Good day, ladies and gentlemen, and welcome to the Second Quarter 2017 Teleflex Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Treasurer and Vice President of Investor Relations, Jake Elguicze, you may begin.

Good morning, everyone, and welcome to the Teleflex Incorporated second quarter 2017 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 855-859-2056 or for international calls, 404-537-3406, passcode, 56173289. 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 provide 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 discussed in the conference call will contain forward-looking statements regarding future events as outlined in our 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 could cause actual results or events to differ materially include, but are not limited to, factors referenced 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'd like to turn the call over to Benson.

Thank you, Jake, and good morning, everyone. First of all, we are pleased with our second quarter and year-to-date 2017 results and our continued progress on many of our long-range initiatives. After six months, we're spot on on our constant currency revenue expectations. On top of that, we are benefiting from a more favorable currency environment that has a positive impact on our as-reported revenue and our adjusted EPS. Here are some details. From a year-to-date standpoint, our constant currency revenue growth including Vascular Solutions was 14.4%, as compared to our full-year guidance range of 12.5% to 14%. If you were to exclude Vascular Solutions and normalize for the impact of shipping days, our constant currency revenue growth for the first six months of the year totaled 4.6%, as compared to our full-year guidance range of 4% to 5%. That puts us right on track towards the achievement of our previously provided full-year constant currency revenue growth guidance range. We've continued to achieve strong results across many of our strategic business units and geographies. And this performance, coupled with our expectations for the remainder of the year, has allowed us to increase our full-year as-reported revenue growth and adjusted earnings per share guidance ranges. Turning to our quarterly results and beginning with revenue. Despite having one fewer shipping day in Q2 as compared to the prior year period, revenues grew 11.6% on an as-reported basis and 12.9% on a constant currency basis. This includes the contribution from Vascular Solutions product lines, which accounted for approximately 9.6% of our constant currency revenue growth. I'm happy to report that year-to-date Vascular Solutions performance has been in line with our initial expectations and that we have an opportunity to accelerate some distributor conversions efforts into the latter part of 2017 that were originally…

Thank you, Benson, and good morning, everyone. For the consolidated company, second quarter 2017 constant currency revenue grew 12.9%. During quarter two, we had one less shipping day, as compared to the second quarter of 2016 and this negatively impacted our results by approximately 1.2%. When normalizing for the shipping day impact, sales volumes of existing products grew 1.4%. Also impacting volumes in the quarter was our decision to go direct within China, which resulted in our former mass distributor of vascular and cardiac goods to no longer purchase product from us. This caused the volume growth shown here to be adversely impacted by approximately 60 basis points. However, as Benson just mentioned, we made good strides in our efforts to build out our direct sales capabilities in China during quarter two and we anticipate that China will no longer be a headwind in quarter three, and then become a revenue tailwind during quarter four. Moving to new products, the positive revenue contribution trend we have seen for the past several quarters once again continued, this time, contributing approximately 1.5% of constant currency growth, squarely in line with our full year guidance expectations. New product revenue growth was once again led by our vascular, surgical and anesthesia product lines. Vascular new product revenues increases are attributed to further penetration of our preloaded antimicrobial and anti-thrombogenic VPS PICCs. While in Surgical, new product growth was primarily due to sales of our EFx and Ae05 products. Finally, anesthesia new product revenue growth is primarily due to increased sales of our LMA unique product with silicon. Turning to pricing. During quarter two, we saw continued improvements in the average selling price of our products, which drove revenue higher by another 60 basis points. This is consistent with the levels that we achieved during…

Thanks, Liam, and good morning, everyone. Given the previous discussion of the company's revenue performance, I'll begin my prepared remarks at the gross profit line. For the quarter, adjusted gross profit was $295.3 million versus $260.4 million in the prior year quarter. Adjusted gross margin was 55.9%, a 90 basis-point increase when compared to the prior year period and representing the highest adjusted gross margin level achieved by Teleflex since becoming a pure-play medical device company. As covered on our last earnings conference call, given the top gross margin comparables in the second quarter of 2016, we are expecting only modest gross margin expansion for the second quarter of 2017. So the result is modestly favorable to our previous expectation. Versus prior year, adjusted OpEx spending grew by approximately 15%, reflecting the inclusion of Vascular Solutions and expenses associated with the China distributor conversion. Adjusted operating margin was in line with prior year at 25.1%. Adjusted net interest expense increased to $19.4 million from $10.3 million in the prior year quarter. The increase is the result of the additional borrowings used to finance the acquisition of Vascular Solutions. For the quarter, the adjusted tax rate of 16.6% marks a 400 basis point reduction from the prior year rate. More than anything else, the year-over-year reduction is a result of an easy comparable from the prior year. For the second quarter, the tax benefit of the new accounting treatment for excess tax benefits from stock plans was minimal. On the bottom line, adjusted earnings per share increased 7.9% from $1.89 in the second quarter of 2016 to $2.04 in the second quarter of 2017. Turning now to select balance sheet and cash flow highlights. During the first six months of 2017, cash flow from operations was $198 million, for an increase…

Thank you. Your first question is from Larry Keusch with Raymond James. Your line is open. Lawrence Keusch - Raymond James & Associates, Inc.: Thanks, everyone. Good morning. So, just a couple of quick things here. Could you maybe talk a little bit about China, and obviously I understand the impact is tracking to your expectations, but could you expand a little bit more on sort of the infrastructure build that you've had to do? And I guess your visibility on how much of the distributors' products are still out there in the channel, as you think about the second half? And then, I had one other question.

Okay. Hey, Larry. It's Liam here. I'll take this. Regarding the build out of our infrastructure, we have appointed regional distributors. So we actually have all of the regions covered and we've also appointed close on 93 sub-distributors that will obviously get product to the market. We had a review recently on our sales out, which is the benchmark you want to have in China, sales to the end customer. We're progressing modestly ahead of our expectations in that regard, so that's quite encouraging for us. We have our infrastructure from a talent acquisition point of view, almost completely in place. We only have four positions that we haven't made an offer on or have the person on board, so we're really comfortable with where we're at. We're currently going through a mediation process with the distributor and they've filed some documents outlining their inventory levels. We are currently reviewing that. It's difficult for us to tell exactly how much is left within their portfolio. But given the fact that they have continued to sell for this period of time, we would expect that to be pretty modest at this stage, what's left with the distributor, Larry. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. Terrific. And then, just one other quick question. I couldn't help but notice the strength in the EMEA region, and I think we saw that beginning in the first quarter as well. So maybe again, if you can expand a little bit on what you think is going on there, and how sustainable could that improved growth be, because I think, you were sort of flattish in the path there. So this marks definitely a nice step-up.

So last year, we grew in EMEA, Larry, by about 1.1%, and this definitely showed the step-up, and the step-up is pretty broad based in the geographies within EMEA. Adjusted for billing days, we're at 4.8% within this quarter. And, as I said, it's broad based; so we've seen nice recovery. Germany was always pretty strong, but we've started to see nice recovery in France, we've seen nice recovery in the UK, Italy and Iberia. And also in the indirect markets in Saudi Arabia, they seem to have overcome some of the oil crisis there, and that has helped us as well, Larry. So the encouraging thing is that it's broad based, and the economies are doing better there, as we all know. So, yeah, we're really encouraged by what's happening within EMEA. And also some of our new products were getting out there into the market, are driving increased demand and we're getting better utilization.

Right. I think there is also some pent-up demand, some of the fact that they had cut back on expenditures for several years, and you can only do that for so long, and really, the population almost demands that there is increased spending against healthcare. So I think we're starting to see the benefit of that as well. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. Terrific. Thanks guys.

Your next question is from David Lewis of Morgan Stanley. Your line is open. Scott S. Wang - Morgan Stanley & Co. LLC: Hi, guys. This is actually Scott in for David. Just two quick questions from me. I guess, first for Liam or Tom. Looking at the organic growth guidance for rest of the year, it seems like you did basically a little bit above 4% in the first quarter. You did the 3.5% this quarter, to get to kind of the midpoint of your guidance, I kind of see the back half delivering organic growth something closer to 5%. And I was wondering if you can talk us through what gives you kind of the confidence that that will happen in the back half versus the front half. What are some of the key drivers of that acceleration?

All right, Scott. I'll start and if Tom wants to add to it and by all means. So, first of all, thanks for the question. I would like to point out that our constant currency revenue growth in the first half of the year was 14.4% first of all. Adjusted for VSI and billing days, our growth is actually 4.6%, which is an apples-to-apples comparison to our constant currency full-year revenue guidance of 4% to 5%. For the first six months of the year, we are right on plan and slightly above the midpoint of our constant currency revenue guidance at the half year stage. We feel good about the reminder of the year as China headwind becomes a tailwind and we feel even better about next year as VSI rose off our base growth and this would add approximately 1% to our organic growth moving forward. So, Scott, we feel in a really good place regarding our guidance. Scott S. Wang - Morgan Stanley & Co. LLC: That's really helpful. And the only other question I had was from our analysis, it seems like Vascular in North America did particularly well this quarter, and I was just wondering if you saw any benefits from disruption at one of your competitors, namely BARD, did you see any kind of benefit in taking market share or was it more just execution? Thank you.

All right. Thank you very much. Yeah, Vascular performed well, growing at 6.3% then when I adjust for billing days, you add about another 1.6% to that. So, we're really encouraged. We've continued to see strength in our PICC portfolio, Scott. Our PICC portfolio within North America was up over almost 30%, and we continue to put a focus on our antimicrobial and anti-thrombogenic PICC, because hospitals are very focused on thrombus and infections, and we're the only company that has the solution to the infection. So we feel very confident on that growth trajectory continuing for our Vascular business. And also EZ-IO, the Vidacare portfolio, continues to grow at the half year, it's still growing at 20%, and we see that very sustainable for the remainder of the year. Scott S. Wang - Morgan Stanley & Co. LLC: That's great. Thank you very much.

Your next question comes from Matthew Mishan with KeyBanc Capital. Your line is open.

Hey. Good morning, and thanks for taking the questions. Hey, Tom, on the Vascular Solutions, your ability to put-off the high-yield financing, is that something you permanently put off or something which is you're just still evaluating your different options?

Well, as mentioned, we've taken a look at our sources and uses of cash that come in a little bit stronger on the cash flow than our initial expectations. We've been able to pay down our bank debt by $90 million, and we freed up additional capacity on the revolver. And so, as we look out for the rest of 2017, the high-yield is off the table relative to Vascular Solutions, and we expect not to need to put that high-yield financing in years following either. So we believe that we are able to meet our own needs for cash through internally generated sources at this point in time. So it's permanently off the table.

And just following up on that, I think you said that Vascular Solutions would be accretive by about $0.50 by 2018. What do you think it would be accretive by 2018 without the high-yield financing?

Well, as we think about the impact for the second half of the year, you know I said it's about a $6 million benefit there, so it would roughly double that benefit on a full year basis and that would put you in the kind of $0.16 to $0.18 additional accretion.

Okay, great. And then on RePlas, is there an opportunity for early sales of that once you've begun the clinical trials? Is that something which you could potentially get sales for before it's over it, is there an opportunity for that?

Hey Matt, it's Liam here. The clinical trials are in order to get FDA approval, so we can't sell prior to FDA approval. So, this clinical trial, and they have advised we need to this one and one more. So we expect to commercialize around the midpoint of 2020, at this stage, that's our expectation, Matt.

All right. Thank you.

Your next question is from Mike Matson with Needham and Company. Your line is open.

Hello? Mike Matson - Needham & Co. LLC: Okay. Can you guys hear me?

Yeah, there we go. Mike Matson - Needham & Co. LLC: Sorry, I had it on mute. So just with regard to the EPS guidance increase, you know it looks like you're increasing it by about the added benefit you're now expecting from smaller currency headwind, and yet you beat it by about $0.14 this quarter, as well. So now, some of that may have been from currency, but why not take the guidance up more, just given the degree of the beat? Was the Street just sort of modeling things wrong in terms of the quarterly sequencing of the EPS numbers?

Well, I think a key point is, we look at our year, we're managing to our internal projections. And so, we're never exactly aligned with how the Street is looking at things. As we look at ourselves through the first six months of the year, what we're seeing is, constant currency revenue is right on expectations, gross margin and operating margin are right on expectations, and the Vascular Solutions integration is proceeding as planned. And where we're seeing some upside is the interest expense, as I mentioned, and that's about $6 million in the back half of the year. We're seeing some benefit from FX as a result of the more favorable rates. And in the first quarter, we got a tax windfall. So as we think about it, those are the areas of upside that we're seeing right now. And as discussed in our prepared remarks, we now believe that we can accelerate some investment for the Vascular Solutions integration. So as we look at those three areas of upside, as well as the investment, we believe we're in position to flow through $0.20 increase in guidance between the first quarter and second quarter raises. Now certainly, if foreign exchange stays at the level we've seen in recent weeks, we could have additional benefit in the future, but right now, we feel as if we're tracking favorably on a couple of non-operating issues, and right on where we expected to be from an operating standpoint for the first six months. Mike Matson - Needham & Co. LLC: All right. Thanks. And then, can you just remind us with regard to the medical device tax, what you did with the savings there? And how big of an impact you'd expect if it were to be resumed in 2018?

It was approximately $0.12 I think or $12 million, excuse me, and the majority of that went into additional R&D spending. Mike Matson - Needham & Co. LLC: And would you be able to pull that back out of R&D to offset the return, if it does come back?

I think at this point it's a little too soon for us to make a prediction about how we might react to that. Certainly, some of these R&D programs are in the middle of their project life and not a good time necessarily to arbitrarily cancel them. So I think we'll just have to look at how we might adjust for that in 2018 against a broader array of things that are going on in our P&L. Mike Matson - Needham & Co. LLC: Okay, thanks. And just finally on RePlas. I mean, is there any chance we'll see any sort of interim data from the trials or is it just going to be – or do we have to wait until everything is done before you'd give us any sort of update there?

No, there are two trials. So the first trial will finish, is expected to finish in the summer of 2018 and we should have those results. And once we have those results, we will be sharing them with the investment community. Mike Matson - Needham & Co. LLC: All right, thanks a lot.

Your next question is from Chris Cooley with Stephens. Your line is open.

Thank you, good morning. I appreciate you taking the questions. Maybe just one quick one for me, for Tom. When you look at the stronger cash flow through the first half of the year, and the reduction that you've seen so far in gross leverage, just kind of curious what you're thinking about or how you're prioritizing uses of cash going forward? Do we see a greater focus on kind of the instant gratification of distributor to direct conversions or tuck-in M&A once you get down to kind of sub-three times gross leverage come back into the equation? Just help us frame that up. Thanks so much.

Sure. Well, as we looked at our cash flow projections, even following the Vascular Solutions acquisition, we always left ample room to continue our distributor to direct conversion strategy and, candidly, to continue to fund business development efforts whether they are late-stage technology or some smaller tuck-ins. Now, we are a company who looks at companies opportunistically, so if something were to come along that were of keen interest, we would certainly take a look at that. So from our perspective, we saw a very quick delevering given both earnings growth and cash flow generation following Vascular Solutions, and we don't expect that to hold us back from pursuing opportunities that appear attractive.

Thank you.

Your next question is from Dave Turkaly with JMP Securities. Your line is open.

Thanks. Just one clarification from Liam. The 4.6% organic growth that you talked about earlier on a question, is that the quarter or is that a year-to-date number?

That was for the half year.

Okay.

And, Dave, that's a constant currency number ex Vascular Solutions.

And adjusted for days, correct.

Yeah.

Great. And then, we've spoken to some surgeons of late on some of your newer products, specifically Percuvance and MiniLap, and I just wanted to get your thoughts on where those products stand today and it seems like there's a bunch of different surgeon group subspecialties that would benefit from them, but any color on where the sales base is now and where you think it's going maybe over the next 12 months or so?

Yeah, Dave. Overall, I think we are very happy with the continued enthusiasm we see for our percutaneous product offering from surgeons. We've had a number of analysts that have spoken to surgeons directly and published. We had a minor setback in quarter two when we initiated a voluntary recall on the Percuvance due to the product falling outside our tight tolerance specification. We identified the issue quickly during quarter two, and we're now back in the market with replacement product. During quarter two, we presented to 14 VAC committees and received 12 approvals. Our sales force is back out there driving the product with great enthusiasm and this recall will not materially impact our performance in 2017, as it was mitigated incredibly quickly by our quality teams. So again, very positive, the VAC hit rate continues in that 80% range, I think that's 86%, 12 out of 14. So again, quite enthusiastic for the product, continues to get traction, procedures that we're seeing it's being used on increasingly are bariatric and gynecological procedures.

Thanks a lot.

Your next question is from Matt Taylor with Barclays. Your line is open.

Hi. Good morning. Thanks for taking the question. You mentioned China a couple of times. I was just hoping you could give us an update on how that transition will look in the second half of the year with regards to growth and maybe just give us some operational thoughts now that you're kind of going direct there. What could that mean for your growth and profitability in China going forward?

Thanks, Matt. It's Liam here. I'll take this. So, what we see is in quarter three, so year-to-date, China has been a headwind of about 60 basis points. So that headwind would disappear in quarter three and it will become neutral or modestly accretive to our growth. And then, once you get into quarter four, we will see it contribute to our growth and you'll see that come through in core volume. Operationally, we are in a good place. We have recruited all the sales talent; they are out there creating demand within the marketplace. And as I said there to you in a recent review I had with the China team in our sales out metric, which is the most important metric, we are marginally ahead of our expectations. So, all-in-all, we feel really comfortable with where we are in the transition from that master distributor in China.

Thanks. And I was wondering, if you could talk a little bit about the different products in the Vascular portfolio now that you've owned the company for a period here, which areas are doing maybe a little bit better than expected and are there any doing a little bit worse than you initially forecast?

So, the good news is that, GuideLiner continues to perform really, really well at the half year; that's growing about 17%. Turnpike is also doing really well at the half year; it's about 70%. The other micro-introducer kits is doing fairly well, that's up in the 18% region. No surprises, Matt, thankfully to report. The products are performing in line with expectations. We're getting double-digit growth in the quarter. It grew by 11.5%, and it's been growing in that range since we acquired it. So, double-digit growth continues. I'm really looking forward to when it rolls off our M&A part of our P&L into core organic growth, because it led approximately 1% to our overall growth in Teleflex.

Great. Thanks a lot for the thoughts.

Your next question is from Richard Newitter with Leerink Partners. Your line is open.

Hi. This is Ravi for Rich. Thank you for taking the questions. I just had one on the freeze-dried plasma product. Could you help us understand the competitive dynamic in the space? I don't believe there's anything out there aside from maybe some French suppliers of the product. And could you maybe give us some opinion on the -- any sort of patent protection you'll have there? And is there anything, given the importance of this study and usage by the U.S. military that could potentially accelerate approval of the product ahead of those 2020 timelines? Thank you.

Okay, Ravi. So, you are absolutely correct. There is one French company and one German company that do provide freeze-dried plasma. Both of those went through a local approval process in their countries, and neither are available for in the United States, neither have a 510(k) approval, and our understanding is that there are no clinical trials going on with either of those product categories. To our own potential of accelerating, it's really, Ravi, dependent on how quickly we can get the clinical trials done and get the results published to move on from Phase I trial to Phase II and accelerate that. Obviously, we're working closely with the FDA, because the military wants this product as soon as they can possibly get it, because it does have a serious impact on the troops in the battlefield. To your IP question, the IP isn't on the freeze-drying a product itself, but it's more in the delivery mechanism. Most products today are in glass jars, almost like if you remember M*A*S*H, those glass jars used to hang up in M*A*S*H, the television program. But ours is in a compressible bag, which is ideal for battlefield and also for emergency ambulance delivery of freeze-dried plasma to a patient. So the double valve on our bag is where the IP lies, and we have really strong IP around that.

Great. Thank you very much.

And you have a follow-up from Larry Keusch with Raymond James. Your line is open. Lawrence Keusch - Raymond James & Associates, Inc.: Yeah, just a quick housekeeping. What's the assumption now for the remainder of the year for the euro? It had been I believe 1.04, and could you just maybe talk a little bit about the headwind that may be present from the peso strengthening?

Sure. So we updated our forecast projections in mid-June at the time the euro was trading around 1.11 to the dollar. We expected Q2 to end up around 1.10, and that's the rate that we put into our projections for the balance of year. So we've got the balance of the year at 1.10, you know as we look past couple of weeks, we've seen a dramatic weakening of the U.S. dollar relative to the euro. The euro's now trading at 1.18, so to the extent it were to stay at that level, we could expect additional translational benefits. As far as the strengthening dollar, that obviously impacts our ability to purchase – or excuse me peso, impacts our ability to purchase from Mexico. And as we look at all of the impacts, we have seen some benefit from the translational side offset on the transactional side. In fact, the transactional impact has been a little bit bigger than we typically see, largely due to some of the other currency moves around the world, including the peso. Lawrence Keusch - Raymond James & Associates, Inc.: Okay, terrific. Thanks, Tom.

And I'm showing no further questions. I would like to turn the call back to Jake Elguicze for any further remarks.

Thanks, operator, and thanks to everyone who joined us on the call today. This concludes the Teleflex Incorporated second quarter 2017 earnings conference call.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may all disconnect. Everyone, have a great day.