Mentor Reports First Quarter Financial Results for Fiscal Year 2009

-- Net Sales were a Record $105.5 Million in the First Quarter of
Fiscal Year 2009, an Increase of 10% over $95.6 Million in the
First Quarter of Fiscal Year 2008

-- Diluted Earnings per Share from Continuing Operations were
$0.40 in the First Quarter of Fiscal Year 2009, Compared to
$0.48 in the First Quarter of Fiscal Year 2008
SANTA BARBARA, Calif.--(Business Wire)--
Mentor Corporation (NYSE:MNT), a leading supplier of medical
products for the global aesthetic market, today announced financial
results for the first quarter ending June 27, 2008.

"We generated solid first quarter financial results and exceeded
the $100 million revenue threshold for the first time. This was
despite continuing economic pressures in the U.S.," commented Joshua
H. Levine, President and Chief Executive Officer. "We realized strong
sales performance from our international business and experienced
continued sales growth in our reconstruction products. During the
quarter, we saw the positive impact of investments that have been and
continue to be made supporting MemoryGel(TM) conversion activity, the
build-out of our international marketing infrastructure, and the
improvement in international revenue momentum related to our
acquisition of Perouse Plastie."

Total Net Sales

Total net sales were $105.5 million in the first quarter of fiscal
year 2009, an increase of 10% over net sales of $95.6 million in the
first quarter of fiscal year 2008. The increase in net sales is
primarily attributable to international sales growth, including $6.2
million of Perouse Plastie (Perouse) sales. Perouse was acquired by
Mentor in July 2007. Total net sales for the first quarter of fiscal
year 2009 included positive foreign currency exchange effects of
approximately $1.6 million.

Gross Profit and Gross Margin

Gross profit for the first quarter of fiscal year 2009 was $76.1
million, or 72.1% of net sales, compared to $74.3 million, or 77.8% of
net sales, in the first quarter of fiscal year 2008. The current year
gross margin percentage decreased primarily due to a higher proportion
of international distributor sales and by sales of lower margin
Perouse products. Prior year gross margin was favorably impacted by a
non-recurring adjustment related to the product warranty accrual.

Selling, General and Administrative Expenses

Selling, general and administrative expenses in the first quarter
of fiscal year 2009 were $43.0 million, or 40.7% of sales, compared to
$36.0 million, or 37.7% of sales, in the first quarter of fiscal year
2008. The increase over last year primarily relates to higher costs
associated with domestic and international marketing programs,
international marketing infrastructure and the post-acquisition costs
of the Perouse organization.

Research and Development Expenses

Research and development expenses in the first quarter of fiscal
year 2009 were $11.0 million, an increase of $0.7 million, or 6%, over
the first quarter of fiscal year 2008.

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-- Dermal Fillers
As a result of recent Food and Drug Administration (FDA) approval,
Mentor has begun sales of Prevelle(R) Silk in the U.S., the first
in the Company's Prevelle(R) family of hyaluronic acid dermal
fillers with lidocaine. Mentor anticipates approval for
Prevelle(R) Shape (formerly Puragen(TM) Plus) in the fourth
quarter of fiscal year 2009. The clinical study for the Company's
next generation dermal filler, Prevelle(R) Volume (formerly DGE)
is complete, with anticipated FDA submission in the fourth
quarter of fiscal year 2009 and anticipated approval in the
second quarter of fiscal year 2010.

-- Botulinum Toxin Type A Program
All studies to support the cosmetic indication, glabellar
rhytides, or frown lines, have been completed or are in the
follow-up phase. With enrollment of the Phase I
torticollis/cervical dystonia study now complete, this clinical
trial is also in the follow-up and early analysis phase.

-- MemoryGel(TM) silicone gel-filled breast implants Post-Approval
Study (PAS)
As of July 30, 2008, Mentor has enrolled approximately 39,000
patients towards the total target of 42,900 patients required by
the PAS conditions. The Company expects to fully complete patient
enrollment in the PAS before the end of this calendar year.
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Operating Income

Operating income from continuing operations was $22.2 million in
the first quarter of fiscal year 2009, representing a decrease of 21%
from the $28.0 million reported in the first quarter of fiscal year
2008.

Net Interest Income (Expense)

Net interest income (expense) was $(0.9) million and $3.3 million
in the first quarter of fiscal year 2009 and 2008, respectively. The
decrease in interest income was due to lower cash and marketable
securities balances primarily as a result of repurchases of shares of
the Company's common stock during fiscal 2008.

Effective Tax Rate

Mentor's effective tax rate for continuing operations in the first
quarter of fiscal year 2009 was 29.3% compared to 29.9% in the first
quarter of fiscal year 2008.

Earnings Per Share

Excluding the results of discontinued operations, Mentor reported
diluted earnings per share from continuing operations of $0.40 in the
first quarter of fiscal year 2009, compared to $0.48 reported in the
first quarter of fiscal year 2008.

Balance Sheet (comparison to prior year-end)

Mentor ended the first quarter of fiscal year 2009 with $105.8
million in cash and marketable securities, compared to $109.9 million
at the end of fiscal year 2008.

Conference Call

Mentor Corporation has scheduled a conference call today regarding
this announcement. Those interested in listening to a recording of the
call may dial (800) 839-6136 at 6:00 p.m. ET today until Midnight ET,
Thursday, August 7, 2008. You may also listen to the live web cast at
5:00 p.m. ET today or the archived call at www.mentorcorp.com under
Investor Relations and "Audio Archives".

Safe Harbor Statement

This release contains forward-looking statements including, but
not limited to, statements relating to Mentor's current and
anticipated product development activity and expenses, and market
acceptance of those products; the approval with conditions by the FDA
of the Company's MemoryGel silicone gel breast implants premarket
approval application (PMA); the continuation of clinical studies with
respect to the Company's botulinum toxin Type A program; the
development program for a portfolio of hyaluronic acid-based dermal
fillers; the approval by the FDA of Prevelle Silk; domestic and
international marketing programs; and the effects of the acquisition
of Perouse by Mentor. These forward-looking statements and the
assumptions about the factors that influence them are based on the
limited information available to Mentor at this time.

A number of factors could cause actual results to differ from the
forward-looking statements including, but not limited to, U.S. market
acceptance and adoption of MemoryGel breast implants; patient
enrollment in the FDA-mandated post-approval study for MemoryGel
breast implants; the amount and timing of expenses to be incurred with
respect to the MemoryGel breast implants post-approval study; the
timing and conditions of FDA approval, if any, of the Company's
Contour Profile Gel breast implant PMA; the ability of the Company to
move forward in a timely and cost-effective manner with the PMAs for
its hyaluronic acid-based dermal fillers; the timing and outcome of
the PMAs submitted to the FDA; results and expenses of clinical
development programs; the timing and outcome of various clinical
trials undertaken by the Company; the impact on revenue and expenses
of delays in FDA approval and other governmental agencies for the
approval and sale of any of the Company's products; seasonal and
economic factors (U.S. and internationally) which affect demand for
aesthetic products and procedures; the ability of the Company to
identify and implement other product opportunities in the global
aesthetics marketplace; competitive pressures and other factors such
as the introduction or regulatory approval of new products by
competitors and pricing of competing products and the resulting
effects on sales and pricing of the Company's products; disruptions or
other problems with sources of supply; significant product liability
or other claims arising from the sales or uses of products;
difficulties with new product development, introduction and market
acceptance; changes in the mix of the Company's products sold; patent
and intellectual property conflicts; product recalls; FDA or other
governmental agency rejection of new or existing products; changes in
Medicare, Medicaid or third-party reimbursement policies; changes in
government regulation; use of hazardous or environmentally sensitive
materials; and other events. Risks and uncertainties relating to the
Perouse acquisition include that the businesses of Mentor and Perouse
will not be integrated successfully; anticipated synergies may not be
fully realized or may take longer to be realized than expected; and
possible disruption of the Perouse business, including with customers,
employees, suppliers or third parties.

Important factors that may cause such a difference for Mentor
include, but are not limited to, those factors described in the
Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
recent Current Reports on Form 8-K and other Securities and Exchange
Commission filings. These filings discuss the foregoing risks as well
as other important risk factors that could contribute to such
differences or otherwise affect the Company's business, results of
operations and financial condition. The Company undertakes no
obligation to revise or update publicly any forward-looking statement
for any reason.

About Mentor

Mentor is a leading supplier of medical products for the global
aesthetic market. The Company develops, manufactures, and markets
innovative, science-based products for surgical and non-surgical
medical procedures that allow patients to retain a more youthful
appearance and improve their quality of life. The Company's website is
www.mentorcorp.com.

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MENTOR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share
data)

Three Months Ended
------------------
June 27, June 29, %
2008 2007 Change
--------- --------
Net sales $105,536 $95,564 10%

Cost of sales 29,395 21,224 38%
--------- --------
Gross profit 76,141 74,340 2%

Selling, general and administrative 42,967 36,045 19%
Research and development 10,982 10,314 6%
--------- --------
53,949 46,359 16%

--------- --------
Operating income from continuing operations 22,192 27,981 (21)%
--------- --------

Interest expense (1,470) (1,464) 0%
Interest income 594 4,774 (88)%
Other income (expense) 34 (294) (112)%

--------- --------
Income before income taxes 21,350 30,997 (31)%
--------- --------

Income taxes 6,248 9,253 (32)%
--------- --------
Net income from continuing operations 15,102 21,744 (31)%
--------- --------
Net loss from discontinued operations (net
of income tax benefit of $213 and $12) (385) (6) (6317)%
--------- --------
Net income $ 14,717 $21,738 (32)%
--------- --------

Basic earnings per share:
Earnings per share from continuing
operations $ 0.45 $ 0.54 (17)%
Earnings (loss) per share from
discontinued operations (0.01) - -
Basic earnings per share 0.44 0.54 (19)%

Diluted earnings per share:
Earnings per share from continuing
operations 0.40 0.48 (17)%
Earnings (loss) per share from
discontinued operations (0.01) - -
Diluted earnings per share 0.40 0.48 (17)%

Dividends per share $ 0.20 $ 0.20 -

Weighted average shares outstanding
Basic 33,472 40,465 (17)%
Diluted 39,277 46,950 (16)%

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MENTOR CORPORATION
SALES BY PRINCIPAL PRODUCT LINE
(unaudited, in thousands)

Three Months
Ended
-----------------
June 27, June 29, %
2008 2007 Change
-------- --------
Breast aesthetics $ 93,932 $84,493 11%
Body contouring 3,745 4,028 (7)%
Other aesthetics, including facial 7,859 7,043 12%
-------- --------
Net sales $105,536 $95,564 10%
-------- --------

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MENTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)

Assets June 27, 2008 March 31, 2008
------------- --------------
Current assets:
Cash and marketable securities $105,783 $109,915
Accounts receivable, net 85,869 82,060
Inventories 51,275 49,940
Deferred income taxes 27,406 29,040
Prepaid expenses and other 16,093 19,307
------------- --------------
Total current assets 286,426 290,262

Property, plant and equipment, net 65,852 58,252
Intangible assets, net 39,419 36,336
Goodwill, net 50,179 49,707
Other assets 5,695 6,022
------------- --------------
Total assets $447,571 $440,579
------------- --------------

Liabilities and shareholders' equity
Current liabilities $113,937 $118,389
Long-term liabilities 29,054 29,156
Convertible subordinated notes 150,000 150,000
Shareholders' equity 154,580 143,034
------------- --------------
Total liabilities and shareholders'
equity $447,571 $440,579
------------- --------------

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MENTOR CORPORATION
CALCULATION OF DILUTED EARNINGS PER SHARE
(unaudited, in thousands, except per share data)

Three
Months
ended
June
27,
Fiscal Year ended March 31, 2008 2008
Q1 Q2 Q3 Q4 FY Q1
-------- -------- -------- ------- ------- --------
Net income as
reported from
continuing
operations $21,744 $10,029 $12,112 $11,066 $54,951 $15,102
Add back after tax
interest expense
on convertible
notes 802 802 802 802 3,208 802
-------- -------- -------- ------- ------- --------
Numerator for
diluted EPS
calculation for
continuing
operations $22,546 $10,831 $12,914 $11,868 $58,159 $15,904
-------- -------- -------- ------- ------- --------
Numerator for
diluted EPS
calculation for
discontinued
operations $ (6) $ (111) $ (170) $ 8,751 $ 8,464 $ (385)
-------- -------- -------- ------- ------- --------
Weighted average
shares
outstanding 40,465 34,044 33,602 33,443 35,375 33,472
Shares issuable
through exercise
of stock options 678 659 502 312 538 271
Shares issuable
through
conversion of
convertible notes 5,165 5,170 5,177 5,187 5,175 5,196
Additional
dilution for
unvested
restricted shares
outstanding 285 292 308 299 296 338
Shares issuable
through exercise
of warrants
(treasury stock
method) 357 518 259 - 65 -
-------- -------- -------- ------- ------- --------
Denominator for
diluted EPS from
continuing
operations 46,950 40,683 39,848 39,241 41,449 39,277
-------- -------- -------- ------- ------- --------
Denominator for
diluted EPS from
discontinued
operations 40,465 34,044 33,602 39,241 41,449 33,472
-------- -------- -------- ------- ------- --------
Diluted earnings
per share from
continuing
operations $ 0.48 $ 0.27 $ 0.32 $ 0.30 $ 1.40 $ 0.40
Diluted earnings
(loss) per share
from discontinued
operations $ - $ - $ (0.01) $ 0.22 $ 0.20 $ (0.01)
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Mentor Corporation
Michael O'Neill
Vice President and Chief Financial Officer
805-879-6082

Copyright Business Wire 2008