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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 17, 1998
Mallinckrodt Inc.
(Exact name of registrant as specified in its charter)
New York 1-483 36-1263901
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
675 McDonnell Boulevard, St. Louis, MO 63134
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, (314) 654-2000
including area code
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Pursuant to Rule 12b-15 of the Securities Exchange Act of 1934, as amended,
this Form 8-K/A is hereby filed with respect to that certain Current Report on
Form 8-K of Mallinckrodt Inc. filed with the Securities and Exchange Commission
on March 2, 1998 (as amended, the "Form 8-K"). In accordance therewith, Item 5
of the Form 8-K is hereby restated in its entirety as follows:
Item 5. Other Events
This document includes as exhibits the Report of Independent Auditors for
Puritan-Bennett Corporation and its subsidiaries, Infrasonics, Inc. and
Aequitron Medical, Inc. and the consent of their auditors which was not
included in the Company's Current Report on Form 8-K filed March 2, 1998.
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NELLCOR PURITAN BENNETT INCORPORATED
Consolidated Balance Sheet
July 6, July 7,
(in thousands, except share and per share amounts) 1997 1996
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ASSETS
Current assets:
Cash and cash equivalents $ 43,330 $ 71,692
Marketable securities 3,312 5,825
Accounts receivable 193,150 158,103
Inventories 168,131 132,392
Deferred income taxes 19,987 32,375
Other current assets 17,597 14,589
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Total current assets 445,507 414,976
Property, plant and equipment 151,195 132,956
Intangible and other assets 60,180 49,983
Deferred income taxes 16,136 13,101
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$ 673,018 $ 611,016
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LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 53,016 $ 40,269
Current maturities of long-term debt 27,209 530
Employee compensation and related costs 24,468 32,072
Merger and related costs 19,626 32,452
Restructuring reserve 7,522 --
Other accrued expenses 38,179 35,135
Income taxes payable -- 20,404
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Total current liabilities 170,020 160,862
Long-term debt, less current maturities 6,040 8,394
Deferred compensation and pensions 9,332 9,522
Deferred revenue 8,213 10,039
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Total liabilities 193,605 188,817
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Commitments and contingencies (Notes 15 and 17)
Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000 shares authorized; none outstanding -- --
Common stock, $.001 par value; 150,000,000 shares authorized:
66,707,325 shares issued and outstanding (65,261,751 in 1996) 67 65
Additional paid-in capital 255,409 236,459
Retained earnings 282,184 242,819
Accumulated translation adjustment 218 304
Unrealized gain on available-for-sale securities and other 352 1,369
Treasury stock, at cost (58,817) (58,817)
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Total stockholders' equity 479,413 422,199
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$ 673,018 $ 611,016
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See accompanying notes to consolidated financial statements.
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NELLCOR PURITAN BENNETT INCORPORATED
Consolidated Statement of Operations
Years Ended
-------------------------------------------
July 6, July 7, July 2,
(in thousands, except per share amounts) 1997 1996 1995
--------- --------- ---------
Net revenue $ 778,583 $ 744,609 $ 653,868
Cost of goods sold 410,818 363,244 326,853
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Gross profit 367,765 381,365 327,015
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Operating expenses:
Research and development 57,440 57,691 52,136
Selling, general and administrative 219,570 211,167 196,135
Restructuring and other non-recurring charges 9,677 -- 2,654
Merger and related costs 21,689 108,899 --
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308,376 377,757 250,925
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Income from operations 59,389 3,608 76,090
Interest income and other income, net 1,256 4,762 7,566
Interest expense (1,095) (3,257) (5,855)
Costs associated with unsolicited takeover offer -- -- (5,049)
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Income before income taxes 59,550 5,113 72,752
Provision for income taxes 20,781 12,062 22,782
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Net income (loss) $ 38,769 $ (6,949) $ 49,970
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Net income (loss) per common share $ 0.61 $ (0.11) $ 0.82
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Weighted average common and common equivalent shares 63,999 61,595 60,736
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See accompanying notes to consolidated financial statements.
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NELLCOR PURITAN BENNETT INCORPORATED
Consolidated Statement of Stockholders' Equity
Unrealized
Gain
Common Stock Additional Accumulated (Loss) on Treasury Stock
(in thousands, except share amounts) ------------------------ Paid-in Retained Translation Securities --------------------
Shares Par Value Capital Earnings Adjustment and Other Shares Par Value
---------- --------- ------- -------- ----------- ---------- -------- ----------
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Balance at July 3, 1994 60,707,644 $61 $169,317 $200,626 $100 $(313) 1,109,784 $(14,274)
Issuance of common stock and
related tax benefits of $3,487
under employee stock plans 1,842,771 2 22,742 644
Stock awards granted,
net of cancellations 47,077 1,184 (1,184)
Amortization of deferred
stock awards 427
Acquisition of treasury stock 1,186,216 (20,909)
Accumulated translation
adjustment (359)
Net income 49,970
Dividends declared (1,518)
Unrealized gain on
available-for-sale securities (294)
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Balance at July 2, 1995 62,597,492 63 193,243 249,078 (259) (1,364) 2,296,000 (34,539)
Puritan-Bennett net income
for the period from
2/1/95 - 6/30/95 690
Issuance of common stock and
related tax benefits of $7,199
under employee stock plans 2,664,259 2 43,216
Amortization of deferred
stock awards 1,359
Acquisition of treasury stock 928,020 (24,278)
Accumulated translation
adjustment 563
Net loss (6,949)
Unrealized gain on
available-for-sale securities 1,374
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Balance at July 7, 1996 65,261,751 65 236,459 242,819 304 1,369 3,224,020 (58,817)
Aequitron net income
for the period from
5/1/96 - 7/07/96 596
Issuance of common stock and
related tax benefits of $3,806
under employee stock plans 1,445,574 2 18,950
Accumulated translation
adjustment (86)
Net income 38,769
Unrealized loss on
available-for-sale securities (1,017)
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Balance at July 6, 1997 66,707,325 $67 $255,409 $282,184 $218 $352 3,224,020 $(58,817)
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See accompanying notes to consolidated financial statements.
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NELLCOR PURITAN BENNETT INCORPORATED
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Consolidated Statement of Cash Flows
Years Ended
--------------------------------------------
July 6, July 7, July 2,
(in thousands) 1997 1996 1995
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Cash flows from operating activities:
Net income (loss) $ 38,769 $ (6,949) $ 49,970
Adjustments to reconcile net income (loss) to
cash provided by (used for) operating activities:
Depreciation and amortization 32,740 32,156 33,616
Deferred income taxes 9,353 (19,030) (4,113)
Restructuring and other charges 9,677 -- 2,205
Merger and related charges 21,689 108,899 --
Deferred compensation and pensions -- (11,635) 1,859
Shares issued to employee benefit plans -- -- 2,376
Other (194) 220 245
Increases (decreases) in cash flows, net of effect of purchased
companies, as a result of changes in:
Accounts receivable (46,626) (33,195) (7,567)
Inventories (30,594) (23,212) (9,484)
Other current assets (2,638) (10,800) (2,578)
Intangible and other assets (4,057) 1,763 (3,070)
Accounts payable 12,096 5,744 (298)
Merger and related costs (29,577) (45,366) --
Employee compensation and other accrued expenses 410 5,630 8,788
Income taxes payable (23,889) 14,618 555
Deferred revenue (532) (920) 933
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Cash (used for) provided by operating activities (13,373) 17,923 73,437
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Cash flows from investing activities:
Puritan-Bennett net cash used during the period from 2/1/95 - 6/30/95 -- (3,628) --
Aequitron net cash provided during the period from 5/1/96 - 7/7/96 46 -- --
Capital expenditures (48,899) (30,466) (31,701)
Purchase of available-for-sale securities (1,800) (2,800) (2,100)
Purchase of securities held-to-maturity -- -- (48,235)
Proceeds from the sale of available-for-sale securities 3,159 66,400 --
Proceeds from maturities of securities held-to-maturity -- -- 37,654
Proceeds from the sale of capital assets -- 7 5,899
Acquisitions, net of cash acquired (5,268) (10,305) (23,415)
Other investing activities (1,889) 220 (599)
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Cash (used for) provided by investing activities (54,651) 19,428 (62,497)
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Cash flows from financing activities:
Issuance of common stock under the
Company's stock plans and related tax benefits, net 18,937 43,347 21,001
Purchase of treasury stock, including shares retired -- (24,410) (20,909)
Issuance (repayment) of notes payable, net -- (18,020) (9,771)
Additions to loans payable -- 40,000 --
Repayment of loans payable -- (40,000) --
Additions to long-term debt 33,547 2,500 20,000
Repayment of long-term debt (11,854) (57,672) (6,099)
Payment of dividends -- -- (1,500)
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Cash provided by (used for) financing activities 40,630 (54,255) 2,722
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Effect of exchange rate changes on cash (968) 416 570
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(Decrease) increase in cash and cash equivalents (28,362) (16,488) 14,232
Cash and cash equivalents at the beginning of the year 71,692 88,180 73,948
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Cash and cash equivalents at the end of the year $ 43,330 $ 71,692 $ 88,180
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See accompanying notes to consolidated financial statements.
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NELLCOR PURITAN BENNETT INCORPORATED
Notes to Consolidated Financial Statements
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization | Nellcor Puritan Bennett Incorporated (together with its
wholly-owned subsidiaries, Nellcor Puritan Bennett or the Company) is a
corporation organized under the laws of the State of Delaware in 1986 and, until
the acquisition of Puritan-Bennett Corporation (Puritan-Bennett) in August 1995,
operated under the name Nellcor Incorporated (Nellcor). The Company develops,
manufactures and markets monitoring systems and diagnostic and therapeutic
products for management of the respiratory-impaired patient across the continuum
of care. The Company's products are primarily sold to hospitals, private and
governmental institutions and health care agencies, medical equipment
distributors and rental companies, and doctors' offices. Nellcor Puritan Bennett
markets its products worldwide with international sales accounting for
approximately one-third of the Company's consolidated net revenue.
Combined financial results | The Company's fiscal 1996 merger with
Puritan-Bennett and acquisition of Infrasonics, Inc. (Infrasonics) and fiscal
1997 acquisition of Aequitron, Inc. (Aequitron) were intended to qualify as
tax-free reorganizations and were accounted for as pooling-of-interests (see
Note 7). Accordingly, the consolidated financial statements for all periods
presented combine the financial results of Nellcor, Puritan-Bennett,
Infrasonics, and Aequitron. The Company's consolidated balance sheet at July 7,
1996 combines the historical balance sheet of the Company at July 7, 1996 and
Aequitron at April 30, 1996. The Company's consolidated statement of operations
at July 7, 1996 combines the historical statement of operations of the Company
for the period ended July 7, 1996 and Aequitron for the period ended April 30,
1996. The Company's consolidated statement of operations at July 2, 1995
combines the historical statement of operations of Nellcor for the period ended
July 2, 1995, Puritan-Bennett for the period ended January 31, 1995, Infrasonics
for the period ended June 30, 1995, and Aequitron for the period ended April 30,
1995. The results of operations of Puritan-Bennett for the period February 1,
1995 through June 30, 1995 of $690,000 have been recorded as an increase to
stockholders' equity for the fiscal year ended July 7, 1996. The results of
operations of Aequitron for the period May 1, 1996 through July 7, 1996 of
$596,000 have been recorded as an increase to stockholders' equity for the
fiscal year ended July 6, 1997. The Company's consolidated statement of
operations for the fiscal year ended July 2, 1995 also reflects an adjustment to
reduce Puritan-Bennett's valuation allowance provided for its deferred tax
assets based upon the combined income from operations of Nellcor and
Puritan-Bennett as required by Statement of Financial Accounting Standards No.
109. The effect of this adjustment was to reduce the provision for income taxes,
as presented herein, by $3.9 million in fiscal 1995. Adjustments made to conform
the accounting policies of Nellcor, Puritan-Bennett, Infrasonics, and Aequitron
were immaterial.
Principles of consolidation | The Company's significant inter-company
transactions and balances have been eliminated. The Company uses the equity
method of accounting for its investments that represent greater than 20%, but
less than 50%, of the investee. Investments which represent less than 20% of the
investee are recorded at cost. All such investments were immaterial for all
periods presented.
Fiscal year | The Company's fiscal year ends on the first Sunday in July, which
results in a 52- or 53-week fiscal year. Fiscal 1997 and 1995 were 52-week years
whereas fiscal 1996 was a 53-week year.
Foreign currency translation | Certain of the Company's foreign subsidiaries use
the local currency, while others use the U.S. dollar as their functional
currency. Subsidiaries using the local currency translate assets and liabilities
denominated in foreign currencies at the rates of exchange at the balance sheet
date. Income and expense items are translated at average monthly rates of
exchange. Any resulting translation adjustments are recorded as a separate
component of stockholders' equity. Subsidiaries using the dollar as the
functional currency measure assets and liabilities at the balance sheet date or
historical rates depending on their nature; income and expenses are re-measured
at the weighted-average exchange rates for the year. Foreign currency gains and
losses resulting from transactions are included in operations in the year of
occurrence and have not been material.
Revenue recognition and product warranty | The Company recognizes revenue at the
time of shipment of product and provides currently for estimated product returns
and the cost to repair or replace products under the warranty provisions in
effect at the time of sale.
Deferred revenue | Deferred revenue relates to extended warranty agreements
offered by the Company which are amortized over the life of the agreement, with
the related extended warranty costs charged to expense as incurred.
Cash equivalents | The Company considers all highly liquid investments with
original maturities of three months or less to be cash equivalents. These
investments are stated at cost which approximates fair value due to their short
maturity.
Inventories | Inventories are stated at the lower of cost (first-in, first-out)
or market. Allowances are made for slow-moving, obsolete, unsalable, or unusable
inventories.
Property, plant and equipment | Depreciation is provided using the straight-line
method over the estimated useful lives of the assets which range from three to
twenty-five years. Leasehold improvements are amortized over the life of the
lease, or the estimated useful life of the asset, whichever is shorter.
Intangible and other assets | Intangible and other assets, including the excess
of cost over the fair value of identifiable net assets acquired, are amortized
on a straight-line basis over the estimated useful lives of the assets which
range from two to fifteen years. An impairment of intangible assets is
recognized when it is considered probable that the carrying amount of an asset
cannot be fully recovered, based on estimated future cash flows of the related
asset.
Fair value of financial instruments | The estimated fair value of long-term debt
is determined based upon rates currently available to the Company for debt with
similar terms and remaining maturities.
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Income taxes | Deferred income taxes are computed using the liability method.
Under the liability method, taxes are recorded based on the future tax effect of
the difference between the income tax and financial reporting bases of the
Company's assets and liabilities. In estimating future tax consequences, all
expected future events are considered, except for potential income tax law or
rate changes. The Company plans to continue to finance foreign expansion and
operating requirements by reinvestment of undistributed earnings of its foreign
subsidiaries and, accordingly, has not provided for United States federal income
tax on these earnings.
Stock split | On June 27, 1996, stockholders approved a two-for-one split of the
Company's common stock. All share and per share data for all periods presented
have been restated to give effect to the split.
Net income (loss) per share | Net income (loss) per share is based upon weighted
average number of common shares outstanding and includes the dilutive effect of
stock options outstanding, if any (using the treasury stock method).
Recent accounting pronouncements | The Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of," in fiscal 1997.
This statement requires that the Company review for impairment its long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. In certain situations, an impairment loss would
be recognized. The adoption of SFAS 121 did not have a material impact on the
financial position, results of operations or cash flows of the Company.
In fiscal 1997, the Company also adopted SFAS 123, "Accounting for
Stock-Based Compensation." SFAS 123 allows companies which have stock-based
compensation arrangements with employees to adopt a fair-value basis of
accounting for stock options and other equity instruments, or it allows
companies to continue to apply the existing accounting rules under APB Opinion
25 "Accounting for Stock Issued to Employees," but requires additional financial
statement footnote disclosure. The Company will continue to account for
stock-based compensation arrangements under APB Opinion 25. The additional
disclosure provisions of SFAS 123 are provided in Note 14.
The Company is required to implement SFAS No. 128, "Earnings per Share,"
in the second quarter of fiscal 1998. This statement replaces the presentation
of primary earnings per share (EPS) with a presentation of basic EPS and
requires dual presentation of basic and diluted EPS on the face of the statement
of operations. Basic EPS excludes common stock equivalents and is computed by
dividing income (loss) available to shareholders by the weighted average number
of common shares outstanding for the period. Diluted EPS is computed similarly
to fully diluted EPS under the provisions of APB Opinion No. 15, "Earnings per
Share." The following table summarizes the pro forma disclosure of EPS data in
accordance with SFAS No. 128:
Years Ended
-----------
July 6, July 7, July 2,
1997 1996 1995
---- ---- ----
As presented under APB Opinion No. 15:
Primary EPS $ 0.61 $ (0.11) $ 0.82
Fully Diluted EPS $ 0.61 $ (0.11) $ 0.82
As calculated under SFAS No. 128:
Basic EPS $ 0.62 $ (0.11) $ 0.83
Diluted EPS $ 0.61 $ (0.11) $ 0.82
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130). SFAS 130 establishes standards for the reporting of comprehensive
income and its components in a full set of general-purpose financial statements
for fiscal years beginning after December 15, 1997. Reclassification of
financial statements for earlier periods is required. The Company will adopt
SFAS 130 beginning in fiscal 1999 and does not expect such adoption to have a
material effect on the consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 revises information
regarding the reporting of certain operating segments disclosed in financial
statements issued for fiscal years beginning after December 15, 1997. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company will adopt SFAS 131 beginning
in fiscal 1999 and does not expect such adoption to have a material effect on
the consolidated financial statements.
Use of estimates | The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses for each fiscal period. Actual results could differ from
those estimated.
2. MARKETABLE SECURITIES
At July 6, 1997, the Company held available-for-sale marketable securities with
a fair market value of $3.3 million. Available-for-sale marketable securities
are securities which the Company does not intend to hold to maturity. The
Company's marketable securities are, generally, high quality government,
municipal, and corporate obligations with original maturities of up to two
years. The Company has established guidelines relative to investment quality,
diversification and maturities to maintain appropriate levels of safety and
liquidity.
Realized gains and losses resulting from the sale of available-for-sale
marketable securities have not been material. The difference between the cost
and market value of the Company's marketable securities at July 6, 1997, an
unrealized gain of approximately $0.4 million, is recorded as a separate
component of stockholders' equity.
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3. INVENTORIES
Inventories are as follows:
July 6, July 7,
(dollars in thousands) 1997 1996,
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Raw materials $ 74,884 $ 66,805
Work-in-process 19,199 16,538
Finished goods 74,048 49,049
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Total inventories $168,131 $132,392
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4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
July 6, July 7,
(dollars in thousands) 1997 1996
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Land and land improvements $ 15,848 $ 10,838
Buildings 47,928 39,286
Machinery and equipment 195,767 183,036
Leasehold improvements 12,266 11,145
Demonstration equipment 21,876 12,259
Furniture and fixtures 23,181 22,142
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316,866 278,706
Less accumulated depreciation
and amortization (165,671) (145,750)
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Property, plant and equipment $151,195 $132,956
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The Company leases a facility which is classified as a capital lease and
the related asset is being amortized over its estimated useful life of 15 years.
As of July 6, 1997, the cost of the asset and accumulated amortization was $4.4
million and $1.0 million, respectively, and is included in Buildings.
Depreciation and amortization expense was approximately $30.6 million in
fiscal 1997, $24.3 million in fiscal 1996, and $23.0 million in fiscal 1995.
5. FINANCIAL INSTRUMENTS AND OFF BALANCE SHEET RISK
Foreign currency instruments | The Company enters into foreign currency exchange
contracts, primarily foreign currency forward contracts, to reduce exposure to
currency exchange risk. The effect of this practice is to minimize the impact of
foreign exchange rate movements on the Company's operating results as gains and
losses on these contracts offset losses and gains on the assets, liabilities and
transactions being hedged. The Company does not engage in foreign currency
speculation. The counter-parties to foreign currency exchange contracts are
major domestic and international financial institutions. To decrease the risk of
non-performance which may result in currency losses, the Company diversifies its
selection of counter-parties. At July 6, 1997, the Company had foreign currency
forward exchange contracts with a notional amount of $70.9 million ($65.1
million at July 7, 1996), and a fair market value of approximately $69.9 million
($65.2 million at July 7, 1996), all of which were denominated in Canadian,
Japanese and European currencies.
Fair market value was determined using foreign currency exchange rates
in effect at the end of each fiscal period. The Company records both the
amortized premium and any unrealized gain or loss on outstanding foreign
currency forward exchange contracts as non-operating income or expense. For both
fiscal 1997 and fiscal 1996, all outstanding foreign currency exchange contracts
were due to mature within six months of fiscal year end.
Concentration of credit risk | The Company provides credit in the form of trade
accounts receivable to hospitals, private and governmental institutions and
health care agencies, medical equipment distributors and rental companies, and
doctors' offices. The Company does not generally require collateral to support
customer receivables. The Company performs ongoing credit evaluations of its
customers and maintains allowances which management believes are adequate for
potential credit losses. At July 6, 1997, the Company was carrying allowances
for doubtful accounts totaling $6.5 million ($2.7 million at July 7, 1996).
The credit risk associated with the Company's trade receivables is
further limited due to dispersion of the receivables over a large number of
customers in many geographic areas. Payment of certain accounts receivable is
made by the national health care systems of several member countries of the
European Economic Community. Although the Company does not currently anticipate
credit problems associated with these receivables, payment may be impacted by
the economic stability of these countries.
The Company limits credit risk exposure to foreign exchange contracts by
periodically reviewing the credit-worthiness of the counter-parties to the
transactions.
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6. ACQUISITIONS
Nellcor-CMI, Inc. | On September 30, 1996, the Company acquired from Century
Medical, Inc. the remaining 50 percent ownership interest in its Japanese
joint-venture, Nellcor-CMI, Inc. (NCI), for $5.4 million in cash. The
acquisition of the remainder of NCI has been accounted for as a purchase and,
accordingly, 100 percent of the operating results of the Company's new
wholly-owned subsidiary, Nellcor Puritan Bennett Japan, are included in the
Company's financial statements subsequent to the acquisition date. The excess of
cost over the fair value of identifiable net assets acquired, primarily working
capital, of $5.1 million is being amortized over 10 years.
Melville | On August 23, 1995, the Company acquired Melville Software Ltd.
(Melville), a privately held Canadian company that manufactures and markets
sleep diagnostic products used primarily in sleep labs, for $4.9 million in
cash. In the event that certain profitability levels were achieved during the
three fiscal years following the acquisition, additional compensation totaling
$1.0 million would be payable to the former principal stockholders of Melville
who continued to manage the company. During fiscal 1997, $0.2 million of
additional compensation was expensed when earned and the remaining $0.8 million
was accrued as a merger cost to reflect the effect that integration decisions
associated with the Company's merger with Aequitron were expected to have upon
the payment of the remaining Melville milestones.
The acquisition of Melville has been accounted for as a purchase and,
accordingly, Melville's results are included in the Company's financial
statements subsequent to the acquisition date. The excess of cost over the fair
value of identifiable net assets acquired, primarily working capital, of $3.7
million is being amortized over 7 years.
Pierre Medical | On May 3, 1995, the Company acquired Pierre Medical, a
privately held French manufacturer of respiratory products used in the home, for
$21.5 million in cash. In the event that certain performance milestones were
achieved subsequent to the acquisition, additional compensation totaling 30
million French Francs ($5.8 million as of July 7, 1996) would be payable to the
former principal stockholders of Pierre Medical who continued to manage the
company. During fiscal 1996, $3.8 million of this additional compensation was
accrued as a merger and related cost to reflect the effect that integration
decisions associated with the Company's merger with Puritan-Bennett were
expected to have upon the achievement of certain of the performance milestones.
Pierre Medical manufactures and markets noninvasive ventilators, sleep apnea
therapy systems, oxygen concentrators and related respiratory products in
Western Europe, primarily in France.
The acquisition of Pierre Medical has been accounted for as a purchase
and, accordingly, Pierre Medical's results are included in the Company's
financial statements subsequent to the acquisition date. The fair value of
identifiable net assets acquired consisted of approximately $4.0 million of
working capital. The excess of cost over the fair value of identifiable net
assets acquired of $18.1 million, including acquisition-related costs, was
subsequently written down by $2.4 million during fiscal 1996 to reflect the
effect that certain integration decisions associated with the Company's merger
with Puritan-Bennett were expected to have upon Pierre Medical's estimated
future cash flows. The remainder of the excess purchase price, $15.7 million, is
being amortized over 15 years.
In connection with the acquisition, supplemental cash flow information
is as follows:
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(dollars in thousands)
Fair value of identifiable net assets acquired,
except for cash and cash equivalents $ 26,999
Liabilities assumed (5,584)
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Cash paid to acquire Pierre Medical, net
of cash and cash equivalents acquired $ 21,415
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Costs associated with an unsolicited offer | During fiscal 1995, $5.0 million of
costs were incurred in connection with an unsolicited offer to acquire
Puritan-Bennett. These costs included investment banking fees, public relations
expenses and legal fees, of which $0.9 million was paid during fiscal 1995 and
the remaining $4.1 million was paid during fiscal 1996.
7. MERGERS WITH PURITAN-BENNETT, INFRASONICS AND AEQUITRON
Puritan-Bennett | On August 24, 1995, the merger of Nellcor and Puritan-Bennett
was approved by stockholders of both companies. On August 25, the merger was
consummated, and Nellcor was renamed Nellcor Puritan Bennett Incorporated. Under
the terms of the merger agreement, Puritan-Bennett shareholders received 0.88 of
a share of the Company's common stock for each Puritan-Bennett share, resulting
in the Company issuing approximately 23.2 million shares, valued at
approximately $600 million based upon the closing price of the Company's common
stock on August 25, 1995. Additionally, outstanding options to acquire
Puritan-Bennett common stock were replaced with options to acquire approximately
1,047,000 shares of the Company's common stock.
Puritan-Bennett develops, manufactures, and markets ventilators, oxygen
delivery systems, home sleep diagnostic and therapeutic equipment, and certain
complementary products such as medical gases, gas-related equipment, and
spirometers. Puritan-Bennett reported revenue of $336.0 million and net income
of $8.4 million for its fiscal 1995 ended January 31, 1995.
Infrasonics | On June 27, 1996, the Company acquired Infrasonics in a
stock-for-stock merger. The issuance of the Company's common stock in accordance
with the Agreement and Plan of Merger was approved by stockholders at special
stockholders meetings held by both companies on June 27, 1996. Under the terms
of the Agreement and Plan of Merger, shareholders of Infrasonics received 0.12
of a share of the Company's common stock for each Infrasonics share, resulting
in the Company issuing approximately 2.6 million shares, valued at $62 million
based upon the closing price of the Company's common stock on June 27, 1996.
Additionally, outstanding options to acquire Infrasonics common stock were
assumed by the Company and converted into options to acquire approximately
130,000 shares of the Company's common stock. Infrasonics is a respiratory
equipment manufacturer of neonatal, pediatric and adult ventilators and
accessories.
8
10
Aequitron | On December 5, 1996, the Company acquired Aequitron in a
stock-for-stock merger. Under the terms of the Amended and Restated Agreement
and Plan of Merger, shareholders of Aequitron received 0.467 of a share of the
Company's common stock for each Aequitron share, resulting in the Company
issuing approximately 2,322,000 shares, valued at approximately $52.5 million
based on the closing price of the Company's common stock on December 5, 1996.
Additionally, outstanding options to acquire Aequitron's common stock were
assumed by the Company and converted into options to acquire approximately
545,000 shares of the Company's common stock.
Aequitron, headquartered in Minneapolis, Minnesota, is primarily a
respiratory equipment manufacturer of portable compact ventilators, infant apnea
products, and sleep disorder diagnostic devices. For the fiscal year ended April
30, 1996, Aequitron reported revenue of $38.5 million and net income of $2.4
million.
Separate results for each of Nellcor's, Puritan-Bennett's, Infrasonics'
and Aequitron's fiscal 1995, and combined results for the twelve months ended
July 2, 1995, including the adjustment described in Note 1, were as follows:
- - -------------------------------------------------------------------------------------------------------------------------------
NELLCOR PURITAN-BENNETT INFRASONICS AEQUITRON COMBINED
Twelve months ended (in thousands): July 2, 1995 January 31, 1995 June 30, 1995 April 30, 1995 Adjustment July 2, 1995
- - -------------------------------------------------------------------------------------------------------------------------------
Revenue $264,040 $336,026 $23,000 $30,802 - $653,868
- - -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 37,165 $ 8,398 $(1,351) $ 1,858 $3,900 $ 49,970
- - -------------------------------------------------------------------------------------------------------------------------------
Merger and related costs | Associated with the Company's acquisition of
Aequitron, the Company recorded merger and related costs during the second
quarter of fiscal 1997 of $21.7 million. Included in this charge were provisions
for merger transaction costs ($3.4 million), certain intangible asset
write-downs ($3.0 million), costs to combine and integrate operations ($14.5
million), and other merger-related costs ($0.8 million).
In connection with the merger with Puritan-Bennett, the Company recorded
merger and related costs during the first quarter of fiscal 1996 of $92.6
million. Included in this charge were provisions for merger transaction costs
($13.7 million), certain intangible asset write-downs ($19.6 million), costs to
combine and integrate operations ($53.8 million), and other merger-related costs
($5.5 million). In connection with the acquisition of Infrasonics, the Company
recorded merger and related costs during the fourth quarter of fiscal 1996 of
$16.3 million. Included in this charge were provisions for merger transaction
costs ($2.5 million), costs to combine and integrate operations ($11.8 million),
and certain intangible asset write-downs ($2.0 million). The merger transaction
costs include expenses for investment banker and professional fees, and other
costs associated with completing the transactions. The write-down of certain
intangible assets, primarily goodwill associated with prior acquisitions made by
both companies, results from the effect that certain integration decisions are
expected to have upon the future realization of these assets.
The costs to combine and integrate acquired operations included provisions
for the following types of costs:
Puritan-
(dollars in millions) Bennett Infrasonics Aequitron Total
- - -----------------------------------------------------------------------------------
Employee severance and
benefits termination $ 26.7 $ 4.1 $ 6.5 $ 37.3
Product line integration
and facilities closing 18.0 2.9 1.3 22.2
Other integration costs 9.1 4.8 6.7 20.6
- - -----------------------------------------------------------------------------------
Total $ 53.8 $ 11.8 $ 14.5 $ 80.1
- - -----------------------------------------------------------------------------------
Employee severance and benefits termination costs include amounts
associated with the elimination of approximately 320 positions from the
Company's total workforce. The positions to be eliminated are primarily
associated with corporate administrative groups, field sales and customer
service organizations, and the consolidation of manufacturing sites. As of July
6, 1997, substantially all positions contemplated by this workforce
consolidation, primarily in the Company's field sales and corporate
administrative groups, had been eliminated.
Of the $130.6 million in merger and related costs which were accrued,
approximately $111.0 million had been utilized as of July 6, 1997, primarily
associated with initial costs incurred to combine and integrate operations
($54.3 million, of which $19.2 million was associated with employee severance),
write-downs (non-cash charges) of certain intangible assets to their net
realizable values ($22.8 million), the payment of merger transaction costs
($21.4 million), and other merger-related costs ($12.5 million). The remaining
merger and related costs accrued at July 6, 1997 of $19.6 million, approximately
$19.0 million of which is expected to result in cash outlays, should be
substantially utilized by the end of fiscal year 1998.
9
11
8. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist of:
July 6, July 7,
(dollars in thousands) 1997 1996
- - --------------------------------------------------------------------------------
Excess of cost over fair value of
identifiable net assets acquired $ 46,914 $ 50,342
Other intangibles from
acquisitions, and purchased
technologies and rights 15,820 11,206
Other assets 27,374 18,030
- - --------------------------------------------------------------------------------
Total cost 90,108 79,578
Less accumulated amortization (29,928) (29,595)
- - --------------------------------------------------------------------------------
Intangible and other assets, net $ 60,180 $ 49,983
- - --------------------------------------------------------------------------------
9. NOTES PAYABLE AND CREDIT FACILITY
The Company has two credit facilities. The first is a $50 million syndicated
revolving credit facility with a group of four banks which provides an option to
convert outstanding borrowings under the facility to a term loan repayable over
four years. The rate of interest payable under this facility is equal to the
three month London Interbank Offered Rate plus 0.5%, which was approximately
6.3% at July 6, 1997. A facility fee equal to 0.25% of the total commitment is
paid quarterly. The credit facility contains various covenants which require the
Company to maintain specified financial ratios, limit liens, regulate asset
dispositions, and subsidiary indebtedness, and restrict certain acquisitions and
investments. During fiscal 1997, the Company borrowed $25 million against the
credit facility. These funds were in turn used to, in part, meet working capital
requirements. At July 6, 1997, the Company was in compliance with the covenants
under this credit facility. Due to the acquisition of the Company by
Mallinckrodt, Inc., this credit facility was repaid in full on August 26, 1997
(see Note 18). The second credit facility is four separate unsecured revolving
credit lines to borrow up to 2.4 billion yen on a one year basis. The rate of
interest payable under this facility is a floating rate, which is a function of
the Japanese Euro Yen lending rate. At July 6, 1997, this rate ranged from 1.02%
to 1.77%. During fiscal 1997, the Company borrowed $8.3 million against this
credit facility. These funds were used for working capital purposes. At July 6,
1997 , the Company was in compliance with the covenants under this credit
facility.
10. LONG-TERM DEBT
Long-term debt is summarized as follows:
July 6, July 7,
(dollars in thousands) 1997 1996
- - --------------------------------------------------------------------------------
Unsecured promissory notes payable:
Unsecured revolving credit facility $ 12,175 $ --
Syndicated revolving credit facility 15,034 --
Note payable to Norwest Bank, prime
rate plus .85%; principal to be paid in
equal quarterly installments with final
payment due in June, 2002 -- 2,223
Secured bank note payable:
Interest rate 7.95%, principal payable
in monthly installments through
August 2003, collateralized by a
building 1,199 1,530
Capital lease:
Interest rate 7.0%, principal payable
in monthly installments through
February 2009 4,514 4,645
Other 327 526
- - --------------------------------------------------------------------------------
33,249 8,924
Less current maturities (27,209) (530)
- - --------------------------------------------------------------------------------
Total long-term debt $ 6,040 $ 8,394
- - --------------------------------------------------------------------------------
The estimated fair value of total long-term debt at July 6, 1997 was
approximately $33.2 million.
Future minimum lease payments required under the capital lease are
included in the aggregate maturities of long-term debt listed below. As of July
6, 1997, the Company was in compliance with the provisions of its lease
agreement. The aggregate maturities of long-term debt during each of the next
five fiscal years are as follows: 1998 - $27,209,000; 1999 - $467,000; 2000 -
$550,000; 2001 - $586,000; and 2002 - $626,000.
Interest paid related to all Company debt during fiscal 1997, 1996 and
1995 totaled $1.1 million, $2.9 million and $6.1 million, respectively.
10
12
11. RESTRUCTURING AND OTHER NON-RECURRING CHARGES
During the fourth quarter of fiscal 1997, the Company recorded a $7.5 million
restructuring charge associated with the consolidation of home care business
activities spread across six existing U.S. sites into three sites and a $2.2
million charge related to intangible asset write-downs. Included in the
restructuring charge were provisions for severance ($3.1 million), facility
closing costs ($2.0 million), professional fees ($1.7 million) and other ($0.7
million). The Company is undertaking this action as part of its operations
improvement plan focused on increasing productivity, reducing cost and improving
the effectiveness of its product development activities. Overall, the Company
expects to eliminate approximately 110 positions. In addition, the portion of
the Company's critical care ventilator research and development operations
located in Ireland will be absorbed into the research and development operations
in Carlsbad, California. As of July 6, 1997, approximately $7.5 million of this
restructuring charge remained as an accrued liability.
During fiscal 1995, Puritan-Bennett recorded a $2.7 million
restructuring charge associated with a workforce reduction. As of July 6, 1997,
substantially all of this restructuring charge had been utilized.
12. EMPLOYEE BENEFITS
Defined benefit plans | The Company's wholly-owned subsidiary, Puritan-Bennett,
has non-contributory, defined benefit pension plans covering certain employees
in the U.S., and substantially all employees in Canada, Ireland, and Germany.
The Company contributes to each plan on an annual basis the amounts necessary to
satisfy the funding requirements of the various jurisdictions in which the plans
are established.
The U.S. defined benefit pension plan was terminated as of October 24,
1995. The costs associated with terminating the plan were not material. As of
June 11, 1996, all participants in the U.S. plan had either received a lump sum
distribution or had an annuity purchased on their behalf.
The Canadian defined benefit pension plan provides retirement benefits
based upon the employee's average earnings and years of service. The Irish plan
provides benefits equal to a certain percentage of the participant's final
salary. Puritan-Bennett has an unfunded supplemental retirement plan covering
certain key employees which provides supplemental retirement benefits based upon
average earnings. Puritan-Bennett also has an unfunded retirement plan for its
former outside directors.
A summary of the components of net cost for each fiscal year for the
defined benefit plans is as follows:
Pension Plans Supplemental Plan
(dollars in thousands) 1997 1996 1995 1997 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------------
Service cost - benefits earned during the year $ 491 $ 169 $ 2,189 $ -- $ 105 $ 85
Interest cost 102 148 3,811 408 374 287
Return on plan assets (431) (341) 466 -- -- --
Net amortization and deferral 333 98 (3,932) 20 72 105
- - ---------------------------------------------------------------------------------------------------------------------------
Net cost $ 495 $ 74 $ 2,534 $ 428 $ 551 $ 477
- - ---------------------------------------------------------------------------------------------------------------------------
Assumptions used in determining the net cost for the defined benefit plans
for each fiscal year were as follows:
Pension Plans Supplemental Plan
1997 1996 1995 1997 1996 1995
- - ------------------------------------------------------------------------------------------------------------------
Weighted average discount rate 7.00% 8.00% 7.50% 8.00% 8.00% 8.50%
Rate of increase in compensation levels 5.00% 4.50% 4.50% 4.50% 4.50% 4.50%
Expected long-term rate of return on plan assets 7.50% 9.75% 9.00% N/A N/A N/A
The following table sets forth the funded status and amounts recognized
in the Company's consolidated balance sheets at July 6, 1997 and July 7, 1996,
for the defined benefit plans:
Pension Plans Supplemental Plan
(dollars in thousands) 1997 1996 1997 1996
- - ------------------------------------------------------------------------------------------------------------------------
Vested benefit obligation $3,340 $ 1,540 $ 5,026 $ 5,117
- - ------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 3,340 1,540 5,026 5,117
- - ------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 3,989 2,233 5,026 5,117
Plan assets at fair value 4,248 3,048 -- --
- - ------------------------------------------------------------------------------------------------------------------------
Projected plan assets in excess of or (less than) projected
benefit obligation 259 815 (5,026) (5,117)
Unamortized net (gain) loss 11 238 755 770
Unrecognized net (asset) liability (309) (314) -- --
- - ------------------------------------------------------------------------------------------------------------------------
Net (liability) asset recognized in the consolidated balance sheet $ (39) $ 739 $(4,271) $(4,347)
- - ------------------------------------------------------------------------------------------------------------------------
11
13
Assumptions used in determining the actuarial present value of the
projected benefit obligation for the pension plans for each fiscal year were as
follows:
U.S. Canada Ireland
1997(1) 1996(1) 1997 1996 1997 1996
- - ---------------------------------------------------------------------------------------------------------------------
Weighted average discount rate 8.00% 8.00% 7.0% 8.00% 7.0% 8.75%
Rate of increase in compensation levels 4.50% 4.50% 5.0% 4.50% 5.0% 6.00%
Expected long-term rate of return on plan assets N/A N/A 7.0% 9.50% 8.0% 10.00%
- - ---------------------------------------------------------------------------------------------------------------------
(1) Supplemental plan only
Both the Canadian and Irish plan assets are invested in pooled mutual
funds. For the unfunded supplemental retirement benefit plan, the Company has
purchased company-owned life insurance policies intended to ultimately fund the
cost of the plan.
As part of the merger of Nellcor and Puritan-Bennett, future benefit
accruals under the supplemental portion of the U.S. defined benefit pension plan
were eliminated. As this decision reduced expected years of future service, the
event resulted in a curtailment charge of $560,000 which was recorded as a
component of merger and related costs during fiscal 1996.
Postretirement benefits other than pensions | The Company provides
postretirement health care benefits to certain eligible retirees of its
wholly-owned subsidiary, Puritan-Bennett. The cost of the postretirement medical
plan is shared by the Company and eligible retirees through such features as
annually adjusted contributions, deductibles and coinsurance. The retiree's
contribution is a factor of age and service at the time of retirement. The
postretirement health care benefits are funded by the Company as claims are
paid. The Company accounts for these benefits in accordance with SFAS No. 106,
"Employers Accounting for Postretirement Benefits other than Pensions." In the
valuation of the liability, an 8.5% discount assumption was used. Medical costs
were trended at 7.0%, trailing down to 6.0%. The components of the Company's
postretirement benefits obligation at July 6, 1997 and July 7, 1996 are as
follows:
(dollars in thousands) 1997 1996
- - -----------------------------------------------------------
Accumulated benefit obligation $ 918 $1,003
Unrecognized net gain 421 509
- - -----------------------------------------------------------
Accrued postretirement benefit $1,339 $1,512
- - -----------------------------------------------------------
The following summarizes the components of the net cost of the
postretirement benefits:
Years Ended
July 6, July 7,
(dollars in thousands) 1997 1996
- - ----------------------------------------------------------
Service cost $ - $ 31
Interest cost 73 125
Net amortization and deferral (58) 64
- - ----------------------------------------------------------
Total $ 15 $220
- - ----------------------------------------------------------
As a result of the merger of Nellcor and Puritan-Bennett, it was
determined that employees retiring from Puritan-Bennett on or after January 1,
1997 would no longer be eligible for postretirement medical coverage. This
decision resulted in a curtailment charge of $971,000, which was recorded as a
component of merger and related costs during fiscal 1996.
Voluntary Investment Plus (VIP) plan | The Company has a Voluntary Investment
Plus (VIP) 401(k) Plan under which substantially all U.S. employees may elect to
contribute up to 15% of their earnings. The Company matches each employee's
contributions, up to a maximum of $1,000 each calendar year.
Prior to the merger with Nellcor, Puritan-Bennett had a 401(k) plan
under which substantially all U.S. employees were eligible to participate. The
Puritan-Bennett Board of Directors amended Puritan-Bennett's 401(k) plan at the
merger date to provide a matching consistent with the Company's plan. The plan
assets were subsequently merged into the Company's VIP plan.
Infrasonics had a 401(k) plan under which substantially all U.S.
employees may elect to contribute up to 15% of their earnings. Infrasonics
contributed an additional 25% for up to 6% of each individual's contribution.
This plan was merged into the Company's VIP plan in January 1997. Aequitron had
a 401(k) plan under which eligible employees could contribute up to 15% of their
annual compensation to the plan. Aequitron contributed an additional 50% for up
to 3% of each individual's annual compensation. This plan was merged into the
Company's VIP plan in April 1997. The amount charged to expense under all plans
was $2.2 million, $2.5 million, and $1.9 million in fiscal 1997, 1996 and 1995,
respectively.
12
14
13. INCOME TAXES
The provision for income taxes consists of the following:
Years Ended
July 6, July 7, July 2,
( in thousands) 1997 1996 1995
- - -----------------------------------------------------------
Federal:
Current $ 4,897 $ 23,836 $20,049
Deferred 9,471 (17,267) (2,842)
- - -----------------------------------------------------------
14,368 6,569 17,207
- - -----------------------------------------------------------
State:
Current 3,591 2,463 3,453
Deferred 171 (1,562) (456)
- - -----------------------------------------------------------
3,762 901 2,997
- - -----------------------------------------------------------
Foreign:
Current 2,940 4,793 3,393
Deferred (289) (201) (815)
- - -----------------------------------------------------------
2,651 4,592 2,578
- - -----------------------------------------------------------
$20,781 $ 12,062 $22,782
- - -----------------------------------------------------------
Pretax income from foreign operations used to determine related tax
liabilities amounted to $10,857,000; $4,151,000; and $14,541,000 for fiscal
1997, 1996, and 1995, respectively. The Company has manufacturing operations in
Ireland which qualify for a reduced tax rate of 10 percent. The reduced rate
available on manufacturing profits earned in Ireland will expire in fiscal year
2011.
The most significant components of the Company's deferred tax assets and
liabilities are as follows:
- - ---------------------------------------------------------------------------------------------------------------
July 6, 1997 July 7, 1996
Deferred Tax Deferred Tax
(in thousands) Assets Liabilities Assets Liabilities
- - ---------------------------------------------------------------------------------------------------------------
Inventory and product allowances $16,243 $ - $20,846 $ 1,714
Property, plant and equipment 2,595 8,715 2,934 8,087
Intangible assets 5,234 - 3,469 -
Employee benefits 7,429 - 7,438 -
Deferred revenue 2,780 - 3,112 -
State income tax accrual 97 - 1,188 -
Provision for accounts receivable 2,375 - 1,109 -
Tax/book year end difference - 2,174 - 2,716
Net operating loss carry-forwards 1,012 - 5,254 -
Merger, restructuring, and other 10,731 - 12,394 -
Credits carried forward 932 - 2,842 -
Other 1,101 - 1,276 381
- - ---------------------------------------------------------------------------------------------------------------
Total 50,529 10,889 61,862 12,898
Less: valuation allowance (3,517) - (3,488) -
- - ---------------------------------------------------------------------------------------------------------------
Deferred income taxes $47,012 $10,889 $58,374 $12,898
- - ---------------------------------------------------------------------------------------------------------------
As of July 6, 1997, the Company had foreign net operating loss
carry-forwards of $1.4 million resulting from the acquisition of
Puritan-Bennett, which expire beginning in fiscal year 2006.
The Company paid income taxes of approximately $27.9 million, $12.6
million, and $22.8 million in fiscal 1997, 1996, and 1995, respectively.
13
15
The difference between the Company's actual effective income tax rate
and the United States federal statutory income tax rate is reconciled as
follows:
Years Ended
July 6, 1997 July 7, 1996 July 2, 1995
(dollars in thousands) $ % $ % $ %
- - -----------------------------------------------------------------------------------------------------------------------------
Federal statutory rate $ 20,841 35.0% $ 1,751 34.2% $ 25,433 35.0%
State income taxes, net of federal benefit 1,921 3.2 585 11.4 1,601 2.2
Goodwill 465 0.8 98 1.9 97 0.1
Foreign sales corporation benefit (597) (1.0) (87) (1.7) (76) (0.1)
R&D credits (273) (0.4) (166) (3.2) (1,185) (1.6)
Foreign rate differences (1,298) (2.2) (3,818) (74.7) (4,740) (6.5)
Merger costs 2,688 4.5 23,361 456.9 -- --
Valuation allowance (903) (1.5) (9,301) (181.9) 1,185 1.6
Net operating losses -- -- (1,351) (26.4) -- --
Foreign earnings taxed in U.S. 533 0.9 399 7.8 -- --
Other (2,616) (4.4) 591 11.6 467 0.6
- - -----------------------------------------------------------------------------------------------------------------------------
Income tax provision $ 20,781 34.9% $ 12,062 235.9% $ 22,782 31.3%
- - -----------------------------------------------------------------------------------------------------------------------------
14. STOCKHOLDERS' EQUITY
Common stock | On June 27, 1996, stockholders approved a two-for-one stock split
of the Company's common stock. As of July 6, 1997, taking into account the
two-for-one stock split, an aggregate of 11,306,253 shares of authorized but
unissued Company common stock remained reserved for issuance under the
Infrasonics 1995 Stock Option Plan (the Infrasonics 1995 Plan), the 1995 Merger
Stock Incentive Plan (the 1995 Plan), the 1994 Equity Incentive Plan, as amended
(the 1994 Plan), the Infrasonics 1991 Stock Option Plan (the Infrasonics 1991
Plan), the 1991 Equity Incentive Plan, as amended (the 1991 Plan), the Aequitron
Medical Inc. (Aequitron) Amended and Restated 1988 Stock Option Plan (the
Aequitron 1988 Plan), the 1988 Stock Option Plan for Non-Employee Directors, as
amended (the 1988 Plan), the Aequitron 1985 Employee Incentive Stock Option Plan
(the Aequitron 1985 Plan), the 1985 Equity Incentive Plan (the 1985 Plan), the
Infrasonics 1983 Employee Stock Option Plan (the Infrasonics 1983 Plan) and the
1995 Employee Stock Participation Plan (the 1995 ESPP).
Stock option plans | The Company maintains eight employee stock option plans:
the Infrasonics 1995 Plan, the 1995 Plan, the 1994 Plan, the Infrasonics 1991
Plan, the 1991 Plan, the Aequitron 1988 Plan, the Aequitron 1985 Plan and the
Infrasonics 1983 Plan. In August 1995, the Company obtained stockholder approval
of the 1995 Plan, which authorized the issuance of up to 1,558,000 shares of
Company common stock in the form of replacement stock options to holders of
unexercised options to purchase Puritan-Bennett stock as of the effective date
of the merger between Nellcor and Puritan-Bennett. Replacement options
representing 1,046,996 shares of Company common stock were issued. No additional
options will be granted from the 1995 Plan. As of the effective date of the
merger between the Company and Infrasonics, the Company assumed the Infrasonics
1995 Plan, the Infrasonics 1991 Plan and the Infrasonics 1983 Plan (the
Infrasonics Plans) and authorized the issuance of Company common stock upon
exercise of options outstanding under the Infrasonics Plans. As of the effective
date of the merger, options to purchase approximately 130,000 shares of Company
common stock were outstanding under the Infrasonics Plans. No additional options
will be granted from the Infrasonics Plans. As of the effective date of the
merger between the Company and Aequitron, the Company assumed the Aequitron 1988
Plan, the Aequitron 1985 Plan (the Aequitron Plans) and the Aequitron 1995
Employee Stock Purchase Plan (the Aequitron 1995 ESPP). As of the effective date
of the merger, options to purchase approximately 545,000 shares of Company
common stock were outstanding under the Aequitron Plans. No additional options
will be granted from the Aequitron Plans. 2,607 shares of Company common stock
were reserved for the Aequitron 1995 ESPP, which expired on April 30,1997
following the purchase of such shares at the end of the offering period.
In October 1994, the Company obtained stockholder approval of the 1994
Plan, which authorized the issuance of up to 3,000,000 shares of common stock to
executive officers, other key employees and consultants in the form of incentive
and nonqualified stock options, stock bonuses and restricted stock. The 1994
Plan satisfies the performance-based compensation requirements of the Omnibus
Budget Reconciliation Act of 1993. In August 1995, the stockholders approved an
amendment to the 1994 Plan to increase the number of shares authorized for
issuance from 3,000,000 to 5,000,000.
The Company obtained stockholder approval of the 1991 Plan in October
1991. Upon stockholder approval of the 1991 Plan, the Company's 1982 Incentive
Stock Option Plan (the 1982 Plan) and the 1985 Plan were terminated; however,
shares available for issuance under these plans at the time of termination,
including shares underlying outstanding options that later expire or are
canceled, totaling approximately 938,500 shares were pooled with the 1,500,000
additional shares reserved for issuance under the 1991 Plan. In October 1992,
the Company obtained stockholder approval for an amendment to the 1991 Plan
increasing the number of shares authorized for issuance under the 1991 Plan by
an additional 3,000,000 shares.
Restricted stock grants totaling 21,400 shares have been made under the
1991 Plan and the 1994 Plan, of which 5,000 shares were subsequently canceled.
These grants typically vest on an annual basis over a three-year period. Stock
bonus awards totaling 43,600 shares have been made under the 1991 Plan.
Options granted under the Infrasonics Plans vest on an annual basis over
a four-year period. Non-employee directors of Infrasonics were granted options
that vest 100% at the date of grant. Options granted under the 1995 Plan
generally vest on an annual basis over a period of two years. Options granted
under the 1994 and 1991 Plans generally vest on a quarterly basis over a period
of four years from the date of grant. A one-year waiting period is required
before vesting in the case of initial grants under the 1994 and 1991 Plans.
Options granted under the Aequitron Plans vest on an annual basis over a two or
five-year period.
The 1995, 1994, 1991, Infrasonics and Aequitron Plans authorize the
grant of incentive stock options at exercise prices equal to the fair market
value of the underlying common stock on the date of grant and permit the grant
of nonqualified stock options at exercise prices not less than 85 percent of
fair market value on the date of grant. To date, only incentive stock options
and nonqualified stock options with exercise prices equal to the fair market
value of the underlying common stock on the date of grant have been granted
under these Plans.
14
16
As of July 6, 1997, options representing 3,609,618 shares, including
options issued under the Infrasonics Plans, the Aequitron Plans, the 1995, 1994
and 1991 Plans and the terminated 1982 and 1985 Plans, were outstanding and
exercisable, and the Company, as of such date, had 3,373,428 shares available
for issuance under the 1994 and 1991 Plans.
Certain options issued under the 1994 and 1991 Plans permit exercise
prior to vesting. As to these options, if the optionee's relationship with the
Company is terminated prior to the complete vesting of the options, the Company
has the right to repurchase unvested shares at the exercise price plus interest.
As of July 6, 1997, no shares were subject to repurchase by the Company under
these options. The maximum term for all plans is 10 years.
1988 Plan. In October 1988, the Company obtained stockholder approval of
the 1988 Plan which authorized the non-discretionary grant of options to
non-employee Directors. Under the 1988 Plan, non-employee Directors
automatically receive stock option grants upon joining the Board of Directors
and annually thereafter. Until amended in May 1994, the 1988 Plan provided for
an initial grant of an option to purchase 40,000 shares of common stock upon a
Director joining the Board and an annual grant of an option to purchase 20,000
shares of stock. On May 14, 1994, the Board of Directors amended the 1988 Plan
to reduce the number of shares issuable to non-employee Directors in the form of
options to an initial grant of 20,000 shares and annual grant of 10,000 shares.
Options issued to non-employee Directors under the 1988 Plan are nonqualified
stock options having a five-year term and an exercise price equal to the fair
market value of the Company's common stock on the date of grant and vesting over
a four year period in the case of the initial option grants and over the
succeeding fiscal year in the case of annual grants.
In October 1994, the Company obtained stockholder approval to amend the
1988 Plan to increase the number of shares authorized for issuance by 150,000
shares and the term of options to be issued under the plan from five to ten
years.
As of July 6, 1997, options representing 171,250 shares were outstanding
and exercisable under the 1988 Plan, and 100,000 shares were available for
issuance under the 1988 Plan.
The following is a summary of option activity for all plans:
- - -------------------------------------------------------------------------------
Number of Weighted Average
Options Exercise Price
- - -------------------------------------------------------------------------------
Balance at July 3, 1994 5,110,464 $11.47
Granted 1,904,220 14.59
Exercised (1,466,392) 10.60
Canceled (489,892) 12.92
----------
Balance at July 2, 1995 5,058,400 12.69
Exercisable at July 2, 1995 2,897,776 12.05
Granted 2,958,968 25.56
Exercised (1,409,209) 12.63
Canceled (277,556) 17.64
----------
Balance at July 7, 1996 6,330,603 16.23
Exercisable at July 7, 1996 3,122,796 14.38
Granted 2,288,283 22.22
Exercised (1,220,564) 10.94
Canceled (332,822) 21.47
----------
Balance at July 6, 1997 7,065,500 18.79
----------
The weighted average fair value of options granted during fiscal 1997 and
1996 was $9.10 and $10.80, respectively.
The following table summarizes information regarding stock options
outstanding at July 6, 1997:
Options Outstanding Options Exercisable
------------------------------------------------ -----------------------------
Weighted Weighted
Avg. Avg.
Range of Number of Exercise Weighted Avg. Number of Exercise
Exercises Prices Options Price Remaining Life Options Price
----------- -------------- --------------- ----------- --------------
$ 4.41 - $14.38 2,533,115 $12.03 5.28 1,696,232 $11.96
14.49 - 22.50 2,612,669 20.25 8.23 1,178,048 19.84
23.13 - 32.50 1,919,716 25.74 7.91 906,588 25.77
---------- ----------
7,065,500 18.79 7.09 3,780,868 17.73
---------- ---------
Stock purchase plans | Under the Aequitron 1995 ESPP and the 1995 ESPP,
qualified employees, not including members of the Board of Directors, may
purchase semi-annually, up to a specified maximum amount, shares of the
Company's common stock through payroll deductions at a price equal to 85% of the
fair market value of the stock at the beginning or end of the six month plan
period, whichever is less. In October 1995, the Company obtained stockholder
approval of the 1995 ESPP, which authorized the issuance of up to 1,000,000
shares of common stock. 2,607 shares of Company common stock were reserved for
the Aequitron 1995 ESPP, which expired on April 30, 1997 following the purchase
of such shares at the end of the offering period. As of July 6, 1997, 678,206
shares remained available for purchase by employees under the 1995 ESPP.
Stock repurchase programs | During the fourth quarter of fiscal 1993, the Board
of Directors approved a Limited Stock Repurchase Program (the Limited Program)
which commenced early in fiscal 1994. The objective of the Limited Program is to
utilize a portion of available cash balances to repurchase on the open market
shares of the Company's common stock to mitigate the dilutive effects of the
issuance of shares under the Company's stock option and other plans. No
repurchases were made under the Limited Program during fiscal 1997. Repurchases
totaling $24.3 million (928,000 shares) were made during fiscal 1996.
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In addition to the Limited Program, the Board of Directors approved a
General Stock Repurchase Program (the General Program) during the second quarter
of fiscal 1994 to repurchase and retire up to 1,000,000 shares of the Company's
common stock. The object of the General Program is to more effectively utilize
an additional portion of available cash balances. No repurchases under the
General Program were made in fiscal 1997 and 1996.
Stock rights - Series A Junior Participating Preferred Stock | During fiscal
1991, the Board of Directors of the Company declared a dividend of one preferred
share purchase right for each outstanding share of common stock. Each right
entitles the holder to purchase from the Company one two-hundredth of a share of
Series A Junior Participating Preferred Stock, par value $0.001 per share,
initially at a price of $160 per one two-hundredth of a preferred share. Each
one two-hundredth of a preferred share is substantially the economic equivalent
of one share of common stock.
In the event that a third party acquires 15 percent or more of the
Company's common stock or announces an offer which would result in such party's
owning 15 percent or more of the Company's common stock, the rights will become
exercisable. On March 8, 1996, the Board of Directors of the Company approved
amendments which extend the expiration date of the rights to March 8, 2006, and
allow for their redemption, subject to certain conditions, at a price of $0.01
per right.
Supplemental cash flow information | Puritan-Bennett had a restricted stock
award program which was terminated following the merger with Nellcor. The
non-cash amount, net of cancellations, included in additional paid-in capital
for this program was $1.2 million for fiscal 1995. No shares of stock were
granted to employees under this program in fiscal 1996 and 1997.
Pro forma disclosures | The Company has elected to continue to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related interpretations in accounting for its employee stock options
because, as discussed below, the alternative fair value accounting provided for
under SFAS 123 requires the use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, no
compensation expense is recognized because the exercise price of the Company's
employee stock options equals the fair market value of the underlying stock on
the date of grant.
Pro forma information regarding net income (loss) and earnings (loss)
per share for fiscal years 1997 and 1996 has been determined as if the Company
had accounted for its employee stock options and employee stock purchase plans
under the fair value method prescribed by SFAS 123. The resulting effect on pro
forma net income (loss) and earnings (loss) per share for fiscal years 1997 and
1996 is not likely to be representative of the effects on net income and
earnings per share on a pro forma basis in future years, because fiscal 1997 and
1996 pro forma results include the impact of only two and one years,
respectively, of grants and related vesting while subsequent years will include
additional years of grants and vesting. The fair value of options was estimated
at the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions: risk-free interest rates of 6.23% for
fiscal 1997 and 6.13% for fiscal 1996; dividend yields of 0%; volatility factors
of the expected market price of the Company's common stock of .40 for both
years; and a weighted-average expected life of the option of 4.25 for both
years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to pro forma expense over the options' vesting period. The
Company's pro forma information follows (in thousands, except per share
amounts):
Years Ended
July 6, July 7,
1997 1996
- - --------------------------------------------------------------------------------
Net income (loss) - as reported $38,769 $ (6,949)
Net income (loss) - pro forma 31,058 (10,765)
Net income (loss) per share - as reported 0.61 (0.11)
Net income (loss) per share - pro forma 0.49 (0.17)
15. COMMITMENTS
The Company leases its facilities under agreements that expire at various dates
through June 2011. Rental expense was approximately $9.9 million, $12.3 million
and $12.2 million in fiscal years 1997, 1996 and 1995, respectively.
Aggregate minimum annual rental commitments under long-term operating
leases are as follows:
Fiscal Years (in thousands)
- - -----------------------------------------------------------
1998 $ 8,887
1999 8,015
2000 6,112
2001 5,605
2002 4,453
After 2002 21,420
- - -----------------------------------------------------------
Total rental commitments $54,492
- - -----------------------------------------------------------
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16. GEOGRAPHIC INFORMATION AND EXPORT SALES
The Company operates within a single industry segment in which it develops,
manufactures, and markets monitoring systems and diagnostic and therapeutic
products for management of the respiratory-impaired patient across the continuum
of care. The Company's products are sold worldwide through a direct sales force,
assisted by clinical education consultants and supplemented by distributors in
selected countries.
Geographic information with respect to the Company's operations is as
follows:
Transfers
Sales to Between Operating
Unaffiliated Geographic Income Identifiable
(in thousands) Customers Areas Total (Loss) Assets
- - ----------------------------------------------------------------------------------------------------------------------------
1997:
United States domestic $543,491 $ - $ 543,491 $ 59,723 $473,018
United States export 100,190 59,626 159,816 - -
Europe 134,902 157,398 292,300 18,986 163,170
Corporate and other - - - - 68,786
Eliminations - (217,024) (217,024) (19,320) (31,956)
- - ---------------------------------------------------------------------------------------------------------------------------
Consolidated $778,583 $ - $ 778,583 $ 59,389 $673,018
- - ---------------------------------------------------------------------------------------------------------------------------
1996:
United States domestic $513,879 $ - $ 513,879 $ 15,433 $430,449
United States export 98,487 23,966 122,453 - -
Europe 132,243 43,063 175,306 13,854 151,594
Corporate and other - - - - 55,893
Eliminations - (67,029) (67,029) (25,679) (26,920)
- - ---------------------------------------------------------------------------------------------------------------------------
Consolidated $744,609 $ - $ 744,609 $ 3,608 $611,016
- - ---------------------------------------------------------------------------------------------------------------------------
1995:
United States domestic $466,107 $ - $ 466,107 $ 59,024 $353,078
United States export 83,014 17,628 100,642 - -
Europe 104,747 25,472 130,219 17,391 146,860
Corporate and other - - - - 160,210
Eliminations - (43,100) (43,100) (325) (39,815)
- - ---------------------------------------------------------------------------------------------------------------------------
Consolidated $653,868 $ - $ 653,868 $ 76,090 $620,333
- - ---------------------------------------------------------------------------------------------------------------------------
Transfers between geographic areas are generally recorded at amounts
above cost and in accordance with the rules and regulations of the governing tax
authorities. Operating income (loss) is total revenue less cost of sales and
operating expenses and does not include interest expense, interest income and
other income (expense), net, litigation settlements, costs associated with
unsolicited takeover offer and income taxes. Identifiable assets of geographic
areas are those assets used in the Company's operations in each area.
Identifiable corporate assets consist primarily of cash and cash equivalents,
marketable securities and other assets.
17. LITIGATION
From time to time the Company has received, and in the future may receive,
notice of claims against it, which in some instances have developed, or may
develop, into lawsuits. The claims may involve such matters, among others, as
product liability, patent infringement, and employment-related claims. In
management's opinion, the ultimate resolution of claims currently pending will
not have a material adverse effect on the Company's financial position or
results of operations.
On July 11, 1995, the U.S. Federal District Court in Delaware issued a
decision in favor of the Company, ruling that four key oximeter and sensor
technology patents are valid and would be infringed by Ohmeda, Inc., a
subsidiary of BOC Health Care, Inc., if Ohmeda sold either its adult or neonatal
OxyTip sensors for use with non-Ohmeda monitors. BOC Health Care filed an appeal
with the Court of Appeals Federal Circuit relating to one of these key patents
and the Court of Appeals affirmed the District Court decision. BOC Health Care
had filed the Delaware suit against the Company in December 1992, seeking a
declaratory judgment that the Company's patents were invalid and would not be
infringed.
On May 3, 1996, the Company and several of its officers and members of
its Board of Directors received notice that they had been named as defendants in
a class action lawsuit seeking unspecified damages based upon alleged violations
of California state securities and other laws. The complaint, filed in the
Superior Court of the State of California, County of Alameda, alleged
misrepresentations during the period from September 29, 1995 through April 16,
1996 with respect to the Company's business, particularly about the merger with
Puritan-Bennett and the integration of Nellcor and Puritan-Bennett. The Company
filed a demurrer to this action which was sustained on October 9, 1996 with
leave to amend. Plaintiffs filed an amended complaint on November 1, 1996. On
April 2, 1997, the Superior Court granted the Company's demurrer to the amended
complaint and dismissed the complaint with prejudice.
On April 14, 1997, another complaint containing essentially the same
allegations of security violations against the Company and the other defendants
was filed in the United States District Court for the Northern District of
California. On October 31, 1997, the Federal District Court granted the
Company's motion to dismiss the complaint with leave to amend. As it has
consistently maintained, the Company believes that the allegations are
completely without merit and intends to defend against them vigorously.
On May 15, 1996, the Company brought an action in Kansas Federal
District Court, requesting a temporary restraining order, preliminary injunction
and damages against Healthdyne Technologies and two former Company employees
based on misappropriation of trade secrets, utilization of trade secrets and
various other causes of action. The Company was granted a permanent injunction
against Healthdyne enjoining it from utilizing the Company's trade secrets and
limiting the scope of work of one of the former employees. The second former
employee was
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terminated by Healthdyne, and the Company was granted a permanent injunction
against that employee relating to use of trade secrets and limiting the scope of
the former employee's future work. The Court has ongoing jurisdiction to enforce
the injunctions and related matters.
On May 5, 1997, the Company filed a complaint in the United States
District Court for the Southern District of Indiana against Healthdyne
Technologies, Inc., Trent Products Limited, Jay L. Hayes and Jeffrey P. Hayes
alleging misappropriation of trade secrets, breach of contract, breach of
fiduciary duty, fraudulent procurement of patent and unfair competition. Jay
Hayes, a former employee and officer of Puritan-Bennett and general manager of
its cryogenic equipment division, is now a principal of Trent Products. Trent
Products, the Company believes, is making extensive use of the Company's trade
secrets to develop a competitive line of cryogenic equipment for sale to
Healthdyne. The Company also believes that Mr. Hayes used the Company's trade
secrets to fraudulently procure a patent to a new oxygen-to-patient delivery
mechanism in the name of his son, Jeffrey Hayes.
On May 23, 1997, the U. S. Federal District Court in San Francisco
entered a consent judgment between the Company and Medical Taping Systems, Inc.
(MTS) which stipulated that MTS's remanufacture of Company oximeter sensors
infringed various patents and trademarks of the Company. The Court issued a
permanent injunction prohibiting MTS from remanufacturing Company sensors.
18. SUBSEQUENT EVENT
On July 23, 1997, the Company and Mallinckrodt, Inc. announced the execution of
a definitive agreement whereby Mallinckrodt would purchase for cash all
outstanding shares of Nellcor Puritan Bennett Incorporated common stock for
$28.50 per share. Under the terms of the merger agreement, unanimously approved
by the Boards of both companies, Mallinckrodt initiated a tender offer for all
of the outstanding shares of Nellcor Puritan Bennett common stock which was
successfully completed on August 26 ,1997.
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- - --------------------------------------------------------------------------------
NELLCOR PURITAN BENNETT INCORPORATED
Report of Independent Accountants
To the Board of Directors
of Nellcor Puritan Bennett Incorporated
In our opinion, based upon our audits and the reports of other auditors, the
accompanying consolidated balance sheet and the related consolidated statements
of operations, of stockholders' equity, and of cash flows present fairly, in all
material respects, the financial position of Nellcor Puritan Bennett
Incorporated and its subsidiaries at July 6, 1997 and July 7, 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended July 6, 1997 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the consolidated financial
statements of Puritan-Bennett Corporation and its subsidiaries, which statements
reflect total revenue of $336,026,000 for the period ended January 31, 1995, or
Infrasonics, Inc. which statements reflect total revenue of $23,000,000 for the
period ended June 30, 1995, or Aequitron Medical, Inc., which statements reflect
total assets of $23,178,000 at April 30, 1996, and total revenues of $38,478,000
and $30,802,000 for each of the two years in the period ended April 30, 1996,
respectively. Those statements were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar as
it relates to the amounts included for Puritan-Bennett Corporation and its
subsidiaries, Infrasonics, Inc. and Aequitron Medical, Inc., is based solely on
the reports of the other auditors. We conducted our audits of these statements
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for the opinion expressed above.
As discussed in Note 18 to the consolidated financial statements, Mallinckrodt,
Inc. acquired all of the outstanding shares of Nellcor Puritan Bennett
Incorporated on August 26, 1997. We have not audited the consolidated financial
statements of Nellcor Puritan Bennett Incorporated and its subsidiaries for any
period subsequent to July 6, 1997.
/s/ PRICE WATERHOUSE LLP
- - ----------------------------
Price Waterhouse LLP
San Jose, California
July 30, 1997, except as to Note 18 which is as of August 26, 1997
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SELECTED QUARTERLY DATA
Year ended July 6, 1997
Unaudited (in thousands, except per share amounts) 1st quarter 2nd quarter 3rd quarter 4th quarter
- - ------------------------------------------------------------------------------------------------------------------
Net revenue $170,893 $186,320 $209,054 $212,316
Gross profit 83,668 85,836 97,825 100,436
Income (loss) from operations 20,227 (3,120) 25,091 17,191
Net income (loss) 14,092 (3,596) 16,591 11,682
Net income (loss) per share 0.22 (0.06) 0.26 0.18
Year ended July 7, 1996
Unaudited (in thousands, except per share amounts) 1st quarter 2nd quarter 3rd quarter 4th quarter
- - ------------------------------------------------------------------------------------------------------------------
Net revenue $172,068 $178,190 $184,750 $209,601
Gross profit 86,710 91,494 95,672 106,321
Income (loss) from operations (69,173)(1) 27,902 28,777 16,179(2)
Net income (loss) (58,271)(1) 19,337 20,146 11,839(2)
Net income (loss) per share (0.92)(1) 0.30 0.31 0.19(2)
- - ------------------------------------------------------------------------------------------------------------------
(1) Includes pretax merger and related charges of $92.6 million, $74.0 million
after-tax, or ($1.26) per share.
(2) Includes pretax merger and related charges of $16.3 million, $10.3 million
after-tax, or ($0.17) per share.
Filed with
Incorporated Herein Electronic
Exhibit Description by Reference to Submission
- - ------- --------------------------------- ------------------- ----------
23.1 Consent of Price Waterhouse LLP X
23.2 Consent of Ernst & Young LLP for X
Puritan-Bennett Corporation
23.3 Consent of Ernst & Young LLP for X
Infrasonics, Inc.
23.4 Consent of Ernst & Young LLP for X
Aequitron Medical, Inc.
99.a Report of Independent Auditors for X
Puritan-Bennett Corporation
99.b Report of Independent Auditors for X
Infrasonics, Inc.
99.c Report of Independent Auditors for X
Aequitron Medical, Inc.
Mallinckrodt Inc.
/s/ DOUGLAS A. McKINNEY
Vice President and Controller
DATE: June 12, 1998
20