MENTOR REPORTS RECORD RESULTS AND
PROVIDES GUIDANCE FOR FISCAL YEAR 2006
• Sales in the Fourth Quarter 2005 Were a Record $131.6 Million, an Increase of 12% over the Fourth
Quarter 2004
• GAAP Diluted Earnings Per Share Were $0.19 in the Fourth Quarter Fiscal Year 2005, Including Special
Charges of $0.23 per Share
• Non-GAAP Diluted Earnings Per Share, which Exclude Special Charges, Were a Record $0.42 in the Fourth
Quarter Fiscal Year 2005, Compared to $0.31 in the Same Period Prior Year
• Sales in the Fiscal Year 2005 Increased 15% to a Record $483.4 Million
• GAAP Diluted Earnings Per Share Were $1.17 in Fiscal Year 2005, Including Special Charges of $0.23 per
Share
• Non-GAAP Diluted Earnings Per Share, which Exclude Special Charges, Were a Record $1.40 for Fiscal
Year 2005, Compared to $1.13 in the Prior Year
• In Fiscal Year 2006, Sales Are Expected to Grow at a Low Double-Digit Rate and Earnings Per Share Are
Expected to be in the Range of $1.60 to $1.65
SANTA BARBARA, May 18, 2005 - Mentor Corporation (NYSE:MNT), a leading supplier of medical products in the United States and internationally, today announced record financial results for the fourth quarter and full year of fiscal year 2005 and provided financial guidance for fiscal year 2006.
Earnings per Share
GAAP diluted earnings per share were $0.19 in the fourth quarter fiscal year 2005, including $0.23 of special charges related to severance, restructuring and impairment of certain long-lived assets, net of tax benefits. Excluding these special charges, non-GAAP diluted earnings per share were a record $0.42 in the fourth quarter fiscal year 2005, an increase of 35% over $0.31 in the fourth quarter 2004.
Fiscal year 2005 GAAP diluted earnings per share were $1.17, including the $0.23 of special charges recorded in the fourth quarter. Excluding these special charges, non-GAAP diluted earnings per share were a record $1.40 for fiscal year 2005, an increase of 24% over $1.13 in fiscal year 2004.
In accordance with the new accounting rule for convertible debt, in February 2005 Mentor restated its earnings per share for the fourth quarter and the full year for fiscal year 2004.
Product Sales
Total sales were a record $131.6 million in the fourth quarter 2005, an increase of 12% over the fourth quarter last year, including $2.6 million of positive foreign currency exchange effects, principally from the Euro. Sales for the full year were a record $483.4 million, an increase of 15% over fiscal year 2004, including $11.8 million of positive foreign currency exchange effects.
Aesthetics Segment
Mentor's Aesthetics business segment continued its record of strong growth. Fourth quarter 2005 Aesthetics sales were $68.7 million, up 13% from sales in the fourth quarter 2004. Fiscal year 2005 Aesthetics sales were $251.7 million, up 15% from sales in fiscal year 2004.
Surgical Urology Segment
Mentor's Surgical Urology business segment also recorded double-digit sales growth. Fourth quarter 2005 Surgical Urology sales were $35.1 million, up 18% from sales in the fourth quarter 2004. Fiscal year 2005 Surgical Urology sales were $129.3 million, up 19% from sales in fiscal year 2004.
Clinical and Consumer Healthcare Segment
Mentor's Clinical and Consumer Healthcare sales were $27.8 million, up 5% from sales in the fourth quarter 2004. Fiscal year 2005 Clinical and Consumer Healthcare sales were $102.4 million, up 7% from sales in fiscal year 2004.
Selling, General & Administrative Expense
Selling, general and administrative (SG&A) expense in the fourth quarter 2005 was $47.3 million, or 36% of sales, compared to $42.1 million, also 36% of sales, in the fourth quarter 2004. Fiscal year 2005 SG&A expense was $176.5 million, or 37% of sales, compared to $152.3 million, or 36% of sales, in fiscal year 2004. Key contributors to the increase during the fourth quarter and full-year were expenses related to Mentor's direct to consumer advertising program, incentive compensation related expenses, higher audit-related expenses including Sarbanes-Oxley compliance, and expenses related to the Company's silicone gel breast implant Pre-Market Approval (PMA) application.
Research & Development Expense
Research and development (R&D) expense in the fourth quarter 2005 was $8.2 million compared to $7.6 million in the fourth quarter 2004. Fiscal year 2005 R&D expense was $32.8 million, compared to $30.0 million in fiscal year 2004. During the quarter, Mentor's investment in R&D supported the ongoing review of Mentor's pending silicone gel breast implant PMA and key clinical programs for the Company's hyaluronic acid-based dermal filler and botulinum toxin products.
Special Charges
During the fourth quarter 2005, Mentor recorded $16.8 million in charges related to severance, restructuring and impairment of certain long-lived assets. Net of $5.4 million of income tax benefits, these charges equated to $0.23 per share. The charges included $8.5 million related to the severance of certain executives and $8.2 million related to the write-down of certain assets determined to be impaired and to the restructuring of certain of the Company's operations to achieve improved efficiencies. As part of the restructuring, the Company reduced its labor force by approximately 100 positions, or 5% of its workforce.
Dividend
Mentor declared a dividend of $0.17 per share in the fourth quarter 2005, compared to $0.15 per share in the fourth quarter 2004. Mentor's dividend in fiscal year 2005 was $0.66 compared to $0.47 in fiscal year 2004.
Balance Sheet
• Mentor ended fiscal year 2005 with $112.9 million in cash and marketable securities, compared to $126.7 at
year-end fiscal year 2004.
• The Company repurchased 2.3 million shares of its common stock for $79.8 million.
• The Company invested $9.7 million in capital expenditures in fiscal year 2005.
• Days-sales-outstanding decreased to 77 days, down from 82 days at year-end 2004.
Outlook for Fiscal Year 2006
The Company expects to build on its strong results in fiscal year 2005. Sales in fiscal year 2006 are expected to grow at a low double-digit rate over sales in fiscal year 2005. With the improved operating leverage of its business platform, Mentor expects earnings per share to grow at a faster rate than sales and to be in the range of $1.60 to $1.65 in fiscal year 2006. This sales and earnings guidance excludes any positive impact that may result from a potential FDA approval of Mentor's pending silicone gel breast implant PMA application.
Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including non-GAAP diluted earnings per share, are considered non-GAAP financial measures. Mentor believes this information is useful to investors because it provides an alternative measure for assessing the Company's operating performance by excluding certain special charges that would normally be included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles. The Company's management uses these non-GAAP financial measures, along with the most directly comparable GAAP financial measure, diluted earnings per share, in evaluating the Company's operating performance. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as reported by the Company may not be comparable to similarly titled amounts reported by other companies.
Conference Call
Mentor Corporation has scheduled a conference call today regarding this announcement. Those interested in listening to a recording of the call may dial (800) 839-5635 at 6:00 p.m. EDT today until Midnight EDT, May 25, 2005. You may also listen to the live webcast at 5:00 p.m. EDT today or the archived call at www.mentorcorp.com, Investor Relations site under "Conference Calls".
About Mentor Corporation
Founded in 1969, Mentor Corporation is a leading supplier of medical products for the global healthcare market. The Company develops, manufactures and markets innovative, science-based products for the aesthetics, urologic specialties and clinical and consumer healthcare markets around the world. The Company's website is www.mentorcorp.com.
Safe Harbor Statement
All statements included or incorporated by reference in this release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by us. Forward-looking statements can often be identified by words such as "anticipates," "scheduled", "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue", similar expressions, and variations or negatives of these words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements speak only as of the date hereof and are based upon the information available to us at this time. Such information is subject to change, and we will not necessarily inform you of such changes. These statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statement as a result of various factors.
Contact:
Mentor Corporation
Peter R. Nicholson
Vice President, Corporate Development
(805) 879-6082
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CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||
(unaudited, in thousands, except per share data) | |||||||||||||
Three months ended | Twelve months ended | ||||||||||||
2005 | 2004 | % Change | 2005 | 2004 | % Change | ||||||||
Net sales | $ | 131,585 | $ | 117,297 | 12% | $ | 483,397 | $ | 422,168 | 15% | |||
Cost of sales | 46,222 | 45,388 | 2% | 173,691 | 160,783 | 8% | |||||||
Gross profit | 85,363 | 71,909 | 19% | 309,706 | 261,385 | 19% | |||||||
Selling, general and administrative expense | 47,300 | 42,070 | 12% | 176,473 | 152,275 | 16% | |||||||
Research and development | 8,203 | 7,571 | 8% | 32,839 | 30,041 | 9% | |||||||
Severance charges | 8,519 | - | 8,519 | - | |||||||||
Restructuring & long-lived asset impairment charges | 8,236 | - | 8,236 | - | |||||||||
72,258 | 49,641 | 46% | 226,067 | 182,316 | 24% | ||||||||
Operating income | 13,105 | 22,268 | -41% | 83,639 | 79,069 | 6% | |||||||
Interest (expense) | (1,406) | (1,163) | 21% | (5,388) | (1,844) | 192% | |||||||
Interest income | 377 | 550 | -32% | 2,008 | 1,663 | 21% | |||||||
Other income (expense) | 719 | 145 | 396% | 968 | 1,252 | -23% | |||||||
Income before income taxes | 12,795 | 21,800 | -41% | 81,227 | 80,140 | 1% | |||||||
Income taxes | 4,431 | 6,832 | -35% | 26,346 | 25,361 | 4% | |||||||
Net income | $ | 8,364 | $ | 14,968 | -44% | $ | 54,881 | $ | 54,779 | - | |||
Earnings per share | |||||||||||||
Basic earnings per share * | $ | 0.21 | $ | 0.34 | -38% | $ | 1.31 | $ | 1.20 | 9% | |||
Diluted earnings per share * | $ | 0.19 | $ | 0.31 | -39% | $ | 1.17 | $ | 1.13 | 4% | |||
Dividends per share | $ | 0.17 | $ | 0.15 | 13% | $ | 0.66 | $ | 0.47 | 40% | |||
Weighted average shares outstanding | |||||||||||||
Basic * | 40,579 | 43,462 | -7% | 41,921 | 45,543 | -8% | |||||||
Diluted * | 48,138 | 51,283 | -6% | 49,667 | 49,272 | 1% | |||||||
Three months ended | Twelve months ended | ||||||||||||
2005 | 2004 | % | 2005 | 2004 | % | ||||||||
GAAP diluted earnings per share | $ | 0.19 | $ | 0.31 | -39% | $ | 1.17 | $ | 1.13 | 4% | |||
Total special charges, net of tax | 0.23 | - | - | 0.23 | - | - | |||||||
Non-GAAP diluted earnings per share ** | $ | 0.42 | $ | 0.31 | 35% | $ | 1.40 | $ | 1.13 | 24% | |||
*Prior year diluted earnings per share and weighted average shares outstanding have been restated to reflect the additional shares that would be issued upon conversion of our 2 3/4% convertible notes, in accordance with recently adopted EITF 04-8. |
MENTOR CORPORATION | ||||||||
SALES BY PRINCIPAL PRODUCT LINE | ||||||||
(unaudited, in thousands) | ||||||||
Three months ended | ||||||||
2005 | 2004 | % Change | ||||||
Breast implants | $ | 58,906 | $ | 54,690 | 8% | |||
Body contouring | 5,323 | 4,091 | 30% | |||||
Other aesthetics | 4,450 | 2,133 | 109% | |||||
Aesthetic sales | 68,679 | 60,914 | 13% | |||||
Erectile dysfunction | 7,321 | 5,282 | 39% | |||||
Brachytherapy | 4,248 | 3,887 | 9% | |||||
Womens health (pelvic floor) | 6,014 | 5,573 | 8% | |||||
Disposable urinary care/other | 17,542 | 15,115 | 16% | |||||
Surgical urology sales | 35,125 | 29,857 | 18% | |||||
Clinical and consumer sales | 27,781 | 26,526 | 5% | |||||
Total sales | $ | 131,585 | $ | 117,297 | 12% | |||
Twelve months ended | ||||||||
2005 | 2004 | % Change | ||||||
Breast implants | $ | 217,420 | $ | 194,052 | 12% | |||
Body contouring | 18,609 | 15,276 | 22% | |||||
Other aesthetics | 15,697 | 9,109 | 72% | |||||
Aesthetic sales | 251,726 | 218,437 | 15% | |||||
Erectile dysfunction | 26,353 | 23,201 | 14% | |||||
Brachytherapy | 15,828 | 14,615 | 8% | |||||
Womens health (pelvic floor) | 22,537 | 15,552 | 45% | |||||
Disposable urinary care/other | 64,574 | 55,002 | 17% | |||||
Surgical urology sales | 129,292 | 108,370 | 19% | |||||
Clinical and consumer sales | 102,379 | 95,361 | 7% | |||||
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Total sales | $ | 483,397 | $ | 422,168 | 15% |
MENTOR CORPORATION | ||||||||
NON-GAAP OPERATING INCOME, NET INCOME, AND EARNINGS PER SHARE RECONCILIATIONS | ||||||||
(unaudited, in thousands, except per share data) | ||||||||
Three Months | % | Twelve Months | % | |||||
Ended | Net | Ended | Net | |||||
March 31, 2005 | Sales | March 31, 2005 | Sales | |||||
Operating income reconciliation | ||||||||
GAAP operating income | $ | 13,105 | 10% | $ | 83,639 | 17% | ||
Special charges: | ||||||||
Severance charges | 8,519 | 7% | 8,519 | 2% | ||||
Restructuring & long-lived asset impairment charges | 8,236 | 6% | 8,236 | 2% | ||||
Total special charges | 16,755 | 13% | 16,755 | 4% | ||||
Non-GAAP operating income | $ | 29,860 | 23% | $ | 100,394 | 21% | ||
Net income reconciliation | ||||||||
GAAP net income | $ | 8,364 | 6% | $ | 54,881 | 11% | ||
Special charges: | ||||||||
Severance charges | 8,519 | 7% | 8,519 | 2% | ||||
Restructuring & long-lived asset impairment charges | 8,236 | 6% | 8,236 | 2% | ||||
Total special charges | 16,755 | 13% | 16,755 | 4% | ||||
Tax effect of special charges | (5,429) | (4%) | (5,429) | (1%) | ||||
Non-GAAP net income | $ | 19,690 | 15% | $ | 66,207 | 14% | ||
Earnings for per share reconciliation | ||||||||
GAAP diluted EPS | $ | 0.19 | $ | 1.17 | ||||
Special charges: | ||||||||
Severance charges | 0.17 | 0.17 | ||||||
Restructuring & long-lived asset impairment charges | 0.17 | 0.17 | ||||||
Total special charges | 0.34 | 0.34 | ||||||
Tax effect of special charges | (0.11) | (0.11) | ||||||
Non-GAAP diluted EPS | $ | 0.42 | $ | 1.40 | ||||
MENTOR CORPORATION |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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(unaudited, in thousands) |
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Assets | March 31, 2005 | March 31, 2004 | |||
Current assets: | |||||
Cash and marketable securities | $ | 112,895 | $ | 126,744 | |
Accounts receivable, net | 110,749 | 106,016 | |||
Inventories | 74,679 | 67,912 | |||
Deferred income taxes | 23,976 | 22,488 | |||
Prepaid expenses and other | 16,573 | 13,205 | |||
Total current assets | 338,872 | 336,365 | |||
Property and equipment, net | 72,287 | 77,529 | |||
Intangibles assets, net | 32,155 | 51,014 | |||
Goodwill, net | 24,080 | 23,711 | |||
Other assets | 10,207 | 10,160 | |||
Total assets | $ | 477,601 | $ | 498,779 | |
Liabilities and shareholders' equity | |||||
Current liabilities | $ | 141,859 | $ | 129,930 | |
Long-term deferred income taxes | - | 2,549 | |||
Long-term accrued liabilities | 10,587 | 17,996 | |||
Convertible subordinated notes | 150,000 | 150,000 | |||
Shareholders' equity | 175,155 | 198,304 | |||
Total liabilities and shareholders' equity | $ | 477,601 | $ | 498,779 | |
MENTOR CORPORATION | |||||||||||||||||||||
DILUTED EARNINGS PER SHARE RESTATEMENT | |||||||||||||||||||||
(unaudited, in thousands, except per share data) | |||||||||||||||||||||
Restatement of Diluted Earnings per Share for Adoption of EITF 04-8 | |||||||||||||||||||||
"The Effect of Contingently Convertible Instrument on Diluted Earnings per Share" | |||||||||||||||||||||
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Fiscal Year 2004 ending March 31, 2004 |
| Fiscal Year 2005 ending March 31, 2005 | |||||||||||||||||||
As Reported | Q1 | Q2 | Q3 | Q4 | Year |
| Q1 | Q2 | Q3 | Q4 | Year | ||||||||||
Net income as reported | $ | 16,033 | $ | 11,238 | $ | 12,540 | $ | 14,968 | $ | 54,779 |
| $ | 17,654 | $ | 12,534 | $ | 16,329 | $ | 8,364 | $ | 54,881 |
Reported diluted EPS | $ | 0.33 | $ | 0.23 | $ | 0.26 | $ | 0.32 | $ | 1.15 | $ | 0.39 | $ | 0.28 | $ | 0.34 | $ | 0.19 | $ | 1.17 | |
Weighted average shares outstanding for diluted | 48,346 | 48,610 | 47,916 | 46,162 | 47,757 | 45,036 | 45,238 | 49,987 | 48,138 | 49,667 | |||||||||||
Year over year growth in diluted EPS | -3% | -12% | -4% | 14% | 0% | 18% | 22% | 31% | -39% | 4% | |||||||||||
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Fiscal Year 2004 ending March 31, 2004 |
| Fiscal Year 2005 ending March 31, 2005 | |||||||||||||||||||
Restated Results | Q1 | Q2 | Q3* | Q4* | Year March 2004* |
| Q1* | Q2* | Q3 | Q4 | Year | ||||||||||
Net income as reported | $ | 16,033 | $ | 11,238 | $ | 12,540 | $ | 14,968 | $ | 54,779 | $ | 17,654 | $ | 12,534 | $ | 16,329 | $ | 8,364 | $ | 54,881 | |
Add back after tax interest expense on convertible notes | $ | - | $ | - | $ | 145 | $ | 802 | $ | 947 | $ | 802 | $ | 802 | $ | 802 | $ | 802 | $ | 3,208 | |
Numerator for diluted EPS calculation | $ | 16,033 | $ | 11,238 | $ | 12,685 | $ | 15,770 | $ | 55,726 |
| $ | 18,456 | $ | 13,336 | $ | 17,131 | $ | 9,166 | $ | 58,089 |
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Weighted average shares outstanding for diluted as reported | 48,346 | 48,610 | 47,916 | 46,162 | 47,757 | 45,036 | 45,238 | 44,859 | 43,007 | 44,541 | |||||||||||
Additional shares issuable for convertible notes | - | - | 891 | 5,121 | 1,515 | 5,121 | 5,124 | 5,128 | 5,131 | 5,126 | |||||||||||
Denominator for diluted EPS calculation | 48,346 | 48,610 | 48,807 | 51,283 | 49,272 |
| 50,157 | 50,362 | 49,987 | 48,138 | 49,667 | ||||||||||
Restated diluted earnings per share | $ | 0.33 | $ | 0.23 | $ | 0.26 | $ | 0.31 | $ | 1.13 |
| $ | 0.37 | $ | 0.26 | $ | 0.34 | $ | 0.19 | $ | 1.17 |
Year over year growth in diluted EPS after restatement | -3% | -12% | -4% | 11% | -2% | 12% | 13% | 31% | -39% | 4% | |||||||||||
* Effective for periods ending after December 15, 2004, EITF 04-8 requires that the dilutive impact of contingently issuable shares from our $150 million of convertible notes be included in the diluted earnings per share calculation. | |||||||||||||||||||||
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