PURITAN-BENNETT CORPORATION AND SUBSIDIARIES
FINANCIAL
REPORT
FISCAL YEAR 1995
Incoming Orders, Net Sales and Net Income (Loss) Per Share.. 21
Ten-Year Summary............................................ 22
Management's Responsibility for Financial Statements........ 24
Report of Independent Auditors.............................. 24
Consolidated Balance Sheets................................. 25
Consolidated Statements of Operations....................... 26
Consolidated Statements of Stockholders' Equity............. 27
Consolidated Statements of Cash Flow........................ 28
Notes to Consolidated Financial Statements.................. 29
Supplemental Information for the Ten-Year Summary........... 41
Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 42
Incoming Orders, Net Sales ($ Millions) and Net Income (Loss) Per Share
- -------------------------------------------------------------------------------
FY 1994 FY 1995
------------------------------------- -------------------------------------
Apr. 30 July 31 Oct. 31 Jan. 31 APR. 30 JULY 31 OCT. 31 JAN. 31
------- ------- ------- ------- ------- ------- ------- -------
MEDICAL - Orders $65.4 $75.6 $69.9 $ 85.0 $71.9 $76.2 $74.9 $82.9
Net Sales 69.4 71.9 69.6 75.0 73.7 77.2 74.9 79.5
AERO - Orders 5.6 7.0 5.1 10.4 8.2 6.0 8.1 9.2
Net Sales 6.0 6.0 5.7 5.7 6.7 6.8 8.5 8.7
TOTAL - Orders $71.0 $82.6 $75.0 $ 95.4 $80.1 $82.2 $83.0 $92.1
Net Sales 75.4 77.9 75.3 80.7 80.4 84.0 83.4 88.2
BACKLOG INCREASE
(DECREASE) $(4.4) $ 4.7 $(0.3) $ 14.7 $ (.3) $ (1.8) $(0.4) $ 3.9
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT
PER SHARE $ .15 $(.41) $ .06 $(2.46) $ .30 $ .34 $(.05) $ .08
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES
PER SHARE $(.23) $ -- $ -- $ (.01) $ -- $ -- $ -- $ --
NET INCOME (LOSS) PER SHARE $(.08) $(.41) $ .06 $(2.47) $ .30 $ .34 $(.05) $ .08
- ---------------------------------------------------------------------------------------------------------
21
TEN-YEAR SUMMARY
PURITAN-BENNETT CORPORATION AND SUBSIDIARIES
All dollar amounts in thousands, except common share data
Transition
1995 1994 1993 Period
- -----------------------------------------------------------------------------
OPERATING RESULTS
Net Sales
Puritan Group $184,101 172,438 146,420 9,833
Bennett Group 121,269 113,399 128,442 7,901
Aero Systems 30,656 23,418 25,198 1,948
Industrial Division -- -- -- --
-------- ------- ------- -------
Total Net Sales 336,026 309,255 300,060 19,682
Gross Profit 139,639 128,671 130,152 7,153
Selling and
Administrative Expense 96,112 95,756 83,178 6,326
Research and Development
Expense 19,978 24,887 25,849 2,361
Restructuring Charges 2,654 43,169 -- --
-------- ------- ------- -------
Operating Profit (Loss) 20,895 (35,141) 21,125 (1,534)
Costs Associated with an
Unsolicited Offer to
Acquire the Company (5,049) -- -- --
Other Income (Expense) (4,478) (4,017) (2,718) (639)
-------- ------- ------- -------
Income (Loss) Before
Income Taxes 11,368 (39,158) 18,407 (2,173)
Income Tax Provision
(Benefit) 2,970 (7,379) 3,812 118
-------- ------- ------- -------
Net Income (Loss) Before
Cumulative Effect 8,398 (31,779) 14,595 (2,291)
Cumulative Effect of
Accounting Changes -- (2,890) -- (3,059)
-------- ------- ------- -------
Net Income (Loss) $ 8,398 (34,669) 14,595 (5,350)
======== ======= ======= =======
- -----------------------------------------------------------------------------
FINANCIAL STATISTICS
Gross Profit 41.6% 41.6 43.4 36.3
Effective Tax Rate 26.1% -- 20.7 --
Net Income As a
Percentage of Sales 2.5% -- 4.9 --
Long-Term Debt to Total
Capital 31.7% 26.4 24.3 22.9
Return on Average
Stockholders' Equity 7.5% -- 11.7 --
Return on Average Assets 3.2% -- 6.5 --
Current Ratio 2.0 1.6 2.8 2.8
Average Asset Turnover 1.3 1.2 1.3 --
- -----------------------------------------------------------------------------
COMMON SHARE DATA
Net Income (Loss) Before
Cumulative Effect $ 0.67 (2.66) 1.24 (0.20)
Cumulative Effect of
Accounting Changes $ -- (0.24) -- (0.26)
Net Income (Loss) $ 0.67 (2.90) 1.24 (0.46)
Dividends Declared $ 0.12 0.12 0.12 --
Net Book Value $ 9.32 8.67 11.23 9.91
Weighted-Average Shares
Outstanding 12,509 11,956 11,812 11,633
- -----------------------------------------------------------------------------
OTHER DATA
Net Working Capital $ 73,572 51,882 81,086 68,534
Long-Term Debt $ 54,492 38,656 42,840 34,510
Stockholders' Equity $117,284 107,712 133,723 115,920
Capital Expenditures $ 18,097 15,727 22,882 --
Total Assets $273,135 256,594 244,408 206,331
- -----------------------------------------------------------------------------
See Page 41 for the supplemental information for the ten-year summary.
22
1991 1990 1989 1988 1987 1986 1985
- ------------------------------------------------------------------
116,994 100,993 86,178 77,043 69,272 64,558 49,803
112,314 120,268 110,892 107,240 86,433 67,553 58,948
26,814 30,615 29,724 20,117 17,026 17,607 13,283
-- -- -- -- -- -- 1,961
- ------- ------- ------- ------- ------- ------- -------
256,122 251,876 226,794 204,400 172,731 149,718 123,995
100,340 113,062 104,348 91,572 79,863 63,675 49,846
75,763 69,831 63,873 60,544 50,637 44,633 38,143
24,137 19,682 15,238 13,327 9,681 7,367 5,763
-- -- -- -- -- -- --
- ------- ------- ------- ------- ------- ------- -------
440 23,549 25,237 17,701 19,545 11,675 5,940
-- -- -- -- -- -- --
(3,162) (334) (850) 3,876 (161) 7,217 1,325
- ------- ------- ------- ------- ------- ------- -------
(2,722) 23,215 24,387 21,577 19,384 18,892 7,265
(3,296) 7,342 8,389 7,438 8,297 7,952 2,337
- ------- ------- ------- ------- ------- ------- -------
574 15,873 15,998 14,139 11,087 10,940 4,928
-- -- -- -- -- -- --
- ------- ------- ------- ------- ------- ------- -------
574 15,873 15,998 14,139 11,087 10,940 4,928
======= ======= ======= ======= ======= ======= =======
- ------------------------------------------------------------------
39.2 44.9 46.0 44.8 46.2 42.5 40.2
-- 31.6 34.4 34.5 42.8 42.1 32.2
0.2 6.3 7.1 6.9 6.4 7.3 4.0
22.2 22.9 17.4 20.7 8.1 10.3 2.4
0.5 14.6 17.4 18.4 17.4 18.0 8.2
0.3 8.9 10.5 11.1 10.5 11.7 5.3
2.8 3.8 3.1 3.3 2.3 2.4 2.7
1.3 1.4 1.5 1.6 1.6 1.6 1.3
- ------------------------------------------------------------------
0.05 1.39 1.42 1.27 1.00 0.99 0.40
-- -- -- -- -- -- --
0.05 1.39 1.42 1.27 1.00 0.99 0.40
0.12 0.12 0.11 0.11 0.11 0.10 0.10
10.35 10.20 8.82 7.48 6.26 5.30 4.98
11,617 11,451 11,297 11,168 11,057 11,087 12,470
- ------------------------------------------------------------------
70,847 81,405 64,308 60,309 40,997 37,841 34,896
34,510 34,926 21,121 21,883 6,100 6,723 1,577
120,929 117,368 100,432 83,921 69,476 58,234 63,030
26,545 24,928 12,401 19,046 13,098 6,757 5,049
208,788 193,157 163,549 140,886 114,533 97,300 90,508
- ------------------------------------------------------------------
23
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
PURITAN-BENNETT CORPORATION AND SUBSIDIARIES
The consolidated financial statements and related footnotes on the following
pages have been prepared in conformity with generally accepted accounting
principles. The integrity and objectivity of data in these consolidated
financial statements, including estimates in judgments relating to matters not
concluded by year-end, are the primary responsibility of management. Financial
information included elsewhere in this Annual Report is consistent with the
consolidated financial statements. The opinion of Ernst & Young LLP, the
Company's independent auditors, on the consolidated financial statements is
included herein.
Puritan-Bennett Corporation and subsidiaries maintain internal accounting
control systems designed to provide reasonable assurance that assets are
safeguarded, that transactions are executed in accordance with management's
authorization and are properly recorded and that accounting records are adequate
for preparation of financial statements and other financial information. The
systems are tested and evaluated regularly by the Company's internal auditors as
well as by the independent auditors in connection with their annual audit. The
design, monitoring and revision of internal accounting control systems involve,
among other things, management's judgment with respect to the relative costs and
expected benefits of specific control measures.
The adequacy of the Company's internal financial controls and the accounting
principles employed in financial reporting are under the general surveillance of
the Audit Committee of the Board of Directors, consisting of three outside
directors. The independent auditors and corporate internal auditors meet
periodically with the committee to discuss accounting, auditing and financial
reporting matters. The committee also recommends to the directors the
designation and fees of the independent auditors. The independent auditors have
direct access to the Audit Committee, with or without the presence of management
representatives, to discuss the scope and results of their audit work and their
comments, on the adequacy of internal accounting controls and the quality of
financial reporting.
/s/ Burton A. Dole Jr. /s/ Lee A. Robbins
Burton A. Dole Jr. Lee A. Robbins
Chairman, President and Vice President, Chief Financial
Chief Executive Officer Officer and Controller
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Puritan-Bennett Corporation
We have audited the accompanying consolidated balance sheets of Puritan-
Bennett Corporation and subsidiaries as of January 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended January 31, 1995. 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Puritan-Bennett
Corporation and subsidiaries at January 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended January 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, during the
year ended January 31, 1994, the company changed its method of accounting for
income taxes, postretirement benefits and postemployment benefits.
/s/ Ernst & Young LLP
Kansas City, Missouri
March 6, 1995
24
CONSOLIDATED BALANCE SHEETS
PURITAN-BENNETT CORPORATION AND SUBSIDIARIES
Dollars in thousands, except per share data
January 31
1995 1994
------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 2,802 $ 713
Trade notes and accounts receivable, less allowance for doubtful accounts
(1995--$1,336; 1994--$1,761) 73,346 70,137
Inventories 57,541 47,470
Prepaid expenses and other 4,416 5,567
Deferred income tax benefits 6,628 10,760
-------- --------
Total Current Assets 144,733 134,647
Plant and Equipment, Net 92,360 88,893
Other Assets:
Patents--at cost, less accumulated amortization (1995--$920; 1994--$762) 1,809 1,682
Cost in excess of amounts assigned to net assets of businesses acquired, less
accumulated amortization (1995--$3,605; 1994--$1,677) 22,445 24,355
Deferred income tax benefits 3,483 --
Other assets 8,305 7,017
-------- --------
Total Other Assets 36,042 33,054
-------- --------
Total Assets $273,135 $256,594
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 18,004 $ 27,791
Trade accounts payable 16,619 13,937
Employee compensation, payroll taxes and withholdings 8,575 8,015
Accrued self-insurance expenses 950 1,299
Other accrued expenses 14,589 21,140
Dividends payable 377 359
Income taxes payable 2,520 3,678
Current maturities of long-term debt 9,527 6,546
-------- --------
Total Current Liabilities 71,161 82,765
Long-Term Debt, less current maturities 54,492 38,656
Deferred Compensation and Pensions 19,303 17,444
Deferred Income Taxes -- 55
Deferred Revenue 10,895 9,962
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $1.00 per share--authorized 30,000,000 shares; issued
and outstanding, 12,581,412 shares in 1995 and 12,427,653 shares in 1994 12,581 12,428
Additional paid-in capital 37,629 34,794
Retained earnings 68,322 61,736
Deferred stock awards (1,248) (602)
Treasury stock, 36,809 shares in 1994 -- (644)
-------- --------
Total Stockholders' Equity 117,284 107,712
-------- --------
Total Liabilities and Stockholders' Equity $273,135 $256,594
======== ========
See notes to consolidated financial statements.
25
CONSOLIDATED STATEMENTS OF OPERATIONS
PURITAN-BENNETT CORPORATION AND SUBSIDIARIES
Dollars in thousands, except per share data
Year Ended January 31
1995 1994 1993
------------------------------------
Net Sales $ 336,026 $ 309,255 $ 300,060
Cost of Goods Sold 196,387 180,584 169,908
---------- ---------- ----------
Gross Profit 139,639 128,671 130,152
Selling and Administrative Expense 96,112 95,756 83,178
Research and Development Expense 19,978 24,887 25,849
Restructuring Charges 2,654 43,169 --
---------- ---------- ----------
Operating Profit (Loss) 20,895 (35,141) 21,125
Other Income (Expense)
Interest Income 372 477 572
Interest Expense (5,830) (4,565) (3,720)
Costs Associated with an Unsolicited Offer
to Acquire the Company (5,049) -- --
Miscellaneous, Net 980 71 430
---------- ---------- ----------
Total Other Income (Expense) (9,527) (4,017) (2,718)
---------- ---------- ----------
Income (Loss) Before Income Taxes
and Cumulative Effect 11,368 (39,158) 18,407
Provision for (Benefit from) Income Taxes 2,970 (7,379) 3,812
---------- ---------- ----------
Net Income (Loss) Before Cumulative Effect
of Accounting Changes 8,398 (31,779) 14,595
Cumulative Effect of Accounting Changes
(Net of Income Taxes) -- (2,890) --
---------- ---------- ----------
Net Income (Loss) $ 8,398 $ (34,669) $ 14,595
========== ========== ==========
Weighted-Average Shares Outstanding 12,508,718 11,955,957 11,812,298
Net Income (Loss) Before Cumulative Effect
Per Common Share $ 0.67 $ (2.66) $ 1.24
Cumulative Effect of Accounting Changes
Per Common Share (Net of Income Taxes) -- (0.24) --
========== ========== ==========
Net Income (Loss) Per Common Share $ 0.67 $ (2.90) $ 1.24
========== ========== ==========
See notes to consolidated financial statements.
26
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PURITAN-BENNETT CORPORATION AND SUBSIDIARIES
Dollars in thousands, except per share data
Additional Deferred
Common Stock Paid-In Retained Stock Treasury
Shares Par Value Capital Earnings Awards Stock
---------------------------------------------------------------
Balances at February 1, 1992 11,696,768 $11,697 $20,647 $ 84,367 $ (791) $ --
Net income -- -- -- 14,595 -- --
Dividends declared, $.12 per share -- -- -- (1,419) -- --
Stock awards canceled (4,368) (4) (92) -- 96 --
Stock awards granted 9,560 9 264 -- (273) --
Amortization of deferred stock awards -- -- -- -- 458 --
Stock options exercised 152,274 152 2,071 -- -- --
Shares received and retired upon exercise
of stock options (11,938) (12) (383) -- -- --
Shares issued to employee benefit plans 60,465 61 1,629 -- -- --
Tax benefit related to stock options -- -- 651 -- -- --
---------- ------- ------- -------- ------- -------
Balances at January 31, 1993 11,902,761 11,903 24,787 97,543 (510) --
Net loss -- -- -- (34,669) -- --
Dividends declared, $.12 per share -- -- -- (1,432) -- --
Stock awards canceled (3,643) (3) (79) -- 82 --
Stock awards granted 22,300 22 434 -- (456) --
Amortization of deferred stock awards -- -- -- -- 282 --
Stock options exercised 23,087 23 202 -- -- --
Shares received and retired upon exercise
of stock options (2,209) (2) (43) -- -- --
Shares issued to employee benefit plans 58,428 58 1,275 -- -- 1,984
Shares issued in business acquisition 426,929 427 8,218 -- -- --
Shares repurchased -- -- -- -- -- (2,628)
Unrealized holding gain on available-for-sale
securities, net of income taxes of $187 -- -- -- 294 -- --
---------- ------- ------- -------- ------- -------
Balances at January 31, 1994 12,427,653 12,428 34,794 61,736 (602) (644)
Net income -- -- -- 8,398 -- --
Dividends declared, $.12 per share -- -- -- (1,518) -- --
Stock awards canceled (4,104) (4) (89) -- 93 --
Stock awards granted 57,600 57 1,109 -- (1,166) --
Amortization of deferred stock awards -- -- -- -- 427 --
Stock options exercised 20,130 20 208 -- -- --
Shares received and retired upon exercise
of stock options (2,174 (2) (43) -- -- --
Shares issued to employee benefit plans 82,307 82 1,650 -- -- 644
Reversal of unrealized holding gain on
available-for-sale securities, net of
income taxes of $187 -- -- -- (294) -- --
---------- ------- ------- -------- ------- -------
Balances at January 31, 1995 12,581,412 $12,581 $37,629 $ 68,322 $(1,248) $ --
========== ======= ======= ======== ======= =======
See notes to consolidated financial statements.
27
CONSOLIDATED STATEMENTS OF CASH FLOWS
PURITAN-BENNETT CORPORATION AND SUBSIDIARIES
Dollars in thousands
Year Ended January 31
1995 1994 1993
------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 8,398 $(34,669) $ 14,595
Adjustments to reconcile net income to net cash and
cash equivalents provided by operating activities:
Depreciation and amortization 15,222 15,440 12,884
Deferred income tax provision (benefit) 594 (12,057) 1,652
Cumulative effect of changes in accounting principles -- 2,890 --
Restructuring charges 2,205 38,404 --
Deferred compensation and pensions 3,663 2,536 473
Provision for losses on accounts receivable 398 929 449
Loss (gain) on disposition of assets (285) 265 (27)
Shares issued to employee benefit plans 2,376 3,317 1,690
Change in operating assets and liabilities:
Trade notes and accounts receivable (3,606) (423) (16,332)
Inventories (10,071) 153 (4,042)
Prepaid expenses and other 670 520 (598)
Other assets (165) 1,714 (3,948)
Trade accounts payable and accrued expenses (3,845) (4,021) 5,908
Deferred compensation (1,804) -- --
Income taxes payable/receivable (989) 4,003 1,623
Deferred revenue 933 3,991 2,472
-------- -------- --------
Net Cash and Cash Equivalents Provided by
Operating Activities 13,694 22,992 16,799
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of capital assets 5,893 1,362 726
Capital expenditures (18,097) (15,727) (22,882)
Purchases of intangible assets (252) (547) (1,902)
Acquisitions, net of cash acquired (2,000) (17,617) (1,500)
-------- -------- --------
Net Cash and Cash Equivalents Used in
Investing Activities (14,456) (32,529) (25,558)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance (repayment) of notes payable (9,787) 19,890 (4,099)
Additions to long-term debt 20,000 515 15,000
Payments on long-term debt (6,045) (6,680) (418)
Dividends paid to stockholders (1,500) (1,430) (1,062)
Stock options exercised 228 225 2,223
Stock repurchased (45) (2,673) (395)
-------- -------- --------
Net Cash and Cash Equivalents Provided by
Financing Activities 2,851 9,847 11,249
-------- -------- --------
Net Increase in Cash and Cash Equivalents 2,089 310 2,490
Cash and Cash Equivalents at Beginning of Year 713 403 (2,087)
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 2,802 $ 713 $ 403
======== ======== ========
See notes to consolidated financial statements.
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PURITAN-BENNETT CORPORATION AND SUBSIDIARIES January 31, 1995
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS: The Company's operations consist predominantly of the design,
manufacture and distribution of specialized equipment for emergency, therapeutic
and surgical pulmonary care. In addition, the Company manufactures and
distributes gas products administered with this equipment. These products are
distributed to hospitals, home care providers, clinics, physicians, nursing
homes, airlines and airframe manufacturers.
REVENUE RECOGNITION: Revenue from product sales is principally recognized at
the time of shipment. Deferred revenue 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.
FOREIGN CURRENCY: The Company's functional currency is the U.S. dollar.
Accordingly, assets and liabilities of the Company's foreign operations are
remeasured at year-end or historical rates depending on their nature; income and
expenses are remeasured at the weighted-average exchange rates for the year.
Foreign currency gains and losses resulting from transactions are included in
consolidated operations in the year of occurrence. The Company recorded foreign
transaction gains and (losses) of $392,000, ($583,000) and ($607,000) in 1995,
1994 and 1993, respectively.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its subsidiaries, substantially all of which are
wholly-owned. All intercompany accounts, transactions and profits have been
eliminated.
INVENTORIES: Inventories are stated at the lower of cost or market. The Last
In, First Out (LIFO) method was used for determining the cost of approximately
72% of total inventories. The cost for the remaining portion of the inventories
was determined using the First In, First Out (FIFO) method.
PLANT AND EQUIPMENT: Plant and equipment are recorded at cost. Provisions
for depreciation and amortization of all fixed assets including capitalized
leases are computed using the straight-line method.
OTHER ASSETS: The cost of patents is amortized on a straight-line basis over
their approximate useful lives, not to exceed seventeen years. The costs in
excess of amounts assigned to net assets of businesses acquired are amortized on
a straight-line basis over periods ranging from fifteen to forty years. The
Company periodically reviews market position and market expansion as well as the
value of ongoing business to assess and measure any impairment in value which is
other than temporary. Other assets include unamortized capitalized software
development costs of $2,071,000 and $947,000 at January 31, 1995 and 1994,
respectively. These costs are amortized using the straight-line method over a
five year period. Amortization expense related to software development costs for
1995, 1994 and 1993 was $248,000, $495,000 and $514,000, respectively.
INCOME TAXES: 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
taxes on such earnings. At January 31, 1995, the amount of undistributed
earnings considered to be indefinitely reinvested was approximately $41,000,000.
As discussed below, the Company changed its method of accounting for income
taxes effective February 1, 1993.
NET INCOME PER COMMON SHARE: Net income per common share is based on the
weighted-average number of shares outstanding during each year. The potential
dilutive effect of stock options is not material.
STATEMENTS OF CASH FLOWS: The Company considers all highly-liquid
investments purchased within three months of maturity to be cash equivalents. As
of January 31, 1995, cash equivalents consisted primarily of overnight
depository balances. Non-cash activity during 1995 included the acquisition of
land and a building, with a cost of $4,862,000, through a capital lease.
INVESTMENTS: During the year, the Company sold an investment that was
classified as available-for-sale. A pretax gain of $289,000 was realized, which
is included in other income (expense).
FINANCIAL INSTRUMENTS: Financial instruments consist primarily of cash and
cash equivalents, trade notes and accounts receivable and notes and trade
accounts payable, all of which are stated at amounts which approximate fair
value except for long-term debt which has an estimated fair value of
approximately $64,000,000 as of January 31, 1995.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING CHANGES: During 1994, the Company changed its method of
accounting for income taxes to conform with Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes" (see Note 6). On January
31, 1994, the Company changed its method of accounting for postemployment
benefits, retroactive to February 1, 1993, to conform with SFAS No. 112
"Employers' Accounting for Postemployment Benefits" (see Note 5). The cumulative
effect of these changes was as follows:
Dollars in thousands, except per share data
Year Ended
January 31
1994
----------
Income taxes ($.23 per share) $(2,755)
Postemployment benefits, net of taxes
of $31 ($.01 per share) (135)
-------
$(2,890)
=======
Effective February 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" using the
prospective basis which amortizes the unrecognized net liability on a straight-
line basis over 20 years. SFAS No. 106 requires accrual of the expected cost of
providing postretirement benefits to employees and their dependents or
beneficiaries during the years in which employees earn benefits. Prior to
adoption, postretirement benefit expenses were recognized on a pay-as-you-go
basis. The adoption of SFAS No. 106 did not materially affect earnings.
NOTE 2: INVENTORIES
Inventories consist of:
1995 1994
(Dollars in thousands)
----------------------
Finished goods $18,714 $16,163
Work in process 5,746 4,437
Raw materials and supplies 37,369 30,894
------- -------
61,829 51,494
Excess of FIFO cost over LIFO cost (4,288) (4,024)
------- -------
Total Inventories $57,541 $47,470
======= =======
During the years ended January 31, 1995 and 1993, the Company had
liquidations of LIFO inventories that increased income before taxes by $442,000
and $487,000, respectively. During the year ended January 31, 1994, the effect
of such liquidations was not significant.
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: PLANT AND EQUIPMENT
Plant and equipment consist of:
1995 1994
(Dollars in thousands)
----------------------
Land and land improvements $ 10,713 $ 9,971
Buildings 38,221 31,355
Machinery and equipment 117,182 113,328
Leasehold improvements 5,024 4,307
-------- --------
171,140 158,961
Less accumulated depreciation and amortization 78,780 70,068
-------- --------
Total Plant and Equipment, Net $ 92,360 $ 88,893
======== ========
During 1993, the Company increased the estimated useful life of its computer
equipment from three to five years to more closely reflect replacement patterns.
The effects of this change in accounting estimate were to decrease 1993
depreciation expense by approximately $1,072,000 and increase 1993 net income by
approximately $654,000, or $.06 per share.
NOTE 4: NOTES PAYABLE
Notes payable consist primarily of bank lines of credit with five banks.
Unsecured bank lines of credit allow the Company to borrow a maximum of
$35,000,000 (at the quoted rate of each bank). There are no withdrawal
restrictions on any cash balances maintained at the various banks. The lines of
credit can be withdrawn at each bank's option. The following information relates
to bank line-of-credit borrowings:
1995 1994 1993
(Dollars in thousands)
-----------------------------
Bank lines of credit outstanding at the end of the year $18,000 $27,600 $ 7,200
Weighted-average interest rate at year-end 6.4% 3.5% 3.5%
Maximum amount outstanding during the year $32,500 $27,700 $24,100
Average amount outstanding during the year $21,897 $12,085 $16,252
Weighted-average interest rate during the year 4.8% 3.5% 4.1%
The average amounts outstanding and weighted-average interest rates during
each year are calculated based on daily outstanding balances.
NOTE 5: EMPLOYEE BENEFITS
DEFINED BENEFIT PLANS: The Company and its subsidiaries have
noncontributory, defined benefit pension plans covering substantially all full-
time employees in the U.S., Canada and Ireland. The Company contributes amounts
necessary to satisfy the minimum funding requirements of the Employee Retirement
Income Security Act of 1974 for the U.S. plan. Amounts necessary to satisfy the
funding requirements of Regulation 63 of the Ontario Pension Benefits Act, 1987
are contributed by the Company for the Canadian plan. The funding policy for the
Irish plan is determined by the Company and is consistent with standard
practices in that country. Contributions for the Irish plan are made by both the
Company and the participants. The U.S. and Canadian defined benefit pension
plans provide retirement benefits based upon the employees' average earnings and
years of service. The Irish plan provides benefits equal to a certain percentage
of the participant's final salary. The Company also has an unfunded supplemental
retirement plan covering certain key employees which provides supplemental
retirement benefits based upon average earnings.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: EMPLOYEE BENEFITS (CONTINUED)
A summary of the components of net cost for the defined benefit plans
follows:
Pension Supplemental
1995 1994 1993 1995 1994 1993
(Dollars in thousands)
--------------------------- -------------------
Service cost--benefits earned during the year $ 2,189 $ 1,832 $ 1,488 $ 85 $ 25 $ 13
Interest cost on projected benefit obligation 3,811 3,615 3,224 287 268 293
Actual return on plan assets 466 (615) (2,885) -- -- --
Net amortization and deferral (3,932) (3,494) (1,057) 105 104 132
------- ------- ------- ----- ----- -----
Net Cost $ 2,534 $ 1,338 $ 770 $ 477 $ 397 $ 438
======= ======= ======= ===== ===== =====
Assumptions used in determining the net cost for the defined benefit plans
were:
Pension Supplemental
1995 1994 1993 1995 1994 1993
---------------------- --------------------
Weighted-average discount rate 7.50% 8.75% 8.75% 8.50% 8.50% 8.50%
Rate of increase in compensation levels 4.50% 6.00% 6.00% 4.50% 6.00% 6.00%
Expected long-term rate of return on assets 9.00% 10.00% 10.00% -- -- --
For the Canadian plan, the rate of increase in compensation levels was 5.0%
for 1995. For the Irish plan, the weighted-average discount rate was 8.75%, the
rate of increase in compensation levels was 6.0% and the expected long-term rate
of return on assets was 10.0% for 1995. Other assumptions are as reported in the
table above.
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets at January 31, 1995 and 1994, for the Company's
defined benefit plans:
Pension Supplemental
1995 1994 1995 1994
(Dollars in thousands)
------------------- -----------------
Vested Benefit Obligation $39,858 $37,851 $3,233 $3,406
======= ======= ====== ======
Accumulated Benefit Obligation $40,897 $39,004 $3,233 $3,406
======= ======= ====== ======
Projected benefit obligation $49,302 $48,003 $3,677 $3,009
Plan assets at fair value 35,280 37,721 -- --
------- ------- ------ ------
Projected benefit obligation in excess of plan assets 14,022 10,282 3,677 3,009
Unrecognized net gain (loss) (5,788) (4,459) (592) 267
Unrecognized net asset (liability) 2,309 2,436 (144) (676)
------- ------- ------ ------
Net Liability Recognized in the Consolidated Balance Sheet $10,543 $ 8,259 $2,941 $2,600
======= ======= ====== ======
Assumptions used in determining the actuarial present value of the projected
benefit obligation for the pension plans were:
U.S. Canada Ireland
1995 1994 1995 1994 1995 1994
------------ ------------- ---------------
Weighted-average discount rate 8.50% 7.50% 8.50% 7.50% 8.75% 8.75%
Rate of increase in compensation levels 4.50% 4.50% 4.50% 5.00% 6.00% 6.00%
Expected long-term rate of return on assets 9.00% 10.00% 9.50% 9.00% 10.00% 10.00%
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: EMPLOYEE BENEFITS (CONTINUED)
The foreign defined benefit pension plans were not material in 1993.
Accordingly, the related pension cost has not been included in prior year
amounts.
The U.S. pension plan assets at January 31, 1995 and 1994, were invested in
listed stocks and bonds, including common stock of the Company. The market value
of Company stock included in plan assets at January 31, 1995 and 1994, was
$3,889,000 and $3,660,000, respectively. Both the Canadian and Irish plan assets
are invested in pooled mutual funds. For the unfunded supplemental plan, the
Company has purchased life insurance policies intended to ultimately fund the
cost of the plan.
During 1993, the Company discontinued one of its foreign pension plans which
resulted in no gain or loss. All active employees in the plan became fully
vested upon discontinuance and were offered either a transfer of the current
value of their benefit to the Company's defined contribution plan or the
purchase of an annuity contract. All funds were transferred to the defined
contribution plan.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: The Company provides
postretirement health care benefits to certain eligible retirees. The cost of
the postretirement medical plan is shared by the Company and 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.
A summary of the components of annual net cost for the postretirement
benefits are as follows:
1995 1994
(Dollars in thousands)
----------------------
Service cost $ 39 $ 35
Interest cost 131 166
Amortization of unrecognized net liability 85 92
------ ------
Net Cost $ 255 $ 293
====== ======
The components of the Company's postretirement benefits obligation recognized
in the consolidated balance sheet were as follows:
1995 1994
(Dollars in thousands)
----------------------
Retirees $1,198 $1,690
Future retirees 556 579
------ ------
Total accumulated benefit obligation 1,754 2,269
Less unrecognized amounts:
Unrecognized net liability 1,659 1,751
Net (Gain) Loss (411) 152
------ ------
Net Liability Recognized in the Consolidated Balance Sheet $ 506 $ 366
====== ======
For measurement purposes, an annual health care trend rate of 10% was assumed
beginning in 1994, decreasing over five years to 6% and remaining constant
thereafter. A one percent increase in these assumed trend rates would not have a
material effect on the accumulated postretirement benefits obligation as of
January 31, 1995, and January 31, 1994, and the net periodic postretirement
benefits cost for 1995 and 1994. The discount rate used in determining the
accumulated postretirement benefits obligation was 8.50% and 7.50% for January
31, 1995 and 1994, respectively.
The cost of providing postretirement benefits in 1993, which was recorded on
a pay-as-you-go basis, was approximately $275,000.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: EMPLOYEE BENEFITS (CONTINUED)
RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN: The Company has a retirement
savings and stock ownership plan under which substantially all U.S. employees
may elect to contribute up to 20% of their earnings. This includes a basic
contribution of up to 10% and an additional voluntary contribution of up to 10%.
The Company contributes an additional 35% (decreased to 10% as of February 15,
1995) for up to 6% of each individual's basic contribution. Contributions are
placed in trust for investment in defined funds, including a stock fund for
investment in common stock of the Company. The plan trustee purchases the
Company's stock at fair market value. The amount charged to expense under this
plan was $1,187,000, $1,190,000 and $1,059,000 in 1995, 1994 and 1993,
respectively.
DEFERRED COMPENSATION PLAN: The Company has a deferred compensation plan for
the benefit of certain employees. Deferred compensation expense was $406,000,
$418,000 and $866,000 for 1995, 1994 and 1993, respectively.
POSTEMPLOYMENT BENEFITS: In the fourth quarter of 1994, the Company adopted
SFAS No. 112. Prior to adoption, postemployment benefit expenses were recognized
on a pay-as-you-go basis. The Company elected to immediately recognize the
cumulative effect of the change in accounting for postemployment benefits of
$166,000 ($135,000 after taxes), which represents the unfunded accumulated
postemployment benefit obligation as of January 31, 1994. The amount charged to
expense in 1995 was not material.
NOTE 6: INCOME TAXES
The provision for (benefit from) income taxes consists of the following:
Deferred
Liability Method Method
1995 1994 1993
CURRENT: (Dollars in thousands)
---------------------------
Federal $ 277 $ 1,941 $1,002
Foreign 2,099 2,215 934
State and local __ 522 224
------ -------- ------
Total Current 2,376 4,678 2,160
DEFERRED:
Federal 621 (8,817) 247
Foreign (134) (1,956) 1,294
State and local 107 (1,284) 111
------ -------- ------
Total Deferred 594 (12,057) 1,652
------ -------- ------
Total Provision (Benefit) $2,970 $ (7,379) $3,812
====== ======== ======
Total income taxes paid in 1995, 1994, and 1993 were $3,180,000, $620,000 and
$720,000, respectively. As of January 31, 1995, the Company had a net operating
loss carryforward of $1,182,000 for tax purposes resulting from the transition
period which will be utilized over the next three years. In addition, the
Company has $14,618,000 U.S. and foreign net operating loss carryforwards, of
which $1,041,000 and $11,190,000 will expire by fiscal years 2000 and 2010,
respectively. The Company has research and development credit carryforwards of
$2,473,000 which will also expire by fiscal year 2010.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
as of January 31, 1995 and 1994 were as follows:
1995 1994
ASSETS LIABILITIES NET Assets Liabilities Net
(Dollars in thousands)
---------------------------------- -------------------------------------
Inventory valuation $ 8,615 $ -- $ 5,119 $ --
Accrued employee benefits 9,391 -- 8,358 --
NOL carryforwards 6,723 -- 3,323 --
Accelerated depreciation -- 4,495 -- 6,095
Deferred revenue 3,785 -- 2,898 187
R&D credit carryforwards 2,473 -- 1,100 --
Restructuring costs 2,125 -- 10,051 --
Other 3,390 788 2,294 460
------- ------ ------- ------- ------ -------
Total $36,502 $5,283 $31,219 $33,143 $6,742 $26,401
Less: Valuation allowance 21,108 -- 21,108 15,696 -- 15,696
------- ------ ------- ------- ------ -------
Total $15,394 $5,283 $10,111 $17,447 $6,742 $10,705
======= ====== ======= ======= ====== =======
The components of the deferred income tax provision for the year prior to
adoption of SFAS No. 109 result from the following:
1993
(Dollars in thousands)
----------------------
Accelerated depreciation for tax purposes $ 655
Timing differences in reporting the taxable portion
of Domestic International Sales Corporation income (50)
Inventory valuation 381
Accrued employee benefits (374)
Accrued costs not deductible for tax purposes until paid 2,350
Deferred extended warranty (1,008)
Alternative minimum tax carryforward (396)
Other, net 94
-------
Total Deferred Income Tax Provision $ 1,652
=======
A reconciliation of the provision for (benefit from) income taxes to the
statutory federal rate is as follows:
1995 1994 1993
(Dollars in thousands)
------------------------------------------------------------------------
EFFECTIVE Effective Effective
AMOUNT RATE Amount Rate Amount Rate
------- --------- -------- --------- ------- ---------
Computed tax at statutory federal rate $ 3,865 34.0% $(13,314) (34.0)% $ 6,259 34.0%
Foreign Sales Corporation tax benefit (426) (3.7) (566) (1.4) (477) (2.6)
State taxes, net of federal tax benefit (545) (4.8) (1,900) (4.9) 221 1.2
Nondeductible amortization and
depreciation 550 4.8 32 0.1 258 1.4
Nondeductible foreign loss -- -- -- -- 378 2.0
Research and development tax credit, net (702) (6.2) (1,813) (4.6) (509) (2.8)
Foreign statutory tax rate differences (5,307) (46.7) (1,490) (3.8) (2,377) (12.9)
Increase in valuation allowance 5,412 47.6 11,148 28.5 -- --
Other, net 123 1.1 524 1.3 59 0.4
------- ---- -------- ------ ------- -----
Total Provision (Benefit) $ 2,970 26.1% $ (7,379) (18.8)% $ 3,812 20.7%
======= ==== ======== ====== ======= =====
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7: LONG-TERM DEBT
Long-term debt is summarized as follows: 1995 1994
(Dollars in thousands)
----------------------
Unsecured promissory notes payable--
Interest rate 9.85%, interest payable semi-annually through October 1998, principal
is payable in annual installments from October 1993 through October 1998 $11,333 $15,333
Interest rate 6.64%, interest payable semi-annually through December 1999, principal
is payable in annual installments from December 1995 through December 1999 15,000 15,000
Interest rate 9.02%, interest payable semi-annually through December 1997, principal
is payable in annual installments from December 1993 through December 1997 6,000 8,000
Interest rate 7.57%, interest payable semi-annually through July 2000, principal
is payable in annual installments from July 1996 through July 2000 20,000 --
Variable interest rate, 5.13% through December 1995, interest payable annually
through December 1998, principal is payable in full in December 1998 4,510 4,510
Secured bank note payable--
Interest rate 7.95%, principal payable in monthly installments through
August 2003, collateralized by a building 1,707 1,662
Capital Lease--
Interest rate 7.0%, principal payable in monthly installments through
February 2009 4,782 --
Other 687 697
------- -------
64,019 45,202
Less current maturities 9,527 6,546
------- -------
Total Long-Term Debt $54,492 $38,656
======= =======
As of January 31, 1995, the Company was in compliance with the modified
provisions of its debt agreements; however, the future payment of dividends will
be limited by the extent to which future earnings of the Company exceed
$1,200,000.
During the second quarter of 1995, the Company arranged through a private
placement $20,000,000 of unsecured promissory notes.
The Company leases a facility which is classified as a capital lease and is
being amortized over fifteen years. As of January 31, 1995, the cost of the
asset and accumulated amortization was $4,404,000 and $307,000, respectively.
The future minimum lease payments required under the capital lease are included
in the aggregate maturities of long-term debt listed below.
The aggregate maturities of long-term debt during each of the next five
fiscal years are as follows: 1996--$9,527,000; 1997--$12,704,000;
1998--$11,453,000; 1999--$13,892,000; and 2000--$7,481,000.
Interest paid on all debt in 1995, 1994 and 1993 totaled $5,846,000,
$4,694,000 and $3,391,000, respectively.
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: STOCK OPTIONS AND AWARDS
The Company has a stock option plan that provides for the purchase of the
Company's common stock by officers and key employees at the fair market value of
shares at the date of grant. Stockholders approved a new stock benefit plan in
1988. This approval also allowed the termination of the 1979 plan. The 1988
Stock Benefit Plan reserved 800,000 common shares for stock options and 200,000
common shares for stock awards. During 1993, the Company reserved an additional
1,000,000 common shares for stock options. At the discretion of the Compensation
Committee of the Board of Directors, the plans allow all vested stock option
holders to elect an alternative settlement method in lieu of purchasing common
stock at the exercise price. The alternative settlement method permits the
employee to receive, without payment to the Company, cash, shares of common
stock or a combination thereof, of up to 100% of the value of market increase in
common stock over the option purchase price; however, alternative settlements
involving the disbursement of cash require approval of the Compensation
Committee of the Board of Directors. Options are granted for terms of ten years
to become exercisable (vested) in 50% installments as of the first and second
anniversary dates from the date of grant, except where vesting is limited in
annual periods in order to meet requirements for qualification as Incentive
Stock Options under the Internal Revenue Code. In such cases, vesting is
extended beyond the two years but is limited to a maximum of the ten year grant
term. Under the 1979 plan, options exercisable and outstanding at January 31,
1995 and 1994, were 106,100 and 125,225, respectively. During 1995, 13,125
options from the 1979 plan were exercised at prices ranging from $4.50 to $19.13
per share. Options exercisable at January 31, 1995 and 1994, under the 1988 plan
were 599,742 and 467,090, respectively.
Number of Shares
----------------------------------
1988 OPTION PLAN: Reserved Granted Available
--------- ------- ---------
Balance at January 31, 1993 1,648,869 639,044 1,009,825
Exercised ($16.50 to $21.75 per share) (2,200) (2,200) --
Granted ($17.50 to $22.75 per share) -- 213,500 (213,500)
Lapsed -- (17,600) 17,600
--------- ------- ---------
Balance at January 31, 1994 1,646,669 832,744 813,925
Exercised ($16.50 to $24.50 per share) (7,005) (7,005) --
Granted ($18.25 to $21.00 per share) -- 188,750 (188,750)
Lapsed -- (46,095) 46,095
--------- ------- ---------
Balance at January 31, 1995 1,639,664 968,394 671,270
========= ======= =========
Under the stock award plan, shares are granted to employees at no cost.
Awards vest at the rate of 25% annually, commencing one year from the date of
award, provided the recipient is still employed by the Company on the vesting
date. The cost of stock awards, based on the fair market value at the date of
grant, is charged to expense over the four-year vesting period ($427,000 in
1995, $282,000 in 1994 and $458,000 in 1993).
Number of Shares
-------------------------------
1988 AWARD PLAN: Reserved Granted Available
-------- ------- ---------
Balance at January 31, 1993 145,212 27,983 117,229
Granted -- 22,300 (22,300)
Vested (14,574) (14,574) --
Canceled -- (3,643) 3,643
------- ------- -------
Balance at January 31, 1994 130,638 32,066 98,572
Granted -- 57,600 (57,600)
Vested (8,970) (8,970) --
Canceled -- (4,104) 4,104
------- ------- -------
Balance at January 31, 1995 121,668 76,592 45,076
======= ======= =======
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9: OPERATING LEASES
Total rental expense for operating leases, principally buildings, amounted to
$6,450,000, $6,781,000 and $6,118,000 for 1995, 1994 and 1993, respectively.
Some of the operating leases have options to renew and there are no contingent
rentals or financial restrictions in any of the operating leases. Future minimum
lease payments on all noncancelable leases are as follows:
(Dollars in thousands)
----------------------
1996 $ 3,160
1997 2,723
1998 2,362
1999 1,445
2000 480
Thereafter 1,775
-------
Total minimum lease payments $11,945
=======
NOTE 10: COMMITMENTS AND CONTINGENCIES
Certain claims, suits and complaints arising in the ordinary course of
business have been filed or are pending against the Company and certain of its
subsidiaries. While it is not feasible to predict the outcome of these suits and
other legal proceedings and claims with certainty, management is of the opinion
that their ultimate disposition should not have a material effect on the
consolidated financial statements of the Company.
During 1995, the Company guaranteed approximately $3,200,000 of debt related
to the sale of equipment through a leasing Company. The debt is collateralized
by a security agreement. Additionally, the Company sold a lease receivable
during 1994 and guarantees performance over four years under a conditional sales
agreement. At January 31, 1995, the outstanding guarantee is approximately
$2,700,000.
NOTE 11: STOCKHOLDERS' EQUITY
In May 1989, the Company declared a dividend of one common share purchase
right on each outstanding share of common stock. One right is issued with each
share of common stock issued after May 17, 1989. The rights are neither
presently exercisable nor separable from the common stock. If they become
exercisable following the occurrence of certain specified events, each right
will entitle the holder to purchase one-half share of common stock for $45,
subject to certain antidilution adjustments. The rights do not have any voting
privileges nor are they entitled to dividends. The rights are redeemable by the
Company at $.01 each until a person or group acquires 20% of the Company's
common stock or until they expire on May 1, 1999. In the event that the Company
is acquired in a merger or other business combination transaction or 50% or more
of its assets or earning power is sold, provision shall be made so that each
holder of a right shall have the right to receive, upon exercise thereof at the
then current exercise price, that number of shares of common stock of the
surviving Company which at the time of such transaction would have a market
value of two times the exercise price of the right. At January 31, 1995,
6,500,000 shares were reserved for future issuance in accordance with the above
plan.
NOTE 12: INDUSTRY SEGMENTS AND EXPORT SALES
The Company's operations consist predominantly of the design, manufacture and
distribution of specialized equipment for emergency, therapeutic and surgical
pulmonary care. In addition, the Company manufactures and distributes gas
products administered with this equipment. These products are distributed to
hospitals, home care providers, clinics, physicians, nursing homes, airlines and
airframe manufacturers. Net sales, operating profit (loss) and identifiable
assets of these operations account for 100% of the consolidated amounts for
1995, 1994 and 1993.
Export sales billed from domestic locations for 1995, 1994 and 1993 totaled
approximately $39,723,000, $36,133,000 and $39,914,000, respectively. These
sales were not concentrated in a specific geographic area.
Income before income taxes from foreign operations accounted for $12,241,000,
$72,000 and $12,386,000 of consolidated income (loss) before income taxes in
1995, 1994 and 1993, respectively.
Transfers between United States and foreign operations are recorded at
varying discounts depending on the country and the type of market. Areas
representing a significant portion of the Company's foreign operations include
Europe, Canada, the Pacific Rim and Latin America.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: INDUSTRY SEGMENTS AND EXPORT SALES (CONTINUED)
Net sales, operating profit (loss) and identifiable assets of the Company for
the United States and foreign geographic segments are summarized as follows for
1995, 1994 and 1993:
(Dollars in thousands)
_______________________________________________________________________________
Transfers
Sales to Between Operating
Unaffiliated Geographic Profit Identifiable
Customers Areas Total (Loss) Assets
____________ __________ ________ _________ ____________
1995:
United States $262,488 $ 11,712 $274,200 $ 8,547 $174,575
Foreign 73,538 43,063 116,601 12,348 98,560
Eliminations -- (54,775) (54,775) -- --
________ ________ ________ ________ ________
Consolidated $336,026 $ -- $336,026 $ 20,895 $273,135
======== ======== ======== ======== ========
1994:
United States $258,686 $ 11,829 $270,515 $(35,374) $170,605
Foreign 50,569 25,472 76,041 233 85,989
Eliminations -- (37,301) (37,301) -- --
________ ________ ________ ________ ________
Consolidated $309,255 $ -- $309,255 $(35,141) $256,594
======== ======== ======== ======== ========
1993:
United States $245,789 $ 30,348 $276,137 $ 8,537 $191,469
Foreign 54,271 11,619 65,890 12,588 52,939
Eliminations -- (41,967) (41,967) -- --
________ ________ ________ ________ ________
Consolidated $300,060 $ -- $300,060 $ 21,125 $244,408
======== ======== ======== ======== ========
NOTE 13: RESTRUCTURING CHARGES
As part of the Company's plan to enhance shareholder value during 1995, the
Company implemented a strategic cost cutting initiative that is expected to
significantly lower overhead and other expenses while preserving growth
potential. This plan included a restructuring for which a charge of $2,654,000
was recorded in 1995. This charge represents severance payments and other costs
of implementing a near 6% reduction in workforce. As of January 31, 1995,
approximately $2,205,000 remained in accrued liabilities related to these
charges. The Company expects to disburse this accrual primarily in the first
quarter of 1996.
During 1994, the Company recorded restructuring charges of $43,169,000.
Included in the charges were restructuring actions taken during the second
quarter of 1994 (approximately $9,014,000) principally made up of severance
costs related to an employment level reduction in the Company's ventilator and
blood gas monitoring divisions; the closing of its facilities in El Segundo,
California; the consolidation of its facilities including offices in its
aviation business, blood gas monitoring operations and sales and service
operations in France and the U.S. and a revaluation of certain production
assets. Fourth quarter 1994 charges (approximately $34,155,000) were principally
made up of severance costs and the write-down of assets in connection with the
closing of the portable ventilator facility in Boulder, Colorado and the
curtailment of the intra-arterial blood gas monitoring operation in Carlsbad,
California. Portable ventilators continue to be sold to customers outside the
U.S.; manufacturing was transferred to the Company's facility in the Republic of
Ireland. A buyer for the intra-arterial blood gas monitoring product line was
not found and the Company closed the operation in the third quarter of 1995. As
of January 31, 1995, approximately $1,882,000 remained in accrued liabilities
and is expected to be disbursed primarily in the first quarter of 1996. As of
January 31, 1994, approximately $12,000,000 remained in accrued liabilities
representing primarily expected severance, cancellation penalties, remaining
facility lease payments and other costs necessary to complete the 1994
restructuring plan.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14: ACQUISITIONS
In April 1993, the Company acquired a German distributor (Hoyer
Medizintechnik) for $10,550,000, of which $2,000,000 was paid in 1995. The
Company also acquired a French supplier of diagnostic and therapeutic sleep
products (SEFAM S.A.) in late January 1994 for a total of $21,592,000, of which
$12,947,000 was paid in cash with the remainder paid through the issuance of
426,929 restricted shares of the Company's common stock. These acquisitions were
accounted for using the purchase method of accounting, and the purchase price
has been allocated to assets acquired and liabilities assumed, reflecting their
estimated fair value as of the dates of the acquisitions with the remaining
excess purchase price to be amortized over fifteen years. The results of
operations of the acquired businesses, which were not significant to 1994
results, have been included in the accompanying statements of operations,
stockholders' equity and cash flows since the dates of acquisition. In
conjunction with these acquisitions, the purchase price consisted of the
following:
(Dollars in thousands)
----------------------
Fair value of assets acquired other than
cash and cash equivalents acquired $34,481
Liabilities assumed or incurred (6,464)
Stock issued (8,645)
Fiscal year 1993 cash payment (1,500)
Assets contributed (255)
-------
Fair value of assets acquired, net of cash
and cash equivalents acquired $17,617
=======
NOTE 15: COSTS ASSOCIATED WITH AN UNSOLICITED OFFER TO ACQUIRE THE COMPANY
During 1995, the Company recorded charges of $5,049,000 for costs incurred
associated with an unsolicited offer to acquire the Company. These costs include
investment banking fees, public relations expenses and legal fees. Of the total
charges, $4,067,000 remained in accrued liabilities at January 31, 1995. The
Company expects to pay this amount during the first half of FY 1996.
The estimated investment banking fees ($4,309,000 included in the charge
described above) were derived by a formula set forth in the contract between the
Company and the investment banking firm. Components of this formula include the
number of shares outstanding and the stock price at the time such fees become
payable in full. The Company estimated the fee using the closing stock price as
of January 31, 1995, which was $21.25 per share and was considered to be the
best estimate at that time. Until such fees become payable in full, the Company
will revise its estimate of such fees quarterly based upon the closing stock
price and any other circumstances relevant to the contract as of the close of
the reporting period. Legal fees and public relations expenses will continue to
be based upon the costs of services actually rendered during the respective
period.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16: SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations for
the years ended January 31, 1995 and 1994:
Quarter Ended
(Dollars in thousands, except per share data)
---------------------------------------------
Apr. 30 July 31 Oct. 31 Jan. 31
------- ------- ------- -------
FY 1995
Net sales $80,408 $83,993 $83,412 $ 88,213
Gross profit 33,791 35,647 34,284 35,917
Net income (loss) 3,724 4,244 (640) 1,070
Net income (loss) per common share .30 .34 (.05) .08
FY 1994
Net sales $75,391 $77,914 $75,277 $ 80,673
Gross profit 33,218 33,395 31,367 30,691
Net income (loss) before cumulative effect 1,849 (4,963) 748 (29,413)
Net income (loss) (906) (4,963) 748 (29,548)
Net income (loss) before cumulative effect
per common share .15 (.41) .06 (2.46)
Net income (loss) per common share (.08) (.41) .06 (2.47)
In the third and fourth quarters of 1995, the Company recorded charges of
$4,559,000 and $490,000, respectively, for obligations associated with an
unsolicited offer to acquire the Company as discussed in Note 15.
In the fourth quarter of 1995, the Company recorded $2,654,000 for
restructuring as discussed in Note 13.
In the second quarter of 1994, a $9,014,000 restructuring charge was
recorded. In the fourth quarter, the Company recorded an additional $34,155,000
of restructuring charges as discussed in Note 13.
SUPPLEMENTAL INFORMATION FOR THE TEN-YEAR SUMMARY (UNAUDITED)
In 1985, the Industrial Division net assets were sold at a gain of $1,854,000
which is included in other income (expense).
In 1986, the Los Angeles facility was sold at a gain of $7,286,000 which is
included in other income (expense).
In 1986, a previously-acquired product line was written off at a loss of
$1,070,000 which is included in gross profit.
In 1988, certain assets and marketing rights were sold at a gain of
$6,000,000 which is included in other income (expense).
In 1991, the Company incurred expenses of $1,948,000 associated with limited
voluntary early retirement benefit programs.
In the transition period, the Company recorded $3,059,000 of expense as a
result of a change in accounting for deferred compensation.
In 1993, the Company made a change in estimate reducing depreciation expense
by $1,072,000, which is included in selling and administrative expense.
In 1994, the Company recorded $43,169,000 in restructuring charges. The
cumulative effect of accounting changes includes $2,755,000 for the adoption of
SFAS No. 109 "Accounting for Income Taxes" and $135,000 for the adoption of SFAS
No. 112 "Employers' Accounting for Postemployment Benefits."
In 1995, the Company recorded $2,654,000 for restructuring and $5,049,000
related to obligations associated with an unsolicited offer to acquire the
Company.
The summary should be read in conjunction with the auditors' report,
consolidated financial statements and related footnotes included on pages 24 to
41 of this report.
Prior year common share data have been adjusted for the two-for-one stock
splits that took place in 1987 and 1986.
41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS - JANUARY 31, 1995 COMPARED TO JANUARY 31, 1994
All tables reflect dollars in millions.
NET SALES
Net sales for the year ended January 31, 1995 (FY 1995) increased nearly 9%
compared to the year ended January 31, 1994 (FY 1994). The following table
reflects sales for the Company's primary business lines:
Percent
1995 1994 Change
------------------------
Puritan $214.8 $184.2 16.6%
Bennett 121.2 122.8 (1.3)%
------ ------
Continuing Product Lines 336.0 307.0 9.4%
Discontinued Product Line -- 2.3 --
------ ------
Total Net Sales $336.0 $309.3 8.6%
====== ======
The Puritan line 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 Company's larger manufacturing facilities with the Puritan
Group and is relatively small. Puritan sales growth continues with revenues and
orders up 17% and 14%, respectively, from last year.
Two major clinical areas, home oxygen therapy and the diagnosis and treatment
of adult sleep disorders, contributed to the Puritan growth. With respect to the
first major clinical area, the Company believes it is the worldwide leader and
that the home oxygen therapy market will continue growing worldwide. With
respect to the second major clinical area of its home care product lines, the
Company expects the emerging field of diagnosing and treating adult sleep
disorders to continue growing also. Recently published research clearly
indicates that millions of adults in the United States suffer chronically from
debilitating but treatable breathing disorders during sleep. The Company
believes the prevalence of such disorders is also widespread in most developed
nations. These disorders are only beginning to be recognized and understood by
the medical community and the general population. Consequently, only a small
fraction of people suffering from sleep disorders have been diagnosed and are
being treated today. Therefore, while the market for such sleep products has
grown rapidly in recent years, the Company believes that most of the market
growth lies ahead. With the late January 1994 acquisition of SEFAM S.A.(Nancy,
France), the Company believes it has the second largest share of the therapeutic
portion of the worldwide sleep market.
The aviation portion of Puritan's business is experiencing growth in revenues
and orders, up 31% and 12%, respectively, from the prior year. The overall
increase in the Company's aviation business is due in part to a growing interest
in the offerings of Airborne Closed Circuit Television (ACCTV ), the Airbus
A330/A340 program and the new Sweep-On 2000 inflatable harness crew masks. The
Company considers this growth to be encouraging in light of the difficult
industry conditions that continued in FY 1995.
The Bennett line includes the Company's worldwide critical care ventilator
business, as well as the CliniVision(R) product line in the United States. The
small holter monitoring and international portable ventilator product lines are
also included. Fiscal year 1995 Bennett revenues decreased 1% from FY 1994. This
decrease is a result of the Company's decision to withdraw from the United
States portable ventilator market and to discontinue some older products. After
adjusting for the loss of sales from these products, revenues increased 7% from
FY 1994 levels. The Company believes it remains the worldwide leader in critical
care ventilation. Uncertainty over health care reform in 1994 and 1993, 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. International demand, however, has continued to grow; half of the
revenues from these products now come from international markets. The level of
interest in CliniVision continues to expand as hospitals increasingly focus on
this system as a valuable solution to their cost-containment challenge and as
the Company continues to enhance the CliniVision system. More than 110 systems
have now been installed. In total, the Company expects a moderate rate of growth
for Bennett's revenues in FY 1996 due to CliniVision, the 7250 Metabolic
Monitor, released to the U.S. market in February 1995, and five ventilator
system-related new products and product enhancements recently cleared by FDA for
marketing in the U.S. and recently introduced internationally.
42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
INTERNATIONAL SALES AND PROFITABILITY
The following tables reflect sales and operating profits from the Company's
United States and foreign geographic segments:
Net Sales Percent Operating Profit (Loss) Percent
1995 1994 Change 1995 1994 Change
------ ------ ------- ----- ------- -------
U.S. Operations $262.5 $258.7 1.5% $ 8.6 $(35.4) --
Foreign Operations 73.5 50.6 45.3% 12.3 .3 --
------ ------ ----- ------
Total $336.0 $309.3 8.6% $20.9 $(35.1) --
====== ====== ===== ======
The increase in foreign operations' net sales and operating profit from FY
1994 was primarily due to the acquisition of SEFAM S.A. and a large increase in
sales in Germany. The German operation was in a start-up environment during FY
1994.
In addition to the above, operating profit for the Company, as a whole,
increased significantly due to lower restructuring charges of $2.7 million in FY
1995 as compared to $43.2 million in FY 1994.
The following table reflects sales by customer location:
Net Sales Percent of Sales
1995 1994 1995 1994
------ ------ ----- -----
Customers Within the U.S. $222.8 $222.6 66.3% 72.0%
Customers Outside the U.S. 113.2 86.7 33.7% 28.0%
------ ------ ----- -----
Total Net Sales $336.0 $309.3 100.0% 100.0%
====== ====== ===== =====
In late January 1994, the Company finalized the acquisition of SEFAM S.A.,
the leading European supplier of diagnostic and therapeutic sleep disorder
products, and its 80% owned Lit Dupont S.A. subsidiary, which manufactures
wheelchair products. Over the past five years, the Company's home care product
business, which reached nearly $125 million in revenues in FY 1995, has achieved
a compound annual revenue growth rate of over 21% worldwide -- 26%
internationally.
GROSS PROFIT
The gross profit percentage for FY 1995 was unchanged from FY 1994. Gross
profit was adversely affected by the more rapid growth of lower gross margin
home care and aviation product lines and by higher costs associated with
strengthening the operating systems and procedures of the Company's research and
manufacturing operations. These effects were offset by the results of operations
of SEFAM S.A., acquired late in FY 1994, as well as the results of restructuring
actions taken late in FY 1994. Additional cost-cutting actions taken at the end
of FY 1995 are expected to lead to a higher gross profit percentage in FY 1996.
Percent
1995 1994 Change
------ ------ -------
Gross Profit $139.6 $128.7 8.5%
Gross Profit Percentage 41.6% 41.6% --
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses for FY 1995 remained relatively unchanged
from FY 1994. An increase in such expenses resulting from the acquisition of
SEFAM S.A. and its 80% owned Lit Dupont S.A. subsidiary in late FY 1994, and
investments in stronger operating systems and procedures were offset by the
results of restructuring
43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
actions taken in late FY 1994. Fiscal year 1995 includes charges of $.5 million
associated with the Company's recently announced cost cutting initiatives that
are discussed elsewhere. These cost cutting actions are expected to lead to
somewhat lower selling and administrative expenses in FY 1996.
Percent
1995 1994 Change
---------------------
Selling and Administrative Expenses $96.1 $95.8 .3%
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for FY 1995 decreased approximately 20%
from FY 1994. The decrease resulted entirely from the elimination of the intra-
arterial blood gas monitoring product line. Research and development continues
across all remaining product lines at levels the Company considers appropriate
to provide long-term growth. Such expenses are expected to be somewhat higher in
FY 1996.
Percent
1995 1994 Change
---------------------
Research and Development Expenses $20.0 $24.9 (19.7)%
COST CUTTING INITIATIVES INCLUDING RESTRUCTURING
As part of the Company's plan to enhance shareholder value during FY 1995,
the Company implemented a strategic cost-cutting initiative that is expected to
significantly lower overhead and other expenses while preserving growth
potential. This plan included a restructuring for which charges of $2.7 million
were recorded. The Company expects the cost reduction program to generate nearly
$14 million in savings during FY 1996. The $2.7 million represents severance
payments and other costs of implementing a near 6% reduction in workforce. As of
January 31, 1995, approximately $2.2 million remained in accrued liabilities
related to these charges. This amount is expected to be disbursed primarily in
the first quarter of FY 1996. In addition to the restructuring, the Company sold
its airplane and reduced the matching contribution rate regarding its 401(k)
plan. Operational changes resulting in significant freight savings, the
scheduled phasing in of a new proportional solenoid valve for the 7200 Series
ventilator and the scheduled transfer of the spirometry product line to the
Company's facility in Mexico from its facility in Ireland are also included in
the Company's cost cutting initiatives. The Company also recorded charges
totaling $.7 million that represent non-restructuring actions associated with
the cost-cutting initiative. These actions primarily include facility
consolidations and a loss on the sale of the Company's airplane. The associated
accrued liability at January 31, 1995 of $.5 million will be paid out primarily
over the course of FY 1996.
As of January 31, 1995, approximately $1.9 million relative to the FY 1994
restructuring remained in accrued liabilities representing costs necessary to
complete the restructuring plan in an orderly and effective manner. This amount
is expected to be disbursed primarily in the first quarter of FY 1996. No buyer
was found for the FOxS operation and the shutdown was completed in the third
quarter of FY 1995.
OTHER INCOME (EXPENSE)
Other expense in FY 1995 increased from FY 1994. Interest expense increased
by $1.2 million due to higher levels of debt in FY 1995 as well as an overall
increase in the Company's average interest rate. The increase was offset by
foreign currency transaction gains in FY 1995 versus losses in FY 1994. These
gains arose from the weakening of the U.S. Dollar, the Company's functional
currency, in the markets in which the Company conducts business. The Company
recorded charges of $5.0 million for obligations associated with an unsolicited
offer to acquire the Company. These obligations include investment banking fees,
public relations expenses and legal fees. Of the $5.0 million, $4.1 million is
recorded in accrued liabilities. The Company expects to disburse this amount in
the first half of FY 1996.
44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Percent
1995 1994 Change
------------------------
Interest Income $ .4 $ .5 (20.0)%
Interest Expense (5.8) (4.6) 26.1%
Costs Associated With an Unsolicited Offer
To Acquire the Company (5.0) -- --
Miscellaneous, Net .9 .1 --
----- -----
Total Other Income (Expense) $(9.5) $(4.0) --
===== =====
PROVISION FOR INCOME TAXES
The FY 1995 effective tax rate was 26.1% versus a U.S. statutory rate of 34%.
This lower rate was due to the interaction of the tax valuation allowance
discussed below and the shift in the proportion of earnings generated
domestically versus internationally, which were taxed at foreign statutory rates
averaging 12% in FY 1995. The shift in the proportion of earnings was caused by
the $5.0 million charge for obligations associated with an unsolicited offer to
acquire the Company and the $3.4 million charge for restructuring and other
cost-cutting actions. The FY 1994 effective tax benefit rate of 18.8% was due to
non-deductible amortization combined with losses for which there was no current
benefit.
The Company has net deferred tax assets of $31.2 million partially offset by
a valuation allowance of $21.1 million. The realization of the deferred tax
benefit depends on the Company's ability to generate sufficient U.S. taxable
income (approximately $20 million) in the future. Approximately 65% of the
Company's total temporary differences are expected to reverse in the next two
years. As a result of the restructuring actions taken during FY 1994 and FY 1995
and the expected continuing growth in future profitability, the Company believes
it is well positioned to take advantage of this tax benefit in the future.
If the Company achieves sufficient profitability to use all of the deferred
tax benefit, the valuation allowance will be reduced through a credit to
expense. If the Company is unable to generate taxable income in the future,
increases in the valuation allowance relative to the deferred tax benefit
currently existing will be required through a charge to expense.
FINANCIAL CONDITION
WORKING CAPITAL
The ratio of current assets to current liabilities was 2.0 as of January 31,
1995, up from 1.6 as of January 31, 1994. Working capital increased to $73.6
million from $51.9 million. The primary reasons for the increase included a $9.8
million decrease in notes payable as a result of the issuance of new long-term
notes late in the second quarter of FY 1995 and an approximate $10.1 million
decrease in other accrued expenses related to accrued FY 1994 restructuring
expenses that were paid in FY 1995, offset by a $4.1 million accrual for
expenses associated with an unsolicited offer to acquire the Company and $2.2
million in FY 1995 accrued restructuring expenses. In addition, the Company's
investment in accounts receivable and inventory grew $13.3 million offset
somewhat by a $4.3 million decrease in deferred income tax benefits.
LIQUIDITY AND CAPITAL RESOURCES
After removing the effect of the restructuring charges, the cumulative effect
of changes in accounting principles and the income tax provision (benefit), the
Company generated an increase of $16 million in net income in FY 1995 over FY
1994. This additional net income was offset by an increase in accounts
receivable of $3.6 million, which is a reflection of higher sales as well as an
increase in the proportion of non-U.S. sales to total sales. Non-U.S. sales
traditionally have a longer collection period. Inventory balances also increased
approximately $10 million due to a planned effort to raise levels of inventory
to meet expected demand. Income taxes payable changed significantly as the
Company was in a net income position in FY 1995 versus a net loss position in FY
1994. In addition, a $1.9 million payout from the deferred compensation plan
occurred in the first quarter of FY 1995 for which there was no comparable event
in FY 1994. Further, deferred revenue increased in the current year due to both
sales of warranties and amortization of past warranties sold where the
comparative amount in FY 1994 included warranty sales and limited amortization.
45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Net cash and cash equivalents used in investing activities decreased when
compared to FY 1994. This decrease was primarily due to the FY 1994 acquisition
of Hoyer Medizintechnik and SEFAM S.A. This accounts for $15.6 million of the
decrease. The remaining decrease of approximately $2.5 million was the result of
an increase in capital expenditures more than offset by the sale of certain
fixed assets during FY 1995. Fiscal year 1996 capital expenditures are expected
to increase relative to current year levels as the Company continues to improve
and replace existing facilities and other fixed assets as appropriate. The
Company also expects to make additional expenditures for land as part of its
previously announced long-term facilities development plans.
Net cash and cash equivalents provided by financing activities have decreased
when compared to FY 1994. Short-term notes payable have been reduced by $9.8
million in FY 1995 versus a $19.9 million increase in FY 1994. This reduction
was offset by a $20 million increase in long-term debt in FY 1995 (discussed
below). These events, combined with minimal stock repurchases in FY 1995 versus
$2.7 million in stock repurchases in FY 1994 resulted in a generation of $2.9
million from financing activities in FY 1995 versus $9.8 million in FY 1994.
As of January 31, 1994, the Company was not in compliance with several
provisions of its long-term debt agreements including current ratio and
restrictions on payments of dividends and purchases of treasury stock. The
Company must normally maintain a current ratio of 1.75 but obtained a waiver to
lower this ratio to 1.6 through January 31, 1995. During the second quarter of
FY 1995, the Company arranged, through a private placement, $20 million of
unsecured promissory notes using the proceeds to extinguish several short-term
notes, thereby bringing the current ratio covenant agreed to under the various
long-term debt agreements into compliance with such agreements. The current
ratio as of January 31, 1995 was 2.0. This increase in long-term debt would have
violated a covenant in several of the Company's debt agreements requiring senior
funded debt not to exceed 45% of net tangible assets. However, waivers were
obtained setting the maximum allowable amount of senior funded debt to 50% of
net tangible assets through October 31, 1994. As of January 31, 1995, the
Company was in compliance with the most restrictive of these agreements. Waivers
through January 31, 1995, were also obtained for payment of dividends and
purchases of treasury stock limited to a maximum of $1.7 million. After January
31, 1995, the most restrictive payment covenant returns to the base of $4.5
million plus 75% of the net income less 100% of losses since June 30, 1988. As
of January 31, 1995, the Company was in compliance with the modified provisions
of its debt agreements; however, the future payment of dividends will be limited
by the extent to which future earnings of the Company exceed $1.2 million. The
Company is confident that first quarter earnings will exceed the $1.2 million
level. The Company expects no need for additional waivers.
Long-term debt, excluding current maturities, represents 31.7% of long-term
debt plus stockholders' equity at January 31, 1995, and 26.4% at January 31,
1994. At January 31, 1995, the Company had $35 million of unsecured bank lines-
of-credit available, $18.0 million of which was used.
U.S. HEALTH CARE SYSTEM CHANGES
The U.S. health care system is undergoing significant changes in response to
market forces. The principal change involves increasing utilization of various
forms of managed care. Managed care trends are, in turn, causing hospitals to
consolidate, restructure, and otherwise slow their rate of spending growth. The
Company believes it is seeing the effects of such spending curtailment in its
hospital capital equipment products -- principally the 7200 Series ventilatory
system. The Company has not seen any significant adverse effects of managed care
trends on its home care products business and home care may, in fact, be
benefiting from such trends due to its inherent cost-effectiveness relative to
institutional care. However, the new Congress, with its Republican majority, is
likely to further emphasize deficit reduction and there can be no assurance that
home care will not be adversely affected by deficit reduction-driven legislative
changes to the Medicare and Medicaid programs.
SUPPLEMENTAL INFORMATION
In order to help stockholders better understand the economic dynamics and
potential of the Company's business, the Company decided to begin providing
supplemental information that sets forth its revenues and earnings before
interest, taxes and other unusual charges (EBITOC) in its two primary business
lines - Puritan and Bennett. The information excludes FOxS operations, which
were shut down in the third quarter of FY 1995, restructuring, other strategic
cost-cutting initiative charges and charges related to an unsolicited offer to
acquire the Company, but otherwise includes fully allocated corporate office
expenses.
46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
PURITAN - Puritan includes 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
larger manufacturing facilities with the Puritan Group and is relatively small.
1995 1994 1993
---------------------------------
Revenue $214.8 $184.2 $167.8
EBITOC $ 20.0 $ 22.9 $ 24.7
% of Revenue 9.3% 12.4% 14.7%
Puritan now accounts for about two-thirds of the Company's total revenues.
The average annual growth for the five years ended January 31, 1995 was 14%.
Within Puritan, home care product revenues have grown at rates considerably
above the overall Puritan average.
Puritan's EBITOC has been higher in the recent past and, with the recently
implemented cost-cutting initiative, is expected to return to higher levels in
FY 1996. Fiscal year 1995 was a year in which the Company placed a very high
priority upon strengthening the operating systems and procedures of Puritan's
research and manufacturing operations, most of which have grown very rapidly in
recent years. This effort increases the Company's ability to continue growing
rapidly in the future while maintaining control over the quality of its products
during such growth. At the same time, however, this investment was not without
initial higher costs and lost revenues, both of which compressed EBITOC as a
percent of revenue. Part of this price involved disruptions as the Company
installed new operating systems and procedures and moved into two larger
facilities and expanded in a third. Such disruptions also prevented the Company
from keeping pace with growing customer demand and caused some temporary loss of
revenues. As of January 31, 1995, these investment measures resulted in virtual
immediate product delivery in all of the Company's home care product lines.
BENNETT - Bennett includes the Company's critical care ventilator business -
a business that continues to represent an exceptional and long-standing customer
franchise on a global basis - as well as the rapidly growing CliniVision product
line in the U.S., and the small holter monitoring and international portable
ventilator product lines.
1995 1994 1993
---------------------------------
Revenue $121.2 $122.8 $131.3
EBITOC $ 5.4 $ .0 $ 11.8
% of Revenue 4.5% -- 9.0%
Since FY 1993, Bennett revenues have declined for several reasons including
difficult market conditions, particularly in the U.S. hospital market,
discontinuation of certain older products and accessories and the Company's
withdrawal from the U.S. portable ventilator market. In addition, Bennett has
also undertaken major initiatives at significant costs to strengthen the
operating systems and procedures of its research and manufacturing operations.
Bennett EBITOC as a percent of revenues improved considerably in FY 1995 over
FY 1994 in spite of the significant investment made in strengthening its
operating systems and procedures for the future. Profitability is expected to
improve further in FY 1996 as a result of recent cost-cutting actions and
revenue growth is expected as a result of a number of new products and product
enhancements recently introduced internationally and cleared for introduction in
the United States. Profitability growth is expected to continue in FY 1997 as
additional new products are introduced.
TOTAL COMPANY - The Company is encouraged by the continued strong growth of
Puritan and believes both Puritan and Bennett are well positioned to begin
returning to higher levels of profitability. Puritan is growing rapidly and is
expected to return to historical profitability as a percentage of revenues
primarily in FY 1996. Bennett, on the other hand, has not been growing as
rapidly. Key elements to increasing profitability are additional new products
under development coupled with maintaining the Company's strong direct sales and
service distribution channels in North America and Europe, which are capable of
handling more volume. Such distribution channels enable these and other new
products to reach their full revenue and profitability potential. The Company
expects it may take somewhat longer for Bennett profitability as a percentage of
revenues to reach desired levels.
47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
1995 1994 1993
-------------------------
Revenue $336.0 $307.0 $299.0
EBITOC $ 25.4 $ 22.9 $ 36.5
% of Revenue 7.6% 7.5% 12.2%
Significant profitability growth is expected next year from both Puritan and
Bennett due to year-end FY 1995 cost-cutting actions and continued revenue
growth. Anticipated profitability growth is before any additional charges
flowing from an unsolicited offer to acquire the Company or similar matters.
RESULTS OF OPERATIONS--JANUARY 31, 1994 COMPARED TO JANUARY 31, 1993
All tables reflect dollars in millions.
NET SALES
Net sales for the year ending January 31, 1994 (FY 1994), increased 3%
compared to the year ended January 31, 1993 (FY 1993). The following tables
reflect sales for the Company's primary business lines:
Percent
1994 1993 Change
-------------------------
Puritan $184.2 $167.8 9.8%
Bennett 125.1 132.3 (5.4)%
------ ------
Total Net Sales $309.3 $300.1 3.1%
====== ======
Puritan continued its pattern of growth, particularly in the U.S. market.
Worldwide, the Company's home care business grew over 18% reaching nearly $110
million. This growth was offset by a 7% decline in Puritan's aviation related
revenues. In the U.S., the Company's home care products business grew about 34%
while outside the U.S. this business declined about 14% from prior year levels.
The Company did not believe the international decline represented a trend as FY
1993 revenues included a sizable oxygen concentrator fleet replacement by a
single European customer whereas FY 1994 revenues did not.
Home oxygen therapy (principally liquid oxygen systems and oxygen
concentrators) represented nearly three-quarters of the Company's Puritan home
care products business. The home oxygen therapy business grew 15% over the prior
year, in spite of that year's unusual oxygen concentrator fleet replacement by a
European customer. The Company expected its home oxygen therapy business to
continue growing, more slowly in the United States but with international growth
resuming.
Worldwide, the sleep disorder diagnosis and treatment products business grew
more than 75% reflecting both rapid market growth and market share gains, again
principally in the United States. In late January 1994, the Company finalized
the previously announced acquisition of SEFAM S.A. (Nancy, France), the leading
European supplier of diagnostic and therapeutic sleep disorder products. It is
the Company's belief that this acquisition places Puritan-Bennett in the leading
market share position in Europe and in the number two position worldwide in what
the Company expects will continue to be a rapidly growing sleep disorders
market. Sleep disorder products should account for an increasing share of the
Company's growing worldwide home care business.
Puritan's aviation revenues declined 7% last year but orders grew 16% from
prior year levels. This order growth mainly reflected a growing interest in the
offerings of the small Airborne Closed Circuit Television (ACCTV) operation
acquired a year ago. Of the $28 million in aviation orders received, ACCTV
accounted for nearly $3.8 million, $2.9 million of which is for the drogue-chute
deployment monitoring system on the McDonnell Douglas C-17 military air
transport. Most of ACCTV's orders last year represented future revenue. The
Company believes ACCTV is on the verge of becoming a meaningful revenue and
profit contributor.
Aviation's order improvement also reflected growing interest in other new
products. Demand for these new products is not limited by rates of new aircraft
production; these products can be used on existing aircraft. Due to such new
product offerings and the facility consolidation, the Company believes its
aviation business will grow and become more profitable during the coming year.
48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Bennett products did not fare well last year. At approximately $137 million,
orders remained essentially unchanged from the prior year. At approximately $125
million, revenues were down 5%.
Although unit orders for the 7200 Series ventilator system grew 10%
internationally in spite of recessionary economic conditions in Europe, unit
orders fell 18% in the United States. The Company expected United States demand
for the 7200 Series ventilator to stabilize generally around FY 1993 levels and
international demand to continue growing. The Company also expected that service
revenues associated with its growing installed base of hospital ventilators
would continue to increase, as they did in FY 1993. Finally, the Company
expected revenues from its CliniVision Respiratory Care Management Information
System to continue to grow. After a very slow start caused by United States
health care reform uncertainty, CliniVision orders increased significantly in
the second half of the year as hospitals increasingly focused on CliniVision as
a valuable solution to their cost-containment challenge and as the Company
continued to enhance the CliniVision system.
INTERNATIONAL SALES AND PROFITABILITY
The decrease in foreign operations' operating profit in FY 94 was the result
of several events. As expected, the German operation, which was in a start-up
environment, had an operating loss of approximately $1.7 million. Fiscal
year 1993 foreign operating profit also included a sizable oxygen concentrator
fleet replacement by a single customer for which there was no comparable event
in FY 1994. This accounted for approximately $2.3 million of the decrease in
foreign operating profit. In addition, approximately $.9 million of FY 1993
operating profit related to the manufacture of portable ventilators and manual
resuscitators in Ireland. The manufacture of this equipment was transferred back
to the U.S. in FY 1994. Approximately $3.4 million recorded in FY 1994 related
to a change in technology transfer costs recorded by foreign operations in FY
1993, FY 1991 and FY 1990 in accordance with the Company's revised transfer
pricing study. The effect of this adjustment decreased the U.S. operating loss
and the foreign operating profit. The recession in Europe, which caused a
reduction in sales and an increase in bad debt expense (primarily one customer),
contributed to the majority of the remaining decrease. The following tables
reflect the amount of sales and operating profits from the United States and
foreign geographic segments:
Net Sales Percent Operating Profit (Loss) Percent
1994 1993 Change 1994 1993 Change
------------------------ -----------------------------------
U.S. Operations $258.7 $245.8 5.2% $(35.4) $ 8.5 --
Foreign Operations 50.6 54.3 (6.8)% .3 12.6 (97.6)%
------ ------ ------- -----
Total $309.3 $300.1 3.1% $(35.1) $21.1 (266.4)%
====== ====== ======= =====
The following table reflects sales by customer location:
Net Sales Percent of Sales
1994 1993 1994 1993
--------------------------------------
Customers Within the U.S. $222.6 $205.9 72.0% 68.6%
Customers Outside the U.S. 86.7 94.2 28.0% 31.4%
------ ------ ------ ------
Total Net Sales $309.3 $300.1 100.0% 100.0%
====== ====== ====== ======
During the past decade, the Company's business profile has changed
substantially from being predominately a supplier of life-support capital
equipment to the United States hospital market. The Company's home care product
line has been, and is expected to continue to be, the fastest growing part of
our business. Life-support products sold in the U.S. market will likely
represent a smaller share of the Company's business in the future, a trend that
does help lower the Company's U.S. regulatory and health care reform risks. At
the same time, the Company will consider utilizing more fully its direct
hospital sales and service organizations in the U.S., Canada, France, Germany,
Italy and the United Kingdom to handle complementary products from other
companies.
In late January 1994, the Company finalized the previously announced
acquisition of SEFAM S.A., the leading European supplier of diagnostic and
therapeutic sleep disorder products, and its 80% owned Lit Dupont S.A.
subsidiary, which makes wheelchair products. Over the past five years, the
Company's home care product business,
49
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
which reached nearly $110 million in revenues in FY 1994, achieved a compound
annual revenue growth rate of over 22% worldwide--31% internationally. The
Company believes that the acquisition of SEFAM S.A. will help such growth trends
continue.
GROSS PROFIT
The gross profit percentage for FY 1994 decreased 2% from FY 1993. The
reduced profitability of Bennett products was the primary contributor to this
decrease. As discussed elsewhere, several factors, including health care reform
uncertainty, recessionary economic conditions in Europe and a fire at Maimonides
Medical Center in Brooklyn, New York, affected the Company's market for Bennett
products. Restructuring actions were taken to improve the profitability of this
part of the business within the context of considerably lower revenue
expectations than the Company has had in the past.
Percent
1994 1993 Change
-------------------------
Gross Profit $128.7 $130.2 (1.2)%
Gross Profit Percentage 41.6% 43.4% (1.8)%
SELLING AND ADMINISTRATIVE EXPENSE
Selling and administrative expenses for FY 1994 increased 15% over FY 1993.
This increase was due primarily to the German operation and a small acquisition
made late in FY 1993. This accounted for approximately $3.9 million of the
increase. Approximately $1.9 million was from increased selling expense earlier
in the year related to the intra-arterial blood gas monitoring products.
Approximately $3.7 million was increased selling and administrative expense
relating to the Company's growing Puritan business. An additional $2.3 million
increase was the net result of a credit for a change in estimate for
depreciation expense, an insurance premium refund in FY 1993 and expense
associated with the investigation of the fire in Brooklyn. As discussed
elsewhere, the restructuring actions were expected to help control the rate of
growth in selling and administrative spending.
Percent
1994 1993 Change
-------------------------
Selling and Administrative Expenses $95.8 $83.2 15.1%
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for FY 1994 decreased nearly 4% from FY
1993. This decrease resulted almost entirely from reduced spending on the intra-
arterial blood gas monitoring product. In FY 1993, significant research and
development expense was incurred to ready the product for market. When shipment
of the product commenced in late FY 1993, the need for research and development
spending was reduced. As discussed elsewhere, shipments of this product ceased
in December 1993 and future spending on this technology was eliminated by the
restructuring action taken in the fourth quarter of FY 1994. In the future,
research and development activities will continue across all remaining product
lines, however, overall expense will be reduced due to the elimination of the
intra-arterial blood gas monitoring product.
Percent
1994 1993 Change
-------------------------
Research and Development Expenses $24.9 $25.8 (3.5)%
RESTRUCTURING CHARGES
Although the Company's Puritan business had a year of growth and
profitability, a number of market and regulatory developments converged to make
FY 1994 a particularly challenging one for the Company as a whole. In addition
to weakness in the aviation market, the combination of health care reform
uncertainty in the United States and recessionary economic conditions in Europe
reduced demand for the Company's hospital capital equipment products, especially
early in the year. Moreover, a tragic fire at Brooklyn, New York's Maimonides
Medical Center in September 1993 called into question the safety of certain of
the Company's products, which were absolved four months later by the findings of
an extensive, independent investigation. However, initial reports that the
Company's
50
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITIONS
products might have caused the fire may have prompted the Food and Drug
Administration (FDA) to conduct additional investigations at some of the
Company's facilities prior to completion of its planned improvement programs and
renew the issue of a consent decree. The January 1994 consent decree primarily
affected the Company's portable ventilator facility in Boulder, Colorado and the
FOxS intra-arterial blood gas monitoring operation in Carlsbad, California. The
agreement also required compliance with GMP and Medical Device Reporting (MDR)
requirements, where applicable, throughout the Company. In response to these
developments, the Company took a number of major actions to reposition itself
for the future.
The Company restructured the hospital ventilator portion of its business in
order to improve its profitability at lower levels of revenue than previously
anticipated. The Company consolidated its aviation business to three facilities
from four so that this part of the business remained profitable in the current
market conditions. The Company closed its Boulder, Colorado facility and
transferred the manufacture of the portable ventilators to its ISO
(International Standards Organization) 9002-certified facility in the Republic
of Ireland from where the Company will serve customers outside the U.S. for the
Companion 2801 portable ventilator. The Company substantially reduced the FOxS
operation, addressed its GMP compliance issues and offered it for sale. No buyer
was found for the FOxS operation and the shutdown was completed in the third
quarter of FY 1995.
As a result of the plan for restructuring, during FY 1994 the Company
recorded restructuring charges of $43.2 million. Included in the charges were
restructuring actions taken during the second quarter (approximately $9 million)
principally made up of severance costs related to a 4.9% employment level
reduction in the Company's ventilator and blood gas monitoring divisions (126
employees), the closing of its aviation facility in El Segundo, California, a
revaluation of certain productive assets, the consolidation of its facilities
including offices in its aviation business, blood gas monitoring operations, and
sales and service operations in France and the U.S., as well as other
miscellaneous charges and costs associated with matching the size of the
Company's operation with the various markets in which the Company operates. The
second quarter charge consisted of approximately $3.3 million in personnel
related charges, $4.4 million in non-cash asset write-downs and $1.3 million for
the consolidation of manufacturing and marketing facilities.
In the fourth quarter of FY 1994, the Company effected a second restructuring
which resulted in a 7.5 % reduction in its work force (188 employees). The
restructuring plan included the closing of the portable ventilator facility in
Boulder, Colorado and the curtailment of the intra-arterial blood gas monitoring
operation in Carlsbad, California. The restructuring resulted in an additional
charge of $34.2 million in the fourth quarter of FY 1994. This charge consisted
of approximately $4.4 million in personnel-related charges, $9.6 million in non-
cash write-downs of inventory, facilities and equipment, and $15.7 million in
non-cash write-downs of certain prepaid royalties, capitalized software and
patents. Portable ventilators will continue to be sold to customers outside the
U.S.; manufacturing was transferred to the Company's facility in the Republic of
Ireland. The expected costs for this period, approximately $4.5 million, which
represent an effective and orderly completion of the stated restructuring plan
and do not include the costs of continuing operations, were accrued.
As of January 31, 1994 approximately $12.0 million remained in accrued
liabilities representing primarily expected severance, cancellation penalties,
remaining facility lease payments, and other costs necessary to complete the
restructuring plan in an orderly and effective manner. This amount was expected
to be disbursed primarily over the first three quarters of FY 1995. After the
third quarter, the Company expected to see the real cash flow benefit of the
restructuring plan. It was not expected that the restructuring would require
significant borrowing. Because of the historical drain on cash flow and the
higher than expected costs developing the proprietary intra-arterial blood gas
monitoring system, the Company expected improved cash flow and profitability
once the restructuring plan was completed. The Company also expected improved
efficiency and profitability from the consolidation of the marketing offices of
the hospital/physician sales force in the United States and the consolidation of
the aviation operation from four locations to three.
51
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITIONS
OTHER EXPENSES
Other expenses increased by 48% in FY 1994 when compared to FY 1993. This
primarily resulted from increased interest expense and unfavorable foreign
currency adjustments which are primarily the result of market fluctuations and
the strengthening of the U.S. Dollar.
Percent
1994 1993 Change
----------------------
Other Expense $4.0 $2.7 48.1%
PROVISION FOR INCOME TAXES
The FY 1994 effective benefit rate of 18.8% changed from the FY 1993
effective tax rate of 20.7%. Nondeductible amortization combined with losses for
which there was no current benefit caused the FY 1994 benefit rate to be less
than the statutory benefit rate. In contrast, the FY 1993 effective tax rate was
less than the U.S. statutory rate of 34% because a significant portion of
international income was taxed at the lower foreign statutory rate of 10% in FY
1994.
The Company has a tax valuation allowance of $15.7 million as required by
SFAS No. 109. The realization of this deferred tax benefit depends on the
Company's ability to generate sufficient taxable income in the U.S. in the
future. Approximately 80% of the Company's total temporary differences are
expected to reverse in the next two years. During the past decade, the Company's
business has changed substantially from being predominately a supplier of life-
support capital equipment to the U.S. hospital market towards supplying the home
care market. This trend should help lower the Company's U.S. regulatory and
health care reform risks. Additionally, the Company has undergone substantial
restructuring during FY 1994. As a result, the Company believes it is well
positioned to take advantage of this benefit in the future.
52
PURITAN-BENNETT CORPORATION AND SUBSIDIARIES
DIRECTORS
Burton A. Dole Jr./4/
Chairman, President and
Chief Executive Officer
Puritan-Bennett Corporation
Overland Park, Kansas
Charles Duboc/1-3/
Chairman (Retired)
Western Casualty and
Surety Company
Kansas City, Missouri
C. Philip Larson Jr., M.D., M.S./4-5/
Professor of Anesthesiology
UCLA School of Medicine
Los Angeles, California
Andre F. Marion/1-2-5/
Vice President (Retired)
Perkin Elmer Corporation
President (Retired)
Applied Biosystems Division
Foster City, California
Thomas A. McDonnell/1-2/
President and
Chief Executive Officer
DST Systems, Inc.
Kansas City, Missouri
Daniel C. Weary/1-3/
Attorney
Blackwell Sanders
Matheny Weary &
Lombardi L.C.
Kansas City, Missouri
Frank P. Wilton/2-3-5/
Chairman, President and
Chief Executive Officer
Ethox Corporation
Buffalo, New York
/1/Member of the Compensation Committee
/2/Member of the Audit Committee
/3/Member of the Pension Committee
/4/Member of the Technology Committee
/5/Member of the Quality and Regulatory
Affairs Committee
MEDICAL ADVISORY BOARD
Reuben M. Cherniack, M.D.
Professor Medicine,
University of Colorado,
National Jewish Center for
Immunology & Respiratory
Medicine
C. Philip Larson Jr. M.D., M.S.
Professor of Anesthesiology
UCLA School of Medicine
Los Angeles, California
John J. Marini, M.D.
Professor of Medicine
University of Minnesota
Medical School, Director,
Pulmonary/Critical Care
St. Paul-Ramsey Medical
Center
Allan I. Pack, M.D., Ph.D.
Director
Center for Sleep & Respiratory
Neurobiology
University of Pennsylvania
Medical Center
Hospital of the University
of Pennsylvania
Henning Pontoppidan, M.D.
Reginald Jenney Professor
Emeritus of Anaesthesia,
Harvard Medical School;
Senior Anesthetist,
Massachusetts
General Hospital
Allen K. Ream, M.S., M.S., M.D.
Clinical Associate Professor
of Anesthesia
Stanford University
Jean E. Rinaldo, M.D.
Professor of Medicine
Vanderbilt University
Chief Pulmonary Medicine/
Critical Care Medicine,
Nashville Department of
Veterans Affairs, Medical
Center
Gordon L. Snider, M.D.
Maurice B. Straus
Professor of Medicine, and
Vice Chairman, Department
of Medicine
Boston University School of
Medicine
Chief, Medical Services,
Boston Veterans
Administration Medical
Center
The Medical Advisory Board meets at regular
intervals to offer its guidance and advice
related to new product programs.
53
PURITAN-BENNETT CORPORATION AND SUBSIDIARIES
CORPORATE OFFICERS
Burton A. Dole Jr.
Chairman, President and
Chief Executive Officer
John H. Morrow
Executive Vice President and
Chief Operating Officer
Robert L. Doyle
Senior Vice President,
Marketing
Thomas E. Jones
Senior Vice President,
General Manager
Puritan Group
Alexander R. Rankin
Senior Vice President,
General Manager
Bennett Group
Lee A. Robbins
Vice President, Chief
Financial Officer and
Controller
Derl S. Treff
Treasurer
Daniel C. Weary
Secretary
OPERATING OFFICERS
William C. Fettes
Vice President,
General Manager
Gas Products Division
Thomas J. Gaskin
Vice President,
Managing Director
Puritan-Bennett Ireland,
Limited
Nathan B. Hope
Vice President,
Bennett Group
Sales and Marketing
Karl K. Jonietz
Vice President,
General Manager
Lenexa Medical Division
Gregory R. Miller
Vice President,
General Manager
Oxygen Concentrator Division
Judson S. Neal
Vice President,
Puritan Group
Sales and Marketing
David P. Niles
Vice President,
Quality and Regulatory
Affairs
Ernest E. Ross
Vice President,
General Manager
Aero Systems
Evan R. Stewart
Vice President,
Information Services
Francis E. Stowell
Vice President,
Human Relations
Paul L. Woodring
Vice President,
Research and Development
Manager, Ventilator Systems
OTHER
Pierrick Haan
President,
SEFAM S.A.
54
PURITAN-BENNETT CORPORATION AND SUBSIDIARIES
CORPORATE HEADQUARTERS
9401 Indian Creek Parkway
Post Office Box 25905
Overland Park, Kansas 66225-
5905
Phone: 913-661-0444
Fax: 913-661-0234
GENERAL COUNSEL
Blackwell Sanders Matheny
Weary & Lombardi L.C.
Kansas City, Missouri
TRANSFER AGENT AND REGISTRAR
UMB Bank, N.A.,
Kansas City, Missouri
INDEPENDENT AUDITORS
Ernst & Young LLP
Kansas City, Missouri
AVAILABILITY OF 10-K REPORT:
Puritan-Bennett's Annual Report on Form 10-K, filed with the Securities and
Exchange Commission, will be provided to stockholders without charge upon
written request to corporate headquarters, Attention: Derl S. Treff, Treasurer.
NASDAQ LISTING
Puritan-Bennett's common stock trades on the Nasdaq National Market System. The
Nasdaq symbol is PBEN. The Company had approximately 1,000 stockholders of
record as of March 24, 1995. Market price information is shown below.
MARKET PRICE INFORMATION
PER NASDAQ: FY 1995 MARKET PRICE
----------------------------------
QUARTER HIGH LOW DIVIDENDS
------- ------ ------ ---------
FIRST 22 3/4 19 1/2 $0.03
SECOND 21 5/8 17 1/4 $0.03
THIRD 26 1/8 15 5/8 $0.03
FOURTH 26 18 3/4 $0.03
FY 1994 Market Price
----------------------------------
Quarter High Low Dividends
------- ------ ------ ---------
First 29 7/8 15 1/4 $0.03
Second 22 3/4 16 5/8 $0.03
Third 20 3/4 16 $0.03
Fourth 21 15 $0.03
55