泰利福醫療 (TFX) 2009 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the fourth quarter and year-end 2009 Teleflex earning's conference call. My name is Keisha and I'll be your operator for today. At this time all participants are in listen only mode. We'll conduct the question and answer session toward the end of this conference. (Operator Instructions) As a reminder this conference is being recorded for replay purposes.

I would now like to turn the call to Mr. Jake Elguicze, Vice President, Investor Relations. Please proceed, sir.

Thank you, operator, and good morning, everyone. The press release and slides to accompany this call are available on our website at www.Teleflex.com, and as a reminder, this call will be available on our website and a replay will be able by dialing 888-286-8010 or for international calls 617-801-6888, pass code 53763506. Participating on today's call, are Jeff Black, Teleflex Chairman and Chief Executive Officer, and Randy Meier, Teleflex Executive Vice President and Chief Financial Officer. Jeff and Randy will be make brief prepared remarks and we'll open up the call for questions.

Before we begin I'd like to remind did you that some of matters discussed in the conference call will contain forward-looking statements regarding future events as outlined on slide two. 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 different 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 filing with the SEC including our form 10-K, which can be accessed on our website.

Also note that when we discuss core revenue growth, this represents revenues that are currency neutral and excludes revenues attributable to acquisitions and divestitures in a comparable period. Finally, we'll be filing our form 10-K over the next day or so. I encourage all of you to read the document. With that said, I would like to call the call over to Jeff.

Thanks Jake. Good morning, everyone. We're glad to have you join us this morning as report our results for the fourth quarter and year-end 2009. Once, again, we're reporting another quarter of strong results with continued achievements against our stated objectives for the year. Although total company core revenue was flat versus the prior year period, this was an improvement from what we saw during the first three quarters of the year, as our medical business grew 2%, and we continued to see sequential expansion in some of the end markets served by our aerospace and commercial businesses. Within medical, our core growth was led by vascular access, respiratory and anesthesia product areas. And similar to the first three quarters of this year, we continue to expand both our consolidated adjusted gross and operating margins, once again, lead by our medical segment.

Overall gross margins excluding special charges were up 170 basis points over 2008. And adjusted segment operating margins were 15.9%, an increase of 90 basis points. The continued higher mix of revenues from the medical segment along with the incremental synergies from the Arrow acquisition, reduced FDA remediation costs, and contributed improvement in our aerospace business contributed to the overall margin improvement.

Operating margins in the medical business remained very strong and were at 21%, up 110 basis points. Operating margins in our aerospace segment were up 130 basis points while operating margins in our commercial segment were down 110 basis points.

Turning to earnings per share, EPS excluding special charges were $1.01 in the quarter, up 31% over the prior year. We're extremely pleased with our continued ability to generate strong EPS growth. And finally, we had an excellent cash flow quarter generating approximately $109 million in cash flow from continuing operations, an increase of 89% compared with the prior year. The cash flow generation for the quarter was lead by our continued focus on reduced working capital, particularly inventory levels.

Moving to the highlights for the year to date, consolidated core revenues declined 6%, principally as a result of reduced revenues for our aerospace and commercial segments, both of which have been severely adversely impacted by the economy, particularly in the early parts of 2009. However, consistent with our results in for the fourth quarter, we delivered both consolidated gross and adjusted operating margin expansion with gross margins expanding approximately 140 basis points, and adjusted operating margins increasing 90 basis points to 15.7%. Earnings per share excluding special charges were up 16% over the prior year, making the third consecutive year of double digits earnings per share growth for the company. While cash flow from continuing operations excluding the tax payments made on the gain on sale of our ATI business, increased an impressive 47%, compared to the prior year.

Now, let me walk you through our segment results. Medical segment revenues for the fourth quarter increased 6%, to approximately $397 million, compared to approximately $373 million the prior year. The increased in revenues was attributed to a 2% increase in core revenues and a 4% favorable impact on foreign currency translation, and as I mentioned earlier, certain product lines experienced very positive growth. Within critical care, our higher margin vascular access products once again performed well, led by mid-single-digit core growth in central venous catheter cells and double-digit core revenue growth in our PICC product offerings. Our PICC growth was particularly strong in the North American region and we believe that we continue to gain market share in this part of the world.

In anesthesia, core revenue growth in the quarter was also in the mid-single-digit range, driven by our regional anesthesia product offerings. Clearly, the continuation of a dedicated and growing sales force and continued investment in our R&B are paying off in this area. In respiratory, similar to what we saw in the third quarter of 2009, our products have positive core revenue growth, up high single-digits, with particular strength in the European, Asia and Latin America markets.

To close out, critical care in our urology sales were relatively flat for the quarter. Offsetting the positive results in the critical care was a decline in surgical sales of 3% on a constant currency basis, lead by reduced general instrument sales as hospitals continue to manage capital constraints and reduced sales of some of our chest drainage products.

Turning to cardiac care, sales you were down on 1% on a constant currency basis versus 2008. Similar to what we experienced in our surgical product sales for the quarter, sales of our cardiac products declined as hospitals manage their year-end budgets. And lastly, from a top line perspective, in our most cyclical healthcare business, OEM, sales were down 5% on a constant currency basis compared to the fourth quarter of 2008. This decline in sales was primarily due to the continued weakness in orthopedic product sales, a trend that quite frankly we saw all year long.

Operating profit, excluding special charges, was $83.1 million for the quarter, compared to $74.5 million in the prior year quarter. The operating profit improvement was due to increased sales of our higher margin critical care products, reduced FDA remediation spending and incremental synergies from the Arrow accusation. This was somewhat offset by reduced revenues in the product areas I mentioned a moment ago, as well as a voluntary recall that we initiated. In the first quarter of 2010 we undertook a voluntary recall of our custom IV tubing product, and as a result, recorded a $1.7 million pre-tax charge in the fourth quarter related to units sold or produced in 2009. We do not expect this issue to have a material impact on our 2010 results.

Adjusted segment operating margins for the fourth quarter of 2009, were 21%, up 110 basis points compared to the fourth quarter of 2008. On a year-to-date basis, revenues decreased 3% due to the unfavorable impact of foreign currency. Medical segment adjusted operating margins were 21.1%, up 110 basis points over 2008, and well in line with our stated objectives.

Now, let me move onto some of the R&D statistics. As I stated on our outlook call just a month ago, many of you who are familiar with Teleflex know that we have been an acquirer of technologies. After purchasing Arrow in 2007, that changed and over the last few years we've pursued a much more balanced approach. While we are continuing to go actively pursue acquisition opportunities, we have increased the investment in medical research and development as a percent of revenue by over 50 basis points for each of last few years. This will continue in the future with a longer term goal of reaching 5% to 6% of medical revenues over the next few years. The increased investment in R&D with a particular emphasis on vascular access and anesthesia translates directly into the core revenue growth rates we achieved this past quarter for these product areas. And before I close out our discussion on the medical segment, I'd like to provide you with a brief update on where we stand with with the FDA and the Arrow corporate warning letter.

At the end of 2009, the FDA began their re-inspections of the former Arrow facilities covered under the warning letter. As I stated on our 2010 outlook call a month ago, that we expected the FDA on-site inspections to be completed by the end of the first quarter of 2010, and as I speak to you today, these inspections have been substantially completed. The FDA has issued certain written observations as a result of these re-inspections, we are currently in the process of responding to those observations, and we are actively communicating with the FDA regarding resolution of all outstanding items. We believe we have substantially remediated these issues through the corrective actions taken to date and that we've put in place the necessary measures to address the concerns raised by the corporate warning letter, nonetheless, the FDA process is continuing. With that, let me move onto our aerospace segment.

Aerospace revenues for the fourth quarter were $58.6 million, down 2% compared to the fourth quarter of 2008. This was due to a decline in core revenues of 5%, offset by a favorable currency impact of 5%. Although the core revenue declines have become smaller as the year progressed, the reasons for the decline remain essentially the same as in the first nine months of the year. Fewer cargo system conversions in the aftermarket and lower demand for cargo containers from commercial airlines and freight companies. On the positive front, unit shipments of a smaller lower unit sales narrow body cargo loading systems were up 5% as compared to the fourth quarter in 2008. This continues the trend we saw from the third quarter of 2009. And wide body system shipments to OEMs increased planned. In addition, higher margins spares sales were up approximately $3 million, clearly a positive sign of an uptick in the market.

Aerospace operating profit increased to $6.8 million or 11.6% of revenues from $6.2 million or 10.3% in the fourth quarter of 2008, principally due to the sales of higher margins spares and continued product cost reduction efforts. On a year-to-date basis, revenues decreased 27%, principally from a core revenue decline. Currency impacted our aerospace segment negatively by 3%, segment operating margins were 8.3%, compared with 10.3% for 2008.

Looking ahead in 2010, we expect core revenue growth to be between 3% and 4%. This will be lead by an increase in the number of wide body cargo loading systems that we're projecting to ship to Boeing and Airbus and increase in cargo container volume as airlines begin to invest capital in this area after deferring many requirements in 2009. The core revenue increase will be somewhat offset by the fact that we're currently projecting spare and repair aftermarket sales to be relatively flat compared to the 2009 levels, as well as the fact that we expect a reduction in narrow body volume.

Moving on to commercial, revenues for the segment in the quarter were $59.7 million compared to $64.2 million in the prior year. Core revenues declined 4%, and the divestiture of an unprofitable marine product line negatively impacted revenues by 4%. Foreign currency impacted the segment positively by 1% during the quarter. The decline in core revenue in the segment resulted primarily from a decrease in demand for rating services product, as a result of a 30% reduction in the number of serviceable oil rigs operating in the gulf, compared to last year, and the significant reductions in material handling and construction markets, as well as the decline in sales of marine products to the OEM manufacturers of recreational boats. This was somewhat offset by increased sales of spare parts in the marine aftermarket, a positive sign that we saw for the first time in the third quarter of 2009, and sales of our higher margin modern burner units to the US military.

Commercial segment operating profit in the quarter was $3.7 million, as compared to $4.7 million in the prior year quarter. Operating margins were 6.2% in the quarter, compared to 7.3% in the fourth quarter of 2008. The decline was primarily due to the significant decline in rating services and marine OEM volume, somewhat offset by the increased marine aftermarket sales, sales to the US military and cost containment and restructuring initiatives. And finally, year to date revenues decreased 21%, principally from a decline in core revenues of 17%, and the impact from the marine product line divestiture of 3%. Segment operating margins were 6.2%, versus 8.3% for 2008.

With with that, I'd like to introduce to you for the first time on our earnings call, Randy Meier. Randy joined Teleflex as Executive Vice President and Chief Financial Officer about a month ago. He brings prior experience as a public company CFO with more than ten years of financial and operational leadership in medical device and pharmaceutical companies. He's a known commodity in the medical device industry and has a proven track record of leading high growth organizations. Clearly in the short time he's been here, he's already become a great addition to our team, as we continue to execute on our strategic initiatives. Randy?

Thanks Jeff, and it's a pleasure to be here and I look forward to meeting many of you in the coming months. That said, let me take you through some of our financial results. Revenues for the fourth quarter were $515 million, up 4% over the fourth quarter last year. Principally due to the core revenue growth of our medical segment and the positive impact of foreign currency, offset by the core revenue decline in our aerospace and commercial segments. Adjusted gross margin for the quarter was 42.8%, was up 170 basis points over the fourth quarter last year, primarily due to the improved medical gross margins from the synergy achievement and manufacturing cost reductions implemented in each of our three segments. Adjusted operating expenses for the quarter were $138.6 million, or 26.9% of sales, compared to $129.7 million, for 26.1% and in prior year quarter.

The increased in operating expenses was principally due to our continued investment in our medical R&D and sales and marketing functions, and an increase in corporate expense attributed to the loss on the sale of our corporate aircraft. This was somewhat offset by synergies achieved in the Arrow integration and lower spending on FDA remediation efforts. Operating income before special charges was $81.6 million, up 9% from $74.6 million in 2008. Adjusted operating margins of 15.9%, reflect an increase of 90 basis points compared to last year.

Pre-tax special charges in the fourth quarter of 2009, totaled $2.3 million, and related to the cost associated with the Arrow integration program. And finally, operating income of $79.3 million, up approximately 37% from the prior year quarter, primarily due to the items I referred to previously as well as the large year-over-year reduction in terms of special charges that were incurred.

Slide 14 provides a reconciliation of income and earnings per share for income from continuing operations before special charges. Excluding special charges, income from continuing operations was $40.3 million or $1.01 per diluted share compared to $30.6 million, or $0.77 per diluted share in 2008. A per share increase of 31%. Fourth quarter of 2009 included lower net interest expense principally due to reduced outstanding debt, lower interest rates compared to the prior year quarter, and the special charges noted earlier in a $9.4 million tax adjustment. Similar to the second and third quarter of 2009, the tax adjustment represents benefits from the net reduction in income tax reserves, and discrete tax benefits related primarily to the expiration of the statute of limitations for various tax provisions and the settlement of tax audits as well as other adjustments resulting from the tax law changes and adjustments to previously filed tax returns. Special charges in the fourth quarter of 2008 totaled $10.5 million, net of tax, and primarily related to the Arrow integration.

Now let's review the year to date performance. Revenue for the year was approximately $1.9 billion, down 9% from 2008. Excluding the impact of currency translation and product line divestitures, revenues were down 6%, again, due to the aerospace and commercial segments. Adjusted gross margin for the year was 43.2%, up 140 basis points over 2008, with each of our three segments reporting higher gross profit margins as a percentage of revenue. The overall improvement was primarily due to higher mix of medical revenues, synergies achieved in our medical segment, manufacturing cost reductions at each of our three businesses, and shipments of a modern burner unit to the US military.

Adjusted operating expenses for the year were $519,100,000, or 27.5% of sales compared to $558,400,000, or 27% of sales in the prior year. A decline of the operating expense was attributed to many of the same factors that positively impacted the fourth quarter, while the increase as a percentage of sales was driven by the overall sales reduction.

Operating income before special charges was $296.6 million or 15.7% as compared to $306.3 million or 14.8% for 2008. Pre-tax special charges for 2009 totaled $26.8 million and primarily related to non-cash goodwill intangible asset impairments of our aerospace and commercial segments recorded in the second quarter and expenses associated with the Arrow integration program and the commercial segment restructuring. Operating income of $269.8 million compared to $265 million in 2008.

For the full year 2009, income and earnings per share excluding special charges was $145.4 million, or $3.64 per diluted share compared to $124.6 million or $3.13 per diluted share in 2008, a per share increase of 16%. The special items that I previously mentioned had a 9% per share impact on diluted EPS in 2009.

Now let's look at the cash flow results. Similar to our strong performance in the third quarter of 2009, we generated approximately $109 million of operating cash flow, an increase of 89%, over the fourth quarter of 2008. For the full year excluding tax payments of $97.5 million associated with the gain on the sale of ATI, cash flow from continuing operations was approximately $287 million, an increase of 47% over the $196 million in 2008, excluding the $90.2 million of tax payments associated with the gain on sale of the automotive and industrial businesses. Adjusted free cash flow defined as adjusted cash flow from continuing operations less capital expenditures, was $257 million in 2009, compared to $161 million in 2008.

Now, a quick look at the capital structure. We paid an additional $58 million in debt in the fourth quarter extending the due date of the next installment under the credit agreement to September of 2011. We finished 2009 with approximately $188 million of cash, and net debt of slightly over $1 billion, a reduction of approximately $430 million from just one year ago.

And before I turn the call over to Jeff, I'd like to reiterate the financial outlook for 2010 that was provided earlier this year. As we look ahead to 2010, we continue to project core revenue growth of between 3% and 4%, in both the medical and aerospace group. However, in our commercial segment we expect to experience a decline in core revenues of approximately 3%.

Prior to special charges, we're forecasting fully diluted EPS in a range of $4.10 to $4.25 per share in 2010. Adjusting for non-cash amortization expense of approximately $45 million, we are targeting cash EPS of $5.22 to $5.37 per fully diluted share. For 2010, we have forecast special items all relate to the final steps of the Arrow integration to be $0.05 per share. GAAP earnings per share from continuing operations available to common shareholders including special items are expected to be in the range of $4.05 and $4.20 per share in 2010. And finally, we continue to expect to generate cash flow from operations of approximately $275 million to $280 million. This estimate is exclusive of the financial impact of FAS 167 which relates to the securitization of assets. With that, let me turn it back over to Jeff.

Thanks, Randy. In summary, we're pleased with our operating performance in 2009. Particularly considering the difficult and uncertain macroeconomic environment that we operated in. Despite the challenging markets that several of our businesses found themselves operating in, and the headwinds from foreign currency, we generated double digit year-over-year growth in EPS before special charges, continued to leverage and reduce our cost structure to maximize profitability and position us for future growth, further reduced outstanding debt, and improved adjusted free cash flow. Clearly, I'm pleased with the achievements of our team, and with that, thank you for joining us and we'll turn it over and start taking questions. Jake?

Operator, we're now prepared to take questions.

(Operator Instructions) Your first question question comes from the line of Paul Mammola from Sidoti & Company.

Hi, good morning everyone.

Hi Paul.

If we could just start with medical, can you give us a sense geographically how sales trended in the quarter?

I'm sorry. Could you repeat the question there Paul.

Sure. Sure if we look at medical for the quarter for fourth quarter, can you give us a sense of how sales were, I guess from a core perspective geographically.

Yes. Clearly it was strongest in, in our North American business, but let me just flip to those slides. For core revenue by quarter, it was about, somewhere around 3% for our North American business, actually our, our Asian and Latin American business was somewhere around, was in the low double digits, so actually our Asian and Latin American sales were highest for the quarter.

Okay. Perfect. And then Randy you gave some commentary on the SG&A increase year-over-year. Can you give us a sense on order of magnitude what's having the biggest impact there and do you see that as an early 2010 run rate for SG&A?

I think there was two things that impacted the slight rise in percentage of operating expenses for 2009. One was, I think, just the natural decline of revenues, but I think we've got two things that we're investing in to improve performance. We're re-investing in the sales and marketing aspect of the medical segment and also as Jeff has indicated many times we're continuing to ramp up some of our R&D which we expect to continue to expand over the next couple of years. I do think we'll continue to see that trend. I think offsetting that trend, you're going to continue to see a nice expansion of our gross profit margins which you certainly saw in 2009, and that trend should continue over the next few years as well, so I would expect overall operating margins to continue to expand for the next couple of years. Just to give us a sense, I think at the end of the first quarter, I'll be able to give you a little more color on what I think down the road, but right now I do see that margin expansion should continue for the foreseeable future.

Okay. Thank for that. And then on pricing and medical, has there been re-negotiation of pricing for 2010 with customers and can you comment on any changes on that versus 2009?

No. Well Paul, as you can imagine, there's always constant pricing pressure, but I think we've been pretty consistent. Again, I would say on some of the more commodity products we've seen more pricing pressure but clearly on some of our more clinically inclined products, I think we have some pricing flexibility there, so overall, still think our pricing approach is plus or minus 1% in aggregate, and I think the more we continue to bring out new products, we would hope to move that more towards the positive.

Okay. And then from the distribution level, was there any shift of order filling into first quarter based on I guess pricing pressure. I mean, typically maybe you'd see folks trying to get in fourth quarter ahead of a price increase, can you see push outs of orders into first quarter?

No, we did not.

Okay. Thanks for your time.

Paul, just a quick follow-up just to give you a sense, the US versus OUS in terms of revenue split for medical is 45% US, and OUS is 55%.

Okay. Thanks again.

Your next question comes from the line of Larry Keusch with Morgan Keegan, please proceed.

Hi, guys. This is Constantine here for Larry. Just the macro question is, can you guys give me more color on the hospital spending environment and what are you seeing with the inventory levels?

Yes. I don't think we've seen a huge change in what's going on in the hospitals, especially from a capital equipment standpoint. We've not seen any dramatic changes. Again it still represents a small part of our overall portfolio, but we have not and I would just tell you I think from a distribution standpoint, again, we have some seasonal businesses, especially in the respiratory, it's a little early to tell but I think we've actually seen some stabilization of inventory levels at both the hospitals and at the distribution, but I would tell you that we're always monitoring as closely as we can, but clearly we think that we have not seen a huge change in their approach.

That's very helpful. And I guess, kind of the next question is on the business development front, can you give anymore color on, I guess what kind of deal that you guys are looking to do and what your thoughts for business development on 2010?

Yes Constantine, I think we're still out actively looking in the marketplace, but I think our approach has been within the verticals that we're committed to and clearly in the verticals which we think we have the right call points and have the best margin opportunity, while there was some deals that were out in the market last year, a lot of those deals quite frankly were what we consider to be low growth and lower margin opportunities, and so I don't think we were overly interested. We are continuing to look for geographic expansion opportunities. That does a lot of things for us. It maximizes our footprint. But it also helps us with our use of cash, which is outside of the US.

Thank you.

(Operator Instructions) Your next question comes from the line of Mr. Patrick Clingen with Lazard. Please proceed.

Good morning, guys, can you hear me okay?

Yes sure can Patrick.

Okay. Great. First question I wanted to ask was regarding gross margins, they ticked down a little bit sequentially, was that due to product mix or could you provide a little more clarity around what happened in the quarter relative to the third quarter?

It was a product mix issue as you move into a little bit of seasonality and in the medical segment, and usually with, even though capital equipment has been under some pressure, you see some of those year-end orders as hospitals review their budgets and whatnot, so I don't think it's uncharacteristic. We also as we mentioned, we had a minor recall that impacted the fourth quarter results that did take down gross profit by about $1.7 million, so that did have an impact as well.

All right. Great. And then, Jeff, you mentioned that you felt like you guys have been performing well on in the PICC market in North America. Could you maybe comment overall, just broadly, about what you're seeing in that marketplace?

Yes. I think again, to the credit of the marketplace while the market continues to grow, I think we're finding the opportunities are out there, so I think we were up about 29% in the fourth quarter year-over-year, and again, I would also caution that comes off a fairly small base. But we do continue to see opportunities and I think what we're really trying to do is be positioned when we come out with our antimicrobial PICC by mid to the late summer, so I think we're seeing opportunities there. But we also felt pretty good that we saw a fairly decent quarter from our CBC, so we didn't think that we were cannibalizing some of our own business.

And then last question from me is just in general, your inventory management, your working capital management, you seem to drive a lot of efficiency here in the quarter, is this something where you could potentially drive more, or did you get out all the low hanging fruit in the fourth quarter? Thank for taking the questions and congrats on a great quarter.

Sure from a capital quarter, there's always opportunities to continue to improve that on a global basis. I think we did, and the company has performed exceedingly well over the last couple of years, in improving their management of the working capital, so I doubt going forward you're going to see as significant an improvement, but I do think it will continue to be a focus of the company going forward.

Yes, and I think, Patrick if you go back to the first half of the year, I think it took us a while to adjust our supply chain to the new realities that we dealt with for the first two quarters, both in our medical business as well as our aerospace business, so I do think it is something that has been mentioned to us by many of our investors focusing on working capital, and again, I think as we get through the FDA remediation, we'll have further opportunities to take some cash out of working capital.

(Operator Instructions) Your next question comes from the line of Gregory Macosko with Lord Abbett. Please proceed.

Yes thank you. Good morning.

Good morning, Greg.

Morning Gregory.

Morning. With regard to some of the product areas and the growth just to understand, could you give us a little more color on the negative side of surgical and cardiac, that you're saying is a more hospital oriented, your previous comments regarding hospital spending, etc., those are the areas where hospital and perhaps inventory and things are impacting you most?

Yes. I think Gregory what we typically would find especially as we get to the tail end of the budget year in the hospitals, people start looking at spending the capital that they have planned, and so in the past where you would normally see between us and some of our peers, you would see a fair amount of surgical instruments sales occurring, typically in the third and mostly in the fourth quarter, I would tell you that I think that changed last year where what we didn't see was a lot of instrument sets being replaced. We saw a lot more of the individual instruments being replaced, and then clearly on the cardiac assist business, our IAB pump business, we're back in the market. I think we're feeling good about getting some traction there after having some product issues earlier in the year. So I actually feel pretty good about it, and I think that, again, when you start to look at the amount of dollars associated with those cardiac pumps, you're between $30,000 and $50,000, I just think that people were trying to be as prudent as they could be with our capital budgets, but we do feel good that we're getting more aggressive in the market and think there's opportunities for us to grow our current market share.

Give us some feedback on the ortho business, you said it's weak, but is that inventory, I know some of the numbers that recently came out were not so bad, but maybe improving a little bit, but just give us a sense of what you see there?

Yes. Gregory, I think it's something that we saw all year in that the inventory levels within most of our orthopedic customers had been relatively high for the whole year. And we really, again, while I think we're starting to see some signs, you're not seeing the large blanket orders placed out there. I think they've gotten more prudent in their visibility and actually I think they've got more prudent in focusing on their own working capital issues.

With regard to the medical area, what about price and just kind of across the board your general sense of things there.

Yes, I think it's flat. I mean, clearly you see more pressure on our, on our lower end or more of our commodity business, and I would tell you that, again, I think we've been pretty clear, our respiratory business is probably the one that has some of our more commodity products, but I would also say as we brought out some new products with some new features, we're able to kind of push some pricing up just slightly, but I think it comes back to providing a value proposition to the opportunities. So again I think it's plus or minus, but overall it's flat.

And with regard to the FDA, now, obviously it feels like things are kind of moving along toward a conclusion, but can you give us a feeling for, I know that you're looking at the antimicrobial wand and that, do you sense any change on that score in dealing with them we relative to what's going on in the manufacturing side?

Absolutely, I think what we're finding as we're submitting products, the time frame for the feedback, and the proof of claims is significantly higher than it's been in the past. We actually think that that may work to our benefit over the longer term as we continue to bring out clinically inclined products geared towards patient safety, but there's no question that the process is taking a little longer than it used to, but I would say that, again, we've put a fair amount of our investment in our RAQA and R&D so we're not going to have to retool that and continue to increase that investment, but there truly is a change at the FDA. I think you hear that from most of the customers, but again, as we're moving up in terms of technology, we think that may actually benefit us from some of the lower end competitors.

No, but no difference you think because you're kind of moving through the issues on manufacturing, therefore you individually are benefiting or not from that, you know --

Greg we're not seeing any additional scrutiny because of the corporate warning letter. I think the FDA is pretty much a level playing field there. I think what we're just seeing is just more scrutiny from the FDA regarding any submissions in there, so I don't think it has anything to do with where we are with the FDA.

And then the Arrow synergies, are they done in the fourth quarter, or the first quarter, excuse me.

I think we got most of them, but I would tell you that there's another, 5 to 10 through the year, and I think you'll see that kind of throughout the year, you'll see that kind of fall into place.

And the FDA investigation or whatever is not really impacting that or slowing it down?

Not at this point. Again, I mean, we're basically, I think we're at the tail end of those inspections, so I don't think it's really impacting our ability to obtain those synergies.

Okay. And then one question on the Gulf of Mexico and rigging and the like, I mean, that's down, are you seeing, any signs of change or your look out forward there?

I don't think so. To be quite honest with you, even at $80 a barrel for oil, we're not seeing a huge. A lost those rigs,l the leases are up this year and I think the companies who own those are going to have to make some decisions as to do they keep them in the gulf, do they put them elsewhere? So I don't think we expect a huge uptick, and we just have not seen anything up to this point.

I know I asked a lot of questions but one final one then I'll get off. The foreign cash. Your cash flow has been good. Are you going to repatriate or is anything coming from overseas back to the US, or what's going on there?

Yes we continue to repatriate a small amount of cash back here in terms of working capital but in large part we've made the election to keep some of the cash overseas in terms of not repatriating it, so again, I think again we're managing it pretty well.

Any reasons for keeping some there?

I think since we've got significant operations overseas with the plants that we've got located all over the world and just some of the maintenance and working capital and then as we look at adjusting our capital structure, we may deploy some capital outside the United States.

But not any M&A or acquisition interests or possibilities?

Well, again as Jeff talked about, we certainly are looking at some targeted acquisitions and certainly looking to expand our geographic footprint so we can enjoy some of the synergies as we grow our business overseas, so having some cash overseas would help those efforts.

Thank you.

(Operator Instructions) Your next question comes from the line of Dave Turkaly with SIG. Please proceed.

Thanks, I'll try to keep it pretty brief here. Based on your communications with the FDA, do you think they need anymore inspections or are those over now and we're just talking about conversations going forward?

Dave, you know I've been so accurate in my forecasting of this, I would just prefer to say that I think from what we've seen, again, I think our approach is, we feel good about where we are, but I can't comment as to whether they will come back in and look at some other things, but clearly as that occurs, we will keep our investors up-to-date throughout the year.

And based on, I know in 2009 there was some impacts from international sales, given the letter, can you remind us how much that was, and I guess under a best case scenario, I would imagine we'd see that come back in 2010?

Well I think they've been pretty clear that some of that will not come back and I think when we did our guidance last month, so I think it was probably in the $10 million to $12 million impact, and I don't think even if we get clearance on our CFGs, that we would expect to see that come back, so again, could that come back in 2011? It's too far out there for me to really comment on.

Last one for me would be the synergies, the 5 to 10 from out of this year, would that include the possible consolidations of many of those plants once the letter was lifted or would that be incremental?

I would tell you that that would probably be incremental, I think what you're seeing in the 5 to 10, is really the year-over-year effect of some of the actions that we've already taken along with some other minor adjustments as well.

Thanks.

(Operator Instructions) And we have no further questions at this time, I will now turn the call back over to Mr. Jake Elguicze for any closing remarks.

Thanks operator and thank you for joining us today, that concludes the Teleflex Inc. fourth quarter and year-end and 2009 conference call.

Thank you for your participation in today's conference, this concludes the presentation, you may now disconnect your lines. Good day.