LeMaitre Vascular CEO Discusses Q4 2010 Results - Earnings Call Transcript

LeMaitre Vascular, Inc. ( LMAT)

Q4 2010 Earnings Call

February 28, 2011 5:00 pm ET

Executives

J.J. Pellegrino - CFO

George LeMaitre - Chairman and CEO

Dave Roberts - President

Analysts

Joshua Zable - WJB Capital

Joe Munda - Sidoti & Company

Larry Haimovitch - HMTC

Bill Wolfenden - Cottonwood Investments

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the fourth quarter 2010 LeMaitre Vascular Incorporated earnings conference call. (Operator Instructions) I would now like to the turn conference over to your host for today, Mr. J.J. Pellegrino, Chief Financial Officer.

J.J. Pellegrino

Good afternoon and thank you for joining us for our Q4, 2010 conference call. Joining me on today's call is our Chairman and CEO, George LeMaitre; and our President, Dave Roberts.

Before we begin, I would like to read our Safe Harbor statement. Today, we will discuss some forward-looking statements, the accuracy of which is subject to risks and uncertainties. Wherever possible we will try to identity those forward-looking statements by using words such as belief, expect, anticipate, forecast and similar expressions.

Please note these words are not the exclusive means for identifying such statements. Please refer to the cautionary statement regarding forward-looking information and the information under the caption Risk Factors in our 2009 10-K and subsequent SEC filings including disclosure of the factors that could cause actual results to differ materially from those expressed or implied.

During this call, we may discuss non-GAAP financial measures. Please refer to our earnings release on our website www.lemaitre.com for a discussion and reconciliation of non-GAAP financial measures.

I will now turn the call over to George LeMaitre.

George LeMaitre

Thanks, J.J. I'd like to focus my remarks on the three headlines in the quarter. Number one, we pushed record sales of $14.4 million, 9% ahead of Q4 2009. Number two, we initiating a quarterly dividend. Number three, we acquired the LifeSpan product line and we bought out two European distributors.

As for our first headline, we posted record sales of $14.4 million in Q4 2010, up 9% organically over Q4 of 2009. The Americas was up 14%, while international grew 2%. For the full year, sales increased 12% organically to $56.1 million led by the Americas, which was up 18% and our vascular category, which was up 17%.

The increase from 61 to 67 sales reps during 2010 was a key sales driver in both Q4 and the full year. The tier-A sales rep model allows us to produce sales growth, while keeping sales rep W2s reasonable. We installed this new rep model in November 2008 and it now comprises over 70% of our North American sales force.

Also, our tight focus on vascular niches is working well. We established a beachhead with our differentiated valvulotomes and shunts, and then we follow-up by selling the full line. At last quarter's call, we announced our intention to scale back our TAArget/UniFit stent program. This allows us to refocus our sales reps efforts on our core vascular products, where growth has been considerably better.

Organically, vascular sales grew 17% in 2010, whereas endovascular was up just 1%. Also vascular accounted for 71% of 2010 sales versus 67% in 2009. As we defocused on these TAAget/UniFit stent grafts, our faster growing vascular category will begin to dictate the company's growth rate. We also began to reduce our stent graft clinical trial spending, as we have suspended our two American trials.

Let me now turn to our second headline, dividends. In 2010, our sales increased 10% and our operating profit more than doubled to $4.3 million. Our 2011 guidance is for 11% sales growth and 40% operating profit growth. As a result of the ongoing strength in our business and our healthy balance sheet, we have elected to begin a quarterly cash dividend.

I view this dividend program as an extension of the share repurchase initiative, which we began in 2009. The central goal of both these programs is to maximize shareholder value.

Our continued product acquisitions and distributed buyouts should indicate that we have plenty of great ways to put cash to work in our business, which we will do in measured and disciplined manner. The dividend is $0.02 a share to shareholders of record on March 22 and will be paid at April 5th.

Regarding our third headline, in November 2010, we bought the LifeSpan ePTFE business from Angiotech, and we set mid 2011 buyouts of our Spanish and Danish distributors. These moves continue our efforts to expand our offerings in our vascular category and enhance our sales channel.

Direct-to-hospital sales in Spain and Denmark are expected to begin in Q3, 2011. We will leverage our European infrastructure by shipping products directly from our Frankfurt warehouse to Spanish and Danish hospitals. We believe that Spain is the eighth largest vascular market in the world.

I'd like to conclude my remarks by reiterating the three headlines. Number one, we posted record sales of $14.4 million, 9% ahead of Q4 2009. Number two, we're initiating a quarterly dividend. Number three, we acquired the LifeSpan product line and we bought out two European distributors.

I will now turn the call over to Dave Roberts, our President.

Dave Roberts

Thanks, George. In Q4 2010, we continue to execute on two of our counter-strategies, bolt-on acquisitions and distributor buyouts. In November we acquired LifeSpan, a vascular graft made of ePTFE, the most popular material for small vessel grafts. 80% of peripheral grafts and 95% of dialysis access grafts are made from ePTFE.

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