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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 28, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                    .
Commission file number 1-5353
TELEFLEX INCORPORATED
(Exact name of registrant as specified in its charter)

Delaware   23-1147939
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. employer
identification no.)
550 E. Swedesford Rd., Suite 400 Wayne, PA 19087
(Address of principal executive offices and zip code)
(610) 225-6800
(Registrant’s telephone number, including area code)
(None)
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $1.00 per share TFX New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes       No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
       
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  
The registrant had 46,516,030 shares of common stock, par value $1.00 per share, outstanding as of July 28, 2020.



TELEFLEX INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 28, 2020
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1


PART I FINANCIAL INFORMATION
Item 1. Financial Statements
TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
  Three Months Ended Six Months Ended
  June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019
  (Dollars and shares in thousands, except per share)
Net revenues $ 567,034    $ 652,507    $ 1,197,676    $ 1,266,091   
Cost of goods sold 288,662    300,269    585,680    589,883   
Gross profit 278,372    352,238    611,996    676,208   
Selling, general and administrative expenses 191,193    215,500    338,989    422,421   
Research and development expenses 29,364    27,595    56,760    54,745   
Restructuring and impairment charges 19,005    1,685    20,351    19,080   
Gain on sale of assets —    —    —    (2,739)  
Income from continuing operations before interest and taxes 38,810    107,458    195,896    182,701   
Interest expense 15,682    20,758    31,121    43,450   
Interest income (163)   (472)   (742)   (811)  
Income from continuing operations before taxes 23,291    87,172    165,517    140,062   
Taxes on income from continuing operations 11,848    3,844    22,922    14,816   
Income from continuing operations 11,443    83,328    142,595    125,246   
Operating income (loss) from discontinued operations 22    61    18    (1,282)  
Tax benefit (expense) on operating loss from discontinued operations   14      (308)  
Income (loss) from discontinued operations 13    47    11    (974)  
Net income $ 11,456    $ 83,375    $ 142,606    $ 124,272   
Earnings per share:    
Basic:    
Income from continuing operations $ 0.25    $ 1.80    $ 3.07    $ 2.72   
Income (loss) from discontinued operations —    0.01    —    (0.02)  
Net income $ 0.25    $ 1.81    $ 3.07    $ 2.70   
Diluted:    
Income from continuing operations $ 0.24    $ 1.77    $ 3.02    $ 2.67   
Loss from discontinued operations —    —    —    (0.03)  
Net income $ 0.24    $ 1.77    $ 3.02    $ 2.64   
Weighted average common shares outstanding    
Basic 46,442    46,172    46,412    46,111   
Diluted 47,242    47,036    47,237    46,989   
The accompanying notes are an integral part of the condensed consolidated financial statements.
2


TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
  Three Months Ended Six Months Ended
  June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019
(Dollars in thousands)
Net income $ 11,456    $ 83,375    $ 142,606    $ 124,272   
Other comprehensive income (loss), net of tax:    
Foreign currency translation, net of tax of $$2,295, $(298), $(5,286), and $(1,759) for the three and six months periods, respectively
17,654    12,568    (545)   12,332   
Pension and other postretirement benefit plans adjustment, net of tax of $(404), $(446), $(926), and $(836) for the three and six months periods, respectively
1,345    1,459    3,034    2,688   
Derivatives qualifying as hedges, net of tax of $64, $83, $436, and $82 for the three and six months periods, respectively
(1,095)   755    (4,912)   158   
Other comprehensive income (loss), net of tax: 17,904    14,782    (2,423)   15,178   
Comprehensive income $ 29,360    $ 98,157    $ 140,183    $ 139,450   
The accompanying notes are an integral part of the condensed consolidated financial statements.
3


TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
  June 28, 2020 December 31, 2019
  (Dollars in thousands)
ASSETS    
Current assets    
Cash and cash equivalents $ 553,535    $ 301,083   
Accounts receivable, net 374,886    418,673   
Inventories 514,755    476,557   
Prepaid expenses and other current assets 94,381    97,943   
Prepaid taxes 7,060    12,076   
Total current assets 1,544,617    1,306,332   
Property, plant and equipment, net 432,401    430,719   
Operating lease assets 101,982    113,160   
Goodwill 2,343,561    2,245,305   
Intangible assets, net 2,260,863    2,156,285   
Deferred tax assets 5,589    5,572   
Other assets 76,117    52,447   
Total assets $ 6,765,130    $ 6,309,820   
LIABILITIES AND EQUITY    
Current liabilities    
Current borrowings $ 83,000    $ 50,000   
Accounts payable 107,140    102,916   
Accrued expenses 103,557    100,466   
Current portion of contingent consideration 25,243    148,090   
Payroll and benefit-related liabilities 80,602    115,981   
Accrued interest 6,887    5,514   
Income taxes payable 18,340    6,692   
Other current liabilities 31,846    33,396   
Total current liabilities 456,615    563,055   
Long-term borrowings 2,328,791    1,858,943   
Deferred tax liabilities 488,968    439,558   
Pension and postretirement benefit liabilities 60,866    82,719   
Noncurrent liability for uncertain tax positions 12,381    10,294   
Noncurrent contingent consideration 24,036    71,818   
Noncurrent operating lease liabilities 91,917    101,372   
Other liabilities 204,154    202,741   
Total liabilities 3,667,728    3,330,500   
Commitments and contingencies
Total shareholders' equity 3,097,402    2,979,320   
Total liabilities and shareholders' equity $ 6,765,130    $ 6,309,820   
The accompanying notes are an integral part of the condensed consolidated financial statements.

4


TELEFLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Six Months Ended
June 28, 2020 June 30, 2019
(Dollars in thousands)
Cash flows from operating activities of continuing operations:    
Net income $ 142,606    $ 124,272   
Adjustments to reconcile net income to net cash provided by operating activities:    
(Income) loss from discontinued operations (11)   974   
Depreciation expense 34,461    31,966   
Intangible asset amortization expense 78,638    75,285   
Deferred financing costs and debt discount amortization expense 1,984    2,249   
Gain on sale of assets —    (2,739)  
Fair value step up of acquired inventory sold 1,707    —   
Changes in contingent consideration (29,951)   25,456   
Impairment of long-lived assets —    6,911   
Stock-based compensation 8,482    12,700   
Deferred income taxes, net 1,055    (5,495)  
Payments for contingent consideration (79,771)   (26,092)  
Interest benefit on swaps designated as net investment hedges (9,805)   (8,799)  
Other (18,981)   4,272   
Changes in assets and liabilities, net of effects of acquisitions and disposals:    
Accounts receivable 45,843    (19,747)  
Inventories (34,875)   (33,970)  
Prepaid expenses and other assets 11,819    (6,381)  
Accounts payable, accrued expenses and other liabilities (26,449)   (6,231)  
Income taxes receivable and payable, net 7,257    (17,347)  
   Net cash provided by operating activities from continuing operations 134,009    157,284   
Cash flows from investing activities of continuing operations:    
Expenditures for property, plant and equipment (39,052)   (56,107)  
Proceeds from sale of assets 400    1,178   
Payments for businesses and intangibles acquired, net of cash acquired (265,895)   (1,025)  
Net interest proceeds on swaps designated as net investment hedges 9,986    8,330   
Net cash used in investing activities from continuing operations (294,561)   (47,624)  
Cash flows from financing activities of continuing operations:    
Proceeds from new borrowings 1,010,000    25,000   
Reduction in borrowings (500,000)   (52,500)  
Debt extinguishment, issuance and amendment fees (7,727)   (4,703)  
Net proceeds from share based compensation plans and the related tax impacts 2,668    7,829   
Payments for contingent consideration (60,947)   (111,928)  
Dividends paid (31,558)   (31,347)  
Net cash provided by (used in) financing activities from continuing operations 412,436    (167,649)  
Cash flows from discontinued operations:    
Net cash (used in) provided by operating activities (317)   2,799   
Net cash (used in) provided by discontinued operations (317)   2,799   
Effect of exchange rate changes on cash and cash equivalents 885    1,925   
Net increase (decrease) in cash and cash equivalents 252,452    (53,265)  
Cash and cash equivalents at the beginning of the period 301,083    357,161   
Cash and cash equivalents at the end of the period $ 553,535    $ 303,896   
The accompanying notes are an integral part of the condensed consolidated financial statements.
5


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

Common Stock Additional
Paid In
Capital
Retained
Earnings
Accumulated Other Comprehensive Loss Treasury Stock Total
Shares Dollars Shares Dollars
(Dollars and shares in thousands, except per share)
Balance at December 31, 2019 47,536    $ 47,536    $ 616,980    $ 2,824,916    $ (344,392)   1,182    $ (165,720)   $ 2,979,320   
Cumulative effect adjustment resulting from the adoption of new accounting standards (791)   (791)  
Net income 131,150    131,150   
Cash dividends ($0.34 per share)
(15,767)   (15,767)  
Other comprehensive loss (20,327)   (20,327)  
Shares issued under compensation plans 24    24    (3,074)   (37)   1,748    (1,302)  
Deferred compensation 383    (5)   358    741   
Balance at March 29, 2020 47,560    47,560    614,289    2,939,508    (364,719)   1,140    (163,614)   3,073,024   
Net income 11,456    11,456   
Cash dividends ($0.34 per share)
(15,791)   (15,791)  
Other comprehensive income 17,904    17,904   
Shares issued under compensation plans 35    35    10,516    (3)   175    10,726   
Deferred compensation —    (1)   83    83   
Balance at June 28, 2020 47,595    $ 47,595    $ 624,805    $ 2,935,173    $ (346,815)   1,136    $ (163,356)   $ 3,097,402   
Common Stock Additional
Paid In
Capital
Retained
Earnings
Accumulated Other Comprehensive Loss Treasury Stock Total
Shares Dollars Shares Dollars
(Dollars and shares in thousands, except per share)
Balance at December 31, 2018
47,248    $ 47,248    $ 574,761    $ 2,427,599    $ (341,085)   1,232    $ (168,545)   $ 2,539,978   
Cumulative effect adjustment resulting from the adoption of new accounting standards (1,321)   (1,321)  
Net income
40,897    40,897   
Cash dividends ($0.34 per share)
(15,650)   (15,650)  
Other comprehensive income
396    396   
Shares issued under compensation plans
75    75    3,094    (40)   2,029    5,198   
Deferred compensation
127    (4)   253    380   
Balance at March 31, 2019
47,323    47,323    577,982    2,451,525    (340,689)   1,188    (166,263)   2,569,878   
Net income 83,375    83,375   
Cash dividends ($0.34 per share)
(15,697)   (15,697)  
Other comprehensive income 14,782    14,782   
Shares issued under compensation plans 77    77    12,252    (2)   177    12,506   
Balance as of June 30, 2019 47,400    $ 47,400    $ 590,234    $ 2,519,203    $ (325,907)   1,186    $ (166,086)   $ 2,664,844   

The accompanying notes are an integral part of the condensed consolidated financial statements.
6


TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1 — Basis of presentation
The accompanying unaudited condensed consolidated financial statements of Teleflex Incorporated and its subsidiaries (“we,” “us,” “our" and “Teleflex”) are prepared on the same basis as its annual consolidated financial statements.
In the opinion of management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary for the fair statement of the financial statements for interim periods in accordance with accounting principles generally accepted in the United States of America ("GAAP") and Rule 10-01 of Securities and Exchange Commission ("SEC") Regulation S-X, which sets forth the instructions for the form and content of presentation of financial statements included in Form 10-Q. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates particularly as it relates to estimates reliant on forecasts and other assumptions impacted by the COVID-19 pandemic, which are described in more detail in the 'Risks and uncertainties' section below. The results of operations for the periods reported are not necessarily indicative of those that may be expected for a full year.
In accordance with applicable accounting standards and as permitted by Rule 10-01 of Regulation S-X, 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. Therefore, our quarterly condensed consolidated financial statements should be read in conjunction with our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. For the three and six months ended June 28, 2020 intangible asset amortization expense of $21.1 million and $42.0 million, respectively, is included within costs of good sold. For the three and six months ended June 30, 2019, we reclassified intangible asset amortization expense of $20.7 million and $41.5 million, respectively, from selling, general and administrative expenses to cost of goods sold for comparability.
Risks and Uncertainties
We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict due to the rapidly evolving environment and continued uncertainties created by the COVID-19 pandemic. Among other things, the response to the COVID-19 pandemic has had the effect of reducing the number of elective procedures being carried out by our customers, thereby reducing demand for products used in elective procedures, while creating an increase in demand for products used in the treatment of patients with COVID-19. The COVID-19 pandemic has significantly impacted economic activity and markets around the world through government-mandated and self-imposed shut-downs in many countries, which were implemented to protect individuals and control the spread of COVID-19. If the pandemic continues and conditions worsen, it could negatively impact our business, results of operations, financial condition and liquidity in numerous ways, including, but not limited to, lower revenues in our product categories dependent on elective procedures; further disruption in the manufacture of our products including increased manufacturing and distribution costs; extended delays in or defaults on payments of outstanding receivables; and increased volatility and pricing in capital markets. Further, the COVID-19 pandemic may cause disruption to our suppliers or their suppliers and/or the distribution of our products, whether through our direct sales force or our distributors.
The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our employees, contractors, suppliers, customers and other business partners, all of which are uncertain and cannot be predicted. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results of operations is uncertain.
Note 2 — Recently issued accounting standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued new guidance that changes the methodology to be used to measure credit losses for certain financial instruments and financial assets, including trade receivables. The new guidance requires the recognition of an allowance that reflects the current estimate of
7


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

credit losses expected to be incurred over the life of the financial asset, based not only on historical experience and current conditions, but also on reasonable forecasts. The main objective of the new guidance is to provide financial statement users with more useful information in making decisions about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Under previous guidance, an entity reflects credit losses on financial assets measured on an amortized cost basis only when it is probable that losses have been incurred, generally considering only past events and current conditions in determining the incurred loss. We adopted the new standard on January 1, 2020 using a modified retrospective transition approach by recognizing a cumulative-effect adjustment of $0.8 million to reduce our opening balance of retained earnings as of the adoption date. Prior period amounts have not been adjusted and continue to reflect our historical accounting.
In December 2019, the FASB issued new guidance that simplifies various aspects of accounting for income taxes including those related to the step-up in the tax basis of goodwill, intraperiod tax allocations and the interim period effects of changes in tax laws or rates. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The majority of the modifications under the new guidance will be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings on January 1, 2021. We are currently evaluating the impact the guidance will have on our consolidated financial statements and related disclosures.
In March 2020, the SEC adopted final rules that amend the financial disclosure requirements for subsidiary issuers and guarantors of registered debt securities in Rule 3-10 of Regulation S-X. The SEC amended its financial disclosure requirements for companies that conduct registered debt offerings involving subsidiaries as either issuers or guarantors and affiliates whose securities are pledged as collateral. The SEC narrowed the circumstances that require separate financial statements of subsidiary issuers and guarantors and streamlined the alternative disclosures required in lieu of those statements. The SEC replaced the requirement for separate financial statements of affiliates whose securities are pledged as collateral for registered securities with requirements similar to those adopted for subsidiary issuers and guarantors. The new disclosures may be located, in all cases, outside of the financial statements. The rule is effective January 4, 2021, but earlier compliance is permitted. We adopted the new rule during the first quarter of 2020. The disclosures are now located within the Liquidity and Capital Resources section of Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.
From time to time, new accounting guidance is issued by the FASB or other standard setting bodies that is adopted by us as of the effective date or, in some cases where early adoption is permitted, in advance of the effective date. We have assessed the recently issued guidance that is not yet effective and, unless otherwise indicated above, believes the new guidance will not have a material impact on the consolidated results of operations, cash flows or financial position.
Note 3 - Net revenues
We primarily generate revenue from the sale of medical devices including single use disposable devices and, to a lesser extent, reusable devices, instruments and capital equipment. Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; this occurs upon the transfer of control of the products. Generally, transfer of control to the customer occurs at the point in time when our products are shipped from the manufacturing or distribution facility. For our Original Equipment and Development Services ("OEM") segment, most revenue is recognized over time because the OEM segment generates revenue from the sale of custom products that have no alternative use and we have an enforceable right to payment to the extent that performance has been completed. We market and sell products through our direct sales force and distributors to customers within the following end markets: (1) hospitals and healthcare providers; (2) other medical device manufacturers; and (3) home care providers such as pharmacies, which comprised 86%, 11% and 3% of consolidated net revenues, respectively, for the six months ended June 28, 2020. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. With respect to the custom products sold in the OEM segment, revenue is measured using the units produced output method. Payment is generally due 30 days from the date of invoice.

8


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

The following table disaggregates revenue by global product category for the three and six months ended June 28, 2020 and June 30, 2019.
Three Months Ended Six Months Ended
June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019
(Dollars in thousands)
Vascular access $ 164,958    $ 153,647    $ 315,214    $ 297,544   
Anesthesia 64,867    85,723    140,569    165,975   
Interventional 82,594    104,785    182,525    207,969   
Surgical 67,275    95,570    142,707    182,289   
Interventional urology 40,094    67,952    114,286    127,683   
OEM 55,832    56,428    119,219    110,666   
Other (1)
91,414    88,402    183,156    173,965   
Net revenues (2)
$ 567,034    $ 652,507    $ 1,197,676    $ 1,266,091   
(1) Revenues in the "Other" category in the table above include revenues generated from sales of our respiratory and urology products (other than interventional urology products).
(2) The product categories listed above are presented on a global basis, while each of our reportable segments other than the OEM reportable segment are defined based on the geographic location of its operations; the OEM reportable segment operates globally. Each of the geographically based reportable segments include net revenues from each of the non-OEM product categories listed above.
Note 4 — Acquisitions
On February 18, 2020, we acquired IWG High Performance Conductors, Inc. (HPC), a privately-held original equipment manufacturer of minimally invasive medical products and high performance conductors, for $260.0 million. The acquisition, which complements our OEM product portfolio, was financed using borrowings under our revolving credit facility. Based on the preliminary purchase price allocation, the assets acquired principally consist of customer relationships of $139.0 million, intellectual property of $40.0 million and goodwill of $107.1 million. The intangible assets are being amortized over a useful life of 20 years. Goodwill arising from the acquisition represents costs synergies, revenue growth attributable to anticipated increased market penetration from acquired products and future customers and is not tax deductible.
Note 5 — Restructuring and impairment charges
2020 Workforce reduction plan
During the second quarter of 2020, we committed to a workforce reduction designed to improve profitability and reduce cost primarily by streamlining certain sales and marketing functions in our EMEA segment and certain manufacturing operations in our OEM segment. The workforce reduction was initiated to further align the business with our high growth strategic objectives. We estimate that we will incur aggregate pre-tax restructuring charges of $10 million to $13 million, consisting primarily of termination benefits, and will result in future cash outlays. This program will be substantially complete during 2020 and as a result most of these charges are expected to be incurred prior to the end of 2020.

9


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

Footprint realignment plans
We have ongoing restructuring programs primarily related to the relocation of manufacturing operations to existing lower-cost locations and related workforce reductions (referred to as 2019, 2018 and 2014 Footprint realignment plans). The following tables provide a summary of our cost estimates and other information associated with these ongoing Footprint realignment plans:
2019 Footprint realignment plan (3)
2018 Footprint realignment plan
2014 Footprint realignment plan (4)
Program expense estimates: (Dollars in millions)
Termination benefits
$16 to $20
$60 to $70
$12 to $13
Other costs (1)
2 to 2
2 to 4
1 to 2
Restructuring charges
18 to 22
62 to 74
13 to 15
Restructuring related charges (2)
40 to 45
40 to 59
38 to 40
Total restructuring and restructuring related charges
$58 to $67
$102 to $133
$51 to $55
Other program estimates:
Expected cash outlays
$55 to $63
$99 to $127
$42 to $46
Expected capital expenditures
$27 to $33
$19 to $23
$25 to $26
Other program information:
Period initiated February 2019 May 2018 April 2014
Estimated period of substantial completion 2022
2022 (5)
2022
Aggregate restructuring charges $15.0 $62.1 $13.4
Restructuring reserve:
Balance as of June 28, 2020 $12.4 $50.5 $3.7
Restructuring related charges incurred:
Three Months Ended June 28, 2020 $3.9 $1.5 $0.8
Six Months Ended June 28, 2020 $6.4 $2.7 $1.7
Aggregate restructuring related charges $13.0 $9.9 $33.9
(1)Includes facility closure, employee relocation, equipment relocation and outplacement costs.
(2)Restructuring related charges represent costs that are directly related to the programs and principally constitute costs to transfer manufacturing operations to the existing lower-cost locations, project management costs and accelerated depreciation. The 2018 Footprint realignment plan also includes a charge associated with our exit from the facilities that is expected to be imposed by the taxing authority in the affected jurisdiction. Excluding this tax charge, substantially all of the restructuring related charges are expected to be recognized within cost of goods sold.
(3)We refined the disclosed ranges for the program expense and other program estimates in consideration of the progress made to date as well as the actions remaining.
(4)We delayed the timing of substantial completion from our prior estimate of 2021 due to an extension in the development and qualification timeline, identified during the second quarter of 2020, for a component to be included in certain of our kits sold by our anesthesia business in North America. The shift in timing also resulted in an increase in the total program cost estimate and related cash outlays and as a result, we increased the high end of the ranges by $3 million. With respect to capital expenditures, we have also refined the range.
(5)We accelerated the timing of substantial completion from our prior estimate of 2024 to take advantage of an opportunity we identified during the second quarter of 2020 to accelerate the recognition of estimated savings.
Three Months Ended June 28, 2020
Termination benefits
Other costs (1)
Total
(Dollars in thousands)
2020 Workforce reduction plan $ 10,564    $ —    $ 10,564   
2019 Footprint realignment plan 323    82    405   
2018 Footprint realignment plan 7,545    52    7,597   
Other restructuring programs (2)
169    270    439   
Restructuring charges $ 18,601    $ 404    $ 19,005   
10


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

Three Months Ended June 30, 2019
Termination benefits
Other costs (1)
Total
(Dollars in thousands)
2019 Footprint realignment plan $ (459)   $ 30    $ (429)  
2018 Footprint realignment plan (2,275)   134    (2,141)  
Other restructuring programs (3)
62    312    374   
Restructuring charges (credits) (2,672)   476    (2,196)  
Asset impairment charges —    3,881    3,881   
Restructuring and impairment charges $ (2,672)   $ 4,357    $ 1,685   

Six Months Ended June 28, 2020
Termination benefits
Other costs (1)
Total
(Dollars in thousands)
2020 Workforce reduction plan $ 10,564    $ —    $ 10,564   
2019 Footprint realignment plan 1,152    91    1,243   
2018 Footprint realignment plan 7,859    133    7,992   
Other restructuring programs (2)
62    490    552   
Restructuring charges $ 19,637    $ 714    $ 20,351   

Six Months Ended June 30, 2019
Termination benefits
Other costs (1)
Total
(Dollars in thousands)
2019 Footprint realignment plan $ 12,516    $ 30    $ 12,546   
2018 Footprint realignment plan (1,838)   708    (1,130)  
Other restructuring programs (3)
188    565    753   
Restructuring charges 10,866    1,303    12,169   
Asset impairment charges —    6,911    6,911   
Restructuring and impairment charges $ 10,866    $ 8,214    $ 19,080   
(1) Other costs include facility closure, contract termination and other exit costs.
(2) Includes program initiated during third quarter of 2019 as well as the 2016 and 2014 Footprint realignment plans.
(3) Includes the Vascular Solutions integration program (initiated in 2017) as well as the 2016 and 2014 Footprint realignment plans.
Note 6 — Inventories
Inventories as of June 28, 2020 and December 31, 2019 consisted of the following:
  June 28, 2020 December 31, 2019
  (Dollars in thousands)
Raw materials $ 137,231    $ 114,302   
Work-in-process 72,526    71,479   
Finished goods 304,998    290,776   
Inventories $ 514,755    $ 476,557   

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

Note 7 — Goodwill and other intangible assets
The following table provides information relating to changes in the carrying amount of goodwill by reportable operating segment for the six months ended June 28, 2020:
  Americas EMEA Asia OEM Total
  (Dollars in thousands)
December 31, 2019 $ 1,550,925    $ 475,772    $ 213,725    $ 4,883    $ 2,245,305   
Goodwill related to acquisitions —    —    —    107,127    107,127   
Currency translation adjustment (4,125)   (2,618)   (2,128)   —    (8,871)  
June 28, 2020 $ 1,546,800    $ 473,154    $ 211,597    $ 112,010    $ 2,343,561   
The gross carrying amount of, and accumulated amortization relating to, intangible assets as of June 28, 2020 and December 31, 2019 were as follows:
  Gross Carrying Amount Accumulated Amortization
  June 28, 2020 December 31, 2019 June 28, 2020 December 31, 2019
  (Dollars in thousands)
Customer relationships $ 1,164,518    $ 1,021,852    $ (393,057)   $ (367,585)  
In-process research and development 28,109    27,940    —    —   
Intellectual property 1,392,124    1,351,990    (443,927)   (402,340)  
Distribution rights 23,419    23,369    (19,455)   (18,859)  
Trade names 563,070    563,315    (58,035)   (50,718)  
Non-compete agreements 22,768    22,618    (18,671)   (15,297)  
 
$ 3,194,008    $ 3,011,084    $ (933,145)   $ (854,799)  

Note 8 — Borrowings
Our borrowings at June 28, 2020 and December 31, 2019 were as follows:
  June 28, 2020 December 31, 2019
  (Dollars in thousands)
Senior Credit Facility:    
Revolving credit facility, at a rate of 1.55% at June 28, 2020, due 2024
$ 285,000    $ 300,000   
Term loan facility, at a rate of 1.55% at June 28, 2020, due 2024
673,000    673,000   
4.875% Senior Notes due 2026
400,000    400,000   
4.625% Senior Notes due 2027
500,000    500,000   
4.25% Senior Notes due 2028
500,000    —   
Securitization program, at a rate of 0.93% at June 28, 2020
75,000    50,000   
2,433,000    1,923,000   
Less: Unamortized debt issuance costs (21,209)   (14,057)  
  2,411,791    1,908,943   
Current borrowings (83,000)   (50,000)  
Long-term borrowings $ 2,328,791    $ 1,858,943   
4.25% Senior Notes due 2028
On May 27, 2020, we issued $500.0 million of 4.25% Senior Notes due 2028 (the "2028 Notes"). We will pay interest on the 2028 Notes semi-annually on June 1 and December 1, commencing on December 1, 2020, at a rate of 4.25% per year. The 2028 Notes mature on June 1, 2028 unless earlier redeemed at our option, as described below, or purchased at the holder’s option under specified circumstances following a Change of Control or Event of
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TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Default (each as defined in the indenture related to the 2028 Notes), coupled with a downgrade in the ratings of the 2028 Notes, or upon our election to exercise its optional redemption rights, as described below. We incurred transaction fees of $8.4 million, including underwriters’ discounts and commissions, in connection with the offering of the 2028 Notes, which were recorded on the consolidated balance sheet as a reduction to long-term borrowings and are being amortized over the term of the 2028 Notes. We used the net proceeds from the offering to repay borrowings under our revolving credit facility.
Our obligations under the 2028 Notes are fully and unconditionally guaranteed, jointly and severally, by each of our existing and future 100% owned domestic subsidiaries that is a guarantor or other obligor under the Credit Agreement and by certain of our other 100% owned domestic subsidiaries.
At any time on or after June 1, 2023, we may, on one or more occasions, redeem some or all of the 2028 Notes at a redemption price of 102.125% of the principal amount of the 2028 Notes subject to redemption, declining, in annual increments of 1.0625%, to 100% of the principal amount on June 1, 2025, plus accrued and unpaid interest. In addition, at any time prior to June 1, 2023, we may, on one or more occasions, redeem some or all of the 2028 Notes at a redemption price equal to 100% of the principal amount of the 2028 Notes redeemed, plus a “make-whole” premium and any accrued and unpaid interest. The “make-whole” premium is the greater of (a) 1.0% of the principal amount of the 2028 Notes subject to redemption or (b) the excess, if any, over the principal amount of the 2028 Notes, of the present value, on the redemption date, of the sum of (i) the June 1, 2023, optional redemption price plus (ii) all required interest payments on the 2028 Notes through June 1, 2023, (other than accrued and unpaid interest to the redemption date), generally computed using a discount rate equal to the yield to maturity of U.S. Treasury securities with a constant maturity for the period most nearly equal to the period from the redemption date to June 1, 2023 (unless the period is less than one year, in which case the weekly average yield on traded U.S. Treasury securities adjusted to a constant maturity of one year will be used), plus 50 basis points.
In addition, at any time prior to June 1, 2023, we may, on one or more occasions, redeem up to 40% of the aggregate principal amount of the 2028 Notes, using the proceeds of specified types of our equity offerings and subject to specified conditions, at a redemption price equal to 104.25% of the principal amount of the Notes redeemed, plus accrued and unpaid interest.
The indenture relating to the 2028 Notes contains covenants that, among other things, limit or restrict our ability, and the ability of our subsidiaries, to create liens; merge, consolidate, sell or otherwise dispose of all or substantially all of our assets; and enter into sale leaseback transactions.
Securitization program
On March 30, 2020, we amended our accounts receivable securitization facility to increase the maximum available capacity from $50 million to $75 million.
Note 9 — Financial instruments
Foreign currency forward contracts
We use derivative instruments for risk management purposes. Foreign currency forward contracts designated as cash flow hedges are used to manage foreign currency transaction exposure. Foreign currency forward contracts not designated as hedges for accounting purposes are used to manage exposure related to near term foreign currency denominated monetary assets and liabilities. We enter into the non-designated foreign currency forward contracts for periods consistent with our currency translation exposures, which generally approximate one month. For the three and six months ended June 28, 2020 we recognized a loss of $0.8 million and a gain of $0.8 million, respectively, related to non-designated foreign currency forward contract. For the three and six months ended June 30, 2019 we recognized a gain of $1.5 million and a loss of $1.6 million, respectively, related to non-designated foreign currency forward contracts.
The total notional amount for all open foreign currency forward contracts designated as cash flow hedges as of June 28, 2020 and December 31, 2019 was $126.6 million and $132.0 million, respectively. The total notional amount for all open non-designated foreign currency forward contracts as of June 28, 2020 and December 31, 2019
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

was $153.3 million and $145.1 million, respectively. All open foreign currency forward contracts as of June 28, 2020 have durations of 12 months or less.
Cross-currency interest rate swaps
During 2019, we entered into cross-currency swap agreements with five different financial institution counterparties to hedge against the effect of variability in the U.S. dollar to euro exchange rate. Under the terms of the cross-currency swap agreements, we have notionally exchanged $250 million at an annual interest rate of 4.875% for €219.2 million at an annual interest rate of 2.4595%. The swap agreements are designed as net investment hedges and expire on March 4, 2024.
During 2018, we entered into cross-currency swap agreements with six different financial institution counterparties to hedge against the effect of variability in the U.S. dollar to euro exchange rate. Under the terms of the cross-currency swap agreements, we have notionally exchanged $500 million at an annual interest rate of 4.625% for €433.9 million at an annual interest rate of 1.942%. The swap agreements are designed as net investment hedges and expire on October 4, 2023.
The swap agreements described above require an exchange of the notional amounts upon expiration or earlier termination of the agreements. We and the counterparties have agreed to effect the exchange through a net settlement.
The cross-currency swaps are marked to market at each reporting date and any changes in fair value are recognized as a component of accumulated other comprehensive income (loss) ("AOCI"). For the three and six months ended June 28, 2020, we recognized foreign exchange a loss of $7.4 million and a gain of $17.6 million, respectively, within AOCI related to the cross-currency swaps. For the three and six months ended June 30, 2019, we recognized foreign exchange loss of $0.7 million and gain of $9.8 million, respectively, within AOCI related to the cross-currency swaps. For the three and six months ended June 28, 2020, we recognized $4.9 million and $9.8 million, respectively, in interest benefit related to the cross-currency swaps. For the three and six months ended June 30, 2019, we recognized $4.9 million and $8.8 million, respectively, in interest benefit related to the cross-currency swaps.
Balance sheet presentation
The following table presents the locations in the condensed consolidated balance sheet and fair value of derivative financial instruments as of June 28, 2020 and December 31, 2019:
June 28, 2020 December 31, 2019
  (Dollars in thousands)
Asset derivatives:    
Designated foreign currency forward contracts $ 995    $ 1,659   
Non-designated foreign currency forward contracts 105    192   
Cross-currency interest rate swaps 21,652    21,575   
Prepaid expenses and other current assets 22,752    23,426   
Cross-currency interest rate swaps 35,701    13,066   
Other assets 35,701    13,066   
Total asset derivatives $ 58,453    $ 36,492   
Liability derivatives:    
Designated foreign currency forward contracts $ 3,391    $ 1,285   
Non-designated foreign currency forward contracts 187    102   
Other current liabilities 3,578    1,387   
Total liability derivatives $ 3,578    $ 1,387   
See Note 11 for information on the location and amount of gains and losses attributable to derivatives that were reclassified from AOCI to expense (income), net of tax.
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TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

There was no ineffectiveness related to our cash flow hedges during the three and six months ended June 28, 2020 and June 30, 2019.
Trade receivables
In the ordinary course of business, we grant non-interest bearing trade credit to our customers on normal credit terms. In an effort to reduce our credit risk, we (i) establish credit limits for all of our customer relationships, (ii) perform ongoing credit evaluations of our customers’ financial condition, (iii) monitor the payment history and aging of our customers’ receivables, and (iv) monitor open orders against an individual customer’s outstanding receivable balance.
Our allowance for credit losses is maintained for trade accounts receivable based on the expected collectability of accounts receivable, after considering our historical collection experience, the length of time an account is outstanding, the financial position of the customer, information provided by credit rating services in addition to new requirements under the accounting guidance, effective January 1, 2020, that includes the consideration of events or circumstances indicating historic collection rates may not be indicative of future collectability, for example, potential customer liquidity concerns resulting from COVID-19, that may impact the collectability of our receivables as well as our estimate of credit losses expected to be incurred over the life of our receivables. To date, we have not experienced significant payment defaults by, or identified other significant collectability concerns with, our customers. The assumptions utilized in our current estimates may change due to changes in circumstances, additional future developments and the resolution of other contingencies.
The allowance for credit losses as of June 28, 2020 and December 31, 2019 was $11.6 million and $9.1 million, respectively. The current portion of the allowance for credit losses, which was $7.3 million and $5.3 million as of June 28, 2020 and December 31, 2019, respectively, was recognized as a reduction of accounts receivable, net.
Note 10 — Fair value measurement
The following tables provide information regarding our financial assets and liabilities measured at fair value on a recurring basis as of June 28, 2020 and December 31, 2019:
 
Total carrying value at
 June 28, 2020
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 $ 10,557    $ 10,557    $ —    $ —   
Derivative assets 58,453    —    58,453    —   
Derivative liabilities 3,578    —    3,578    —   
Contingent consideration liabilities 49,279    —    —    49,279   

  Total carrying
value at December 31, 2019
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 $ 10,926    $ 10,926    $ —    $ —   
Derivative assets 36,492    —    36,492    —   
Derivative liabilities 1,387    —    1,387    —   
Contingent consideration liabilities 219,908    —    —    219,908   
15


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

Valuation Techniques
Our financial assets valued based upon Level 1 inputs are comprised of investments in marketable securities held in trust, which are available to satisfy benefit obligations under our benefit plans and other arrangements. The investment assets of the trust are valued using quoted market prices.
Our financial assets and liabilities valued based upon Level 2 inputs are comprised of foreign currency forward contracts and cross-currency interest rate swap agreements. We use foreign currency forwards and cross-currency interest rate swaps to manage foreign currency transaction exposure, as well as exposure to foreign currency denominated monetary assets and liabilities. We measure the fair value of the foreign currency forwards and cross-currency swaps by calculating the amount required to enter into offsetting contracts with similar remaining maturities, based on quoted market prices, and taking into account the creditworthiness of the counterparties.

Our financial liabilities valued based upon Level 3 inputs (inputs that are not observable in the market) are comprised of contingent consideration arrangements pertaining to our acquisitions, which are discussed immediately below.
Contingent consideration
Contingent consideration liabilities, which primarily consist of payment obligations that are contingent upon the achievement of revenue-based goals, but also can be based on other milestones such as regulatory approvals, are remeasured to fair value each reporting period using assumptions including estimated revenues (based on internal operational budgets and long-range strategic plans), discount rates, probability of payment and projected payment dates.
We determine the fair value of the contingent consideration liabilities related to the NeoTract and Essential Medical acquisitions, which represent most of our contingent consideration liabilities as of June 28, 2020 and December 31, 2019, using a Monte Carlo simulation (which involves a simulation of future revenues during the earn-out period using management's best estimates). Increases in projected revenues, estimated cash flows and probabilities of payment may result in significantly higher fair value measurements; decreases in these items may have the opposite effect. Increases in the discount rates in periods prior to payment may result in significantly lower fair value measurements and decreases in the discount rates may have the opposite effect.
The table below provides additional information regarding the valuation technique and inputs used in determining the fair value of contingent consideration.
Contingent Consideration Liability Valuation Technique Unobservable Input Range (Weighted average)
Milestone-based payments
Discounted cash flow Discount rate
3.3% - 4.3% (3.7%)
Projected year of payment 2021 - 2023
Revenue-based payments
Monte Carlo simulation Revenue volatility
19.5% - 24.2% (21.9%)
    Risk free rate Cost of debt structure
Projected year of payment 2020 - 2022
Discounted cash flow Discount rate
10.0%
Projected year of payment 2020 - 2029
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TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

The following table provides information regarding changes in the contingent consideration liabilities during the six months ended June 28, 2020:
  Contingent consideration
  (Dollars in thousands)
Balance - December 31, 2019
$ 219,908   
Payments (1)
(140,718)  
Revaluations (2)
(29,951)  
Translation adjustment
40   
Balance - June 28, 2020
$ 49,279   
(1) Consists mainly of a $140.6 million payment associated with our acquisition of NeoTract, Inc. resulting from the achievement of a revenue-based goal for the period from January 1, 2019 to December 31, 2019.
(2) The decrease, which is included within selling, general and administrative expenses, is mainly due to adverse financial projections resulting from the COVID-19 pandemic.
Note 11 — Shareholders’ equity
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in the same manner except that the weighted average number of shares is increased to include dilutive securities. The following table provides a reconciliation of basic to diluted weighted average number of common shares outstanding:
Three Months Ended Six Months Ended
June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019
(Shares in thousands)
Basic 46,442    46,172    46,412    46,111   
Dilutive effect of share-based awards 800    864    825    878   
Diluted 47,242    47,036    47,237    46,989   
The weighted average number of shares that were antidilutive and therefore excluded from the calculation of earnings per share were 0.2 million and 0.1 million for the three and six months ended June 28, 2020, respectively, and 0.2 million for the three and six months ended June 30, 2019.
The following tables provide information relating to the changes in accumulated other comprehensive loss, net of tax, for the six months ended June 28, 2020 and June 30, 2019:
Cash Flow Hedges Pension and Other Postretirement Benefit Plans Foreign Currency Translation Adjustment Accumulated Other Comprehensive (Loss) Income
(Dollars in thousands)
Balance as of December 31, 2019 $ 735    $ (138,810)   $ (206,317)   $ (344,392)  
Other comprehensive (loss) income before reclassifications (4,189)   183    (545)   (4,551)  
Amounts reclassified from accumulated other comprehensive income (723)   2,851    —    2,128   
Net current-period other comprehensive (loss) income (4,912)   3,034    (545)   (2,423)  
Balance as of June 28, 2020 $ (4,177)   $ (135,776)   $ (206,862)   $ (346,815)  
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TELEFLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

  Cash Flow Hedges Pension and Other Postretirement Benefit Plans Foreign Currency Translation Adjustment Accumulated Other Comprehensive (Loss) Income
  (Dollars in thousands)
Balance as of December 31, 2018 $ 807    $ (131,380)   $ (210,512)   $ (341,085)  
Other comprehensive income (loss) before reclassifications 429    (13)   12,332    12,748   
Amounts reclassified from accumulated other comprehensive loss (271)   2,701    —    2,430   
Net current-period other comprehensive income 158    2,688    12,332    15,178   
Balance as of June 30, 2019 $ 965    $ (128,692)   $ (198,180)   $ (325,907)  
  
The following table provides information relating to the location in the statements of operations and amount of reclassifications of losses/(gains) in accumulated other comprehensive (loss) income into expense/(income), net of tax, for the three and six months ended June 28, 2020 and June 30, 2019:
Three Months Ended Six Months Ended
June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019
(Dollars in thousands)
(Gains) losses on foreign exchange contracts:
Cost of goods sold $ (685)   $ (179)   $ (751)   $ (365)  
Total before tax (685)   (179)   (751)   (365)  
Taxes 19    71    28    94   
Net of tax $ (666)   $ (108)   $ (723)   $ (271)