-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MvJyg5QPMmfS1SIJY4KygEJ3YSZNkmxihWjb+ozrHJ+mll5zMMg7LY0r/Yamfks7 MHmLVL6jgCCRtao7W+wCAg== 0000897101-01-000118.txt : 20010214 0000897101-01-000118.hdr.sgml : 20010214 ACCESSION NUMBER: 0000897101-01-000118 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCHESTER MEDICAL CORPORATION CENTRAL INDEX KEY: 0000868368 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 411613227 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18933 FILM NUMBER: 1535399 BUSINESS ADDRESS: STREET 1: ONE ROCHESTER MEDICAL DR CITY: STEWARTVILLE STATE: MN ZIP: 55976 BUSINESS PHONE: 5075339600 MAIL ADDRESS: STREET 1: ONE ROCHESTER MEDICAL DR CITY: STEWARTVILLE STATE: MN ZIP: 55976 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________________ to __________________ Commission File Number: 0-18933 ROCHESTER MEDICAL CORPORATION (Exact name of registrant as specified in its charter) MINNESOTA 41-1613227 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE ROCHESTER MEDICAL DRIVE, STEWARTVILLE, MN 55976 (Address of principal executive offices) (Zip Code) (507) 533-9600 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES _X_ NO ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. 5,338,900 Common Shares as of February 6, 2001. TABLE OF CONTENTS ROCHESTER MEDICAL CORPORATION REPORT ON FORM 10-Q FOR QUARTER ENDED DECEMBER 31, 2000 PAGE ---- PART I. FINANCIAL INFORMATION.................................................3 Item 1. Financial Statements (Unaudited)...................................3 Balance Sheets - December 31, 2000 and September 30, 2000...............3 Statements Of Operations - Three months ended December 31, 2000 and 1999....................................................4 Statements Of Cash Flows - Three months ended December 31, 2000 and 1999....................................................5 Notes To Financial Statements...........................................6 Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations..............................7 Item 3. Quantitative And Qualitative Disclosures About Market Risk........10 PART II. OTHER INFORMATION...................................................10 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ROCHESTER MEDICAL CORPORATION BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30, 2000 2000 ------------ ------------ ASSETS CURRENT ASSETS: Cash and Cash Equivalents ............................ $ 2,401,748 $ 3,204,161 Marketable Securities ................................ 5,025,469 5,654,442 Accounts Receivable .................................. 1,216,298 1,007,432 Inventories .......................................... 1,977,746 1,892,455 Prepaid Expenses and Other Assets .................... 210,009 251,328 ------------ ------------ TOTAL CURRENT ASSETS ........................ 10,831,270 12,009,818 PROPERTY AND EQUIPMENT Land and Buildings ................................... 5,446,606 5,420,427 Equipment and Fixtures ............................... 10,015,590 9,984,496 ------------ ------------ 15,462,196 15,404,923 Less: Accumulated Depreciation ....................... (4,679,818) (4,351,235) ------------ ------------ TOTAL PROPERTY AND EQUIPMENT ............... 10,782,378 11,053,688 INTANGIBLE ASSETS Patents, Less Accumulated Amortization ............... 191,897 190,717 ------------ ------------ TOTAL ASSETS ............................................ $ 21,805,545 $ 23,254,223 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable ..................................... $ 550,082 $ 799,737 Accrued Expenses ..................................... 498,419 881,468 ------------ ------------ TOTAL CURRENT LIABILITIES ............... 1,048,501 1,681,205 SHAREHOLDERS' EQUITY Common Stock, no par value: Authorized-- 20,000,000 Issued and Outstanding Shares-- 5,338,900 41,295,979 41,295,979 Accumulated Deficit .................................. (20,538,935) (19,706,341) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY .............. 20,757,044 21,573,018 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY ................ $ 21,805,545 $ 23,254,223 ============ ============
Note -- The Balance Sheet at September 30, 2000 was derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See Notes to Financial Statements 3 ROCHESTER MEDICAL CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED DECEMBER 31, --------------------------- 2000 1999 ----------- ----------- NET SALES .............................. $ 1,855,216 $ 2,007,783 Cost of Sales .......................... 1,291,871 1,525,100 ----------- ----------- GROSS PROFIT ........................... 563,345 482,683 COSTS AND EXPENSES: Marketing and Selling ............... 790,566 1,298,718 Research and Development ............ 255,026 223,176 General and Administrative .......... 475,741 459,939 ----------- ----------- TOTAL OPERATING EXPENSES ............ 1,521,333 1,981,833 ----------- ----------- LOSS FROM OPERATIONS ................... (957,988) (1,499,150) OTHER INCOME: Interest Income ..................... 125,394 165,121 ----------- ----------- NET LOSS ............................... $ (832,594) $(1,334,029) =========== =========== NET LOSS PER COMMON SHARE (Basic and Diluted) .................... $ (0.16) $ (0.25) =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ............................ 5,338,900 5,348,221 =========== =========== See Notes to Financial Statements 4 ROCHESTER MEDICAL CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, ---------------------------- 2000 1999 ------------ ------------ OPERATING ACTIVITIES Net Loss ................................................................... $ (832,594) (1,334,029) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization .............................................. 338,113 268,980 Other Non Cash Compensation ................................................ 16,620 -- Changes in assets and liabilities: Accounts Receivable ........................................................ (208,866) 13,447 Inventories ................................................................ (85,291) 17,785 Other Current Assets ....................................................... 41,319 71,965 Accounts Payable ........................................................... (249,655) 329,056 Other Current Liabilities .................................................. (383,048) (404,773) ------------ ----------- NET CASH (USED IN) OPERATING ACTIVITIES .................................... (1,363,402) (1,037,569) INVESTING ACTIVITIES Capital Expenditures ....................................................... (57,274) (339,671) Patents .................................................................... (10,710) (10,781) Sales of Marketable Securities ............................................. 628,973 13,180 ------------ ----------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ........................ 560,989 (337,272) FINANCING ACTIVITIES Proceeds from Sales (Purchases) of Common Stock ............................ -- (72,843) ------------ ----------- NET CASH USED IN FINANCING ACTIVITIES ...................................... -- (72,843) ------------ ----------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ....................................................... (802,413) (1,447,684) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....................................................... 3,204,161 4,216,814 ------------ ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD .................................... $ 2,401,748 $ 2,769,130 ============ ===========
See Notes to Financial Statements 5 ROCHESTER MEDICAL CORPORATION NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2000 NOTE A -- BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the financial statements and related notes included in the Company's 2000 Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended December 31, 2000 are not necessarily indicative of the results that may be expected for the year ending September 30, 2001. NOTE B -- EARNINGS (LOSS) PER SHARE For the three-month periods ended December 31, 2000 and 1999, there is no difference between basic and diluted net loss per share. Common equivalent shares from stock options and convertible debt are excluded as their effects are antidilutive. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the fiscal periods indicated, certain items from the statements of operations of the Company expressed as a percentage of net sales. THREE MONTHS ENDED DECEMBER 31, ------------ 2000 1999 ---- ---- Net Sales......................................... Private Label............................ 50% 62% ROCHESTER MEDICAL BRAND.................. 50% 38% ---- ---- Total Net Sales................................... 100% 100% Costs of Sales.................................... 70% 76% ---- ---- Gross Margin...................................... 30% 24% Operating Expenses................................ Marketing and Selling.................... 42% 64% Research and Development................. 14% 11% General and Administrative............... 26% 23% ---- ---- Total Operating Expenses.......................... 82% 98% Loss From Operations.............................. (52%) (74%) Interest Income (Expense) Net..................... 7% 8% ---- ---- Net Loss (45%) (67%) ==== ==== 7 THREE MONTH PERIODS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999 NET SALES. Net sales for the first quarter of fiscal 2001 decreased 8% to $1,855,000 from $2,008,000 for the comparable quarter of last fiscal year. The sales decrease resulted from reduced international private label sales and the timing of orders from certain international private label customers. As previously disclosed, there was an anticipated significant decrease in sales as a result of the canceled sale of the Company's Foley catheter manufacturing business to Maersk Medical. In preparation for that sale, Maersk Medical had purchased significant additional inventory prior to the cancellation of that transaction for the expected transition period. As previously announced by the Company, ConvaTec, one of the Company's significant private label customers, has made a strategic decision to focus on its core product offerings in Ostomy and Wound Care and plans to exit the incontinence marketplace. As a result, ConvaTec has agreed to work closely with the Company to transfer its business in male external catheters and Foley catheters directly to the Company. The Company expects a significant reduction in sales to ConvaTec in the short term as ConvaTec stops ordering products, but the Company believes most of those sales volumes will be later replaced as the Company and its distributors directly supply ConvaTec's incontinence customers with its products. GROSS MARGIN. The Company's gross margin as a percentage of net sales for the first quarter of fiscal 2001 was 30% compared to 24% for the comparable quarter of last fiscal year. The increase in the current quarter's margin reflects a favorable change in product mix and improved operating efficiencies. MARKETING AND SELLING. Marketing and selling expenses for the first quarter of fiscal 2001 are down 39% to $791,000 from $1,299,000 for the comparable quarter of last fiscal year. The decrease in marketing and selling expense primarily is due to significant non-recurring marketing costs associated with the Company's phased rollout of the FEMSOFT(R) INSERT in the comparable quarter of the prior year, together with the effect of personnel reductions in the first quarter of fiscal 2001. RESEARCH AND DEVELOPMENT. Research and development expense for the first quarter of fiscal 2001 increased 14% to $255,000 from $223,000 for the comparable quarter of last fiscal year. The increase in research and development expense primarily relates to the development and testing of a new hydrophilic intermittent catheter. GENERAL AND ADMINISTRATIVE. General and administrative expense for the first quarter of fiscal 2001 increased 3% to $476,000 from $460,000 for the comparable quarter of last fiscal year. The increase in general and administrative expense is primarily related to restructuring savings of $50,000 and a reversal of $80,000 in severance costs expensed in the fourth quarter of 2000, offset by non-recurring severance costs of $138,000. INTEREST INCOME. Interest income for the first quarter of fiscal 2001 decreased 24% to $125,000 from $165,000 for the comparable quarter of last fiscal year. The decrease in interest income reflects the comparatively lower average level of invested cash balances in the current quarter due to the utilization of cash for operations and capital expenditures. 8 LIQUIDITY AND CAPITAL RESOURCES The Company's cash, cash equivalents and marketable securities were $7,427,000 at December 31, 2000 compared with $8,859,000 at September 30, 2000. The Company used a net $1,363,000 of cash from operating activities during the quarter, primarily reflecting the net loss before non-cash depreciation. During the three-month period ended December 31, 2000, the Company's working capital position, excluding cash and marketable securities, increased by a net $886,000. Accounts receivable balances during this period increased 21% or $209,000 as a result of increased sales and the timing of orders. Other current assets increased 2% or $44,000 during the recent three-month period primarily as a result of increases in inventory. Current liabilities decreased 38% or $633,000 during the recent three-month period, reflecting comparatively lower accrued compensation and marketing expenses. Changes in other asset and liability balances during the recent three-month period related to timing of expense recognition. The Company believes that its capital resources on hand at December 31, 2000, together with revenues from sales, will be sufficient to satisfy its working capital requirements for the foreseeable future as described in the Liquidity and Capital Resources portion of Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K (Part II, Item 6) for the fiscal year ended September 30, 2000. FORWARD-LOOKING STATEMENTS Statements other than historical information contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by the use of terminology such as "believe," "may," "will," "expect," "anticipate," "predict," "intend," "designed," "estimate," "should" or "continue" or the negatives thereof or other variations thereon or comparable terminology. Such forward-looking statements involve known or unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following: the uncertainty of gaining private label distributors for the hydrophilic intermittent catheters and the the FEMSOFT INSERT; the uncertainty of insurance coverage of the FEMSOFT INSERT by additional insurers; the uncertainty of market acceptance of the RELEASE NF catheter, the FEMSOFT INSERT and new products; the uncertainty that initial consumer interest in the FEMSOFT INSERT may not result in significant sales of the product or continued sales of the product after trial; the uncertainty of the level of continuing sales volumes, if any, to Maersk Medical; the uncertainty regarding the Company's ability to replace lost sales following anticipated lower sales to ConvaTec in future periods; the results of product evaluations; the securing of Group Purchasing Organization contract participation; the timing of purchases by customers; manufacturing capacities for both current products and new products; results of clinical tests; the timing of clinical preference testing and product introductions; FDA review and response times; the risks associated with the Company's expanded reliance on sales of ROCHESTER MEDICAL brand products; and other risk factors listed from time to time in the Company's SEC reports, including, without limitation, the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K (Part II, Item 6) for the year ended September 30, 2000. 9 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company does not believe that there is any material market risk exposure with respect to derivative or other financial instruments which would require disclosure under this item. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not a party to any material legal proceedings. ITEM 2. CHANGES IN SECURITIES Not Applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None. (b) Reports on Form 8-K: None. 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ROCHESTER MEDICAL CORPORATION Date: February 12, 2001 By: /s/ Anthony J. Conway ------------------------- Anthony J. Conway CHIEF EXECUTIVE OFFICER Date: February 12, 2001 By: /s/ David A. Jonas ------------------------- David A. Jonas CONTROLLER 11 -----END PRIVACY-ENHANCED MESSAGE-----