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LMA Declares 2008 Results

LMA International N.V. (LMA), a company engaged in the manufacture, development and distribution of medical equipments and supraglottic airway management devices, has reported net sales of $108.5 million for the year-end 2008, compared with the net sales of $99.6 million in the previous year. It also reported net income of $8.84 million for the year-end 2008, compared with the net income of $12.7 million in the previous year.

Net sales of anaesthesia products in the United States at $60.9 million for the year ended December 31, 2008 increased by 3% over sales of $59.1 million for the year ended December 31, 2007 aided by strong sales of the McGrath Video Laryngoscope. Sales of the LMA PerfecTemp made a positive contribution from third quarter of 2008.

Net sales of anaesthesia products for International at $44.1 million for the year ended December 31, 2008 increased by 15% over sales of $38.3 million for the year ended December 31, 2007, boosted by a large tender order for Iraq and strong growth in both the International West and International East markets.

LMA Deutschland achieved local currency sales expectations for the year and continues to show progress in a very difficult market.

For the group, total sales of single-use devices for the full year in 2008 increased some 19%, in both unit and revenue terms, compared to 2007. A significant portion of this increase was generated by the LMA Supreme.

Sales of LMA StoneBreaker to distributors were slow in 2008 as efforts were concentrated on demonstrating and promoting the device to end-users and helping existing distributors to sell down their inventory. Sales in the last quarter of the year were curtailed as the company progressed its discussion with Cook Medical, a leading global healthcare company, for an exclusive worldwide distribution arrangement for its LMA StoneBreaker. This Agreement has now been signed and will have significant benefits for both companies.

Gross profit for the group at $67.6 million for the year ended December 31, 2008 increased by $2.3 million or 3.5% over the year ended December 31, 2007. Gross profit from anaesthesia products at $65.2 million for the year ended December 31, 2008 increased by $1.5 million or 2% over the year ended December 31, 2007. Gross margin at 62% for the year ended December 31, 2008, however, was down from 65% for the year ended December 31, 2007 due to the continued market shift in product mix towards lower margin single-use products and a higher mix of third party distributor devices as well as provisions for product obsolescence.

Group selling, general and administrative expenses (SG&A) at $56.3 million for the year ended December 31, 2008 increased by $8.8 million or 18% from $47.5 million for the year ended December 31, 2007. Excluding expenses for the LMA Urology joint venture and Pain Care, SG&A increased by $4.7 million or 11% over the year ended December 31, 2007. The increase in anaesthesia operating expenses includes increases in sales and marketing resources and marketing spend, the high legal costs related to its current patent infringement litigation against Ambu A/S in the US and a provision of $0.6 million for doubtful debts arising from the current global financial crisis.

Operating expenses for LMA Urology also increased substantially for the year ended December 31, 2008. This, however, was due in part to a one-off reorganisation expense of $1.1 million resulting from the exclusive worldwide distribution agreement referred to earlier and an additional $0.4 million for the purchase of intellectual property for a complementary device to the LMA StoneBreaker.

Excluding LMA Urology costs, intellectual property litigation costs and the higher provision for doubtful debts, SG&A for FY2008 will be at 44% of net sales, the same level as in the year ended December 31, 2007.

Operating income (excluding LMA Urology operating losses) at $13.2 million for the year ended December 31, 2008 was 22% down on the year ended December 31, 2007 as a result of the factors outlined above. However, if adjusted for the stock obsolescence provision and the additional bad debt provision the decrease reduces to 4%.

Income tax expense was $0.5 million for the year ended December 31, 2008 compared to $2.1 million for the year ended December 31, 2007 due to lower profits in the United States, losses in Urology and a prior year tax credit in the International group.

The company ended the year with a strong balance sheet with cash balances of $35.6 million and no debt. Net assets* amounted to $93.6 million at December 31, 2008, compared to $90.2 at December 31, 2007 and net tangible assets increased to $58.8 million or 11 cents per share.

Net cash provided by operating activities was $19.8 million for the year ended December 31, 2008 boosted by cash collection of Accounts Receivables balances and reduced inventory. Net cash used in investing activities totalled $10.0 million for the year including the acquisition of the PainCare business in Q1 2008. During the year, $4.8 million was spent on acquiring 34,669,000 treasury shares bringing the total cash outlay on treasury shares, since the buyback programme first commenced, to $6.3 million.