Teleflex Inc. ( TFX)

Q3 2011 Earnings Call

October 25, 2011 08:00 am ET

Executives

Benson Smith – Chairman, President and Chief Executive Officer

Randy Meier – Executive Vice President and Chief Financial Officer

Jake Elguicze – Treasurer and Vice President, Investor Relations

Analysts

Thomas Kouchoukos – Stifel Nicolaus

John Demchak – Morgan Stanley

Dave Turkaly – SIG

Rich Newitter – Leerink Swann

Larry Keusch – Morgan Keegan

Chris Cooley – Stephens Inc.

James Sidoti – Sidoti & Company

Gregory Hertz – Citi

Anthony Petrone – Jefferies

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Q3 2011 Teleflex Inc. Earnings Conference Call. My name is Lacey and I’ll be your facilitator for today. (Operator instructions.) As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Mr. Jake Elguicze, Treasurer and Vice President of Investor Relations. Please proceed.

Jake Elguicze

Thanks, Operator, and good morning everyone, and welcome to the Teleflex, Inc. Q3 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 62497743.

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 will 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 as 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 actual results or events to differ materially include but are not limited to factors made in our press release today as well as our filings 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 Smith

Thanks, Jake, and good morning everyone. On today’s call I’ll begin with an overview of the results for Q3, 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 as well as a review of our product line and geographic revenue performance. Finally, before he turns the call back to me, he’ll also update you on our financial outlook for the remainder of 2011. So let’s begin.

Q3 2011 revenue was $371.9 million. That represents an increase of 7.8% over Q3 2010. On a constant currency basis, sales in Q3 were up 3.2%, continuing the performance we saw in the first half of the year and within our full-year 2011 constant currency revenue growth expectations. And while Randy will cover this in his prepared remarks, similar to Q1 and Q2, the growth in Q3 came from a variety of our franchises and geographies.

Turning to gross and operating margins, they were 47.9% and 17%. This represented a sequential increase of 90 and 170 basis points respectively over Q2. And finally, adjusted earnings per share for Q3 were $1.03, an increase of 4% from Q3 2010.

Now, let’s move to some of the strategic highlights for the quarter. First, I would like to provide you with an update regarding our recently-announced pricing initiatives. Even though we are clearly in the very early stages of this process I am pleased to tell you that the initial results are encouraging. Since we only began these for the most part in July, only a modest amount has matriculated into our Q3 2011 results. However, the regions that we expected to be able to drive price – Asia, North and Latin America – did see nice growth from price within the quarter, further indicating to us that our recently-announced price initiatives in these markets are achievable.

During Q3 2011, pricing in Asia-Pacific accounted for approximately 260 basis points of their growth, while pricing in Latin and North America accounted for approximately 240 basis points of the sales growth in those regions respectively. This was somewhat offset by a continued difficult European market which saw a decline of approximately 90 basis points in the quarter.

Turning to VasoNova, we continued to see additional penetration of this technology and standard of care into US hospitals during the quarter, including most recent wins at Duke University Hospital and GBMC. And while the adoption of this technology is clearly at its infancy, there was a noticeable buzz at the Association of Vascular Access conference that was held in early October. Clinicians see the benefits that the VPS technology has to offer and we have several accounts in the sales funnel that we hope to close during Q4 this year.

Before I shift gears to provide you with a product development update, I am also extremely happy to report that this past Friday we announced a definitive agreement to sell our aerospace businesses for $280 million. And while this transaction is subject to certain customary closing conditions, we do expect it to close before the year-end. I’d like to take a minute to thank all of the Telair and Nordisk employees for all of their years of service and wish them well. In addition, I’d like to thank Randy and our Legal and Strategic Development personnel who spent countless hours seeing this transaction through to a successful resolution. Their hard work and dedication over the last several months is deeply appreciated.

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