泰利福醫療 (TFX) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2011 Teleflex Incorporated earnings conference call. My name is Kim, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question and answer session at the end of today's conference.

(Operator Instructions)

As a reminder, this call is being recorded. I will now turn the call over to your host for today's conference, Mr. Jake Elquicze, Treasurer and Vice President of Investor Relations. Please proceed, sir.

Thank you, operator, and good morning, everyone. And, welcome to the 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, passcode 36708812.

Participating on today's call are Benson Smith, Teleflex Chairman, President, and Chief Executive Officer, and Randy Meier, Teleflex Executive Vice President and Chief Financial Officer. Benson and Randy will make brief prepared remarks, then we'll 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 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 would like to now turn the call over to Benson.

Thanks, Jake, and, good morning, everyone. On today's call I will begin with an overview of the results for the fourth quarter and full year of 2011 and then include some of our strategic highlights. Then, I will provide you with an update on product introductions as well as recent GPO wins. And then, Randy will provide you with a detailed review of our fourth-quarter financial performance, as well as a review of our product line and geographic revenue mix. Finally, we'll share with you our outlook for 2012.

So, beginning with the fourth-quarter financial highlights, fourth-quarter 2011 revenue was $411.7 million. This was an all-time record in terms of revenue dollars generated by our medical franchise. It represents an increase of 6.6% over fourth quarter of 2011. On a constant currency basis, sales in the fourth quarter were up 6.8%. This represents the Company's largest constant currency sales percentage increase in recent years. We continue to be very pleased with our ability to generate such strong sales growth and make market share gains despite operating in what many see as a difficult macro environment. We would like to remind you that our rather unique product and geographic mix of products provides us with some immunity to the elective procedure downturns as compared to some of our peers.

The sales growth we've seen to date is the result of continued improvement in our sales force, more targeted marketing efforts, and investments made in research and development, and the associated new product we've been able to introduce to the marketplace. And, continuing the trend from prior quarters in 2011, the growth in the fourth quarter came from a variety of our franchises and geographies. This success in driving revenue growth is encouraging. And, we plan to continue investment in these areas in 2012 and 2013 to ensure that we continue to leverage our infrastructure and generate sustainable top-line growth and margin expansion. Sustainable revenue growth is the most important element in our ability to reach our other financial strategic goals.

Turning to adjusted gross and operating margins, they were 47.1% and 16.8% respectively. This represents a year-over-year decline of 20 basis points in gross margin but an increase of 200 basis points versus prior year on the operating margin line. And finally, adjusted earnings per share for the fourth quarter were $1.07, an increase of 29% from the fourth quarter of 2010.

It's important to point out that our adjusted earnings per share in the fourth quarter of 2011 include $0.17 of expense associated with the decision that we made to accelerate the early termination of our interest rate swap. The acceleration of these costs will allow for a more accurate view of our capital structure costs and provide a benefit to our expected 2012 results. Let's now move to some of the strategic highlights for the quarter. First, I would like to provide an update regarding the price increases that were put in place around the mid-year mark of 2011. Fourth quarter results indicate that these initiatives continue to trend in the right direction.

Overall, pricing was up 50 basis points this quarter, as well as up from 10 basis points of growth that were added in the third quarter of 2011. This was up significantly from the results posted in the first quarter of 2011 where pricing was down approximately 120 basis points from the year earlier. We monitor these developments closely, and we continue to be very encouraged with these results. From a geographic perspective, during the fourth quarter of 2011, pricing in Asia Pacific accounted for approximately 310 basis points of that region's growth. Pricing in Japan, Latin and North America accounted for approximately 260, 250, and 80 basis points of the sales growth in those regions respectively. This was somewhat offset by continued difficult market in Europe which saw a decline of approximately 120 basis points for their sales in the quarter.

Turning to VasaNova, we continue to see additional penetration of this technology as the standard of care into US hospitals during the quarter. During the course of 2011, we focused on showing clinicians the outstanding clinical benefits of utilizing this product while creating a beach head of hospitals that rely on this device. To date, 21 accounts have been closed that we have conducted evaluations in. We've won 20 while losing only one. We see that as a pretty good win/loss ratio.

In addition, the work that we've done to date will pay benefits for us in 2012 as well. For example, we are accelerating our sales efforts, and we currently have approximately 30 trials scheduled per month throughout the midyear point of 2012. We fully expect that these trials will translate in additional revenue and profitability for our vascular franchise. And, before I shift gears to provide you with a review of our full year 2011 results, I'm happy to report that on December 2 we completed the sale of our last remaining non medical business for $280 million. Now, let's turn to the highlights from our full-year of 2011 performance.

No good company ever stands still, and that is surely true of Teleflex in 2011. And, while a great deal of change occurred during the course of 2011, including my appointment as President, Chairman, and Chief Executive Officer last January, as well as the completion of our portfolio transformation to a medical device company, I believe a great deal of support and stability was added during that time frame as well. We shifted our operational alignment towards a more traditional business unit approach. The leaders consist of a good mix of preexisting Teleflex talent, as well as an infusion of external resources.

We made a technology acquisition, something we plan on doing more of in the coming months and years and we received formal resolution of the longstanding Arrow corporate warning letter from the FDA. All of these items helped create a platform that culminated in the achievement of the highest full year constant currency revenue growth that the Company's medical products have contributed in recent memory. Further indicating to us that the achievement of some of our longer term goals are well within our reach.

As all of you well know, the life blood of consistent and sustainable revenue and profitability growth in the medical device industry is new product development and commercialization. This is something that has been revitalized over the last 24 months at Teleflex, evidenced by the 14% increase in R&D spending in 2011, much of which helped bring over 20 new products and line extensions to market this past year. And now, as the chart shows, these 20 plus new product introductions occurred across a variety of our franchises and contributed about 1% of our overall constant currency growth this year. And, as I stated earlier, this investment is something that we are committed to making in the next several years, both in the form of internal investment and acquisition.

And finally, before I turn the call over to Randy, I would like to spend a few moments to talk about another key item that allows for predictable and sustainable future growth, and that item is access to hospitals. Although Teleflex has been selling to hospitals for decades, it really wasn't until this past year that we gained the access necessary in order to compete more effectively against many of our peers. Relationships with group purchasing organizations are critical to a company like Teleflex, and during the course of 2011 we were awarded 37 GPO contracts, 10 of which were brand-new for us. And, as we exit 2011 the annualized 2011 revenue that we sell through GPOs is up 6% versus the prior year. As I stated earlier, much was accomplished during 2011 to set the foundation for future growth and profitability.

With that, I will now turn the call over to Randy, and he can walk you through our most recent quarterly financial performance in more detail. Randy?

Thanks, Benson, and, good morning, everyone. Revenues for the fourth quarter were $411.7 million, up 6.6% on an as reported basis. And, when adjusted for currency fluctuations, revenue grew at 6.8%. And, looking at how the constant currency revenue growth was achieved, approximately 560 basis points came from increased volume, 70 basis points came in the form of new product introductions while the last 50 basis points came from the improved pricing measures that Benson referred to earlier.

Turning to adjusted gross profit and margins, they were $194 million, or 47.1%. This compares to $182.7 million, or 47.3%, in the prior year quarter. The adjusted gross profit and margin figures I am referencing exclude approximately $2 million of costs associated with the SKU rationalization program that the Company began in mid-2011, as well as the impact of approximately $5.9 million of IV tubing business shutdown costs that occurred in the fourth quarter of 2010. The SKU rationalization program is expected to reduce approximately 8,000 product SKUs, or approximately 15% of our total finished goods SKUs. The eliminated SKUs were identified on the basis of sales volume and margin contribution or the lack thereof.

Adjusted margins were down slightly year over year due to a thorough review of our product line inventory levels that resulted in a year-over-year increase in our inventory reserves by approximately $3.3 million. This expense was included in our calculation of adjusted operating results. However, we do not expect this to occur in future periods.

Moving to operating expenses, selling, general, and administrative expenses were $111.9 million during the quarter, down from $113 million last year. The decrease in SG&A for the quarter was due to cost containment initiatives, primarily in the corporate spending area, as we continue to transform the cost structure of the Company to be more reflective of an operating entity. These OpEx savings were somewhat offset by the additional expense incurred to write down our zero coupon Greek government bond receivables. And, I am pleased to report that, as of today, we have sold our remaining interest in these bonds and our balance sheet does not have any additional exposure associated with these items.

Turning to R&D, in the quarter, research and development spending was $12.9 million, up from $12.5 million last year. The higher level of R&D expense primarily reflects increased investments in our catheter tip positioning technologies. Moving to interest expense, it was $18.6 million for the quarter, down approximately $2.5 million and reflective of the positive changes that we've made in our capital structure during the course of the last 12 months. Continuing along the income statement, during the fourth quarter of 2010, we incurred approximately $16.3 million of losses on the extinguishment of debt that did not occur in the fourth quarter of 2011. Turning to taxes, the effective income tax rate for the fourth quarter was 5.8%. However, on a full-year basis when adjusted for the items that affected comparability our adjusted tax rate was 23.3%.

The lower fourth quarter and full-year effective tax rate is a function of an APB 23 benefit resulting in part from the 2011 legal reorganization of certain of the Company's wholly owned subsidiaries, which had the effect of reducing the estimated future US tax cost on the remittance of forward earnings that are not permanently reinvested. We do not anticipate being able to maintain the tax rate from the fourth quarter or, for that matter, the full year 2011. We anticipate that our tax rate for 2012 will be between 29% and 30%. And finally, before our fiscal 2000 year end closed we entered into a transaction with the counter party of our interest rate swap in which we made a cash payment of approximately $14.8 million.

This transaction did not impact our GAAP earnings. However, from an adjusted earnings perspective, this transaction accelerated the 2012 interest expense into 2011. This resulted in additional cash expense of $0.17 being incurred in 2011, which will benefit adjusted earnings in 2012 in an equal manner. All of my aforementioned comments results in adjusted earnings per share for Teleflex of $1.07 for the quarter, up approximately 29% versus the prior year. Now, let's move to a more detailed review of our constant currency product and geographic revenue results.

Critical care revenue was $268.2 million, up 4.3%. During the quarter, sales of the anesthesia products were up 8.1%, urology sales increased 5.3%, while respiratory and vascular access sales were up 3.8% and 2.2% respectively. Moving to surgical, revenue was $73.5 million, a 2.7% increase. Growth in the quarter was primarily due to increased sales of our ligation products.

Turning to cardiac, revenue was$ 22 million, up 37.7%. Revenue in the quarter was generated in both the intra-aortic pump capital equipment portion of the business, as well as the single-use disposable catheter side. In addition to improved volumes in the quarter, year-over-year sales growth was also aided by the product recall that occurred in the fourth quarter of 2010. If you normalize the results of this business for the impact of the recall, sales were up approximately 13% versus 2010. And, before I discuss our performance of our -- from a regional perspective, let me briefly mention our OEM business. Revenue was 47.7%, up 18.2%. The increase in revenue in the quarter came from higher sales of specialty suture and catheter fabrication products, while sales of our orthopedic implant products were down versus the prior year.

Now, I will walk you through our top line performance from a geographic perspective. Revenue in North America was $168.8 million, up 2.4%. Sales growth was led by our cardiac, anesthesia, urology, and vascular access products. While sales from the respiratory and surgical products were flat year-over-year. In Europe, sales were $134.9 million, up 7%. Despite the difficult macroeconomic environment, we continued to post sales growth across all of our product lines, with particular strength in the cardiac, urology, and anesthesia franchises.

In the Asia Pacific region, sales were $30.8 million, up 20.1%. This strong increase was led by improved anesthesia, surgical, vascular, respiratory, and cardiac volumes as well as improved pricing. Turning to Latin America, sales were $15.8 million in the quarter, up 4.8%. Growth in this market was driven by improved pricing and cardiac volumes. And finally, in Japan, sales rebounded from levels posted in the third quarter of this year and came in at $13.8 million, up 2.4%. The revenue increase was primarily due to sales of respiratory therapy products.

With that, I would like to turn the call back over to Benson, so he can share the Company's 2012 outlook and make some closing remarks.

Thanks, Randy. In 2012, we expect to continue to build on the positive momentum that occurred in 2011. We plan on once again delivering sales growth that exceeds market growth rates and our preliminary 2012 outlook calls for constant currency revenue growth of between 4% and 6%. The vast majority of our projected revenue growth is expected to come from increased volumes and favorable product mix, while new product introductions are expected to contribute approximately 100 to 150 basis points of growth as well.

Finally, the remaining 50 to 75 basis points of growth is expected to come from increased pricing. From a product line standpoint, we anticipate sales of our critical care products to grow closer towards the higher end of our range. This will be led by increased sales of our vascular access and urology products. For our surgical products, we anticipate that sales will grow in line with normalized surgical procedure growth, and as a result, our expectation is that surgical sales will grow towards the lower end of our range.

Moving to cardiac, we expect strong growth in North America, partly the result of new GPO awards that we've recently received, while outside the North America, our expectation is that sales will grow slightly below our overall revenue growth range. And, turning to our specialty medical and OEM franchise, we currently anticipate revenue growth towards the lower end of our overall range. From a margin perspective, our expectation is that our operating margin will expand approximately 100 basis points in 2012 from the adjusted margins we posted in 2011. And, although we expect our gross margin in 2012 to expand at levels exceeding 100 basis points, driven by increased volumes, favorable product mix, and pricing, as we progress through the fourth quarter of 2011, it became apparent to us that we have an opportunity to capture additional market share and accelerate the sustainable achievement of our longer term top line revenue growth initiatives much sooner than we originally anticipated.

That achievement, however, requires some near-term investments in R&D, sales and marketing, and clinical education versus our initial expectations. And, while many of these targeted increases in product development and sales and marketing will not impact 2012 revenue and gross margins, we believe that they will translate into greater revenue and margin expansion beginning in 2013 and the future. In addition, given to where we are today, we expect foreign currency to be a headwind to revenue of slightly more than 1%, impacting our operating margins negatively by approximately 50 basis points. While another item impacting operating margins in 2012 is a pretax increase of approximately $3 million in our pension and other post-retirement benefit costs through certain actuarial pension assumption changes. As a result of all these items, our 2012 operating margin will expand slightly less than our prior expectation, which called for 150 to 200 basis points of growth in 2012.

Other assumptions implicit in our adjusted earnings per share guidance include weighted average shares of approximately $41.5 million. The positive impact from the early termination of our interest rate swap, a tax rate of approximately 29% to 30%, and a variety of costs that were previously called to your attention during the course of 2011 that are not expected to recur in 2012. These costs include things such as the expense that was incurred related to the write-down of our Greek bond receivables as well as investment impairments and additional litigation and asset amortization expense that were incurred in our second-quarter 2011 results. These assumptions translate into our 2012 adjusted earnings per share range of $4.25 to $4.45 per share.

That concludes the formal prepared remarks section of the presentation. With that, I would like to turn the call back to the operator for questions. Operator?

(Operator Instructions) Lawrence Keusch, Morgan Keegan.

Hi, guys, this is actually Constantine for Larry. So, I guess to start off with, Benson, if you can update us on where do we stand on the five -- on the high five goals that you guys put out? And, can you also update us on the time frame?

I think the most fundamental change in the high fives that we're making some adjustments to has to do with our revenue assumptions in our longer term plan. The original description of the high fives, and I think we were careful to not to overstate how much of our improvement was going to come from revenue that we were uncertain of. And so, the expectation that we'd be able to grow at 5% seemed reasonable at the time, particularly given the last couple of prior years of medical device sales at Teleflex. We are now, based on the trajectory of our sales over the last year and, looking forward into 2012 and 2013, believe that 7% is a much more achievable revenue growth target for us during that period of time as we get to the last three years of that time frame. So, that adds to the formula additional volume which improves our gross margin and adds to it, considerably, improved leverage from our selling and marketing expenses.

We have adjusted, I think, the way that we're going to achieve the high fives, we have not adjusted our time frame to get there. And, I think it's our internal belief that the path we have now actually is an easier route to get there because of those increased volumes than some of the things that had to transpire for us to get there earlier. I will give you an example. There was a lot of concern about whether or not we would be able to deliver price increases at 1% per year over the next several years. And, I think some of those concerns have born out a little bit in the fact that Europe remains a more challenged environment. Our ability to raise revenues to 7% based on our current trajectories takes some of the difficulties in achieving the high fives the way we were previously thinking about them. So, we don't see that there's -- just to summarize, we don't see that there's any real difference in the time frame to achieve them. We are relying somewhat more on revenue than we had in the past.

Okay, and, I just want to make sure I understand. So, the 7% revenue growth, do you think is that a sustainable revenue growth level for Teleflex beyond those years? Is that the right way to think about it?

It's a little difficult for us to make predictions much further out than the next three years. But, there's nothing on the horizon, that we know of at this point in time, which would slow down our revenue growth. So, the answer is yes, with a lot more caution as we get well into the outer years in terms of what might happen in the market.

Okay. Then, in terms of, I guess, can you update on what operating margin assumptions is contemplated in this plan? And also, if you can update your latest thoughts on pricing?

So our -- first of all, in the 2012 guidance we're assuming 100 basis points improvement in our operating margin over our 2011 results. Originally, we had projected numbers somewhere between 150 and 200 basis points. And, I think in the course of the script we addressed the issues of the differences in terms of that number and the 100 number. In terms of pricing initiatives, I have to tell that you we have been really pleased with the results of our pricing initiatives in both Asia and North America. We actually don't see any change in our assumptions in terms of the positive price increase that's coming out of those regions.

Europe was a drag on our results this year to the tune of about 120 basis points. We believe we can mitigate some of that in 2012, but are making our assumptions based on relatively conservative adjustments in the European arena. So, I think some of our short-term pricing initiatives can be eroded a little bit by what goes on in Europe. But, we're really pleased with what's happened in North America and Asia and those price initiatives are sticking. I would add, also, that gross margins are expected to grow by approximately 100 basis points, and there's a significant impact to that from pricing.

Got you. Terrific, thank you.

David Lewis, Morgan Stanley.

Good morning. Benson, I just want to come back to margins for a second to make sure that I'm clear in terms of this slight change in strategy. Margins are growing in 2012, both gross and operating, but they're still coming in below our consensus expectations. It sounded like in your prepared remarks you see an opportunity to grow the business faster. But, potentially leveraging maybe the GPO contracts or in lower priced regions or in product categories. Is that the primary difference in why margins would be a little lower? It sounds like there's some pressure on gross, then a reinvestment on the operating line to drive the business. I just want to be very, very clear in terms of where you see these additional opportunities and what the margin profile of those areas is.

They come from principally two different areas. Number one, we are accelerating our R&D spending beyond what was in our original thought process for 2012. One of the results of our de-centralized approach and splitting R&D into our different strategic business units has been the identification of more projects than we had on our plate before. We've gone through a pretty careful review of what those projects are and think that the additional expenditure is warranted. And, that's good example of spending more in 2012. We're not going to realize the benefit of that until 2013, and in some cases 2014. If we don't spend it now, that places in jeopardy the opportunity really to grow at that 7% number.

The second area really of expense is realignment of some of our sales and marketing expenditures and activities towards those product lines specifically that we believe have some significant potential to grow. And, I want to comment on this, that we're not simply spending more money. We have redirected a lot of resources from slower growth businesses into those businesses, as well as adding some additional resources. And, VasaNova is a good example. We've been very pleased with the early results from our clinical trials. And, feel like we would be missing an opportunity not to make sure that's reinforced with the appropriate sales forces this year.

Just to reinforce and give you a sense that we're not just investing but we are realigning some of the costs. In the fourth quarter we did go through a reduction of workforce. And, targeting two of our specific sales forces but continue to invest in other sales forces. So, I think it gets back to Benson's point that while we're increasing some of the investment, mainly in the front end of our business in both sales, marketing, and R&D, we aren't doing so completely across the board. We're investing in those areas where we think we're going to get the most leverage as well.

Okay, very helpful. And then, Randy, just a couple of moving parts here on the interest expense line heading into '12. Obviously, with the swap termination and maybe other potential restructurings, can you just help us understand what is a reasonable baseline to assume for interest expense for '12?

When we look at our interest expense, I believe we'll be coming in at about $70 million for the whole year going forward. And, this is a reflection of just the elimination of the swap. We haven't had any plans to further reduce interest expense, although that -- or excuse me, total debt, although that remains an option for us, depending how we move through year.

Great. Thank you very much.

Rich Newitter, Leerink Swann.

Hey, guys, thanks for taking the question. Just going back to your long-term objectives. I just want to make sure I'm understanding. You're -- in some ways the high fives are no longer quite the high fives. Over the long run you project to get to 7%. What are the precise gross margin and operating margin longer term targets?

The longer term targets for gross margins for our medical device segments of our business remains at 55% and our operating margins remain at 25%. The adjustment that we're really making is in the -- is raising the revenue portion of the high fives from a 5% sustainable growth rate to a 7% sustainable growth rate. That does change how you get to the 55% and how you get to the 25% somewhat over the years as a result of increased volume and increased leverage.

Okay. And, the number of companies in our universe have talked about the upcoming medical device tax and ways that they're going address it. Should we consider some of your rethinking of the investments you're making today as a potential way to offset that medical device tax in 2013?

So, the short answer to that, without getting into a lot of detail, is yes. I think, like everyone else, we're really cognizant of that -- of the likelihood of that coming to pass. And, have calculated that into our expectations for 2013, with some hope that it doesn't come to pass. But, we're not particularly optimistic that that's going to be the case.

Okay. And, just as we think about your 4% to 6% constant currency 2012 guidance. Do -- you gave some specifics on the contribution of price, volume, and mix. Were those all assumptions that get you mostly to the midpoint? What's the swing factor there in your mind? Which is most likely to get you towards the upper end of that range?

I think the upper end of strange is represented by, I think, somewhat more optimistic division by division expectations on the revenue line than we would feel comfortable with in putting into our actual plan. However, there are some -- certainly there are some trajectories that support the business unit's plan to get there. So, it reflects some conservatism. Mostly, it's going to come from increased volume as opposed to adjustments in the pricing frame. We expect that the adjustments in pricing are going to happen at either end of the range. They're not the issue that is responsible for our revenue range.

Okay. I'm sorry, if I can just squeeze one more in there. I think you had mentioned that GPO contracts in 2011, or the new GPO contract wins, on a year-over-year basis, contributed or grew at 6%, or sales associated with those GPO contracts grew at 6%. Can you give us a sense of what the like for like growth comparison would be for GPO related new contract wins in 2012?

I would expect that revenue is going to sustain at a similar level going forward. We think with the 10 new contracts, we certainly have the opportunity to continue to leverage our growth rate in North America which has been a pretty significant focus for us in the last year. And, we're really starting to see dividends of both the investment and the expansion of our presence in the GPO arena.

Okay, thanks a lot, guys.

What we've seen historically is GPO growth rates for us have been in the top end of our revenue range, and we expect that to continue.

Anthony Petrone, Jeffreys.

Thanks, gentlemen. Just want to stay on the revenue guidance. So, the 300 or so basis point increase from volume specifically, and really relates to the comments just a moment ago. If we look at that specifically, how much would be related to GPO volumes versus share gains? I'm assuming there's a little bit of both in there.

The answer to your question is you're right. With 10 new GPO contracts that we didn't have in the prior year, particularly in areas like our cardiac business, we expect pretty reasonable share gain. So, the majority of our growth is coming from -- obviously, from volume and not pricing, particularly in GPO contracts. But, it's a little different. The share gains actually are quite different from new contracts to existing renewals where we've probably already capitalized on the share opportunity within that contract.

Great. And then, I guess just to go back on the price increase for a moment. Benson, you mentioned the 1% in APAC and North America. As we go forward should we assume that itself does continue with some moderation in Europe? I just want to clarify those comments as it relates to price increases going forward.

Yes, so, the average price increase coming out of Asia Pacific and North America is actually somewhat above that 1% number. It gets down to a range of 50 to 75 basis points when you -- based on the assumptions you make about how big of a drag Europe might be on those numbers. So, Europe is negative, Asia Pacific and North America are above that 1% number.

That helps. And then, a couple on VasaNova. The win rate seems pretty robust here, 21 out of 22. Can you elaborate on how long it actually takes a hospital to get to signing for that system? And, maybe an update on the funnel as of the end of the quarter? And, if the 510-k labeling extension had any factor this quarter?

I would say that the 510-k labeling extension has not had a factor this quarter. The average valuation time and decision time has ranged -- there's a big rang from hospital to hospital. Some move quicker, some move slowly. But, the range is somewhere between 3 months and 10 months for from the time we get an okay to start an evaluation in a hospital to the time they might actually make the decision. The reason for that range is, for the most part, this does represent a significant short-term expenditure for the hospital that's only justified really if they can really remove the x-ray from that equation. Our system, as you're aware of, is priced much higher than competitive systems which don't have as good of a track record in eliminating x-rays. So, the hospital has to be pretty comfortable that that's a sustainable event that they can count on as taking out of their budget.

The good news, from our perspective, is that in many cases the longer the evaluation goes, the more likely they are to go ahead and make that conversion. So, it's not something we've been deliberately trying to accelerate. The second issue, your question about the pipeline, is that the pipeline is much more robust going into 2012 than it was going into 2013. In my scripted remarks I mentioned that we are anticipating and have lined up for the first half of the year approximately 30 new trials per month. So, there's a lot of activity and some of our increased expense in sales and marking is to support that activity.

That's great. And then, maybe the last one from me, Randy, and when we look at debt service and maybe the proceeds from the final Telair sale, I think you mentioned in prior quarters waiting on some tax repatriation legislation. I'm not aware that we have seen any. Is that still the case there? If you do have favorable legislation could you potentially see an acceleration in debt service? Thanks.

Sure. As many of you know, our aerospace business was predominantly based outside the United States. So, the vast majority of the proceeds do sit outside the United States. And, while we have provided, from an income tax perspective on the income statement, for the possibility of repatriation, we are very comfortable leaving that cash offshore and waiting to see how things pan out here. With current interest rates where they are, and given our capital structure, our overall cost to capital on the debt side is in the lower 4% we don't see as an urgency to move forward. And, having that cash sitting on the balance sheet is an enabler to move fairly quickly on a transaction outside the United States.

We'll sit back and look and see how things unfold in 2012 and keep you posted as to whether we decide to more aggressively pay down debt. But again, we don't have any amortization schedules and the next time we have any debt repayment required, which is 2014. So, we're pretty comfortable right now.

Thanks.

(Operator Instructions) Chris Cooley, Stephens.

Thank you. I appreciate you taking the questions. Can I clarify, in terms of when we think about the factors contributing to growth going forward, the price itself is only now expected to add between 50 and 75 basis points, not the original 100 basis points when I think about that going forward, or is that just for 2012? And, just have one other quick follow-up.

It's our -- it's the numbers that are contained in our 2012 plan, or guidance. As we look out further than that, we remain confident about the contribution we are going to be able to get from Asia and North America. We think, depending on what happens in Europe, we think there's some opportunity to mitigate what the impact that Europe -- or the negative impact from Europe. It's just the nature of European sales. Many of which are tender driven, many of which contain relatively severe restrictions to even enter a tender this year that slowed down some of our efforts to improve pricing. However, we have a more aggressive program in place this year for Europe to be really more selective in looking for those places where we can get some price increases. The number we gave you is strictly and only related to our 2012 plan.

Understood. I just wanted to be clear on that. And then, secondly, when we think about your adjusted earnings guidance, help us a little bit with the variability that you have in these incremental spends that we're seeing under the R&D and sales and marketing lines. If you see any pockets throughout the course of the coming year in terms of revenue growth tapering, how much of that is discretionary versus more structural in nature when you start those programs? We can think about maybe what might be the variability to operating leverage as we go through the year? Thanks, so much.

Just as a matter of course, each of our divisions essentially has appropriate contingency plans to be able to respond to lower than planned revenue numbers. We have, also, the appropriate contingency thought process going on at corporate in terms of how we would respond to lower than expected revenue numbers. So, that it doesn't have a one for one impact on what our EPS is.

Chris, to expand a little bit on that, I think if you look at some of the footnotes in terms of the adjusted earnings, you can see it has the, I think the quality of our earnings have improved from 2010 to 2011. One of the benefits of that is we have a little bit more visibility into our variable spend as opposed to our fixed spend. So, just to echo what Benson said, we do have the opportunity, should some of the top nine not materialize later in the year, to continue to manage our costs going forward. And, certainly with our SBU structure we have the ability to get to that in a fairly expeditious manner rather than where we were about a year or so ago.

Okay, thanks so much.

(Operator Instructions) And, there are no further questions at this time. I would like to turn the call back over to Mr. Jake Elquicze for closing remarks.

Thanks, operator. And, thank you for joining us today. This concludes the Teleflex Incorporated earnings conference call. Have a good day.

Thank you for your participation in today's conference. This does conclude the presentation. You may now disconnect, and have a great day.