Good day, ladies and gentlemen, and welcome to the Teleflex Incorporated Q1 2016 earnings conference call. [Operator Instructions]. As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference, Mr. Jake Elguicze, Treasurer and Vice President of Investor Relations. Sir, you may begin.

Thank you, and good morning, everyone, and welcome to the Teleflex Incorporated first quarter 2016 earnings 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 855-859-2056, or for international calls, 404-537-3406, pass code 90662973. Participating on today’s call are Benson Smith, Chairman and Chief Executive Officer; Liam Kelly, President and Chief Operating Officer; and Thomas Powell, Executive Vice President and Chief Financial Officer. Benson, Liam, and Tom will make some brief prepared remarks, and then we’ll open up the call to Q&A. Before we begin, I’d like to remind you that some of the matters discuss in the conference call will contain forward-looking statements regarding future events as outlined in the slides. 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 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. Good morning, everyone. I’m pleased to report a very solid first quarter that exceeded our internal expectations in nearly area, which allows us to raise our full year 2016 adjusted earnings per share guidance even at this early point in the year. While Liam and Tom will go through the numbers in more detail, I would like to highlight some of our key performance metrics. Overall, I’m delighted with the company’s Q1 results, but I am glad to have the first quarter of the year behind us. As I am sure you’ll remember from our last earnings call, for a variety of reasons, we believed that first quarter of 2016 was going to be our most challenging quarter of the year. This principally had to do with a difficult comparison as a result of a very strong quarter in 2015, two less shipping days in Q1 of this year, a significant foreign currency headwind, and some other one-off events we expected in Q1. Beginning with revenue, on an as-reported basis, revenue slightly exceeded our initial estimates and was helped by a modestly more favorable foreign currency environment versus our guidance assumption. From a constant currency perspective, our growth rate of 1.1% was slightly under our expectations, but just under it. That being the case we saw nothing in the quarter that leads us to change our expectations for the year, as we are reaffirming our full year constant currency revenue growth range of between 5% and 6%. A few more details on Q1 revenue; it’s always difficult for us to predict with pinpoint accuracy how the loss of two shipping days will precisely affect revenue for a given quarter, and now retrospectively I believe we had modestly underestimated the two day impact when the quarter ended on a…

Thank you, Benson and good morning everyone. For the consolidated company, first quarter 2016 constant currency revenue grew 1.1%. If you were to normalize our first quarter results for the two fewer shipping days, our constant currency revenue growth would have been approximately 3.3%. As mentioned earlier, we faced a tough comparable in Q1 2015 where if you recall, we grew by 5.2% with one less shipping day. This comparable eases in quarter two and three, in addition we will have one additional shipping day in quarter two and another in quarter four. As such, we expect to see a strengthening in sales growth beginning in quarter two, and although this phasing may be lumpy, this is consistent with our internal expectations on revenue for the quarter and year. Sales of new products introduced to the market contributed 1.1% and were the main driver of revenue growth in the quarter. New product sales were particularly strong within our Surgical and OEM businesses, as well as within our EMEA segment. And while not yet a key contributor in terms of revenue dollars, we continue to make progress in two key strategic initiatives, the launch of Percuvance within our Surgical business, and the LMA Protector within our Anesthesia business. First to Percuvance; the recent stage of meeting in Boston was an important event signaling our upcoming full market release. Clinician feedback continues to reinforce what we learned in our limited market release, which that Percuvance is equal to standard 5 millimeter laparoscopic instruments in terms of rigidity, so causing less trauma to the patient with virtually scarless incisions. The strength and functionality of the 5 millimeter end effector is a exceeding our initial expectations, even during complex cases with challenging patient anatomy. We recently completed the first cases with our second generation…

Thanks Liam and good morning everyone. Given the previous discussion of the company’s revenue growth drivers, I’ll begin my prepared remarks at the gross profit line. But before I do, I’d like to reinforce that the company is off to a solid start in the first quarter of 2016. During the quarter, we realized expansion of both the gross and operating margins versus prior year levels. Financial leverage was good, with 19.6% adjusted net income growth being generated from flattish revenue gains. Cash flow generation was also strong. Additionally currency headwinds moderated during the quarter versus what we’d experienced throughout 2015. Given the strength of the first quarter results and our outlook for the remainder of the year, we are raising adjusted earnings per share guidance by $0.10 on both the top and bottom end of our adjusted EPS range. Turning now to first quarter results; for the quarter adjusted gross profit was 227.8 million, versus 224.8 million in the prior year quarter. Adjusted gross margin was 53.6%, representing a 130 basis point increase when compared to the prior year period and positioning us well for the achievement of our full year gross margin targets. During the first quarter, adjusted gross margin benefited from increased sales of higher margin products primarily in the Asia, Anesthesia, and the All Other segments, the impact of 2015 acquisitions, distributer conversions, and net favorable pricing. Also in the first quarter, adjusted operating margin improved by 190 basis points. The increase was largely the outcome of the gross margin gain, control over discretionary overhead spending, and the impact of the suspension of the medical device excise tax. For the quarter, adjusted operating profit and margin were $95.1 million and 22.4% respectively, versus $87.8 million and 20.5% respectively, in the prior year quarter. Continuing down the…

[Operator Instructions] And our first question comes from Larry Keusch from Raymond James. Your line is now open.

Two questions, first Liam, congratulations on the promotion, and Benson just wanted to pick your brain and see if had any thoughts on how we should be thinking about succession planning and timing.

So I will repeat my previous comments that I think that our expectation is that we’ll have an internal candidate to be able to replace me. I think we’ll be in a position to talk about more on timing later in the year. But I am personally very comfortable that and as is our Board that we’ve got a good succession spot and intend to share that more publicly as we get closer to the time.

And then perhaps for Benson or Tom or Liam, just remind us again how you take the constant currency growth from the 1% range in the first quarter to 5% to 6% for the year, obviously, implies a significant acceleration. I recognize there’s some extra days in the 2Q and 4Q, but again, just walk us through how that math works.

Larry, I’ll take that, and thank you for your congrats. So if you take it and you take the constant currency growth of 1.1%, then you’re layering the billing days, then you’re at 3.3%, as we outlined on our Q4 results. So if we take that as our jump-off point, and you look at what happened with the OEM business moving out and some of the destocking that we felt within our distributors, that’s about another 1.1%. And then you look at the tough comparables last year, 5.2% with one less billing day, which would be 6.3. That should get you about another percent. So that’s how we bridge it to a 5% to 6% growth rate, and we’re pretty confident, Larry, that we’ll see a nice rebound in quarter two and continue on from there. It’s not a question of waiting for a Q4 to get there this year, so we are pretty confident we will see a nice rebound in Q2.

And our next question comes from Dave Turkaly from JMP Securities. Your line is now open.

I know we had spoken earlier, sort of looking at your segments about Vascular potentially leading the way this year. I know Vidacare did like 20% last year, so I’m curious if you still feel like that could be the strongest segment. And I was wondering if you could maybe help us with what we should expect from Vidacare this year.

Liam here, Dave. Thanks for that. I will deal with Vidacare first. The Vidacare we do anticipate a very solid performance again this year from Vidacare. We expect to see Vidacare growing at the 20% range on a full year basis, and we see it being a contributor to our growth overall. Vascular continues to perform very strongly, as it did last year. And you are correct we continue to see Vascular as a segment that will lead the way in our growth in the Americas and globally.

And then just one quick follow-up, maybe for Benson because he historically has had good thoughts on sort of what’s happening in the broader macro market. I heard the prepared remarks, but given what we’ve seen from you guys and peers, the year is off to a good start, a lot of beat raises even though it is early, is there anything that you are seeing and I know in the past you’ve experienced, you’ve been able to grow even when the market wasn’t. But on a utilization point or a procedure volume, anything you’d point to, because it seems like just across the sector, there’s been a lot of strength so far this year.

Yes, so I would concur that that’s our perspective as well. Liam mentioned the fact that sales out from distributors to hospitals was actually stronger than our sales into distributors, so we are quite comfortable that we are seeing continued robustness in the US market. The one footnote I would say is, there was a relatively strong flu season last year, which didn’t replicate itself this season, but in spite of that, I think we’re going to see quite good growth out of North America. The other growth area for us, and I think for other manufacturers as well, is going to be in China. Europe will be positive, but to a lesser extent and the situation with the oil producing countries has essentially remained unchanged, which is not in good shape, as I said earlier. All of that is built into our guidance and this is consistent from what we’re seeing from other manufacturers as well.

Our next question comes from Matt Mishan from KeyBanc. Your line is now open.

Just a couple of clarifying ones for me, did you quantify the impact of the selling days in the quarter on sales?

Yes we did. We qualified it as 2.2% with the two less billing days.

And then what was your new euro assumption?

Our euro assumption remains for the balance of the year at $1.06, and I think that’s one of the areas for upside during the course of the year. What we saw last year though was quite a bit of volatility, and I think in the spirit of some conservatism want to make sure we don’t underestimate what could happen in the third and fourth quarters.

I think that’s fair. And then just in terms of potentially terming out the savings (inaudible) the converts on the debt side. How are you modeling your free cash flow coming in for the year? I feels like $300 million of free cash flow expect is coming that should be able to cover that pretty easily.

Yeah, so that’s in line with our internal expectations, is about the 300 of free cash.

So how are you modeling the impact of that free cash? Are you modeling it going straight to cash and equivalents or are you modeling it to taking it down debt or are you modeling it towards instead of terming out of the convert to actually taking that down?

So in terms of modeling we have not assumed a reduction of debt to our capital structure for the balance of the year. Right now, as we took down or redeemed a portion of convertible notes, we put those redemptions that we paid in cash on the revolver, and so I think the way to think about it is that what we did in the first and early part of the second quarter is not what you should assume instead of the full-year impact of what happens with the converts and/or what’s on the revolver. But I wouldn’t assume that interest expense is a source of additional earnings or leverage for 2016. So if that helps you to better understand it, but we are not assuming that that free cash flow is going to reduce our --.

And I think coming at this another way, we continue to want to preserve position liquidity as we see ourselves as a serial acquirer, and we’ll continue down the path of making appropriate acquisitions for the targets that we are keenly interested in.

[Operator Instructions] our next question comes from Jason Wittes from Brean Capital. Your line is now open.

I wanted to ask about second-generation Percuvance, can you give us a quick sketch of how it’s improved, and also wanted to know if any docs in the US have gotten their hands on it yet.

Okay, so how it has improved, when we did our limited amount of release, if you’ve seen the Percuvance, you change the heads in order to [extrapacorally], which means outside the body, to actually continue the procedure. The advantage is we don’t make any change to how the surgeon does the procedure. One improvement that we made was the exchange was a screw-on head in the first round, and in the second iteration of the product, it’s actually clip-on. We just did that to speed up the exchange time and it makes the procedure time shorter for the doctor. Yes, it is in the hands, the generation one is in the hands of doctors in the US, and actually we have completed 250 procedures globally with the majority of them being the US. There was 10 sites of the initial launch. 9 out of the 10 sites have committed to using the product moving forward, and four of them have already gone through their back committee and added it to their formulary, and they are actually waiting for the second-gen products to be launched. Now overseas in Europe, we received a CE mark in quarter one, so doctors in Europe we now have sites in Italy, Germany, UK, France, Belgium, the Netherlands, Greece, actually trialing the product as we speak today and we are in active full launch in Europe.

What has been the feedback, I mean on your description, this doesn’t sound like a major overhaul. It just seems like some tweaks. But I’m curious to know if you’ve got initial feedback?

The initial feedback is incredibly positive. The incision is almost scarless, the feedback from the patient, one patient actually said to a doctor - accused a doctor of not doing the procedure because the scar was that invisible at which he was quite amused by --. And the feedback from the doctor is, there’s no change, the surgeons see no change in their procedure. The exchange goes well. They are able to use it for more complex cases than we initially thought, so all-in-all, the feedback from the limited market release and now the full market release in Europe is resoundingly positive.

(Inaudible) from first generation versus second generation is actually what I was asking.

So that’s really just the change in the way the end effector is attached. The original generation as Liam said, has to be screwed on. It’s a relatively fine thread, particularly in terms of training the technician on how to make those changes. One of the things that came up during our release was that they wish they had a slightly easier way to do this. This, in fact, is a lot easier way to do it, and there’s not a danger that they’ve only partially screwed the head on and allowing it to come loose. Although, that’s just a theoretical observation since it’s never happened, but there seems to be a greater comfort level with this attachment method.

And we’re very encouraged that we only had to make that one small change from limited market release to full market release, gen one to gen two.

Should we assume a more significant impact in ‘17? Let me rephrase that, can you give us a sense of what we should expect from this in 2016 and sort of then versus that versus 2017?

So the impact in ‘16 is minimal. We are just beginning to build up our base of customers and you should begin to see the impact ramp up as we go into 2017 for the Percuvance and Protector.

Okay, but we should assume that ‘17 will be a more significant year?

That is correct.

One last question for Vascular, you mentioned Vidacare, which continues to do very well. Curious about the other business lines, CVCs and PICC, how they’re doing and what the outlook is for the year?

The outlook for the year on both CVCs and PICCs is resoundingly positive. Within the quarter, because of the poor flu season, both CVCs and PICCs were impacted by that. But we don’t have any concerns for the full year on our vascular business, and we are continuing to be very bullish about our ability to continue to support the CVC franchise and take share with our PICC franchise.

Do you have growth rates for the quarter for those two business lines?

Yes, I do. So our CVC showed a modest decline of about 2%, and our PICC business, again, a modest decline of about $1 million, mostly driven by the flu season.

(Inaudible) sales to distributors, not necessarily sales to hospitals.

Our next question comes from Brian Weinstein from William Blair.

You mentioned a couple times US distributor destocking. I’m hoping that you can educate us a little bit as to what’s going on there, what’s driving this, and when do you think that that bottoms out?

Brian, this happens occasionally. About 50% of our business goes through these large distributors, the (inaudible), [dealers and miners], so those people that you’d be familiar with. And occasionally we see that we get tracing some of the shows, the end hospital sales, and occasionally, we will see a trend where they destock their own inventory levels. It normally normalizes within a quarter, and if it just normalizes in a quarter, then it comes back during the year. It’s not going to have any impact in the year. We just happened to see it in this current quarter that we’re in.

On the restructuring and the facility footprint consolidation, any update there as to how that’s progressing and the impact that that could have in terms of margin contribution this year? Any potential upside that you guys are willing to talk about at this point?

I think it’s too early in the year for us to talk about an upside at this point in time, I would say everything is on track as we initially planned for 2016. We expect to see some benefit from this towards the end of the year and more benefit as we move into 2017, but both the phase 1 and phase 2 essentially are tracking to plan.

And last question for me is on gross margin, last quarter you talked about operational efficiency driving about 60% of the gain and volume and mix driving about 40% of the anticipated gain in 2016. Is that still the way that we should be thinking about it, or are they tracking somewhat differently?

No, that’s still a consistent thought in terms of how we are going to get there in the full year. I’d say that in the first quarter, we had a little stronger benefit coming out of mix, but we continue to expect the operational efficiency gains to build as the year progresses, so still thinking along those same lines for the full year.

[Operator Instructions] We have a follow-up question from Larry Keusch from Raymond James. Your line is now open.

Benson since we haven’t really touched on it, wanted to circle back and M&A. Well, you guys continue to be extremely disciplined, and just wanted to get some thoughts on how you’re thinking about valuations, and it doesn’t feel like there’s a major sense of urgency given the way the business is performing, and again, just wanted to see how you’re thinking about M&A broadly.

Larry, I think our long term view remains similar that the general marketplace is less favorable to smaller companies than it is to the larger companies through a certain scale extent. Those companies that are $50 million to $100 million in revenue have a tough time with IDNs and GPOs. They have a tough time globalizing, that’s becoming a much more important part of a growth strategy. So we think there’s reasonable availability of product lines that we are interested in. We have said no to a couple of things that we liked over the past several months, because we thought the valuations were out of line. So I would echo the point that we continue to be quite disciplined. But also as last year, we continue to be very; very active in many, many smaller acquisitions that I think are more than gap fillers, but good strategic additions for the product line. I think you can expect that to continue with or without a larger acquisition.

And our next question comes from Anthony Petrone from Jefferies. Your line is now open.

Maybe just going back a little bit to Percuvance and just get a little bit of an update there on when do you think you’ll move beyond the initial procedures that you were targeting with that device? I know it’s still early. I think the initial target market in some of the general surgery applications that you called out is around $300 million to $400 million, but there’s clearly a broader market opportunity our there for Percuvance potentially multiples of that. So I’m just wondering, you’ve made some tweaks to the device, is that now set for a broader surgical application or is it still - you’re going after this smaller market within general surgery first, and then that product will expand perhaps in the next 2 or 3 years.

Well, I think the $300 million; $400 million was a sub-segment of the overall laparoscopic market. It wasn’t defined on a procedural basis. When we launched the product first, we thought we would be doing a considerable number of lap callings. We are doing some of those, but we’ve found a broader application for the product in more complex procedures, complex, tiny procedures. But the position of the patient limits the ability of the surgeon to place trocars where they would once placing trocars, and obviously, with our device they don’t need to place trocars. Some bariatric procedures that the surgeons are doing and have used the product for in the limited market release. So the market size is not limited by the procedures per se, but it’s the step taking a proportion of the laparoscopic overall market.

And then maybe a follow-up also on M&A, I mean clearly a big transaction announced this morning. And if you listen to that call, there’s this bigger-is-better mantra is resonated out of that call as well. Medtronic has commented on that as much, certainly with Covidien. So maybe an update Benson, on your view and Liam on your view on how the hospital market is evolving. Is a bigger bag necessarily better or do you think being more dominant in a smaller product set is still the way to go? So any thoughts there would be helpful.

Well, for us it has to be the way to go for the most part since our size is what it is. But I would point to the continued success we have with both IDNs and GPOs in this country, in terms of winning awards and for new products as well. So that notion that GPOs or hospitals want to deal with a limited number of suppliers has some partial truth to it, but there’s still a robust place for product differentiation and for better clinical outcomes. I do think and I’ve said this many times, I think we are big enough to get in front of GPOs and in front of IDNs. We’re big enough to be able to sell our products globally. So I don’t see a disadvantage in our size, I see more of an advantage in our nimbleness.

That’s helpful, and then one last quick for me is just on the cap structure and the converts, so clearly a portion that was retired. I don’t know if there’s an update on the remaining converts in the cap structure, if there’s any plans for that? Thanks again.

Sure, well, just a little bit of background on the transaction would perhaps give you some insight. As a reminder, the notes come due on August, 2017 we wanted to take steps to redeem some of those notes in advance maturity. Given where the notes were currently trading in the marketplace, we saw an opportunity now to take those notes out at a pretty attractive price for us. And we determined that the best approach was a privately negotiated transaction versus going out with a full tender offer, just given the difference in the premium that would be required between the two. And because we approached this in that manner, there’s a limitation of the amount of notes that could be redeemed at this time. Now, we’re always evaluating the highest and best use of the capital, and so we’ll continue to monitor the terms, the maturities, and the rates, and as I mentioned earlier, you shouldn’t assume that we are finished with what’s been done in the first and early part of the second quarter. So we are continuing to look to see if it makes sense when we can go back in the marketplace to look at the remaining notes.

I am showing no further questions. I would now like to turn the call back over to Jake Elguicze for any further remarks.

Thanks, operator, and thanks to everyone that joined us on the call today. This concludes the Teleflex Incorporated first quarter 2016 earnings conference call.

Ladies and gentlemen, thank you for participating in today’s conference. You may all disconnect. Everyone have a great day.