UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JANUARY 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER 0-3717
PURITAN-BENNETT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 44-0399150
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
9401 INDIAN CREEK PARKWAY
BUILDING #40, SUITE 300
P.O. Box 25905
OVERLAND PARK, KANSAS 66225
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 913-661-0444
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common stock, $1.00 par value
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Common Stock held by non-affiliates on
March 29, 1995 was approximately $298,089,689. Such value was computed by
reference to the reported last sales price of such stock on March 29, 1995.
There were 12,617,553 shares of the Puritan-Bennett Corporation
Common Stock, $1.00 par value, outstanding on March 29, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders' meeting
to be held June 20, 1995 are incorporated by reference in Part III.
Portions of the Annual Report to Stockholders for the fiscal year
ending January 31, 1995 are incorporated by reference in Parts I and II.
PART I
ITEM 1. BUSINESS
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GENERAL
Puritan-Bennett Corporation (the "Company") was reincorporated in Delaware in
August 1968. The Company is the successor to a business founded in 1913 that was
incorporated in the State of Missouri and was a pioneer in the use of oxygen as
a medicinal agent.
The Company is primarily engaged in the development, manufacture and sale of
products related to respiration. Such products are used in a wide variety of
health care settings and on aircraft. The Company's intentions are global in
scope; and it aspires to be the preeminent respiratory company in the world.
Since 1982, the Company has pursued a strategy that focuses on expanding its
leading position within the hospital and aviation markets, and on continuing to
build a major presence in the home care market. To penetrate these differing
markets more effectively, the Company has developed sales forces and other
channels of distribution to address the home care, hospital, and physician
markets. Aggressive efforts have been made to expand international sales.
The Company is organized in two main business lines. Bennett primarily covers
the hospital market and includes the Company's worldwide critical care
ventilator business, as well as the rapidly growing CliniVision(R) product line
in the U.S., and the smaller holter monitoring and international portable
ventilator product lines. Puritan includes nearly all of the rapidly growing
home care product lines and certain complementary products such as medical gases
and gas-related equipment and spirometry. Aero Systems is also included because
it shares one of the Company's larger manufacturing facilities with the Puritan
Group and is relatively small.
PRODUCTS AND RELATED MARKETS
BENNETT
The Company's strategy in the hospital market has been to expand its
historical leadership position by designing products that provide new modes of
treatment and respond to the need of hospitals to enhance labor productivity
while maintaining high standards of quality and reliability. Bennett's core
business is critical care ventilation with the 7200(R) Series ventilator system
(and its related options, accessories, repair parts and service) and the
CliniVision respiratory care management information system. The ventilator sold
to the hospital market is a microprocessor controlled ventilator. This
ventilator is designed to ease the work of patient breathing and lessen patient
discomfort. It automatically performs pulmonary function diagnostic tests and
reduces therapists' time spent attending to patients and preparing the
ventilators for patient use. The Company believes that respiratory care
activities represent an important labor cost component of a hospital's
operations and that its strategy is consistent with hospital cost-containment
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objectives. The Company is also designing its products as systems to allow for
future enhancements through integration with existing or planned Company
products.
At $121 million in FY 1995, Bennett's revenues decreased 1% from FY 1994.
However, after adjusting for the withdrawal from the U.S. portable ventilator
market and the discontinuance of the Company's intra-arterial blood gas
monitoring systems and some older products, Bennett revenues increased 7% over
prior year levels. Bennett now has a cost structure that allows it to be
profitable at the lower revenue levels the Company has been experiencing and
increasingly profitable at the growing revenue levels that can be anticipated in
the future. The Company also has an enviable resource with its worldwide
distribution system consisting of a professional direct sales and service
organization in many major markets and a distributor network elsewhere. The
Company has a platform for the 7200 Series ventilator from which it can now
offer an even wider range of features customers want. Additionally, the
CliniVision respiratory care management information system is solving
productivity problems for the Company's U.S. customers.
During the first half of FY 1995, continued uncertainty over health care
reform, as well as ongoing mergers and alliances of hospitals and hospital
groups in response to managed care trends, caused the postponement of many
capital purchases in the United States. As a result, orders for 7200 Series
ventilators and for CliniVision systems were well below the Company's
expectations. In contrast to prior years' experience, second half orders for
ventilators surged 37% in the U.S. and 26% worldwide, enabling the Company to
increase fourth quarter revenues and profitability while still rebuilding
backlog. The Company believes that the stronger than normal second half,
relative to the first half, was due to a combination of: (a) the partial release
of pentup demand for replacement equipment after health care reform
uncertainties abated; and (b) more importantly, the Company's new products and
enhancements to the 7200 Series ventilator and CliniVision.
Significant products within this business line include:
7200 SERIES VENTILATORY SYSTEM: The primary respiratory care products
purchased by hospitals are ventilators (sometimes called respirators) used to
assist or manage respiration in a variety of acute care settings. The 7200
Series ventilator is also finding increasing use in so-called sub-acute care
settings, where chronically ventilator-dependent patients who are otherwise
stable, require sophisticated ventilation modes to improve the chances of
weaning. The 7200 Series ventilator is sold in three basic configurations to
cover the wide range of cost/performance applications, and is designed to
protect the user's investment by providing upgrade paths to incorporate new
options as they are developed by the Company. The Company remains the world
leader in critical care ventilation.
The Company has strong research and development programs related to critical
care ventilation in both the U.S. and the Republic of Ireland, both of which
have significant worldwide implications for FY 1997 and beyond. In October, the
Company received FDA clearance for four new features for the 7200 Series
ventilator system: a new simplified control panel, an improved digital
communications interface, an improved flow triggering system and an automated
measurement of lung hyperinflation. The Company also received clearance for a
proprietary
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proportional solenoid valve, with improved performance and lower cost. These new
features were shown to the Company's customers for the first time at the
American Association of Respiratory Care (AARC) meeting in December 1994 and
helped create a surge in orders in January 1995 both for new ventilators and for
upgrades to the Company's large installed base. With these new products and the
Company's strong research and development program, the company has long-term
competitive strength, both in the U.S. and internationally, with products that
reinforce one another.
7250 METABOLIC MONITOR: The 7250 Metabolic Monitor, already introduced in some
international markets, was released in the U.S. in late February 1995. Clearance
from the Japanese Ministry of Health and Welfare was received about the same
time.
Metabolic monitoring is the measurement of oxygen (O2) consumption and carbon
dioxide (CO2) production and is used to determine patient nutritional
requirements and metabolic status. The 7250 Metabolic Monitor (PB 7250) measures
a patient's inspired oxygen and carbon dioxide and compares these measurements
with the patient's expired oxygen and carbon dioxide. From such measurements and
the volume of inspired and expired gas, the monitor calculates oxygen
consumption and carbon dioxide production. From these calculated parameters, the
monitor can determine values used for deciding daily caloric intake needs.
Metabolic monitoring, in general, is an important tool for detecting and
monitoring conditions that can affect clinical outcome such as nutritional
support, drug titration and respiratory muscle workload that can affect weaning
from mechanical ventilation. Until the introduction of the PB 7250, metabolic
monitoring required bulky equipment, provided only periodic measurements, had
limited accuracy and usually required specialists to operate because of the
difficulties of the measurements. The PB 7250 is integrated with the 7200 Series
ventilator, is relatively simple to use and provides more accurate, continuous
measurements of a patient's energy expenditure. The Company believes that the
attributes of the PB 7250 will make it possible for metabolic monitoring to
become even more useful in areas where patient stabilization is important (e.g.,
trauma) and in managing ventilator-dependent patients. In both cases, lower
costs of care and improved patient outcomes are anticipated. Important in its
own right, the PB 7250 also supports the position of the 7200 Series ventilator
and vice versa on a worldwide basis.
CLINIVISION: This personal computer-based patient care and respiratory therapy
department management system integrates the patient data captured and processed
by the 7200 Series ventilator, as well as other clinical data, into a management
information system that can be used by respiratory therapy department directors
and therapists to manage and monitor patient care and staffing requirements.
Once interfaced to the host hospital information system, CliniVision
electronically handles admitting, discharge, transfer, and order entry data, as
well as transmitting billing and results reporting.
The Company's customers are looking for ways to improve productivity in the
face of increased cost-containment pressure. CliniVision is a valuable
productivity tool and is finding increasing widespread acceptance in U.S.
hospitals. During this past year, CliniVision orders and
4
revenue grew 24% and 39%, respectively. CliniVision systems are now installed
and operating in more than 110 hospitals.
The Company introduced significant new enhancements to its systems
communications and report generation features during FY 1994. RadioLink 3.0
allows users to transfer new work orders or work order changes to therapists
while working in remote parts of the hospital. Introduced last year, the
RadioLink product uses spread spectrum radio frequency (RF) transmission, adding
cable-free data communication capabilities to the Clinivision system. With
RadioLink 3.0, the Company has also added electronic mail, allowing supervisors
to relay messages from any workstation to therapists on the floor. These new
features allow hospitals to become more efficient in their delivery of patient
care.
The Company also released PhoneLink 2.0 during FY 1994. With this feature,
therapists can download information from any phone, rather than needing to
return to the hospital or office to transfer information. This allows the use of
CliniVision in sub-acute, nursing home and home care locations as well as the
traditional acute-care hospital.
The new Management Reports 2.0 product produces over 50 management reports,
providing each user a degree of customization in their documentation.
New customers this year include the Company's first home care site which
increases Puritan-Bennett's optimism of growing into the home care market
segment. The Company implemented CliniVision's RadioLink product at one of the
largest hospitals in the U.S. This hospital has 3.3 million square feet, over
35,000 inpatients, and over 1 million outpatients a year. Therapists are
connected to the RadioLink wireless network in all clinical areas of the 1,527
bed facility.
At the AARC meeting in December 1994, CliniVision "Lite" - an entry level,
lower cost single workstation system that enables smaller hospitals to take
advantage of productivity tools they need but without as substantial a capital
outlay - was introduced. For CliniVision Lite customers, the Company provides a
clear upgrade path for the future, which allows users to obtain the benefits of
a full CliniVision system over time as their needs evolve and their funding
permits.
The Company anticipates that its total CliniVision business will continue to
grow in FY 1996 and beyond. More importantly, this past year CliniVision became
profitable and should contribute more significantly to earnings in FY 1996 and
in subsequent years as the Company realizes the economic leverage of continued
revenue growth. Finally, in the U.S. market CliniVision supports the leading
position of the 7200 Series ventilator and vice versa.
PORTABLE VENTILATORS: Portable ventilators are used by patients requiring
breathing assistance as a result of neuromuscular disease, chronic obstructive
pulmonary disease or spinal cord injury. These ventilators are compact in size
and incorporate an internal battery for short-term emergency power outages.
Portable ventilators are used at the patient's bedside, mounted on wheelchairs
or in automobiles and airplanes. Portable ventilators offer a reduced cost
alternative to hospital care for patients who can be discharged to their home or
nursing home. The Company
5
designs and manufactures the microprocessor-based Companion 2801 Portable
Ventilator in the Republic of Ireland where it is marketed to customers outside
the United States.
PB 3300(TM) SYSTEM: A January 1994 consent decree affected the Company's
intra-arterial blood gas monitoring systems requiring a cessation of shipments
to customers until compliance with Good Manufacturing Practice (GMP) regulations
was achieved. As a result, the Company ceased operations, addressed the GMP
issues and offered the technology for sale. No buyer was found and the shutdown
was completed in the third quarter of FY 1995.
PURITAN
The Puritan line, with $215 million of revenues in FY 1995, includes nearly
all of the Company's rapidly growing home care product lines as well as the
complementary medical gas and gas-related equipment, and spirometry product
lines. Aero Systems is also included because it shares one of the larger
manufacturing facilities with the Puritan Group and is relatively small.
The Company believes that both the domestic and international markets for non-
hospital respiratory products are experiencing growth for a number of reasons
including (i) growth in the population of individuals suffering from asthma,
lung cancer and severe, chronic obstructive pulmonary diseases such as
bronchitis and emphysema; (ii) technological innovations making care for
respiratory patients at home possible; (iii) growing clinical evidence
supporting the efficacy of various types of home respiratory care; and (iv)
government cost-containment pressures encouraging a shift in the delivery of
care from the hospital to lower cost alternate sites, particularly the home. As
a result, patients suffering from a variety of severe, chronic respiratory
conditions as well as patients requiring short-term respiratory therapy due to
earlier hospital discharge are increasingly being cared for at home.
The Company's principal home oxygen therapy products are oxygen concentrators
and liquid oxygen systems, both of which are manufactured in the U.S. and the
Republic of Ireland. The Company is now uniquely well positioned to supply the
entire family of products aimed at helping its customers achieve cost
reductions. For most ambulatory oxygen patients, the Company believes the most
cost-effective solution consists of the following combination of products:
OXYGEN CONCENTRATORS: Oxygen concentrators extract oxygen from room air and
generally provide the least expensive supply of oxygen for patients who require
a continuous supply, at home, and whose prescribed flow rates do not exceed five
liters per minute. This product family includes an optional OCI(TM) indicator
(Oxygen Concentration Indicator) that continuously monitors the oxygen
percentage of the output of the oxygen concentrator, and the Companion(R) 492a
and the 590 oxygen concentrator units. Worldwide, oxygen concentrator orders and
sales grew by 9% and 6%, respectively, during FY 1995.
By utilizing an oxygen concentrator at home, the patient reduces usage of
systems that require refilling, which reduces trips by the home care provider.
By supplying the OCI indicator option with the Companion 590, the home care
provider is able to verify by phone that the concentrator is generating high
oxygen concentrations, detect infrequent problems early before
6
they become expensive ones and reduce trips for routine filter replacement. For
these same reasons, the Company believes the Companion with OCI indicator is
also the most cost-effective solution for most nonambulatory patients.
LIQUID OXYGEN SYSTEMS: Liquid oxygen systems store oxygen at a very low
temperature in liquid form, which is 860 times more concentrated than gaseous
oxygen under high pressure. The stationary unit can be easily refilled at home
and can be used to fill a portable device that permits greatly enhanced patient
mobility. Orders and sales for liquid oxygen systems grew 10% during FY 1995.
The Companion 550 ambulatory unit introduced during FY 1993 continued to grow
during FY 1995 as a product for highly mobile patients. This unit utilizes a
proprietary, pneumatic oxygen conserving device that requires no batteries and
is significantly smaller and lighter than its predecessor, while providing
essentially the same duration of use. In addition, it uses less oxygen for the
same amount of ambulatory time, which in turn helps reduce the frequency of
trips home care providers must make to refill the larger liquid oxygen
containers from which patients refill their portable units.
The Company recently established liquid oxygen system fabrication capabilities
in the Republic of Ireland facility, where assembly and test capability already
existed. The fabrication capabilities will increase the Company's total
fabrication capacity to accommodate additional growth, enable the Company to
serve customers in a more timely manner from both the Indianapolis and Ireland
facilities and save freight and duty costs.
COMPANION OR MARK "LOW LOSS" OXYGEN RESERVOIR: These units are designed to
supply oxygen for long periods with reduced evaporation loss until patients are
ready to refill their portable units for use outside the home. The low loss
feature helps reduce even further the frequency of home care provider trips to
refill them. The Mark Low Loss Reservoir is now available; the Companion Low
Loss Reservoir is scheduled to be available in April 1995.
The Puritan line products also include:
SLEEP APNEA SYSTEMS: Adult sleep apnea, temporary cessation of breathing while
asleep, affects millions of people in the U.S. and can become a virtually
debilitating ailment. The Company began to realize meaningful results in late
1989 with the introduction of a proprietary, patented patient circuit - the
Airway Delivery and Management System (ADAM) - used with the Company's Nasal
Continuous Positive Airway Pressure (CPAP) System. A significant new product was
developed in this field and introduced in the third quarter of 1991, the
Companion 318 Nasal CPAP System. The Companion 318 is smaller than competitive
products and offers additional diagnostic tools for sleep lab clinicians. In
addition, its many features are aimed at providing the highest level of patient
comfort. During the second quarter of FY 1994, the Company introduced the
Companion(R) 320 I/E Bi-level(TM) Respiratory System for patients requiring
higher respiratory pressures to overcome airway obstruction.
7
Sleep disorder products are the most rapidly growing portion of the Company's
home care business today. This trend is expected to continue into FY 1996.
Accounting for about 21% of FY 1995 home care revenues, the Company's sleep
products revenues grew 122%. The acquisition in January 1994 of SEFAM S.A.,
accounts for much of this growth.
During the second quarter of FY 1993, the Company entered into an agreement
with Biologic Systems Corp. granting the Company distribution rights in the U.S.
to Bio-Logic's Sleepscan(R) computerized diagnostic system product line used by
hospital sleep laboratories and home care providers. SEFAM also has diagnostic
systems, principally, the Respisomnographe and the Minisommo, which the Company
is considering adapting for the U.S. market. The Company jointly concluded with
Bio-logic Systems Corp. that U.S. market economics do not permit an extra level
in the distribution chain. Effective April 1, 1995, this relationship is not
being renewed.
The Company has active sleep disorders research and development programs in
both the U.S. and France that are coordinated from a worldwide perspective. A
number of new diagnostic and therapeutic products are scheduled for introduction
in various markets throughout the coming year and beyond as regulatory
clearances are received. In addition, some of the bi-level systems planned to be
introduced in the future, subject to various regulatory clearances, can be used
for noninvasive ventilation of patients who need long-term support but for less
than 24 hours each day.
HIGH PRESSURE OXYGEN SYSTEMS: High pressure oxygen systems supply oxygen from
high pressure cylinders that require periodic exchange for refilling. These were
the first commercially viable oxygen supplementation systems for the home health
care market but have been increasingly replaced in the home by liquid oxygen
systems and oxygen concentrators. These systems are used in the home primarily
on a standby basis and for patients who need high flow rates.
MANUAL RESUSCITATORS: Portable, manually-powered, reusable resuscitators
designed for use in emergency situations to provide lung ventilation to those
individuals with impaired respiratory function have been marketed by the Company
for some time with the versatile PMR(R) 2 being marketed since 1980. In October
1989, the Company introduced its Disposable Manual Resuscitator (DMR) as a cost-
effective way to provide infection control on patients who require manual
resuscitation.
MEDICAL GASES: The production and distribution of medical gases represents the
Company's oldest product line. The Company is the largest producer of nitrous
oxide in North America. This gas is used in anesthesia and analgesia and is sold
by the Company under its own label and through other distributors. The Company
also distributes other medical gases, including oxygen, Sodalime (used to absorb
CO2 during anesthesia) and special gas mixtures that are used for calibration,
testing, and other purposes.
The Company now has 27 U.S. locations for transfilling and distributing
medical gases. From these locations the Company also serves home care providers
with bulk liquid oxygen. Three new locations were added in FY 1995 and other
locations may be added in the future as opportunities
8
become available. The Company's long standing involvement in the gas industry
has also helped it develop international home care markets, where industrial gas
companies represent important distribution channels.
PB100 SPIROMETER: This small, hand held spirometer offers true portability.
The patient data memory card and the rechargeable batteries allow testing of
multiple patients at off-site locations. The base station is used for
downloading patient information to a choice of printers along with the option of
sending patient data to a computer. A disposable pneumotach eliminates cleaning
and minimizes the risk of cross-infection for both patients and staff. Marketed
under the name of Renaissance(R) Spirometry System, orders and shipments began
for this product in December 1991. In February 1995, the Company introduced a
new software feature for the Renaissance system that helps customers store,
analyze and manage the growing amount of diagnostic data now available to them.
The spirometry product line is manufactured in the Company's facility in the
Republic of Ireland.
AERO SYSTEMS: The Company is the primary supplier of chemical oxygen
generators and passenger air valves for the Boeing 737, 757, 767 and 777 and for
all current models of the European Airbus; oxygen distribution manifolds and air
valves for the Boeing 747 and 777; passenger masks for the Boeing 777; oxygen
systems for the Dutch Fokker 70 and 100, the German Dornier Do328, the British
Aerospace 146 and the Canadian RJ. The Company also supplies passenger service
units for the British Aerospace Jetstream 41 and the Swedish SAAB 2000. Market
response to the Sweep-On 2000(R), inflatable harness crew mask, continues to be
very strong with an increasing number of aircraft manufacturers selecting the
equipment as standard equipment for various models of aircraft. The Company also
supplies oxygen equipment and passenger service units for numerous aircraft in
the commuter and business aircraft market.
Airborne Closed Circuit Television (ACCTV(TM)), the small video systems
business acquired in FY 1994, experienced significant growth and its first
profitable year. The product provides remote viewing of internal and external
areas of an aircraft both in visual and infrared light for aircraft safety
purposes, as well as providing landscape camera views for passenger
entertainment. The program for the drogue-chute deployment monitoring system for
the McDonnell Douglas C-17 military transport is well underway with the delivery
of systems for 23 aircraft. Various combinations of landscape viewing, and
security and safety systems were installed in Boeing 747 and 767, Gulfstream IV,
and several Airbus aircraft models. Interest in ACCTV products is very strong
with many major airlines actively considering system installations on existing
aircraft.
Despite continued softness in the aviation market, FY 1995 orders increased
12% (to nearly $32 million) and revenues 31% (to nearly $31 million) over FY
1994 levels. Profitability also improved.
MARKETING AND SALES
The Company's U.S. hospital sales and service organization consists of
approximately 190 people who are responsible for marketing to approximately
5,000 acute care hospitals in the
9
United States. The Company has also established direct hospital sales
organizations in Canada, England and Wales, Italy, France, and Germany.
The Company also employs a direct sales force of over 40 people who sell to
home care providers throughout the United States. Some of these sales
representatives also are involved in the sale of medical gases and gas
distribution/administration products. Additional sales personnel market medical
gas and gas distribution/administration products only.
The Company has targeted the international market as an important growth
opportunity. During FY 1995, international business accounted for about 33.7% of
the Company's total revenues. The Company conducts its sales in foreign
countries through its headquarters in Kansas and international sales offices
located in California, Canada, Great Britain, France, Hong Kong, Malaysia,
Argentina, Australia, Italy, Finland, Germany, Taiwan and Puerto Rico. Direct
sales organizations exist in Great Britain, Canada, France, Italy, and Germany.
The home care delivery systems of many foreign countries are far less developed
than in the U.S. The Company expects foreign countries to expand their home care
delivery systems, in part because home care is more cost-effective than hospital
care.
In an effort to strengthen its development of its international business, the
Company is positioning itself for further growth. Channels of distribution are
presently being strengthened for significant, long-term growth opportunities in
Mexico. The manufacturing operation the Company maintains in Tijuana continues
to grow. In addition, during FY 1994, the Company acquired a hospital products
distributor in Germany and in January 1994 acquired SEFAM S.A. and its 80% owned
Lit Dupont subsidiary expanding the Company's international business.
Foreign and export sales for fiscal years ending January 31, 1995, 1994 and
1993 totaled approximately $113,261,000, $86,702,000 and $94,185,000,
respectively. These sales were not concentrated in a specific geographic area.
(The information contained in Note 12 to the consolidated financial statements
on pages 38 and 39 of the Puritan-Bennett Annual Report to Stockholders for
fiscal year ending January 31, 1995 is incorporated herein by reference.)
A material part of the business of the Company is not dependent upon a single
customer or a very few customers (no single customer accounts for 10% or more of
consolidated sales), the loss of any one of which would not have a materially
adverse effect on the Company.
The Company's operations constitute one significant, reportable industry
segment consisting predominantly of the design, manufacture, and distribution of
specialized products related to respiration.
Sales by the Company of classes of similar products which, for the last three
fiscal years, contributed 10% or more of net sales are as follows:
Bennett products accounted for approximately 36%, 35% and 39% of net sales for
FY 1995, FY 1994 and FY 1993, respectively.
10
Medical gas products accounted for approximately 12%, 13% and 12% of net sales
for FY 1995, FY 1994 and FY 1993, respectively.
Home care products accounted for approximately 37%, 36% and 31% of net sales
for FY 1995, FY 1994 and FY 1993, respectively.
Order back-log as of March 31, 1995 was approximately $79,148,000 compared to
$78,452,000 for March 31, 1994. All back-log is expected to be shipped during FY
1996, with the exception of approximately $192,000 within the Aero product line.
The Company is not subject to material seasonal fluctuations in business nor
is any portion of the business subject to renegotiation of profits or
termination of contracts at the election of the U.S. Government.
RAW MATERIALS
Raw materials and supplies are purchased by the Company from such diverse
industry sources as chemicals, machine components, plastic resins, electronics
and private label products and a variety of original equipment manufacturers and
suppliers. These materials have been readily available throughout the past year,
and the Company has no reason to believe that it cannot continue to obtain such
materials as needed. While the Company typically makes purchases pursuant to
multi-year contracts, it does utilize single source suppliers for a limited
number of specific component parts for its products. In addition, the Company
itself produces components made from a wide variety of raw materials that are
generally available in quantity from alternate sources of supply.
PATENTS AND TRADEMARKS
While the Company has several patents, patent applications and trademarks
relating to its products, it does not consider its business to be dependent upon
the protection of any of these or any group thereof, or that its operations
would be materially affected by the expiration or loss of any of them. In the
Company's opinion, its design, manufacturing and marketing skills, experience,
and reputation are more responsible for its industry position than its patents
or licenses.
COMPETITION
The Company competes actively with numerous other companies that manufacture
and sell products in the same markets, some of which are divisions of
substantially larger companies in terms of their total sales (taking into
account sales of non-competitive products) and assets than the Company. The
Company believes that it is one of the leaders in the market for products
related to respiration. The principal methods of competition in the Company's
main business areas are the products' contribution and support to patient care,
as well as the quality of the product and service support to the customer.
11
RESEARCH AND DEVELOPMENT
The Company expended approximately $19,978,000 in FY 1995, $24,887,000 in FY
1994 and $25,849,000 in FY 1993, on research and development activities. The
decrease resulted entirely from the elimination of the intra-arterial blood gas
monitoring product line. These amounts have been utilized to improve existing
products, expand the applications of existing products, and develop new
products. All of this activity is Company-sponsored.
GOVERNMENT REGULATION
The manufacture and sale of the Company's principal products are subject to
regulation by the U.S. Food and Drug Administration (FDA). Under the Federal
Food, Drug, and Cosmetic Act, FDA regulates a wide spectrum of device
manufacturers' operations, including manufacturing processes, and the
introduction of new devices and improvements to existing devices. FDA
administers a system under which device manufacturers, distributors and users
are required to submit reports of adverse device experience. The Company's
facilities and operations are subject to unscheduled FDA inspections.
FDA can ban certain medical devices, detain or seize "adulterated or
misbranded" medical devices and order repair, replacement or refund and require
notification of health professionals and others, with regard to medical devices
that present unreasonable risks of substantial harm to the public health. FDA
also can order cessation of shipment and recall of a medical device by the
manufacturer if there are serious adverse health consequences or death.
FDA can impose civil money penalties for certain violations of the law
relating to medical devices, and can proceed through court action to enjoin and
restrain certain violations of the Federal Food, Drug, and Cosmetic Act
pertaining to medical devices or initiate criminal prosecutions for such
violations without proving criminal intent. If FDA determines that a
manufacturer is in substantial noncompliance with FDA's good manufacturing
practices regulation, the Agency can withhold product approvals (premarket
approval applications and supplements and Section 510(k) notifications) with
respect to the manufacturer's devices, and can notify the Veterans
Administration and other U.S. government agencies of such noncompliance. Such
notification may lead to a cessation of purchases of the manufacturer's devices
by the notified agencies. FDA has proposed new regulations governing good
manufacturing practices, which if adopted in their proposed form would further
increase the costs of regulatory compliance.
Increasingly stringent regulation of medical device manufacturers by FDA in
recent years is reflected in a significant reduction in the number of new
products and improvements to existing products that the Agency has cleared for
commercial release, corresponding increases in approval times, and in recent
enforcement actions by the Agency. FDA has given high priority to surveillance
and enforcement activities related to device manufacturers, especially
manufacturers of critical care devices such as Puritan-Bennett. FDA may take
stringent regulatory action upon finding deficiencies during inspections, or
upon learning of product performance problems. Lengthened product approval
times, intensified regulatory enforcement and the expense of
12
compliance with FDA requirements have increased substantially the risks
associated with manufacturing and marketing medical devices in the United
States.
In January 1994, the Company entered into a consent decree with FDA under
which the Company agrees to maintain systems and procedures complying with FDA
regulations in all of its device manufacturing facilities. Under the decree,
domestic shipments of portable ventilator products and intra-arterial blood gas
(IABG) monitoring systems are suspended until FDA is satisfied with the
Company's manufacturing practices for such products. Under certain
circumstances, the consent decree permits export of such products.
The Company has decided to discontinue U.S. portable ventilator manufacturing
and is shifting production to Ireland to serve the international market. The
Company also has discontinued IABG monitoring systems production.
As the Company increases its emphasis on export sales and overseas
manufacturing of its products, device laws and regulations of other countries
will have an increasing impact on the Company's business. Such laws and
regulations vary greatly from country to country, and include comprehensive
premarket approval requirements in some countries. Throughout the world, the
trend is toward increasing device regulation.
OTHER INFORMATION
On October 6, 1994, the Company received an unsolicited letter from Thermo
Electron Corporation proposing to acquire all of the outstanding common stock of
the Company in a merger transaction for $21 per share in cash. After receiving
an opinion from its financial advisor, Smith Barney Inc., on October 10, 1994,
the Company rejected Thermo Electron Corporation's unsolicited proposal to
acquire the Company for $21 per share in cash as grossly inadequate and not in
the best interests of the Company and its shareholders other than Thermo
Electron Corporation. On October 12, 1994, Thermo Electron Corporation raised
its bid to $24 per share in cash. On October 25, 1994, Thermo Electron
Corporation launched a tender offer to acquire all of the outstanding shares of
the Company's common stock for $24.50 per share in cash expiring on November 22,
1994, subject to a number of conditions. On November 7, 1994, after receiving an
opinion from Smith Barney Inc., the Board of Directors of the Company
unanimously determined that the unsolicited tender offer from Thermo Electron
Corporation to acquire the Company for $24.50 per share in cash was not in the
best interests of the Company and its stockholders. Accordingly, the Board
recommended that stockholders reject the offer and not tender their shares to
Thermo Electron Corporation. On November 23, 1994, Thermo Electron Corporation
extended the tender offer to November 28, 1994 and then again to December 8,
1994. On December 9, 1994, Thermo Electron Corporation terminated its tender
offer without purchasing any shares. See Item 3. Legal Proceedings.
As of March 1, 1995, the Company employed approximately 2,700 employees
worldwide.
There has been no material effect on the capital expenditures, earnings, and
competitive position of the Company because of compliance with federal, state,
and local provisions regulating
13
the discharge of materials into the environment or otherwise relating to the
protection of the environment.
The Company owns 56% of Medicomp, Inc., a Florida corporation that develops,
manufactures, and distributes ambulatory cardiac monitors. These solid state
devices perform real-time analysis of 24-hours of cardiac data captured through
dual channel electrodes. Real-time analysis is done by a microprocessor as data
are recorded, which allows physicians to review results within minutes.
In 1990, the Company established its first European manufacturing operation in
Galway, Republic of Ireland. The Company now maintains a manufacturing presence
within the European Community in a financially advantageous location. Its size
and scope is helping to serve the Company's European customers better,
preserving full access to these customers as the "1992 process" continues to
unfold in the European Community and improving overall financial performance. In
May 1992, the Company purchased an approximate 82,500 square foot facility in
Galway, Republic of Ireland. The Company had rented approximately half of the
facility at the time of purchase. After taking into consideration previously
announced capital grants from the Irish Development Authority, the net cost was
approximately $2.7 million.
In April 1993, the Company acquired a German distributor (Hoyer
Medizintechnik) for $10.5 million. The information contained in Note 14 to the
consolidated financial statements on page 40 of the Puritan-Bennett Annual
Report to Stockholders for FY 1995 is incorporated herein by reference.
In late January 1994, the Company acquired a French supplier of diagnostic and
therapeutic sleep products (SEFAM S.A.) for a total of $21.6 million of which
$12.9 million was paid in cash, with the remainder paid through the issuance of
426,929 shares of the Company's common stock. The information contained in Note
14 to the consolidated financial statements on page 40 of the Puritan-Bennett
Annual Report to Stockholders for FY 1995 is incorporated herein by reference.
ITEM 2. PROPERTIES
- ------------------
The Company's executive offices, occupying approximately 31,618 square feet,
are located in Building No. 40, 9401 Indian Creek Parkway, Overland Park,
Kansas, and are leased by the Company. Manufacturing and research facilities are
located in Lenexa, Kansas; Fountain Valley and Carlsbad, California; Wilmington,
Massachusetts; Indianapolis, Indiana; St. Louis, Missouri; Melbourne, Florida;
Nancy and Lyon, France; Galway, Republic of Ireland and Tijuana, Mexico. The
Company considers that its properties are generally in good condition, are well
maintained and are generally suitable and adequate to carry on the Company's
business.
The Lenexa plant is located on 30 acres of land and contains approximately
116,000 square feet, the Fountain Valley plant contains approximately 24,000
square feet, the Carlsbad facility contains approximately 225,000 square feet,
the Ireland facility contains approximately 82,500 square feet, and the Nancy,
France facility contains approximately 29,700 square feet. All of these Company-
owned plant locations contain both office and manufacturing space.
14
The Wilmington plant contains approximately 16,200 square feet, the
Indianapolis facility contains approximately 68,400 square feet, the St. Louis
facility contains approximately 70,000 square feet, the Lenexa facility contains
approximately 25,400 square feet, the Melbourne facility contains approximately
21,000 square feet, the Tijuana, Mexico facility contains approximately 22,000
square feet and the Lyon, France facility contains approximately 28,600 square
feet. All of these Company-leased facilities contain both manufacturing and
office space with allocations for warehouse facilities. These leases will expire
or be extended at varying dates between the present and June 2011.
The Company produces nitrous oxide at facilities located in Galena, Kansas;
Maitland, Ontario; Pensacola, Florida and Richmond, California. Those
facilities, other than the one Company-owned location in California, are leased
from and located adjacent to its supplier of ammonium nitrate.
The Company also maintains 37 sales and/or service offices and warehouse
facilities worldwide of which 28 are leased and 9 are owned. The Company
considers that all facilities whether owned or leased are well maintained and in
good operating condition.
The Company owns approximately 27 acres of undeveloped land located in Rancho
Bernardo, California. As the Company's need for the Rancho Bernardo property has
significantly diminished, the Company continues to actively market this asset.
In fourth quarter fiscal year 1993, the Company entered into an agreement
whereby it constructed an approximately 72,000 square foot, build-to-suit
facility in the St. Louis area for its oxygen concentrator business. This leased
facility, with an option to purchase, replaces a smaller leased facility in the
same general area.
The Company previously announced it had started planning for a facility
suitable for its longer-term requirements in the Kansas City area. The Company
is moving forward on obtaining the facility site funded by selling, as the
market conditions permit, real estate and other assets that are no longer part
of the Company's long-term plans such as the unused land in Lenexa, Kansas and
Rancho Bernardo, California and the vacant El Segundo, California facility.
However, the remainder of the project has been indefinitely postponed.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
On October 7, 1994, a purported class action complaint entitled Kenneth
Steiner v. Puritan-Bennett Corp., Burton A. Dole, Jr., C. Phillip Larson, Jr.,
Andre F. Marion, Thomas A. McDonnell, Daniel C. Weary, Frank P. Wilton, C.A. No.
13790 (the "Steiner Complaint"), was filed against the Company and its directors
in the Court of Chancery of the State of Delaware in and for New Castle County
(the "Chancery Court"), alleging, among other things, that the defendants have
breached their fiduciary duties to the Company's stockholders as a result of the
defendants' adoption of a Rights Agreement dated on or about May 17, 1989 and
the directors' refusal to properly consider Thermo Electron Corporation's
initial proposal to acquire all
15
outstanding shares of the Company's common stock. Among other things, the
Steiner Complaint seeks an order directing the Company's directors to carry out
their fiduciary duties to the Company's stockholders by cooperating fully with
Thermo Electron Corporation or any other entity or person having a bona fide
interest in proposing any extraordinary transactions with the Company, including
a merger or acquisition of the Company, as well as damages and costs. On October
24 and 28, 1994, respectively, two purported class action complaints entitled
Louise Kovacs v. Puritan-Bennett Corp., et al., C.A. No. 13828 (the "Kovacs
Complaint"), and Charles Miller v. Puritan-Bennett Corporation, et al., C.A. No.
13839 (the "Miller Complaint"), were filed against the Company and its directors
in the Chancery Court, alleging, among other things, that the defendants have
breached their fiduciary duties to the Company's stockholders as a result of the
defendants' refusal to properly consider Thermo Electron Corporation's proposals
to acquire all outstanding shares of the Company's common stock. The material
allegations and prayers for relief contained in each of these complaints are
substantially similar to those contained in the Steiner Complaint filed earlier
against the Company and its directors. On or about December 5, 1994, the
plaintiffs in each of the above actions filed a first amended and consolidated
complaint which contains material allegations and a prayer for relief that are
substantially similar to those contained in the above described complaints.
On November 28, 1994, counsel to plaintiffs in each of the Steiner, Kovacs and
Miller actions filed an application in the Chancery Court requesting, among
other things, that the court schedule a hearing on plaintiffs' motion for a
preliminary injunction, which motion was filed on November 29, 1994. Plaintiffs'
motion for a preliminary injunction sought an order (i) compelling the
defendants to meet with representatives of Thermo Electron Corporation to
discuss the terms of the tender offer and (ii) declaring null and void certain
provisions of certain executive agreements, severance agreements,
indemnification agreements and the Company's employee benefit plans and
arrangements. On December 6, 1994, the Chancery Court issued a letter opinion in
which the Chancery Court declined to schedule a hearing on plaintiff's motion.
Citing the "substantial costs and disruption" to the defendants and the public
of an expedited preliminary injunction proceeding, the Chancery Court found that
the threatened "injury" alleged by the plaintiffs "is too speculative to warrant
intervention at this time."
Since the Chancery Court's December 6, 1994 ruling, the parties have engaged
in discovery. The director defendants believe that they have fulfilled their
fiduciary duties to the Company and its shareholders and intend to continue to
do so. The Company and the director defendants intend to defend these actions
vigorously. See Other Information in Item 1.
Except as described above, neither the Company nor any of its subsidiaries is
involved in any material pending litigation other than ordinary routine
proceedings incident to their business.
16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
There were no matters submitted to a vote of security holders during the
fourth quarter ending January 31, 1995.
17
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
Year
First
Name Office Age Elected
-------- ---------- --- -------
Burton A. Dole Jr. Chairman of the Board, President and
Chief Executive Officer 57 1980
John H. Morrow Executive Vice President and Chief
Operating Officer 50 1979
Robert L. Doyle Sr. Vice President, Marketing 52 1988
Thomas E. Jones Sr. Vice President, General Manager
Puritan Group 51 1989
Alexander R. Rankin Sr. Vice President, General Manager
Bennett Group 59 1993
Lee A. Robbins Vice President, Chief Financial Officer
and Controller 53 1985
Derl S. Treff Treasurer and Assistant Secretary 52 1985
Daniel C. Weary Secretary and Director 67 1968
The term of office of all executive officers is one year and extends until
the next Annual Meeting of the Board of Directors, generally at the time of the
Annual Meeting of Stockholders.
The business experience of executive officers of the Company during the
past five years is as follows:
Burton A. Dole Jr. President, Chief Executive Officer and Director of Company
since 1980. Subsequently elected Chairman of the Board in
1986.
John H. Morrow Vice President of Company since 1979. Executive Vice
President and Chief Operating Officer since 1989.
Robert L. Doyle Vice President of Company since 1988. Senior Vice President
since 1988.
Thomas E. Jones General Manager of Lenexa Division through May 1989. Elected
Vice President in May 1989. Currently General Manager of
Puritan Group. Senior Vice President since April 1993.
Alexander R. Rankin Group Manufacturing Manager and General Manager of
Massachusetts Medical Manufacturing Operation for Hewlett-
Packard Company Medical Products Group through March 1993.
Elected Vice President, Bennett Group Manager as of April
1993. Senior Vice President since April 1995.
Lee A. Robbins Corporate Controller of Company since December 1985. As of
July 1986, Chief Financial Officer. Elected Vice President
in May 1990.
Derl S. Treff Treasurer and Assistant Secretary of the Company since July
1985.
Daniel C. Weary Secretary of Company since October 1968. Also partner in the
law firm of Blackwell Sanders Matheny Weary and Lombardi
L.C. of Kansas City, Missouri.
18
Part II
-------
Item 5. Market for Company's Common Equity and Related Stockholder Matters.
- ---------------------------------------------------------------------------
The information in Note 8 to the consolidated financial statements on
page 37 and information on pages 27 and 55 of the Puritan-Bennett Annual Report
to Stockholders for FY 1995 is incorporated herein by reference. During FY 1995
and FY 1994, the Company declared dividends of $.12 per share.
Item 6. Selected Financial Data.
- --------------------------------
The information in the Ten-Year Summary on pages 22 and 23 of the
Puritan-Bennett Annual Report to Stockholders for FY 1995 is incorporated herein
by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations.
- --------------
The information in Management's Discussion and Analysis of Results of
Operations and Financial Condition on pages 42 through 52 of the Puritan-Bennett
Annual Report to Stockholders for FY 1995 is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
- ----------------------------------------------------
The consolidated financial statements, together with the report
thereon of independent accountants, dated March 6, 1995, on pages 24 through 41
of the Puritan-Bennett Annual Report to Stockholders for FY 1995 are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure.
- ---------------------
There are no changes or disagreements to report.
19
PART III
--------
Item 10. Directors and Executive Officers of the Company.
- ---------------------------------------------------------
All information required by this item is incorporated herein by
reference from the Company's proxy statement, which will be filed within 120
days of January 31, 1995, except with respect to executive officers of the
Company.
The unnumbered item, "Executive Officers of the Company", following
Item 4, Part I is incorporated by reference.
Item 11. Executive Compensation.
- --------------------------------
All information required by this item is incorporated herein by
reference from the Company's proxy statement, which will be filed within 120
days of January 31, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------
All information required by this item is incorporated herein by
reference from the Company's proxy statement, which will be filed within 120
days of January 31, 1995.
Item 13. Certain Relationships and Related Transactions.
- --------------------------------------------------------
All information required by this item is incorporated herein by
reference from the Company's proxy statement, which will be filed within 120
days of January 31, 1995.
Item 405. Compliance with Section 16(a) of the Exchange Act.
- -----------------------------------------------------------
All information required by this item is incorporated herein by
reference from the Company's proxy statement, which will be filed within 120
days of January 31, 1995.
PART IV
-------
Item 14. Exhibits. Financial Statement Schedules and Reports on Form 8-K.
- -------------------------------------------------------------------------
(a) (1) and (2)--List of Financial Statements and Financial Statement
Schedules:
The following consolidated financial statements of Puritan-Bennett
Corporation and Subsidiaries, included in the Puritan-Bennett Annual
Report to Stockholders for fiscal year ending January 31, 1995, are
incorporated by reference in Item 8.
20
Consolidated Balance Sheets - January 31, 1995 and 1994 (incorporated herein by
reference to page 25 of the Puritan-Bennett Annual Report to Stockholders for
fiscal year ending January 31, 1995).
Consolidated Statements of Operations - Years ended January 31, 1995, 1994 and
1993 (incorporated herein by reference to page 26 of the Puritan-Bennett Annual
Report to Stockholders for fiscal year ending January 31, 1995).
Consolidated Statements of Stockholders' Equity - Years ended January 31, 1995,
1994 and 1993 (incorporated herein by reference to page 27 of the Puritan-
Bennett Annual Report to Stockholders for fiscal year ending January 31, 1995).
Consolidated Statements of Cash Flows - Years ended January 31, 1995, 1994 and
1993 (incorporated herein by reference to page 28 of the Puritan-Bennett Annual
Report to Stockholders for fiscal year ending January 31, 1995).
Notes to Consolidated Financial Statements - January 31, 1995 (incorporated
herein by reference to pages 29 through 41 of the Puritan-Bennett Annual Report
to Stockholders for fiscal year ending January 31, 1995).
The following Consolidated Financial Statement Schedules of the Puritan-Bennett
Corporation and Subsidiaries are included in Item 14(d):
Schedule VIII - Valuation and Qualifying Accounts - Years ended January 31,
1995, 1994 and 1993.
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
(3)--Listing of Exhibits
Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index
which is incorporated herein by reference.
21
(b) Reports on Form 8-K
-------------------
No Form 8-K was filed during the quarter ending January 31, 1995.
(c) Exhibits
--------
The response to this portion of Item 14 is submitted as a separate section
to this report.
(d) Financial Statement Schedules
-----------------------------
The response to this portion of Item 14 is submitted as a separate section
of this report.
22
SIGNATURES
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PURITAN-BENNETT CORPORATION
-------------------------------
(Registrant)
4/5/95 /s/ Burton A. Dole Jr.
--------------------------
Date Burton A. Dole Jr.
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
/s/ Burton A. Dole Jr. 4/5/95 /s/ Daniel C. Weary 4/5/95
- -------------------------------------- --------------------------------------
Burton A. Dole Jr. Date Daniel C. Weary Date
Chairman of the Board, Director
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Charles A. Duboc 4/5/95 /s/ Frank P. Wilton 4/5/95
- -------------------------------------- --------------------------------------
Charles A. Duboc Date Frank P. Wilton Date
Director Director
/s/ Lee A. Robbins 4/5/95
- --------------------------------------
Lee A. Robbins Date
Vice President, Chief Financial
Officer and Controller
(Principal Financial Officer and
Principal Accounting Officer)
23
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
- ----------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ----------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
--------------------------------------
DESCRIPTION Balance at Begin- (1) (2) Deductions-Describe Balance at End
ning of Period Charged to Costs Charged to Other of Period
and Expenses Accounts - Describe
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, 1995:
Allowances deducted from
asset accounts:
Allowance for doubtful accounts $1,760,966 663,885 __ 1,088,756(A) $1,336,095
Inventory reserves $7,155,690 2,211,810 3,088,539(G) 2,609,904(B) $9,846,135
Deferred revenue $9,961,795 __ 3,939,454 3,006,054 $10,895,195(C)
Tax Valuation $15,696,000 5,412,000 __ __ $21,108,000
Year Ended January 31, 1994:
Allowances deducted from
asset accounts:
Allowance for doubtful accounts $645,590 928,658 408,868(E) 222,150(A) $1,760,966
Inventory reserves $1,502,182 2,683,723 4,717,959(F) 1,748,174(B) $7,155,690
Deferred revenue $5,531,088 __ 5,774,744 1,344,037 $9,961,795(C)
Tax Valuation $0 11,148,000 4,548,000(D) __ $15,696,000
Year Ended January 31, 1993:
Allowances deducted from
asset accounts:
Allowance for doubtful accounts $546,126 449,426 __ 349,962(A) $645,590
Inventory reserves $3,026,118 995,415 __ 2,519,351(B) $1,502,182
Deferred revenue $3,058,780 __ 3,079,308 607,000 $5,531,088(C)
24
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS - CONTINUED
(A) Represents accounts written off, net of recoveries.
(B) Represents inventory disposed of or otherwise written off.
(C) Relates to extended warranty agreements offered by the company which are amortized over the life of the agreement with the
related warranty costs charged to expense as incurred.
(D) This amount was recorded in the cumulative effect at the date of adoption of SFAS 109.
(E) Write-downs related to restructuring ($207,000) and the sale of the Company's home care services business in South Florida
($201,868).
(F) Write-down related to restructuring.
(G) Related to returned goods expensed through the FY 1994 restructuring charge.
25
EXHIBIT INDEX
EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION
(NUMBER AND DESCRIPTION OF EXHIBIT)
(2) (a) Stock Purchase Agreement dated December 14, 1993 included in Form
8-K dated January 28, 1994, and incorporated herein by reference.
(3) (a) Restated Certificate of Incorporation as amended on May 7, 1987,
included in Annual Report for 1987 on Form 10-K and incorporated
herein by reference.
(b) Amendment of Certificate of Incorporation filed June 6, 1990 with the
Delaware Secretary of State included in Form 10-Q for the Quarter
ended June 30, 1990 and incorporated herein by reference.
(c) By-laws adopted on July 31, 1991, included in Form 10-Q for the
Quarter ended September 30, 1991 and incorporated herein by reference.
(4) (a) Shareholder Rights Agreement dated May 2, 1989, included in Form 8-K
dated May 15, 1989 and incorporated herein by reference.
(b) Amendment Agreement dated as of October 27, 1994, between the Company
and UMB Bank, N.A., amending the Rights Agreement dated as of May 2,
1989, included in Form 10-Q for the Quarter ended October 31, 1994 and
incorporated herein by reference.
Long-term debt instruments of the Company in amounts not exceeding 10% of
the total assets of the Company and its Subsidiaries on a consolidated
basis will be furnished to the Commission upon request.
(10) (a)* Employment agreement - Burton A. Dole, Jr. included in the Annual
Report for fiscal year 1994 on Form 10-K and incorporated herein by
reference.
(b)* 1979 Employee Stock Benefit Plan (as amended and restated through the
eighth amendment) and the ninth amendment thereto included in the
Annual Report for 1989 on Form 10-K and incorporated herein by
reference.
(c)* Management Incentive Compensation Plan A, as amended.
(d)* (i) Supplemental Retirement Benefit Plan, included in the Annual
Report for 1985 on Form 10-K and incorporated herein by reference.
26
* (ii) Agreement dated August 13, 1993 between the Company and Burton A.
Dole, Jr., included in the Annual Report for fiscal year 1994 on Form
10-K and incorporated herein by reference.
* (iii) Agreement dated August 10, 1993, between the Company and John H.
Morrow included in the Annual Report for fiscal year 1994 on Form 10-K
and incorporated herein by reference.
* (iv) First Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan included in Form 10-Q for the Quarter ended October 31,
1994 and incorporated herein by reference.
* (v) Second Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan included in Form 10-Q for the Quarter ended July 31, 1994
and included herein by reference.
* (vi) Third Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan included in Form 10-Q for the Quarter ended October 31,
1994 and incorporated herein by reference.
* (vii) SERP Agreement dated November 7, 1994, between Burton A. Dole
Jr. and the Company included in Form 10-Q for the Quarter ended
October 31, 1994 and incorporated herein by reference.
* (vii) SERP Agreement dated November 7, 1994, between John H. Morrow
and the Company included in Form 10-Q for the Quarter ended
October 31, 1994 and incorporated herein by reference.
(e)* (i) Employment Agreement Between the Company and John H. Morrow dated
June 9, 1994 included in Form 10-Q for the Quarter ended October 31,
1994 and incorporated herein by reference.
* (ii) Supplemental Agreement dated November 7, 1994, between John H.
Morrow and the Company included in Form 10-Q for the Quarter ended
October 31, 1994 and incorporated herein by reference.
(f)* (i) Restated Deferred Compensation Plan included in the Annual Report
for fiscal year 1994 on Form 10-K and incorporated herein by
reference.
* (ii) First Amendment to the Restated Puritan-Bennett Deferred
Compensation Plan included in Form 10-Q for the Quarter ended
October 31, 1994 and incorporated herein by reference.
27
(g)* (i) Amended and restated Retirement Plan for Non-Employee Directors
included in Form 10-Q for the Quarter ended September 30, 1991, and
incorporated herein by reference.
* (ii) Amendment Adopted on November 6, 1994, to the Puritan-Bennett
Corporation Retirement Plan for Non-Employee Directors included in
Form 10-Q for the Quarter ended October 31, 1994 and incorporated
herein by reference.
(h)* (i) 1988 Employee Stock Benefit Plan, as amended, included in the
Annual Report for fiscal year 1993 on Form 10-K and incorporated
herein by reference.
* (ii) Amendment Adopted on November 6, 1994, to Puritan-Bennett 1988
Employee Stock Benefit Plan included in Form 10-Q for the Quarter
ended October 31, 1994, and incorporated herein by reference.
(i)* Promissory note dated December 19, 1991, between the Company and
Robert L. and Melanie M. Doyle included in the Annual Report for 1991
on Form 10-K and incorporated herein by reference.
(j)* Promissory note dated June 21, 1993 between the Company and
Alexander R. and Suzanne D. Rankin included in the Annual Report for
1994 on Form 10-K and incorporated herein by reference.
(k)* Indemnification Agreement among the Company and its Directors
included in the Annual Report for fiscal year 1994 on Form 10-K and
incorporated herein by reference
(l)* (i) Pension Benefit Make Up Plan included in Form 10-Q for the Quarter
ended July 31, 1994 and incorporated herein by reference.
* (ii) First Amendment to the Puritan-Bennett Corporation Pension
Benefit Make Up Plan included in Form 10-Q for the Quarter ended
October 31, 1994 and incorporated herein by reference.
(m)* Executive Agreement, dated November 7, 1994, between Robert L. Doyle
and the Company included in Form 10-Q for the Quarter ended
October 31, 1994 and incorporated herein by reference.
(n)* Executive Agreement, dated November 7, 1994, between Thomas E. Jones
and the Company included in Form 10-Q for the Quarter ended
October 31, 1994 and incorporated herein by reference.
28
(o)* Executive Agreement, dated November 7, 1994, between Alexander R.
Rankin and the Company included in Form 10-Q for the Quarter ended
October 31, 1994 and incorporated herein by reference.
(P)* Executive Agreement, dated November 7, 1994, between David P. Niles
and the Company included in Form 10-Q for the Quarter ended October
31, 1994 and incorporated herein by reference.
(q)* Severance Agreement, dated November 7, 1994, between Lee A. Robbins
and the Company included in Form 10-Q for the Quarter ended October
31, 1994 and incorporated herein by reference.
(r)* Severance Agreement, dated November 7, 1994, between Derl S. Treff and
the Company included in Form 10-Q for the Quarter ended October 31,
1994 and incorporated herein by reference.
(s) Lease of residential real estate dated August 30, 1994, between
Robert Doyle and the Company.
(11) Statement re: Computation of Per Share Earnings.
(13) Excerpts of the Puritan-Bennett Corporation Annual Report to Stockholders
for fiscal year ending January 31, 1995.
(21) Subsidiaries of the Company.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule.
* Represents a management contract or compensatory plan or arrangement.
(All other exhibits are inapplicable)
Copies of the above exhibits are available upon written request to the
Stockholder Services Department, Puritan-Bennett Corporation, 9401
Indian Creek Parkway, Overland Park, Kansas 66210.
29