continuing operations attributable to noncontrolling interests |
| | 395 | | 395 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income attributable to common shareholders |
69,479 | 123,486 | 75,565 | (199,051 | ) | 69,479 | ||||||||||||||
Other comprehensive loss attributable to common shareholders |
(30,710 | ) | (33,350 | ) | (27,372 | ) | 60,722 | (30,710 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income attributable to common shareholders |
$ | 38,769 | $ | 90,136 | $ | 48,193 | $ | (138,329 | ) | $ | 38,769 | |||||||||
|
|
|
|
|
|
|
|
|
|
30
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Six Months Ended July 1, 2012 | ||||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Condensed Consolidated |
||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Net revenues |
$ | | $ | 473,548 | $ | 409,706 | $ | (119,355 | ) | $ | 763,899 | |||||||||
Cost of goods sold |
| 278,961 | 233,622 | (117,162 | ) | 395,421 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit |
| 194,587 | 176,084 | (2,193 | ) | 368,478 | ||||||||||||||
Selling, general and administrative expenses |
28,569 | 121,377 | 67,831 | 310 | 218,087 | |||||||||||||||
Research and development expenses |
| 21,919 | 3,336 | | 25,255 | |||||||||||||||
Goodwill impairment |
| 331,779 | 349 | | 332,128 | |||||||||||||||
Restructuring and other impairment charges |
| (1,650 | ) | 646 | | (1,004 | ) | |||||||||||||
Gain on sales of businesses and assets |
(116,194 | ) | | (332 | ) | 116,194 | (332 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before interest and taxes |
87,625 | (278,838 | ) | 104,254 | (118,697 | ) | (205,656 | ) | ||||||||||||
Interest expense |
73,101 | (40,240 | ) | 3,590 | | 36,451 | ||||||||||||||
Interest income |
(253 | ) | (8 | ) | (723 | ) | | (984 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations before taxes |
14,777 | (238,590 | ) | 101,387 | (118,697 | ) | (241,123 | ) | ||||||||||||
Taxes (benefit) on income (loss) from continuing operations |
(35,061 | ) | 17,193 | 14,495 | (903 | ) | (4,276 | ) | ||||||||||||
Equity in net income of consolidated subsidiaries |
(290,814 | ) | 78,760 | | 212,054 | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from continuing operations |
(240,976 | ) | (177,023 | ) | 86,892 | 94,260 | (236,847 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) from discontinued operations |
(91 | ) | (9,429 | ) | 2,400 | | (7,120 | ) | ||||||||||||
Taxes (benefit) on income (loss) from discontinued operations |
55 | (3,584 | ) | 171 | | (3,358 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) from discontinued operations |
(146 | ) | (5,845 | ) | 2,229 | | (3,762 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
(241,122 | ) | (182,868 | ) | 89,121 | 94,260 | (240,609 | ) | ||||||||||||
Less: Income from continuing operations attributable to noncontrolling interests |
| | 513 | | 513 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) attributable to common shareholders |
(241,122 | ) | (182,868 | ) | 88,608 | 94,260 | (241,122 | ) | ||||||||||||
Other comprehensive loss attributable to common shareholders |
(28,902 | ) | (43,257 | ) | (34,766 | ) | 78,023 | (28,902 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) attributable to common shareholders |
$ | (270,024 | ) | $ | (226,125 | ) | $ | 53,842 | $ | 172,283 | $ | (270,024 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
31
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TELEFLEX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2013 | ||||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Condensed Consolidated |
||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | 28,093 | $ | | $ | 253,325 | $ | | $ | 281,418 | ||||||||||
Accounts receivable, net |
1,325 | 845,867 | 540,488 | (1,075,799 | ) | 311,881 | ||||||||||||||
Inventories, net |
| 213,247 | 149,733 | (14,372 | ) | 348,608 | ||||||||||||||
Prepaid expenses and other current assets |
7,010 | 4,735 | 16,025 | | 27,770 | |||||||||||||||
Prepaid taxes |
15,872 | | 17,251 | | 33,123 | |||||||||||||||
Deferred tax assets |
14,051 | 24,227 | 7,693 | | 45,971 | |||||||||||||||
Assets held for sale |
| 2,740 | 5,195 | | 7,935 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
66,351 | 1,090,816 | 989,710 | (1,090,171 | ) | 1,056,706 | ||||||||||||||
Property, plant and equipment, net |
7,347 | 185,529 | 118,588 | | 311,464 | |||||||||||||||
Goodwill |
| 710,786 | 529,806 | | 1,240,592 | |||||||||||||||
Intangibles assets, net |
| 758,520 | 294,325 | | 1,052,845 | |||||||||||||||
Investments in affiliates |
5,326,916 | 1,290,138 | 21,263 | (6,636,427 | ) | 1,890 | ||||||||||||||
Deferred tax assets |
58,641 | | 2,994 | (61,549 | ) | 86 | ||||||||||||||
Other assets |
32,229 | 2,738,907 | 476,276 | (3,186,858 | ) | 60,554 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 5,491,484 | $ | 6,774,696 | $ | 2,432,962 | $ | (10,975,005 | ) | $ | 3,724,137 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Current liabilities |
||||||||||||||||||||
Current borrowings |
$ | | $ | | $ | 4,700 | $ | | $ | 4,700 | ||||||||||
Accounts payable |
81,392 | 957,737 | 116,534 | (1,079,170 | ) | 76,493 | ||||||||||||||
Accrued expenses |
17,613 | 23,912 | 36,625 | | 78,150 | |||||||||||||||
Current portion of contingent consideration |
| 11,761 | 608 | | 12,369 | |||||||||||||||
Payroll and benefit-related liabilities |
26,876 | 7,356 | 26,883 | | 61,115 | |||||||||||||||
Accrued interest |
8,956 | | 4 | | 8,960 | |||||||||||||||
Income taxes payable |
| | 17,917 | | 17,917 | |||||||||||||||
Other current liabilities |
1,212 | 427 | 1,892 | | 3,531 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
136,049 | 1,001,193 | 205,163 | (1,079,170 | ) | 263,235 | ||||||||||||||
Long-term borrowings |
970,825 | | | | 970,825 | |||||||||||||||
Deferred tax liabilities |
| 418,108 | 56,987 | (61,549 | ) | 413,546 | ||||||||||||||
Pension and other postretirement benefit liabilities |
99,994 | 37,598 | 18,831 | | 156,423 | |||||||||||||||
Noncurrent liability for uncertain tax positions |
14,496 | 25,728 | 26,928 | | 67,152 | |||||||||||||||
Other liabilities |
2,470,688 | 20,372 | 749,181 | (3,188,812 | ) | 51,429 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
3,692,052 | 1,502,999 | 1,057,090 | (4,329,531 | ) | 1,922,610 | ||||||||||||||
Total common shareholders equity |
1,799,432 | 5,271,697 | 1,373,777 | (6,645,474 | ) | 1,799,432 | ||||||||||||||
Noncontrolling interest |
| | 2,095 | | 2,095 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total equity |
1,799,432 | 5,271,697 | 1,375,872 | (6,645,474 | ) | 1,801,527 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and equity |
$ | 5,491,484 | $ | 6,774,696 | $ | 2,432,962 | $ | (10,975,005 | ) | $ | 3,724,137 | |||||||||
|
|
|
|
|
|
|
|
|
|
32
TELEFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2012 | ||||||||||||||||||||
Parent Company |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Condensed Consolidated |
||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | 70,860 | $ | 1,989 | $ | 264,190 | $ | | $ | 337,039 | ||||||||||
Accounts receivable, net |
2,147 | 774,280 | 511,609 | (990,060 | ) | 297,976 | ||||||||||||||
Inventories, net |
| 202,748 | 136,492 | (15,893 | ) | 323,347 | ||||||||||||||
Prepaid expenses and other current assets |
7,769 | 5,294 | 15,649 | | 28,712 | |||||||||||||||
Prepaid taxes |
11,079 | | 19,217 | (3,136 | ) | 27,160 | ||||||||||||||
Deferred tax assets |
13,987 | 27,130 | 6,810 | (1,045 | ) | 46,882 | ||||||||||||||
Assets held for sale |
| 2,738 | 5,225 | | 7,963 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
105,842 | 1,014,179 | 959,192 | (1,010,134 | ) | 1,069,079 | ||||||||||||||
Property, plant and equipment, net |
7,258 | 168,451 | 122,236 | | 297,945 | |||||||||||||||
Goodwill |
| 702,947 | 546,509 | | 1,249,456 | |||||||||||||||
Intangibles assets, net |
| 782,631 | 276,161 | | 1,058,792 | |||||||||||||||
Investments in affiliates |
5,226,567 | 1,281,201 | 21,379 | (6,527,081 | ) | 2,066 | ||||||||||||||
Deferred tax assets |
59,644 | | 3,197 | (62,545 | ) | 296 | ||||||||||||||
Other assets |
33,937 | 2,707,264 | 720,184 | (3,399,522 | ) | 61,863 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 5,433,248 | $ | 6,656,673 | $ | 2,648,858 | &nbs |