================================================================================
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 JUNE 30, 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.)
1500 SECOND AVENUE N. W., STEWARTVILLE, MN 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 latest practicable date:
4,133,500 Common Shares as of August 4, 1997.
================================================================================
ROCHESTER MEDICAL CORPORATION
REPORT ON FORM 10-QSB
FOR QUARTER ENDED
JUNE 30, 1997
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Balance Sheets -- June 30, 1997 and September 30, 1996 ................... 1
Statements of Operations -- Three months ended June 30, 1997 and 1996;
Nine months ended June 30, 1997 and 1996 ................................. 2
Statements of Cash Flows -- Nine months ended June 31, 1997 and 1996 ..... 3
Notes to the Financial Statements ........................................ 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................... 5
PART II OTHER INFORMATION ........................................................ 8
</TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
ROCHESTER MEDICAL CORPORATION
BALANCE SHEETS
JUNE 30, SEPTEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents .............................. $ 3,714,281 $ 8,394,607
Marketable Securities .................................. 7,341,472 9,013,522
Accounts Receivable .................................... 1,279,584 1,513,577
Inventories ............................................ 1,526,047 1,191,283
Prepaid Expenses And Other Assets ...................... 220,704 84,194
------------ ------------
TOTAL CURRENT ASSETS .................................. 14,082,088 20,197,183
PROPERTY AND EQUIPMENT
Land and Buildings ..................................... 4,366,957 815,075
Equipment and Fixtures ................................. 5,856,618 3,929,507
------------ ------------
10,223,575 4,744,582
Less: Accumulated Depreciation ......................... (1,753,448) (1,432,257)
------------ ------------
TOTAL PROPERTY AND EQUIPMENT .......................... 8,470,127 3,312,325
INTANGIBLE ASSETS
Patents, Less Accumulated Amortization ................. 352,325 378,232
------------ ------------
TOTAL ASSETS .......................................... $ 22,904,540 $ 23,887,740
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ....................................... $ 724,165 $ 957,951
Accrued Expenses ....................................... 833,184 377,813
------------ ------------
TOTAL CURRENT LIABILITIES ............................. 1,557,349 1,335,764
LONG-TERM DEBT ........................................... 3,534,375 3,320,625
SHAREHOLDERS' EQUITY
Common Stock, no par value: Authorized -- 20,000,000
Issued and Outstanding Shares -- 4,133,500 -- June, 1997
and 4,127,500 -- Sept, 1996 ............................ 24,697,199 24,648,913
Accumulated Deficit .................................... (6,884,383) (5,417,562)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY ............................. 17,812,816 19,231,351
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY ............... $ 22,904,540 $ 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
</TABLE>
<TABLE>
<CAPTION>
ROCHESTER MEDICAL CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES .................... $ 2,019,752 $ 1,710,603 $ 5,491,128 $ 3,753,254
Cost Of Sales ................ 1,287,362 1,119,326 3,469,325 2,599,363
----------- ----------- ----------- -----------
GROSS PROFIT ................. 732,390 591,277 2,021,803 1,153,891
COSTS AND EXPENSE:
Marketing and Selling ...... 589,654 388,485 1,562,267 940,747
Research and Development ... 344,594 422,974 1,144,230 819,547
General and Administrative . 411,820 257,861 1,099,312 659,835
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 1,346,068 1,069,320 3,805,809 2,420,129
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS ......... (613,678) (478,043) (1,784,006) (1,266,238)
OTHER INCOME (EXPENSE):
Interest Income ............ 150,022 229,984 530,935 589,624
Interest Expense ........... (71,338) (71,250) (213,750) (213,916)
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (EXP) 78,684 158,734 317,185 375,708
----------- ----------- ----------- -----------
NET LOSS ..................... $ (534,994) $ (319,309) $(1,466,821) $ (890,530)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE .... $ (0.13) $ (0.08) $ (0.36) $ (0.24)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ... 4,133,500 4,047,500 4,130,900 3,786,200
=========== =========== =========== ===========
See Notes to Financial Statements
</TABLE>
<TABLE>
<CAPTION>
ROCHESTER MEDICAL CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
JUNE 30,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss ....................................... $ (1,466,821) $ (890,530)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization ................. 405,069 339,240
Changes in operating assets and liabilities:
Accounts Receivable ......................... 233,993 (596,190)
Inventories ................................. (334,764) (327,689)
Other Current Assets ........................ (136,510) 295,130
Accounts Payable ............................ (233,786) 220,215
Other Current Liabilities ................... 455,371 56,553
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES ............ (1,077,448) (903,271)
INVESTING ACTIVITY
Capital expenditures .......................... (5,478,992) (329,860)
Patents ....................................... (57,972) (79,776)
Marketable Securities ......................... 1,672,049 (4,559,284)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ............ (3,864,915) (4,968,920)
FINANCING ACTIVITIES
Interest Expense Added To Note Payable ........ 213,750 213,750
Proceeds from Sale of Common Stock ............ 48,287 16,217,393
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........ 262,037 16,431,143
------------ ------------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS ..................................... (4,680,326) 10,558,952
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD ....................................... 8,394,607 551,142
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ....... $ 3,714,281 $ 11,110,094
============ ============
See Notes to Financial Statements
</TABLE>
ROCHESTER MEDICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 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 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 nine month period
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending September 30, 1997.
NOTE B -- NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding during the period. Common equivalent shares from stock
options and convertible debt are excluded from the computation as their effect
is antidilutive. In February 1997, the Financial Accounting Standards Board
(FASB) issued FASB Statement No. 128, "Earnings Per Share". This Statement
replaces the presentation of primary earnings per share (EPS) with basic EPS and
also requires dual presentation of basic and diluted EPS for entities with
complex capital structures. This statement is effective for financial statements
for periods ending after December 15, 1997. For the quarter ended the nine-month
period ended June 30, 1997, there is no difference between the basic loss share
under Statement No. 128 and net loss per share as reported.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
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.
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 NINE MONTHS
ENDED ENDED
JUNE 30 JUNE 31
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
Net Sales
Private Label .............. 75% 86% 78% 81%
ROCHESTER MEDICAL Brand .... 25% 14% 22% 19%
---- ---- ---- ----
Total Net Sales ............. 100% 100% 100% 100%
Cost of Sales ............... 64% 65% 63% 69%
---- ---- ---- ----
Gross Margin ................ 36% 35% 37% 31%
Operating Expenses
Marketing and Selling ...... 29% 23% 28% 25%
Research and Development ... 17% 25% 21% 22%
General and Administrative . 20% 15% 20% 18%
---- ---- ---- ----
Total Operating Expenses .... 67% 63% 69% 65%
Loss From Operations ........ (30)% (28)% (32)% (34)%
Interest Income (Expense) Net 4% 9% 6% 10%
---- ---- ---- ----
Net Loss .................... (26)% (19)% (27)% (24)%
=== === === ===
THREE MONTH AND NINE MONTH PERIODS ENDED JUNE 30, 1997 AND JUNE 30, 1996
NET SALES. Net Sales increased 18% to $2,019,752 for the third quarter of fiscal
1997 from $1,710,603 for the third quarter of fiscal 1996. The Company
experienced strong sales in its strategic growth segments, namely sales of
Company branded products and sales to ConvaTec. Sales of ROCHESTER MEDICAL(R)
brand products grew at a rate of 112% during the current quarter compared to
last year's comparable quarter. Sales to ConvaTec grew at the rate of 385% for
the same period. Sales to Mentor grew at the rate of 38% for the same period.
Other private label sales, besides sales to Mentor, were below the comparable
period of the prior year.
Net Sales increased 46% to $5,491,128 for the nine months ended June 30, 1997,
from $3,753,254 for the comparable nine months of the prior year. Progressive
growth in branded product sales and sales to ConvaTec account for the increase.
Sales of ROCHESTER MEDICAL(R) brand products grew at a rate of 72% during the
current nine months compared to last year's comparable period, while sales to
ConvaTec grew at the rate of 349% for the same period. Other private label
sales, inclusive of sales to Mentor, were relatively flat for the period.
GROSS MARGIN. The Company's gross margin as a percentage of net sales was 36%
for the third quarter of fiscal 1997 compared with 35% for the third quarter of
fiscal 1996. The Company's gross margin during the current quarter is in line
with recent trend and reflects product mix with slightly higher material costs.
The Company's gross margin as a percentage of net sales was 37% for the nine
months ended June 30, 1997 compared with 31% for the nine months ended June 30,
1996. Year to date margins have benefited from manufacturing efficiencies
associated with higher production volumes.
MARKETING AND SELLING. Marketing and selling expense increased 52% to $589,654
for the third quarter of fiscal 1997 from $388,485 for the third quarter of
fiscal 1996 due to expansion of domestic field sales force for branded products.
Marketing and selling expense increased 66% to $1,562,267 for the nine months
ended June 30, 1997 from $940,747 for the nine months ended June 30, 1996, The
increased expense reflects expansion of the domestic field sales force and
increased product promotion spending year to date.
RESEARCH AND DEVELOPMENT. Research and development expense decreased 19% to
$344,594 for the third quarter of fiscal 1997 from $422,974 for the third
quarter of fiscal 1996. The decrease is due to the completion of clinical
studies of the Company's Antibacterial Foley catheter.
Research and development expense increased 40% to $1,144,230 for the nine months
ended June 30, 1997 from $819,547 for the nine months ended June 30, 1996, due
to costs of clinical studies of the FEMSOFT(TM) insert.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased 60% to
$411,820 for the third quarter of fiscal 1997 from $257,861 for the third
quarter of fiscal 1996. The expense increase relates to spending requirements
for business and administrative infrastructure development to support current
and anticipated growth.
General and administrative expense increased 67% to $1,099,312 for the nine
months ended June 30, 1997 from $659,835 for the nine months ended June 30,
1996, due to the factors noted above for the current quarter.
INTEREST INCOME (EXPENSE). Interest income decreased to $150,022 for the third
quarter of fiscal 1997 from $229,984 for the third quarter of fiscal 1996, and
to $530,935 for the nine months ended June 30, 1997, from $589,624 for the nine
months ended June 30, 1996, as a result of earnings on lower levels of cash
available for investment. Interest expense remained constant for the three and
nine month periods. The interest expense relates to the $3 million convertible
subordinated loan from ConvaTec.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and marketable securities at June 30, 1997 were $11,055,753
compared to $17,408,129 at September 30, 1996, a net decrease of $6,352,376.
Cash of $5,478,992 was used for capital expenditures during the current nine
month period relating to expansion of the existing production facility and
construction of the Company's new production and administrative facility.
Substantially all of the remaining cash used was to fund operating activities.
Trade accounts receivable at June 30, 1997 decreased 15% to $1,279,584 as
compared to September 30, 1996, reflecting an increased focus on collection
activities. Inventories increased 28% to $1,526,047 as compared to September 30,
1996, reflecting anticipated future sales. Changes in other asset and liability
balances relate primarily to timing of expense recognition, including an
increase of $300,000 of accrued clinical project costs.
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, FDA review and response times, the
timing and ultimate outcome of clinical tests, the scope and effect of patent
opinions, 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.
Strong growth in sales of ROCHESTER MEDICAL(R) brand products reflects expanded
international distribution, and an expanding domestic account base resulting
from implementation of the Company's marketing strategy for the domestic health
care market. The Company anticipates continued growth in branded product sales.
The Company also anticipates continued growth in sales to ConvaTec as ConvaTec
further develops its world-wide markets for incontinence products. Other private
label sales fluctuate by customer from quarter to quarter, with the overall
trend presently appearing to be relatively flat.
The Company recently received ISO 9001/EN 46001 Certification documenting the
Company's compliance with international quality system standards, including
requirements for use of the CE mark which become mandatory in 1998 for marketing
medical products in the European Economic Community.
The Company is awaiting formal FDA response to a 510(K) Premarket Notification
under which the Company seeks marketing approval for its Antibacterial Foley
catheter. The filing is based on clinical tests conducted at the University of
Wisconsin which show a three-fold reduction in catheter induced bacterial
urinary tract infections as compared to a control catheter in a large,
prospective, randomized, double-blinded study. In addition to a lower rate of
bacterial infections, the patient group using the Antibacterial catheter had a
lower number of infections from bacterial strains likely to be resistant to
antibiotics. The Company expects to receive formal FDA response in due course.
The Company's clinical study of its FEMSOFT(TM) female continence insert is
proceeding at eight clinical sites throughout the US with encouraging results to
date.
The Company's installation of automated manufacturing capacity for liquid
encapsulation at its new manufacturing facility, and the plant expansion for
manufacturing male external catheters both continue on schedule and will both
become operational later this year.
The Company intends to address the prospect of additional financing when
appropriate from a timing and valuation standpoint.
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:
10.13 First Amendment to Amended UF Catheter Exclusive OEM/Private
Label Agreement dated May 7, 1997, between the Company and
Hollister Incorporated
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: August 5, 1997 By: /s/ ANTHONY J. CONWAY
--------------------------------------------
Anthony J. Conway
Chief Executive Officer
Date: August 5, 1997 By: /s/ BRIAN J. WIERZBINSKI
--------------------------------------------
Brian J. Wierzbinski
Chief Financial Officer
Exhibits
Page
----
10.13 First Amendment to Amended UF Catheter Exclusive OEM/Private
Label Agreement dated May 7, 1997, between the Company and
Hollister Incorporated.
27 Financial Data Schedule
Exhibit 10.13
FIRST AMENDMENT
TO
AMENDED UF CATHETER EXCLUSIVE OEM/PRIVATE LABEL AGREEMENT
THIS FIRST AMENDMENT TO AMENDED UF CATHETER EXCLUSIVE OEM/PRIVATE LABEL
AGREEMENT ("Amendment") is made this seventh day of May l997 between ROCHESTER
MEDICAL CORPORATION, a Minnesota corporation (herein, "RMC") and HOLLISTER
INCORPORATED, an Illinois corporation (herein, "HOLLISTER").
RECITALS:
Whereas, RMC and HOLLISTER are parties to an Amended UF Catheter
Exclusive OEM Private Label Agreement dated March 18, 1994 (the "1994
Agreement"); and
Whereas, Section 3.2 of 1994 Agreement provides that RMC and HOLLISTER
shall negotiate in good faith for the extension of the 1994 Agreement for a
Successive Term of three (3) years commencing May 1, 1998.
Whereas, the provisions of Section 3.2 of the 1994 Agreement to the
contrary notwithstanding, the parties desire to record their agreement to extend
the 1994 Agreement for a first Successive Term of four (4) years upon the terms
and conditions set forth in this Amendment.
NOW, THEREFORE, the parties hereby agree as follows;
SECTION 1 DEFINITIONS:
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the 1994 Agreement, as amended herein.
SECTION 2 TERM
2.1 The 1994 Agreement is hereby extended for a first Successive Term
(the "First Successive Term") commencing May 1, 1998 and expiring April 30,
2002.
2.2 Any further extension of the 1994 Agreement shall be made in
accordance with Section 3.2 thereof, and shall be for the Successive Term(s) of
three (3) years each, unless the parties otherwise expressly agree in the future
to a different duration for any Successive Term.
SECTION 3 PURCHASES; PRICES; ORDERS; FULFILLMENT
3.1. Purchases. During the First Successive Term, HOLLISTER shall
purchase Non-Latex Male External Catheters from RMC as provided herein.
3.1.1. During the First Successive Term, HOLLISTER shall purchase
from RMC all of HOLLISTER's requirements of Non-Latex Male External Catheters.
3.1.2. During the First Successive Term, HOLLISTER shall purchase
from RMC a minimum of Four Million (4,000,000) UF Catheters (the "Overall
Quota") at the rate of at least One Million (1,000,000) Catheters per year (the
"Annual Quota"). HOLLISTER shall purchase the Annual Quota in increments of at
least Two Hundred Thousand (200,000) UF Catheters per Term Quarter.
3.1.3. HOLLISTER's obligation to purchase any part of the Annual
Quota of UF Catheters during the First Successive Term shall be abated during
the pendency of an Extenuating Circumstance. The amount of abatement in any Term
Year shall be equal to the Annual Quota multiplied by a fraction whose
denominator is three hundred sixty-five (365) and whose numerator is the number
of days of duration of the Extenuating Circumstance during that same Term Year.
3.1.4. The provisions of ss.4.1.1 of the 1994 Agreement to the
contrary notwithstanding, HOLLISTER may acquire, manufacture and/or sell from a
source other than RMC, including HOLLISTER itself, another or different
non-latex male external catheter(s) having an integral adhesive means upon
twelve (12) months' prior notice to RMC and payment to RMC of an amount (the
"Amount") equal to one hundred ten percent (110%) of the then current remaining
Overall Quota. HOLLISTER may elect to pay the Amount to RMC in cash or to apply
the Amount toward the purchase of UF Catheters at their then current Transfer
Price(s) or toward the purchase of Sheaths at the then agreed price (if
HOLLISTER and RMC have by then agreed to terms and prices for Sheaths).
HOLLISTER may pay the Amount over the duration of the First Successive Term, or
such other time as the parties agree (the "Termination Period"). Payment of the
Amount shall be in lieu of, and not in addition to, HOLLISTER's purchase
obligations. Upon HOLLISTER's notice of intent to sell such other non-latex male
external catheter(s) having an integral adhesive means, HOLLISTER shall
relinquish its exclusive rights set forth in ss.2.1 of the 1994 Agreement, and
RMC shall be immediately released from the limitations on it set forth in ss.2.2
and ss.2.3 of the 1994 Agreement, but RMC shall continue to fill HOLLISTER's
purchase orders, if any, during the Termination Period. Upon payment of the
Amount or the expiration of the Termination Period, whichever comes first, RMC
shall be relieved of any further obligation to sell any Non-Latex Male External
Catheters to HOLLISTER, and HOLLISTER shall be relieved of any further
obligation to purchase any Non-Latex Male External Catheters from RMC.
3.2. Purchase Orders. By April 15, 1998, and by the fifteenth (15th)
day of the first month of each Term Quarter thereafter during the First
Successive Term, HOLLISTER shall provide to RMC a purchase order ("Quarterly
Order") for HOLLISTER's UF Catheter requirements for the immediately following
Term Quarter. HOLLISTER may furnish RMC, from time to time, with additional or
supplemental purchase orders ("Supplemental Order") for delivery within the same
Term Quarter during which such Supplemental Orders are given. RMC will use its
best efforts to fill Supplemental Orders within the same Term Quarter as
received. By the first day of each Term Quarter, RMC shall furnish HOLLISTER
with a shipment schedule for such Term Quarter showing estimated quantities and
shipment dates for deliveries during such Term Quarter and, subject to RMC's
production schedule, reasonably accommodating HOLLISTER's requested shipment
schedule.
3.3. Order Fulfillment. RMC will fulfill HOLLISTER's Quarterly Orders
in three (3) or fewer shipments, depending on RMC's manufacturing schedule for
the applicable Term Quarter, and consistently with the previously furnished
shipment schedule. Provided HOLLISTER is not then in breach of any of its
obligations under the 1994 Agreement, as amended herein, RMC will not place any
Quarterly Order or Supplemental Order received from HOLLISTER on a back-order
status if RMC is then manufacturing the same size and types of UF Catheters for
its own customers. In the event of manufacturing capacity constraints, RMC shall
allocate UF Catheter production reasonably among customers. Provided, further,
that if HOLLISTER's Quarterly Order and Supplemental Orders, in the aggregate,
for delivery in any Term Quarter are reasonably consistent as to sizes and
quantities with its prior purchases during preceding Term Quarters, then, in the
event that RMC is unable to fill any HOLLISTER Quarterly or Supplemental Orders
(i) within thirty (30) days following the end of the Term Quarter for which a
Quarterly Order was placed or (ii) within thirty (30) days following the end of
the Term Quarter succeeding the Term Quarter in which a Supplemental Order was
placed, then HOLLISTER shall be relieved prorata of its purchase obligation
under this Amendment to the extent of the unfilled Quarterly or Supplemental
Orders remaining unshipped at the expiration of those respective periods.
Notwithstanding the foregoing, RMC shall only be required to use its best
efforts to fill such portions of any Quarterly or Supplemental Order that, alone
or when aggregated with all other Quarterly or Supplemental Orders received for
delivery in any Term Quarter during the First Successive Term, is greater than
Four Hundred Thousand (400,000) UF Catheters, and HOLLISTER shall not be
relieved of any purchase obligation for a Term Quarter under this Amendment for
undelivered UF Catheters in excess of Four Hundred Thousand (400,000) UF
Catheters ordered for delivery in any Term Quarter.
3.4. Forecasts. During the First Successive Term, no forecasts are
required under Section 4.4 of the 1994 Agreement.
SECTION 4. NOTICES
The addresses for notices specified in Section 14.1 of the 1994
Agreement are hereby designated as follows:
Anthony J. Conway, President
Rochester Medical Corporation
One Rochester Medical Drive
Stewartville, Minnesota 55976
Telefacsimile Number: (507) 533-9725
Jerome A. Saxon, Secretary
Hollister Incorporated
2000 Hollister Drive
Libertyville, Illinois 60048
Telefacsimile Number: (847) 918-3494
SECTION 5. CONTINUATION
The 1994 Agreement, as amended herein and except as otherwise
inconsistent with the terms hereof, shall continue in full force and effect
during the First Successive Term. Paragraphs one (1) through five (5) inclusive
and paragraph nine (9) of that Supplemental Agreement dated March 18, 1994,
shall continue in full force and effect during the First Successive Term.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed by its duly authorized representatives as of the day and year first
above written.
ROCHESTER MEDICAL CORPORATION, HOLLISTER INCORPORATED,
a Minnesota corporation an Illinois corporation
By: /s/ Anthony J. Conway By: /s/ Lew Fisher
------------------------------- ------------------------------
Anthony. J. Conway Lew Fisher,
President and Secretary Senior Group Vice President
ATTEST: ATTEST:
By: /s/Brian J. Wierzbinski By: /s/ Jerome A. Saxon
------------------------------- ------------------------------
Brian J. Wierzbinski Jerome A. Saxon
Chief Financial Officer Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,714,281
<SECURITIES> 7,341,472
<RECEIVABLES> 1,338,584
<ALLOWANCES> 59,000
<INVENTORY> 1,526,045
<CURRENT-ASSETS> 14,082,088
<PP&E> 10,223,575
<DEPRECIATION> 1,753,448
<TOTAL-ASSETS> 22,904,540
<CURRENT-LIABILITIES> 1,557,348
<BONDS> 0
0
0
<COMMON> 24,697,199
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 22,904,540
<SALES> 5,491,128
<TOTAL-REVENUES> 5,491,128
<CGS> 3,469,325
<TOTAL-COSTS> 7,275,134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (1,784,006)
<INTEREST-EXPENSE> 213,750
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,466,821)
<EPS-PRIMARY> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
