TELEFLEX INC — Interim / Quarterly Report 2005

Nov 4, 2005

10-Q 1 w13907e10vq.htm FORM 10-Q TELEFLEX INCORPORATED e10vq PAGEBREAK

Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 25, 2005

OR

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

For the transition period from to .

Commission file number 1-5353

TELEFLEX INCORPORATED

(Exact name of registrant as specified in its charter)

| Delaware (State
or other jurisdiction of incorporation or organization) | 23-1147939 (I.R.S. employer identification no.) |
| --- | --- |
| 155 South Limerick Road, | |
| Limerick, Pennsylvania | 19468 |
| (Address
of principal executive offices) | (Zip
Code) |

(610) 948-5100

(Registrant’s telephone number, including area code)

(None)

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes þ No o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of October 20, 2005:

Common Stock, $1.00 Par Value (Title of each class) 40,495,970 (Number of shares)

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TELEFLEX INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 25, 2005

TABLE OF CONTENTS

	PART I — FINANCIAL
INFORMATION
Item 1:	Financial Statements:
	Condensed Consolidated Statements of Income
for the three and nine months ended September 25, 2005 and
September 26, 2004 (Unaudited)	2
	Condensed Consolidated Balance Sheets as of
September 25, 2005 and December 26, 2004
(Unaudited)	3
	Condensed Consolidated Statements of Cash
Flows for the nine months ended September 25, 2005 and
September 26, 2004 (Unaudited)	4
	Notes to Condensed Consolidated Financial
Statements (Unaudited)	5
Item 2:	Management’s Discussion and Analysis
of Financial Condition and Results of Operations	17
Item 3:	Quantitative and Qualitative Disclosures
About Market Risk	23
Item 4:	Controls and Procedures	23
	PART II — OTHER
INFORMATION
Item 1:	Legal Proceedings	24
Item 2:	Unregistered Sales of Equity Securities and
Use of Proceeds	24
Item 3:	Defaults Upon Senior Securities	25
Item 4:	Submission of Matters to a Vote of Security
Holders	25
Item 5:	Other Information	25
Item 6:	Exhibits	25
SIGNATURES		26
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATION OF CHIEF FINANCIAL OFFICER
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(b)
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(b)

/TOC

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link1 "PART I -- FINANCIAL INFORMATION"

PART I — FINANCIAL INFORMATION

link1 "Item 1. Financial Statements"

ITEM 1. Financial Statements

TELEFLEX INCORPORATED AND SUBSIDIARIES

link1 "CONDENSED CONSOLIDATED STATEMENTS OF INCOME"

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended — September 25,		September 26,		Nine Months Ended — September 25,	September 26,
	2005		2004		2005	2004
	(Dollars and shares in thousands, except per share)
Revenues	$ 587,390		$ 575,939		$ 1,867,999	$	1,745,457
Materials, labor and other product costs	421,327		402,799		1,337,956		1,238,709
Gross profit	166,063		173,140		530,043		506,748
Selling, engineering and administrative expenses	104,666		126,837		337,236		351,521
(Gain) loss on sales of businesses and assets	(5,569	)	563		(5,569	)	(4,520	)
Restructuring costs	5,776		—		19,723		—
Income from continuing operations before interest, taxes and
minority interest	61,190		45,740		178,653		159,747
Interest expense, net	9,798		12,590		31,451		25,510
Income from continuing operations before taxes and minority
interest	51,392		33,150		147,202		134,237
Taxes on income from continuing operations	10,360		5,209		33,288		29,778
Income from continuing operations before minority interest	41,032		27,941		113,914		104,459
Minority interest in consolidated subsidiaries	5,318		4,457		15,197		13,333
Income from continuing operations	35,714		23,484		98,717		91,126
Operating income (loss) from discontinued operations (including
gain (loss) on disposal of $(1,291), $0, $34,830 and $0,
respectively)	(4,299	)	(7,551	)	3,645		(11,378	)
Taxes (benefit) on income (loss) from discontinued operations	(2,185	)	(1,560	)	1,063		(1,382	)
Income (loss) from discontinued operations	(2,114	)	(5,991	)	2,582		(9,996	)
Net income	$ 33,600		$ 17,493		$ 101,299	$	81,130
Earnings per share:
Basic:
Income from continuing operations	$ 0.88		$ 0.58		$ 2.43	$	2.27
Income (loss) from discontinued operations	$ (0.05	)	$ (0.15	)	$ 0.06	$	(0.25	)
Net income	$ 0.83		$ 0.43		$ 2.50	$	2.02
Diluted:
Income from continuing operations	$ 0.87		$ 0.58		$ 2.41	$	2.25
Income (loss) from discontinued operations	$ (0.05	)	$ (0.15	)	$ 0.06	$	(0.25	)
Net income	$ 0.82		$ 0.43		$ 2.47	$	2.00
Dividends per share	$ 0.25		$ 0.22		$ 0.72	$	0.64
Weighted average common shares outstanding:
Basic	40,569		40,273		40,552		40,153
Diluted	41,185		40,414		40,972		40,470

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

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TELEFLEX INCORPORATED AND SUBSIDIARIES

link1 "CONDENSED CONSOLIDATED BALANCE SHEETS"

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 25,	December 26,
	2005	2004
	(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents	$ 246,078	$ 115,955
Accounts receivable, net	402,184	514,179
Inventories	422,599	431,399
Prepaid expenses	33,159	32,525
Deferred tax assets	39,379	40,810
Assets held for sale	4,171	54,384
Total current assets	1,147,570	1,189,252
Property, plant and equipment, net	479,164	584,252
Goodwill	515,881	524,134
Intangibles and other assets	232,338	244,859
Investments in affiliates	24,193	24,194
Deferred tax assets	127,003	103,352
Total assets	$ 2,526,149	$ 2,670,043
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current borrowings	$ 22,774	$ 101,856
Accounts payable	193,703	183,700
Accrued expenses	176,557	210,027
Income taxes payable	37,418	22,784
Deferred tax liabilities	6,152	2,134
Liabilities held for sale	50	27,952
Total current liabilities	436,654	548,453
Long-term borrowings	635,875	685,912
Deferred tax liabilities	157,984	159,750
Other liabilities	100,779	100,717
Total liabilities	1,331,292	1,494,832
Minority interest in equity of consolidated subsidiaries	61,424	65,478
Commitments and contingencies
Shareholders’ equity	1,133,433	1,109,733
Total liabilities and shareholders’ equity	$ 2,526,149	$ 2,670,043

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

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TELEFLEX INCORPORATED AND SUBSIDIARIES

link1 "CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS"

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended — September 25,	September 26,
	2005	2004
	(Dollars in thousands)
Cash Flows from Operating Activities:
Net income	$ 101,299	$	81,130
Adjustments to reconcile net income to net cash provided by
operating activities:
(Income) loss from discontinued operations	(2,582	)	9,996
Depreciation expense	65,930		66,377
Amortization expense of intangible assets	10,868		9,531
Amortization expense of deferred financing costs	757		155
Net gain on sales of businesses and assets	(5,569	)	(4,520	)
Impairment of long-lived assets	2,664		—
Minority interest in consolidated subsidiaries	15,197		13,333
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable	74,029		(7,747	)
Inventories	(13,535	)	4,077
Prepaid expenses	2,991		(588	)
Accounts payable and accrued expenses	(26,354	)	(8,511	)
Income taxes payable and deferred income taxes	6,144		13,675
Net cash provided by operating activities	231,839		176,908
Cash Flows from Financing Activities:
Proceeds from long-term borrowings	61,085		495,300
Reduction in long-term borrowings	(122,417	)	(51,411	)
Decrease in notes payable and current borrowings	(46,358	)	(116,067	)
Proceeds from stock compensation plans	21,191		12,734
Purchases of treasury stock	(39,263	)	—
Dividends	(29,200	)	(25,495	)
Net cash provided by (used in) financing activities	(154,962	)	315,061
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment	(45,690	)	(37,129	)
Payments for businesses acquired	(14,701	)	(458,273	)
Proceeds from sales of businesses and assets	124,420		43,831
Investments in affiliates	173		1,378
Other	(831	)	2,225
Net cash provided by (used in) investing activities	63,371		(447,968	)
Cash Flows from Discontinued Operations:
Net cash provided by (used in) operating activities	(582	)	8,408
Expenditures for property, plant and equipment	(2,682	)	(6,799	)
Net cash provided by (used in) discontinued operations	(3,264	)	1,609
Effect of exchange rate changes on cash and cash equivalents	(6,861	)	390
Net increase in cash and cash equivalents	130,123		46,000
Cash and cash equivalents at the beginning of the period	115,955		56,580
Cash and cash equivalents at the end of the period	$ 246,078	$	102,580

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

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TELEFLEX INCORPORATED AND SUBSIDIARIES

link1 "NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS"

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands, except per share)

Note 1 — Basis of presentation/ accounting policies

Teleflex Incorporated (the “Company”) is a diversified industrial company specializing in the design, manufacture and distribution of specialty-engineered products. The Company serves a wide range of customers in niche segments of the commercial, medical and aerospace industries. The Company’s products include: driver controls, motion controls, power and vehicle management systems and fluid management systems for commercial industries; disposable medical products, surgical instruments, medical devices and specialty devices for hospitals and health-care providers; and repair products and services, precision-machined components and cargo-handling systems for commercial and military aviation as well as other industrial markets.

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

The accompanying financial information is unaudited; however, in the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and accruals) necessary for a fair statement of the financial position, results of operations and cash flows for the periods reported have been included. The results of operations for the periods reported are not necessarily indicative of those that may be expected for a full year.

This quarterly report should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2004 filed with the Securities and Exchange Commission.

Certain reclassifications have been made to the prior year condensed consolidated financial statements to conform to current period presentation. Certain financial information is presented on a rounded basis, which may cause minor differences.

Stock-based compensation: Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, compensation expense for stock options and restricted stock issued to employees is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of the grant over the amount an employee must pay to acquire the stock.

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TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table illustrates the pro forma net income and earnings per share for the three and nine months ended September 25, 2005 and September 26, 2004 as if compensation expense for stock options issued to employees had been determined consistent with SFAS No. 123:

	Three Months Ended — September 25,	September 26,		September 25,		September 26,
	2005	2004		2005		2004
Net income, as reported	$ 33,600	$	17,493	$	101,299	$	81,130
Deduct: Stock-based employee compensation determined under fair
value based method, net of tax of $640, $814, $1,930 and $2,514,
respectively	(902	)	(1,148	)	(2,720	)	(3,543	)
Pro forma net income	$ 32,698	$	16,345	$	98,579	$	77,587
Earnings per share — basic:
Net income per share, as reported	$ 0.83	$	0.43	$	2.50	$	2.02
Pro forma net income per share	$ 0.81	$	0.40	$	2.43	$	1.93
Earnings per share — diluted:
Net income per share, as reported	$ 0.82	$	0.43	$	2.47	$	2.00
Pro forma net income per share	$ 0.80	$	0.41	$	2.42	$	1.93

The fair value for options granted in 2005 and 2004 was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

September 25,	September 26,	September 25,	September 26,
2005	2004	2005	2004
Risk-free interest rate	4.1%	3.2%	4.1%	3.0%
Expected life of option	4.6 yrs.	4.6 yrs.	4.6 yrs.	4.6 yrs.
Expected dividend yield	1.4%	2.0%	1.7%	1.7%
Expected volatility	24.6%	24.4%	24.4%	24.3%

Variable interest entities: Following the consolidation of certain variable interest entities, the Company has determined that it is appropriate to separately identify and reclassify for all periods presented minority interest and minority interest in equity for all of its consolidated, but not wholly-owned, subsidiaries. The minority interest in consolidated subsidiaries, which previously was included within selling, engineering and administrative expenses, totaled $4,457 and $13,333 for the three and nine months ended September 26, 2004, respectively. These reclassifications had no impact on previously reported net income.

Note 2 — New accounting standards

American Jobs Creation Act: On October 22, 2004 the American Jobs Creation Act (“the AJCA”) was signed into law. The AJCA includes a deduction of 85% of certain foreign earnings that are repatriated, as defined in the AJCA. The deduction is subject to a number of limitations and complexities, and during the past six months, the Company has been analyzing the previous guidance provided by Treasury and the potential impact of applying the repatriation provision to unremitted foreign earnings held by its various controlled foreign corporations. As of September 25, 2005, management had not decided on whether, and to what extent, the Company might repatriate foreign earnings under the AJCA, and accordingly, the Company’s condensed consolidated financial statements do not reflect any provision for taxes on the unremitted earnings. Subsequent to September 25, 2005, management completed its analysis of the impact of the AJCA and has finalized the Company’s plans for repatriation. Based on this analysis, the Company plans to repatriate

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TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$300 million of dividends during November and December 2005. Accordingly, the Company expects to record a tax expense of approximately $10.1 million during the three months ending December 25, 2005 as a result of this repatriation. This expense may be offset by an amount up to approximately $13.5 million to the extent that the Company records a tax benefit with respect to excess foreign tax credits that may be generated in connection with this repatriation. The Company is also considering additional opportunities to repatriate earnings during the remainder of the year but, based on the analysis to date, is not able to complete the evaluation with respect to these opportunities until after a number of factors are concluded upon. Such factors include, but are not limited to, a final decision with respect to different divestiture and restructuring alternatives currently under consideration and the potential increased cash flow of non-U.S. operations. Based on the analysis performed to date, the Company believes that it may be possible to repatriate an additional $0 to approximately $80 million in dividends subject to the elective 85% dividends received deduction which would generate a corresponding tax expense from $0 to approximately $3.0 million. With regard to these potential additional dividends, the Company expects to finalize its evaluation and may then seek the required corporate officer and Board of Directors approvals of the requisite domestic reinvestment plan within the timeframe that the deduction is available.

Stock-Based Compensation: In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), “Share-Based Payment,” which establishes accounting standards for transactions in which an entity receives employee services in exchange for (a) equity instruments of the entity or (b) liabilities that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of equity instruments. SFAS No. 123(R) requires an entity to recognize the grant-date fair value of stock options and other equity-based compensation issued to employees in the statement of income. The statement also requires that such transactions be accounted for using the fair value based method, thereby eliminating use of the intrinsic value method of accounting in APB No. 25, “Accounting for Stock Issued to Employees,” which was permitted under Statement 123, as originally issued. SFAS No. 123(R) will be effective for fiscal years beginning after June 15, 2005. The Company intends to adopt this statement using modified prospective application and previously reported operating results will remain unchanged. The Company expects the provisions of this statement to have a material impact on the Company’s results of operations and the Company believes that the pro forma disclosures in Note 1 provide a preliminary short-term indicator of the level of expense that will be recognized in accordance with SFAS No. 123(R). However, the total expense recorded in future periods will depend on several factors, including future grants, the number of share-based awards that vest and the fair value of those vested awards.

Exchanges of Nonmonetary Assets: In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29.” The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions,” is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This statement amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company adopted the provisions of this statement in the third quarter of 2005 and it did not have a material impact on the Company’s financial position, results of operations or cash flows.

Conditional Asset Retirement Obligations: In March 2005, the FASB issued Interpretation (“FIN”) No. 47, “Accounting for Conditional Asset Retirement Obligations,” which clarifies that an entity must record a liability for a conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. The provisions of FIN No. 47 are effective for fiscal years ending after December 15, 2005. The Company does not expect the provisions of this interpretation to have a material impact on the Company’s financial position, results of operations or cash flows.

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TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accounting Changes and Error Corrections: In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” SFAS No. 154 replaces APB Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements” and changes the requirements of the accounting for and reporting of a change in accounting principle. SFAS No. 154 also provides guidance on the accounting for and reporting of error corrections. The provisions of this statement are applicable for accounting changes and error corrections made in fiscal years beginning after December 15, 2005. The Company does not expect the provisions of this statement to have a material impact on the Company’s financial position, results of operations or cash flows.

Amortization Period for Leasehold Improvements: In June 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 05-6, “Determining the Amortization Period for Leasehold Improvements,” which requires that leasehold improvements acquired in a business combination or purchased subsequent to the inception of a lease be amortized over the lesser of the useful life of the assets or a term that includes renewals that are reasonably assured at the date of the business combination or purchase. EITF No. 05-6 is effective for periods beginning after June 29, 2005. The Company does not expect the provisions of this consensus to have a material impact on the Company’s financial position, results of operations or cash flows.

Note 3 — Acquisitions

Acquisition of Hudson Respiratory Care, Inc.

In connection with the acquisition of Hudson Respiratory Care Inc. (“HudsonRCI”) in July 2004, the Company formulated a plan related to the future integration of the acquired entity. The Company finalized the integration plan during the second quarter of 2005, and the integration activities are ongoing as of September 25, 2005. The Company has accrued estimates for certain costs, related primarily to personnel reductions and facility closings and the termination of certain distribution agreements at the date of acquisition, in accordance with EITF Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” Set forth below is a reconciliation of the Company’s future integration cost accrual:

	Involuntary Employee — Termination Benefits	Restructuring Costs		Total
Balance at December 26, 2004	$ 9,667	$	5,585	$	15,252
Costs incurred	(1,479	)	(2,358	)	(3,837	)
Adjustments to reserve	965		2,158		3,123
Balance at September 25, 2005	$ 9,153	$	5,385	$	14,538

Note 4 — Restructuring

During the fourth quarter of 2004, the Company announced and commenced implementation of a restructuring and divestiture program designed to improve future operating performance and position the Company for future earnings growth. The planned actions include exiting or divesting non-core or low performing businesses, consolidating manufacturing operations and reorganizing administrative functions to enable businesses to share services.

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TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the three and nine months ended September 25, 2005, the charges, including changes in estimates, associated with the restructuring and divestiture program by segment that are included in restructuring costs were as follows:

	Three Months Ended
	September 25, 2005
	Commercial	Medical	Total
Termination benefits	$ 715	$ 1,237	$ 1,952
Contract termination costs	148	48	196
Other restructuring costs	448	3,180	3,628
	$ 1,311	$ 4,465	$ 5,776

	Nine Months Ended September 25, 2005 — Commercial	Medical		Aerospace	Total
Termination benefits	$ 2,711	$	4,735	$ 517	$ 7,963
Contract termination costs	(313	)	957	—	644
Asset impairments	156		610	1,898	2,664
Other restructuring costs	859		6,983	610	8,452
	$ 3,413	$	13,285	$ 3,025	$ 19,723

Termination benefits are comprised of severance-related payments for all employees terminated in connection with the restructuring and divestiture program. Contract termination costs relate primarily to the termination of leases in conjunction with the consolidation of facilities in the Company’s Medical Segment and also include a $531 reduction in the estimated cost associated with a lease termination in conjunction with the consolidation of manufacturing facilities in the Company’s Commercial Segment. Asset impairments relate primarily to machinery and equipment associated with the consolidation of manufacturing facilities. Other restructuring costs include expenses primarily related to the consolidation of manufacturing operations and the reorganization of administrative functions.

As of September 25, 2005, the Company expects to incur the following future restructuring costs in its Commercial and Medical segments over the next three quarters:

	Commercial	Medical
Termination benefits	$ 250 - 500	$ 14,500 - 17,500
Contract termination costs	0 - 250	2,250 - 4,000
Other restructuring costs	250 - 500	5,500 - 8,000
	$ 500 - 1,250	$ 22,250 - 29,500

At September 25, 2005, the accrued liability associated with the restructuring and divestiture program consisted of the following and was entirely due within twelve months:

	Balance at	Subsequent — Accruals and			Balance at
	December 26,	Changes in			September 25,
	2004	Estimates	Payments		2005
Termination benefits	$ 15,014	$ 7,963	$ (14,091	)	$ 8,886
Contract termination costs	3,075	644	(2,702	)	1,017
Other restructuring costs	228	8,452	(8,625	)	55
	$ 18,317	$ 17,059	$ (25,418	)	$ 9,958

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TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 5 — Inventories

Inventories consisted of the following:

	September 25,	December 26,
	2005	2004
Raw materials	$ 182,644	$ 185,279
Work-in-process	74,387	74,759
Finished goods	165,568	171,361
	$ 422,599	$ 431,399

Note 6 — Goodwill and other intangible assets

Changes in the carrying amount of goodwill, by operating segment, for the nine months ended September 25, 2005 are as follows:

Goodwill at December 26, 2004	Commercial — $ 107,953	$	405,031	$	11,150	$	524,134
Dispositions	(709	)	—		(3,852	)	(4,561	)
Adjustments (1)	(970	)	372		—		(598	)
Translation adjustment	(694	)	(2,400	)	—		(3,094	)
Goodwill at September 25, 2005	$ 105,580	$	403,003	$	7,298	$	515,881

(1) Goodwill adjustments relate primarily to purchase price allocation changes associated with the HudsonRCI acquisition in 2004. These changes resulted from the Company finalizing its integration plan and preacquisition liabilities.

Intangible assets consisted of the following:

	Gross Carrying Amount — September 25,	December 26,	Accumulated Amortization — September 25,	December 26,
	2005	2004	2005	2004
Customer lists	$ 80,389	$ 79,997	$ 12,354	$ 7,526
Intellectual property	57,683	58,258	22,068	18,474
Distribution rights	36,159	38,599	15,923	14,669
Trade names	85,465	85,471	—	—
	$ 259,696	$ 262,325	$ 50,345	$ 40,669

Amortization expense related to intangible assets was $3,500 and $10,868 for the three and nine months ended September 25, 2005, respectively, and $4,160 and $9,531 for the three and nine months ended September 26, 2004, respectively. Estimated annual amortization expense for each of the five succeeding years is as follows:

2005	14,100
2006	13,400
2007	12,700
2008	12,600
2009	12,000

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TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 7 — Earnings per share

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 for dilutive securities. The difference between basic and diluted weighted average common shares results from the assumption that dilutive stock options were exercised. A reconciliation of basic to diluted weighted average shares outstanding is as follows:

September 25,	September 26,	September 25,	September 26,
2005	2004	2005	2004
(Shares in thousands)
Basic	40,569	40,273	40,552	40,153
Dilutive shares assumed issued	616	141	420	317
Diluted	41,185	40,414	40,972	40,470

Weighted average stock options (in thousands) that were antidilutive and therefore not included in the calculation of earnings per share were 4 and 259 for the three and nine months ended September 25, 2005, respectively, and 1,199 and 773 for the three and nine months ended September 26, 2004, respectively.

Note 8 — Comprehensive income

The following table summarizes the components of comprehensive income:

	Three Months Ended — September 25,	September 26,	Nine Months Ended — September 25,	September 26,
	2005	2004	2005	2004
Net income	$ 33,600	$ 17,493	$ 101,299	$	81,130
Financial instruments marked to market	928	109	(3,062	)	(1,039	)
Cumulative translation adjustment	163	6,240	(32,998	)	(2,025	)
Comprehensive income	$ 34,691	$ 23,842	$ 65,239	$	78,066

Note 9 — Changes in shareholders’ equity

Common shares

September 25,	September 26,	September 26,	September 26,
2005	2004	2005	2004
(Shares in thousands)
Common shares, beginning of period	40,791	40,248	40,450	39,817
Shares issued under compensation plans	275	75	616	506
Common shares, end of period	41,066	40,323	41,066	40,323

Treasury shares

On July 25, 2005, the Company’s Board of Directors authorized the repurchase of up to $140 million of outstanding Teleflex common stock over twelve months ending July 2006. Under the approved plan, the Company repurchased (in thousands) 580 shares on the open market for an aggregate purchase price of $39,263 during the third quarter of 2005.

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TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 10 — 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 primarily noncontributory. The benefits under these plans are based primarily on years of service and employees’ pay near retirement. The Company’s funding policy for U.S. plans is to contribute annually, at a minimum, amounts required by applicable laws and regulations. Obligations under non-U.S. plans are systematically provided for by depositing funds with trustees or by book reserves.

The parent Company and certain 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						Pension
	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 25,	September 26,		September 25,		September 26,	September 25,	September 26,		September 25,		September 26,
	2005	2004		2005		2004	2005	2004		2005		2004
Service cost	$ 1,182	$	1,227	$	65	$ 79	$ 3,645	$	3,355	$	191	$ 194
Interest cost	2,403		2,569		357	431	7,447		7,025		1,057	1,063
Expected return on plan assets	(2,677	)	(2,593	)	—	—	(8,382	)	(7,092	)	—	—
Net amortization and deferral	491		406		122	187	1,509		1,111		361	461
Foreign plans	430		854		—	—	1,548		1,971		—	—
Curtailment charge	116		—		115	—	116		—		115	—
Net benefit cost	$ 1,945	$	2,463	$	659	$ 697	$ 5,883	$	6,370	$	1,724	$ 1,718

Through September 25, 2005, contributions to U.S. and foreign pension plans amounted to $9,382. The Company’s contributions to U.S. and foreign pension plans during all of 2005 are expected to be approximately $10 million.

Note 11 — Commitments and contingent liabilities

Product warranty liability: The Company warrants to the original purchaser of certain of its products that it will, at its option, repair or replace, without charge, such products 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

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TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

claims experience relative to sales) can be made. Set forth below is a reconciliation of the Company’s estimated product warranty liability for the nine months ended September 25, 2005:

Balance — December 26, 2004	$
Accruals for warranties issued in 2005	9,119
Settlements (cash and in kind)	(7,160	)
Accruals related to pre-existing warranties	1,460
Effect of dispositions and translation	(211	)
Balance — September 25, 2005	$ 12,911

Operating leases: The Company uses various leased facilities and equipment in its operations. The terms for these leased assets vary depending on the lease agreement. The Company also has synthetic lease programs that are used primarily for plant and equipment. In connection with the synthetic and other leases, the Company had residual value guarantees in the amount of $7,823 at September 25, 2005. The Company’s future payments cannot exceed the minimum rent obligation plus the residual value guarantee amount. The guarantee amounts are tied to the unamortized lease values of the assets under synthetic lease, and are due should the Company decide neither to renew these leases, nor to exercise its purchase option. At September 25, 2005, the Company had no liabilities recorded for these obligations. Any residual value guarantee amounts paid to the lessor may be recovered by the Company from the sale of the assets to a third party.

Accounts receivable securitization program: The Company uses an accounts receivable securitization program to gain access to enhanced credit markets and reduce financing costs. The Company sells certain trade receivables on a non-recourse basis to a consolidated company, which in turn sells an interest in those receivables to a commercial paper conduit. The conduit issues notes secured by that interest to third party investors. These notes are secured by a 364-day liquidity facility provided by a bank. The assets of the special purpose entity are not available to satisfy the obligations of the Company. In accordance with the provisions of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” transfers of assets under the program qualify as sales of receivables. Accordingly, $40,051 of accounts receivable and the related amounts previously recorded in notes payable have been removed from the condensed consolidated balance sheet as of September 25, 2005, with $20,017 removed during the third quarter of 2005.

Environmental: The Company is subject to contingencies pursuant to environmental laws and regulations that in the future may require the Company to take further action to correct the effects on the environment of prior disposal practices or releases of chemical or petroleum substances by the Company or other parties. Much of this liability results from the U.S. Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), often referred to as Superfund, the U.S. Resource Conservation and Recovery Act (“RCRA”) and similar state laws. These laws require the Company to undertake certain investigative and remedial activities at sites where the Company conducts or once conducted operations or at sites where Company-generated waste was disposed.

Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs, depend on the mix of unique site characteristics, evolving remediation technologies, diverse regulatory agencies and enforcement policies, as well as the presence or absence of potentially responsible parties. At September 25, 2005, the Company’s condensed consolidated balance sheet included an accrued liability of $6,469 relating to these matters. Considerable uncertainty exists with respect to these costs and, under adverse changes in circumstances, potential liability may exceed the amount accrued as of September 25, 2005. The time-frame over which the accrued amounts may be paid out, based on past history, is estimated to be 15-20 years.

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TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, available insurance coverage, established reserves and other resources, the Company does not believe that any such actions are likely to be, individually or in the aggregate, material to its business, financial condition, results of operations or liquidity. However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to the Company’s business, financial condition, results of operations or liquidity.

In February 2004, a jury verdict of $34,800 was rendered against one of the Company’s subsidiaries in a trademark infringement action. In February 2005, the trial judge entered an order rejecting the jury award in its entirety. Both parties have filed notice to appeal on various grounds. While the Company cannot predict the outcome of the appeals, it will continue to vigorously contest this litigation. No accrual has been recorded in the Company’s condensed consolidated financial statements.

Other: The Company has various purchase commitments for materials, supplies and items of permanent investment incident to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market.

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TELEFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 12 — Business segment information

Information about continuing operations by business segment is as follows:

	Three Months Ended — September 25,	September 26,		September 25,		September 26,
	2005	2004		2005		2004
Segment data:
Commercial	$ 270,173	$	267,620	$	888,687	$	903,535
Medical	196,553		202,461		624,410		506,625
Aerospace	120,664		105,858		354,902		335,297
Revenues	587,390		575,939		1,867,999		1,745,457
Commercial	9,199		16,542		59,377		84,459
Medical	38,938		30,377		114,878		79,664
Aerospace	11,521		2,512		20,054		(1,556	)
Operating
profit (1)	59,658		49,431		194,309		162,567
Corporate expenses	3,579		7,585		16,699		20,673
(Gain) loss on sales of businesses and assets	(5,569	)	563		(5,569	)	(4,520	)
Restructuring costs	5,776		—		19,723		—
Minority interest	(5,318	)	(4,457	)	(15,197	)	(13,333	)
Income from continuing operations before interest, taxes and
minority interest	$ 61,190	$	45,740	$	178,653	$	159,747

(1) Segment operating profit is defined as a segment’s revenues reduced by its materials, labor and other product costs along with the segment’s selling, engineering and administrative expenses and minority interest. Corporate expenses, (gain) loss on sales of businesses and assets, restructuring costs, interest expense and taxes on income are excluded from the measure.

Note 13 — Discontinued operations and assets held for sale

In August 2005, the Company completed the sale of its automotive pedal systems business and received $13,000 in gross proceeds. The Company recognized a loss on the sale of $983, subject to certain post-closing working capital adjustments which the Company expects to finalize within the next two quarters. During the third quarter of 2005, the Company sold a European medical product sterilization business that was classified as held for sale during the second quarter of 2005 and recognized a pre-tax gain on the sale of $2,150. In addition, the Company recognized a loss on sale of assets of $2,458 related to the first quarter divestiture of Sermatech International. For financial statement purposes, the assets, liabilities, results of operations and cash flows of these businesses have been segregated from those of continuing operations and are presented in the Company’s condensed consolidated financial statements as discontinued operations and assets and liabilities held for sale.

Revenues of discontinued operations were $16,043 and $111,094 for the three and nine months ended September 25, 2005, respectively, and $49,823 and $171,734 for the three and nine months ended September 26, 2004, respectively. Operating income (loss) from discontinued operations was $(4,299) and $3,645 for the three and nine months ended September 25, 2005, respectively, and $(7,551) and $(11,378) for the three and nine months ended September 26, 2004, respectively.

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TELEFLEX INCORPORATED AND SUBSIDIARIES

link1 "NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(Concluded)"

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Concluded)

As part of the Company’s previously announced restructuring and divestiture program, the Company determined that assets totaling $867 met the criteria for held for sale classification during the third quarter of 2005. The assets are comprised primarily of land and buildings that are no longer being used in the Company’s operations. The Company determined that the carrying value of each asset held for sale did not exceed the estimated fair value of the asset less costs to sell and therefore did not adjust the carrying value of the asset in the third quarter. During the third quarter of 2005, in addition to the sales of the discontinued operations noted above, the Company sold assets, including assets held for sale totaling $12,545, and recognized an aggregate pre-tax gain on these sales of $5,569. The Company is actively marketing its remaining assets held for sale.

Assets and liabilities held for sale are comprised of the following:

	September 25,	December 26,
	2005	2004
Assets held for sale:
Accounts receivable, net	$ 1,495	$ 32,551
Inventories	55	13,020
Property, plant and equipment	2,427	8,099
Other	194	714
Total assets held for sale	$ 4,171	$ 54,384
Liabilities held for sale:
Accounts payable	$ —	$ 16,088
Accrued expenses	50	6,223
Deferred income taxes and other	—	5,641
Total liabilities held for sale	$ 50	$ 27,952

Note 14 — Subsequent Event

In October 2005, the Company completed the sale of a product line in its Medical Segment. The Company received gross proceeds of approximately $10 million and anticipates recording a pre-tax gain on the sale of approximately $8 million in the fourth quarter of 2005.

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link1 "Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations"

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

All statements made in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “plan”, “will”, “would”, “should”, “guidance”, “potential”, “continue”, “project”, “forecast”, “confident”, “prospects”, and similar expressions typically are used to identify forward-looking statements. Forward-looking statements are based on the expectations, beliefs, assumptions, estimates and forecasts about our business and the industry and markets in which we operate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Factors which may affect our business, financial condition and operating results include changes in business relationships with and purchases by or from major customers or suppliers, including delays or cancellations in shipments; demand for and market acceptance of new and existing products; our ability to integrate acquired businesses into our operations, realize planned synergies and operate such businesses profitably in accordance with expectations; our ability to effectively execute our restructuring and divestiture program; competitive market conditions and resulting effects on revenues and pricing; increases in raw material costs that cannot be recovered in product pricing; and global economic factors, including currency exchange rates, difficulties entering new markets and general economic conditions such as interest rates, as well as other factors described in our reports filed with the Securities and Exchange Commission, including the information under “Risk Factors” in Item 1 of our Annual Report on Form 10-K for the fiscal year ended December 26, 2004. We expressly disclaim any intent or obligation to update these forward-looking statements, except as otherwise specifically stated by us.

Overview

We are focused on achieving consistent and sustainable growth through the continued development of our core businesses and carefully selected acquisitions. Our internal growth initiatives include the development of new products, moving existing products into market adjacencies in which we already participate with other products and the expansion of market share. Our core revenue growth in both the third quarter and first nine months of 2005 as compared to 2004, excluding the impacts of currency, acquisitions and divestitures, was 4%. During the first nine months of 2005, our results were affected by the contribution from the third quarter 2004 acquisition of Hudson Respiratory Care Inc., or HudsonRCI, a leading provider of disposable medical products for respiratory care and anesthesia.

In August 2005, we completed the sale of our automotive pedal systems business and received $13 million in gross proceeds. We recognized a loss on the sale of $1.0 million, subject to certain post-closing working capital adjustments, which we expect to finalize within the next two quarters. During the third quarter of 2005, we sold a European medical product sterilization business and recognized a pre-tax gain on the sale of $2.2 million. In addition, we sold assets, including assets held for sale totaling $12.5 million, and recognized an aggregate pre-tax gain on these sales of $5.6 million. Earlier in 2005, we reported additional product and business line divestitures associated with our ongoing portfolio review program. During the second quarter of 2005, we adopted a plan to sell a small medical business and we are actively marketing this business. On February 28, 2005, we completed the sale of Sermatech International, a surface-engineering/specialty coatings business, and have recorded a net gain on the sale of $33.7 million. For the third quarter and first nine months of 2005 and comparable periods, the automotive pedal systems business, the European medical product sterilization business, the small medical business and Sermatech business have been presented in our condensed consolidated financial statements as discontinued operations. The Sermatech business was previously reported as part of our Aerospace Segment. In January and February 2005, we also completed the sale of two small product lines in our Medical Segment and an industrial cables business in our Commercial Segment. In October 2005, we completed the sale of a product line in our Medical Segment. We received gross proceeds of approximately $10 million and anticipate recording a pre-tax gain on the sale of approximately $8 million in the fourth quarter of 2005.

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During the fourth quarter of 2004, we announced and commenced implementation of our restructuring and divestiture program designed to improve future operating performance and position us for earnings growth in the years ahead. The planned actions include exiting or divesting of non-core or low performing businesses, consolidating manufacturing operations and reorganizing administrative functions to enable businesses to share services. The charges associated with the restructuring and divestiture program for continuing operations that are included in restructuring costs during the third quarter of 2005 totaled $5.8 million, of which 23% was attributable to our Commercial Segment and 77% was attributable to our Medical Segment. The charges associated with the restructuring and divestiture program for continuing operations that are included in restructuring costs during the first nine months of 2005 totaled $19.7 million, of which 17%, 67% and 16% were attributable to our Commercial, Medical and Aerospace segments, respectively.

During 2004, we adopted the provisions of the Financial Accounting Standards Board, or FASB, Interpretation, or FIN, No. 46(R), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.” As a result, beginning with the third quarter of 2004, we consolidated four small entities which previously had not been consolidated. These entities are reported in our Medical and Commercial segments. We also determined that it is appropriate to separately identify and reclassify for all periods presented minority interest for all of our consolidated, but not wholly-owned, subsidiaries. The minority interest in consolidated subsidiaries, which previously was included within selling, engineering and administrative expenses, totaled $4.5 million and $13.3 million for the third quarter and first nine months of 2004, respectively. These reclassifications had no impact on previously reported net income.

On October 22, 2004 the American Jobs Creation Act, or AJCA, was signed into law. The AJCA includes a deduction of 85% of certain foreign earnings that are repatriated, as defined in the AJCA. The deduction is subject to a number of limitations and complexities, and during the past six months, we have been analyzing the previous guidance provided by Treasury and the potential impact of applying the repatriation provision to unremitted foreign earnings held by our various controlled foreign corporations. As of September 25, 2005, management had not decided on whether, and to what extent, we might repatriate foreign earnings under the AJCA, and accordingly, our condensed consolidated financial statements do not reflect any provision for taxes on the unremitted earnings. Subsequent to September 25, 2005, management completed its analysis of the impact of the AJCA and has finalized our plans for repatriation. Based on this analysis, we plan to repatriate $300 million of dividends during November and December 2005. Accordingly, we expect to record a tax expense of approximately $10.1 million during the fourth quarter of 2005 as a result of this repatriation. This expense may be offset by an amount up to approximately $13.5 million to the extent that we record a tax benefit with respect to excess foreign tax credits that may be generated in connection with this repatriation. We are also considering additional opportunities to repatriate earnings during the remainder of the year but, based on the analysis to date, are not able to complete the evaluation with respect to these opportunities until after a number of factors are concluded upon. Such factors include, but are not limited to, a final decision with respect to different divestiture and restructuring alternatives currently under consideration and the potential increased cash flow of non-U.S. operations. Based on the analysis performed to date, we believe that it may be possible to repatriate an additional $0 to approximately $80 million in dividends subject to the elective 85% dividends received deduction which would generate a corresponding tax expense from $0 to approximately $3.0 million. With regard to these potential additional dividends, we expect to finalize our evaluation and may then seek the required corporate officer and Board of Directors approvals of the requisite domestic reinvestment plan within the timeframe that the deduction is available.

Results of Operations

Discussion of growth from acquisitions reflects the impact of a purchased company up to twelve months beyond the date of acquisition. Activity beyond the initial twelve months is considered core growth. Core growth excludes the impact of translating the results of international subsidiaries at different currency exchange rates from year to year and the comparable activity of divested companies within the most recent twelve-month period. The cumulative nine-month consolidation of variable interest entities performed in the third quarter of 2004 impacts the following quarterly comparisons only. The following comparisons exclude the impact of the automotive pedal systems business, Sermatech International business, European medical

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product sterilization business and small medical business, which have been presented in our condensed consolidated financial results as discontinued operations.

Comparison of the three and nine months ended September 25, 2005 and September 26, 2004

Revenues increased 2% in the third quarter of 2005 to $587.4 million from $575.9 million in the third quarter of 2004. This increase was due to an increase of 4% from core growth, offset, in part, by decreases of 1% from the consolidation of variable interest entities and 1% from dispositions. Revenues increased 7% in the first nine months of 2005 to $1.87 billion from $1.75 billion in the first nine months of 2004. This increase was due to increases of 5% from acquisitions, 4% from core growth and 1% from currency, offset, in part, by a decrease of 3% from dispositions. The Commercial, Medical and Aerospace segments comprised 46%, 33% and 21% of our third quarter 2005 revenues, respectively, and 48%, 33% and 19% of our revenues for the first nine months of 2005, respectively.

Materials, labor and other product costs as a percentage of revenues increased to 71.7% and 71.6% in the third quarter and first nine months of 2005, respectively, compared with 69.9% and 71.0% in the third quarter and first nine months of 2004, respectively, due primarily to the impact of duplicate costs and inefficiencies related to the transfer of products between facilities in the Commercial Segment associated with the restructuring program. Selling, engineering and administrative expenses (operating expenses) as a percentage of revenues declined to 17.8% and 18.1% in the third quarter and first nine months of 2005, respectively, compared with 22.0% and 20.1% in the third quarter and first nine months of 2004, respectively, due primarily to the continuing reduction of facilities and supporting infrastructure costs and decreased corporate expenses relative to higher revenues.

Interest expense decreased in the third quarter of 2005 principally due to lower average debt levels in the third quarter of 2005. Interest expense increased in the first nine months of 2005 principally from higher acquisition related debt balances in the first half of 2005. The effective income tax rate was 20.2% in the third quarter of 2005 compared with 15.7% in the third quarter of 2004. The higher rate in the third quarter of 2005 was primarily the result of recognizing a benefit in the third quarter of 2004 of $2.0 million, or $0.05 per share, from releasing a tax reserve whose statutory limitation period expired during the quarter. The effective income tax rate was 22.6% in the first nine months of 2005 compared with 22.2% in first nine months of 2004. Net income for the third quarter of 2005 was $33.6 million, an increase of 92% from the third quarter of 2004, due primarily to a 34% increase in segment operating profits net of corporate expenses. Net income for the first nine months of 2005 was $101.3 million, an increase of 25% from the first nine months of 2004, due primarily to a 25% increase in segment operating profits net of corporate expenses and to the gain on the sale of the Sermatech business. Diluted net earnings per share for the third quarter of 2005 increased 91% to $0.82, and includes the cost of restructuring and discontinued operations. Diluted net earnings per share for the first nine months of 2005 increased 24% to $2.47.

Minority interest in consolidated subsidiaries increased $0.9 million and $1.9 million in the third quarter and first nine months of 2005, respectively, due to increased profits from our entities that are not wholly-owned.

For the third quarter and first nine months of 2005, the charges, including changes in estimates, associated with the restructuring and divestiture program by segment that are included in restructuring costs were as follows:

	Third Quarter 2005 — Commercial	Medical	Total
	(Dollars in thousands)
Termination benefits	$ 715	$ 1,237	$ 1,952
Contract termination costs	148	48	196
Other restructuring costs	448	3,180	3,628
	$ 1,311	$ 4,465	$ 5,776

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	First Nine Months 2005 — Commercial	Medical		Aerospace	Total
	(Dollars in thousands)
Termination benefits	$ 2,711	$	4,735	$ 517	$ 7,963
Contract termination costs	(313	)	957	—	644
Asset impairments	156		610	1,898	2,664
Other restructuring costs	859		6,983	610	8,452
	$ 3,413	$	13,285	$ 3,025	$ 19,723

Termination benefits are comprised of severance-related payments for all employees terminated in connection with the restructuring and divestiture program. Contract termination costs relate primarily to the termination of leases in conjunction with the consolidation of facilities in our Medical Segment and also include a $0.5 million reduction in the estimated cost associated with a lease termination in conjunction with the consolidation of manufacturing facilities in our Commercial Segment. Asset impairments relate primarily to machinery and equipment associated with the consolidation of manufacturing facilities. Other restructuring costs include expenses primarily related to the consolidation of manufacturing operations and the reorganization of administrative functions.

As of September 25, 2005, we expect to incur the following future restructuring costs in our Commercial and Medical segments over the next three quarters:

	Commercial	Medical
	(Dollars in thousands)
Termination benefits	$ 250 - 500	$ 14,500 - 17,500
Contract termination costs	0 - 250	2,250 - 4,000
Other restructuring costs	250 - 500	5,500 - 8,000
	$ 500 - 1,250	$ 22,250 - 29,500

Segment Reviews

The following is a discussion of our segment operating results.

Commercial

Products in the Commercial Segment generally are produced in higher unit volume than those of our other two segments. They are manufactured for broad distribution as well as custom fabricated to meet individual customer needs. Consumer spending patterns influence the market trends for products sold to the automotive and marine markets.

Automotive cable and shifter products are manufactured primarily for automotive OEMs. Discussion of marine and industrial product lines below includes the manufacturing and distribution of driver controls, motion controls, power and vehicle management systems and fuel management systems to the automotive supply, marine and industrial markets.

Comparison of the three and nine months ended September 25, 2005 and September 26, 2004

Commercial Segment revenues increased 1% in the third quarter of 2005 to $270.2 million from $267.6 million in the third quarter of 2004. The increase was due to a 2% increase in core growth, offset, in part, by a 1% decrease from dispositions. The segment benefited from continued strength in its industrial OEM markets and increased sales of driver and motion controls to automotive OEM markets. Slower sales of products into marine and recreational markets resulted in a decline in revenues for these markets when compared with the prior year period. Commercial Segment revenues declined 2% in the first nine months of 2005 to $888.7 million from $903.5 million in the first nine months of 2004. The decline was due to a 6% decrease from dispositions, offset, in part, by increases of 3% from core growth and 1% from currency.

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Increased sales of products into industrial markets were more than offset by slower sales of products into marine and recreational markets.

Commercial Segment operating profit declined 44% in the third quarter of 2005 to $9.2 million from $16.5 million in the third quarter of 2004 and declined 30% in the first nine months of 2005 to $59.4 million from $84.5 million in the first nine months of 2004. These declines primarily reflect lower volume related contributions from higher margin marine and recreational products, the impact of duplicate costs and inefficiencies related to the transfer of products between two Tier 2 automotive supply facilities, the bankruptcy of an automotive supply customer and the impact of divestitures made in 2004. Operating profit as a percent of revenues declined to 3.4% in the third quarter of 2005 from 6.2% in the third quarter of 2004 and declined to 6.7% in the first nine months of 2005 from 9.3% in the first nine months of 2004.

Medical

Products in the Medical Segment generally are required to meet exacting standards of performance and have long product life cycles. Economic influences on revenues relate primarily to spending patterns in the worldwide medical devices and hospital supply market.

Comparison of the three and nine months ended September 25, 2005 and September 26, 2004

Medical Segment revenues declined 3% in the third quarter of 2005 to $196.6 million from $202.5 million in the third quarter of 2004. The segment generated an increase of 1% from core growth that was more than offset by decreases of 3% from the consolidation of variable interest entities and 1% from dispositions. New product sales of both surgical devices and specialty products from medical device manufacturers contributed to core growth. Medical Segment revenues increased 23% in the first nine months of 2005 to $624.4 million from $506.6 million in the first nine months of 2004. This increase was due to increases of 19% from acquisitions, 4% from core growth and 1% from currency, offset, in part, by a decrease of 1% from dispositions. Medical Segment revenues increased primarily as a result of the increased sale of disposable medical products, particularly related to the third quarter 2004 acquisition of HudsonRCI, a provider of respiratory care products. Sales of surgical instruments and medical devices increased primarily as a result of new product sales and volume increases for specialty devices sold to medical device manufacturers.

Medical Segment operating profit increased 28% in the third quarter of 2005 to $38.9 million from $30.4 million in the third quarter of 2004 due primarily to significant improvements in the core business related to benefits of the restructuring program and the integration of HudsonRCI. Medical Segment operating profit increased 44% in the first nine months of 2005 to $114.9 million from $79.7 million in the first nine months of 2004 driven primarily by the HudsonRCI acquisition and significant improvements in the core business as benefits of the restructuring program began to be recognized. Operating profit as a percent of revenues increased to 19.8% in the third quarter of 2005 from 15.0% in the third quarter of 2004 and increased to 18.4% in the first nine months of 2005 from 15.7% in the first nine months of 2004.

Aerospace

Products and services in the Aerospace Segment, many of which are proprietary, require a high degree of engineering sophistication and are often custom-designed. Economic influences on these products and services relate primarily to spending patterns in the worldwide aerospace industry and to demand for power generation.

Comparison of the three and nine months ended September 25, 2005 and September 26, 2004

Aerospace Segment revenues increased 14% in the third quarter of 2005 to $120.7 million from $105.9 million in the third quarter of 2004. This growth was primarily attributable to strong core growth in repair products and services and in sales of both narrow-body cargo loading systems and wide-body cargo system conversions. Aerospace Segment revenues increased 6% in the first nine months of 2005 to $354.9 million from $335.3 million in the first nine months of 2004. Core growth in repair products and services and cargo handling was offset by the phase out of industrial gas turbine aftermarket services.

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Aerospace Segment operating profit increased 359% in the third quarter of 2005 to $11.5 million from $2.5 million in the third quarter of 2004. The Aerospace Segment had an operating profit of $20.1 million in the first nine months of 2005 compared to a loss of $1.6 million in the first nine months of 2004. Higher volume and improvements in precision-machined components and the cargo systems businesses contributed to the improvement as did a reduction in losses resulting from the exit of the industrial gas turbine aftermarket services. Operating profit as a percent of revenues increased to 9.5% in the third quarter of 2005 from 2.4% in the third quarter of 2004 and increased to 5.7% in the first nine months of 2005 from (0.5)% in the first nine months of 2004.

Liquidity and Capital Resources

Operating activities provided net cash of approximately $231.8 million during the first nine months of 2005. Changes in our operating assets and liabilities during the first nine months of 2005 resulted in a net cash inflow of $43.3 million, the most significant of which were decreases in accounts receivable and accounts payable and accrued expenses. The decrease in accounts receivable was primarily due to improved cash collection practices including the sale of certain receivables under a non-recourse securitization program. The decrease in accounts payable and accrued expenses was primarily due to pension plan contributions, payments to a minority interest and payments associated with our restructuring program. Our financing activities during the first nine months of 2005 consisted primarily of a reduction in long-term borrowings of $122.4 million, proceeds from long-term borrowings of $61.1 million and a decrease in notes payable and current borrowings of $46.4 million, driven by improved operating cash flow, proceeds from the disposition of businesses and lower capital spending. On July 25, 2005, our Board of Directors authorized the repurchase of up to $140 million of outstanding Teleflex common stock over twelve months ending July 2006. Under the approved plan, we repurchased 0.6 million shares on the open market for an aggregate purchase price of $39.3 million. Our investing activities during the first nine months of 2005 consisted primarily of proceeds from the sale of businesses and assets of $124.4 million. Net cash used in discontinued operations was $3.3 million in the first nine months of 2005.

The following table provides our net debt to total capital ratio:

	September 25,	December 26,
	2005	2004
	(Dollars in thousands)
Net debt includes:
Current borrowings	$ 22,774	$ 101,856
Long-term borrowings	635,875	685,912
Total debt	658,649	787,768
Less: Cash and cash equivalents	246,078	115,955
Net debt	$ 412,571	$ 671,813
Total capital includes:
Net debt	$ 412,571	$ 671,813
Shareholders’ equity	1,133,433	1,109,733
Total capital	$ 1,546,004	$ 1,781,546
Percent of net debt to total capital	27 %	38 %

The decline in our percent of net debt to total capital for September 25, 2005 as compared to December 26, 2004 is primarily due to the receipt of proceeds from the sale of businesses and assets and improved management of working capital.

We believe that our cash flow from operations and our ability to access additional funds through credit facilities will enable us to fund our operating requirements, capital expenditures and additional acquisition opportunities.

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link1 "Item 3. Quantitative and Qualitative Disclosures About Market Risk"

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in market risk for the quarter ended September 25, 2005. See the information set forth in Part II, Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2004.

link1 "Item 4. Controls and Procedures"

ITEM 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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link1 "PART II -- OTHER INFORMATION"

PART II — OTHER INFORMATION

link1 "Item 1. Legal Proceedings"

ITEM 1. Legal Proceedings

We are 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, available insurance coverage, established reserves and other resources, we do not believe that any such actions are likely to be, individually or in the aggregate, material to our business, financial condition, results of operations or liquidity. However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to our business, financial condition, results of operations or liquidity.

In February 2004, a jury verdict of $34.8 million was rendered against one of our subsidiaries in a trademark infringement action. In February 2005, the trial judge entered an order rejecting the jury award in its entirety. Both parties have filed notice to appeal on various grounds. While the Company cannot predict the outcome of the appeals, we will continue to vigorously contest this litigation.

link1 "Item 2. Unregistered Sales of Equity Securities and Use of Proceeds"

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

On July 25, 2005, our Board of Directors authorized the repurchase of up to $140 million of outstanding Teleflex common stock over twelve months ending July 2006.

The following table sets forth certain information regarding our repurchases of our equity securities on the open market during the third quarter of 2005:

			Total Number — of Shares	Approximate — Dollar Value of
			Purchased as	Shares that May
Total Number		Average	Part of Publicly	Yet Be Purchased
of Shares		Price Paid	Announced Plans	Under the Plans
Purchased		Per Share	or Programs	or Programs
June 27, 2005 - July 31, 2005	—	$ —	—	$ 140,000,000
August 1, 2005 - August 28, 2005	565,300	$ 67.65	565,300	$ 101,742,000
August 29, 2005 - September 25, 2005	14,900	$ 67.48	14,900	$ 100,737,000
	580,200	$ 67.64	580,200	$ 100,737,000

link1 "Item 3. Defaults Upon Senior Securities"

ITEM 3. Defaults Upon Senior Securities

None.

link1 "Item 4. Submission of Matters to a Vote of Security Holders"

ITEM 4. Submission of Matters to a Vote of Security Holders

None.

link1 "Item 5. Other Information"

ITEM 5. Other Information

None.

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link1 "Item 6. Exhibits"

ITEM 6. Exhibits

The following exhibits are filed as part of this report:

Exhibit No.		Description
31(a)	—	Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934.
(b)	—	Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934.
32(a)	—	Certification of Chief Executive Officer pursuant to
Rule 13a-14(b) under the Securities Exchange Act of 1934.
(b)	—	Certification of Chief Financial Officer, Pursuant to
Rule 13a-14(b) under the Securities Exchange Act of 1934.

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link1 "SIGNATURES"

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TELEFLEX INCORPORATED

By: /s/ Jeffrey P. Black

Jeffrey P. Black
President and Chief Executive Officer
(Principal Executive Officer)

By: /s/ Martin S. Headley

Martin S. Headley
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

By: /s/ Bruno Fontanot

Bruno Fontanot
Corporate Controller
(Principal Accounting Officer)

Dated: November 4, 2005

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