泰利福醫療 (TFX) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the first 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 a listen-only mode. Later we will conduct a question and answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Jake Elguicze, Vice President of Investor Relations. Please proceed, sir.

Good morning, everyone. And welcome to the Teleflex Incorporated first quarter 2011 earnings conference call. 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 available by dialing 888-286-8010, or for international calls 617-801-6888, passcode 32439030.

Participating on today's call are Benson Smith, Teleflex 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 will open up the call to questions. Before we begin I would 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 or events to differ materially include but are not limited to, the 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.

I would also like to draw your attention to the fact that in the first quarter of 2011 management and the Board of Directors approved a plan to sell the Company's cargo container business. This was a reporting unit within our Aerospace segmentThe Company is actively marketing the business, while it continues to serve its customers and provide appropriate transition. For financial statement purposes the assets, liabilities, results of operations, and cash flows of this business have been segregated from those of continuing operations, and are presented in the Company's financial statements as discontinued operations. The accompanying financial statements have been adjusted to reflect this presentation.

With that, I would like to now turn the call over to Benson.

Thanks, Jake and good morning everyone. On today's call I would like to begin with an overview of the results for the first quarter including some of the strategic development highlights. I will then discuss some of the new product introductions and recent GPO wins before turning the call over to Randy. Randy will provide you with a much more detailed review of the financial performance in the first quarter, as well as a review of our product and regional revenue performance. Finally, before he turns the call back to me, he will also update you on our financial outlook for 2011. I will then close the call with some information regarding our organization structure and our strategy moving forward.

So let's get started. First quarter 2011 revenue was $389 million, that represents an increase of 6% over the first quarter of 2010 on both an as reported and constant currency basis. Medical revenue grew 3% over last year in constant currency, and is off to a good start slightly ahead of our initial expectations. The balance and diversity of our product portfolio coupled with our global presence served us well in the quarter. From a geographic standpoint our medical revenue in North America grew about 2%, while Europe and emerging markets increased 3% and 12% respectively.

Turning to R&D. Our spending increased 19% over last year, and currently stands at approximately 2.8% of revenue. As I stated in our 2011 outlook call, we are committed to increasing our R&D spending, and the figures that you see for the first quarter should represent the low point in terms of dollars spent in 2011. And finally, adjusted earnings per share for the first quarter were $0.96, and although this was down slightly from last year, this was also slightly ahead of our initial expectations.

Moving to some of the strategic highlights for the quarter, in early January we acquired VasoNova. This acquisition brings with it a unique central venous catheter navigation technology that allows for real-time accurate confirmation of placement of peripherally inserted central catheters and central venous catheters. This technology will allow us to continue to expand our vascular access product offerings. It is the first real-time intravenous intervascular catheter navigation technology that does not require external metal detectors or viewing screens, nor subjective interpretation of ECG signals. We were extremely pleased to see that in early March we received 510k clearance to market the VasoNova technology as an alternative to chest x-ray or fluoroscopy. This clearance came earlier than we expected, and puts us in a strong competitive position, to establish a new standard of care in catheter placement.

I also want to say that this acquisition is indicative of the kinds of acquisitions we need to do more of in the future, as it meets an unmet clinical need and augments our internal R&D efforts. Also during the quarter we completed a global distribution agreement with Perouse Medical to distribute their POLYSITE line of intravenous implantable infusion ports. This adds a much needed port offering to our portfolio, and we are now one of only a few companies that can offer ports, central venous and peripherally inserted catheters. In addition to taking steps to add to our medical business, we are also busy reducing our noncore asset footprint.

Turning to slide eight, in a transaction valued at approximately $122 million, we completed the divestiture of our marine business. And as Jake mentioned earlier in late March management took another step in moving the Company forward when we approved a plan to sell our cargo container business. The cargo container business was expected to contribute approximately $50 million in revenue and approximately $0.05 in earnings per in earnings per share to our 2011 results. Since we are actively marketing this business, we have reclassified it to discontinued operations.

Turning to new product introductions, in the first quarter we received 510k clearance from the FDA for our next step Antegrade chronic hemodialysis catheter. This catheter is designed to provide some of the benefits of step tip and split tip catheter in a single solution. We expect to launch this product in the United States later this year, and we are confident that it will become a preferred option for clinicians who use the integrate tunneling procedure to insert chronic hemodialysis catheters.

Before I turn the call over to Randy to discuss the financials, I would like to give you update on some recent GPO contract wins. During the first quarter we received two GPO contract extensions, and we were awarded three new GPO contracts including the PICC agreement, which we announced yesterday with Amerinet. The contracts that we were awarded in the quarter cover a broad array of vascular access, surgical, respiratory and anesthesia products, and continue to position us well from a competitive standpoint.

With that, I will now turn the call over to Randy, and he can walk you through the financials. Randy?

Thanks Benson, and good morning everyone. Revenues for the first quarter were $388.7 million, up 6% on both an as-reported and constant currency basis. Medical constant currency revenue growth during the quarter was 3%, while our cargo systems business grew at a rate of 42%.

Gross profit and margins for the quarter were $176 million, or 45.3%,this compares to $176.9 million, or 48.2% in the prior quarter. Although gross margins were down year-over-year due to product mix in the quarter, as well as higher raw material and distribution costs, they were in line with our internal expectations. Looking forward and based on our forecasted product mix for the balance of the year combined with planned cost reduction efforts, we remain confident that our gross margins will improve significantly throughout the remainder of this year.

Moving to operating expenses, selling, general and administrative expenses were $109.8 million during the quarter, up from $100.6 million last year. This includes $5.5 million in charges related to the severance payments and benefits to be provided to our former CEO. These costs excluded when arriving at our adjusted earnings per share for the quarter. The remainder of the increases in SG&A for the quarter was due to increases in sales, marketing, regulatory activities, as well as the integration costs associated with the acquisition of VasoNova.

And as Benson mentioned earlier, R&D was $11 million for the quarter, up from $9.3 million last year. The higher level of R&D expense reflects increased investment in the antimicrobial and catheter tip positioning technologies. Interest expense for the quarter was down approximately $2.8 million to $16.2 million. This decrease is due to a reduction in approximately $219 million in average outstanding debt. And as we stated on our 2011 outlook call during the first quarter we elected to retire the remaining $166 million in outstanding principle of our 2004 series senior notes. In connection with this prepayment we recognized debt extinguishment costs of approximately $14.6 million. These costs were excluded when arriving at our adjusted earnings per share for the quarter.

Turning to taxes. On a GAAP basis the effective income tax rate for the first quarter was 26.9%. When adjusting for items that affect comparability our adjusted tax rate was 31.3% for the quarter. This was slightly higher than the full year guidance,however, our full year tax rate expectations remain approximately 28% to 30% for the full year. These results equated into adjusted earnings per share performance of $0.96 for this quarter.

Let's now move to a more detailed review of our constant currency segment revenue results. Medical revenue for the first quarter was $354 million, up 3%. Critical care revenue was $237.1 million, up 5%. During the quarter, respiratory sales grew at 8%, vascular sales grew at 6%, neurology sales grew at 5%, and anesthesia sales grew at 1%. Moving to Surgical, revenues were $65 million, up 3%. During the quarter, ligation sales grew 4%,closure and chest drainage sales drew 3%, and instrument sales grew 1%, marking the first time since the fourth quarter of 2008 that surgical instrument sales have grown on a constant currency basis. We believe this is a positive indication of future procedure volume and utilization rates.

Turning to Cardiac. Revenues were $17.7 million, down 4%. This decline in cardiac was solely attributed to the product recall we announced in December of 2010. A quick update on this recall. We reintroduced the 5800 series beginning in January to selected customers, with priority given to the European market. Since then, we have continued to fill the pipeline with increased quantities of the 5800 series products since then, and anticipate being out of back order globally during the second quarter.

And before I move on to discussing the top line results of our nonmedical assets, let me close with a discussion of our medical business by talking about our OEM business. OEM revenues were $33.9 million, down 4%. The decline in OEM was largely attributable to lower sales of our specialty suture and catheter fabrication products, partially offset by higher sales of our orthopedic implant products.

Now I would like to quickly turn your attention to the top line performance of our noncore businesses. Aerospace revenue in the quarter was $34.7 million, up 42% on a constant currency basis. These results which represent just our cargo systems business saw an increase in the aftermarket spare and repair volume, as well as an increase in the number of wide-body cargo loading units shipped.

With that, let's move to our 2011 outlook. In late February of this year we provided an outlook that included the revenue and profitability associated with both our marine and our cargo container business. Slide 17 serves as a bridge from our initial outlook for 2011 to our current outlook. The important thing to note here is that the 2011 outlook has only changed due to the fact that we have sold our marine business, and we have reclassified the cargo container business to discontinued operations.

As a result of those two items, our current outlook for 2011 is adjusted as follows, revenues to be between $1.575 billion and $1.605 billion. Of that amount, we expect noncore revenues to be between $125 million and $135 million. We continue to expect our medical business to grow between 2.5% and 3.5% on a constant currency basis.

From a product line standpoint, we continue to anticipate sales of our critical care products to grow slightly above our overall constant currency growth rate. This will be led by sales increases of our vascular bit products. In addition we continue to expect strength in the performance of our urology and respiratory product lines, and for our anesthesia sales to improve from the growth rate posted in the first quarter of 2011. For our surgical products, we still believe that sales will grow in line with the normalized surgical procedure growth, resulting in growth rate for the full year similar to what we achieved in the first quarter of approximately 3%. Moving to cardiac. Because of the recall that was announced late last year, we continue to anticipate that revenue will be relatively flat in 2011 as compared to 2010, as we work through the back order situation.

And turning to our OEM business. We expect sales to rebound in the next few quarters as compared to the results posted in the first quarter of this year, and anticipate only a slight improvement from 2011 as opposed to 2010. From an earnings perspective in 2011 we expect to achieve adjusted earnings per share in the range of $4.45 to $4.46.(Sic-see press release) Because of the marine divestiture and the reclassification of our cargo business to discontinued operations, we attribute approximately 40% of that amount to our remaining noncore assets.

With that, I would like to turn the call back over to Benson for him to make some additional closing remarks.

Thanks Randy. Before we open up the call for questions, I would like to take a minute and share with you some of our thoughts we have regarding the Company's structure, and our strategy moving forward. This slide shows the current state of the medical business versus where we plan on moving the organization forwards. Currently, we are aligned by region, and although this offers some benefits particularly in the European and emerging markets, it has some drawbacks in the United States.

My background and experience in the medical device industry leads me to believe that a product line approach is more appropriate within the United States. This approach aligns sales, marketing, R&D, and finance, and leads to better decision-making, increased accountability, more efficiency, and improved results. As such, moving forward our US-based businesses will be divided into a vascular access business, a surgical business, a respiratory/anesthesia business and cardiac business. We will have presidents of each of the businesses, and they will be accountable for full P&L. Outside the US I do not envision there to be much change, and we will continue to be aligned in the manner that we previously were.

Turning to slide 20. During my first quarter as the leader of Teleflex, many external people I have met with wanted to understand whether I believed in the high-fives and asked me if I thought they were achievable, and perhaps more importantly how we are going to get there. The answer to that question is yes, I do believe they are achievable, and I want to touch briefly on how I think we can get there. To achieve our longer term revenue goals we obviously need to introduce more products, we need to have a beefed up R&D effort, but we also need to be more aggressive in our pricing, even in today's economic environment. For far too long, Teleflex has not focused in this area.

We have excellent products, many of which have a good market share but we have not seen a price increase in quite some time. During my first quarter on the job, we reviewed this situation on a product by product basis, and we will be implementing targeted price increases on some of our key products beginning in the second half of this year. Going forward, these pricing reviews will continue on a regular basis, and we will continue the discipline of instituting price increases where we believe we can on an annual basis. In addition, our revenue growth will be achieved through sales force realignment and targeted additions.

Finally, emerging markets will continue to play an important part in Teleflex achieving the high-five goals. Growth rates in these markets will remain very high, and although the US market will almost always be one in which new products and technologies are initially launched, we have the ability to expand upon the number of products that we currently sell in the US, and bring them over to either Brazil, China, or India.

From a gross margin standpoint the pricing initiatives I just mentioned will be one key. In addition to pricing, product mix, improved logistics and reduced facility costs will be another key to margin expansion. And finally, divesting our lone remaining cargo system business will also drive gross margins higher.

Moving to R&D. The areas for future investment need to be focused on products that are more clinical in nature, and drive a higher value proposition for hospitals. We began to take steps in this area during the past year, but more can be done. The business unit approach I mentioned earlier will help us with this. In addition to internal sustaining and advanced engineering we as a Company need to do additional product-focused acquisitions. This is common to do in our industry, and we need to use these smaller VasoNova-type acquisitions, to augment our current R&D pipeline.

And finally, to operating margins. I have already talked about pricing mix and noncore asset divestitures, but another opportunity for Teleflex is to continue to reduce its G&A. We still have a G&A structure representative of a holding company. And although some steps have occurred already, more can be done to better align and trim additional G&A.

So in closing, I would like to leave you with the following, based on what we are seeing in the markets today, it is our current expectations that we will continue to see nice top line growth for the remainder of the year, with particular strength in the second half of the year. In addition, we continue to expect both gross and operating margins to expand from the levels we posted in the first quarter. And finally, I and every member of the Teleflex management team remain committed to the achievement of the high-fives.

With that, I would like to turn the call over to the operator for questions. Operator?

(Operator Instructions). Your first question today comes from the line of Rich Newitter with Leerink Swann. Please proceed.

Hey, guys. Thanks for taking the question. Maybe I can just start off with what you touched upon towards the end on pricing. I was just wondering, I know you guys have been kind of the lower priced offering on a number of your products, so there is probably some room for you guys to step up in pricing in those areas, but is this, and if I am reading into it, I don't know, is this any indication of a broader view of the pricing environment perhaps getting incrementally better? Was there something that you have seen in the marketplace that is going on beyond kind of a Teleflex specific event?

So I am not sure that that is entirely true across the board. I do think there are some signals that that is the case. But I would say I think to a large extent Teleflex has been a lagger in this regard, and my comments related more to I think our playing catch-up, particularly in some segments of our product line.

Okay. Thanks. And then on the medical margin came in at 17% this quarter. I think it is towards the lower end of the 17% to 19% range that you guys gave us on the last quarter call to expect this year. Just wondering just in light of the fact that you said there is some G&A to be taken out of the model on probably the corporate expense side. How much low-hanging fruit is there, how quickly can those identifiable costs go away? Is this something that happens over 12 months, and then we will see the next leg the positive mix shift on pricing kick in? Can you just quantify how quickly we might see some of the corporate expenses go away?

I would divide that into two buckets and one of them has to do with the actual corporate expenses that we are going to be eliminating as a result of the divestiture of some of those other businesses. And the other bucket really has to do with some of the savings we anticipate from restructuring our domestic businesses. And I would say both of those are within that 12 month timeframe, in terms of being able to have an impact on our performance. I would expect that most of those are actually going to be realizable towards the first part of the next year. So probably even closer to the nine-month timeframe than the 12-month timeframe.

I think you are going to be seeing sequential progress on that front, and I think as we get towards year end, I think that was the primary reason for the range that we provided last quarter, we will be exiting the year at the upper end of that range. So I think we will be well positioned next year to again continue to see margin expansion.

Great, thanks, guys.

(Operator Instructions). Your next question comes from the line of Larry Keusch with Morgan Keegan. Please proceed.

Hi, good morning. Can you talk a little bit about how we should think about the consolidation of the manufacturing plants. I know that is something you haven't really been able to do, given the focus on the FDA warning letter, and maybe help us understand now how you are thinking Randy, about the timing and again sort of what expenses you think you might be able to take out of the P&L from those actions?

I think what we indicated in our comments today is a lot of the margin expansion was going to be coming from improved product mix, pricing, looking at some of the distribution and consolidation of the supply chain. Longer term over the next two or three years, I think there are opportunities to continue to take a real hard look at some of the facility and production, the number of production facilities that we have to do that. I don't think that is a near term opportunity as we look in terms of our gross profit margin, but we are going to begin an evaluation of our footprint as we move forward here, and give you more color on that over the next couple of quarters.

Okay, one more, and then just one bigger strategic question. Just help us understand again Randy, the Company's exposure within the medical business to the commodities, and I assume that there is a certain lag period of time, particularly for resins between actual changes in the prices of oil, and when that actually moves up within your raw material costs? If you could just sort of shed a little light on the Company's exposure, and how that works?

Sure. We are most exposed to sort of resin costs which obviously are derivatives of the oil, and when we start getting well above $100 a barrel we start to see some pressure on that. Having said that, it still represents a fairly small portion of our overall cost of goods sold. So while we will see some upwards pressure in terms, it is probably a couple hundred thousand dollars over the course of the full year in terms of our overall cost of goods. So while it will put some pressure on margins, it is not going be something that is going to have a dramatic impact or create a tremendous amount of volatility.

Great. And then just a strategic question. I think you mentioned several times in this call in your prepared comments that acquisitions are going to be an important component and how you would like to do more of these type of VasoNova-type of acquisitions. Can you talk a little bit about the criteria, perhaps size, willingness to take on dilution, as you work through the inorganic growth phase of the company?

I will let Randy go first, and then I will make some comments.

We have provided a fair amount of comment generally how we look at this, but I think we do like sort of the tuck-in acquisitions both on a product or product line, something that is very slanted towards the clinical side of our product line. We suggested that sort of the $50 million to $500 million range is where we are comfortable, and we certainly wouldn't stress our balance sheet or our cash flow. And I think again when you look at a VasoNova-type, that was about a $50 million to $55 million acquisition potentially all-in. That is a nice range for us. So I would expect to see sort of at the lower end of that, but there might be a few lower acquisitions that ended up on the upper end of that range.

I think strategically one of the reasons that we are going through this business unit sort of structure is acquisitions like VasoNova aren't evaluated on their finances, they are evaluated on really the relevance of their technology, and that takes a team of people who really understand that particular clinical need, what the competitive offerings are, and willingness, even though they are smaller bets, they still require that amount of certainty in terms of their likelihood to pay off. In the past we really haven't had the resources targeted to be looking at those kind of clinical areas, and that is one of the things that we are trying to accomplish with this structuring of our businesses in the US.

Terrific. Thanks very much.

As a follow-up, we wouldn't expect any of these transactions to be dilutive in terms of on a full-year basis.

Okay, great. Thanks, Randy.

(Operator Instructions). Your next question comes from the line of Josh Jennings with Jefferies & Company. Please proceed.

Hi, thanks. Good morning, gentlemen.

Good morning.

Just quickly Randy if you could break out first just the margins for the medical segment if you are able to give us the gross margin, operating margin on adjusted basis for just the medical segment in the quarter?

The operating margins were in the 17% range, and the gross margins were approximately 47%.

Great. And then Benson, just now that you have had a little bit more time to fully absorb the CEO role, not that much time, but in terms of high-fives, what do you see as more challenging, to the top line 5% of revenue growth, or getting operating margin expansion out to the mid-20s over the next few years?

I would say at this point right now the slightly bigger challenge is getting the operating margins up there, but they are related. We are trying to obviously focus our growth into a product mix that has higher gross margins to begin with. But I think that we have got some segments of our product line that are going to always be a bit of an anchor to that. So there a little bit more of a challenge in moving that number right now.

Great. Maybe just comment on the balloon pump recall, where you are at in terms of reintroducing the 5800 catheter sets. I know you began in January and were selective in terms of what customers you were initially going back at/to. Maybe along the lines of how share shifts have gone so far, and whether share gains can be retrieved from Datascope particularly, and then just your confidence in getting back out to flat year-over-year growth in 2011 for the cardiac business?

So, generally we are continuing to make very steady progress in terms of the resupply, that is obviously the biggest gaiting factor in terms of getting back into the marketplace. We were actually pleasantly surprised at the relatively limited impact we had in terms of losing the sale of pumps there were certainly a couple of occasions of that, but not as severe as they could have been. And we fortunately had enough customers that were willing to wait and postpone their purchases until we were in a better supply situation, and I think generally we are quite optimistic that this business is going to return in the second quarter. So we are on track with that. It is probably one of the situations we paid close attention to, and are doing everything proactively we can to prevent some sort of recurrence of this event.

As we indicated in our remarks we re-entered the market in the first quarter. Supplies are coming up, and we expect to be out of backorder by the end of the second quarter, so in terms of top line growth we are pretty confident that we will see a very solid year from our cardiac division.

Great, so basically things are going to plan, meeting expectations in terms of recovery after the recall?

Very much so.

And just on the M&A front, if you are looking out into the marketplace and you have got a number of competitors talking about tuck-in acquisitions as well. Can you talk about the environment right now, and maybe just the pipeline of what you guys are looking on out there?

Well, I think the market continues to rebound. Certainly multiples based on revenue and cash flows continue to expand, so certainly the market seems to be rather robust for certainly clinical and technologically oriented products, but I think we do have a certain amount of differentiation in the marketplace, and there is a lot of opportunity for us to find things like a VasoNova that we don't think there is going be a tremendous amount of competition around. Some of the things I think that we are focused on though are in our existing verticals and product lines, and that is where we are going to remain focused. I think there is a fair amount of opportunity. We have got our eyes on a couple of very interesting opportunities. But we will have to keep you posted with regard to the timing of those.

And I would just say that by the time you get down to any of these sort of slightly niched segments, there are only a few really potential strategic buyers, and it is really a matter of our being alert to those opportunities.

Alright. And then just lastly, if you are looking at the Amerinet GPO contract that you guys won, did that come a little bit sooner than anticipated and can you just talked about some of the drivers that got you in there, was it the antimicrobial PICC, was it the VasoNova, a combination of both? What is the cadence of GPO contract wins specifically on the PICC side going forward, if you could just remind us of the timing of when those contracts come up for bid? Thanks a lot.

I think it is a combination of the antimicrobial PICC, the wand, VasoNova, I think that that GPO marketplace is identifying Teleflex as a legitimate contender in that segment. And are actually welcoming of a competitive entry in there. And whether it is Amerinet or the other GPO contracts that are coming up this year, we expect really strong consideration as a player on any of those dual source contracts, and most of them are moving towards a dual source, so that there can be a competitive market. I think it is a combination of our technology acquisitions, improved product line, and kind of the need and desire for a genuine competitor.

And Josh from a timing standpoint I think there are additional contracts that come up for renewal beginning I believe in July of this year, and additional ones through December of 2012.

Great, thanks again.

(Operator Instructions). Your next question comes from the line of Shawn Bevac with SIG. Please proceed, sir.

Thank you. Could you guys please remind us how many medical facilities you have, and how many would be potentially cited for closure?

When you talk about medical, are you referring to manufacturing facilities?

Yes, manufacturing, distribution.

We operate in a little over 25 countries around the world. So we have a number of offices and facilities in a variety of places. We have got facilities from a manufacturing participant in Malaysia, Czech Republic. Certainly a number of facilities in the United States, and at the Mexican/American border. I think when we look at our overall manufacturing footprint, and also look at the consolidation of some of our distribution channels I would say that would be probably be in the near term where we might look at some facility closures. But to give you a specific number right now, would probably be a little bit ahead of where we are in our analysis.

And then looking at the medical operating margin were there any one-time items in there? Last quarter you had the IV tubing sale charges and the IV catheter recall charges. Was there anything like that in that number this quarter?

Most of those things have been adjusted out in terms of our earnings per share so the 47% and the 17% are fairly clean numbers. Again, on the gross profit margin we did have some product mix as we usually do in the first quarter that was heavily slanted towards sort of our urology and respiratory businesses, which are on the lower end of our gross profit margin objectives. As we move throughout the year we are very confident in terms of how the product mix will continue to unfold, and achieving some of our longer term margin objectives. I think we are pretty well situated as we start the year right now.

Lastly on the tax rate what was driving the higher rate there this quarter?

Higher rate was just again from a corporate participant with some of the adjustments that we made this year reduced our overall pretax income and when you adjusted those things out our tax rate was up a little bit. But again we are very confident that the 28% to 30% is the range we will be in for the full year. So again, on a GAAP basis our tax rate was fairly low. But when you adjust out all of the issues and the geographic location of some of the earnings, the taxes were up this quarter. But again, that really is just a function of some of the adjustments that were made in adjusted earnings.

Okay. Thank you, guys.

(Operator Instructions). It appears there are no questions at this time. I would like to turn the call back over to Mr. Jake Elguicze for closing remarks.

Thanks, operator. Thank you for joining us today. This concludes the Teleflex Incorporated first quarter 2011 earnings conference call. Have a nice day.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.