Teleflex
Annual Report 2012

Plain-text annual report

HEALTHIER OUTCOMES ANNUAL REPORT 2012 The real benefits of what we do at Teleflex are to make possible healthier outcomes for patients, for the bottom line of hospitals, and for our business. We create medical devices that enable healthcare providers to improve patient outcomes and enhance patient and provider safety. We develop, manufacture and supply specialty devices used for common diagnostic and therapeutic procedures in critical care and surgery. Our strategy of finding opportunities where we can reduce costs for hospital systems while providing optimal clinical outcomes keeps us well-positioned to deliver the best results to all our stakeholders. TELEFLEX ANNUAL REPORT 2012 FINANCIAL HIGHLIGHTS FROM CONTINUING OPERATIONS (Dollars in thousands, except per share data) 8 2 5 , 2 9 4 , 1 $ 9 0 0 , 1 5 5 , 1 $ 2 2 7 , 7 9 3 , 1 $ 8 7 2 , 6 5 $ 2 1 7 , 8 4 $ 0 8 3 , 2 4 $ 0 4 . 4 $ 9 6 . 3 $ 3 8 . 3 $ 3 5 8 , 3 9 1 $ 4 3 8 , 3 4 1 $ 7 5 3 , 4 9 $ 10 11 12 10 11 12 10 11 12 10 11 12 NET REVENUES RESEARCH AND DEVELOPMENT EXPENSE ADJUSTED EARNINGS PER SHARE1 NET CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS $1,551,009 2012 $1,492,528 2011 3.9% Variance $56,278 2012 $48,712 2011 15.5% Variance $4.40 2012 $3.83 2011 14.9% Variance $193,853 2012 $94,357 2011 105.4% Variance 1 A table reconciling adjusted earnings per share to the most directly comparable GAAP measures can be found on the final page of this Annual Report. A table reconciling our 2012 constant currency revenue growth, which is discussed on page 2 of this Annual Report, can be found on page 37 of our Annual Report on Form 10-K for the year ended December 31, 2012, which forms a part of this Annual Report. TELEFLEX TODAY Diversified and well-positioned across clinical areas, healthcare markets and geographic regions 67% 9% 5% 6% 10% 51% 15% 19% 84% 34% Critical Care Surgical Care Cardiac Care OEM & Development Services Hospitals/Healthcare Providers Medical Device Manufacturers Home Care United States Europe, Middle East & Africa (“EMEA”) Asia, Latin America & Canada 1 TELEFLEX ANNUAL REPORT 2012 TO OUR SHAREHOLDERS Our strategy continues to deliver results for customers and shareholders alike. Over the past five years, we have fully transformed ourselves from a cyclical, diversified industrial conglomerate into a pure-play medical technology company serving global markets. Today, Teleflex is well-positioned to capture opportunities in a changing healthcare environment, where increased utilization in aging populations competes against pressures to reduce the overall cost of care. Our performance in 2012 was solid, even with foreign exchange headwinds and additional operating expenses from investments in acquisitions to grow the company: • We achieved higher volumes and revenue on a global basis, including products recently introduced to the marketplace. • Our focused R&D efforts are creating a more robust product pipeline, with clearances gained in key global markets for new vascular, anesthesia and surgical products. • We reported on five acquisitions that added new products, technologies and growth opportunities to our medical device platform. • We further decentralized our business units, empowering our people to manage customer relationships more effectively, make decisions more efficiently and drive their own revenue growth. • Investors demonstrated their confidence in Teleflex, with our shares rising to their highest levels in recent years; total return for 2012 was 16 percent. SUSTAINABLE GROWTH THROUGH CONTINUOUS IMPROVEMENT In mid-2010, we compared Teleflex to peer companies within the medical device space. We discovered room for significant improvement in revenue growth, gross margins and operating margins, coupled with the need to increase R&D spending. During the last two years, those aspirational goals have become specific operating plans; and we made good progress in several areas during 2012. Each year, our short-term goal is to grow revenue faster than the markets we serve and expand our gross and operating margins while, at the same time, continuing to invest for the future. Our first priority is revenue growth and the creation of a more robust product pipeline that can ensure sustainability. We have made excellent progress, with constant currency growth in 2012 of 6.8 percent. We introduced new products in every business unit and gained significant innovations through our late-stage technology acquisitions. We have made progress on expanding gross margins, introducing several initiatives to create future improvement. Our pricing efforts have been successful, and we expect continued contribution over the next few years. We initiated footprint consolidations in our distribution centers and at certain manufacturing locations. Acquisitions and divestitures have also improved our product mix. We have made underlying improvements in our operating margins, although some are less visible as a result of currency fluctuations and additional R&D spending. Looking to 2013, the medical device excise tax and our investments to improve manufacturing will have an impact on results, causing progress in operating margins to lag behind that of gross margins. Still, we expect to achieve higher operating margins over the next few years. INVESTING FOR THE FUTURE With our successful transformation into a medical technology company, we have set our sights on becoming a supplier of choice throughout our various markets. Innovation remains key to providing healthier clinical outcomes and reducing procedure costs. Our recent R&D investments are beginning to 2 TELEFLEX ANNUAL REPORT 2012 PEOPLE POWER Healthcare is more than a domestic or international issue; it’s a human issue. That’s why we rely on local Teleflex people in markets around the world. They understand best the nuances of operating in nearby diverse regional markets. Our global presence forces us to rethink common universal challenges in healthcare, always looking for better ways to make it more affordable while improving outcomes and safety. We are making targeted geographic investments, especially in markets such as China and Brazil, where the emerging middle class is increasing utilization of healthcare. Our overall success depends on the individual and collective contributions of our 12,000 employees around the world—whether they are improving our manufacturing costs, improving our distribution processes, or developing technologies of the future that will be launched to the marketplace. With their dedication, we continue to improve our value proposition to customers. Our aspiration is to become the medical device partner of choice. Beyond clinical solutions and cost benefits, we want to make doing business with us so easy and responsive that our customers become advocates for Teleflex. Our efforts led to being named 2011 Medical Surgical Supplier of the Year by Novation, the leading U.S. healthcare supply contracting company. We believe Teleflex will succeed in 2013 and the years ahead for many reasons. Our technology. Our global brands and distribution network. Our financial strength. And, most of all, our people. They are the ones transforming our strategies into healthier outcomes for patients, healthcare providers, hospital systems and shareholders. BENSON F. SMITH Chairman, President and CEO return value. In 2012, $17.5 million in revenue came from products that weren’t in our portfolio in the prior year. Introduced across clinical areas and in international markets, they delivered 1.2 percent of constant currency revenue growth. In addition to organic growth through R&D, we reported on five acquisitions in 2012. These investments help to augment our pipeline and jumpstart the product commercialization process, cutting years off the timeline to market launch. Our acquisitions typically fall into two principal types, both of which fit within our existing business units. The first type of acquisition is what we refer to as a late-stage technology acquisition. This type of acquisition is of a company that is generally pre-revenue in nature, but that has products through, or nearly through, the regulatory approval process in a major market. Four examples of late-stage technology acquisitions that we completed in 2012 were: • Assets of Axiom Technology Partners, LLC, maker of the EFx family of laparoscopic fascial closure products, which won awards for excellence and innovation in 2012; • EZ-Blocker™ disposable catheter product line for lung isolation procedures; • Hotspur Technologies, Inc., for more efficient and cost-effective procedures to open blocked blood vessels than current treatment options; and • Semprus BioSciences, an MIT spinout with proprietary platform technology for next-generation medical devices that reduce healthcare complications. The second type of acquisition that we are interested in is what we refer to as a “bolt-on.” This type of acquisition typically has considerable revenue and enhances one of our strategic business unit franchises. An example of a bolt-on transaction that we completed during 2012 was our acquisition of the assets of LMA International N.V. and affiliates. This acquisition significantly expands our global anesthesia product portfolio, provides opportunities with key clinical U.S. and international call points, and further strengthens our relationships with healthcare purchasing groups. We continue to evaluate potential acquisitions that fit our existing business and provide clear clinical and cost benefits to current alternatives. 3 TELEFLEX ANNUAL REPORT 2012 INNOVATION FOR HEALTHIER OUTCOMES The biggest challenges in our industry involve finding ways to improve patient outcomes and make healthcare more affordable to a global community. In the past, innovation has centered on making things better. Today, technology has to be better and more cost effective. This is where Teleflex is making its mark. We bring balance to customers and shareholders. We operate across global markets and clinical areas, not solely dependent on any one region, product or procedure. Our franchises typically serve critically ill patients, often in need of emergency or other non-postponable medical care. The innovation in our products brings significant value to patients and to hospitals—a small component of the overall procedure cost that makes a big impact on outcomes. 2012 Key New Product Launches & Regulatory Approvals 4 Trans-RadialHotspur GPS CathISO-Gard Circuit TechnologyIR PICC w/ ChloragardWeck Vista Reposable ObturatorWeck AE5Weck Vista Balloon ExpansionArrow FlexBlock Continuous Peripheral Nerve Block CatheterPre-loaded PICC w/ ARROW VPSCE Mark PICC & VPSEZ BlockerWeck Vista Optical TrocarSoftech Plus Nasal Cannula4,5,6Fr IR PICCWeck EFxArrow FlexTip Plus Multi-Port Epidural CatheterAT 510(k) on PICCPRODUCT INNOVATIONS CRITICAL CARE | VASCULAR ACCESS Teleflex offers a broad range of vascular access and vascular catheter management technologies, with advanced features that support the ARROW® brand goal of making zero complications in vascular care a reality. Among the latest advances is the ARROW® Vascular Positioning System® (VPS®), which removes any guesswork in central catheter placement. VPS® Technology replaces the need for confirmatory chest X-ray to locate the catheter tip. Instead, the technology uses real-time intravascular Doppler, ECG and advanced algorithmic logic to notify the clinician when the catheter tip has reached the optimal location. Additionally, accurate catheter tip placement has been proven to reduce complications such as thrombosis. In September 2012, we received FDA 510(k) clearance to market our pressure injectable ARROW® PICC preloaded with the VPS® Stylet. The preloaded option improves clinician ease of use by eliminating the need to manually load the VPS® Stylet in the catheter. This is one of a series of new product introductions that demonstrates our continuous commitment to reducing vascular access complications and improving ease of use for clinicians. In May 2012, we received FDA 510(k) clearance for antithrombogenic claims on our ARROW® PICC with Chlorag+ard™ Technology, making it the only PICC in the world that offers both antimicrobial and antithrombogenic benefits for up to 30 days. To complement Chlorag+ard Technology, our 2012 acquisition of Semprus BioSciences gave us Semprus Sustain™, a non-eluting surface modification technology that helps prevent platelet adhesion and thrombus accumulation on device surfaces. With our expertise in catheters, and clinicians’ desire to reduce thrombosis-related complications, we see exciting opportunities to improve patient outcomes. Our first application will be dialysis catheters, then other vascular products, with the possibility of licensing the technology through our OEM business. TELEFLEX ANNUAL REPORT 2012 ARROW® PICC PRELOADED WITH THE VPS® STYLET ARROW® GPSCATH® Balloon Dilatation Catheter CRITICAL CARE | INTERVENTIONAL ACCESS Our July 2012 acquisition of Hotspur Technologies, Inc. gives us a unique technology that makes procedures to open blocked blood vessels more efficient and cost-effective than current treatment options. The transaction broadens and strengthens our global product portfolio for dialysis access and peripheral percutaneous transluminal angioplasty (PTA) balloon catheters. 5 VISIOVALVE™ Injection System TELEFLEX ANNUAL REPORT 2012 PRODUCT INNOVATIONS CRITICAL CARE | ANESTHESIA In 2012, we significantly strengthened our Anesthesia product portfolio. Our acquisition of LMA International N.V. and affiliates in October 2012 gave us a leading worldwide position in laryngeal masks and added a full portfolio of innovative products used extensively in anesthesia and emergency care. Our acquisition of the EZ-Blocker™ product line in May 2012 brought patented bronchial blocker technology for lung isolation and one-lung ventilation. Marketing clearance has been received in the U.S. and Europe. Other product innovations launched during the year include the ARROW® FlexBlock™ Continuous Peripheral Nerve Block Catheter and the ARROW® FlexTip Plus® Closed Tip, Multi-Port Epidural Catheter. LMA® SUPREME™ ISO-GARD® CIRCUIT TECHNOLOGY CRITICAL CARE | RESPIRATORY CARE In 2012, Teleflex received the prestigious Zenith Award from the American Association for Respiratory Care, honoring the solutions, service and innovation we deliver through our Hudson RCI® products and Breathing, Made Easier® programs. Several new products and line extensions were introduced in 2012, including the Softech® Plus Nasal Cannula, for optimal fit and patient comfort. In late 2012, we strengthened our ConchaTherm® Neptune® Humidification platform with the introduction of ISO-Gard® Circuit Technology. This breathing circuit promotes a closed system ventilation approach and supports strategies for reducing the risk for ventilator-associated pneumonia. 6 TELEFLEX ANNUAL REPORT 2012 CRITICAL CARE | UROLOGY Through our Rüsch® brand, Teleflex offers more than 100 years of product development, specialization, experience and collaboration with our customers in urology. With an established reputation and facilities around the globe, our comprehensive portfolio performed well in 2012, exceeding the market growth rates of competitive products. Our urological solutions address the needs of acute and home care settings and help reduce the risk of nosocomial urinary tract infections. LIQUICK® PLUS SURGICAL CARE With the May acquisition of Axiom Technology Partners, LLC, we gained the EFx family of laparoscopic fascial closure system products, broadening our line of minimally invasive surgery products. The EFx product portfolio includes both FDA-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. Product innovations include the award-winning Weck EFx™ Endo Fascial closure device, recognized as an Innovation of the Year by the Society of Laparoendoscopic Surgeons and honored for Excellence in Surgical Products by Surgical Products Magazine. Product launches in 2012 included a line of Weck Vista™ Bladeless Laparoscopic Access Ports, including optical, balloon, cone, and standard ports; Weck Hem-o-lok® Auto-Endo™ 5; and Weck Vista Reusable Obturators. 7 WECK VISTA™ Bladeless Laparoscopic Access Ports (Optical is shown) WECK EFX™ Endo Fascial Closure System TELEFLEX ANNUAL REPORT 2012 PRODUCT INNOVATIONS ARROW® TRANSRADIAL ARTERY ACCESS KITS CARDIAC CARE Our launch of TransRadial artery access kits for cardiac catheterization in international markets was well-received. Whether radial artery catheterization is a new or current procedure in the cath lab, differences in patient anatomy can present significant challenges for access. The ARROW brand of TransRadial access kits, developed in collaboration with experienced clinicians, addresses the needs of challenging patients. Our Cardiac Care Business Unit is dedicated to engineering, developing, manufacturing, selling and supporting a broad range of technologically advanced capital and catheter-based diagnostic and therapeutic products used in the treatment of critically ill cardiac patients. ARROW® TRANSRADIAL SHEATH OEM & DEVELOPMENT SERVICES (OEM) Teleflex Medical OEM excelled in 2012, based on its deep expertise and decades of experience, global brand recognition and concept-to- completion capabilities. It is known worldwide as a true leader in product design, development and production. Further, the business has a strong reputation for industry-changing innovation, including a coreless braid configuration for sutures, embedded marker band technology, and an award- winning process for joining catheter segments of dissimilar diameters. Its portfolio, marketed under TFX OEM® and Deknatel® brands, includes custom- engineered extrusions, diagnostic and interventional catheters, sheath/dilator sets (introducers) and kits, sutures, performance fibers, and bioresorbable resins and fibers. CUSTOM CATHETERS AND COMPONENTS 8 BOARD OF DIRECTORS LISTED IN ORDER OF ELECTION EXECUTIVE LEADERSHIP SIGISMUNDUS W. W. LUBSEN *2 Retired Member of the Executive Board Heineken N.V. BENSON F. SMITH Chairman, President and Chief Executive Officer Teleflex Incorporated PATRICIA C. BARRON *2 Retired Clinical Professor Stern School of Business New York University Lead Director Governance Committee Chair WILLIAM R. COOK *1,3 Retired President and CEO Severn Trent Services, Inc. Compensation Committee Chair BENSON F. SMITH Chairman, President and Chief Executive Officer Teleflex Incorporated LIAM KELLY Executive Vice President and President, International LAURENCE G. MILLER Executive Vice President, Chief Administrative Officer, General Counsel and Secretary THOMAS E. POWELL Executive Vice President and Chief Financial Officer LINDA BENEZE President Specialty Division HAROLD L. YOH III *2 Chairman of the Board and CEO The Day & Zimmermann Group, Inc. JEAN-LUC DIANDA President Europe, Middle East and Africa JAMES W. ZUG *3 Retired Audit Partner PricewaterhouseCoopers LLP Audit Committee Chair GEORGE BABICH, JR. *3 President and Chief Executive Officer Checkpoint Systems, Inc. DR. JEFFREY A. GRAVES *1 President and Chief Executive Officer MTS Systems Corporation DR. STEPHEN K. KLASKO *3 Chief Executive Officer USF Health STUART A. RANDLE *1 President and Chief Executive Officer GI Dynamics *Board Committees 1 Compensation 2 Governance 3 Audit TIMOTHY DUFFY Vice President and Chief Information Officer JAKE ELGUICZE Treasurer and Vice President, Investor Relations GEOFF HILLS Vice President, Global Supply Chain and Technical Services TONY KENNEDY Vice President, Europe, Middle East, Africa Operations JAMES J. LEYDEN Deputy General Counsel and Assistant Secretary HOWARD MILLER President Cardiac Care Division PAUL MOLLOY President Vascular Access Division MICHAEL TAGGART Vice President Regulatory Affairs / Quality Assurance CARY G. VANCE President Anesthesia and Respiratory Division JAY WHITE President Surgical Division GREGG WINTER Vice President, Tax INVESTOR INFORMATION ANNUAL MEETING The annual meeting of shareholders will take place at 11:00 a.m. on May 3, 2013 at: Teleflex Incorporated 155 South Limerick Road Limerick, PA 19468 INVESTOR INFORMATION Market and Ownership of Common Stock New York Stock Exchange Trading Symbol: TFX INVESTOR RELATIONS Investors, analysts and others seeking information about the company should contact: Jake Elguicze Teleflex Incorporated (610) 948-2836 e-mail: jake.elguicze@teleflex.com www.teleflex.com A copy of the Annual Report as filed with the Securities and Exchange Commission on Form 10-K, interim reports on Form 10-Q, and current reports on Form 8-K can be ac- cessed on the Investor’s page of the company’s website or can be mailed upon request. TRANSFER AGENT AND REGISTRAR Questions concerning transfer requirements, lost certificates, dividends, duplicate mailings, change of address, or other stockholder matters should be addressed to: American Stock Transfer & Trust Company 59 Maiden Lane Plaza Level New York, New York 10005 (800) 937-5449 (toll free) DIVIDEND REINVESTMENT Teleflex Incorporated offers a dividend reinvestment and direct stock purchase and sale plan. For enrollment information, please contact American Stock Transfer & Trust Company, Dividend Reinvestment Department, 1-877-842-1572 (toll free). CODE OF ETHICS AND BUSINESS GUIDELINES All Teleflex businesses around the world share a common Code of Ethics, which guides the way we conduct business. The Code is available on the Teleflex website at www.teleflex.com. CERTIFICATIONS The certifications by the Chief Executive Officer and the Chief Financial Officer of Teleflex Incorporated required under Section 302 of the Sarbanes-Oxley Act of 2002 have been filed as exhibits to Teleflex Incorporated’s 2012 Annual Report on Form 10-K. In addition, in May 2012, the Chief Executive Officer of Teleflex Incorporated certified to the New York Stock Exchange (“NYSE”) that he is not aware of any violation by the Company of NYSE corporate governance listing standards, as required by Section 303A.12(a) of the NYSE Corporate Governance Rules. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP Philadelphia, Pennsylvania FORWARD-LOOKING STATEMENTS In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the company notes that certain statements contained in this report are forward-looking in nature. These forward-looking statements include matters such as business strategies, market potential, product deployment, future financial performance and other future- oriented matters. Such matters inherently involve many risks and uncertainties. For additional information, please refer to the company’s Securities and Exchange Commission filings and the Form 10-K included in the annual report. TELEFLEX INCORPORATED CORPORATE HEADQUARTERS 155 SOUTH LIMERICK ROAD, LIMERICK, PA 19468 610.948.5100 • WWW.TELEFLEX.COM 

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