SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
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
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 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 Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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.)
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act 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:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
[LOGO]
November 1, 1996
Dear Stockholders:
By now you should have received our proxy statement, which we mailed to all
stockholders several days ago. The proxy statement contains important
information concerning business to be conducted at our annual meeting on
November 25, 1996, including a vote by stockholders on the merger with Andros
Inc.
We are sending you the enclosed summary of the reasons why your Board of
Directors unanimously believes the merger will enhance stockholder value. We
hope that after reviewing this summary, together with our proxy statement, you
will agree that the merger is in the best interests of the Novametrix
stockholders and should be approved.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE MERGER, FOR THE
COMPANY'S NOMINEES FOR CLASS A DIRECTORS AND FOR THE OTHER PROPOSALS IN THE
COMPANY'S PROXY STATEMENT. YOUR VOTE IS IMPORTANT, AND WE ASK THAT YOU PROMPTLY
COMPLETE, SIGN, DATE AND RETURN THE WHITE PROXY CARD THAT WAS ENCLOSED WITH OUR
PROXY STATEMENT. AN ADDITIONAL WHITE PROXY CARD HAS BEEN ENCLOSED FOR YOUR
CONVENIENCE.
WE STRONGLY URGE YOU NOT TO SIGN OR RETURN ANY OF THE GREEN PROXY CARDS YOU
RECEIVE FROM THE 13D GROUP.
YOU CAN REVOKE ANY PROXY YOU HAVE SENT TO THE 13D GROUP BY SIGNING, DATING
AND RETURNING THE COMPANY'S WHITE PROXY CARD, USING EITHER THE ENCLOSED ENVELOPE
OR THE ENVELOPE THAT WAS ENCLOSED WITH OUR PROXY STATEMENT.
ONLY YOUR LATEST DATED PROXY COUNTS.
I believe the Andros merger provides an unparalled opportunity for
Novametrix and its stockholders, and I urge you to approve it.
Thank you for your continued support.
Sincerely yours,
/s/ William J. Lacourciere
William J. Lacourciere
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SUMMARY OF NOVAMETRIX PROXY
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
- FOR the acquisition of Andros Inc.
- FOR the election of the Company's nominees to the Board of Directors,
Michael J. Needham and Joseph A. Vincent.
- FOR a long term incentive plan for key employees of the Company.
- FOR the selection of Ernst & Young LLP as our auditors.
YOUR VOTE IS IMPORTANT . . . WE NEED YOUR SUPPORT
BE SURE TO VOTE THE COMPANY'S WHITE PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE.
THE COMPANY'S PROXY STATEMENT MAILED TO YOU PREVIOUSLY CONTAINS IMPORTANT
INFORMATION CONCERNING THE BUSINESS TO BE CONDUCTED AT OUR ANNUAL MEETING AND
SHOULD BE READ CAREFULLY.
WHY IS THE ACQUISITION OF ANDROS IMPORTANT?
- The acquisition should TRIPLE revenues.
The market that Novametrix sells to is consolidating into larger
purchasing groups. It is becoming more difficult for small
companies like Novametrix to compete in this environment. REVENUES
IN EXCESS OF $75 MILLION(1) will substantially improve the
Company's opportunity to conduct business with large hospital
groups.
- The acquisition should more than DOUBLE EARNINGS PER SHARE (EPS).
In the next fiscal year EPS should more than double(2) compared to
last fiscal year. EPS is the most significant factor used by the
financial community to determine the value of a company's stock.
- The acquisition should more than QUADRUPLE cash flow (EBITDA).
In the next fiscal year, EBITDA (earnings before interest, taxes,
depreciation and amortization) should more than quadruple from $3.4
million to approximately $16 million.
- The acquisition should increase NOVAMETRIX' MARKET VISIBILITY.
REVENUES GREATER THAN $75 MILLION AND A SUBSTANTIAL INCREASE IN
MARKET CAPITALIZATION(3) should improve Novametrix' visibility in
the financial community and should attract interest by more
institutional funds and financial analysts.
- Genstar Capital Partners LLP will be a 38%(4) stockholder in the new
Company.
Genstar acquired Andros in March of this year. Genstar is an
investment group with extensive experience in buying companies and
growing the companies' revenues and profits.
Genstar brings a new dimension to Novametrix, offering the
potential for ACCELERATED GROWTH THROUGH FUTURE ACQUISITIONS.
- Andros adds a TECHNOLOGY boost to Novametrix.
Andros' Anesthetic Agent monitoring technology broadens Novametrix'
product offering to both our direct customer base and to our OEM
(original equipment manufacturer) partners.
- Andros BROADENS our OEM customer base.
All of Andros' SALES are to OEM customers, some of whom do not
presently have an OEM agreement with Novametrix.
HOW SIGNIFICANT ARE THE RISKS ASSOCIATED WITH THIS ACQUISITION?
- The Company assumes approximately $42 million of Andros debt.
DEBT VS. CASH FLOW
It is projected the combined company will produce a very positive
EBITDA of approximately 20% of revenue; approximately $16 million
in the next fiscal year. A ratio of combined debt ($48 million) to
EBITDA ($16 million annually) of 3.0 to 1(5) is considered a
favorable lending ratio by most banks. Presently, two banks have
proposed to finance the debt at very attractive interest rates.
At present levels of revenue and earnings, most of the debt will be
amortized in five years. As revenue and earnings grow, debt
amortization will be accelerated.
- The increased shares outstanding will dilute existing stockholders'
ownership by 38% and will give Genstar substantial voting power.
THE ACQUISITION IS PROJECTED TO BE NON-DILUTIVE
Although the existing shareholder position will be reduced by 38%,
the acquisition is NON-DILUTIVE SINCE EARNINGS PER SHARE ARE
PROJECTED TO INCREASE by over 100% in fiscal 1998 compared to
Novametrix fiscal 1996 earnings, on an increased number of shares
outstanding.
We expect Genstar's representatives on the Board of Directors will
use their voting power to enhance stockholder value, since they are
professional investors motivated to increase the value of the
Company's stock.
- The unsatisfactory performance of Andros in fiscal 1995.
IMPROVED ANDROS PERFORMANCE SINCE GENSTAR ACQUISITION
In fiscal 1994 Andros revenues were buoyed by an incremental, one
time, $14 million sale of automotive products. During that year the
company substantially stepped up overhead expense and made an
acquisition on unfavorable terms.
When sales returned to their normal levels in fiscal 1995, the
incremental overhead burden negatively impacted EPS and cash
flow(6).
Andros' unsatisfactory performance made them an attractive
acquisition for Genstar, which has experience turning around
under-performing companies.
Genstar immediately reduced Andros' overhead and made book
adjustments for the pro-forma year ended 4/30/96 resulting in
substantial losses(7); which properly positions Andros for the
future.
Andros' book value is a function of accounting adjustments made
since the Genstar acquisition, NOT a reflection of the value of the
business(8).
Since the Genstar acquisition, Andros improved its performance in
the quarter ended July 31, 1996(9).
Andros has signed TWO LONG-TERM MEDICAL OEM AGREEMENTS within the
last 12 months which should substantially improve revenue and
earnings in future periods.
- The difficulty with integrating the two companies and the challenge of
managing bi-coastal operations.
BUSINESS IS SIMILAR TO NOVAMETRIX
Andros uses similar technology, non-dispersive infra-red
spectroscopy, employs similar engineers, uses similar manufacturing
processes and sells its products to many of the same customers.
Novametrix presently manages a division in the State of Washington
and is accustomed to bi-coastal management.
Novametrix is not familiar with the environmental and automotive
markets and will depend in this area on Andros' marketing
expertise. This was Andros' original market and product area and
they retain qualified people to develop these products and markets.
WHY IS THE ACQUISITION SO IMPORTANT?
- The Company's revenue should TRIPLE
- The Company's after tax earnings should MORE THAN DOUBLE
- The Company's cash flow should MORE THAN QUADRUPLE
- The Company gains critical size, providing
- MARKET LEVERAGE
- FINANCIAL COMMUNITY VISIBILITY
- The Company gains Genstar as a partner which wants to DRIVE SHAREHOLDER
VALUE
- The Company's technology base is STRENGTHENED
- The Company's market opportunity is BROADENED
- Andros has STRONG GROWTH prospects
The Board of Directors believes a vote FOR the merger is a vote for
ACCELERATED GROWTH.
TWO DIRECTORS HAVE BEEN NOMINATED FOR REELECTION -- MICHAEL J. NEEDHAM AND
JOSEPH A. VINCENT
Michael Needham is Chairman and CEO of SimEX Inc., an international designer
and developer of entertainment attractions. Mr. Needham was formerly
President of Helix Investments Ltd., a $450 million venture capital fund
which made a number of investments in medical technology companies. Mr.
Needham's 15 year history with the Company, his insight into medical
products companies, his financial background and his management experience
make him an invaluable member of the Board of Directors. Mr. Needham owns
2,000 shares of Novametrix stock.
Joseph Vincent, a certified management accountant (CMA), presently serves as
the Company's Vice President of Finance and Chief Financial Officer. Mr.
Vincent has 22 years of diversified experience in the medical products
industry, 13 of them with Novametrix. Mr. Vincent has served the Institute
of Management Accountants in many capacities including National Vice
President and currently chairs the Pension Subcommittee. He is recognized as
a leader in this 85,000 member organization, the largest management
accounting organization in the world. Mr. Vincent's unique background and
detailed knowledge of Novametrix' financial circumstances make him an
irreplaceable member of the Board of Directors. Mr. Vincent presently owns
50,716 shares of Novametrix stock.
The Board of Directors urge you to vote FOR both of our nominees.
LONG TERM INCENTIVE PLAN
In order to attract and retain key employees, a comprehensive compensation
program, including incentive awards, is essential to remain competitive in
the marketplace and to attract highly capable people.
The Long Term Incentive Plan provides a very flexible means of providing
such incentives through a variety of stock-based awards. ALL employees will
be eligible for awards, subject to LIMITS on the number of shares that may
be awarded to directors.
The Board of Directors recommends a vote FOR the Long Term Incentive Plan.
RATIFICATION OF ERNST & YOUNG LLP AS AUDITORS
Ernst & Young has been the Company's outside audit firm since the Company's
inception, and the Board of Directors considers them eminently qualified.
The Board of Directors recommends a vote FOR the ratification of Ernst &
Young LLP as the Company's auditors.
IF YOU HAVE ANY COMMENTS OR QUESTIONS PLEASE CALL NOVAMETRIX AND ASK ABOUT THE
PROXY AT (800) 243-3444 OR GEORGESON & COMPANY, THE FIRM ASSISTING US IN THE
SOLICITATION OF PROXIES, AT (800) 223-2064.
THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS CONCERNING POST-MERGER
OPERATIONS OF NOVAMETRIX. THERE ARE MANY IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS
HEREIN, INCLUDING, WITHOUT LIMITATION, DIFFICULTIES THAT MAY BE ENCOUNTERED IN
INTEGRATING THE OPERATIONS OF NOVAMETRIX AND ANDROS, WHICH DIFFICULTIES WILL BE
EXACERBATED BY THE NECESSITY OF COORDINATING GEOGRAPHICALLY SEPARATE
ORGANIZATIONS, FUNDAMENTAL CHANGES OCCURRING IN THE HEALTH CARE INDUSTRY AS A
RESULT OF ECONOMIC FORCES, REGULATORY INFLUENCES AND POLITICAL INITIATIVES, THE
CONTINUING TREND TOWARDS MORE STRINGENT REGULATORY OVERSIGHT OF MEDICAL DEVICE
MANUFACTURERS, UNCERTAINTIES RELATED TO PATENTS AND OTHER PROPRIETARY RIGHTS,
INTENSE COMPETITION IN THE INDUSTRIES IN WHICH NOVAMETRIX AND ANDROS OPERATE,
DIFFICULTIES IN DEVELOPING AND INTRODUCING NEW PRODUCTS AND THE INCREASING
FOREIGN SALES OF THE COMBINED COMPANY AND THE RESULTANT EXPOSURE TO FOREIGN
CURRENCY FLUCTUATIONS. MANY OF THESE IMPORTANT FACTORS ARE OUTSIDE NOVAMETRIX'
CONTROL AND COULD CAUSE THE FORWARD-LOOKING STATEMENTS TO BE MATERIALLY
INACCURATE, AND NO ASSURANCE CAN BE PROVIDED AS TO ANY FUTURE FINANCIAL RESULTS.
IN ADDITION, BECAUSE THE MARKETS IN WHICH NOVAMETRIX AND ANDROS OPERATE ARE
HIGHLY COMPETITIVE AND BECAUSE OF THE INHERENT UNCERTAINTIES ASSOCIATED WITH
MERGING TWO COMPANIES, NO ASSURANCE CAN BE PROVIDED THAT NOVAMETRIX WILL BE ABLE
TO REALIZE FULLY THE REVENUE AND COST SAVINGS OPPORTUNITIES THAT NOVAMETRIX
CURRENTLY EXPECTS AFTER THE MERGER OR THAT SUCH REVENUE SYNERGIES AND COST
SAVINGS WILL BE REALIZED AT THE TIMES CURRENTLY ANTICIPATED. FURTHER, NO
ASSURANCE CAN BE PROVIDED THAT COST SAVINGS THAT ARE REALIZED WILL NOT BE OFFSET
BY LOSSES IN REVENUES. NOVAMETRIX DOES NOT PRESENTLY INTEND TO UPDATE PUBLICLY
THE FORECASTS INCLUDED HEREIN OR PROVIDE SIMILAR FORECASTS IN THE FUTURE.
FOOTNOTES:
(1) Novametrix fiscal 1998 revenues are expected to exceed $75 million compared
to fiscal 1996 revenues of $25 million.
(2) Fiscal 1998 earnings are expected to exceed $.34 per share on a fully taxed
basis, compared to fully taxed fiscal 1996 earnings per share of $.17 ($.26
pre-tax) assuming a 36% tax rate.
(3) Market capitalization refers to shares outstanding multiplied by the market
price, expected initially to be approximately $68 million (11,824,000 X
$5.75 @ 9/27/96).
(4) The Merger Agreement provides for the issuance of up to an additional 5% of
the shares of Novametrix Common Stock in the event that Andros' revenue
exceeds $48.9 million by $8.7 million or the combined company's consolidated
EBITDA exceeds $16.3 million by $3.3 million, for fiscal 1998.
(5) EBITDA is used by many banks and financial institutions as a measure of a
company's ability to generate cash flows.
(6) Overhead spending grew from $9.1 million in fiscal 1993 to $15.3 million in
fiscal 1995.
(7) Pro-forma results reflect these substantial restructuring costs (reference
page 16 of Proxy Statement).
(8) Andros' book value at July 31, 1996 of ($3.6 million) includes the book
write-off of $22.7 million of in-process research and development, which
write-off is associated with Genstar's acquisition of Andros.
(9) Overhead spending has been reduced to an annualized rate of approximately
$9.2 million for the quarter ended July 31, 1996.
IMPORTANT
1. Be sure to vote on the WHITE proxy card. We strongly urge you not to sign or
return any green proxy cards you receive from the 13D group, even as a
protest vote against their nominees. Remember, each properly executed proxy
you submit revokes all prior proxies.
2. If any of your shares are held in the name of a bank, broker or other
nominee, please contact the party responsible for your account and instruct
them to vote on the WHITE proxy card "FOR" the Novametrix board nominees and
"FOR" the Andros merger proposal.
3. IF YOU HAVE ALREADY SIGNED AND RETURNED THE 13D GROUP'S PROXY YOU CAN REVOKE
THAT PROXY BY SIGNING AND RETURNING A LATER-DATED WHITE PROXY WHICH IS
INCLUDED WITH THE ENCLOSED PROXY MATERIALS. ONLY YOUR LATEST DATED PROXY
COUNTS.
If you have any comments or questions please feel free to call us at (800)
243-3444 or Georgeson & Company, the firm assisting us in the solicitation of
proxies, at (800) 223-2064. Your opinions are important to us.