TELEFLEX INC
For the period ended Dec 31, 2024. Filed Feb 28, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 28, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-23.
0000096943-24-000036
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0000096943-25-000031
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 136 previous paragraphs and 155 current paragraphs.
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A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (45)
Current report
Goodwill Impairment
Current report
Our goodwill impairment testing is performed annually during the fourth quarter of each fiscal year in addition to periods where changes in circumstances indicate that the carrying value of our goodwill assets may not be recoverable. During the second quarter of 2024, we identified indicators of a potential impairment related to our Interventional Urology North America reporting unit (the “IU reporting unit”), included within our Americas operating segment. The indicators of a potential impairment primarily arose from lower than anticipated sales results from our UroLift product line (“UroLift"), primarily driven by the adverse impact of persistent end-market challenges within the U.S. office site of service. We performed a quantitative impairment test of the reporting unit using both the income and the market approaches, and no impairment to goodwill was recognized in the second quarter of 2024 as the fair value of the reporting unit exceeded the carrying value. During the third quarter of 2024, the IU reporting unit performed largely in line with the forecast used in the second quarter 2024 quantitative fair value test.
Current report
In connection with preparing the financial statements for the year ended December 31, 2024, we performed our annual impairment test for goodwill and determined that the carrying value of the IU reporting unit exceeded its fair value. Consequently, we recognized a non-cash impairment charge of $240 million in the goodwill impairment line in the Consolidated Statements of Income. The charge was primarily driven by updates to our UroLift forecast, done as part of our annual operating plan process, which reflects management's expectations of a prolonged period of subdued revenue growth due to persistent end-market challenges and changes in competitive pressures in the short to mid-term. Moreover, we anticipate that challenges related to a combination of price, mainly within the office site of service, and volume, will likely continue to impact growth rates.
Current report
As of December 31, 2024, goodwill of the IU reporting unit was $403.9 million after the impairment charge. We estimated the fair value of the reporting unit using both the income and the market approaches. The more significant judgments and assumptions in determining the fair value of the IU reporting unit for our 2024 impairment assessments included the revenue growth rates, the projected operating margins and the discount rate. The quantitative assessment utilized a discount rate of 10.75%. A hypothetical 1% increase in our discount rate estimate used to determine the fair value of the estimated future cash flows would result in an additional impairment charge of $95.0 million.
Current report
Italian payback measure
Current report
In 2015, the Italian parliament enacted legislation that, among other things, imposed a “payback” measure on medical device companies that supply goods and services to the Italian National Healthcare System. Under the measure, companies are required to make payments to the Italian government if medical device expenditures in a given year exceed regional expenditure ceilings established for that year. The payment amounts are calculated based on the amount by which the regional ceilings for the given year were exceeded. In response to decrees issued by the Italian Ministry of Health, in the fourth quarter of 2022 the various Italian regions issued invoices to medical device companies, including Teleflex, under the payback measure seeking payment with respect to excess expenditures for the years 2015 through 2018. Following the issuance of the invoices, we and numerous other medical device companies filed appeals with the Italian administrative courts challenging the enforceability of the payback measure, primarily on the basis that the law was unconstitutional. The Italian administrative courts referred the question regarding the constitutionality of the law to the Italian Constitutional Court, which in July 2024, issued a ruling upholding the law as constitutional. During the year ended December 31, 2024 we recognized increases to our reserve, and corresponding reductions to revenue of $22.1 million. The increase in reserve for the year ended December 31, 2024 included $13.8 million pertaining to prior years stemming from the July 2024 ruling. As of December 31, 2024, our reserve related to this matter was $35.7 million. Following the ruling of the Italian Constitutional Court, the appeal before the Italian administrative court will proceed with respect to the remaining legal arguments asserted by the appellants with regard to the enforceability of the payback law.
Current report
In 2023, we began the execution of a plan to terminate the Teleflex Incorporated Retirement Income Plan (the “TRIP”), a U.S. defined benefit pension plan. The TRIP is subject to Title IV of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and, therefore, must be terminated in accordance with the requirements of ERISA and the process governed by the Pension Benefit Guaranty Corporation (the “PBGC”). The termination date of the TRIP was August 1, 2023, which is the date upon which the timing of the requirements for the formal termination process is based. On September 8, 2023, we filed the required notice regarding the TRIP termination with the PBGC. The termination process requires that all TRIP benefits be distributed to participants, beneficiaries and alternate payees or transferred to a group annuity contract or the PBGC. In December of 2023, we made payments to eligible participants, beneficiaries and alternate payees who elected the one-time lump sum distribution option offered in connection with the TRIP termination, resulting in the recognition of a pre-tax settlement charge of $45.2 million.
Current report
In 2024, we purchased a group annuity contract, using TRIP assets, which resulted in the recognition of net pre-tax settlement charges of $132.7 million for the year-ended December 31, 2024. The participants, beneficiaries, and alternate payees whose benefits were transferred to the group annuity contract will each receive from such group annuity contract the full value of their benefit that accrued under the TRIP. The assets in the TRIP Trust exceed the estimated liability for amounts to be transferred to the PBGC for missing participants and beneficiaries (“surplus plan assets”) and as a result, we transferred $43.0 million of the surplus plan assets to a suspense account within the Teleflex 401(k) Savings Plan, a qualified defined contribution plan. These assets are restricted for future use in accordance with our election to use them to fund future employer contributions to participants in the Teleflex 401(k) Savings Plan. The surplus assets contributed to the suspense account remaining as of December 31, 2024 are included within prepaid and other current assets and other assets on the Consolidated Balance Sheet included below within this Annual Report on Form 10-K.
Current report
On February 24, 2025, we executed a definitive agreement to acquire substantially all of the Vascular Intervention business (the “VI Business”) of BIOTRONIK SE & Co. KG ("BIOTRONIK"). The acquisition will include a broad suite of coronary and peripheral medical devices, such as drug-coated balloons, stents, and balloon catheters, which will complement our interventional product portfolio. Under the terms of the agreement, we will acquire the VI Business for an initial cash payment of €760 million reduced by certain adjustments as provided in the purchase agreement including certain working capital not transferring and other customary adjustments. The acquisition is subject to customary closing conditions, including receipt of certain regulatory approvals, and is expected to be completed in the third quarter of 2025.
Current report
Concurrent with the execution of the agreement to acquire the VI Business, we entered into an amendment to our Third Amended and Restated Credit Agreement (the “Credit Agreement”), which, among other things, (a) provides for a delayed draw term loan facility in an aggregate principal amount of $500 million, which will be available to be drawn on the date on which we consummate the VI Business acquisition and (b) permits us to borrow up to $550 million under the revolving facility provided for under the Credit Agreement on a limited condition basis on the date on which the VI Business acquisition is consummated. Borrowings under the delayed draw term loan will bear interest at a rate per annum equal to the applicable margin plus, at our option, either (1) the highest of (i) the “Prime Rate” in the U.S. last quoted by The Wall Street Journal, (ii) 0.50% above the greater of the federal funds rate and the rate comprised of both overnight federal funds and overnight eurodollar transactions denominated in dollars and (iii) 1.00% above the Term SOFR Rate for a one month interest period, plus an applicable margin ranging from 0.125% to 1.00%, in each case subject to adjustments based on our total net leverage ratio or (2) a Term Secured Overnight Financing Rate (“SOFR”) rate (which includes a credit spread adjustment of 10 basis points). The applicable margin for borrowings under the delayed draw term loan range from 1.125% to 2.00% for SOFR borrowings and from 0.125% to 1.00% for base-rate borrowings, in each case, depending on, at our election, either (x) our public corporate family rating or (y) our consolidated total net leverage ratio, in each case, based on the most recently ended fiscal quarter. The obligations under the delayed draw term loan will be guaranteed and secured on the same basis as the facilities provided for under the Credit Agreement. The delayed draw term loan will not amortize and will mature on the earlier of (x) the date that is two years after the date on which such loans are funded and (y) the maturity date for the revolving facility provided for under the Credit Agreement.
Current report
In addition to amending our Credit Agreement, we also entered into foreign exchange derivative contracts with an aggregate notional value of €700 million to economically hedge against the foreign currency exposure associated with the cash consideration needed to complete the VI Business acquisition.
Current report
We anticipate using the new delayed draw term loan along with revolving credit borrowings under the Credit Agreement and cash on hand to finance the VI Business acquisition. For the year ended December 31, 2024, we incurred transaction costs of $11.5 million in connection with the acquisition, which was recognized in selling, general and administrative expenses in the Consolidated Statement of Income. The majority of the transaction costs were recognized in the fourth quarter of 2024.
Current report
On February 27, 2025, we announced our intention to create a new, independently traded public company comprising Urology (consisting of our Interventional Urology and Urology product categories), Acute Care (consisting of our Respiratory product category, the majority of our Anesthesia product category and certain products within our Interventional Access and Surgical product categories) and our OEM businesses. Our Vascular Access product category, most of our products within our Interventional Access and Surgical product categories and the expected acquisition of the VI business will remain with Teleflex. We intend to target the completion of the transaction in the middle of 2026 via a distribution of newly issued shares of the new company to shareholders that is tax-free for U.S. tax purposes. There can be no guarantees that the proposed separation will be completed on the terms and within the timeframe we announced, or at all.
Current report
The healthcare industry has been impacted by shifts in the delivery, or site of service, of healthcare services, staffing shortages at healthcare facilities and government-led initiatives designed to reduce the cost of healthcare products. These factors have impacted and may continue to influence the demand for our products in the future.
Current report
Net revenues for the year ended December 31, 2024 increased by $72.8 million, or 2.4%, compared to the prior year, primarily due to a $51.4 million contribution from price increases and a $43.0 million increase in sales of new products. Moreover, there was a net increase in sales volume of existing products, primarily due to higher global intra-aortic balloon ("IAB") pump sales, which were partially offset by a decline in sales related to our UroLift product line within our Americas segment. The increases in net revenues were partially offset by the unfavorable impact from an increase in our reserves related to the Italian payback measure and, to a lesser extent, a decrease from the net impact of acquired and divested businesses.
Current report
Selling, general and administrative expenses increased $65.4 million for the year ended December 31, 2024, compared to the prior year period, primarily due to a benefit recognized in the prior year period resulting from decreases in the estimated fair value of our contingent consideration liabilities, whereas, in the current period, we recognized an expense due to increases in these liabilities. Additionally, higher operating expenses incurred by the acquired Palette business and higher IT related costs that were primarily driven by our implementation of a new ERP solution contributed to the overall increase.
Current report
Goodwill impairment charge
Current report
During the year ended December 31, 2024, we recognized a goodwill impairment charge of $240.0 million related to our IU reporting unit. Refer to Note 8 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Current report
Restructuring and other impairment charges
Current report
During the second quarter of 2024, we initiated the "2024 Footprint realignment plan," encompassing several strategic restructuring initiatives. These initiatives primarily include the relocation of select manufacturing operations to existing lower-cost locations, the optimization of specific product portfolios through targeted rationalization efforts, the relocation of certain integral product development and manufacturing support functions, the optimization of certain supply chain activities and related workforce reductions. We estimate that we will incur aggregate pre-tax restructuring and restructuring related charges in connection with the 2024 Footprint realignment plan of $37 million to $46 million. The actions under the 2024 Footprint realignment plan are expected to be substantially completed by the end of 2025.
Current report
We expect to achieve annual pre-tax savings of $12 million to $14 million once the plan is fully implemented. The impact of product rationalization efforts will partially offset the annual pre-tax savings generated by the plan.
Current report
2023 Footprint realignment plan
Current report
(1)For the year ended December 31, 2024, we recorded non-cash impairment charges totaling $7.8 million related to a decrease in the carrying value of an equity investment and an impairment of a portion of our operating lease assets stemming from our cessation of occupancy of a specific facility.
Current report
Interest expense
Current report
A significant number of jurisdictions, including EU member states, have enacted legislation to establish a 15% global minimum tax in accordance with both the established Pillar Two framework and guidance subsequently published by the OECD. We considered and analyzed the enacted tax laws and guidance in the jurisdictions relevant to Teleflex, and there are no material impacts to our tax provision for the year ended December 31, 2024. We will continue to evaluate the potential impact of future proposed legislation, enacted legislation, and updated guidance as it becomes available but do not currently expect a material increase to our effective tax rate as a result of the Pillar Two framework.
Current report
Comparison of 2024 and 2023
Current report
Americas net revenues for the year ended December 31, 2024 increased $24.9 million, or 1.2%, compared to the prior year, which was primarily attributable to a $36.0 million contribution from price increases and a $35.2 million increase in sales of new products. The increases in net revenue were partially offset by a $25.9 million decrease from the net impact of acquired and divested businesses and an $18.1 million decrease in sales volumes of existing products, primarily driven by a decline in sales related to our UroLift product line partially mitigated by higher IAB pumps sales.
Current report
During the second half of 2024, we were notified that a large customer within our OEM product category intended to vertically integrate a component that we previously manufactured on their behalf. Additionally, we have begun to experience delays in orders from certain customers as they increasingly focus on managing inventories. We cannot predict with certainty the timing of customer inventory corrections; however, should the current trend of customers more tightly managing their inventory persist, it may adversely impact future results.
Current report
EMEA net revenues for the year ended December 31, 2024 increased $31.8 million, or 5.4%, compared to the prior year, which was primarily attributable to a $25.8 million increase in sales volumes of existing products and price increases, partially offset by the unfavorable impact from an increase in our reserves related to the Italian payback measure.
Current report
EMEA operating profit for the year ended December 31, 2024 increased $21.9 million, or 19.7%, compared to the prior year, which was primarily attributable to lower research and development expenses related to the European Union Medical Device Regulation and an increase in gross profit resulting from higher sales and price increases. The increases in operating profit were partially offset by an increase in sales expenses to support higher sales.
Current report
Asia net revenues for the year ended December 31, 2024 increased $16.1 million, or 4.7%, compared to the prior year, which was primarily attributable to a $13.0 million increase in sales volumes of existing products, and revenues generated by the acquisition of Palette. The increase in net revenues was partially offset by unfavorable fluctuations in foreign currency exchange rates.
Current report
Asia operating profit for the year ended December 31, 2024 decreased $6.3 million, or 5.2%, compared to the prior year, which was primarily attributable to an increase in sales and marketing expenses to support higher sales, an increase in research and development expenses, and unfavorable fluctuations in foreign currency exchange rates. The decreases in operating profit were partially offset by an increase in gross profit resulting from higher sales, despite an unfavorable impact from product mix.
Current report
The Chinese government has implemented regional and national programs for volume-based procurement ("VBP") of medical device products designed to reduce healthcare costs. These programs require manufacturers to meet specific quality and quantity requirements to be awarded tenders. Successful tenders provide allocated sales volumes, while unsuccessful bids may result in significant revenue loss. During the fourth quarter of 2024, we were awarded a tender for certain products with our surgical product category under a VBP program. The anticipated implementation of this program during 2025 is expected to have an adverse impact on future results due to reduced pricing.
Current report
Currently, we are not aware of any other upcoming VBP programs that are expected to materially impact our product portfolio. However, to the extent additional VBP programs are implemented in the future, we cannot reasonably predict the direct or indirect impact on our financial performance.
Current report
Revenue generated from our China business represented approximately 4% of consolidated revenue for the year ended December 31, 2024.
Current report
Comparison of 2023 and 2022
Current report
Americas
Current report
EMEA
Current report
Asia
Current report
On July 30, 2024, the Board of Directors authorized a share repurchase program for up to $500 million of our common stock. The timing, price and actual number of shares of common stock that may be repurchased under the share repurchase authorization will depend on a variety of factors including price, market conditions and corporate and regulatory requirements. The repurchases may occur in open market transactions, transactions structured through investment banking institutions, in privately negotiated transactions, by direct purchases of common stock or a combination of the foregoing, and the timing and amount of stock repurchased will depend on market and business conditions, applicable legal and credit requirements and other corporate considerations. The authorization of the repurchase program does not constitute a binding obligation to acquire any specific amount of common stock, and the repurchase program may be suspended or discontinued at any time. On August 2, 2024, we entered into an accelerated share repurchase agreement for $200 million of our common stock. Under this agreement, 678,110 shares of common stock, representing 80% of the $200 million aggregate, were delivered and included in treasury stock. The initial shares received were calculated based on a price per share of $235.95, which was the closing share price of our common stock on August 1, 2024. Final settlement under the ASR Transaction occurred on October 30, 2024, at which time we received 172,351 additional shares of common stock. The total shares received were calculated based on a price per share of $235.17, which was based on volume-weighted average prices of our common stock during the accelerated share repurchase period less a discount.
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Removed paragraphs (24)
Previous report
Acquisition
Previous report
On October 10, 2023, we completed the acquisition of Palette, a privately held medical device company that sells a portfolio of hyaluronic acid gel-based products primarily utilized in the treatment of urology diseases including a rectal spacing product used in connection with radiation therapy treatment of prostate cancer. The fair value of consideration transferred was $621.9 million, consisting of net cash payments of $594.9 million and $27.0 million in estimated fair value of contingent consideration. The contingent consideration liability represents the estimated fair value of our obligations, under the acquisition agreement, to make two milestone payments up to $50 million, in aggregate, if certain commercial milestones are met. The acquisition was financed using borrowings under our revolving credit facility and cash on hand. See Note 4 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Previous report
Divestiture
Previous report
On May 15, 2021, we entered into a definitive agreement to sell certain product lines within our global respiratory product portfolio to Medline for consideration of $286.0 million, reduced by $12 million in working capital not transferring to Medline (the "Respiratory business divestiture"). In connection with the Respiratory business divestiture, we also entered into several ancillary agreements with Medline to help facilitate the transfer of the business, which provide for transition support, quality, supply and manufacturing services, including a manufacturing and supply transition agreement (the "MSTA").
Previous report
On June 28, 2021, we completed the initial phase of the Respiratory business divestiture, pursuant to which we received cash proceeds of $259.0 million. On December 4, 2023, we completed the second and final phase of the Respiratory business divestiture with the transfer of certain additional manufacturing assets to Medline resulting in $15.0 million in additional cash proceeds and the recognition of a gain on sale of $4.4 million.
Previous report
In May 2023, our Board of Directors approved the termination of the Teleflex Incorporated Retirement Income Plan (the “TRIP”), a U.S. defined benefit plan, effective as of August 1, 2023. The TRIP is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and is intended to be tax-qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (“Code”). Participation in and accrual of benefits under the TRIP have been frozen since 2012, and, as of December 31, 2023, the TRIP assets exceeded the liabilities. In June 2023, we notified participants of our intent to terminate the TRIP and requested a determination letter from the Internal Revenue Services (“IRS”) stating that the TRIP satisfies the requirements, in form, to be tax-qualified under Code Section 401(a) upon termination. In September 2023, a notice of benefits was sent to participants, beneficiaries and alternate payees in connection with the proposed termination. Participants, beneficiaries and alternate payees who had not started their TRIP benefits were offered the opportunity to elect to receive their benefits in the form of a lump sum distribution in connection with the termination of the TRIP or to commence their benefits in the form of monthly annuity payments in accordance with TRIP terms. Because the TRIP is an ERISA plan, the termination is subject to approval by the Pension Benefit Guaranty Corporation (“PBGC”). In September 2023, we filed a termination notice with the PBGC for approval. After the termination has been approved by the PBGC, one or more annuity contracts with a qualifying insurer(s) will be purchased to provide TRIP benefits that have not already been distributed. While we expect to proceed with the termination, we may decide not to proceed for certain reasons including, for example, if the cost to terminate the TRIP exceeds our current expectations. Should the Company proceed with the termination, participants, beneficiaries, and alternate payees will each receive the full value of their benefit under the TRIP, paid either from TRIP assets or from an annuity contract purchase as described under this paragraph.
Previous report
Upon settlement of the TRIP, we are required to remeasure the plan assets and obligation and will recognize a settlement loss for the recognition of the unrecognized losses in accumulated other comprehensive income including the effects of the remeasurement. In December 2023, we recognized a settlement charge of $45.2 million resulting from payments to eligible participants who elected the lump sum distribution option. As of December 31, 2023, the pre-tax accumulated other comprehensive loss related to the TRIP was approximately $150.5 million. We expect to recognize a settlement charge upon annuitization of the TRIP benefits, which we expect to occur during 2024. We also continue to evaluate our options with respect to TRIP plan assets in excess of liabilities ("surplus plan assets") remaining upon settlement of the TRIP. We may contribute any surplus plan assets to a qualified defined contribution savings plan, which would result in a charge equal to the surplus plan assets at the contribution date. As of December 31, 2023, the surplus plan assets were $26.3 million.
Previous report
On April 4, 2023, one of our Mexican subsidiaries received a notification from the Mexican Federal Tax Administration Service (“SAT”) setting forth its preliminary findings with respect to a foreign trade operations audit carried out by SAT for the period from July 1, 2017 to June 6, 2019. The preliminary findings stated that our Mexican subsidiary did not evidence the export of goods temporarily imported under Mexico’s Manufacturing, Maquila and Export Services Industries Program (“IMMEX Program”), therefore triggering the potential obligation for payment of import duties, value added tax, customs processing fees and other fines and penalties, which may cause an adverse impact on our gross profit in the future. In response to the notification, our Mexican subsidiary has requested that the matter be referred to the Procuraduría de la Defensa del Contribuyente, or “PRODECON,” (local tax ombudsperson) to help facilitate the process. In June 2023, SAT was provided with the appropriate documentation evidencing the export of the goods in accordance with the requirements of the IMMEX Program.
Previous report
While we cannot predict with certainty the outcome of this audit, based on currently known information, we do not believe a loss is either probable or estimable. Accordingly, no loss contingency has been recorded in our financial statements as of December 31, 2023 related to this matter. However, if the final resolution of the matter is not favorable to us, our Mexican subsidiary may be required to make payment of certain import duties, fines and surcharges, which could be material.
Previous report
Selling, general and administrative expenses increased $66.2 million for the year ended December 31, 2023, compared to the prior year period, primarily due to higher sales expenses across certain of our product portfolios, higher operating expenses incurred by the acquired Palette and Standard Bariatrics businesses, higher performance related employee benefit costs, higher transaction costs stemming from our acquisition of Palette and higher IT related costs. The increases in selling, general and administrative expenses were partially offset by a decrease in contingent consideration expense resulting from changes in the estimated fair value of our contingent consideration liabilities.
Previous report
Restructuring and impairment charges
Previous report
Respiratory divestiture plan
Previous report
In 2021, in connection with the Respiratory business divestiture, we committed to a restructuring plan designed to separate the manufacturing operations that will be transferred to Medline from those that will remain with Teleflex, which includes related workforce reductions (the “Respiratory divestiture plan”). The plan is substantially complete and as a result, we expect future restructuring expenses associated with the plan, if any, to be immaterial.
Previous report
(1)For the year ended December 31, 2022, we recorded impairment charges of $1.5 million related to our decision to abandon certain assets.
Previous report
Interest income and expense
Previous report
Interest income for the year ended December 31, 2023 increased compared to the prior year primarily due to higher investments in time deposits and money market mutual funds.
Previous report
Loss on extinguishment of debt
Previous report
During the year ended December 31, 2022 we recognized a $0.5 million loss on extinguishment of debt due to the write off of unamortized deferring financing costs related to the amendment of our senior credit facility.
Previous report
During 2023, a significant number of individual Member States of the EU enacted legislation to establish a 15% global minimum tax in accordance with the Pillar Two EU directive. We continue to evaluate the impact the laws will have on our consolidated results of operations, but based on legislation currently enacted, we do not expect the laws to have a material effect on our consolidated financial statements.
Previous report
OEM
Previous report
OEM net revenues for the year ended December 31, 2023 increased $53.4 million, or 19.6%, compared to the prior year, which was primarily attributable to a $28.3 million increase in sales volume of existing products and price increases.
Previous report
In December 2023, we entered into a zero cost foreign exchange collar contract that aligns with the notional amount and expiration date of the 2023 Cross-currency swaps. We sold a put option with a lower strike price and bought a call option with a higher strike price to manage the foreign exchange risk related to the final settlement of the $500 million notional cross currency swaps. Upon the execution of the zero cost foreign exchange collar contract, we have de-designated the existing $500 million notional cross-currency swaps and re-designated the combined $500 million notional cross currency swaps and zero cost collar into a new hedging instrument. At re-designation, the existing $500 million notional cross-currency swaps were off-market due to changes in foreign exchange rates and interest rates. The off-market value due to interest rates will be amortized ratably into earnings through October 2025 and the off-market value due to foreign exchange rates will remain in accumulated other comprehensive income until the underlying net investment is sold. The combined cross-currency swaps and zero cost collar has been designated as a net investment hedge for accounting purposes.
Previous report
Net cash provided by operating activities from continuing operations was $511.7 million during 2023, and $342.8 million during 2022. The $168.9 million increase was primarily attributable to lower tax payments, favorable changes in working capital and favorable operating results. The favorable changes in working capital were primarily driven by lower inventory purchases stemming from the build up of inventory in the prior year due to elevated global supply chain volatility.
Previous report
Net cash provided by financing activities from continuing operations was $38.5 million during 2023, which primarily consisted of $101.3 million in net proceeds from borrowings resulting from a $600 million draw on our Senior Credit facility to fund the acquisition of Palette, partially offset by payments against the Senior Credit facility. Net cash provided by financing activities for the year also reflects $63.9 million in dividend payments.
Reworded paragraphs (35)
Previous wording
We are a global provider of medical technology products focused on enhancing clinical benefits, improving patient and provider safety and reducing total procedural costs. We primarily design, develop, manufacture and supply medical devices used by hospitals and healthcare providers for common diagnostic and therapeutic procedures in critical care and surgical applications. Approximately 94% of our net revenues come from single-use medical devices. We market and sell our products worldwide through a combination of our direct sales force and distributors. Because our products are used in numerous markets and for a variety of procedures, we are not dependent upon any one end-market or procedure. We are focused on achieving consistent, sustainable and profitable growth by increasing our market share and improving our operating efficiencies.
Current wording
We are a global provider of medical technology products focused on enhancing clinical benefits, improving patient and provider safety and reducing total procedural costs. We primarily design, develop, manufacture and supply medical devices used by hospitals and healthcare providers for common diagnostic and therapeutic procedures in critical care and surgical applications. Approximately 92% of our net revenues come from single-use medical devices. We market and sell our products worldwide through a combination of our direct sales force and distributors. Because our products are used in numerous markets and for a variety of procedures, we are not dependent upon any one end-market or procedure. We are focused on achieving consistent, sustainable and profitable growth by increasing our market share and improving our operating efficiencies.
Previous wording
Our operations, supply chain, contractors, suppliers, customers and other business partners are impacted by various global macroeconomic factors. During 2023, we continued to experience elevated levels of overall cost inflation, specifically within materials and services, and we continue to monitor the impacts stemming from increases in interest rates and volatile exchange rates driven by monetary policy decisions of central banks as well as ongoing geopolitical conflicts. Moreover, the healthcare industry has been impacted by a transition in the delivery, or site of service, where healthcare services are being performed and staffing shortages at healthcare facilities that could impact the demand for our products in the future.
Current wording
Our operations, supply chain, contractors, suppliers, customers and other business partners are impacted by various global macroeconomic factors. During 2024, we experienced a general stabilization in overall cost inflation; however, materials and labor costs remain elevated compared to historical levels. We continue to monitor the impacts stemming from increases in interest rates and fluctuations in exchange rates driven by monetary policy decisions of central banks as well as ongoing geopolitical conflicts and the evolving global trade landscape, characterized by newly enacted, proposed and retaliatory tariffs. The implementation of such trade policies and tariffs could have a material adverse impact on our business.
Previous wording
In the latter part of 2023, we began to experience stabilization with respect to some of the macroeconomic and other factors discussed above, including but not limited to lower logistics and distribution cost inflation and a decrease in staffing shortages at healthcare facilities. In addition, we have implemented various measures designed to mitigate the future impacts of these factors impacting our business. Due to the dynamic nature of the macroeconomic and other factors discussed above, we cannot accurately predict the extent, duration, or our ability to offset the impact of these factors or the related effects on our business, results of operations, financial condition and cash flows.
Current wording
We have implemented various measures designed to mitigate the future impacts of these factors impacting our business. Due to the dynamic nature of the macroeconomic and other factors discussed above, we cannot accurately predict the extent, duration, or our ability to offset the impact of these factors or the related effects on our business, results of operations, financial condition and cash flows.
Previous wording
For a discussion of our results of operations comparison for 2022 and 2021, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed on February 23, 2023.
Current wording
For a discussion of our results of operations comparison for 2023 and 2022, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed on February 23, 2024. Discussion of our reportable segment results of operations comparison for 2023 and 2022 is included below within this Annual Report on Form 10-K to reflect the changes in our segment presentation, which occurred during the fourth quarter of 2024.
Previous wording
For the year ended December 31, 2023, gross margin increased 50 basis points, or 0.9%, compared to the prior year period, primarily due to price increases, benefits from cost improvement initiatives and lower logistics and distribution related costs, partially offset by continued cost inflation from macro-economic factors, specifically with respect to raw materials, and an unfavorable impact on manufacturing productivity due to constraints in raw material supply.
Current wording
For the year ended December 31, 2024, gross margin increased 50 basis points, or 0.9%, compared to the prior year period, primarily due to the favorable impact of gross margin attributed to acquired and divested businesses, price increases and the benefits from cost improvement initiatives. The increases in gross margin were partially offset by the unfavorable impact from an increase in our reserves related to the Italian payback measure, continued cost inflation from macro-economic factors, specifically with respect to labor and raw materials, the adverse impact of manufacturing inefficiencies and unfavorable fluctuations in foreign currency exchange rates.
Previous wording
Research and development expenses increased $0.6 million for the year ended December 31, 2023, compared to the prior year, which was primarily attributable to higher project spend within certain of our product portfolios and expenses incurred by Standard Bariatrics, partially offset by lower expenses related to the European Union Medical Device Regulation related costs.
Current wording
Research and development expenses increased $7.3 million for the year ended December 31, 2024, compared to the prior year, which was primarily attributable to expenses incurred by the acquired Palette business and higher project spend within certain product categories, partially offset by lower European Union Medical Device Regulation related costs.
Previous wording
During the year ended December 31, 2023, we recognized a settlement charge of $45.2 million related to our plan to terminate the TRIP resulting from payments to eligible participants who elected a lump sum distribution.
Current wording
During the year ended December 31, 2024, we recognized net pre-tax settlement charges of $132.7 million related to our plan to terminate the TRIP resulting from our purchase of a group annuity contract to provide participants, beneficiaries, and alternate payees the full value of their benefit under the plan. During the year ended December 31, 2023, we recognized a pre-tax settlement charge of $45.2 million stemming from payments to eligible participants who elected a lump sum distribution under our plan to terminate the TRIP.
Previous wording
We expect to begin realizing plan-related savings in 2024 and expect to achieve annual pre-tax savings of $29 million to $35 million once the plan is fully implemented.
Current wording
During the fourth quarter of 2024, we initiated the "2024 restructuring plan," a new strategic restructuring plan aimed at optimizing operations, reducing costs and enhancing efficiencies across our business lines and includes the relocation of select office administrative operations. We estimate that we will incur aggregate pre-tax restructuring and restructuring related charges in connection with the 2024 restructuring plan of $9 million to $11 million. The actions under the 2024 restructuring plan are expected to be substantially completed by the end of 2025. We began realizing plan-related savings in the fourth quarter of 2024 and expect to achieve annual pre-tax savings of $9 million to $11 million once the plan is fully implemented.
Previous wording
In September 2023, we initiated a restructuring plan primarily involving the relocation of certain manufacturing operations to existing lower-cost locations, the outsourcing of certain manufacturing processes and related workforce reductions (the "2023 Footprint realignment plan"). We estimate that we will incur $11 million to $15 million in aggregate pre-tax restructuring and restructuring related charges in connection with the 2023 Footprint Realignment plan. We expect this plan will be substantially completed by the end of 2027.
Current wording
In 2023, we initiated the "2023 Footprint realignment plan," a restructuring plan primarily involving the relocation of certain manufacturing operations to existing lower-cost locations, the outsourcing of certain manufacturing processes and related workforce reductions. We estimate that we will incur aggregate pre-tax restructuring and restructuring related charges in connection with the plan of $11 million to $15 million. We expect to achieve annual pretax savings in connection with the 2023 Footprint realignment plan of $2 million to $4 million once the plan is fully implemented.
Previous wording
In November 2022, we initiated a strategic restructuring plan designed to improve operating performance and position the organization to deliver long-term durable growth by creating efficiencies that align with our high growth strategic objectives (the “2022 Restructuring plan”). The plan is substantially complete and as a result, we expect future restructuring expenses associated with the plan, if any, to be immaterial.
Current wording
In 2023, we initiated the "2023 restructuring plan," which primarily involved the integration of Palette into Teleflex and workforce reductions designed to improve operating performance across the organization by creating efficiencies that align with evolving market demands and our strategy to enhance long-term value creation. The plan is substantially complete and as a result, we expect future restructuring expenses associated with the plan, if any, to be immaterial.
Previous wording
The following table provides information regarding restructuring charges we have incurred with respect to each of our restructuring programs, as well as impairment charges, for the years ended December 31, 2023 and 2022. The restructuring charges listed in the table primarily consist of termination benefits.
Current wording
The following table provides information regarding restructuring charges we have incurred with respect to each of our restructuring programs, as well as other impairment charges, for the years ended December 31, 2024 and 2023. The restructuring charges listed in the table primarily consist of termination benefits.
Previous wording
The increase in interest expense for the year ended December 31, 2023 compared to the prior year was primarily due to a higher average interest rate resulting from increases in interest rates associated with our variable interest rate debt instruments and an increase in average debt outstanding.
Current wording
The decrease in interest expense for the year ended December 31, 2024, compared to the prior year was primarily due to a decrease in our average outstanding debt balance.
Previous wording
During the year ended December 31, 2023, we recognized a gain related to the second phase of the Respiratory divestiture. During the year ended December 31, 2022, we recognized a gain related to a sale of a building.
Current wording
During the year ended December 31, 2023, we recognized a gain related to the second phase of the Respiratory divestiture.
Previous wording
The effective income tax rate for 2023 was 17.6% compared to 18.6% for 2022. The effective income tax rate for 2023 reflects the impact of deferred charges resulting from a legal entity rationalization and the impact of a non-taxable contingent consideration adjustment recognized in connection with a decrease in the estimated fair value of our contingent consideration liabilities. Additionally, the effective income tax rate for 2023 reflects a tax benefit associated with the TRIP pension settlement charge. The effective income tax rate for 2022 reflects tax expense resulting from a deferred charge relating to the 2022 Restructuring Plan. The effective income tax rates for both 2023 and 2022 reflect tax expense resulting from a U.S. law effective in 2022 requiring capitalization of certain research and development expenditures. Additionally, the effective income tax rates for both 2023 and 2022 reflect a net excess tax benefit related to share-based compensation and a tax benefit from research and development tax credits.
Current wording
The effective income tax rate for 2024 reflects a non-deductible goodwill impairment charge recognized in connection with our annual impairment test for goodwill. Tax benefits were recognized in both 2024 and 2023 related to the pension settlement charge recognized in connection with the termination of the TRIP. The effective income tax rate for 2023 reflects the impact of deferred charges resulting from a legal entity rationalization, the impact of a non-taxable contingent consideration adjustment recognized in connection with a decrease in the estimated fair value of our contingent consideration liabilities and a tax expense resulting from a deferred charge relating to the 2022 Restructuring Plan.
Previous wording
OEM operating profit for the year ended December 31, 2023 increased $20.8 million, or 31.9%, compared to the prior year, which was primarily attributable to an increase in gross profit resulting from price increases and higher sales, partially offset by higher research and development expenses.
Current wording
Americas operating profit for the year ended December 31, 2024 decreased $43.5 million, or 6.1%, compared to the prior year, which was primarily attributable to a benefit recognized in the prior year resulting from decreases in the estimated fair value of our contingent consideration liabilities, in contrast to an increase recognized in the current period, and operating expenses incurred by the acquired Palette business. The factors contributing to a decrease in operating profit were partially mitigated by an increase in gross profit resulting from price increases and higher sales, partially offset by higher manufacturing costs.
Previous wording
Americas net revenues for the year ended December 31, 2023 increased $61.7 million, or 3.7%, compared to the prior year, which was primarily attributable to a $125.1 million increase in sales of new products, price increases and net revenues generated by the acquired Palette and Standard Bariatrics businesses, partially offset by a $114.5 million decrease in sales volume of existing products. The increase in sales of new products and the decrease in sales of volumes of existing products primarily reflect the conversion to the next generation of an existing product.
Current wording
Americas net revenues for the year ended December 31, 2023 increased $115.1 million, or 6.0%, compared to the prior year, which was primarily attributable to a $125.9 million increase in sales of new products, price increases and, to a lesser extent, net revenues generated by the acquired Palette and Standard Bariatrics businesses, partially offset by an $86.2 million decrease in sales volume of existing products. The increase in sales of new products and the decrease in sales of volumes of existing products primarily reflect the conversion to the next generation of an existing product.
Previous wording
Americas operating profit for the year ended December 31, 2023 increased $1.1 million, or 0.2%, compared to the prior year, which was primarily attributable to an increase in gross profit resulting from higher sales and price increases and a decrease in contingent consideration expense resulting from changes in the estimated fair value of our contingent consideration liabilities, partially offset by an increase in sales expenses to support higher sales and an increase in operating expenses incurred by the acquired Palette and Standard Bariatrics businesses.
Current wording
Americas operating profit for the year ended December 31, 2023 increased $44.1 million, or 6.6%, compared to the prior year, which was primarily attributable to an increase in gross profit resulting from higher sales and price increases and a benefit recognized from decreases in the estimated fair value of our contingent consideration liabilities. The increases in operating profit were partially offset by an increase in sales expenses to support higher sales, higher research and development expenses, and an increase in operating expenses incurred by the acquired Palette and Standard Bariatrics businesses.
Previous wording
EMEA operating profit for the year ended December 31, 2023 increased $9.7 million, or 22.9%, compared to the prior year, which was primarily attributable to lower expenses related to the European Union Medical Device Regulation within research and development expenses and favorable fluctuations in foreign currency exchange rates, partially offset by an increase in sales expenses to support higher sales.
Current wording
EMEA operating profit for the year ended December 31, 2023 increased $14.2 million, or 14.7%, compared to the prior year, which was primarily attributable to lower expenses related to the European Union Medical Device Regulation within research and development expenses and favorable fluctuations in foreign currency exchange rates, partially offset by an increase in sales expenses to support higher sales.
Previous wording
Asia operating profit for the year ended December 31, 2023 increased $7.3 million, or 8.8%, compared to the prior year, which was primarily attributable to an increase in gross profit resulting from higher sales, partially offset by unfavorable fluctuations in foreign currency exchange rates and an increase in sales expenses to support higher sales.
Current wording
Asia operating profit for the year ended December 31, 2023 increased $16.3 million, or 15.5%, compared to the prior year, which was primarily attributable to an increase in gross profit resulting from price increases and higher sales, partially offset by unfavorable fluctuations in foreign currency exchange rates and an increase in sales expenses to support higher sales.
Previous wording
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal source of liquidity is our cash flows provided by operating activities. Our cash flows provided by operating activities are reduced by cash used to, among other things, fulfill contractual obligations for minimum lease payments under noncancellable operating leases, which often extend beyond one year; the weighted average remaining lease term of our operating lease portfolio is 7.0 years. Our cash flows provided by operating activities are also reduced by cash used for unconditional legally binding commitments to purchase goods or services (i.e., purchase obligations), which are primarily related to inventory expected to be purchased within one year.
Current wording
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal source of liquidity is our cash flows provided by operating activities. Our cash flows provided by operating activities are reduced by cash used to, among other things, fulfill contractual obligations for minimum lease payments under noncancellable operating leases, which often extend beyond one year; the weighted average remaining lease term of our operating lease portfolio is 6.5 years. Our cash flows provided by operating activities are also reduced by cash used for unconditional legally binding commitments to purchase goods or services (i.e., purchase obligations), which are primarily related to inventory expected to be purchased within one year.
Previous wording
Other significant factors that affect our overall management of liquidity include contractual obligations such as scheduled principal and interest payments with respect to outstanding indebtedness and tax on deemed repatriation of non-U.S. earnings, which will be paid annually over the next three years. We may also be obligated to make payments for contingent consideration due to past acquisitions, the timing and amount of which may be uncertain, and the magnitude of which can vary from year to year. Other significant factors that affect our liquidity include certain actions controlled by management such as capital expenditures, acquisitions, and dividends. See Note 10, Note 12 and Note 15 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Current wording
Other significant factors that affect our overall management of liquidity include contractual obligations such as scheduled principal and interest payments with respect to outstanding indebtedness and tax on deemed repatriation of non-U.S. earnings, of which the final payment will be made in 2025. We may also be obligated to make payments for contingent consideration due to past acquisitions, the timing and amount of which may be uncertain, and the magnitude of which can vary from year to year. Other significant factors that affect our liquidity include certain actions controlled by management such as capital expenditures, acquisitions, and dividends. See Note 10, Note 12 and Note 15 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Previous wording
Of our $222.8 million of cash and cash equivalents at December 31, 2023, $196.7 million was held at non-U.S. subsidiaries. We manage our worldwide cash requirements by monitoring the funds available among our subsidiaries and determining the extent to which we can access those funds on a cost effective basis.
Current wording
Of our $290.2 million of cash and cash equivalents at December 31, 2024, $192.6 million was held at non-U.S. subsidiaries. We manage our worldwide cash requirements by monitoring the funds available among our subsidiaries and determining the extent to which we can access those funds on a cost effective basis.
Previous wording
Under the terms of our outstanding Euro cross-currency swap agreements, we notionally exchanged in the aggregate $750 million for €693.9 million. The swap agreements begin to expire in March 2024. We and the counterparties have agreed to effect the exchange through a net settlement. As a result, we may be required to pay (or be entitled to receive) an amount equal to the difference, on the expiration or earlier termination dates, between the U.S. dollar equivalent of the €693.9 million notional amount and the $750 million notional amount. If, at the expiration or earlier termination of the swap agreements, the U.S. dollar to euro exchange rate has increased or decreased by 10% from the rate in effect at the inception of these agreements, we would either receive an aggregate payment of approximately $34.4 million from the counterparties or be required to make an aggregate payment of approximately $75 million to the counterparties in respect of the notional settlement. As of December 31, 2023, we had $16.5 million in current assets and $31.3 million in non-current liabilities related to the fair value of our cross-currency swap agreements. The swap agreements entail risk that the counterparties will not fulfill their obligations under the agreements. However, we believe the risk is reduced because we have entered into separate agreements with different counterparties, all of which are large, well-established financial institutions.
Current wording
On February 26, 2024, we executed two separate term cross-currency swap agreements set to expire on February 26, 2027 and February 28, 2029, respectively, to hedge against the effect of variability in the U.S. dollar to euro exchange rate. Each of the swap agreements had a notional principal amount of $250 million and was designated as a net investment hedge. On April 25, 2024, the cross-currency agreements executed in February 2024 were terminated in response to changes in market conditions, resulting in $0.4 million in a cash settlement payment, and we simultaneously executed two new separate term cross-currency swap agreements with the same expiration dates and notional values (together, the "2024 Cross-currency swap agreements"). The cross-currency swap agreements expiring in 2027 include five different financial institution counterparties and notionally exchanged $250 million at an annual interest rate of 4.25% for €233.4 million at an annual interest rate of 2.44%. The cross-currency swap agreements expiring in 2029 include four different financial institution counterparties and notionally exchanged $250 million at an annual interest rate of 4.25% for €233.4 million at an annual interest rate of 2.45%. Both of the 2024 Cross-currency swap agreements are designated as net investment hedges and require an exchange of the notional amounts upon expiration or the earlier termination of the agreements. We and the counterparties have agreed to effect the exchange through a net settlement. As a result, we may be required to pay (or be entitled to receive) an amount equal to the difference, on the expiration or earlier termination date, between the U.S. dollar equivalent of the €466.8 million notional amount and the $500 million notional amount. The 2024 Cross-currency swap agreements entail risk that the counterparties will not fulfill their obligations under the agreements. However, we believe the risk is reduced because we have entered into separate agreements with nine different counterparties, all of which are large, well-established financial institutions. Based on the U.S. dollar to euro currency exchange rate in effect April 25, 2024, and assuming exchange rates remain constant throughout the terms of the 2024 Cross-currency swap agreements, we would realize a reduction in annual cash interest expense of $9.0 million.
Previous wording
The 2027 Notes are issued by Teleflex Incorporated (the “Parent Company”), and payment of the Parent Company's obligations under the 2027 Notes is guaranteed, jointly and severally, by an enumerated group of the Parent Company’s subsidiaries (each, a “Guarantor Subsidiary” and collectively, the “Guarantor Subsidiaries”). The guarantees are full and unconditional, subject to certain customary release provisions. Each Guarantor Subsidiary is directly or indirectly 100% owned by the Parent Company. Summarized financial information for the Parent and Guarantor Subsidiaries (collectively, the “Obligor Group”) as of and for the year ended December 31, 2023 is as follows:
Current wording
The 2027 Notes are issued by Teleflex Incorporated (the “Parent Company”), and payment of the Parent Company's obligations under the 2027 Notes is guaranteed, jointly and severally, by an enumerated group of the Parent Company’s subsidiaries (each, a “Guarantor Subsidiary” and collectively, the “Guarantor Subsidiaries”). The guarantees are full and unconditional, subject to certain customary release provisions. Each Guarantor Subsidiary is directly or indirectly 100% owned by the Parent Company. Summarized financial information for the Parent and
Previous wording
Net cash used in investing activities from continuing operations was $621.2 million during 2023, which primarily consisted of $603.9 million in net payments for businesses and intangibles acquired, primarily related to the Palette acquisition, and $91.4 million of capital expenditures, partially offset by $63.1 million in net interest proceeds on swaps designated as net investment hedges and $15.0 million in proceeds from the second phase of the Respiratory divestiture.
Current wording
Net cash used in investing activities from continuing operations was $99.4 million during 2024, which primarily consisted of $126.4 million in capital expenditures, partially offset by $27.2 million in net proceeds on swaps designated as net investment hedges.
Previous wording
On November 4, 2022, we amended and restated our existing credit agreement by entering into a Third Amended and Restated Credit Agreement (the “Credit Agreement”) which provides for a five-year revolving credit facility of $1.0 billion and a term loan facility of $500.0 million. The obligations under the Credit Agreement are guaranteed (subject to certain exceptions and limitations) by substantially all of our material domestic subsidiaries. The obligations under the Credit Agreement are secured, subject to certain exceptions and limitations, by a lien on substantially all of the assets owned by us and each guarantor. The maturity date of the revolving credit facility and the term loan facility under the Credit Agreement is November 4, 2027.
Current wording
In 2022, we amended and restated our existing credit agreement by entering into a Third Amended and Restated Credit Agreement (the “Credit Agreement”) which provides for a five-year revolving credit facility of $1.0 billion and a term loan facility of $500.0 million. The obligations under the Credit Agreement are guaranteed (subject to certain exceptions and limitations) by substantially all of our material domestic subsidiaries. The obligations under the Credit Agreement are secured, subject to certain exceptions and limitations, by a lien on substantially all of the assets owned by us and each guarantor. The maturity date of the revolving credit facility and the term loan facility under the Credit Agreement is November 4, 2027.
Previous wording
At December 31, 2023, we had $262.0 million in borrowings outstanding and $0.9 million in outstanding standby letters of credit under our $1.0 billion revolving credit facility.
Current wording
At December 31, 2024, we had $113.0 million in borrowings outstanding and $0.9 million in outstanding standby letters of credit under our $1.0 billion revolving credit facility.
Previous wording
We review the net realizable value of inventory each reporting period and adjust as necessary. We regularly compare inventory quantities on hand against historical usage or forecasts related to specific items in order to evaluate obsolescence and excessive quantities. In assessing historical usage, we also qualitatively assess business trends to evaluate the reasonableness of using historical information in estimating future usage. Our inventory reserve was $54.3 million and $47.1 million at December 31, 2023 and 2022, respectively.
Current wording
We review the net realizable value of inventory each reporting period and adjust as necessary. We regularly compare inventory quantities on hand against historical usage or forecasts related to specific items in order to evaluate obsolescence and excessive quantities. In assessing historical usage, we also qualitatively assess business trends to evaluate the reasonableness of using historical information in estimating future usage. Our inventory reserve was $59.4 million and $54.3 million at December 31, 2024 and 2023, respectively.
Previous wording
The increased use and the recent FDA approval of glucagon-like peptide 1 ("GLP-1") products for the treatment of chronic weight management has impacted the demand for bariatric surgery procedures and our Titan SGS product line acquired as part of our 2022 acquisition of Standard Bariatrics Inc. Although the long term impact on bariatric procedures from GLP-1 products is uncertain, to the extent GLP-1 products reduce the long term demand for bariatrics surgery procedures and cause their prevalence to differ significantly from management’s expectations, we ultimately may find it necessary to recognize future impairment charges with respect to the related assets, which could be material.
Current wording
The increased use and FDA approval of GLP-1 products for the treatment of chronic weight management has impacted the demand for bariatric surgery procedures and our Titan SGS product line acquired as part of our 2022 acquisition of Standard Bariatrics Inc. Although the long term impact on bariatric procedures from GLP-1 products is uncertain, to the extent GLP-1 products reduce the long term demand for bariatrics surgery procedures and cause their prevalence to differ significantly from management’s expectations, we ultimately may find it necessary to recognize future impairment charges with respect to the related assets, which could be material.
Previous wording
Goodwill impairment assessments are performed at a reporting unit level. For purposes of this assessment, our reporting units are our operating segments, or, in certain cases, a business one level below our operating segments. As the fair values of our reporting units are more likely than not greater than the carrying values, no impairment was recorded as a result of the annual goodwill impairment testing performed during the fourth quarter of 2023.
Current wording
Goodwill impairment assessments are performed at a reporting unit level. For purposes of this assessment, our reporting units are our operating segments, or, in certain cases, a business one level below our operating segments. Our reporting units did not change as a result of our segment change in the fourth quarter of 2024.
Previous wording
The more significant judgments and assumptions in determining fair value using in the Income Approach include (1) the amount and timing of expected future cash flows, which are based primarily on our estimates of future sales, operating income, industry trends and the regulatory environment of the individual reporting units, (2) the expected long-term growth rates for each of our reporting units, which approximate the expected long-term growth rate of the global economy and of the medical device industry, and (3) the discount rates that are used to estimate the present value of the future cash flows, which are based on an assessment of the risk inherent in the future cash flows of the respective reporting units along with various market based inputs. The more significant judgments and assumptions used in the Market Approach include (1) determination of appropriate revenue and EBITDA multiples used to estimate a reporting unit’s fair value and (2) the selection of appropriate comparable companies to be used for purposes of determining those multiples. There were no changes to the underlying methods used in 2023 as compared to the valuations of our reporting units in the past several years.
Current wording
The more significant judgments and assumptions in determining fair value using in the Income Approach include (1) the amount and timing of expected future cash flows, which are based primarily on our estimates of future sales, operating income, industry trends and the regulatory environment of the individual reporting units, (2) the expected long-term growth rates of revenue and EBITDA for each of our reporting units, which approximate the expected long-term growth rate of the global economy and of the medical device industry, and (3) the discount rates that are used to estimate the present value of the future cash flows, which are based on an assessment of the risk inherent in the future cash flows of the respective reporting units along with various market based inputs. The more significant judgments and assumptions used in the Market Approach include (1) determination of appropriate revenue and EBITDA multiples used to estimate a reporting unit’s fair value and (2) the selection of appropriate comparable companies to be used for purposes of determining those multiples. There were no changes to the underlying methods used in 2024 as compared to the valuations of our reporting units in the past several years.
Previous wording
In connection with an acquisition, we may be required to pay future consideration that is contingent upon the achievement of specified objectives, such as receipt of regulatory approval, commercialization of a product or achievement of sales targets. In a business combination, we record a contingent liability, as of the acquisition date, representing the estimated fair value of the contingent consideration we expect to pay. We determined the fair value of the contingent consideration liabilities related to the Palette and Standard Bariatrics acquisitions, which represented most of our contingent consideration liabilities at December 31, 2023, using a Monte Carlo valuation approach, which simulates future revenues during the earn out-period using management's best estimates. We determined the fair value of our other contingent consideration liabilities using a discounted cash flow analysis. Significant judgment is required in determining the assumptions used to calculate the fair value of the contingent consideration. Increases in projected revenues and probabilities of payment may result in significantly higher fair value measurements; decreases in these items may have the opposite effect. Increases in discount rates in the periods prior to payment may result in significantly lower fair value measurements; decreases may have the opposite effect. See Note 12 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Current wording
In connection with an acquisition, we may be required to pay future consideration that is contingent upon the achievement of specified objectives, such as receipt of regulatory approval, commercialization of a product or achievement of sales targets. In a business combination, we record a contingent liability, as of the acquisition date, representing the estimated fair value of the contingent consideration we expect to pay. We determined the fair value of the contingent consideration liabilities related to the Palette acquisition, which represents the majority of our contingent consideration liabilities at December 31, 2024, using a Monte Carlo valuation approach, which simulates future revenues during the earn out-period using management's best estimates. We determined the fair value of our other contingent consideration liabilities using a discounted cash flow analysis. Significant judgment is required in determining the assumptions used to calculate the fair value of the contingent consideration. Increases in projected revenues and probabilities of payment may result in significantly higher fair value measurements; decreases in these items may have the opposite effect. Increases in discount rates in the periods prior to payment may result in significantly lower fair value measurements; decreases may have the opposite effect. See Note 12 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Previous wording
We remeasure our contingent consideration liabilities each reporting period and recognize the change in the liabilities' fair value within selling, general and administrative expenses in our consolidated statement of income. As of December 31, 2023 and 2022, we accrued $39.5 million and $44.0 million of contingent consideration, respectively, related to completed business combinations.
Current wording
We remeasure our contingent consideration liabilities each reporting period and recognize the change in the liabilities' fair value within selling, general and administrative expenses in our Consolidated Statement of Income. As of December 31, 2024 and 2023, we accrued $49.3 million and $39.5 million of contingent consideration, respectively, related to completed business combinations.
Previous wording
In assessing the realizability of our deferred tax assets, we evaluate positive and negative evidence and use judgments regarding past and future events, including results of operations and available tax planning strategies that could be implemented to realize the deferred tax assets. Based on this assessment, we determine when it is more likely than not that all or some portion of our deferred tax assets may not be realized, in which case we apply a valuation allowance to offset the amount of such deferred tax assets. To the extent facts and circumstances change in the future, adjustments to the valuation allowances may be required. The valuation allowance for deferred tax assets of $95.7 million and $91.5 million at December 31, 2023 and 2022, respectively, relates principally to the uncertainty of the utilization of tax loss and credit carryforwards in various jurisdictions.
Current wording
In assessing the realizability of our deferred tax assets, we evaluate positive and negative evidence and use judgments regarding past and future events, including results of operations and available tax planning strategies that could be implemented to realize the deferred tax assets. Based on this assessment, we determine when it is more likely than not that all or some portion of our deferred tax assets may not be realized, in which case we apply a valuation allowance to offset the amount of such deferred tax assets. To the extent facts and circumstances change in the future, adjustments to the valuation allowances may be required. The valuation allowance for deferred tax assets of $88.4 million and $95.7 million at December 31, 2024 and 2023, respectively, relates principally to the uncertainty of the utilization of tax loss and credit carryforwards in various jurisdictions.
Previous wording
Significant judgment is required in determining income tax provisions and in evaluating tax positions. We establish additional provisions for income taxes when, despite the belief that tax positions are supportable, there remain certain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority. In the normal course of business, we are examined by various federal, state and non-U.S. tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We adjust the income tax provision, the current tax liability and deferred taxes in any period in which we become aware of facts that necessitate an adjustment. We are currently under examination in Germany and Italy. The ultimate outcome of these examinations could result in increases or decreases to our recorded tax liabilities, which would affect our financial results. See Note 15 to the consolidated financial statements in this Annual Report on Form 10-K for additional information regarding our uncertain tax positions.
Current wording
Significant judgment is required in determining income tax provisions and in evaluating tax positions. We establish additional provisions for income taxes when, despite the belief that tax positions are supportable, there remain certain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority. In the normal course of business, we are examined by various federal, state and non-U.S. tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We adjust the income tax provision, the current tax liability and deferred taxes in any period in which we become aware of facts that necessitate an adjustment. We are currently under examination in Germany and the United States. The ultimate outcome of these examinations could result in increases or decreases to our recorded tax liabilities, which would affect our financial results. See Note 15 to the consolidated financial statements in this Annual Report on Form 10-K for additional information regarding our uncertain tax positions.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Guarantor Subsidiaries (collectively, the “Obligor Group”) as of and for the year ended December 31, 2024 is as follows:
Current report — wording carried from elsewhere
For the year ended December 31, 2024 we recognized a goodwill impairment charge of $240 million related to our Interventional Urology North America reporting unit. For further information refer to Note 8 in this Annual Report on Form 10-K. As the fair values of our remaining reporting units are more likely than not greater than the carrying values, no additional impairment charges were recorded as a result of the annual goodwill impairment testing performed during the fourth quarter of 2024.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Net revenues for the year ended December 31, 2023 increased by $183.5 million, or 6.6%, compared to the prior year, primarily due to a $149.2 million increase in sales of new products, price increases and net revenues generated by the acquired Palette and Standard Bariatrics businesses, partially offset by a $61.0 million decrease in sales volume of existing products. The increase in sales of new products and the decrease in sales of volumes of existing products primarily reflect the conversion to the next generation of an existing product.
Previous report — wording carried elsewhere
During the fourth quarter of 2023, we initiated a new restructuring plan, which primarily involves the integration of Palette into Teleflex and workforce reductions designed to improve operating performance across the organization by creating efficiencies that align with evolving market demands and our strategy to enhance long-term value creation (the “2023 restructuring plan”). We estimate that we will incur $15 million to $19 million in aggregate pre-tax restructuring and restructuring related charges in connection with the 2023 restructuring plan. We expect this plan will be substantially completed by the end of 2024.
Previous report — wording carried elsewhere
We expect to begin realizing plan-related savings in 2024 and expect to achieve annual pre-tax savings of $2 million to $4 million once the plan is fully implemented.
Previous report — wording carried elsewhere
In October 2023, the agreements related to our cross-currency swaps entered into in 2018 matured resulting in $43.0 million in cash settlement proceeds. On October 2, 2023, we executed new 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 (the "2023 Cross-currency swap agreements"). Under the terms of the new swap agreements, we notionally exchanged $500 million at an interest rate of 4.63% for €474.7 million at an interest rate of 3.05%. The 2023 Cross-currency swap agreements, which expire on October 4, 2025, are designated as net investment hedges and require an exchange of the notional amounts upon expiration or the earlier termination of the agreements.