-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ud927KfOBMhAre+tBhRpKLoN8QAo4uBnQLRc7HZUs+U49NEPKEW2z9Uiz9ol4kSf GdwpcEynb1nziG3ppXeU5A== 0000064892-96-000004.txt : 19960816 0000064892-96-000004.hdr.sgml : 19960816 ACCESSION NUMBER: 0000064892-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MENTOR CORP /MN/ CENTRAL INDEX KEY: 0000064892 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 410950791 STATE OF INCORPORATION: MN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07955 FILM NUMBER: 96613420 BUSINESS ADDRESS: STREET 1: 5425 HOLLISTER AVENUE CITY: SANTA BARBARA STATE: CA ZIP: 93111 BUSINESS PHONE: 8056816000 MAIL ADDRESS: STREET 1: 5425 HOLLISTER AVENUE CITY: SANTA BARBARA STATE: CA ZIP: 93111 10-Q 1 FORM 10-Q FOR QUARTER ENDED 6/30/96 SECURITIES AND EXCHANGE COMMISSION Washington D.C. FORM 10-Q Quarterly Report Under Section 13 or 15(d) Of the Securities Exchange Act of 1934 For Quarter Ended June 30, 1996 Commission File Number 0-7955 Mentor Corporation (Exact name of registrant as specified in its charter) Minnesota 41-0950791 (State of Incorporation) (I.R.S. Employer Identification Number) 5425 Hollister Avenue, Santa Barbara, California 93111 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number: (805) 681-6000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 of 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 |_| The number of shares outstanding for each of the Issuer's classes of common stock as of August 12, 1996 was: Common stock, $.10 par value 24,861,592 shares Mentor Corporation INDEX Part I. Financial Information Item 1. Financial Statements (unaudited) Condensed Consolidated Statements of Financial Position -- June 30, 1996 and March 31,1996............ 3-4 Consolidated Statements of Income -- Three Months Ended June 30, 1996 and 1995........................... 5 Condensed Consolidated Statements of Cash Flows -- Three Months Ended June 30, 1996 and 1995.............. 6 Notes to Condensed Consolidated Financial Statements-- June 30, 1996.......................................... 7-8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition............ 9-11 Part II. Other Information Item 1. Legal Proceedings................................... 12 Item 2. Changes in Securities............................... 12 Item 3. Defaults upon Senior Securities..................... 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information................................... 12 Item 6. Exhibits and Reports on Form 8-K.................... 12 List of Exhibits 11. Statement Regarding Computation of Per Share Earnings
Mentor Corporation Condensed Consolidated Statements of Financial Position June 30, 1996 and March 31, 1996 (Unaudited) June 30, March 31, (dollars in thousands) 1996 1996 ASSETS Current assets: Cash and marketable securities $20,352 $18,541 Accounts receivable, net 36,387 34,855 Inventories 36,051 35,158 Deferred income taxes 10,148 10,148 Other 2,455 3,143 Total current assets 105,393 101,845 Property, plant and equipment, net of accumulated depreciation 31,441 29,317 Other assets: Deferred income taxes -- -- Patents, licenses, trademarks and bond issue costs net of accumulated amortization 4,404 4,689 Goodwill, net of accumulated amortization 13,205 13,109 Other assets 631 658 18,240 18,456 Total assets $155,074 $149,618
See Notes to Condensed Consolidated Financial Statements
Mentor Corporation Condensed Consolidated Statements of Financial Position June 30, 1996 and March 31, 1996 (Unaudited) June 30, March 31, (dollars in thousands) 1996 1996 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $5,257 $5,003 Accrued compensation 4,509 6,153 Income taxes payable 3,707 428 Interest payable -- 3 Dividends payable 629 628 Sales returns 6,574 6,705 Litigation settlement obligation 5,139 4,950 Other accrued liabilities 6,544 7,425 Short-term borrowings and current portion of long-term debt 235 415 Total current liabilities 32,594 31,710 Long-term deferred taxes 1,370 1,355 Long-term debt 43 58 Shareholders' equity: Common shares, $.10 par value: Authorized-- 20,000,000 shares Issued and outstanding: 24,838,892 shares at June 30, 1996 24,860,642 shares at March 31, 1996 2,484 2,486 Capital in excess of par 36,557 37,840 Cumulative translation adjustment (1,056) (445) Retained earnings 83,082 76,614 Shareholders' equity 121,067 116,495 Total liabilities and shareholders' equity $155,074 $149,618
See Notes to Condensed Consolidated Financial Statements
Mentor Corporation Consolidated Statements of Income Three Months Ended June 30, 1996 and 1995 (Unaudited) (in thousands, except per share data) 1996 1995 Net sales $50,388 $43,729 Costs and expenses: Cost of sales 16,653 14,746 Selling, general and administrative 18,838 16,711 Research and development 4,052 3,420 39,543 34,877 Operating income 10,845 8,852 Interest expense (212) (465) Interest income 210 72 Other expense (53) (45) Income before income taxes 10,790 8,414 Income taxes 3,701 2,930 Net income $7,089 $5,484 Earnings per share: Primary $.27 $.23 Supplemental / Fully diluted $.27 $.22
See notes to consolidated financial statements
Mentor Corporation Condensed Consolidated Statements of Cash Flows Three Months Ended June 30, 1996 and 1995 (Unaudited) (in thousands) 1996 1995 Cash flows from operating activities $7,839 $8,556 Cash flows from investing activities: Sale of equipment, intangibles and other assets 2 147 Purchase of property, equipment, and intangibles (3,911) (2,093) Reduction of notes receivable (17) 24 (3,926) (1,922) Cash flows from financing activities: Exercise of stock options 401 282 Dividends paid (622) (542) Reduction of long-term debt (195) (177) Net repayment under line of credit agreement -- -- Repurchase of common stock (1,686) -- (2,102) (437) Increase (decrease) in cash, cash equivalents, and marketable securities 1,811 6,197 Cash at beginning of period 18,541 11,379 Cash at end of period $20,352 $17,576
See notes to consolidated financial statements Mentor Corporation Notes to Condensed Consolidated Financial Statements June 30, 1996 Note A Inventories at June 30, 1996 and March 31, 1996, consisted of:
June 30 March 31 (In thousands) Raw materials $8,935 $10,191 Work in process 10,155 9,040 Finished goods 16,961 15,927 $36,051 $35,158
Note B Primary earnings per share is computed based on the weighted average number of Common Stock and Common Stock equivalents outstanding during the period. Common Stock equivalents represent the dilutive effect of the assumed exercise of certain outstanding options. The calculation of supplemental and fully diluted earnings per share assumes the Convertible Subordinated Debentures are converted into Common Stock at the beginning of the period and interest expense related to the debentures, net of tax, is added to net income. Effective September 27, 1995, the Company issued 12,356,856 shares of Common Stock in connection with a two-for-one stock split. All references in the financial statements with regard to number of shares of Common Stock and related dividend and per share amounts have been restated to reflect the stock split. Note C The amounts set forth in the accompanying statements are unaudited but, in the opinion of management, reflect all adjustments (consisting only of normal accruals) necessary for a fair statement of the results of operations for the periods presented. Operating results for the three month period ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended March 31, 1997. It is suggested that the condensed consolidated financial statements included herein be read in conjunction with the Company's annual report on form 10-K for the year ended March 31, 1996. Note D The Company's three quarterly interim reporting periods are each approximately thirteen week periods ending on the Friday nearest the end of the third calendar month. The fiscal year end remains March 31. To facilitate ease of presentation, each interim period is shown as if it ended on the last day of the appropriate calendar month. The actual dates on which each quarter ended are shown below: Fiscal 1997 Fiscal 1996 First Quarter June 30, 1996 July 1, 1995 Second Quarter September 29, 1996 September 30, 1995 Third Quarter December 29, 1996 December 30, 1995 Mentor Corporation Management's Discussion and Analysis of Results of Operations and Financial Condition Except for the historical information contained herein, the matters discussed in this Management's Discussion are forward-looking statements, the accuracy of which is necessarily subject to risks and uncertainties. Actual results may differ significantly from the discussion of such matters in the forward looking statements. RESULTS OF OPERATIONS Sales Sales for the three months ended June 30, 1996 increased 15% to $50.4 million, compared to $43.7 million the prior year. Growth was particularly strong in sales of plastic surgery and surgical urology products, continuing trends of the past several quarters.
Sales by Principal Product Line For the Three Months Ended June 30, Percent 1996 1995 Change Plastic surgery products $27,187 $23,112 17.6% Urology products 14,261 11,598 23.0% Ophthalmology products 8,940 9,019 (1.0)% $50,388 $43,729 15.2%
Cost of Sales Cost of sales was 33.0% for the three months ended June 30, 1996, compared to 33.7% for the same period last year. The improvement was aided by a greater proportion of higher margin product in the sales mix. Selling, General and Administrative Expenses Selling, General and Administrative expenses decreased to 37.3% of sales in the quarter compared to 38.2% in the previous year. The Company is seeing productivity improvements in several of its administrative areas. Research and Development Research and development expenses were 8.0% of sales for the first quarter, compared to 7.8% for the prior year. The Company continues to spend substantial funds on its premarket approval applications ("PMAAs") for its saline breast implants, silicone gel filled breast implants, and penile implants. The Company is committed to a variety of clinical and laboratory studies in connection with these products. Other major studies underway include Urethrin, a product for treating urinary incontinence and the Memory Lens, a foldable intraocular. The Company expects to pursue a number of additional clinical studies in the coming year, for products such as ultrasonic assisted liposuction and an alternate filler breast implant. Thus the Company expects to spend more in research and development as a percent of sales in fiscal 1997 than it did in fiscal 1996. Interest and Other Income and Expense Interest expense decreased $253 thousand in the quarter over the prior year. During the first quarter of fiscal 1996, the Company's Convertible Subordinated Debentures were converted into Common Stock. The reduction in interest expense reflects the result of this conversion. Interest income increased from $72 thousand last year to $210 thousand this year, resulting from higher cash balances. Included in interest expense last year was $175 thousand for the quarter ($700 thousand for the fiscal year) in imputed interest on the Litigation Settlement Obligation. In fiscal 1997, this amount was $189 thousand for the quarter ($379 thousand for fiscal 1997). The imputed interest will cease following the final payment on the Obligation in September 1996. Income Taxes The effective rate of corporate income taxes was 34.3% for the quarter, compared to 34.8% in the same period a year ago. Net Income Net earnings per primary share increased to $.27 for the three months ended June 30, 1996, compared to $.23 last year, due to the increased sales and lower operating expenses ratios. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, the Company's working capital was $73 million compared to $70 million at March 31, 1996. The Company's working capital needs were provided from operations. The Company generated $7.8 million of cash from operations during the three months ended June 30, 1996, compared to $8.6 million the previous year. Increased net income was offset by reductions in current liabilities. The Company anticipates investing approximately $10 million in facilities and capital equipment in fiscal 1997. The majority of the expenditures will be to increase capacity at the Company's manufacturing facilities in Texas and Minneapolis. During fiscal 1994, the Company finalized its agreement with the Federal Multi-District Plaintiffs Steering committee, which settled all outstanding breast implant litigation and claims against the Company. The agreement established a settlement fund of $25.8 million, to be funded by the Company and its insurers. Under the terms of the agreement, the Company is required to make one more payment of $5.3 million in September 1996. This will complete the Company's monetary obligations under the Agreement. At the Annual Meeting of Shareholders, held September, 1994, the Company announced the resumption of a quarterly cash dividend of $.025 per share. At the indicated rate of $.10 per year, the aggregate annual dividend would equal approximately $2.5 million. In the first quarter of fiscal 1996, the Company announced that its Board of Directors had authorized the repurchase of up to 500,000 shares of Common Stock. The shares purchased and retired under this program will be used to offset stock options previously granted to employees of the Company under existing stock option plans. During the first quarter of fiscal 1997, the Company repurchased 75,000 shares for consideration of $1.7 million. The Company's principal source of liquidity at June 30, 1996 consisted of $20 million in cash and marketable securities plus $15 million available under its line of credit. PART II Item 1. Legal Proceedings In regards to the litigation reported in Item 3 of the annual report on Form 10-K for the fiscal year ended March 31, 1996, there have been no material changes. Item 2. Changes in Securities No changes have been made in any registered securities. Item 3. Defaults Upon Senior Securities No event constituting a material default has occurred respecting any senior security of the Registrant. Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K Exhibit 11 Statement regarding computation of Per Share Earnings EX-11 2 STATEMENT REGARDING COMPUTATION OF EPS EXHIBIT 11
MENTOR CORPORATION AND SUBSIDIARIES STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED JUNE 30, 1996 1995 PRIMARY: Primary Earnings $7,089 $5,484 Average Shares Outstanding 24,847 22,960 Net effect of dilutive stock options - based on the treasury stock method using average stock market price 1,454 1,150 Total Shares for Primary Earnings 26,301 24,110 Primary Earnings Per Share $0.27 $0.23 SUPPLEMENTAL AND FULLY DILUTED: Primary Earnings $7,089 $5,484 Interest and Related Expenses on 6 3/4% debentures eliminated -- 165 Fuly diluted earnings $7,089 $5,649 Average Shares Outstanding 24,847 24,654 Net effect of dilutive stock options - based on the treasury stock method using the higher of ending and average stock market prices 1,529 1,404 Additional shares issued in assumed conversion of 6 3/4% debentures at 16.50 per share -- 52 Total shares for supplemental/fully diluted 26,376 26,110 Fully Diluted Supplemental Earnings Per Share $0.27 $0.22
Note: In June 1996 the Company's 6 3/4% Sub-ordinated Convertible Debenture was converted into shares of Common stock. The Supplemental calculation is presented in lieu of the fully diluted calculation and assumes the conversion took place at the beginning of the period. This calculation also adds interest expense for the period, net of tax, back to net income. Note: The shares outstanding for 1995 have been adjusted to reflect a two-for-one split of the Company's Common Stock in the form of a 100 percent stock dividend effective September 27, 1995. Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. MENTOR CORPORATION (Registrant) DATE: August 13, 1996 BY: /s/ANTHONY R. GETTE Anthony R. Gette President and Chief Operating Officer DATE: August 13, 1996 BY: /s/GARY E. MISTLIN Gary E. Mistlin Chief Financial Officer EX-27 3 FDS PURSUANT TO ARTICLE 5, REGULATION SX
5 1,000 3-mos MAR-31-1997 JUN-30-1996 20,352 0 38,797 2,410 36,051 105,393 31,441 1,873 155,074 32,594 0 0 0 2,484 118,583 155,074 50,388 50,388 16,653 39,543 53 0 212 10,790 3,701 7,089 0 0 0 7,089 .27 .27
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