Teleflex to Close Plants Even As Business Improves

Teleflex may be enjoying improved profits and sales. But it will still lay off workers and close plants as it restructures in the face of what top executive Benson F. Smith describes as "continuing pressures" in the healthcare industry. Company officials announced the restructuring Wednesday, though there are no details as yet about how many jobs or plants will be eliminated. The Wayne, PA-based company--which makes everything from surgical instruments to central venous catheters to advanced humidification devices--actually reported greatly improved first-quarter earning results. Teleflex earned $35 million, or 76 cents per share, off $439 million in sales during the quarter ended March 31, up from profits of $27 million, or 66 cents per share, off revenue of $412 million during the same period in 2012.Teleflex also has a new deal with Intuitive Surgical to supply its Weck disposable trocar seals and obturators for Intuitive's new da Vinci Xi Surgical System.Nevertheless, Teleflex is concentrating on consolidating operations and reducing workforce at certain facilities, Smith, Teleflex's CEO, president and chairman, told analysts during a conference call transcribed by SeekingAlpha."It will include the relocation of manufacturing operations from certain higher-cost locations to existing lower-cost Teleflex locations," Smith said.

When asked if he could provide a little more detail regarding numbers of layoffs and facilities to be closed, Smith would only say, "...That would ... get us to a position that's beyond what we're able to communicate until we have conversations with our employees about the specific sites." "I want to point out that we expect the [restructuring] plan, combined with improvements we expect to realize from other initiatives, will enable us to cross over the 55% adjusted gross margin target level by the time we exit 2015. Having our 55% goal well in sight, we expect to be communicating in the near future about our new long-term margin goals that we believe are achievable by 2018.""I realize that this may be an unsettling time for Teleflex employees," Smith said. "I want to thank you for all your hard work and dedication, and you have my commitment that we will treat you in a fair manner as we proceed in the upcoming months and years."Also on the conference call, chief financial officer Thomas E. Powell said he and other company officials expect Teleflex to achieve annualized savings of about $28 million to $35 million once the plan is fully implemented, and currently expect realized plan-related savings beginning in 2015.Describing the current state of the healthcare market, Smith referred to "some recent conversations we've had from some heads of some major health care systems that continue to report ... slower procedural volume this year than last year." Smith continued, "Their physician office visits continue to look negative compared to last year, but they're getting better. They're less negative than they were in the beginning of the year."Looking to the future, Smith said, "Our own projections for 2014 don't include much in the way of improvement in procedural volumes. Most of our improvement is going to come from other things.... So we have not counted heavily on ... procedural volumes improving in the U.S. as part of our forecast process."

Stephen Levy is a contributor to Qmed and MPMN.