Acquisitions

During 2017, the Company completed the acquisitions described below, which, with the exception of its acquisition of certain assets of Airway Medix S.A. and certain of the distributor sales to direct sales conversions, were accounted for as business combinations. The results of operations of the acquired businesses and assets are included in the consolidated statements of income from their respective acquisition dates.

Vascular Solutions, Inc.

On February 17, 2017, the Company completed the acquisition, via a merger transaction, of Vascular Solutions, a medical device company that has developed and marketed products for use in minimally invasive coronary and peripheral vascular procedures. In connection with the merger, subject to specified exclusions, each share of common stock of Vascular Solutions (each, a "Share" and collectively, the “Shares”) was converted into the right to receive $56.00 per Share in cash, without interest and subject to applicable withholding tax. In addition, each outstanding option or similar right to purchase Shares issued under the Vascular Solutions’ Stock Option and Stock Award Plan (the "Company Options") was cancelled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the total number of Shares subject to such Company Option immediately prior to the acquisition and (ii) the excess, if any, of $56.00 over the exercise price of such Company Option. The aggregate consideration paid by the Company in connection with the merger was approximately $975.5 million, net of cash acquired.

For the years ended December 31, 2017 and 2016 the Company incurred $8.3 million and $3.0 million, respectively, in transaction expenses associated with the Vascular Solutions acquisition, which are included in selling, general and administrative expenses in the consolidated statements of income. For the year ended December 31, 2017, the Company recorded post acquisition revenue and operating loss of $152.6 million and $3.5 million, respectively, related to Vascular Solutions. Financial information of Vascular Solutions is primarily presented within the "Interventional North America" reportable operating segment.

The Vascular Solutions acquisition was financed utilizing borrowings under the amended and restated credit agreement, dated January 20, 2017 (the "Credit Agreement"), which is described in Note 8.

The following table presents the purchase price allocation among the assets acquired and liabilities assumed with respect to the Vascular Solutions acquisition:



	(Dollars in thousands)
Assets
Current assets	$	61,592
Property, plant and equipment	45,533
Intangible assets	539,250
Goodwill	524,872
Other assets	728
Total assets acquired	1,171,975
Less:
Current liabilities	15,079
Deferred tax liabilities	181,372
Liabilities assumed	196,451
Net assets acquired	$	975,524

The goodwill resulting from the Vascular Solutions acquisition primarily reflects synergies currently expected to be realized from the integration of the acquired business and is not fully tax deductible.

The following table sets forth the components of identifiable intangible assets acquired and the ranges of the useful lives as of the date of the Vascular Solutions acquisition:



	Fair value		Useful life range
	(Dollars in thousands)		(Years)
Intellectual property	$	248,200	10- 20
In-process research and development ("IPR&D")	15,600		Indefinite
Trade names	16,650		20
Customer relationships	258,800		25

NeoTract, Inc.

On October 2, 2017, the Company acquired NeoTract, Inc. ("NeoTract"), a medical device company that developed and commercialized the UroLift System, a minimally invasive medical device for treating lower urinary tract symptoms due to benign prostatic hyperplasia, or BPH. The fair value of consideration transferred by the Company was $975.2 million, which included initial payments of $725.6 million in cash less a favorable working capital adjustment of $1.4 million (for which the Company had not yet received payment as of December 31, 2017) and $251.0 million in estimated fair value of contingent consideration. The contingent consideration liability represents the estimated fair value of the Company's obligations, under the acquisition agreement, to make four milestone payments of up to $375 million in the aggregate if certain sales goals are met. The milestone payments are based on net sales (as defined in the acquisition agreement) for the periods from January 1, 2018 through April 30, 2018 and the years ended December 31, 2018, 2019 and 2020. The fair value of the contingent consideration was estimated using a Monte Carlo valuation approach. See Note 10 for additional information on the fair value measurement of the contingent consideration. The acquisition was financed using borrowings under the Company's revolving credit facility.

For the year ended December 31, 2017, the Company incurred $10.1 million in transaction expenses associated with the NeoTract acquisition, which are included in selling, general and administrative expenses in the consolidated statement of income. For the year ended December 31, 2017, the Company recorded post acquisition revenue and operating loss of $39.0 million and $13.3 million, respectively, related to NeoTract. Financial information of NeoTract is primarily presented within the newly established Interventional Urology North America operating segment, which is included in the "all other" category in the Company's presentation of segment information.

The following table presents the purchase price allocation among the assets acquired and liabilities assumed with respect to the NeoTract acquisition:



	(Dollars in thousands)
Assets
Current assets	$	32,887
Property, plant and equipment	6,980
Intangible assets	763,314
Goodwill	341,171
Other assets	184
Total assets acquired	1,144,536
Less:
Current liabilities	13,580
Deferred tax liabilities	155,806
Liabilities assumed	169,386
Net assets acquired	$	975,150

The Company is continuing to evaluate the initial purchase price allocations in connection with its acquisition of NeoTract, and further adjustments may be necessary as a result of the Company's assessment of additional information related to the fair values of the assets acquired and liabilities assumed, primarily deferred tax liabilities, certain intangible assets and goodwill. The goodwill resulting from the NeoTract acquisition primarily reflects the benefit the Company expects to realize from the establishment of new customer relationships and the development of technology resulting from the operation of NeoTract's business. Goodwill arising from the NeoTract acquisition is not tax deductible.

The following table sets forth the components of identifiable intangible assets acquired and the ranges of the useful lives as of the date of the NeoTract acquisition:



	Fair value		Useful life
	(Dollars in thousands)		(Years)
Intellectual property	$	492,118	15
Trade names	161,637		25
Customer relationships	109,559		15

Tianjin Medis Medical Device Co. LTD

On September 15, 2017, the Company acquired certain assets from one of its contract manufacturers, Tianjin Medis Medical Co. LTD ("Tianjin Medis"), consisting of substantially all of the assets used by Tianjin Medis to manufacture a line of the Company's laryngeal masks. The aggregate consideration transferred for the assets was $21.3 million, which included payments of $16.0 million and $5.3 million in estimated fair value of contingent consideration. The assets acquired include goodwill and finite-lived intangible assets (consisting of intellectual property, customer relationships and a non-compete agreement) of $14.7 million and $6.9 million, respectively. The goodwill resulting from the acquisition primarily reflects synergies currently expected to be realized from the integration of the acquired business and is not tax deductible.

Pyng Medical Corp

On April 3, 2017, the Company completed the acquisition of Pyng Medical Corp ("Pyng"), a medical device company that developed and marketed sternal intraosseous infusion products, which complement the Company's anesthesia product portfolio. The Company acquired all of the issued and outstanding common shares of Pyng utilizing available cash. The aggregate consideration was $17.9 million, net of cash acquired. The assets acquired include goodwill and finite-lived intangible assets (primarily intellectual property and customer relationships) of $13.0 million and $5.5 million, respectively. The goodwill resulting from the acquisition primarily reflects synergies currently expected to be realized from the integration of the acquired business and is not tax deductible.

Airway Medix assets

On October 2, 2017, the Company acquired certain assets of Airway Medix S.A., a medical device company that developed and marketed devices for mechanically ventilated patients in intensive care, which complement the Company's respiratory product portfolio. The aggregate consideration transferred for this asset acquisition was $11.6 million, which included payments of $6.3 million and $5.3 million in estimated fair value of contingent consideration. The assets acquired consist mainly of intellectual property of $11.5 million.

Distributor to direct sales conversions

During the past several years, the Company has engaged in a number of “distributor to direct” sales conversions, which generally involve the elimination of a distributor from the sales channel, either by acquiring the distributor or terminating the distributor relationship. In some instances, particularly in Asia, the conversion involves the acquisition or termination of a master distributor and the continued sale of the Company’s products through third party sub-distributors or through new distributors.

During 2017, the Company completed conversions from distributor sales to direct sales related to the Vascular Solutions business in several countries, primarily within the Company's EMEA segment. The aggregate consideration the Company provided in connection with the conversions was $29.3 million. The assets acquired consisted mainly of non-compete agreements and customer relationships. The Company reversed $2.4 million in net revenues associated with sales of inventory made to these distributors that, in conjunction with the conversions, the Company subsequently repurchased.

Pro forma combined financial information

The following unaudited pro forma combined financial information for the years ended December 31, 2017 and 2016, respectively, gives effect to the Vascular Solutions and NeoTract acquisitions as if they were completed at the beginning of the earliest period presented. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have occurred under the ownership and management of the Company.



	2017		2016
	(unaudited)
Net revenue	$	2,255,696	$	2,084,439
Net income	$	119,934	$	106,512
Basic earnings per common share:
Net income	$	2.66	$	2.46
Diluted earnings per common share:
Net income	$	2.57	$	2.24
Weighted average common shares outstanding:
Basic	45,004		43,325
Diluted	46,664		47,646

The unaudited pro forma combined financial information presented above includes the accounting effects of the Vascular Solutions and NeoTract business combinations, including, to the extent applicable, amortization charges from acquired intangible assets; adjustments for depreciation of property, plant and equipment; interest expense; the revaluation of inventory; and the related tax effects. The unaudited pro forma financial information also includes non-recurring charges specifically related to the Vascular Solutions and NeoTract acquisitions and interest expense associated with a bridge loan facility that was put in place to, among other things, assist the Company in financing the acquisition of Vascular Solutions. The Company did not use the bridge loan facility, as it obtained financing from other sources.

Pro forma information for Tianjin Medis, Pyng and the distributor to direct conversions (for those conversions accounted for as a business combination) is not presented as the operations of the acquired businesses are not material to the overall operations of the Company.

2016 acquisitions

The Company made the following acquisitions during 2016 (the "2016 acquisitions"), which, with the exception of its acquisition of the outstanding noncontrolling interest in Teleflex Medical Private Limited, were accounted for as business combinations:


•	On September 2, 2016, the Company acquired certain assets of CarTika Medical, Inc., ("CarTika"), an original equipment manufacturer (OEM) of catheters and other medical devices that complement the Company's OEM product portfolio.

•

On July 1, 2016, the Company, which previously owned a 74% controlling interest in its Indian affiliate, Teleflex Medical Private Limited, acquired the remaining 26% ownership interest from the noncontrolling shareholders. Teleflex Medical Private Limited is part of the Company's Asia reportable operating segment. As this acquisition did not result in a change in the Company's control of the entity, the Company recognized the $7.5 million excess of the purchase price of the noncontrolling interest over its carrying value as equity.


•	During the second quarter 2016, the Company acquired certain assets of two medical device and supplies distributors in New Zealand.

The aggregate purchase price paid by the Company in connection with the 2016 acquisitions was $22.8 million. The results of operations of the acquired businesses and assets are included in the consolidated statements of income from their respective acquisition dates. Pro forma information is not presented, as the operations of the acquired businesses are not significant to the overall operations of the Company.