SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement Confidential
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or section
240.14a-12
NOVAMETRIX MEDICAL SYSTEMS INC.
...............................................................................
(Name of Registrant as Specified In Its Charter)
...............................................................................
(Name of Person(s) Filing Proxy Statement if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
.....................................................................
2) Form, Schedule or Registration Statement No.:
.....................................................................
3) Filing Party:
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4) Date Filed:
.....................................................................
November 1996
XXXXXXXX
XXXXXXXX
XXXXXXXX
Dear
Enclosed are a set of charts and graphs describing Andros history and the basis
of our "going forward" projections. The following are informational notes for
each graph.
GRAPH #1
* Shows Andros steady revenue climb over the last 28 years.
* Note extraordinary positive spike in FY-1994. Sales have not declined,
rather, they had one extraordinary sales year.
GRAPH #2
* Describes the product mix in each of the last five years.
* Note the 14 million German order in 1994.
* Note medical sales have doubled since 1992.
GRAPH #3
* Describes 1992-1995 financial years.
* Note the increase in spending in 1994-95 from $9 million/year to $15
million/year.
* Genstar has reduced overhead spending by $6 million back to $9 million
rate.
* If 1995 operating expenses were reduced by $6 million to their current,
actual operating expenses, Andros' EBITDA would have been $10.9 million
(25% as shown).
GRAPH #4
* Note $9.6 million actual revenues
* Note $1.25 million addition for contracts already sold (Siemens) but not yet
being shipped (next quarter).
* New quarterly run rate = $10.8 million.
GRAPH #5
* Andros $43.4 million annual revenue = Q1 run rate of $10.8 million (previous
graph) x 4.
* $75 million combined company revenues 1st 12 months, WITH NO
GROWTH PROJECTIONS.
* After tax income of $.39/share.
GRAPH #6
* Cash flow is $17 million (earnings before interest, taxes, depreciation and
amortization, EBITDA).
* Net cash available, after interest taxes and capital expenditures which will
be used to reduce debt, is $9.6 million IN THE FIRST YEAR.
GRAPH #7
* Describes the components of debt.
* Note that Andros had no debt when Genstar acquired Andros. Genstar created
the debt as part of the leveraged buy-out (LBO). Two banks have proposed to
finance the debt at attractive interest rates. Andros is presently servicing
the debt on their own.
GRAPH #8
* Note first year amortization (FY '98) is $4.0 million and that the combined
company will produce $9.6 million after expenses for debt amortization.
* We fully expect to reduce the overall debt by at least $40 million in four
years.
GRAPH #9
* Describes the significant increases in net income and after tax earnings per
share resulting from the merger.
* Earnings per Share grow from $.17/share to $.39/share.
GRAPH #10
* Describes what Novametrix has proposed to pay for Andros, approximately 1.5
times their last twelve months (LTM) revenues.
GRAPH #11
* The chart describes the purchase price to LTM (last twelve months) revenue
ratio for companies that have been acquired over the last four years.
* Note average ratio of approximately 1.8 to 1.
* If Novametrix were sold for 1.8 x LTM revenues = 1.8 x $25 million =
$45 million divided by approximately 8.3 million shares outstanding =
$5.42/share.
Should you have any questions or wish additional information, please do not
hesitate to contact me at 1-800-243-3444.
Sincerely,
William J. Lacourciere
Chairman and CEO
WJL/cm
encs.
This document contains forward-looking statements concerning post-merger
operations of Novametrix. There are many factors that could cause actual
results to differ materially from those in the forward-looking statements
herein, including difficulties in integrating the operations of Andros and
Novametrix, changes in the health care industry, more stringent regulation of
medical device manufacturers, uncertainties regarding patents and other
proprietary rights, intensive competition and foreign currency fluctuations. No
assurance can be given that Novametrix will fully realize the cost savings and
revenue opportunities it expects from the merger. Novametrix does not presently
intend to update publicly the foregoing forward-looking statements.
[Slides to be used at meetings with stockholders
beginning November 12, 1996]
NOVAMETRIX
MEDICAL SYSTEMS
NOVAMETRIX MEDICAL SYSTEMS
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PROPOSED ACQUISITION OF ANDROS INC.
OVERVIEW
* BENEFITS OF ACQUISITION * PURCHASE PRICE
* ANDROS BUSINESS * ANDROS BOOK NET WORTH
* ANDROS FINANCIAL HISTORY * DILUTION
* ANDROS FINANCIAL REVIEW * GENSTAR
* QUARTER ENDING 7/31/96 * BOARD REPRESENTATION
* BASE FINANCIAL PROJECTIONS * SUMMARY
* DEBT
[Stockholders are to be referred to the statements in the Proxy Statement dated
October 23, 1996 regarding risks associated with forward-looking information.]
NOVAMETRIX MEDICAL SYSTEMS
- ------------------------------------------------------------------------------
BENEFITS OF ACQUISITION
* REVENUE SHOULD TRIPLE
* EPS SHOULD MORE THAN DOUBLE
* CASH FLOW SHOULD MORE THAN QUADRUPLE
* CRITICAL SIZE PROVIDES:
* MARKET LEVERAGE
* FINANCIAL COMMUNITY VISIBILITY
NOVAMETRIX MEDICAL SYSTEMS
- ------------------------------------------------------------------------------
BENEFITS OF ACQUISITION (CONT.)
* GENSTAR WANTS TO DRIVE SHAREHOLDER VALUE
* TECHNOLOGY BASE IS STRENGTHENED
* MARKET OPPORTUNITIES ARE BROADENED
* ANDROS HAS STRONG GROWTH PROSPECTS
NOVAMETRIX MEDICAL SYSTEMS
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BACKGROUND OF ANDROS INC.
* FORMED IN 1968 TO DEVELOP SCIENTIFIC INSTRUMENTS UNDER CONTRACT TO
U.S. GOVERNMENT AGENCIES
* LEADING MANUFACTURER OF NON-DISPERSIVE INFRARED (NDIR) GAS
INSTRUMENTATION
* NDIR TECHNOLOGY SERVES MEDICAL, AUTOMOTIVE AND ENVIRONMENTAL MARKETS
NOVAMETRIX MEDICAL SYSTEMS
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BACKGROUND OF ANDROS INC. (CONT.)
* LARGEST PROVIDER OF AUTOMOTIVE GAS ANALYZERS IN THE U.S. AND EUROPE
WITH 70% MARKET SHARE
* LARGEST PROVIDER OF ANESTHETIC AGENT MONITORS IN THE U.S. AND EUROPE
WITH 45% MARKET SHARE
* STRONG RELATIONSHIPS WITH PRIMARY OEM MANUFACTURERS
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS MEDICAL MARKETS
* TRADITIONAL 45% PLUS WORLDWIDE MARKET SHARE
* NDIR MULTIGAS ANESTHETIC AGENT BENCHES MEASURE:
* NITROUS OXIDE
* CARBON DIOXIDE
* 5 HALOGENATED ANESTHETIC AGENTS
* OXYGEN
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS MEDICAL MARKETS (CONT.)
* A STANDARD OF CARE IN U.S., WESTERN EUROPE AND JAPANESE OPERATING ROOMS
* MAJOR OEM PARTNERS INCLUDE:
* HEWLETT PACKARD
* SIEMENS SME
* DRAEGERWERK
* DATASCOPE
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS MEDICAL MARKETS (CONT.)
* DEVELOPING MICROBENCH
* REDUCED SIZE
* REDUCED COST
* REDUCED POWER
NOVAMETRIX MEDICAL SYSTEMS
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OTHER ANDROS MEDICAL PRODUCTS
* SIDESTREAM CO2 BENCH
* MAINSTREAM CO2 BENCH
* O2 SENSORS
* PULMONARY FUNCTION BENCHES
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS AUTOMOTIVE MARKET
* TRADITIONAL 70% PLUS WORLDWIDE MARKET SHARE
* NDIR MULTIGAS BENCHES MEASURE
* HYDROCARBONS
* CARBON MONOXIDE
* CARBON DIOXIDE
* OXYGEN
* DIGITAL OPACIMETER
* MEASURES THE DENSITY OF EXHAUST SMOKE
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS AUTOMOTIVE MARKET (CONT.)
* ANNUAL REVENUE IMPACTED BY LOCAL GOVERNMENT LEGISLATION
* 1977 AMENDMENTS OF 1970 CAA STIMULATED U.S. BUSINESS
* MAJOR AUTOMOTIVE OEM PARTNERS INCLUDE:
* SUN ELECTRIC
* TECNOTEST S.R.L.
* SNAP-ON TOOLS
* AUTOMOTIVE DIAGNOSTICS
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS AUTOMOTIVE MARKET (CONT.)
* INTRODUCING NEW MICROBENCH
* REDUCED COST
* REDUCED SIZE
* ADDITIONAL PARAMETERS (NOX)
* EXPAND MARKET
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS ENVIRONMENTAL MARKET
LEAD BASED PAINT
* 25% - 30% MARKET SHARE LEAD BASED PAINT (LBP) MARKET
* LBP MARKET DRIVEN BY "RESIDENTIAL LEAD BASED PAINT HAZARD REDUCTION
ACT OF 1992"
* TITLE X DISCLOSURE RULE
* REQUIRING DISCLOSURE OF KNOWN LEAD BASED PAINT HAZARDS ON
PRE-1978 DWELLINGS (DEC. 96)
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS ENVIRONMENTAL MARKET
LEAD BASED PAINT (CONT.)
* 50 MILLION PRE-1978 DWELLINGS
* SCITEC MAP-4, "XRF" TECHNOLOGY IS A HAND-HELD, MOBILE, LEAD BASED
PAINT ANALYZER IDEAL FOR ON-SITE LEAD BASED PAINT DETECTION:
* LOW COST OF OPERATION
* COMPLETE SPECTRUM ANALYSIS
* MEETS EPA CRITERIA
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS ENVIRONMENTAL MARKET
AMBIENT AIR MONITORING
* FREON, A CFC HAS BECOME SCARCE AND EXPENSIVE DUE TO ENVIRONMENTAL
CONCERNS
* IF FREON IS LOST IN A SUPERMARKET REFRIGERATION SYSTEM, THE COST TO
RECHARGE THE SYSTEM CAN EXCEED $50,000
* CPC, A LEADING MANUFACTURER OF REFRIGERATION CONTROL EQUIPMENT HAS
SIGNED AN INITIAL $2 MILLION, 2 YEAR CONTRACT FOR THE ANDROS NDIR
FREON ANALYZER WHICH BEGAN IN 1996
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS RECENT DEVELOPMENTS
* DEVELOPMENT OF MICROBENCH TECHNOLOGY
* SIGNIFICANT NEW CUSTOMERS FOR MEDICAL PRODUCTS
* NEW FEDERAL REGULATION REGARDING LEAD TESTING
* STREAMLINING OF OPERATING EXPENSES
* RESTRUCTURING OF EUROPEAN OPERATIONS
* FOCUS ON QUALITY ISSUES
NOVAMETRIX MEDICAL SYSTEMS
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SYNERGIES FROM THE COMBINATION
* COMMON TECHNOLOGIES IN NDIR
* SHARE TECHNOLOGY RESOURCES
* ENHANCED R&D EFFORTS
* POTENTIAL FOR PRODUCT IMPROVEMENT
* ANDROS FILLS THE GAS ANALYZER GAP IN NOVAMETRIX PRODUCT OFFERING
* BROADENED PROFILE AS AN OEM SUPPLIER THROUGH ANDROS RELATIONSHIPS
NOVAMETRIX MEDICAL SYSTEMS
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SYNERGIES FROM THE COMBINATION (CONT.)
* DIRECT SELLING OPPORTUNITIES THROUGH NOVAMETRIX MARKETING
* MANUFACTURING AND PURCHASING ECONOMIES OF SCALE
* STRENGTH OF NOVAMETRIX MANAGEMENT APPLIED TO ANDROS
* MARKET DIVERSIFICATION WITH THE ADDITION OF AUTOMOTIVE AND
ENVIRONMENTAL LINES
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS CONSOLIDATED STATEMENTS OF INCOME
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1992 1993 1994 1995
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Net Sales 35,001 39,723 57,742 42,753
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Gross Profit 17,569 19,993 26,954 19,502
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Gross Margin 50.2% 50.3% 46.7% 45.6%
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Overhead 8,694 9,110 13,063 15,303
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Unadjusted EBITDA 8,875 10,883 13,891 4,199
- ------------------------------------------------------------------------------
Scitec Restructuring - - - 2,728
Salaries & Benefits - - - 2,123
Consultants Elim. - - - 193
Investment Banking - - - 240
European Restructuring - - - 1,091
Management Adds - - - (525)
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Other Changes - - - 862
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Adjusted EBITDA 8,875 10,883 13,891 10,911
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25.4% 27.4% 24.1% 25.5%
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NOVAMETRIX MEDICAL SYSTEMS
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ANDROS Q1 '97 (ENDED 7/31/96)
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Actual Adjustments Projected
- ------------------------------------------------------------------------------
Revenue $9,608 $1,250 $10,858
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Gross Profit 3,859 832 4,691
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% 40.2% 43.2%
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R&D/SG&A 2,302 2,302
Amort. Goodwill 255 255
Amort. Loan Orig. Fees 294 (294) -
Interest 1,056 1,056
Other (326) 326 -
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Pre-tax Income $278 $800 $1,078
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% of Revenue 2.9% 9.9%
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NOVAMETRIX MEDICAL SYSTEMS
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BASE PROJECTIONS OF COMBINED COMPANY
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NOVA ANDROS TOTAL
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Revenue $31.6 $43.4 $75.0
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Gross Profit 18.0 18.7 36.8
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% 57.0% 43.2% 49.0%
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R&D Expense 3.6 3.3 6.9
S, G, & A 9.9 5.6 15.5
Other 0.2 0.2
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Operating Income 4.3 9.8 14.2
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% 13.6% 20.5% 18.9%
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Goodwill 1.5
Interest 3.6
Pre-tax Income 9.1
Income Taxes 3.5
Net Income $5.6
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Shares Outstanding (mils) 14.3
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EPS fully taxed $0.39
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NOVAMETRIX MEDICAL SYSTEMS
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BASE CASH FLOW OF COMBINED BUSINESS
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NOVA ANDROS TOTAL
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Revenue $31.6 $43.4 $75.0
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Gross Profit 18.0 18.7 36.8
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% 57.0% 43.2% 49.0%
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R&D Expense 3.6 3.3 6.9
S, G, & A 9.9 5.6 15.5
Other 0.2 0.0 0.2
Operating Income 4.3 9.8 14.2
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Depreciation & Amortization 2.8
EBITDA 17.0
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% 22.7%
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Debt interest payments (3.6)
Taxes paid (est.) (2.8)
Capital expenditures (1.0)
Cash available for debt reduction $9.6
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NOVAMETRIX MEDICAL SYSTEMS
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COMPONENTS OF DEBT OF COMBINED COMPANY
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Existing Andros Debt 42.0
Existing Nova Debt 2.4
Andros Revolver 1.0
Transact Costs 2.6
Combined Total Debt $48.0
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Estimated Interest Rates:
Revolver Libor* +3**
Term "A" Libor +3**
Term "B" Libor +3.25
* London Interbank Offered Rate
** decrease based upon leverage ratio
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NOVAMETRIX MEDICAL SYSTEMS
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ACQUISITION IS NON-DILUTIVE
[Bar Graphs depicting earnings (after 36% tax rate), number of shares and
earnings per share of Stand Alone Novametrix FY '96 and Combined Company
FY '98.]
[For Stand Alone Novametrix FY '96 the graph depicts earnings of $1.3 million,
8.1 million shares and earnings per share of $.17/sh.]
[For the Combined Company FY '98 the graph depicts earnings of $5.6 million,
14.3 million shares and earnings per share of $.39/sh.]
NOVAMETRIX MEDICAL SYSTEMS
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AMORTIZATION SCHEDULE OF COMBINED COMPANY
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Term Term Total
"A" "B"
- ------------------------------------------------------------------------------
FY '97 $1.3 - $1.3
FY '98 4.0 - 4.0
FY '99 5.5 - 5.5
FY '00 7.0 .5 7.5
FY '01 8.0 .5 8.5
FY '02 - .5 .5
FY '03 - 5.5 5.5
FY '04 - 8.0 8.0
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$25.8 $15.0 $40.8
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NOVAMETRIX MEDICAL SYSTEMS
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ANDROS BOOK NET WORTH
POST GENSTAR ACQUISITION
($ 3.6M) NEGATIVE NET WORTH 7/31/96
22.7 IN-PROCESS R&D*
-------
$19.1 NET WORTH WITHOUT ONE-TIME BOOK ADJUSTMENT
*ONE-TIME ACCOUNTING ADJUSTMENT AT THE TIME OF ACQUISITION OF ANDROS BY
GENSTAR, REDUCED THE GOODWILL OF ANDROS
NOVAMETRIX MEDICAL SYSTEMS
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ANDROS PURCHASE PRICE
Ratio of FY'96
sales ($43m) to
purchase price
4.4 MILLION* SHARES $5.75 $25M
DEBT 42M
---------------
ENTERPRISE VALUE 67M 1.55X
---------------
*38% OF SHARES OUTSTANDING POST MERGER, CAN INCREASE TO 43% AS ANDROS REVENUE
GROWS BETWEEN $48.9 AND $57.6M.
NOVAMETRIX MEDICAL SYSTEMS
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INDUSTRY PURCHASE PRICE RATIOS
DATE ANNOUNCED TARGET NAME ACQUIROR NAME ENT. VAL/SALES
- ---------------------------------------------------------------------------------------------------
2/12/92 Spacelabs Inc. Shareholders 1.3x
7/1/92 Micron Products Inc. Arrhythmia Research Technology 2.8
5/19/93 Physical Health Devices Inc. Empi Inc. 2.3
6/11/93 Andover Medical Inc. CONMED Corp. 0.9
10/7/93 Advanced Interventional Systems Spectranetics Corp. 1.0
12/21/93 Diagnostic Medical Instruments Burdick Inc. (Siemens Corp.) 0.4
4/8/94 Corometrics Medical Systems Marquette Electronics Inc. USA 0.8
7/12/94 Diasonics Ultrasound Inc. Elbit Ltd. (Elron Electronic) 0.4
5/22/95 Puritan-Bennett Nellcor Inc. 1.4
7/17/95 Visiplex Instruments-Multiform AFP Imaging Corp. 0.6
11/6/95 E for M Corp. Marquette Electronics Inc. 0.5
1/30/96 Daig Corporation St. Jude Medical Inc. 10.7
5/14/96 Medical Data Electronics Thermo Electron Corp. 1.1
9/10/96 Aequitron Medical, Inc. Nellcor Puritan Bennett, Inc. 1.6
NOVAMETRIX MEDICAL SYSTEMS
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BACKGROUND OF GENSTAR CAPITAL
* PRIVATELY HELD INVESTMENT FIRM BASED IN FOSTER CITY, CA
* PURCHASES CONTROLLING EQUITY POSITIONS IN UNDERVALUED MANUFACTURING AND
SERVICE BUSINESSES IN NORTH AMERICA
* SINCE 1991, GENSTAR HAS INVESTED IN 6 LEVERAGED EQUITY TRANSACTIONS WITH
AN AGGREGATE VALUE OF $290 MILLION
NOVAMETRIX MEDICAL SYSTEMS
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BACKGROUND OF GENSTAR CAPITAL
* IRR ON FIRST FUND WAS 44%
* SKILLED IN MERGERS & ACQUISITIONS TO BENEFIT NOVAMETRIX CORPORATE
DEVELOPMENT
* PRIMARY GOAL = SHAREHOLDER RETURN
NOVAMETRIX MEDICAL SYSTEMS
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BOARD OF DIRECTORS
* 12 MEMBER BOARD
* 50% GENSTAR
* 50% NOVAMETRIX
* DICK PATERSON OF GENSTAR WILL BE CHAIRMAN
* BOARD OF DIRECTORS WILL PRESENT NOMINEES ANNUALLY FOR SHAREHOLDER APPROVAL
* BOARD OF DIRECTORS DOES NOT ELECT DIRECTORS
NOVAMETRIX MEDICAL SYSTEMS
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SUMMARY
* REVENUE SHOULD TRIPLE, EARNINGS PER SHARE SHOULD MORE THAN DOUBLE AND
CASH FLOW SHOULD QUADRUPLE
* REVENUE PROJECTIONS ARE BASED ON ACTUAL HISTORICAL RESULTS
* PLUS SIEMENS BACKLOG
* PLUS NEW SCITEC RUN RATE
NOVAMETRIX MEDICAL SYSTEMS
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SUMMARY (CONT.)
* GOING FORWARD EBITDA/CASH FLOW ESTIMATES ARE BASED ON ACTUAL HISTORICAL
RESULTS
* CASH FLOW SHOULD AMORTIZE MOST OF THE DEBT WITHIN 5 YEARS
* DEBT AMORTIZATION ACCELERATES EARNINGS GROWTH
* BOTH ANDROS AND NOVAMETRIX HAVE SIGNIFICANT GROWTH OPPORTUNITIES
NOVAMETRIX MEDICAL SYSTEMS
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A VOTE FOR THE ACQUISITION PROPOSAL IS A VOTE FOR ACCELERATED GROWTH
VOTE FOR THE MERGER ON THE PROXY CARD