-----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, US7X4eOiNBiVk9wsIe5dw3nT2reKtb/CkWXSvwsvbx6WiV9T9kO/7cU0Ue8sLfiQ /+NZkJLlSJex/FyRlezHZg== 0000897101-98-000143.txt : 19980218 0000897101-98-000143.hdr.sgml : 19980218 ACCESSION NUMBER: 0000897101-98-000143 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 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: SEC FILE NUMBER: 000-18933 FILM NUMBER: 98538910 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 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, 1997 Commission file number: 0-18933 ROCHESTER MEDICAL CORPORATION (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER) MINNESOTA 41-1613227 (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) ONE ROCHESTER MEDICAL DRIVE, STEWARTVILLE, MN 55976 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (507) 533-9600 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 latest practicable date: 5,261,500 Common Shares as of February 12, 1998. Table of Contents ROCHESTER MEDICAL CORPORATION Report on Form 10-Q for quarter ended December 31, 1997 PART 1 FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Balance Sheets - - December 31, 1997 and 1 September 30, 1997 Statements Of Operations - - Three months ended 2 December 31, 1997 and 1996 Statements of Cash Flows - - Three months ended 3 December 31, 1997 and 1996 Notes to Financial Statements 4 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations. 5 PART II OTHER INFORMATION 8 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ROCHESTER MEDICAL CORPORATION BALANCE SHEETS
December 31, September 30, 1997 1997 ------------ ------------ ASSETS CURRENT ASSETS: Cash and Cash Equivalents $ 310,266 $ 1,191,428 Marketable Securities 19,486,752 3,447,461 Accounts Receivable 1,468,892 1,967,194 Inventories 1,963,961 1,653,733 Prepaid Expenses And Other Current Assets 393,489 253,785 ------------ ------------ TOTAL CURRENT ASSETS 23,623,360 8,513,601 PROPERTY AND EQUIPMENT Land and Buildings 2,447,532 2,438,826 Equipment and Fixtures 9,903,282 9,186,588 ------------ ------------ 12,350,814 11,625,414 Less: Accumulated Depreciation (2,022,262) (1,855,980) ------------ ------------ TOTAL PROPERTY AND EQUIPMENT 10,328,552 9,769,434 INTANGIBLE ASSETS Patents, Less Accumulated Amortization 307,502 330,338 ------------ ------------ TOTAL ASSETS $ 34,259,414 $ 18,613,373 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 422,389 $ 457,564 Accrued Expenses 1,275,238 974,836 ------------ ------------ TOTAL CURRENT LIABILITIES 1,697,627 1,432,400 Shareholders' equity Common Stock, no par value: Authorized--20,000,000 Issued and Outstanding Shares--5,261,500 --Dec, 1997 and 4,133,500--Sep 1997 40,584,202 24,697,199 Accumulated Deficit (8,022,415) (7,516,226) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 32,561,787 17,180,973 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 34,259,414 $ 18,613,373 ============ ============
Note - The Balance Sheet at September 30, 1997 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 STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended December 31, ---------------------------- 1997 1996 ----------- ----------- NET SALES $ 1,855,287 $ 1,727,840 Cost Of Sales 1,271,321 1,086,816 ----------- ----------- GROSS PROFIT 583,966 641,024 COSTS AND EXPENSE: Marketing and Selling 632,610 523,016 Research and Development 298,153 411,925 General and Administrative 326,872 343,745 ----------- ----------- TOTAL OPERATING EXPENSES 1,257,635 1,278,686 ----------- ----------- LOSS FROM OPERATIONS (673,669) (637,662) OTHER INCOME (EXPENSE): Interest Income 172,652 204,377 Interest Expense -- (71,250) ----------- ----------- TOTAL OTHER INCOME (EXPENSE) 172,652 133,127 ----------- ----------- NET LOSS $ (501,017) $ (504,535) =========== =========== NET LOSS PER COMMON SHARE (Basic and Diluted) $ (0.11) $ (0.12) =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 4,771,200 4,128,200 =========== =========== See Notes to Financial Statements STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended December 31, ------------------------------ 1997 1996 ------------ ------------ OPERATING ACTIVITIES Net Loss $ (501,017) $ (504,535) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 198,312 133,349 Changes in assets and liabilities: Decrease In Accounts Receivable 498,302 190,093 (Increase) Decrease In Inventories (315,400) 10,232 (Increase) In Other Current Assets (139,703) (4,374) (Decrease) In Accounts Payable (35,175) (652,104) Increase In Other Current Liabilities 300,401 135,852 ------------ ------------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,720 (691,487) INVESTING ACTIVITY Capital expenditures (725,400) (1,403,390) Patents (9,195) (14,383) (Purchase) Of Marketable Securities (18,539,333) (9,755,794) Sales and Maturities Of Marketable Securities 2,500,043 6,793,405 ------------ ------------ NET CASH (USED IN) INVESTING ACTIVITIES (16,773,885) (4,380,162) FINANCING ACTIVITIES Interest Expense Added To Note Payable -- 71,250 Proceeds from Sale of Common Stock 15,887,003 14,750 ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 15,887,003 86,000 ------------ ------------ (DECREASE) IN CASH AND CASH EQUIVALENTS (881,162) (4,985,649) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,191,428 8,394,607 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 310,266 $ 3,408,958 ============ ============
See Notes to Financial Statements ROCHESTER MEDICAL CORPORATION Notes to Financial Statements (Unaudited) December 31, 1997 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 1997 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, 1997 are not necessarily indicative of the results that may be expected for the year ending September 30, 1998. NOTE B - - EARNINGS (LOSS) PER SHARE The Company has adopted Financial Accounting Standards Board Statement No. 128, "Earnings Per Share". This Statement replaces previously reported primary and fully diluted earnings per share (EPS) with basic and diluted EPS. Unlike primary EPS, basic EPS excludes any dilutive effects of options, warrants and convertible debt. Diluted EPS is very similar to the previously reported fully diluted EPS. For the three-month periods ended December 31, 1997 and 1996, there is no difference between basic and diluted net loss per share or between basic and net loss per share as previously reported. Common equivalent shares from stock options and convertible debt are excluded as their effects are antidilutive. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company develops, manufactures and markets innovative urinary continence care products for urinary dysfunction management and urine drainage management. The Company currently manufactures and markets a broad line of functionally and technologically enhanced latex-free versions of standard continence care products, including male external catheters, Foley catheters and intermittent catheters. The Company markets its products under its own ROCHESTER MEDICAL(R) brand and through private label arrangements. 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 ------------------ 1997 1996 ---- ---- Net Sales Private Label ............ 73% 87% Rochester Medical Brand .. 27% 13% ---- ---- Total Net Sales ............... 100% 100% Cost of Sales ................. 69% 63% ---- ---- Gross Margin .................. 31% 37% Operating Expenses Marketing and Selling .... 34% 30% Research and Development . 16% 24% General and Administrative 17% 20% ---- ---- Total Operating Expenses ...... 67% 74% Loss From Operations .......... (36%) (37%) ---- ---- Net Loss ...................... (27%) (29%) FISCAL QUARTERS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996 NET SALES. Net sales increased 7% to $1,855,000 for the first quarter of fiscal 1998 from $1,728,000 for the comparable quarter last year, primarily as a result of increased sales of Rochester Medical brand products. Sales of Rochester Medical brand products increased 117%, with growth in both domestic and international markets. Sales to private label customers decreased 10% in the fourth quarter of fiscal 1998 as compared to the same period of fiscal 1997 as a result of lower sales to ConvaTec which were partially offset by increased sales to other private label customers. GROSS MARGIN. The Company's gross margin was 31% for the first quarter of fiscal 1998 compared with 37% for the same period last year. Gross margin in the first quarter of fiscal 1997 was lower as compared to the first quarter of the prior fiscal year primarily due to increased depreciation expense associated with the expansion of male external catheter production capacity, increases in labor rates and recent investment in production support areas. MARKETING AND SELLING. Marketing and selling expense increased 19% for the first quarter of fiscal 1998 to $633,000 from $523,000 for the comparable quarter last year. The increase in expense primarily relates to expansion of the domestic field sales force to promote sales growth of Rochester Medical brand products. RESEARCH AND DEVELOPMENT. Research and development expense decreased 28% to $298,000 in the first quarter of fiscal 1998 from $412,000 for the comparable quarter last year. The decrease in expense primarily reflects the completion of clinical tests for the nitrofuran delivery catheter in early 1997. GENERAL AND ADMINISTRATIVE. General and administrative expense decreased 5% to $327,000 in the first quarter of fiscal 1998 from $344,000 for the comparable quarter last year. The decrease in expense reflects improved productivity of administrative resources and a temporary delay in hiring and information technology investments pending receipt of FDA approval for the Nitrofuran Delivery Catheter. INTEREST INCOME AND (EXPENSE). Interest income decreased by 16% to $173,000 for the first quarter of fiscal 1998 from $204,000 for the comparable quarter last year. The average balance of invested assets was lower in the first quarter of fiscal 1998 versus the comparable quarter of the prior year due to capital expenditures for production infrastructure expansion throughout 1997 and to the timing of receipt of proceeds from the public offering. Interest expense has been eliminated in the first quarter of fiscal 1998, reflecting repayment of the $3 million convertible loan from ConvaTec, with accrued interest, on September 30, 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's cash, cash equivalents and marketable securities were $19,797,000 at December 31, 1997 compared with $4,639,000 at September 31, 1997. The increase reflects the receipt of public offering proceeds of $15,887,000 in November, 1997. The Company generated a net $6,000 of cash from operating activities during the quarter, reflecting substantial collections of accounts receivable and the timing of accounts payable disbursements. Capital expenditures of $725,000 were made during the quarter, substantially all of which relate to the Company's new manufacturing facilities. Inventory levels increased moderately as planned, restoring stock levels in line with current sales trends. The Company believes that its capital resources on hand at December 31, 1997, 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, 1997. BUSINESS OUTLOOK The following discussion contains forward looking statements that involve risks and uncertainties, including the timing of purchases by customers, 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-K (Part II, Item 6) for the year ended September 30, 1997. The Company anticipates continued sales growth of currently marketed products under its own ROCHESTER MEDICAL(R) brand and under private label arrangements, other than ConvaTec. The Company was recently awarded a contract with the Veteran's Administration to supply its hospitals nationwide with non-latex self-self adhering male external catheters. The Company also reached agreement with Maersk Medical, a division of A. P. Mueller Group, to supply its worldwide requirements of silicone Foley catheters. In December 1997, ConvaTec announced a reorganization of senior management and a restructuring of its business. The Company and ConvaTec are in continuing discussions regarding their strategic relationship, including future sales trends and distribution activities for the Company's products. Based on those discussions, the Company presently estimates that ConvaTec order volumes for fiscal 1998 are likely to approximate 50% of ConvaTec's order volumes for fiscal 1997, as ConvaTec continues the redeployment of its purchased inventory. In January 1997, the Company received FDA marketing approval for its new Nitrofuran Delivery Catheter. The approval was based on the results of a rigorous clinical study which showed that use of the Nitrofuran Delivery Catheter resulted in a substantial decrease in the incidence of catheter induced urinary tract bacterial infection during the first seven days of catheterization when compared to a control group. The Company plans to introduce the new catheter at industry trade shows being held during May 1998. The Company is aware of the possibility that some computer programs may fail or cause erroneous results due to their innability to accommodate the date 2000. The principal components of the Company's computer systems have been recently purchased. Although the Company is not presently aware of any such problems with its computer systems, it plans to make appropriate inquiries to its vendors, and does not now know what the results of those inquiries may be. The Company continues to receive favorable results from its multi-site clinical trial of its FEMSOFT(TM) insert, a soft, liquid-filled, conformable urethral insert for managing female incontinence. The Company plans to use that data to support its submission to the FDA later this year. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There 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 he 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 13, 1998 By: /s/ Anthony J. Conway --------------------- Anthony J. Conway Chief Executive Officer, Date: February 13, 1998 By: /s/ Brian J. Wierzbinski ------------------------ Brian J. Wierzbinski, Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS SEP-30-1998 SEP-01-1997 DEC-31-1997 310,266 19,486,752 1,522,991 54,099 1,963,961 23,623,360 12,350,814 2,022,262 34,259,414 1,697,627 0 0 0 40,584,202 0 34,259,414 1,855,287 1,855,287 1,271,321 2,528,956 0 (673,669) 0 0 0 0 0 0 0 (501,017) (0.11) (0.11)
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