TFX
#So there were some modest headcount increases in our vascular business, as a result of the Vidacare acquisition.
Surgery really has remained largely constant at this point, although it's a targeted area for some modest expansion, as we roll out the Percuvance product line.
The adjustments that we've made, in terms of cost control, really come more at the expense of eliminating some smaller divisional managerial headcount, versus sales headcount.
So we haven't really changed the headcount, we've just reapportioned it.
And we think that it's actually better to have a smaller sales force, exclusively focusing in on the respiratory therapy business.
That's a very GPO-oriented, IDN-oriented sale.
And have that remaining sales force in the anesthesia product lines really just focused on their products, and their call point.
And so far I think the response to that has been quite favorable.
So we have not, other than the small addition that came from Vidacare, changed our headcount.
I think <UNK>, it's as much due to having a more exciting product line itself to sell.
And that helps sales commissions, it helps attract a better group of talented salespeople to the organization, and all those things are paying off.
And I would say for the last several years, we've been focusing a lot on sales force effectiveness.
Yes.
So it's probably ---+ so they're very different sizes and very different numbers.
I think the best answer I can give to that question is, we've generated around 100 basis points of improvement, in terms of our numbers over the past couple years, as an average.
We certainly have a pretty clear line of sight over the next couple years, and I think what you've seen in the last couple years as an average is what you're going to see over the last couple years.
Mini-Lap was about 30 basis points of surgery.
So it was a very small contribution to the 9%.
$700,000.
So 30 basis points out of that 9% increase.
No.
The short answer is yes, we've thought about it a lot.
There's a wide range, in terms of what the performance of this product line can be.
Right now, we're in fairly intensive clinical use opportunities in leading institutions around the United States and in Europe.
And getting an understanding from the early, highly experienced laparoscopic surgeons, where they where they see this most applicable.
And they're trying to understand what percentage of the traditional laparoscopic procedure rate it's going to be able to, I think, be able to encroach into.
At this point, the feedback we're getting from the physicians that are using this is quite positive, and again, we'll have more information to be able to share with you at the analyst day.
We'll have one of the leading surgeons in the US that's working with us on this, to give you his viewpoints.
Yet.
So just answering the question about Vidacare as a pull through item, so I think the short answer is yes.
It's an exciting product to sell.
We made really good inroads into the hospital segment, in the first quarter.
The growth within that unit was right at 31%.
It was one of the key reasons that we purchased Vidacare, was we thought we could really do a really good job with that in-hospital customers and beyond the emergency room of the hospital, getting right down into their crash cart situation.
I don't know that we have a completely exact number, but I would say it's somewhere between 6.5% and 7% of vascular growth without Vidacare, so still pretty strong growth even with that accepted.
What I will tell you this growth isn't happening by accident.
Is taking sales time and sales energy to be able to move into that segment, and every time we sell a Vidacare unit, it's the highest gross margin product we have.
So we're certainly not discouraging them from spending a lot of time on it.
<UNK>, <UNK>'s right.
For the first quarter, vascular North America revenue grew 6.9%, excluding Vidacare sales.
Yes.
So CVCs grew around that rate.
Around that 6.6% constant currency rate for vascular North America.
And PICCs were a little bit lower than that in the vascular North America area, although I would say globally, they grew about 18%.
Not yet.
Those agreements really didn't have any significant impact on our first-quarter results.
Luckily, we are in a position to supply from a demand standpoint, we have been quite aggressively ramping up those, and we are just doing our best, actually, to respond to a critical situation here.
But we're certainly leaning in favor of those institutions and groups that are willing to give us a long-term contract with the product, particularly given the uncertainty of when the issue may be resolved.
Correct.
Yes.
So we could go up to that size of our when and still be within our comfort range, in terms of total leverage.
So that's what readily available on a revolver.
We've got opportunities to be up to expand the revolver as well by another $250 million, if we were to choose that option.
That would take some time to get in place, but not too long.
Yes.
So the short answer to that is no.
We don't change our pricing in OUS markets based on currency, for the most part.
We take the hit as opposed to our goods becoming more expensive over there.
Europe actually exceeded our expectations.
I think there continues to be a fair amount of economic uncertainty in Europe, so as we look at it, stability as being good.
Our revenue in Japan was really quite good for the quarter.
Australia is now, since our Mayo acquisition, is a bigger part of our Asia business, and they tend to be a slower growing developed market.
I think for us, our slower performance in Asia was quite limited to China, and quite limited to a timing issue, I think.
So I don't know that we are representative of what's going on with other countries.
Okay.
So on the interest expense, we're assuming that we're going to save about $0.08 to $0.10 from an adjusted EPS impact.
Interest expense will go down to about $51 million for the year.
That's on an adjusted basis.
It will go down to $51 million for the year, on an adjusted basis.
So ---+
So we are still obviously trying to get the best bead on where this should be priced.
There is an inherent savings, just from one to another for the hospital, because they don't have to use trocars in the procedure.
The time it takes to finish off the procedure is shortened, so in a busy OR, that's another issue.
The potential for complications is reduced, which is also a cost savings to the hospital.
Why are we doing a gradual launch.
This is, I would characterize it as a major upstream for Teleflex.
My past experience is that you learn a lot in the first couple of months, in terms of actual user experience, in terms of what the benefits are to highlight, what the actual training might be, to be able to get this introduced.
And also have a better understanding, in terms of the best initial procedures to target.
And all that, in my past experience, leads to a much better launch, when you have a little bit of that ground work behind you, so this is a big opportunity.
Our sense is we want to do this right.
And make sure we're deploying those resources in the best way possible.
Yes.
You're absolutely correct.
It was in January's numbers, so there was a month there.
In terms of your question about, are they nice to have, or need to have them.
They generally tend to make small overall contributions to our overall gross margin picture.
However, it really changes the profile of some of those products from one that's not particularly worth the sales person spending a lot of time to one that is worth spending a lot of time to, so they're quite helpful from that standpoint.
And there's often other benefits associated with that, as we are able to take over the manufacturing of the product.
And some of the benefits take several years, actually to get integrated into our system.
But it means that as we look forward to the future this is a product we really want to devote resources and selling time against, as opposed to being a marginal product for us.
And I forgot, you had another question, and I forgot what it was.
Most of our footprint consolidation moves affect our vascular product lines.
And so, the real opportunity for improving any of those product lines really is going to come from the completion of this footprint consolidation.
So once completed, yes, those would be an attractive product for us to sell.
Just a little more color on the impact of distributor M&A, et cetera on gross margin.
So as we think about the 2015 gross margin expansion, there's only three key areas that are driving that expansion.
The first is operations efficiency, and I'll include the footprint consolidation in that.
That accounts for about half of the gain we are looking for this year.
We also then have collectively a number of acquisitions smaller M&A, as well as go directs and that includes the M&A, Mini-Lap, Truphatek, Korea distributor, Japanese distributor.
Those collectively account for another quarter.
And then finally as we look at it mix, that's the third leg in the stool.
That's the final quarter, and that would be driven largely from things like Vidacare growth.
We're also looking at winding down our surgical repair business.
We've got a focus in Latin America on mix improvements.
Same thing in anesthesia and respiratory, where they're focusing on some higher-margin atomization, as well as laryngoscope products.
So as we think about it, our gross margin drivers are largely being driven out of operations efficiency footprint, but M&A and go-directs are help, and mix is a help so it's coming from a variety of different angles and the rest is kind of a number of pluses and minuses that collectively aren't that significant.
If that helps.
Thanks, operator and thanks to everyone that joined us on the call today.
This concludes the Teleflex Incorporated first-quarter 2015 earnings conference call.
