ROCM Rochester Medical Corp. (MM)

STEWARTVILLE, Minn., July 31 /PRNewswire-FirstCall/ -- Rochester Medical Corporation (NASDAQ:ROCM) today announced operating results for its third quarter ending June 30, 2007. The Company reported record sales of $8,367,000 for the current quarter compared to $5,358,000 for the third quarter of last year. It also reported net income of $807,000 or $.06 per diluted share compared to a net income of $985,000 or $.08 per diluted share for the third quarter of last year. Net income excluding stock option expense, expense for amortization of intangibles, and also excluding income tax benefits from the realization of deferred assets; or "Non-GAAP Net Income" for the current quarter is $1,315,000 or $.10 per diluted share, compared to Non-GAAP Net Income of $305,000 or $.03 per diluted share for the third quarter of last year. To aid in analysis of the quarterly results, the Company also notes the following: -- The results for the current quarter include an expense of approximately $170,000 relating to enhancing IT systems and implementing procedures needed to become compliant with Section 404 of Sarbanes-Oxley, which the Company is required to complete by the end of this fiscal year. -- The results for the current quarter reflect a planned increased investment in marketing and sales. The Company expects this investment will lead to increased sales and earnings in the future. The 56% increase in sales revenue for the current quarter compared to last year's third quarter resulted from increased sales of Rochester Medical branded products and from increased Private Label sales. International sales resulting from the acquired U.K. business generated a significant portion of the increase. The increase in the Non-GAAP net income for the current quarter is due to increased contribution from increased sales. "The Company's performance is solid," said CEO Anthony J. Conway. "We see increasing interest in our product lines and increasing recognition of the Rochester Medical brand in the marketplace. We expect continued success going forward." The Company will hold a quarterly conference call this afternoon to discuss its earnings report. The call will begin at 4:00 p.m. central time (5:00 p.m. eastern time). This call is being webcast by Thomson Financial and can be accessed at Rochester Medical's website at http://www.rocm.com/. To listen live to the conference call via telephone, call: Domestic: 1-800-831-6272, password 10254659 International: 1-617-213-8859, password 10254659 Replay will be available for seven days at: http://www.rocm.com/ or via telephone: Domestic Replay: 1-888-286-8010 password 88787377 International Replay 1-617-801-6888, password 8778377 The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at http://www.fulldisclosure.com/, Thomson Financial individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (http://www.streetevents.com/). Rochester Medical has provided Non-GAAP Net Income in addition to earnings calculated in accordance with generally accepted accounting principles (GAAP) because management believes Non-GAAP Net income provides a more consistent basis for between quarter comparisons that are not influenced by certain charges and non-cash expenses and are therefore helpful in understanding Rochester Medical's underlying operating results. Non-GAAP Net Income is not a measure of financial performance under GAAP, and should not be considered an alternative to net income or any other measure of performance or liquidity under GAAP. Non-GAAP Net Income is not comparable to information provided by other companies. Non-GAAP Net Income has limitations as an analytical tool and should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP. Reconciliations of Net Income and Non-GAAP Net Income are presented at the end of this press release. This press release contains forward-looking statements that involve risks and uncertainties, including the uncertainty of estimated revenues and profits, as well as the uncertainty of market acceptance of new product introductions, the uncertainty of gaining new strategic relationships or locating and capitalizing on strategic opportunities, the uncertainty of timing of private label sales revenues (particularly international customers), FDA and other regulatory review and response times, and other risk factors listed from time to time in the Company's SEC reports and filings, including, without limitation, the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended September 30, 2006. Rochester Medical Corporation develops, manufactures, and markets disposable medical catheters and devices for urological and continence care applications. The Company markets under its own Rochester Medical(R) brand and under existing private label arrangements. For further information, please contact Anthony J. Conway, President and Chief Executive Officer of Rochester Medical Corporation at (507) 533-9600. More information about Rochester Medical is available on its website at http://www.rocm.com/. ROCHESTER MEDICAL CORPORATION Reconciliation of Reported GAAP Net Income to Non-GAAP Net Income For the three and nine months ended June 30, 2007 Three months ended Nine months ended June 30, June 30, 2007 2006 2007 2006 GAAP Net Income as Reported $807,000 $985,000 $33,317,000 $1,053,000 Diluted EPS as Reported $0.06 $0.08 $2.69 $0.09 Adjustments for non- recurring unusual items: Settlement income after taxes (1) - - (31,305,000) - Deferred revenue (2) - (39,000) (564,000) (118,000) Deferred tax benefit (3) - (759,000) - (759,000) Subtotal - (798,000) (31,869,000) (877,000) Adjustments for recurring non-cash expenses: Intangible Amortization (4) 163,000 30,000 490,000 30,000 FAS 123R Compensation Expense (5) 345,000 88,000 1,806,000 504,000 Subtotal 508,000 118,000 2,296,000 534,000 Non-GAAP Net Income $1,315,000 $305,000 $3,744,000 $710,000 Non-GAAP Diluted EPS $0.10 $0.03 $0.30 $0.06 Weighted Average Shares - Diluted 12,565,278 11,837,710 12,400,531 11,652,584 (1) Settlement income received November 20, 2006 from Premier, Inc of $5,155,000 and December 14, 2006 from CR Bard, Inc. of $33,450,000 after taxes. This adjustment reduces net income for amounts received net of taxes paid in connection with one-time settlement of certain litigation. These amounts were recorded in Other Income in the Statement of Operations for the nine months ended June 30, 2007. (2) Deferred revenue from a $1,000,000 fee paid by Coloplast A/S in June 2002 for marketing rights to our antibacterial Release NF foley catheter. These rights have been cancelled by mutual agreement, thus accelerating the recognition of the remaining amount as all conditions for revenue recognition have now been met. Also includes a $250,000 fee paid by Hollister for marketing rights to our hydrophilic intermittent catheter in September 2003. This adjustment reduces net income related to the realization of certain one-time revenue from marketing rights. The amounts were recorded in net sales in the Statement of Operations for the nine months ended June 30, 2007. (3) Increase in the deferred tax asset which resulted in a tax benefit and an increase in earnings. This adjustment reduces net income for certain one-time tax benefits recorded in the three and nine months ended June 30, 2006. (4) Amortization of the intangibles acquired in June 2006 asset acquisition from Coloplast AS and Mentor Corporation. Management believes these assets are appreciating. This adjustment adds back amortization expense for the three and nine months ended June 30, 2007 related to certain intangibles. (5) Compensation expense mandated by SFAS 123R. This adjustment adds back the compensation expense recorded when stock options are granted to employees and directors for the three and nine months ended June 30, 2007. Condensed Balance Sheets (unaudited) June 30, September 30, 2007 2006 Assets Current Assets Cash and equivalents $7,671,267 $2,906,698 Marketable securities 30,311,938 - Accounts receivable 5,665,945 4,494,094 Inventories 7,046,042 4,642,578 Prepaid expenses and other assets 494,417 410,267 Deferred income tax asset 900,000 53,000 Total current assets 52,089,609 12,506,637 Property and equipment 9,410,980 8,239,246 Deferred income tax asset 415,000 1,178,000 Patents, net 264,246 271,171 Intangible assets, net 7,780,012 8,270,157 Goodwill 5,430,176 5,487,141 Total Assets $75,390,023 $35,952,352 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $1,485,824 $1,278,441 Accrued expenses 1,038,094 1,621,376 Short term debt 1,731,825 1,681,361 Current maturities of capital leases - 42,084 Income taxes payable 1,641,372 105,559 Deferred revenue - 114,287 Total current liabilities 5,897,115 4,843,108 Long-term liabilities Long term debt 6,024,445 7,540,737 Capital leases, less current portion - 21,946 Deferred revenue - 449,999 Total long term liabilities 6,024,445 8,012,682 Stockholders' equity 63,468,463 23,096,562 Total Liabilities and Stockholders' Equity $75,390,023 $35,952,352 Summary Statements Of Operations Three months ended Nine months ended June 30, June 30, 2007 2006 2007 2006 Sales $8,367,140 $5,358,076 $24,225,709 $14,839,355 Cost of sales 3,918,614 3,361,907 11,574,203 9,682,200 Gross profit 4,448,526 1,996,169 12,651,506 5,157,155 Gross profit % 53% 37% 52% 35% Costs and expense: Marketing and selling 1,809,928 786,583 4,564,275 1,961,950 Research and development 267,235 209,060 710,500 569,657 General and administrative 1,443,932 788,584 5,202,631 2,355,384 Total operating expenses 3,521,095 1,784,227 10,477,406 4,886,991 Income from operations 927,431 211,942 2,174,100 270,164 Other income (expense) (Loss) on sale of investments - - - (103,532) Interest income 393,594 70,933 907,947 188,379 Interest expense (89,626) (56,377) (402,448) (61,451) Other income - - 38,605,000 - Net income before income taxes $1,231,399 $226,498 $41,284,599 $293,560 Income tax expense (benefit) 424,836 (758,991) 7,967,902 (758,991) Net income 806,563 985,489 33,316,697 1,052,551 Earnings per common share - Basic $0.07 $0.09 $2.93 $0.10 Earnings per common share - Diluted $0.06 $0.08 $2.69 $0.09 Weighted Average Shares: 11,649,268 11,072,988 11,371,894 11,064,224 Basic Weighted Average Shares: Diluted 12,565,278 11,837,710 12,400,531 11,652,584 DATASOURCE: Rochester Medical Corporation CONTACT: Anthony J. Conway, President and Chief Executive Officer of Rochester Medical Corporation, +1-507-533-9600 Web site: http://www.rocm.com/

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