Teleflex's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Teleflex, Inc. (TFX)

Q2 2012 Earnings Call

July 31, 2012, 8:00 a.m. ET

Executives

Jake Elguicze – Treasurer and VP, IR

Benson Smith – Chairman, President and CEO

Thomas Powell – SVP and CFO

Analysts

Lawrence Keusch (Constantine) – Raymond James

David Lewis (John) – Morgan Stanley

Rich Newitter – Leerink Swann

Anthony Petrone – Jefferies

Jonathan Palmer - CLSA

James Sidoti – Sidoti & Company

Presentation

Operator

Good day Ladies and Gentlemen, and welcome to the second quarter 2012 Teleflex, Incorporated earnings conference call. (Operator Instructions).

And now I have the pleasure in turning the conference over to Jake Elguicze, Treasurer and Vice President of Investor Relations. Please proceed, Sir.

Jake Elguicze

Thank you, Operator, and good morning everyone. And welcome to the second quarter 2012 Teleflex, Incorporated 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, pass code 46362185.

Participating on today's call are Benson Smith, Chairman, President, and Chief Executive Officer, and Thomas Powell, Senior Vice President and Chief Financial Officer. Benson and Tom 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 as outlined on slide four. 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 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 10K, which can be accessed on our website.

In addition, I would like to point out that on July 18th, 2012, the company announced that it had entered into a definitive agreement to sell its OEM with Pedic's Business. As such, the results for this business are included in discontinued operations for all periods presented.

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 the second quarter including some strategic highlights. Then Tom will provide you with a review of our second quarter financial performance, a review of our product line at geographic revenue mix, as well our outlook for 2012. He will then turn the call back to me for some closing remarks, so let's get started.

Building upon the solid performance from the first quarter of the year, the second quarter of 2012 was another strong quarter for Teleflex with revenues reaching $383.3 million. Due to the impact of foreign currency fluctuations on an as-reported basis, sales increased .6%. However on a constant currency basis, sales increased 4.7% as compared to the prior year period. Once again, the company achieved constant currency sales growth in all of its' geographic regions as well as all but one of its' strategic business unit franchises.

Comparing first quarter to second quarter, it might appear that our constant currency growth is slowing down on a sequential basis. However, because of the difference in days compared to last year and other factors, our quarterly comparisons this year are somewhat lopsided. In context, let me say that both our first quarter and our second quarter constant currency revenue attainment are ahead of our initial expectations.

Turning to gross and adjusted operating margins, they were at 48.1% and 17% respectively representing a year-over-year improvement of 50 base points on the gross margin line. And 150 basis points at the operating margin line.

And finally, adjusted earnings per share for the second quarter of 2012 was $1.23, an increase of 34% over the prior year period.

So now let's move to some of the strategic highlights for the quarter. I know that many of you are interested in getting an update regarding the price increases that were put in place around the mid-year mark of 2011. During the second quarter of 2012, the average selling prices of our products continued to trend in the right direction. Overall, pricing contributed 132 basis points towards our sales growth.

These contributions continued to exceed our initial full year expectations with much of the favorability being driven by our ability to continue to increase prices in Europe faster than we had initially expected. For the second quarter in a row, European pricing has been positive, this quarter, generating 28 basis points of growth.

In addition to Europe, we also had positive pricing in the Asia-Pacific and Latin America markets of 252 basis points. As well as positive pricing in the North American market of 140 basis points.

I can appreciate that some of you are wondering why our pricing strategy is working and wondering if it will continue to work. The reason quite simply is because of the hard work our teams did in identifying those particular areas where we could take price improvement even in a difficult market environment. I am pleased to tell you that one of the significant cultural improvements we have made at Teleflex is a rigorous pricing discipline, which in and of itself will benefit us in the future in good markets and in tough markets.

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