-----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, W1GkeMh2tLZi9FPsBlxcFrGZ30pkFd/NJ6X1eY9DNDvwD3v/ZiAk5Ci2TqJCkvXI zA/CH5Armm/FJyvIXnky6w== 0000897101-02-000082.txt : 20020414 0000897101-02-000082.hdr.sgml : 20020414 ACCESSION NUMBER: 0000897101-02-000082 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020211 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: 1934 Act SEC FILE NUMBER: 000-18933 FILM NUMBER: 02534025 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 rochester020639_10q.txt ROCHESTER MEDICAL CORPORATION FORM 10-Q 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, 2001 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. 5,328,500 Common Shares as of February 4, 2002. TABLE OF CONTENTS ROCHESTER MEDICAL CORPORATION REPORT ON FORM 10-Q FOR QUARTER ENDED DECEMBER 31, 2001 PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Balance Sheets -- December 31, 2001 and September 30, 2001.............. 3 Statements of Operations -- Three months ended December 31, 2001 and 2000.................................................................. 4 Statements of Cash Flows -- Three months ended December 31, 2001 and 2000.................................................................. 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 ..... 9 PART II. OTHER INFORMATION ................................................... 9 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ROCHESTER MEDICAL CORPORATION BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30, 2001 2001 -------------- -------------- ASSETS (UNAUDITED) CURRENT ASSETS: Cash and Cash Equivalents ..................................... $ 509,549 $ 1,842,796 Marketable Securities ......................................... 4,016,440 3,904,840 Accounts Receivable ........................................... 1,621,357 1,499,337 Inventories ................................................... 2,586,823 2,099,226 Prepaid Expenses and Other Assets ............................. 285,903 177,105 -------------- -------------- TOTAL CURRENT ASSETS .................................... 9,020,072 9,523,304 PROPERTY AND EQUIPMENT Land and Buildings ............................................ 5,454,537 5,454,537 Equipment and Fixtures ........................................ 10,282,389 10,175,200 -------------- -------------- 15,736,926 15,629,737 Less: Accumulated Depreciation ................................ (5,990,266) (5,682,089) -------------- -------------- TOTAL PROPERTY AND EQUIPMENT ............................ 9,746,660 9,947,648 INTANGIBLE ASSETS Patents, Less Accumulated Amortization ........................ 188,196 188,345 -------------- -------------- TOTAL ASSETS ..................................................... $ 18,954,928 $ 19,659,297 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable .............................................. $ 523,901 $ 383,145 Accrued Expenses .............................................. 418,469 820,967 -------------- -------------- TOTAL CURRENT LIABILITIES ............................... 942,370 1,204,112 SHAREHOLDERS' EQUITY Common Stock, no par value: Authorized -- 20,000,000 Issued and Outstanding Shares -- 5,328,500 ........... 41,249,003 41,249,003 Accumulated Deficit ........................................... (23,205,400) (22,660,988) Unrealized loss on available-for-sale securities .............. (31,045) (132,830) -------------- -------------- TOTAL SHAREHOLDERS' EQUITY .............................. 18,012,558 18,455,185 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY ......................... $ 18,954,928 19,659,297 ============== ==============
Note -- The Balance Sheet at September 30, 2001 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, ------------------------------- 2001 2000 ------------- ------------- NET SALES ................................................. $ 2,326,433 $ 1,855,216 COST OF SALES ............................................. 1,751,059 1,291,871 ------------- ------------- GROSS PROFIT .............................................. 575,374 563,345 COSTS AND EXPENSES: Marketing and Selling .................................. 536,054 790,566 Research and Development ............................... 190,495 255,026 General and Administrative ............................. 451,298 475,741 ------------- ------------- TOTAL OPERATING EXPENSES ............................ 1,177,847 1,521,333 ------------- ------------- LOSS FROM OPERATIONS ...................................... (602,473) (957,988) OTHER INCOME: Interest Income ........................................ 58,061 125,394 ------------- ------------- NET LOSS .................................................. $ (544,412) $ (832,594) ============= ============= NET LOSS PER COMMON SHARE (Basic and Diluted) ....................................... $ (0.10) $ (0.16) ============= ============= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ............................................... 5,328,500 5,338,900 ============= =============
See Notes to Financial Statements 4 ROCHESTER MEDICAL CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, ------------------------------- 2001 2000 ------------- ------------- OPERATING ACTIVITIES Net Loss .............................................................. $ (544,412) $ (832,594) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ......................................... 313,809 338,113 Other non-cash compensation ........................................... -- 16,620 Changes in assets and liabilities: Accounts Receivable ................................................... (122,020) (208,866) Inventories ........................................................... (487,598) (85,291) Other Current Assets .................................................. (108,799) 41,319 Accounts Payable ...................................................... 140,755 (249,655) Other Current Liabilities ............................................. (402,498) (383,048) ------------- ------------- NET CASH USED IN OPERATING ACTIVITIES ....................... (1,210,763) (1,363,402) INVESTING ACTIVITY Capital Expenditures .................................................. (107,189) (57,274) Patents ............................................................... (5,483) (10,710) Sales (Purchases) of Marketable Securities, Net ....................... (9,812) 628,973 ------------- ------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ................... (122,484) 560,989 FINANCING ACTIVITIES Proceeds from Sales (Purchases) of Common Stock ....................... -- -- ------------- ------------- NET CASH USED IN FINANCING ACTIVITIES ................................. -- -- DECREASE IN CASH AND CASH EQUIVALENTS .................................... (1,333,247) (802,413) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ......................................... 1,842,796 3,204,161 CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................... $ 509,549 $ 2,401,748 ============= =============
See Notes to Financial Statements 5 ROCHESTER MEDICAL CORPORATION NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2001 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 2001 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, 2001 are not necessarily indicative of the results that may be expected for the year ending September 30, 2002. NOTE B -- NET LOSS PER COMMON SHARE For the three-month period ended December 31, 2001, 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. NOTE C -- INVESTMENTS IN MARKETABLE SECURITIES As of December 31, 2001, the carrying value of the Company's marketable securities, which consisted primarily of corporate bonds and commercial paper, was $4.0 million. This total included a $1.0 million corporate bond from Pacific Gas & Electric ("PG&E") with a carrying value of $935,000 on December 31, 2001, which matured December 24, 2001, but which has not yet been paid. On April 6, 2001, PG&E filed for Chapter 11 bankruptcy protection. While PG&E's management has stated their intent to pay their creditors, the numerous political and economic factors influencing the California utility market coupled with PG&E's bankruptcy filing could potentially impact the timing and/or actuality of payments. However, the Company currently believes that it will realize the full value of this investment. NOTE D -- INVENTORIES Inventories consist of the following: DECEMBER 31, SEPTEMBER 30, 2001 2001 ------------- ------------- Raw materials .............................. $ 615,075 $ 675,234 Work-in-progress ........................... 1,257,441 892,736 Finished goods ............................. 814,307 631,256 Reserve for inventory obsolescence ......... (100,000) (100,000) ------------- ------------- $ 2,586,823 $ 2,099,226 ============= ============= NOTE E -- COMPREHENSIVE LOSS Comprehensive loss includes net loss and all other nonowner changes in shareholders' equity during a period. The comprehensive loss for the first quarter ended December 31, 2001 and 2000 consists of the following: THREE MONTHS ENDED DECEMBER 31, ------------------------------- 2001 2000 ------------- ------------- Net loss ................................... $ (544,412) $ (832,594) Unrealized gain on securities held, net .... 101,785 -- ------------- ------------- $ (442,627) $ (832,594) ============= ============= 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, ------------ 2001 2000 ---- ---- Total Net Sales .................................. 100% 100% Costs of Sales ................................... 75% 70% ---- ---- Gross Margin ..................................... 25% 30% Operating Expenses Marketing and Selling ................... 23% 42% Research and Development ................ 8% 14% General and Administrative .............. 19% 26% ---- ---- Total Operating Expenses ......................... 50% 82% Loss From Operations ............................. (25%) (52%) Interest Income (Expense) Net .................... 2% 7% ---- ---- Net Loss ......................................... (23%) (45%) ==== ==== THREE MONTH PERIODS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2000 NET SALES. Net sales for the first quarter of fiscal 2002 increased 25% to $2,326,000 from $1,855,000 for the comparable quarter of last fiscal year. The sales increase resulted from an increase in both branded and private label sales. GROSS MARGIN. The Company's gross margin as a percentage of net sales for the first quarter of fiscal 2002 was 25% compared to 30% for the comparable quarter of last fiscal year. The decrease in the current quarter's margin reflected a higher proportion of sales of higher margin products during the first fiscal quarter of fiscal 2001, as well as lower labor and scrap efficiencies in the first quarter of fiscal 2002 due to the hiring of new personnel. MARKETING AND SELLING. Marketing and selling expenses for the first quarter of fiscal 2002 were down 32% to $536,000 from $791,000 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 FEMSOFT(R) INSERT in the comparable quarter of the prior year, together with decreases in acute care marketing costs and domestic sales costs in the first quarter of fiscal 2002. 7 RESEARCH AND DEVELOPMENT. Research and development expense for the first quarter of fiscal 2002 decreased 25% to $191,000 from $255,000 for the comparable quarter of last fiscal year. The decrease in research and development expense primarily related to decreased clinical costs. GENERAL AND ADMINISTRATIVE. General and administrative expense for the first quarter of fiscal 2002 decreased 5% to $451,000 from $476,000 for the comparable quarter of last fiscal year. The decrease in general and administrative expense is primarily related to restructuring savings in the first quarter of fiscal 2002. INTEREST INCOME. Interest income for the first quarter of fiscal 2002 decreased 54% to $58,000 from $125,000 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, as well as generally lower interest rates on short-term investments. LIQUIDITY AND CAPITAL RESOURCES The Company's cash, cash equivalents and marketable securities were $4,526,000 at December 31, 2001 compared with $5,748,000 at September 30, 2001. The Company used $1,211,000 of cash from operating activities during the quarter, primarily reflecting the net loss before non-cash depreciation and non-cash compensation, as well as increased inventory levels and payment of accrued liabilities. During the three-month period ended December 31, 2001, the Company's working capital position, excluding cash and marketable securities, increased by a net $980,000. Accounts receivable balances during this period increased 8% or $122,000 as a result of increased sales and the timing of orders. Inventories increased 23% or $488,000 primarily as a result of the Company expanding its product lines, and increasing its production of finished goods to meet customer demand. Other current assets increased 61% or $109,000 during the recent three-month period primarily as a result of accrued interest receivable relating to the Company's PG&E bond asset. Current liabilities decreased 22% or $262,000 during the recent three-month period, reflecting payments of accrued compensation paid after the Company's fiscal year end. The Company believes that its capital resources on hand at December 31, 2001, 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, 2001. 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 8 hydrophilic intermittent catheters, the RELEASE-NF Foley catheters and the FEMSOFT INSERT; the uncertainty of insurance coverage of the FEMSOFT INSERT by additional insurers; the uncertainty of market acceptance of the RELEASE NF Foley 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 results of product evaluations; the securing of Group Purchasing Organization contract participation; the timing of purchases by customers (particularly international 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; 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, 2001. 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. However, as disclosed under Note C to the Company's financial statements that appears on page 6, the bankruptcy of PG&E could potentially impact the timing and/or actuality of payment of our $1.0 million PG&E corporate bond. 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 Not Applicable. ITEM 5. OTHER INFORMATION None. 9 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 11, 2002 By: /s/ Anthony J. Conway ------------------------------------- Anthony J. Conway CHIEF EXECUTIVE OFFICER Date: February 11, 2002 By: /s/ David A. Jonas ------------------------------------- David A. Jonas CHIEF FINANCIAL OFFICER AND TREASURER -----END PRIVACY-ENHANCED MESSAGE-----