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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED October 1, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 0-14980
NELLCOR PURITAN BENNETT INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-2789249
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
4280 HACIENDA DRIVE
PLEASANTON, CALIFORNIA 94588
(Address of principal executive offices)
(Zip code)
TELEPHONE: (510) 463-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Number of shares of Common Stock, $.001 par value, outstanding as of
October 1, 1995 was 28,467,137.
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Page 1
Exhibit Index on Page 19
2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NELLCOR PURITAN BENNETT INCORPORATED CONSOLIDATED BALANCE SHEET
(In thousands, unaudited)
ASSETS October 1, 1995 July 2, 1995
--------------- ------------
Current assets:
Cash and cash equivalents $ 93,252 $ 78,444
Marketable securities 14,460 65,039
Accounts receivable, net of allowance for doubtful
accounts of $2,418 ($2,610 at July 2, 1995) 114,951 117,650
Inventories 104,588 88,987
Deferred income taxes and other current assets 24,744 26,580
--------- ---------
Total current assets 351,995 376,700
--------- ---------
Property and equipment, at cost 258,075 253,037
Accumulated depreciation (132,137) (124,863)
--------- ---------
Net property and equipment 125,938 128,174
--------- ---------
Intangibles and other assets, net of accumulated amortization 58,728 71,330
--------- ---------
$ 536,661 $ 576,204
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable 40,434 --
Accounts payable $ 27,529 $ 37,316
Accrued liabilities:
Payroll and payroll related 21,416 25,286
Warranty 6,506 4,195
Merger and related costs 54,436 0
Other 18,804 30,510
Income taxes payable -- 5,727
--------- ---------
Total current liabilities 169,125 103,034
--------- ---------
Deferred compensation and pension 20,233 19,303
Deferred revenue 10,286 10,895
Long-term obligations 12,217 76,367
--------- ---------
Total liabilities 211,861 209,599
--------- ---------
Stockholders' equity:
Common stock, par value 13,236 11,351
Additional paid-in-capital 165,226 148,641
Retained earnings 181,203 241,416
Accumulated translation adjustment (254) (259)
Notes receivable from stockholders (5) (5)
Unrealized loss on available-for-sale securities (67) --
Treasury stock, at cost (1,148,000 shares) (34,539) (34,539)
--------- ---------
Total stockholders' equity 324,800 366,605
--------- ---------
$ 536,661 $ 576,204
========= =========
See accompanying note
Page 2
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NELLCOR PURITAN BENNETT INCORPORATED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts, unaudited)
For the Three Months Ended
----------------------------------
October 1, 1995 October 2, 1994
--------------- ---------------
Net revenue $ 156,250 $ 136,122
Cost of goods sold 77,583 69,453
--------- ---------
Gross profit 78,667 66,669
Operating expenses:
Research
and development 12,196 11,245
Selling, general
and administrative 44,607 41,986
Merger and related costs 92,618 --
--------- ---------
149,421 53,231
--------- ---------
Income (loss) from operations (70,754) 13,438
Interest income 1,856 1,025
Interest expense (1,378) (1,216)
Other income (expense), net (690) 857
--------- ---------
Income (loss) before income taxes (70,966) 14,104
Provision for income taxes (11,664) 4,521
--------- ---------
Net Income (loss) $ (59,302) $ 9,583
========= =========
Net income (loss) per common and
common equivalent share $ (2.04) $ 0.35
========= =========
Weighted average common
and common equivalent
shares used in the calculation
of net income (loss) per share 29,048 27,776
========= =========
See accompanying note
Page 3
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NELLCOR PURITAN BENNETT INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands, unaudited)
For the Three Months Ended
-----------------------------------
October 1, 1995 October 2, 1994
--------------- ---------------
Cash flows from operating activities:
Net income $(59,302) $ 9,583
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation and amortization 7,797 7,443
Merger and related costs 75,602 --
Restructuring charges -- (3,307)
Deferred compensation and pensions 19 (1,031)
Gain on disposition of assets (48) (462)
Deferred income taxes 102 (452)
Increases (decreases) in cash flows, as a
result of changes in:
Accounts receivable 2,169 5,020
Inventories (4,360) (3,762)
Other current assets (15,347) 333
Other assets 2,918 148
Accounts payable (9,856) (4,550)
Accrued liabilities (1,983) (2,599)
Income taxes payable (4,685) 3,834
-------- --------
Cash provided by (used for) operating activities (6,974) 10,198
-------- --------
Cash flows from investing activities:
Capital expenditures (5,165) (6,611)
Cash used to purchase securities held-to-maturity -- (2,002)
Proceeds from sales of available-for-sale securities 31,295 --
Proceeds from maturities of securities held-to-maturity 19,218 20,166
Payments for purchases of companies,
net of cash acquired (4,923) (2,000)
Other -- (15)
-------- --------
Cash provided by investing activities 40,425 9,538
-------- --------
Cash flows from financing activities:
Proceeds from the issuance of common stock under the
Company's stock plans and related tax benefits,
net of notes receivable from stockholders 9,901 6,348
Repayment of long-term obligations (64,700) --
Additions to loans payable 40,000 707
Dividends paid to stockholders -- (372)
Purchase of treasury shares -- (2,292)
-------- --------
Cash provided by (used for) financing activities (14,799) 4,391
-------- --------
Effect of exchange rate changes on cash balances (216) 134
-------- --------
Increase in cash and cash equivalents 18,436 24,261
Cash and cash equivalents at the beginning of the period 74,816 68,876
-------- --------
Cash and cash equivalents at the end of the period $ 93,252 $ 93,137
======== ========
Page 4
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NELLCOR PURITAN BENNETT INCORPORATED NOTE TO CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
General. The consolidated financial statements reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position and results of operations of
Nellcor Puritan Bennett Incorporated (the Company) as of the end of and for the
periods indicated.
On August 25, 1995, the Company consummated its merger with Puritan-Bennett
Corporation (see Merger with Puritan-Bennett below). The merger was intended to
qualify as a tax-free reorganization and was accounted for as a pooling of
interests. Accordingly, the consolidated financial statements present, for all
periods, the combined financial results of Nellcor Incorporated (Nellcor) and
Puritan-Bennett Corporation (Puritan-Bennett).
Comparative historical financial information presented represents the
combination of the historical financial data from Nellcor's fiscal year ended
July 2, 1995, and Puritan-Bennett's fiscal year ended January 31, 1995. Thus,
the Company's consolidated balance sheet as of July 2, 1995 combines Nellcor's
balance sheet as of the end of its fiscal 1995, July 2, 1995, with
Puritan-Bennett's balance sheet as of the end of its fiscal 1995, January 31,
1995. The Company's consolidated balance sheet as of July 2, 1995 also reflects
an adjustment to reduce Puritan-Bennett's valuation allowance provided for its
deferred tax assets based on the combined income from operations of Nellcor and
Puritan-Bennett as required by Statement of Financial Accounting Standard No.
109. The effect of this adjustment was to increase deferred tax assets and
retained earnings, as presented herein, by $8.7 million.
The Company's consolidated statements of income and cash flows for the three
months ended October 2, 1994 combine the financial results of Nellcor's first
quarter of fiscal 1995, the three months ended October 2, 1994, with
Puritan-Bennett's first quarter of fiscal 1995, the three months ended April 30,
1994.
The accompanying interim consolidated financial statements should be read in
conjunction with the financial statements and related notes included in
Nellcor's and Puritan-Bennett's 1995 Annual Reports to Stockholders. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the Securities and Exchange Commission rules
and regulations. The Company believes the information included in the report on
Form 10-Q, when read in conjunction with the consolidated financial statements
and related notes thereto included in Nellcor's and Puritan-Bennett's 1995
Annual Reports to Stockholders, is not misleading.
The results of operations for the three month period ended October 1, 1995 are
not necessarily indicative of operating results for the full fiscal year.
Inventories. Inventories are stated at the lower of cost or market (net
realizable value). Prior to the merger with Nellcor, Puritan-Bennett recorded
the cost of the majority of its inventory using the Last In, First Out (LIFO)
method of accounting. During the first quarter of fiscal 1996, the Company
changed the accounting for these inventories such that all of the Company's
inventory is now recorded at cost using the First In, First Out method. The
effect of this change in accounting principle was not material to the Company's
financial position or results of operations for any period presented.
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Interim and year-end inventory balances for the Company were as follows (in
thousands):
October 1, 1995 July 2, 1995
--------------- ------------
Raw materials $ 56,967 $ 47,518
Work-in process 8,247 10,589
Finished goods 39,374 30,880
-------- --------
$104,588 $ 88,987
Statement of Cash Flows. The Company paid income taxes of approximately $4.8
million in the three months ended October 1, 1995, and received a refund of $0.3
million in the three months ended October 2, 1994.
Property and equipment. Depreciation expense was approximately $6.0 million in
the first three months of fiscal 1996 and $5.3 million in the first three months
of fiscal 1995.
Marketable securities. As of October 2, 1995, the Company was carrying
available-for-sale marketable securities with a market value of $14.5 million.
Available-for-sale marketable securities are securities which the Company does
not intend to hold to maturity. The Company's marketable securities, generally,
are in high quality government, municipal, and corporate obligations with
original maturities of up to two years.
During the first quarter of fiscal 1996, the Company transferred all marketable
securities which had been classified as held-to-maturity as of July 2, 1995, to
available-for-sale. The marketable securities which were transferred to
available-for-sale were government and corporate issued debt securities with an
amortized cost of $41.4 million, of which $31.2 million of these securities were
subsequently sold during the quarter, generating a realized gain of $80,000. The
Company continues to hold the remainder of these securities. The decision to
classify all of the Company's marketable securities as available-for-sale was
due entirely to the Company's merger with Puritan-Bennett during the quarter and
the significant cash outlays which are expected to be made as part of effecting
the combination of these two companies.
The market value, amortized cost, and gross unrealized gains and losses of the
Company's marketable securities at October 2, 1995, are summarized below (in
thousands). The market value of marketable securities is based upon quoted
market prices.
Gross Gross
Amortized Unrealized Unrealized Market
Marketable Securities Cost Gains Losses Value
--------------------- --------- ---------- ---------- ------
AVAILABLE-FOR-SALE:
Debt securities issued by the U.S.
Treasury and other U.S. government
corporations and agencies $10,166 $ 7 $ (7) $10,166
Mortgage backed securities $ 4,361 14 (81) 4,294
------- ------- ------- -------
Marketable securities $14,527 $ 21 $ (88) $14,460
------- ------- ------- -------
Page 6
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The difference between the amortized cost and market value of the Company's
marketable securities at October 2, 1995, a net unrealized loss of $67,000, is
carried as a separate component of stockholders' equity under the caption
"Unrealized loss on available-for-sale securities."
Merger with Puritan-Bennett. On August 24, 1995, the merger of Nellcor and
Puritan-Bennett was approved by stockholders of both companies. On August 25,
the merger was consummated, and the newly combined company was renamed Nellcor
Puritan Bennett. Under the terms of the merger agreement, Puritan-Bennett
shareholders received .88 of a share of the Company's common stock for each
Puritan-Bennett share, resulting in the Company issuing approximately 11.5
million shares, valued at approximately $600 million based upon the closing
price of the Company's common stock on August 25, 1995. Additionally,
outstanding options to acquire Puritan-Bennett common stock were converted to
options to acquire approximately 500,000 shares of the Company's common stock.
Puritan-Bennett develops, manufactures, and markets ventilators, oxygen delivery
systems, home sleep diagnostic and therapeutic equipment, and certain
complementary products such as medical gases, gas-related equipment, and
spirometers. Puritan-Bennett reported revenue of $336.0 million and net income
of $8.4 million for its fiscal 1995 ended January 31, 1995.
The merger was intended to qualify as a tax-free reorganization and was
accounted for as a pooling of interests. Accordingly, the consolidated financial
statements present, for all periods, the combined financial results of Nellcor
and Puritan-Bennett. The consolidated statement of income for the three months
ended October 2, 1994, combines the financial results of Nellcor's first quarter
of fiscal 1995, the three months ended October 2, 1994, with Puritan-Bennett's
financial results for its first quarter of fiscal 1995, the three months ended
April 30, 1994. Adjustments made to conform the accounting policies of Nellcor
and Puritan-Bennett were immaterial. Separate results for each of Nellcor's and
Puritan-Bennett's first quarter of fiscal 1995, and combined results for the
three months ended October 2, 1994, were as follows (in thousands):
Nellcor Puritan-Bennett Combined
Three months ended: October 2, 1994 April 30, 1994 October 2, 1994
- ------------------- --------------- --------------- ---------------
Revenue $ 55,714 $ 80,408 $136,122
- -------------------------------------------------------------------------------------
Net Income $ 5,859 $ 3,724 $ 9,583
- -------------------------------------------------------------------------------------
In connection with the merger, the Company recorded one-time merger and related
costs during the quarter of $92.6 million. Included in this charge were
provisions for merger transaction costs ($13.7 million), costs to combine and
integrate operations ($53.8 million), certain intangible asset write-downs
($19.6 million), and other merger related costs ($5.5 million). The merger
transaction costs include expenses for investment banker and professional fees,
and other costs associated with completing the transaction. The costs to combine
and integrate operations include provisions for severance and severance-related
costs, facilities consolidations and other integration costs. The write-down of
certain intangible assets, primarily goodwill associated with prior acquisitions
made by both companies, results from the effect that certain integration
decisions have had upon the future realization of these assets.
Of the $92.6 million in merger and related costs which were accrued,
approximately $38.2 million was utilized during the first quarter of fiscal
1996, primarily associated with the write-down of certain intangible assets to
their net realizable value ($19.6 million) and the payment of merger transaction
costs ($11.8 million). The remaining merger and related costs accrued liability
balance at October 2, 1995, of $54.4 million, is expected to be substantially
utilized by the end of 1996.
Page 7
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Acquisition of Melville Software Ltd. On August 23, 1995, Nellcor Puritan
Bennett's EdenTec subsidiary acquired for $4.9 million in cash, Melville
Software Ltd. (Melville), a privately held Canadian company that manufactures
and markets sleep diagnostic products used primarily in sleep labs. In the event
that certain profitability levels are achieved over the next three fiscal years,
additional compensation totalling $1.0 million would be payable to the former
principal stockholders of Melville who continue to manage the company. Such
amounts will be expensed when, and if, earned.
The acquisition of Melville has been accounted for as a purchase and,
accordingly, Melville's results are included in the Company's financial
statements subsequent to the acquisition date. The pro forma effect of Melville
upon the Company's results of operations for the quarter is immaterial.
Page 8
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS - QUARTER AND PERIOD ENDED OCTOBER 1, 1995, COMPARED WITH
THE QUARTER AND PERIOD ENDED OCTOBER 2, 1994.
The Company reported a net loss for the first quarter of fiscal 1996 of $59.3
million, or ($2.04) per share. The Company's results for the quarter reflect
one-time merger and related costs of $92.6 million, ($2.55) per share,
associated with the merger of Nellcor and Puritan-Bennett. Excluding the effect
of these nonrecurring charges, net income for the first quarter of fiscal 1996
was $14.7 million, $0.51 per share, a 53 percent increase over combined net
income of $9.6 million, $0.35 per share, for the first quarter of fiscal 1995.
The Company's net revenue for the first quarter of fiscal 1996 increased to
$156.3 million from combined net revenue of $136.1 million for the first quarter
of fiscal 1995. The increase in net revenue principally resulted from higher
sales across the Company's home care and hospital businesses. Sales of the
Company's products into international markets were also particularly strong
during the quarter.
Home care business sales, which include the oxygen therapy, gas products and
spirometry group; the sleep and respiratory support systems group; and the Aero
systems group, increased 21 percent to $63.0 million from $52.2 million for the
same period last year due primarily to higher sales across all the product
groups, and the first full quarter of revenue from the Company's recently
acquired Pierre Medical subsidiary. Revenue increased significantly within the
oxygen therapy, gas products and spirometry group as a result of higher
cryogenic equipment and gas product sales. The increase in cryogenic equipment
sales was due primarily to strong product demand in the quarter as well as
production disruptions in the prior year, which created higher order backlog
levels in the first quarter of fiscal 1995. Gas product sales were higher
principally as a result of the addition of two new gas branches and increased
ethylene oxide sales, which were lower in the first quarter of fiscal 1995, in
part, due to the imposition of a new environmental tax beginning in that
quarter. Sales within the Aero systems group increased significantly due
primarily to higher revenue from the replacement of passenger service units in
existing aircraft and continued growth in sales of the Sweep-on(R) 2000
inflatable harness crew mask.
Hospital business sales, which include the oximetry, ventilator and clinical
information systems product lines, increased 11 percent to $93.3 million from
$83.9 million for the same period last year. The increase in hospital business
revenue was due primarily to higher sales of oximetry products and
CliniVision(R) respiratory care management information systems, which are now
installed in more than 125 U.S. hospitals. Oximetry product revenue increased
due primarily to higher oximetry sensor volumes, partially offset by slightly
lower oximetry sensor pricing.
International revenue increased 26 percent to $49.2 million from $39.0 million
for the first quarter of fiscal 1995. International revenue growth was strongest
in the Company's Asia Pacific and European regions, where growth rates exceeded
20 and 35 percent, respectively. Favorable foreign currency exchange rates
accounted for 7 percentage points of the international revenue growth during the
first quarter.
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During the quarter, the Company announced its intention to substantially reduce
its future investment in the HealthQuiz(TM) product line. This decision was
reached as a result of the merger of Nellcor and Puritan-Bennett, and the desire
to refocus on the newly combined company's core strategy of providing products
for the respiratory-impaired patient. The Company is continuing to look at
third-party opportunities for this product.
Gross profit as a percentage of net revenue for the first quarter of fiscal 1996
was 50 percent compared to 49 percent for the same period last year due
primarily to the favorable effect which foreign currency exchange rates had upon
revenue, and a slight shift in mix to higher margin oximetry and sleep products.
Operating expenses for the first quarter of fiscal 1996 reflect the effect of
one-time merger and related costs of $92.6 million associated with the merger of
Nellcor and Puritan-Bennett. Included in this charge were provisions for merger
transaction costs ($13.7 million), costs to combine and integrate operations
($53.8 million), certain intangible asset write-downs ($19.6 million), and other
merger related costs ($5.5) million. The merger transaction costs include
expenses for investment banker and professional fees, and other costs associated
with completing the transaction. The costs to combine and integrate operations
include provisions for severance and severance-related costs, facilities
consolidations and other integration costs. The write-down of certain intangible
assets, primarily goodwill associated with prior acquisitions made by both
companies, results from the effect that certain integration decisions have had
upon the future realization of these assets.
Operating expenses for the first quarter of fiscal 1996 decreased to 36 percent
of net revenue from 39 percent for the first quarter last year, exclusive of the
effect of the one-time merger and related charges.
Research and development expenses at 8 percent of net revenue were comparable to
the first quarter of fiscal 1995. Research and development expenses increased in
absolute dollars primarily due to higher monitoring and ventilator systems
development costs. For the first quarter of fiscal 1996, selling, general, and
administrative expenses decreased to 28 percent of net revenue from 31 percent
for the same period in fiscal 1995. Selling, general, and administrative
expenses increased in absolute dollars in the first quarter of fiscal 1995 due
primarily to the unfavorable effect foreign currency exchange rates had upon
international operating expenses as well as increased funding of the Company's
profit sharing and bonus programs, partially offset by the favorable effect
which Puritan-Bennett's fourth quarter fiscal 1995 workforce reduction program
has had upon operating expenses.
Liquidity and Capital Resources
At October 2, 1995, the Company had cash, cash equivalents and marketable
securities of approximately $107.7 million compared to $143.5 million at the end
of fiscal 1995.
Operating activities provided positive cash flows of approximately $10.0 million
during the first three months of fiscal 1996, exclusive of merger related cash
outlays. Of the $92.6 million in merger and related charges which were recorded,
approximately $17.0 million resulted in a cash outlay during the quarter. The
remainder of the merger and related charges of $75.6 million was a significant
non-cash operating activity during the period.
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Sales and maturities of marketable securities were significant investing
activities during the first three months of fiscal 1996. Additionally, in
August, 1995, Nellcor Puritan Bennett's EdenTec subsidiary acquired for $4.9
million in cash, Melville Software Ltd. (Melville), a privately held Canadian
company that manufactures and markets sleep diagnostic products used primarily
in sleep labs. In the event that certain profitability levels are achieved over
the next three fiscal years, additional compensation totalling $1.0 million
would be payable to the former principal stockholders of Melville who continue
to manage the company. Such amounts will be expensed when, and if, earned.
Shares of Nellcor Puritan Bennett common stock issued under the Company's stock
option plans were significant sources of cash from financing activities for the
first three months of fiscal 1996. Additionally, the Company retired
approximately $64.7 million of the debt that it assumed as part of its merger
with Puritan-Bennett. The debt was retired using $24.7 million of the Company's
cash and $40 million drawn from the Company's credit facility. As of October 2,
1995, the Company was carrying $40.4 million in current loans payable and $12.2
million in long-term obligations.
The Company's inventories have increased to $104.6 million at October 2, 1995,
from $89.0 million at July 2, 1995. Much of the increase in inventory occurred
during the eight month period comprising the Puritan-Bennett portion of this
comparison, the period from February 1, 1995 to October 1, 1995. The increase in
Puritan-Bennett inventory was due primarily to production levels across several
product lines which exceeded customer demands, and, in part, resulted from
inventory build-ups associated with new product introductions within the sleep
and respiratory support systems group.
The Company anticipates that current capital resources combined with cash
generated from operating activities will be sufficient to meet its liquidity and
capital expenditure requirements at least through the end of fiscal 1996. As the
Company continues to combine and integrate operations as part of its merger with
Puritan-Bennett, it is expected that costs associated with the merger, as well
as other merger related cash outlays, will continue to contribute to a net
reduction in the Company's cash and cash equivalents and marketable securities
during fiscal 1996. The Company may continue to use debt to fund certain capital
and other strategic opportunities when deemed necessary and financially
advantageous.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
In July 1995, the U.S. Federal District Court in Delaware issued a decision in
favor of the Company, ruling that four key oximeter and sensor technology
patents are valid and would be infringed by Ohmeda, if Ohmeda sold either its
adult or neonatal OxyTip sensors for use with non-Ohmeda monitors. BOC has filed
notice of its intention to appeal the decision of the court.
The Company filed a motion in July 1995 requesting an amendment to the Court's
judgment to issue an injunction against BOC to enjoin BOC from infringing the
patents. The Court denied the motion in October, 1995.
Except as noted above, neither the Company nor any of its subsidiaries is
involved in any material pending litigation other than ordinary routine
proceedings incident to their business.
ITEM 4. Submission of matters to a Vote of Security Holders.
a) A special meeting of stockholders was held on August 24, 1995. Four items
were the subject of the meeting: (i) approval of the issuance of Company
common stock in connection with the merger of Nellcor and Puritan-Bennett;
(ii) approval of an amendment to Nellcor's Restated Certificate of
Incorporation to change its name to Nellcor Puritan Bennett; (iii)
approval of the Company's 1995 Merger Stock Incentive Plan; and (iv)
approval of amendment to the Company's 1994 Equity Incentive Plan to
increase the number of shares of Company common stock available for
issuance under the plan from 1,500,000 shares to 2,500,000 shares.
(i) Approval of issuance of Company common stock in connection with the
merger of Nellcor and Puritan-Bennett
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
10,821,049 14,960 15,665 2,094,884
(ii) Approval of Name Change
For Against Abstain
--- ------- -------
12,874,065 56,951 15,542
(iii) Approval of 1995 Merger Stock Incentive Plan
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
10,674,447 121,005 56,272 2,094,834
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(iv) Approval of Amendment to 1994 Equity Incentive Plan
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
10,243,844 639,483 50,759 2,012,472
b) The Company's annual meeting of stockholders was held on October 19, 1995.
Three items were the subject of the meeting: (i) the election of
directors; (ii) approval of the 1995 Employee Stock Participation Plan;
and (iii) the ratification of the selection of Price Waterhouse as the
Company's independent public accountants for fiscal year 1996.
The following directors were elected at the meeting for one-year terms:
Burton A. Dole, Jr., Robert J. Glaser, M.D., Frederick M. Grafton, Donald
L. Hammond, C. Raymond Larkin, Jr., Risa J. Lavizzo-Mourey, M.D., Thomas
A. McDonnell, Walter J. McNerney and Edwin E. van Bronkhorst. Messrs.
Glaser, Grafton, Hammond, Larkin, McNerney and van Bronkhorst are
continuing directors. Mr. Dole and Mr. McDonnell were appointed to the
board of directors of the Company in August 1995 and were nominated for
re-election to the board pursuant to the Agreement and Plan of Merger
between Nellcor and Puritan-Bennett. Dr. Lavizzo-Mourey was nominated for
election to the board of directors pursuant to the terms of the Agreement
and Plan of Merger between Nellcor and Puritan-Bennett.
(i) Election of Directors
For Against
--- -------
Burton A. Dole, Jr 24,999,615 51,119
Robert J. Glaser, M.D 25,026,291 51,119
Frederick M. Grafton 25,033,482 51,119
Donald L. Hammond 25,033,414 51,119
C. Raymond Larkin, Jr 25,029,943 51,119
Risa J. Lavizzo-Mourey, M.D 25,026,249 51,119
Thomas A. McDonnell 25,030,498 51,119
Walter J. McNerney 25,028,415 51,119
Edwin E. van Bronkhorst 25,027,851 51,119
(ii) Approval of 1995 Employee Stock Participation Plan
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
24,130,894 624,636 78,220 243,358
(iii) Ratification of Price Waterhouse as the Company's independent public
accountants for fiscal year 1996.
For Against Abstain
--- ------- -------
25,031,840 16,013 29,255
Page 13
14
ITEM 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
Exhibit
No. Description of Exhibit
------- ----------------------
2.1 Agreement and Plan of Merger, dated as of May 21, 1995, as
amended, among Registrant, a wholly-owned subsidiary of
Registrant and Puritan-Bennett Corporation (filed as Annex
A to Form S-4 Registration Statement No. 33-61169 and
incorporated herein by reference).
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as
of June 30, 1995, among Registrant, a wholly-owned
subsidiary of Registrant and Puritan-Bennett Corporation
(filed as Annex B to Form S-4 Registration Statement No.
33-61169 and incorporated herein by reference).
3.1 Restated Certificate of Incorporation of Registrant.
3.2 Certificate of Determination of Preferences of Series A
Junior Participating Preferred Stock (filed as Exhibit 3.2
to the Report on Form 10-K for the year ended July 7, 1991
and incorporated herein by reference).
3.3 By-laws of Registrant, as amended (filed as Exhibit 3.3 to
the Report on Form 10-K for the year ended July 3, 1994
and incorporated herein by reference).
4.1 Rights Agreement, dated as of September 1, 1992, between
Registrant and The First National Bank of Boston, as
Rights Agent (incorporated by reference to Exhibit 2.1 of
Amendment No. 1 to the Registrants' Registration Statement
on Form 8-A filed with the Commission on July 13, 1995).
Reference is also made to Exhibits 3.1, 3.2 and 3.3.
4.2 Credit Agreement, dated as of November 16, 1994, entered
into by Registrant, the Banks Named Therein and ABN AMRO
Bank N.V., San Francisco International Branch, as Agent
(filed as Exhibit 10.1 to the Report on Form 10-Q for the
period ended January 1, 1995 and incorporated herein by
reference).
4.3 Long-term debt instruments of the Company in amounts not
exceeding 10% of the total assets of the Company and its
Subsidiaries on a consolidated basis will be furnished to
the Commission upon request.
10.1 Employment Agreement between Puritan-Bennett and Burton A.
Dole, Jr. dated April 25, 1980 (filed as an exhibit to
Puritan-Bennett's annual report on Form 10K for fiscal
year 1994 and incorporated herein by reference).
*10.2 Employment Agreement and Separation Agreement between the
Company and Burton A. Dole, Jr. dated August 18, 1995.
Page 14
15
*10.3 Employment Agreement between the Company and John H.
Morrow dated August 25, 1995.
*10.4 Puritan-Bennett Restated Deferred Compensation Plan (filed
as an exhibit to Puritan-Bennett's annual report on Form
10K for fiscal year 1994 and incorporated herein by
reference).
*10.5 First Amendment to the Restated Puritan-Bennett Deferred
Compensation Plan (filed as an exhibit to Puritan-
Bennett's quarterly report on Form 10Q for its fiscal
quarter October 31, 1994 and incorporated herein by
reference).
*10.6 Amended and restated Puritan-Bennett Retirement Plan for
Non-Employee Directors (filed as an exhibit to
Puritan-Bennett's quarterly report on Form 10Q for its
fiscal quarter September 30, 1991 and incorporated herein
by reference).
*10.7 Amendment to the Puritan-Bennett Retirement Plan for
Non-Employee Directors (filed as an exhibit to Puritan-
Bennett's quarterly report on Form 10Q for its fiscal
quarter October 31, 1994 and incorporated herein by
reference).
*10.8 Promissory note, dated December 19, 1991, between
Puritan-Bennett and Robert L. and Melanie M. Doyle (filed
as an exhibit to Puritan-Bennett's annual report on Form
10K for fiscal year 1991 and incorporated herein by
reference).
*10.9 Form of Indemnification Agreement between Puritan-Bennett
and each of its directors (filed as an exhibit to
Puritan-Bennett's annual report on Form 10K for fiscal
year 1991 and incorporated herein by reference).
*10.10 Pension Benefit Make Up Plan (filed as an exhibit to
Puritan-Bennett's quarterly report on Form 10Q for its
fiscal quarter July 31, 1994 and incorporated herein by
reference).
*10.11 First Amendment to the Puritan-Bennett Pension Benefit
Make Up Plan (filed as an exhibit to Puritan-Bennett's
quarterly report on Form 10Q for its fiscal quarter
October 31, 1994 and incorporated herein by reference).
*10.12 Executive Agreement, dated November 7, 1994, between
Robert L. Doyle and Puritan-Bennett (filed as an exhibit
to Puritan-Bennett's quarterly report on Form 10Q for its
fiscal quarter October 31, 1994 and incorporated herein by
reference).
*10.13 Executive Agreement, dated November 7, 1994, between
Thomas E. Jones and Puritan-Bennett (filed as an exhibit
to Puritan-Bennett's quarterly report on Form 10Q for its
fiscal quarter October 31, 1994 and incorporated herein by
reference).
*10.14 Executive Agreement, dated November 7, 1994, between
Alexander R. Rankin and Puritan-Bennett (filed as an
exhibit to Puritan-Bennett's quarterly report on Form 10Q
for its fiscal quarter October 31, 1994 and incorporated
herein by reference).
Page 15
16
*10.15 Executive Agreement, dated November 7, 1994, between David
P. Niles and Puritan-Bennett (filed as an exhibit to
Puritan-Bennett's quarterly report on Form 10Q for its
fiscal quarter October 31, 1994 and incorporated herein by
reference).
*10.16 Severance Agreement, dated November 7, 1994, between Lee
A. Robbins and Puritan-Bennett (filed as an exhibit to
Puritan-Bennett's quarterly report on Form 10Q for its
fiscal quarter October 31, 1994 and incorporated herein by
reference).
*10.17 Severance Agreement, dated November 7, 1994, between Derl
S. Treff and Puritan-Bennett (filed as an exhibit to
Puritan-Bennett's quarterly report on Form 10Q for its
fiscal quarter October 31, 1994 and incorporated herein by
reference).
*10.18 Company's Merger Incentive Plan
*10.19 Company's Retention Compensation Plan
*10.20 Promissory Note secured by Deed of Trust, dated November
16, 1994 made by Kenneth Sumner in favor of the Company.
*10.21 Promissory Note secured by Deed of Trust, dated
October 5, 1995 made by Russell Hays in favor of the
Company.
*10.22 Puritan-Bennett Supplemental Retirement Benefit Plan
(filed as an exhibit to Puritan-Bennett's annual report on
Form 10K for fiscal year 1985 and incorporated herein by
reference).
*10.23 First Amendment to the Puritan-Bennett Supplemental
Retirement Benefit Plan (filed as an exhibit to Puritan-
Bennett's quarterly report on Form 10Q for its fiscal
quarter July 31, 1994 and incorporated herein by
reference).
*10.24 Second Amendment to the Puritan-Bennett Supplemental
Retirement Benefit Plan (filed as an exhibit to Puritan-
Bennett's quarterly report on Form 10Q for its fiscal
quarter July 31, 1994 and incorporated herein by
reference).
*10.25 Third Amendment to the Puritan-Bennett Supplemental
Retirement Benefit Plan (filed as an exhibit to Puritan-
Bennett's quarterly report on Form 10Q for its fiscal
quarter October 31, 1994 and incorporated herein by
reference).
*10.26 SERP Agreement, dated November 7, 1994, between Burton A.
Dole Jr. and Puritan-Bennett (filed as an exhibit to
Puritan-Bennett's quarterly report on Form 10Q for its
fiscal quarter October 31, 1994 and incorporated herein by
reference).
*10.27 SERP Agreement, dated August 25, 1995, for the benefit of
John H. Morrow.
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11.1 Statement of computation of Net Income per share.
27 Financial Data Schedule
- ----
* An asterisk next to the number of an exhibit indicates that the exhibit
is a management contract or compensatory plan or arrangement.
b) Reports on Form 8-K.
Form 8-K dated July 11, 1995, filed August 2, 1995, announcing under
Item 5 ("Other Events") that the U.S. Federal District Court in
Delaware had issued a decision in favor of the Company, ruling that
four key oximeter and sensor technology patents are valid and would be
infringed by Ohmeda Inc., a subsidiary of BOC Health Care Inc., if
Ohmeda sold either its adult or neonatal OxyTip sensors for use with
non-Ohmeda monitors. BOC Health Care had filed the suit in December
1992, seeking a declaratory judgment that Nellcor's patents were
invalid and would not be infringed.
Form 8-K dated July 27, 1995, filed August 23, 1995, reporting under
Item 5 ("Other Events") the Company's financial results for its 1995
fiscal year ended July 2, 1995.
Form 8-K dated August 25, 1995, filed September 8, 1995, reporting the
consummation of the merger between Nellcor and Puritan-Bennett pursuant
to Item 2 ("Acquisition or Disposition of Assets").
Page 17
18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be filed on its behalf by the
undersigned thereunto duly authorized.
NELLCOR PURITAN BENNETT INCORPORATED
DATED November 14, 1995 By /s/ Michael P. Downey
-------------------- -------------------------
Michael P. Downey
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Page 18
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EXHIBIT INDEX
Page
Exhibit No. Description Location in Form 10-Q
----------- ----------- ---------------------
3.1 Company's Restated Certificate of Incorporation 20
10.2 Employment and Separation between Company and 29
Burton A. Dole, Jr.
10.3 Employment Agreement between the Company and John 53
H. Morrow
10.18 Company's Merger Incentive Plan 73
10.19 Company's Retention Compensation Plan 76
10.20 Promissory Note made by Kenneth Sumner in favor of 79
the Company
10.21 Promissory Note made by Russell Hays in favor of 81
the Company
10.27 SERP Agreement for John H. Morrow 83
11.1 Statement of computation of net income per share 90
27 Financial Date Schedule 91
Page 19