SFSK is trading down preopening due to a downgrade this morning by the the analyst at Salomon who now has a 12 month price target of $27.
unfuckingbelieveable. i don't know what she's smoking on her lunch break, but i'd sure like to get some.
attention, the blue light's now flashing in the rubber aisle. let's go shopping!
from the CC ...
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MODERATOR: Melissa Wilmot (ph), of Solomon Smith Barney, please go ahead with your questions.
Q Good morning. Good quarter.
MR. JAFFE: Thank you.
Q I have a whole list of questions. The first question I'd like addressed, is what we've heard on the street as a rumor coming out allegedly of Allegiance, that you're giving gloves away on a two-for-one basis now that you have capacity. Based on the quarter results, I doubt that's true, but can you talk about that, or where that's coming from? If it's not Allegiance, what's the source?
MR. JAFFE: Okay. First, I have not personally heard it. So, if it has been said out there, I think you hit it correctly. It's obviously not true. Okay, there's no way to give product away two- for-one, or give it away and still maintain 52 percent margins.
So I think, Melissa, what you're really seeing, is that when we were in the allocation mode, we lost some business. People took some business away. We are now in the process of taking our business back, and taking new business. And I think, as we hurt our competitors, they're trying to do everything they can to resist us.
We don't sell on price. We have never sold on price. Okay, we wouldn't be able to maintain these margins. We have the absolutely best sales force in the industry, and they sell on personal relationship, and they sell on value. So I think what's happened -- we've even heard the rumor, you know, from Allegiance that we've been able to take their exam glove business away, but they're not going to let us take their surgical business away.
You know, I don't think that's possible. I don't think their products are as good, and their sales forces are definitely not as good. So I think that we're starting to see some concerned competitors our there.
But to answer your question, we're not giving it away. Our margins are maintaining, and we continue to sell on the strategy of value, and not sell on price.
Q Okay, terrific. Richard, can you give me an idea on a per-bed basis, what does the average hospital -- acute- care hospital -- order in exam gloves on an annual contract, on a per-bed basis?
MR. JAFFE: You know, you can't -- that's not one answer. The issue is, there are different types of hospitals. There are tertiary hospitals, okay, there are outpatient hospitals. Different hospitals are filled at different rates. So, it's not really a per-bed issue. I think maybe you'd like that -- why don't you call back in, let's get some of our marketing people on that, and they can give you some of their trending on what they based it on.
But you really have to take a look at what type of hospital it is, and what are the things they're doing. Also, who are they buying for? Okay, some hospitals -- for example, Stanford -- not only buys for Stanford, but they buy for the surrounding doctors' offices. So, the number of beds in the hospital, does not truly reflect the wide range that they buy for. So, there's not a direct correlation, one-for-one.
Q Okay. On the 200 accounts that you've closed this quarter -- and did I understand you correctly, that the accounts, the new accounts that were closed in October, was more than the full three months?
MR. JAFFE: No. In any of the months.
Q Oh, any of the months. Fair enough.
MR. JAFFE: So, what I'm trying to say, is the trending, okay, is positive.
Q Okay. Terrific. What would be the average bed size of those 200 accounts you closed this quarter?
MR. JAFFE: Again, I don't have those off the top of my head. And I'm not sure bed count is the best way to measure 'em.
Q Right.
MR. JAFFE: But the ones I mentioned, were significant. If you know the industry, you know that Henry Ford Purchasing Partners up in Boston -- I mean, these are major, major accounts.
Q Hm-hm. I understand that. As far as consolidating on your distributors, and consolidating on -- I'm assuming, when you say contracts, GPO contracts, are you now out actively trying to bid on more GPO contracts, now that you have the capacity?
MR. JAFFE: We're actually out negotiating on contracts, okay. We have many group purchasing organizations coming to us, as well as non. You know, IDNs, and individual ones, and, you know, we're really seeing a big flurry of activity.
Q So, going forward, in, say, the first, second quarter, could we see new contracts come on line?
MR. JAFFE: That's possible. Yes.
Q -- announcements?
MR. JAFFE: Yeah, that's possible.
Q Okay. And then, in terms of consolidating on the distributor basis, would we see big jump-up, in terms of business going through, General Medical, Owens & Miner (ph), et cetera?
MR. JAFFE: You know, there are others of this alternate care suppliers that we're working with, as well as the acute care, as well as European. So, I think that many of the distributors just are handling many more gloves than they want to. And that as we broaden our breadth of products, as we give them more opportunity to consolidate where they'll need other people, we're trying to work with everyone to drive their costs down.
The cost in use is not just the price of a products. It's supply chain management, it's inventory, it's all sorts of things. It's electronic data interchange.
So, we are working very closely with them, to help drive their costs down, and show them how they could save money by consolidating. We've had a lot of success. And so I think that, you know, I think across the board, it's not just the top two or three top guys. Even the smaller guys, you know, who carry multiple brands, have a additional costs.
Q Okay. So it's not going to be that the little guys get shut out. It's just that if the little guys are going to do business with you, they've got go 100 percent Safeskin.
MR. JAFFE: Well, it's not 100 percent. We don't say 100 percent. But surprisingly, even some small guys carry 15, 20 different glove suppliers.
Q Right.
MR. JAFFE: Okay. And when you're that small, and you're limited for space, you try and turn your inventories, it doesn't make sense. So, I think, again, if you go back to supply chain management, driving the costs down, you want to get more put through the same space. And the hospitals are trying to consolidate, the distributors are trying to consolidate, and we're trying to help them.
Q Okay. With regard to latex pricing, what have been the trends in Thailand -- I mean, knowing the baht's a little stronger, and also, you know, seeing competitors come into Thailand, and building plants in Thailand, what do you think that's going to do latex pricing, where all latex pricing going forward?
MR. JAFFE: I think there is ample supply. The latex prices are down and diminished. And they've stayed there. We don't see any new demand --
Q On a sequential quarterly basis, or --
MR. JAFFE: It's down, at this point, it's lower than it has been earlier in the year. Okay, part of that is the lack of demand for latex from China and from Russia, okay, from car companies. It's really down across the board.
You know, the new glove factories coming in, are not incrementally significant. Also, I don't expect to see that very quickly. I mean, we have a competitor who is in Malaysia, that started up a year and a half ago -- in Thailand -- and they're still not operating yet, okay? And it's not -- I mean, it's not that easy to build in a new culture. People are different, middle management is difficult. It's just -- it's not easy.
Plus, it takes time. I mean, take a look at us. It's taken us 10 months from trees to production. That's -- that's incredible. I mean, you've been over to Asia. You know what happens over there, is that the scale of what you have to do.
The other thing is that our competitors are not growing market share. So, what you're seeing, is you're seeing them transfer capacity from one place to another. So there's is not a new demand on latex.
Q Okay, great. I think that's it. Thank you very much. |
