泰利福醫療 (TFX) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2012 Teleflex Incorporated earnings conference call. My name is Beyana, and I will be the operator 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 today's conference is being recorded for replay purposes.

I would now like to turn the conference over to your are host for today, Mr. Jake Elguicze, Treasurer and Vice President Investor Relations. Please proceed.

Thank you, operator. And good morning, everyone, andwelcome to the first quarter 2012 Teleflex Incorporated earnings conference call. The press release and slides to accompany this call are available on our website at www.teleflex.com. As a reminder, this call will be available on our website and a replay will be available by dialing 888-286-8010 or for international calls 617-801-6888,passcode 60148281.

Participating on today's call are Benson Smith, Chairman, President and Chief Executive Officer; and Thomas Powell, Senior Vice President and Chief Financial Officer. Benson and Tom will make brief prepared remarks, and then we will open up the call for 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 and 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 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.

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

Q1 2012 was a strong quarter for Teleflex, with revenues reaching $387.8 million. This represents anincrease of 9.5% over the first quarter of 2011 on an as reported basis, while on aconstant currency sales in the first quarter up 10.9%. This performance comes on the heels of a strong fourth quarter of 2011 and represents the Company's largest constant currency sales percentage increase in recent years.

We realize that these results are some what contrary to results posted by some of our peers, and we continue to be very pleased with our ability to generate such positive sales growth as well as your ability to take market share despite operating in what many see as a difficult macro environment. As we have stated before, our rather unique and geographic footprint provides us with some immunity to elective procedural downturns, leading to a strong competitive advantage.

And while we are aided somewhat by extra shipping days this quarter, we achieved sales growth across all of our franchises and geographic regions. The success we are having in driving revenue growth is very encouraging and provides me with the increased confidence that we will be able to achieve our longer term growth and profitability targets.

Turning to gross and adjusted operating margins, they were 47.9% and 15.7% respectively. This represents a year-over-year improvement of 140 basis points in gross margin, primarily the result of improved pricing, which I will go into more detail on in a moment; buta decrease of 10 basis points versus prior year on the operating margin line.

Year-over-year adjusted operating margin performance was negatively impacted by foreign currency headwinds, alarge option forfeiture associated with my predecessor that occurred in the first quarter of 2011, and some costs that were in incurred in the first quarter of 2012 that we do not anticipate recurring for the remainder of the year. As a result, we are reaffirming our previously provided expectations for margin expansion and adjusted earnings per share.

The circumstances leading to this charge are rather unique. Typically most companies recording impairment charges have experienced either a material decline in the underlying performance of their operations or their valuation. I want to be clear that this is not the reason why we are recording this impairment charge. The impairment charge is an accounting item resulting from the reorganization of the Company's internal business unit reporting structure and is in no way reflective of our current operating performance or the Company's longer term growth opportunities.

In fact, prior to the reorganization of the Company's internal reporting structure, there was no impairment in the [carrying] value of any of Teleflex's reporting units. When excluding this charge and other items that affect comparability in the quarter, adjusted earnings per share for the first quarter was $1.01, an increase of 15% over the first quarter of 2011.

Let's now move to some of the strategic highlights for the quarter. I know that many of you are interested in getting an update regarding the price increases that were put in place around the mid-year mark of 2011. First quarter results indicate that the initiatives continue to trend in the right direction. Overall, pricing up 107 basis points versus the first quarter of 2011. This exceeded our estimates due to a quicker than initially anticipated improvement in our European markets. You may recall that pricing in the European markets has been declining for the past several quarters. That trend reversed itself this quarter, and we saw positive pricing totaling 32 basis points out of Europe.

In addition to the positive pricing we saw in Europe, we also had positive pricing in the Asia Pacific and Latin American markets of 217 basis points, as well as positive pricing from the North American market of 133 basis points. Our pricing strategy is working, and we are confident that this will help us drive future gross and operating margin expansion.

Turning to R&D, the recent investments that we have made over the past 15 months continue to pay benefits. This past quarter spending on R&D initiatives were up 5% versus the first quarter of 2011, and sales of new product introductions contributed 84 basis points of top line growth. New products were introduced in the anesthesia and respiratory, surgical, specialty and vascular access franchises, with one of the most notable contributors being our sales of VasoNova VPS targeting systems.

Regarding VasoNova, our trial pipeline continues to be robust, with 30 trials scheduled per month through June. And during the quarter we won an additional 10 accounts while only losing one. In the United States our close ratio continues to be very strong, and I'm pleased with the progress of the rollout and the adoption of this technology. I'm also pleased to report that during the first quarter we received CE mark certification for the VPS device as wall. This clearance puts us in a position to establish a new standard of care in catheter placement in Europe, with the goal of making zero complications a reality while improving outcomes and enhancing patient and provider safety.

And before I shift gears to provide you with a review of recent GPO wins, I would like to update you on two acquisitions that were announced this morning.

First, we acquired the EZ-Blocker single use catheter product line, which is an innovative technology used for lung isolation and one lung ventilation procedures. It has unique bifurcated distal ends and currently has CE mark approval in Europe. It also has a 510(k) application that has been submitted to the FDA that pending clearance. This product line is designed to provide benefits that overcome the significant drawbacks of currently used products for lung isolation procedures, namely its use in combination with a standard endotracheal tube and easy and intuitive positioning. This product line will strengthen our anesthesia and respiratory therapy franchise.

Next, I would like to discuss the definitive agreement that we announced this morning to acquire the EFx family of laparoscopic fascial closure system product. This product portfolio includes bothFDA cleared and pipeline products designed for the safe and simple closure of abdominal trocar defects through which access ports and instruments are used during laparoscopic surgeries. More than 750 clinical cases have been performed with the device in the United States, and currently this product is being prepared for CE mark review.

The transaction is scheduled to close in the second quarter and opens up new surgical procedure markets is to Teleflex. Both this, as well as the EZ-Blocker acquisition, is consistent with the Company's strategy to invest in late stage innovative technologies to support our future growth.

And before I turn the call over to Tom, let's briefly review our accomplishments this past quarter from a GPO perspective. While the pace of GPO awards for bid has slowed from last year, Teleflex was awarded five GPO contracts during the first quarter of 2012. Of those awards, one associated with the inter-aortic balloon pumps and another covering urology products are new for Teleflex.

I am also pleased that during the first quarter Teleflex was named Novation's 2011 medical surgical supplier of the year. This is a tremendous accomplishment, and it is indicative of the focus and service that Teleflex has been providing to our key GPO partners. In addition to the five GPO contracts that we received in Q1, during the second quarter of 2012 we hope to have several additional award wins to announce.

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

Thanks, Benson, and good morning, everyone. Before I begin, I would like to say that I am very pleased to be here today as the recently appointed CFO of Teleflex. I look forward to meeting with many of you in upcoming conferences and investor meetings in the near future.

Now turning to results. Revenues for the first quarter were $387.8 million, up 9.5% on an as-reported basis. When adjusting for currency fluctuations, revenue grew 10.9%. Looking at how that constant currency revenue growth was achieved, 107 basis points came from improved pricing,84 basis points came from new product introductions,and 900 basis points came from increased volumes.

First quarter revenue growth benefited from the having several additional days versus the prior year first quarter. Given the variability inherent in our customer ordering patterns, it is difficult to precisely determine the benefits of the additional days. Our estimate indicates that the additional days contributed approximately 5% to 6% of additional constant currency growth.

Turning to gross profit margins, they were $185.8 million or 47.9%. This compares to $164.5 million or 46.5% in the prior year quarter. Gross margins were up year-over-year due to the impact of additional volumes and improved pricing,although gains were somewhat offset by currency headwinds, which had a negative impact of approximately $2.4 million.

Moving to adjusted operating expenses. Selling, general and administrative expenses were $113.4 million during the quarter, up from $97.7 million last year. Consistent with past practice, the prior year amount is adjusted to exclude $5.5 million of severance costs associated with the departure of Teleflex's former CEO. The increase in SG&A this quarter was due to higher marketing and selling expenses, largely attributable to commission and other expenses associated with the additional shipping days in the quarter, as well as an increase in G&A.

The increase in G&A is due to a couple of items. In the first quarter of 2012 we incurred higher consulting and professional fees and had expenses associated with the separation of our former CFO. We view these costs as one time in nature rather than an increase in our G&A run rate. Additionally, in the first quarter of 2011 G&A expenses were reduced by equity forfeitures of approximately $3.5 million associated with the departure of our former CFO.

Now turning the to R&D. In the quarter, research and development spending was $11.6 million, up from $11 million last year. A higher level of R&D expense principally reflects an increased investment in catheter tip positioning technologies in North America.

Moving to interest. First quarter expense was $17.7 million,an increase of approximately $1.7 million. The increase in interest expense is due to $100 million of additional indebtedness as of April 1, 2012, as compared to that outstanding March 27, 2011. This is principally associated with the $250 million senior subordinated note offering that was completed in June of 2011 and bears interest and 6.875%.

Continuing along the income statement to goodwill. As Benson referred to earlier in his prepared remarks, during the first quarter of 2012 we recorded goodwill impairment charges totaling $332.1 million. To aid you understanding of the accounting treatment underlying the impairment, letme provide some background.

As disclosed in our 10-K at the end of 2011, we have changed our internal business unit reporting structure and related internal financial reporting effective January 1, 2012. These management and reporting changes came about as we completed the 2011 divestitures and became a pure play medical company.

As a result of the reorganization, we also changed our segment reporting from a single reportable segment to four reportable segments. Three of the four reportable segments are geographically based and are presented as North America, EMEA and ASLA. The fourth reportable segment comprised of original equipment manufacturer and development services businesses.

In connection with the change in reportable segments, accounting rules require that the Company perform goodwill impairment tests for each of the four segments. For testing purposes, the North American segment was converted from a single reporting unit to five reporting units. When tested as one reporting unit as of December 31, 2011, we determined that the North America segment did not indicate an impairment [of carrying] value as warranted. However, when subsequently tested as five reporting units as of March 3 31, 2012, the determination was made that impairment was warranted for three of the five units.

In accordance with accounting regulations, the first quarter we report recorded impairment charges of $332.1 million. The charges are noncash and do not affect the Company's liquidity, compliance with existing financial covenants, cash flow from operating activities, or future operations. Additionally, thecharges are excluded from the Company's adjusted earnings per share. The impairment is not the result of reduced expectations for our businesses, as we continue to be encouraged by our growth opportunities and are confident we are on track to accomplish our growth objectives.

Now turning to taxes. As a result of the goodwill impairment, the GAAP tax amount was income of $4 million for the quarter. However, when adjusting for items that affect comparability, our adjusted tax rate for the quarter was 29.7% and in line with guidance previously provide.

And finally, adjusted earnings per share for the first quarter was $1.01, an increase of 15% versus the prior year.

Now, let's move to a more detailed review of our constant currency products and geographic revenue results. Critical care revenue was $256.2 million, up 9.5%. During the quarter, anesthesia product sales increased 11%, urology sales increased 10.8%,vascular access sales increased 9.5%, andrespiratory sales increased 6.5%.

Moving to surgical. Revenue was $72.7 million, up 13.2%. Growth in the quarter was primarily due to increased sales of ligation products, general surgical instruments and closure products.

Turning to cardiac. Revenue was $20 million, up 15.4%. Revenue growth in the quarter was from both the intra-aortic pump capital equipment of the business, as well as the single use disposable catheter side.

And lastly OEM revenue was $38.9 million, up 15.4%. Continuing the trend the last few quarters, the increase in OEM revenue came from higher sales of specialty suture and catheter fabrication products.

Now I will walk you through the top line performance from a geographic perspective. Revenue in North America was $167.3 million, up 9.6%. Sales growth was the result of improved volume, the introduction of new products to the market, and improved pricing.

In Europe, sales were up 100 -- excuse me, sales were $134.6 million, up 11%. Despite a difficult macroeconomic environment, we again posted strong results, with revenue increases from volume growth, new products and modestly improving pricing.

In the Asia Pacific and Latin America markets sales $47 million, up 11.5%. In these markets increased revenues were principally the result of higher volume and improved pricing.

Before I turn the call over to Benson for some closing remarks, I would like to provide you with an update regarding our full year 2012 financial outlook. On the heels of first quarter results that were in line with our expectations, we are reaffirming our full year 2012 financial outlook. We continue to expect constant currency revenue growth to be in the 4% to 6% range. In addition, we are reaffirming our expectations for adjusted operating margin expansion and adjusted earnings per share. From operating margin perspective, we expect approximately 100 basis points of growth over 2011, while from an adjusted EPS perspective we continue to project earnings between $4.25

and $4.45 per share. With that, I would like to turn the call over to Benson for some closing remarks. Benson?

Thanks, Tom. In closing I would like to say that Teleflex is off to a strong start for 2012. Our growth in the quarter was fueled by higher demand for our products and services across all product groups and geographic regions as well as from improved pricing. As a result, we were able to achieve a 15% increase in our adjusted earnings per share as compared to the prior year quarter.

In addition we continued to execute our strategic plan for future growth through investments in new products and late stage technology acquisitions this quarter addressing the anesthesia and surgical markets. We continue to be encouraged by our growth opportunities and are more confident than ever that we are on track to reach our longer term financial objectives and create increased value to our customers and shareholders.

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

(Operator Instructions). The first question from the line of Rich Newitter, Leerink Swann.

Hi, guys. Thanks for taking the questions. I just wanted to start off on price,specifically your comments on the EU and the bump-up that you saw relative to your expectations. Can you elaborate on that a little bit and what is going on kind of at the ground level there?Is it company specific related to new products, or some change in the environment that might have helped as well?

No, we -- it has more to do with I think conservative planning on our part. At the -- when we initiated the price increases at the mid part of last year, our initial focus was on North America and Asia Pacific, expecting more resistance in Europe, and so we weren't as optimistic early on that we would get the result of our pricing increase translated into actual results. As we approached the first quarter of 2012 we were pleasantly surprised actually to see that those pricing initiatives were generating more of a result than we had originally anticipated. So it has more to do with our conservative planning than anything else.

Okay. And then just one on the operating margin. Your operating margins were essentially in line despite the upside this quarter. As we think -- and you left your guidance unchanged for the year. As we think about kind of the rest of the year and the expenses that might go away that were one-time in nature in the SG&A line this quarter, should we think of it as a gradual ramp through the year, or do we maybe see a step-up next quarter and that is kind of the new baseline for the remainder of the year?

Well, we largely are looking for two things to happen back half of the year in the operating margin line. So you should view those expenses in the first quarter as going away as we move into next quarter. So we viewed them as kind of one-time in nature. But as we move through the back half of the year, we do expect also to have a little bit of uptick in our R&D spending.

So -- okay. So we should think about kind of the SG&A margin coming down sequentially each quarter and there might be some slight offset from higher R&D spend. Is that the right way to think about it?

That is the right way to think about it.

Okay. And just one last one. I don't know if you provided any details about the two acquisitions you did, how big they were in terms of sales. I would welcome any color you can give on the size of the contribution there. And then secondly, on that new products, do we expect or should we expect new products over the next several quarters to kind of begin to contribute more to the growth contribution versus price, or do you still think it is going to kind of trend in line with your original expectations heading into the year?

So, just relative to the acquisitions, the revenue contribution and in fact the entire financial impact of those acquisitions this year is relatively minimal, so we have not adjusted any of our guidance as a result of that. They are on the smaller side and really are just either in the immediately launched situation in Europe or just getting ready to launch. So the impact from those is going to be largely a 2013 phenomenon. Our revenue expectations for 2012 relative -- for all of 2012, our expectations is it is going to slightly exceed price. So they are both approximately in the same range in terms of contributions.

Okay, thanks a lot.

The next question comes from the line of Larry Keusch, Raymond James.

Good morning.

Good morning, Larry.

Benson, I'm wondering -- I mean, you guys have had great success in the GPO wins, and clearly we are continue to hear about the wins that you are getting on a quarterly basis, but I'm just wondering if there is any way you can help us understand through is translating now into revenues?Is there any way to help us just kind of figure that out?

So in 2012 for the full year, our GPO business in the United States was is fastest growing segment and was growing about 6% year-over-year. So as a ballpark number, that is probably the closest number we can give you in terms of what the growth is in that particular segment.

And I am assuming that you probably don't want to give us some sense of, if you took your total revenues -- US revenues, what you are generating on GPOs at this point, would you?

Larry, it's about some where between 45% and 50%.

Okay, terrific. And then just twoother quick ones. I think, Benson, it was in your prepared comments -- it may have been in Tom's -- about R&D spending in the quarter being influenced by some additional development work around the catheter tip location products. And again, I'm wondering if you could share a little bit of where you are going with it how, we should think about how VasoNova moves from its current iteration now?

So there is obviously some work that was done to be able to get the CE mark certification that would be included within our R&D expenditure. There is some work that is being done on what I would describe as improvement of the hardware console, improvement to make it -- I would say more ready for prime time sale in the hospital segment. And we continued to work on modifying our PICC line to make the entire line more compatible the VPS system.

Got you. Lastly, you gave some -- again some color on how the system is doing. It sounds like it is doing very well. Any way to help us think about, I don't know, how many accounts it is in or anything like that? And the other quick question is just on the interest expense for Tom, is this the quarterly run rate? Should we be thinking about that now on a go-forward basis?

Let me answer the VasoNova question first, and then I will turn it over to Tom. We continue to book approximately 30 trials per month. We tend to be right now somewhat carefully targeting where those trials take place. One of the things we've learned is that is does require some fairly intensive presence in the hospital as they get used to this. So we are -- and I believe our successful close rate is driven by the fact that we are being very attentive to these trials.

So for the present time we are continuing to limit those amount of trials to about 30 per month. The trials, as we have said before, can take anywhere from four months to sometimes eight months. So there can be somewhat of a time delay between the time we started and the time we actually start receiving some revenue for it, and our general numbers in terms of acceptance continue to hold very strongly at enormously positive ratios. So the big impact I think or bigger impact certainly will come starting in 2013 as result of that -- those trial efforts. And I will turn your -- the last part of the question over to Tom.

As far as interest expense, you should assume that the first quarter rate will trend through the end of the third quarter. But then a component of that interest expense for the first three quarters is a noncash charge associated with the early termination of our interest rate swap, so we have some expense being amortized until the -- until September of this year. So in the fourth quarter you should see a drop in the interest expense. Overall you should be thinking about $70 million or so for interest expense for the year.

Terrific. Thank you, guys.

The next question comes from the line of David Lewis, Morgan Stanley.

Hello, this is [John Demchak] in for David.

Good morning, John.

Hi, John.

Hi. I wanted to talk about not adjusting the revenue guidance, given the very strong revenue that was put up, and likely increased visibility into the future growth, given the success in GPO contracting. Is there anything that occurred this quarter that was more, I guess, one time in nature? Is there a reason to assume maybe a dropoff into the remainder of the year? Or is holding guidance constant more of just being cautious?

It is a little bit of the latter. I think Tom mentioned in his remarks and I mentioned in my remarks that we did have some additional shipping days in the first quarter this year. It is always a little difficult to come to an exact calculation of what those extra shipping days might be. We have distributors that are going to order twice a month no matter how many days there are in the month. We have take and more conservative view to our results first quarter, attributing some of that to the additional shipping days.

Okay. Very helpful. But when I guess you talk about the price increases, and then also share gains and growing this quarter probably in the 10% range relative to, I guess, 2.5% in North America is there just -- can you provide any more are specifics among the segments of where you are seeing the most share gain?

I think one of the real encouraging things for us this quarter was we really saw almost even growth throughout all of our franchises, not just in Asia, but in Europe and in North America. I think our improved results in North America are coming again from really a wide swath of group contracts that we have been able to negotiate. And I think also the reorganization of our business into discrete business units just has helped put more short-term focus on products that were neglected before.

So it is a combination of things, and to answer your question we don't particularly see this as a result of some -- other than the shipping day phenomenon, the result of some short-term thing that occurred first quarter. We were pretty pleased with the strength of the growth across all of our product lines.

Okay. And just one more quick one. Just had a question about I guess R&D spend, I guess through the year and into the next few relative to I guess M&A, which we saw some this morning. Is the goal still to get into the 4% to 5% range?

So, yes. And to a certain extent some of the M&A activities also contribute to the additional need for R&D spending along those particular product lines to either expand out the product offering that may be associated with those acquisitions, new sizes, or to make some final improvements to the product line before launching. So actually a good part of the additional R&D spend over the next several years is tied directly to some of those late stage technology acquisitions.

Thank you very much.

And, John, this is Jake. Just following up on the impact of the days and your reference to still maintaining 4% to 6% guidance. It is very difficult to give an exact amount associated with the additional shipping days, but in Tom's prepared remarks he indicated that we think that it could have added anywhere from 5 to 6 points of that approximately 11% constant currency growth. That was all planned for as part of our calendarization during the year and the 2012 outlook we had provided.

And even ex that, using an estimate, we would have been square right in the range of our full year expectation for constant currency revenue growth. And what you will see is in the fourth quarter you will get some less days because they were actually incurred in the first quarter of 2012. So from an outlook standpoint, from a full year perspective, right in line if not maybe even a little bit better than what we had originally anticipate.

Thank you very much. Very helpful.

(Operator Instructions). The next question comes from the line of Anthony Petrone, Jefferies.

Thanks, gentlemen. Good morning. A couple of growth mix in the quarter, specifically on price. If we look at the price increases in the quarter, how much of that actually coincides with the launch of new products, which I'm assuming carry a higher ASP, versus purely a function of the price resetting initiatives that are ongoing.

In our price calculations we don't count new product pricing into that equation. That helps us from a mix perspective, but in terms of the improvement we are giving you in prices, that is just strictly from existing products year-over-year price improvements.

Got it. And then if my math is correct -- I don't know, Tom, if you gave this, but urology in the quarter, the growth there, and if I'm doing the math correctly seemed to be a little bit light in the quarter. So I'm wondering what happened across urology?

It's 10%.

Urology growth, I think, in the --

10.8%.

Okay. So actually was --

Pretty solid growth.

Yes. Okay. And then last for me, competitively earlier the year we had AngioDynamics and Navilyst, there was a merger there, and I believe they are still in the process of closing and integrating obviously. But I'm wondering if that acquisition changes anything on the vascular front for you guys, and if you are seeing anything different out there?

On the whole PICC stage, I think it is very difficult to compete long-term without a really effective targeting system. I think it is going to be increasingly difficult to compete without antimicrobial or antithrombogenic coatings in that market. So we understand the logic that they saw in putting those two companies together, but fromour perspective it doesn't -- they were both out there before. The products are still out there now. There is a different label on them -- or going to be a different label on them. We don't see it having a real significant difference in the competitive landscape.

All right. Thanks.

And the next question comes from the line of Chris Cooley, Stephens, Inc.

Thank you, good morning. Appreciate you taking the questions.

Good morning.

If I may, could you maybe just talk a little about the VasoNova product, and specifically, as you see these trials, help us think about what other incremental sales that helps you drive in conjunction with the trial itself? And then I have a follow-up.

So right now about I would say at least half or maybe slightly more than half of the accounts that are trialing this have already adopted the competitor's targeting system and essentially are evaluating this to see whether or not there is a significant reduction in the number of patients that have to go down for a confirmatoryx-ray. The remaining half of the accounts that are evaluating this right now weren't persuaded enough, I suppose is the way to look at it, by the arguments of the current product that is out there that it would be helpful enough to shift over to it.

The single thing that they are looking for during the course of the trials is the actual -- their actual experience in reducing the number of confirmatory x-rays, and associated with that, the ease of use -- the amount of time it takes the nursing staff to get comfortable with starting to rely on the device. And our experience is the longer the trial takes, the more likely it is that they are going to convert to the product, because there is a -- as the trial continues there is growing evidence of economic benefit -- as well as the clinical benefit, but certainly the economic benefit of being able to reduce those number of x-rays, and a high level of confidence that is what they are going to see after they convert to the product.

So we have been not doing anything to try and rush those trials along or rush them to closure. We have found that the hospital's own discovery process about the effectiveness of this is the most helpful thing. And again, our experience is that it is turning out to be effective in about 98% of the cases in terms of eliminating the need for x-ray, and it is quite clear those cases where they need to go ahead and do the x-ray, because the bulls eye simply doesn't light up.

So to answer your later question, there is certainly an opportunity that is created by that lengthy trial to interest the hospital in the remainder of our vascular product line as we develop better relations in that hospital, as we are able to talk to them on a day to day basis, and we kind of move from that "we don't know you category" into "we know you and we trust you" category. So we are seeing improvements in our PICC sales as a result of those VasoNova trials.

Understood. Thank you. And then two quick follow-ups, and I will get back in queue. I believe previously you had a pricing assumption for Europe whereby Europe would basically be a 50 to 75 basis point drag when we [talked] about price contributions to the growth in 2012. With the growth that you saw -- or favorable pricing, I should say, you saw in the first quarter, are you of a mindset to change that. or how should we think about that assumption as it basically plays into your guidance for the full year?

And the similarly, although I realize we're not getting formal details on the two acquisitions this morning, I believe the majority of the cash was still -- of the Company's corporate cash was still outside of the United States. Could you maybe address a little bit about just the financing of that, whether that cash is going to some have offshore or it's domestic cash, and then how we should think about the structure? Thanks so much.

I will answer the question about pricing. First of all, our original estimate for the year was that we would get some where between 50 and 75 basis points of net improvement as a result of our pricing. We are certainly quite confident in that number as a result of our improvement in Europe. We have seen this now for one quarter, so at this juncture we are not making any changes and taking a conservative approach to what the impact is. But with that being said, we are pleased to see this reversal occur in it Europe sooner than we thought.

I'm going to turn over the capital allocation question to Tom.

In terms of purchases, we -- the acquisitions would be paid for in the second quarter, so it didn't come out of first quarter. But essentially given the size of them, we do not see the need to consider raising additional financing to cover this. Rather we would use cash on the balance sheet for these acquisitions.

Right, I guess -- again, I would assume that, but I'm trying to ask just whether is that going to be cash held in the states, [which] I believe the majority -- roughly 75%, 80% -- of our cash is outside of the US. I guess I'm just trying to fish a little bit. Are you thinking about repatriating capital that this point in time, or how should we think about that?

Well, that cash -- they were split; one US, one outside the US. We -- at this point in time obviously we would love the opportunity to repatriate cash if there was a tax efficient means to do that. However, until such opportunity arises, we are happy keeping the cash where it resides.

Understood.

We have got adequate liquidity to fund both of these acquisitions from cash on balance sheets.

No, no understood. Thanks so much.

And the next question comes from the line of Jim Sidoti, Sidoti & Company.

Good morning, can you hear me?

Yes, we can.

Good morning, Jim.

Two questions. You talked a lot about the shipping days, but you never said how many extra shipping days were there in the quarter?

We had six.

Six. All right. And so there will be some what similar decrease of shipping days in the fourth quarter?

For the entire year there is essentially one more shipping day than we had last year. We will see a negative five in the fourth quarter.

Okay. All right. And you talked about getting CE approval for VasoNova. Can you just give us a little bit of detail on what the rollout schedule is in Europe and how quickly you think you will be able to roll that out to all of your territories?

So the PICC market in Europe in general is not as well developed as it is in the United States. There are some pockets in Europe where it is more developed; in Italy, for example. We are targeting those areas that already had or experienced some conversion over to the PICC market, and we are pretty well positioned there.

I would say again, just given the same caveats I gave about the US, we would expect the same lengthy trials to occur in Europe. Again, even a more economically sensitive marketplace in Europe. And so we don't expect a big difference in our sales is revenue this year as a result of the rollout, and probably somewhat even beyond the US in terms of its significance to our overall strategy -- or ouroverall accomplishment with the VasoNova line in particular.

All right, thank you.

Once again, it is star one for questions. The next question is a follow-up question from the line of Rich Newitter, Leerink Swann.

Hi, guys. My follow-up question was answered. Thanks a lot.

And there are no more questions at this time. I would now like to turn the call back to Jake Elguicze, Vice President Investor Relations, for closing remarks.

Thank is, Operator, and thank you, everyone, for joining us today. This concludes the Teleflex Incorporated earnings conference call. Have a good day.

Thank you once again for participating. You may now disconnect, and have a great day.