Rochester Medical Corporation ( ROCM)

F1Q2012 Earnings Conference Call

January 25, 2012 4:30 PM ET


Jim Conway – President and Chief Executive Officer

Dave Jones – Chief Financial Officer


Ernie Andberg – Rochester Medical

Rishun Jain – Quad Capital



Good day ladies and gentlemen and welcome to the first quarter 2012 Rochester Medical Corporation earnings conference call. My name is Kisha [ph] and I will be your operator for today. At this time all participants are in listen-only mode. We will conduct a question and answer session towards the end of this conference (Operator Instructions) as a reminder this conference is being recorded for replay purposes.

I would now like to hand the conference over to Mr. Jim Conway, President and CEO. Please proceed.

Jim Conway

Thank you for joining Rochester Medical’s first quarter conference call. I’m Jim Conway the company’s President and CEO and with me is David Jonas, Rochester Medical’s Chief Financial Officer. First I will provide a brief high level review of our first quarter and then Dave will then provide you with more details on our financial results. And then I will give a quick update on a few items and summarize and we will take your questions.

Before starting let me remind you that we will be making some forward-looking statements today and I would refer you to the Safe Harbor statement found in today’s press release and also to the risk factors section in the company’s annual report on Form 10-K for the year ended September 30, 2011. These statements further clarify the risks and uncertainties that are associated with the forward-looking statements.

Okay, we reported first quarter revenues of $13.8 million, up 26% on both the reported and constant currency basis. These results encourage us that our strategy to drive top line growth through our direct sales business on a global basis is firmly working. Specifically, direct sales rose strongly up 45% including Laprolan and up 15% excluding Laprolan.

Total reported sales growth was tempered by 20% decline in private label sales, which as we have noted in the past is a business that fluctuates from quarter to quarter as was the case this quarter. Importantly, we posted 27% and 18% growth respectively in our direct sales businesses in the U.S. and the UK while Laprolan, which we acquired in April 2011, grew modestly from the prior quarter and continues to be a promising addition to our international direct sales business. And Dave will provide more detail on the revenue performance in just a minute.

In addition to our encouraging direct sales performance I believe we managed our expense structure well enabling us to report nearly breakeven net income even on the softness in private label. In terms of GAAP earnings we reported a net loss of $75,000 on a non-GAAP basis excluding certain non-cash expenses we reported net income of $285,000. We are pleased with our start to fiscal year 2012 given the solid performance in our main engine of growth direct sales. Furthermore, we believe that private label sales and direct international distributor sales are on track for the full fiscal year.

I remain confident in Rochester Medical’s growth trajectory and reaffirm our fiscal ’13 objectives to reach $83 million in revenues and $9 million to $10 million in net income. And I will talk more about that after Dave gives you further details on the quarter, which he will do right now. Dave?

Dave J onas

Thanks Jim. I’m going to spend a few minutes highlighting the results reflected in our just released first quarter 2012 earnings release. And for either discussion unless otherwise noted all sales information will be discussed in constant currency. I’m doing this to exclude the impact of foreign currency exchange in order to show a true reflection of our sales growth. Foreign currency minimally benefited our top line this quarter adding approximately $23,000 for revenue.

As most of you have seen exchange rates for the British Pound and the Euro have been quite volatile the last few months. Our foreign exchange risk is limited to our sales into the UK and Holland these sales currently make up approximately half of our current sales and increased pressure on these rates will have an impact on both our top and bottom line results. Our three year plan and projections for this year used a 1.37 exchange rate for the Euro and 1.57 rate for the Pound. While the Pound has hovered around that number all year the Euro has fluctuated from 1.27 to 1.44 just in the last 120 days.

As Jim mentioned, total sales rose 27% in the first quarter including Laprolan the $13.8 million versus $10.9 million a year ago. Organic growth excluding Laprolan was approximately 5% for the first quarter, this 5% organic growth consist of 15% growth in our direct sales offset by a 20% decline in our private label sales this quarter. Regarding U.S. sales total sales increased 8% to $4.7 million from $4.3 million in the prior year’s first quarter, driven by a robust 27% growth in U.S. direct sales tempered by a 15% decline in U.S. private label sales.

Total sales outside of the U.S. mainly in the Europe and the Middle East are EME through 39% led by 53% growth in direct sales, which offset a 30% decline quarter-over-quarter in private label sales. Geographically 34% of our sales in the first quarter were generated in the U.S. with 66% of sales coming from outside the U.S. compared to 39 and 61 last year. This change in global sales mix compared to last year is due mainly to our acquisition of Laprolan in April of 2011. Almost 90% of our international sales are drive from regions in Europe and the Middle East.

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