Teleflex Inc. (
Q2 2011 Earnings Call
July 27, 2011 8:00 am ET
Jake Elguicze – Vice President, Investor Relations
Benson F. Smith – Chairman, President and Chief Executive Officer
Richard A. Meier – Executive Vice President and Chief Financial Officer
Lawrence Keusch – Morgan, Keegan & Company, Inc.
Richard Newitter – Leerink Swann LLC
Kathleen McGrath – Susquehanna International Group
Anthony Petrone – Jefferies & Co.
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Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Teleflex Incorporated Earnings Call. My name is Modesta and I will be your coordinator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)
I would now like to turn the conference over to your host for today Mr. Jake Elguicze, Treasurer and Vice President of Investor Relations. Please proceed, sir.
Thank you, operator, and good morning everyone, and welcome to the Teleflex Incorporated second quarter 2011 earnings conference call. The press release and slides to accompany this call are available on our website at www.teleflex.com. As a reminder, this call will be available on our website and a replay will be available by dialing 888-286-8010 or for international calls 617-801-6888, passcode 66816668.
Participating on today's call are Benson Smith, Teleflex's Chairman, President and Chief Executive Officer; and Randy Meier, Teleflex's Executive Vice President and Chief Financial Officer. Benson and Randy will make brief prepared remarks and then we'll open up the call to questions.
Before we begin, I'd like to remind you that some of the matters discussed in the conference call will contain forward-looking statements regarding future events outlined on Slide 4. We wish to caution you that such statements are in fact forward-looking in nature and are subject to risks and uncertainties and actual events or results may differ materially.
The factors that could cause the actual results or events to differ materially include, but are not limited to factors made in our press release today as well as our filing with the SEC including our Form 10-K which can be accessed on our website.
With that, I’d like to now turn the call over to Benson.
Benson F. Smith
Thanks, Jake, and good morning everyone. On today's call, I'd like to begin with an overview with the results for the second quarter, including some strategic highlights, then I'll discuss some of our new product introductions and recent GPO wins before turning the call over to Randy.
Randy will provide you with a detailed review of the financial performance in the second quarter as well as the review of our product line and geographic revenue performance. Finally, before he turns the call back to me, he will also update you on our financial outlook for the rest of the year.
So let’s begin. As reported, second quarter 2011 revenue was $391.3 million that represents an increase of 9.2% over the second quarter of 2010. On a constant currency basis, sales in the second quarter were up 4% this builds up on our first quarter performance and continues deposits start to
2011. Similar to the first quarter, the balance and diversity of our product portfolio, coupled with our global presence, served us well.
From a geographic standpoint, Europe and our emerging markets led the way with revenue growth of 4.3% and 12.6% respectively, while North American sales were up 0.4% versus the second quarter of 2010. While our gains in North America are modest on an apples-to-apples comparison, our trend is increasing and in line with our expectations. While some portions of our U.S. portfolio can be affected by lower procedure rates, we have enough balancing elements that we did not see any impact of this in our overall North American sales in the second quarter and are not expecting to see an observable difference throughout the balance of the year.
Turning to operating margins, they were 15.3% in the quarter, and while Randy will get into more detail about this in a few minutes, it’s important to point out that our results for the second quarter were impacted by approximately $6 million of costs that are not expected to re-incur in the second half of 2011 and were not excluded when arriving at our adjusted earnings per share for the quarter. Approximately $3 million of these costs were recorded in operating expenses, while another $3 million was recorded as impairment expense. When adjusting for the $3 million of cost that impacted operating profit, operating margins would have been approximately 16% in the quarter.
In the quarter also, we also initiated some of our first pricing initiatives, and Randy will discuss the impact of this during his remarks. And finally adjusted earnings per share for the second quarter were $0.94, and although this was down slightly from last year, it was in line with our expectations.
Moving to some of the strategic highlights for the quarter, much was accomplished from a strategic perspective. We resolved the FDA Corporate Warning Letter related to our Arrow International subsidiary, putting behind us an issue that has existed for about four years. I would like to take a minute to thank all of the Teleflex employees who are involved in seeing this through to a successful resolution. Your hard work and dedication in the remediation efforts over last several years is deeply appreciated.
In addition to getting the Warning Letter resolved, we also completed another item that has been in process for several years. With the decision to move our last remaining non-medical business to discontinued operations Teleflex is now a pure-play medical technology company. And in conjunction with the transformation from a cyclical diversified industrial conglomerate to a standalone medical device company, we also completed the realignment of our North American structure to be more business unit and product line focused moving away from the regional structures that had previously existed.