Rochester Medical Corp ( ROCM)

Q1 2011 Earnings Call

January 25, 2011 4:30 p.m. ET


Anthony Conway - CEO

David Jonas - Chief Financial Officer


Tyson Bauer - Wealth Monitors

Ernie Andberg - Feltl & Company

Larry Haimovitch - HMTC

Beth Lilly - Gabelli Investors

William Hanson - individual investor



Great day ladies and gentlemen and welcome to the first quarter 2011 Rochester Medical Corporation earnings conference call. My name is Thelma and I will be your coordinator for today’s event. At this time all participants are in a listen only mode. We will facilitate a question and answer session towards the end of this presentation. You may press star, 1 on your touchtone telephone at any time to pose a question.

If at any time during this call you require assistance please key star followed by 0 and a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Mr. Anthony J. Conway, President and CEO. Please go ahead.

Anthony Conway

Thank you for joining Rochester Medical’s first quarter conference call. I’m Jim Conway, the company’s President and CEO and with me is David Jonas, Rochester Medical’s Chief Financial Officer. To start I will review the highlights of the quarter and then David will present additional information on the financials and more detail on the pending acquisition. After that we will give you some further insight into our plans for the future and then take questions.

Now before starting let me remind you that we will be making some forward-looking statements today and I would refer you to the Safe Harbor statement found in today’s press release and also to the risk factors section in the company’s annual report on Form 10-K for the year ended September 30, 2010. These statements further clarify the risks and uncertainties that are associated with the forward-looking statements.

Now first let me review the results as reported in the press release. We reported sales of 10,946,000 for the current quarter compared to 10,332,000 for the first quarter of last year. That’s an 8% increase in overall sales on a constant currency basis. Rochester Medical branded sales rose 18% on a constant currency basis and while that is certainly good branded growth it is somewhat less than expected primarily due to timing of orders from international branded distributors.

The branded growth continues to be led by strong sales of our all silicone Magic 3 and hydrophil layered hydrophilic intermittent catheters. Overall Foley sales were slightly down this quarter again primarily because of international order timing. Domestic Foley sales were very slightly down. We see this as an aberration especially since our overall hospital sales are up and evaluations and interest are at their highest levels ever. We expect excellent growth going forward with all these products. We believe sales levels of all branded products will certainly benefit from a sales force expansion.

Speaking of which, we are very pleased with the initial results of our US sales team recruiting effort. We have added 34 sales professionals during the first quarter, which more than triples our domestic sales force. The recruits are seasoned professionals with strong experience and we are confident that this will accelerate sales as laid out in our three-year plan. Also this quarter we negotiated our agreement in principle for the acquisition of Laprolan in the Netherlands.

As stated in the press release, for calendar 2010 Laprolan reported $11.2 million in revenue with a pre-tax profit of $3.5 million. We think the pending acquisition is a great strategic and financial move for Rochester Medical. Now I’ll turn it over to Dave and he will give you more detail and insight into the financials and into the pending acquisition. Then I will sum up and we’ll take your questions.

David Jonas

Thanks Jim. I’m going to spend a few minutes highlighting these results just released in our first quarter 2011 earnings release. First our sales - for ease of discussion unless otherwise noted all sales information will be discussed in constant currency. I’m doing this to exclude the impact of foreign currency exchange, which will show a true reflection of our sales growth. As Jim has explained, our sales results for the first quarter showed good overall branded growth especially in our key branded markets in the US and UK.

As we have recently discussed, we are focused on and continue to increase our investments and activity in our worldwide branded sales especially in the US and Europe. We have added over 30 sales people in the US this quarter alone and once completed, our Laprolan acquisition will give us direct access to the Netherlands and more direct access to mainland Europe. These investments and focus fuel the growth in our worldwide branded sales, which were $7.8 million this quarter versus $6.6 million last year, an increase of over 18% for the first quarter.

In this first quarter we continued to show strong, solid growth in our products highlighted by a 29% growth in worldwide intermittent sales and a 10% increase in male external catheter sales. Overall Foley sales were down 9% this quarter primarily due to the timing of international orders and also due to a slight decline in domestic Foley sales during the quarter. The overall outlook and trend in our Foley sales look very good. Field evaluations and hospital interest in our technology is stronger than ever and we expect good growth as we add more new customers in 2011.

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