-----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, SJAuXEIHih1OkDKFaieytk8N1SkhIgGN133bOh56Hknh1PWysv0ghOgOM9YUUI22 0v4nwUVbVZPs4ibkMamOqw== 0000897101-97-000093.txt : 19970221 0000897101-97-000093.hdr.sgml : 19970221 ACCESSION NUMBER: 0000897101-97-000093 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970210 SROS: NASD 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: 97521283 BUSINESS ADDRESS: STREET 1: 1500 SECOND AVE N W CITY: STEWARTVILLE STATE: MN ZIP: 55976 BUSINESS PHONE: 5075334203 MAIL ADDRESS: STREET 1: 1500 SECOND AVE NW CITY: STEWARTVILLE STATE: MN ZIP: 55976 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996 Commission File Number: 0-18933 ROCHESTER MEDICAL CORPORATION (Exact name of issuer as specified in its charter) MINNESOTA 41-1613227 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1500 SECOND AVENUE N. W. STEWARTVILLE, MINNESOTA 55976 (Address of principal executive offices) (507) 533-4203 Issuer's Telephone Number Check whether the issuer (1) 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 last practicable date: 4,128,500 Common Shares as of February 6, 1997. Total Number of Pages: 11 Index to Exhibits on Page: 9 TABLE OF CONTENTS ROCHESTER MEDICAL CORPORATION REPORT ON FORM 10-Q FOR QUARTER ENDED DECEMBER 31, 1996 PAGE PART 1 FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Balance Sheets -- December 31, 1996 and September 30, 1996 3 Statements Of Operations --Three months ended December 31, 1996 and 1995 4 Statements of Cash Flows --Three months ended December 31, 1996 and 1995 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II OTHER INFORMATION 10 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ROCHESTER MEDICAL CORPORATION BALANCE SHEETS DECEMBER 31, SEPTEMBER 30, 1996 1996 ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 3,408,958 $ 8,394,607 Marketable Securities 11,975,911 9,013,522 Accounts Receivable 1,323,484 1,513,577 Inventories 1,181,051 1,191,283 Prepaid Expenses And Other Current Assets 88,568 84,194 TOTAL CURRENT ASSETS 17,977,972 20,197,183 PROPERTY AND EQUIPMENT Land and Buildings 2,774,440 815,075 Equipment and Fixtures 3,373,532 3,929,507 6,147,972 4,744,582 Less: Accumulated Depreciation (1,538,006) (1,432,257) TOTAL PROPERTY AND EQUIPMENT 4,609,966 3,312,325 INTANGIBLE ASSETS Patents, Less Accumulated Amortization 365,015 378,232 TOTAL ASSETS $22,952,953 $23,887,740 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 305,847 $ 957,951 Accrued Compensation 200,468 74,499 Accrued Expenses 313,197 303,314 TOTAL CURRENT LIABILITIES 819,512 1,335,764 LONG-TERM DEBT 3,391,875 3,320,625 SHAREHOLDERS' EQUITY Common Stock, no par value: Authorized--20,000,000 Issued and Outstanding Shares--4,128,500 --Dec, 1996 and 4,127,500--Sep 1996 24,663,663 24,648,913 Accumulated Deficit (5,922,097) (5,417,562) TOTAL SHAREHOLDERS' EQUITY 18,741,566 19,231,351 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $22,952,953 $23,887,740 Note --The Balance Sheet at September 30, 1996 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 ROCHESTER MEDICAL CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED DECEMBER 31, 1996 1995 NET SALES $1,727,840 $ 957,999 Cost Of Sales 1,086,816 691,302 GROSS PROFIT 641,024 266,697 COSTS AND EXPENSE: Marketing and Selling 523,016 280,494 Research and Development 411,925 128,402 General and Administrative 343,745 111,427 TOTAL OPERATING EXPENSES 1,278,686 520,323 LOSS FROM OPERATIONS (637,662) (253,626) OTHER INCOME (EXPENSE): Interest Income 204,377 130,510 Interest Expense (71,250) (71,276) TOTAL OTHER INCOME (EXPENSE) 133,127 59,234 NET LOSS $ (504,535) $ (194,392) NET LOSS PER COMMON SHARE $ (0.12) $ (0.06) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 4,128,200 3,270,000 See Notes to Financial Statements ROCHESTER MEDICAL CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED DECEMBER 31, 1996 1995 OPERATING ACTIVITIES Net Loss $ (504,535) $ (194,392) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 133,349 97,785 Changes in assets and liabilities: (Increase) Decrease Accounts Receivable 190,093 (152,287) (Increase) Decrease Inventories 10,232 (104,033) (Increase) Decrease Other Current Assets (4,374) 73,614 Increase (decrease) Accounts Payable (652,104) (5,215) Increase (decrease) Other Current Liabilities 135,852 (97,581) NET CASH USED IN OPERATING ACTIVITIES (691,487) (382,109) INVESTING ACTIVITY Capital expenditures (1,403,390) (3,930) Patents (14,383) (26,244) (Increase) Decrease Marketable Securities (2,962,389) (1,255,202) NET CASH USED IN INVESTING ACTIVITIES (4,380,162) (1,285,376) FINANCING ACTIVITIES Interest Expense Added To Note Payable 71,250 71,250 Proceeds from Sale of Common Stock 14,750 16,217,393 NET CASH PROVIDED BY FINANCING ACTIVITIES 86,000 16,288,643 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,985,649) 14,621,158 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,394,607 551,142 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,408,958 $15,172,300 See Notes to Financial Statements ROCHESTER MEDICAL CORPORATION NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1996 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 1996 Form 10-KSB. 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, 1996 are not necessarily indicative of the results that may be expected for the year ending September 30, 1997. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company designs, develops, manufactures and markets disposable latex-free continence care and other urological devices. The Company markets its products under its own ROCHESTER MEDICAL(R) brand and through private label arrangements, including its strategic marketing alliance with ConvaTec, a division of the Bristol-Myers Squibb Company. During the quarter ended December 31, 1996, the Company completed a reorganization of its marketing and field sales groups, increased sales and marketing activities for its current product lines, and began construction necessary to house expanded production for its current products. The Company completed a major, year long clinical study of its Antibacterial Foley catheter at the University of Wisconsin, and began preparations to submit a 510(k) Notification to the FDA based on the favorable results of that study. The Company also completed arrangements for a multi-site clinical study of its FEMSOFT(tm) female continence insert, which began in January of 1997. 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 1996 1995 Net Sales Private Label 87% 73% Rochester Medical Brand. 13% 27% Total Net Sales 100% 100% Cost of Sales 63% 72% Gross Margin 37% 28% Operating Expenses Marketing and Selling. 30% 29% Research and Development. 24% 13% General and Administrative 20% 12% Total Operating Expenses 74% 54% Loss From Operations (37%) (26%) Interest Income (Expense) Net 8% 6% Net Loss (29%) (20%) FISCAL QUARTERS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995 NET SALES. Net Sales increased 80% to $1,727,800 for the first quarter of fiscal 1997 from $958,000 for the first quarter of fiscal 1996, due primarily to significant increases in private label order volumes from ConvaTec and Mentor. Sales of ROCHESTER MEDICAL(R) brand products were slightly below the comparable prior quarter due primarily to the timing of stocking orders to certain international distributors and to domestic field sales force reorganization. GROSS MARGIN. The Company's gross margin improved nine percentage points in the current quarter compared to the same quarter last year. The improvement was the result of manufacturing efficiencies from higher production volumes and labor productivity as well as favorable mix in private label sales. MARKETING AND SELLING. Marketing and selling expenses increased 87% to $523,000 for the first quarter of fiscal 1997 from $280,500 for the first quarter of fiscal 1996. The increase reflects planned acceleration of advertising and promotion spending and reorganization of the Company's marketing and sales groups, including the addition of a director of marketing for branded products and four field sales personnel. RESEARCH AND DEVELOPMENT. Research and development expenses increased 220% to $412,000 for the first quarter of fiscal 1997 from $128,400 for the first quarter of fiscal 1996. The increase primarily reflects costs associated with the commencement of multi-site clinical evaluations of the Company's FEMSOFT(tm) female continence insert. GENERAL AND ADMINISTRATIVE. General and administrative expense increased 208% to $343,700 for the first quarter of fiscal 1997 from $111,400 for the first quarter of fiscal 1996. The increased expense reflects the continued development of administrative infrastructure, which began in the second quarter of fiscal 1996 with the addition of a Chief Financial Officer and implementation of information systems, to support the Company's expanded activities and increased sales volumes. INTEREST INCOME (EXPENSE). Interest income increased by 57% to $204,400 for the first quarter of fiscal 1997 from $130,500 for the first quarter of fiscal 1996, as a result of earnings on cash invested from the proceeds of the Company's public offering in November 1995. Interest expense remained constant reflecting interest due on the $3 million convertible subordinated loan from ConvaTec. LIQUIDITY AND CAPITAL RESOURCES The Company's cash, cash equivalents and marketable securities were approximately $15,385,000 at December 31, 1996 compared to $17,408,000 at September 30, 1996. The Company used $691,487 of cash to finance operating activities, the majority of which relates to the net loss for the quarter. Capital expenditures totaling $1,403,000 were made during the quarter, substantially all of which relates to the Company's new manufacturing facilities. Changes in accounts receivable and current liability balances are due to the timing of receipts and payments. Inventory levels remained steady and in line with the Company's current sales trends. The Company believes that its capital resources on hand at December 31, 1996, 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-KSB (Part II, Item 6) for the fiscal year ended September 30, 1996. BUSINESS OUTLOOK The following discussion contains forward looking statements that involve risks and uncertainties, including the timing of purchases by customers, the successful renewal of a private label agreement presently in negotiations, manufacturing capacities for both current products and new products, the timing of clinical preference testing and product introductions, and FDA review and response times, as well as other risk factors listed from time to time in the Company's SEC reports, including, without limitation, the sections entitled "Business Outlook" and "Risk Factors" in the Company's Annual Report on Form 10-KSB (Part II, Item 6) for the year ended September 30, 1996. The Company continues to experience solid sales growth in private label sales, particularly to ConvaTec. The Company believes this growth trend will continue through the second quarter, however, growth may slow during the second half of the fiscal year due to significant non-recurring stocking orders from major private label customers in the prior year. The Company is presently concluding negotiations with Allegiance Euromedical ("Allegiance") to revise and extend its private label agreement. The agreement now being negotiated contemplates that the Company will conduct expanded packaging activities for Allegiance, which would offset the slower order volumes that the Company has experienced during the period of these negotiations. Should these negotiations conclude without renewal, sales growth during the second half of the fiscal year may be adversely affected. The Company anticipates increases in branded product sales from both domestic and overseas customers reflecting the results of sales activities by the Company's newly hired field sales force and from expansion of overseas distribution. The Company continues research and development activities for its high potential new products. Multi-site clinical trials of the Company's FEMSOFT(tm) female continence insert commenced in January 1997. The Company is also preparing to submit a 510-k notification for its Antibacterial Foley catheter. Construction of the Company's new manufacturing facility to house its FEMSOFT(tm) product line and expansion of its current manufacturing facility for its current products are proceeding on schedule. The Company continues to explore the prospect of additional financing to expand future marketing activities which may be necessary to properly bring its Antibacterial Foley catheter and FEMSOFT(tm) female continence insert to market, if and as those products receive FDA marketing approval, as well as for research and development activities necessary to bring other of its products in development to market. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not involved in any material legal proceedings. ITEM 2. CHANGES IN SECURITIES Not Applicable. The Company has made no sales of unregistered securities during the period covered by this Report. 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: 27. Financial Data Schedule (b) Reports on Form 8-K: None SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Rochester Medical Corporation Date: February 7, 1997 By: /S/ ANTHONY J. CONWAY Anthony J. Conway CHIEF EXECUTIVE OFFICER Date: February 7, 1997 By: /S/ BRIAN J. WIERZBINSKI Brian J. Wierzbinski CHIEF FINANCIAL OFFICER EX-27 2 FINANCIAL DATA SCHEDULE
5 YEAR SEP-30-1997 DEC-31-1996 3,408,958 11,975,911 1,376,484 53,000 1,181,051 17,977,972 6,147,972 1,538,006 22,952,953 819,512 0 0 0 24,663,663 0 22,952,953 1,727,840 1,727,840 1,086,816 2,365,502 0 (637,662) 71,250 0 0 0 0 0 0 (504,535) (0.12) (0.12)
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