Add
ROCM to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| ROCM > SEC Filings for ROCM > Form 10-Q on 11-Aug-2008 | All Recent SEC Filings |
11-Aug-2008
Quarterly Report
Three Months Ended Nine Months Ended
June 30, June 30,
2008 2007 2008 2007
Net Sales 100 % 100 % 100 % 100 %
Cost of Sales 55 % 47 % 53 % 48 %
Gross Margin 45 % 53 % 47 % 52 %
Operating Expenses:
Marketing and Selling 29 % 22 % 27 % 19 %
Research and Development 2 % 3 % 3 % 3 %
General and Administrative 19 % 17 % 20 % 21 %
Total Operating Expenses 50 % 42 % 50 % 43 %
Income (loss) from Operations (6 )% 11 % (3 )% 9 %
Interest Income (Expense), Net 2 % 4 % 2 % 2 %
Other Income, 0 % 0 % 0 % 159 %
Net Income (loss) before taxes (4 )% 15 % (1 )% 170 %
Income tax expense (benefit) (8 )% 5 % (2 )% 33 %
Net Income after taxes 4 % 10 % 2 % 137 %
|
The following table sets forth, for the periods indicated, net sales information by product category (base products and advanced products), marketing method (private label and Rochester Medical® branded sales) and distribution channel (domestic and international markets) (all dollar amounts below are in thousands):
Fiscal Quarter Ended June 30,
2008 2007
Domestic International Total Domestic International Total
Private label sales:
Base products $ 1,605 $ 474 $ 2,079 $ 1,957 $ 1,222 $ 3,179
Advanced products 144 - 144 309 - 309
Total private label sales $ 1,749 $ 474 $ 2,223 $ 2,266 $ 1,222 $ 3,488
Branded sales:
Base products $ 930 $ 4,245 $ 5,175 $ 851 $ 3,543 $ 4,394
Advanced products 677 166 843 439 46 485
Total branded sales $ 1,607 $ 4,411 $ 6,018 $ 1,290 $ 3,589 $ 4,879
Total net sales: $ 3,356 $ 4,885 $ 8,241 $ 3,556 $ 4,811 $ 8,367
Fiscal Year to Date Ended June 30,
2008 2007
Domestic International Total Domestic International Total
Private label sales:
Base products $ 5,028 $ 2,358 $ 7,386 $ 5,516 $ 3,522 $ 9,038
Advanced products 749 - 749 751 550 1,301
Total private label sales $ 5,777 $ 2,358 $ 8,135 $ 6,267 $ 4,072 $ 10,339
Branded sales:
Base products $ 2,927 $ 12,387 $ 15,314 $ 2,669 $ 9,665 $ 12,334
Advanced products 1,880 351 2,231 1,258 295 1,553
Total branded sales $ 4,807 $ 12,738 $ 17,545 $ 3,927 $ 9,960 $ 13,887
Total net sales: $ 10,584 $ 15,096 $ 25,680 $ 10,194 $ 14,032 $ 24,226
|
Three Month and Nine Month Periods Ended June 30, 2008 and June 30, 2007
Net Sales. Net sales for the third quarter of fiscal 2008 decreased 2% to
$8,241,000 from $8,367,000 for the comparable quarter of last fiscal year. The
sales decrease primarily resulted from an increase in sales of branded products
both domestically and in the U.K offset by decreased private label sales.
Domestic sales of branded products increased by 24% for the quarter compared to
the same period last year. Our international branded sales increased 23%
compared to the same period last year. Sales of branded products comprised 73%
of total sales. Private label sales decreased 36% for the quarter compared to
the same period last year. We believe the decrease in private label sales is
primarily attributable to the timing of orders and ordering patterns of large
private label customers that vary up and down in any given quarter.
Net sales for the nine months ended June 30, 2008 increased 6% to
$25,680,000 from $24,226,000 for the comparable nine-month period of last fiscal
year. Factors affecting the comparative nine-month sales are generally
consistent with those discussed above for the current quarter.
Gross Margin. Our gross margin as a percentage of net sales for the third
quarter of fiscal 2008 was 45% compared to 53% for the comparable quarter of
last fiscal year. The decrease in gross margin this quarter was primarily due to
material cost increases, a change in product mix and manufacturing variances
resulting from lower volumes of private label products.
Marketing and Selling. Marketing and selling expense primarily includes
costs associated with base salary paid to sales and marketing personnel, sales
commissions, and travel and advertising expense. Marketing and selling expense
for the third quarter of fiscal 2008 increased 30% to $2,350,000 from $1,810,000
for the comparable quarter of last fiscal year. The increase in marketing and
selling expense is primarily due to increased sales personnel and related
expenses incurred through the addition of sales and marketing staff in both our
U.S. and U.K. operations, and increased advertising expense related to marketing
in the U.K. and the U.S. acute care market, as part of our strategic plan for
this fiscal year. Marketing and selling expense as a percentage of net sales for
the fiscal quarters ended June 30, 2008 and 2007 was 29% and 22%, respectively.
Marketing and selling expense for the nine months ended June 30, 2008
increased 52% to $6,955,000 from $4,564,000 for the comparable nine-month period
of last fiscal year. Factors affecting the comparative nine-month expense levels
are generally consistent with those discussed above for the current quarter.
Research and Development. Research and development expense primarily
includes internal labor costs, as well as expense associated with third-party
vendors performing validation and investigative research regarding our products
and development activities. Research and development expense for the third
quarter of fiscal 2008 decreased $65,000 to $202,000 from $267,000 for the
comparable quarter of last fiscal year. The decrease in research and development
expense relates primarily to decreased expenses related to salaries and wages
offset by increases in testing and development of new and enhanced products.
Research and development expense as a percentage of net sales for the fiscal
quarters ended June 30, 2008 and 2007 was 2% and 3%, respectively.
Research and development expense for the nine months ended June 30, 2008
increased 3% to $735,000 from $711,000 for the comparable nine-month period of
last fiscal year. The increase in research and development expense for the nine
months ended June 30, 2008 relates primarily to increases in testing and
development of new and enhanced products.
General and Administrative. General and administrative expense primarily
includes payroll expense relating to our management and accounting, information
technology and human resources staff, as well as fees and expenses of outside
legal counsel and accounting advisors. General and administrative expense for
the third quarter of fiscal 2008 increased 9% to $1,578,000 from $1,444,000 for
the comparable quarter of last fiscal year. The increase in general and
administrative expense is primarily related to increased legal fees and audit
related expenses. General and administrative expense as a percentage of net
sales for the fiscal quarters ended June 30, 2008 and 2007 was 19% and 17%,
respectively.
General and administrative expense for the nine months ended June 30, 2008
increased $7,000 to $5,210,000 from $5,203,000 for the comparable nine-month
period of last fiscal year. The increase in general and administrative expenses
for the nine month period primarily reflects a decrease in stock option
compensation expense offset by an increase in legal and audit fees from the
prior year.
Interest Income. Interest income for the third quarter of fiscal 2008
decreased 41% to $233,000 from $394,000 for the comparable quarter of last
fiscal year. The decrease in interest income reflects lower amounts being
invested than the previous year and at lower interest rates.
Interest income for the nine months ended June 30, 2008 increased 15% to
$1,042,000 from $908,000 for the comparable nine-month period of last fiscal
year. The increase reflects significantly higher investment balances for the
entire nine months in fiscal 2008 resulting from proceeds of lawsuit settlements
received late in the first quarter of fiscal 2007.
Interest Expense. Interest expense for the third quarter of fiscal 2008
increased $27,000 to $117,000 from the comparable quarter of last fiscal year.
The increase in interest expense reflects adjustments made in the prior year to
true up interest expense when making our first annual term loan debt payment.
Interest expense for the nine months ended June 30, 2008 decreased $7,000
to $395,000 from $402,000 for the comparable nine-month period of last fiscal
year. The decrease in interest expense reflects lower amounts of debt as a
result of quarterly and annual debt payments.
Income Taxes. We recorded a valuation allowance to reduce the carrying
value of our net deferred tax assets to the amount that is more likely than not
to be realized. Prior to fiscal 2005, we recorded a full valuation allowance
against our deferred tax assets due to the uncertainty of the realization and
timing of the benefits from those deferred tax assets as we had not achieved a
sufficient level of sustained profitability. During 2005, management concluded
that we had attained a sufficient level of sustained profitability to allow the
valuation allowance to be reduced to reflect management's estimate of the amount
of deferred tax assets that will be realized in the near term. During the first
quarter of fiscal 2007, our earnings fully offset the valuation allowance. We
utilized our entire $20.7 million net operating loss carryforward during fiscal
2007. For the quarter ended June 30, 2008, we had an effective income tax rate
of approximately (348%) due to tax adjustments and credits known after the tax
return filing. In future periods of taxable earnings, we expect to report an
income tax provision using an effective tax rate to be in the range of 34 - 35%.
Liquidity and Capital Resources
Our cash, cash equivalents and marketable securities were $36.5 million at
June 30, 2008 compared to $37.1 million at September 30, 2007, reflecting an
increase in cash and cash equivalents offset by a decrease in marketable
securities. The increase in cash and cash equivalents primarily resulted from
cash provided from operations and the sale of common stock upon exercise of
options offset by capital expenditures and repayment of long-term debt. As of
June 30, 2008, we had $28.7 million invested in marketable securities as a
result of the cash settlements received from lawsuits. The marketable securities
primarily consist of $21 million invested in U.S. treasury bills, $4.8 million
invested in a high quality, investment grade municipal bond issued by the State
of New Jersey with a variable interest rate that matures within the next 12
months, and $3 million invested in mutual funds. We are currently reporting an
unrealized loss of $59,375 with respect to the municipal bond because the
secondary market for auction rate securities is currently illiquid, and an
unrealized loss of $306,189 related to the mutual fund as a result of the recent
fluctuations in the credit markets impacting the current market value. We
consider these unrealized losses temporary as we have the intent and ability to
hold these investments long enough to avoid realizing any significant losses.
During the nine-month period ended June 30, 2008, we generated $621,000 of
cash from operating activities compared to $36,021,000 of cash being provided by
operations during the comparable period of the prior fiscal year (which included
cash received from lawsuit settlements). Decreased net cash from operating
activities in the first nine months of fiscal 2008 primarily reflects net income
before depreciation and amortization and increases in inventories and other
current assets and decreases in accounts receivables, income tax payable and
other current liabilities, offset by increases in accounts payable. Accounts
receivable balances during this period decreased 3% or $187,000, primarily due
to the timing of large shipments. Inventories increased 3% or $198,000. Accounts
payable increased 103% or $1,120,000, primarily reflecting timing of expenses.
Other current liabilities decreased 9% or $172,000, primarily reflecting
payments of annual executive bonuses. Income taxes decreased $2,638,000 in the
current period due to various state tax payments and a reclassification to other
current assets. In addition, capital expenditures during this period were
$1,112,000 compared to $1,964,000 for the comparable period last year.
In June 2006, we entered into a $7,000,000 credit facility with U.S. Bank
National Association. The credit facility consists of a $5,000,000 term loan
payable in five years and accruing interest at a rate equal to 6.83%, and a
revolving line of credit of up to $2,000,000, maturing annually on March 31,
with interest payable monthly at a floating rate based on the quoted one-month
LIBOR rate plus 1.60%. We have renewed the revolving line of credit through
March 31, 2009. As of June 30, 2008, we had no borrowings under the revolving
line of credit and the term loan had an outstanding balance of $3,205,781. Our
obligations are secured by our assets, including accounts receivable,
investments, general intangibles, inventory, and equipment. In June 2008, we
refinanced the term loan at a fixed rate of 4.77%. The term loan agreement and
revolving credit agreement require us to comply with certain financial
covenants,
including a fixed charge coverage ratio and minimum working capital of
$8 million, and restrict certain additional indebtedness and liens. As of
June 30, 2008, we were in compliance with the bank covenants.
We believe that our capital resources on hand at June 30, 2008, together
with cash generated from sales, will be sufficient to satisfy our 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 our Annual Report on Form 10-K
for the fiscal year ended September 30, 2007. In the event that additional
financing is needed, we may seek to raise additional funds through public or
private financing. Any additional equity financing may be dilutive to
shareholders, and debt financing, if available, may involve significant
restrictive covenants. Failure to raise capital when needed could have a
material adverse effect on our business, financial condition and results of
operations. There can be no assurance that such financing, if required, will be
available on terms satisfactory to us, if at all.
Cautionary Statement Regarding Forward Looking Information
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 our actual results, performance
or achievements, 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 market acceptance of new product introductions;
• the uncertainty of gaining new strategic relationships;
• the uncertainty of timing of revenues from private label sales (particularly with respect to international customers);
• the uncertainty of successfully integrating and growing our new UK operations and the risks associated with operating an international business;
• FDA and other regulatory review and response times;
• the securing of Group Purchasing Organization contract participation;
• the uncertainty of gaining significant sales from secured GPO contracts;
and other risk factors listed from time to time in our SEC reports, including, without limitation, the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2007.
|
|