<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 1, 1998
[ ] 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 20-8969
NOVAMETRIX MEDICAL SYSTEMS INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0977422
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5 Technology Drive, Wallingford, CT 06492
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (203) 265-7701
--------------------------------------------------------------------------
(Former name, former address and former fiscal year if changed since last
report)
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 _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $0.01 par value: 8,812,993 shares issued and outstanding as of
February 28, 1998
Page 1 of 22
Index to Exhibits at Page 14
<PAGE> 2
NOVAMETRIX MEDICAL SYSTEMS INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Condensed Consolidated Statements of Income -
Quarters ended February 1, 1998 and January 26, 1997 3
Nine months ended February 1, 1998 and January 26, 1997 4
Condensed Consolidated Balance Sheets -
February 1, 1998 and April 27, 1997 5
Condensed Consolidated Statements of Cash Flows -
Nine months ended February 1, 1998 and January 26, 1997 7
Notes to Condensed Consolidated Financial Statements -
February 1, 1998 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
Page 2 of 22
<PAGE> 3
PART I - FINANCIAL INFORMATION
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
FEBRUARY 1, 1998 JANUARY 26, 1997
---------------- ----------------
<S> <C> <C>
Net sales $ 7,378,240 $ 7,255,157
Costs and expenses:
Cost of products sold 3,307,401 3,212,517
Research and product development 884,429 814,182
Selling, general and administrative 2,433,411 2,342,447
Interest 5,267 64,896
Non-recurring expense 2,149,910
Other expense 4,737 1,065
----------- -----------
6,635,245 8,585,017
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 742,995 (1,329,860)
Income tax provision (benefit) 208,000 (50,000)
----------- -----------
NET INCOME (LOSS) $ 534,995 $(1,279,860)
=========== ===========
Per common share amounts:
Basic $ 0.06 $ (0.18)
Diluted $ 0.06 $ (0.18)
Weighted average common shares outstanding:
Basic 8,650,811 7,168,117
Diluted 9,336,310 7,168,117
</TABLE>
See accompanying notes.
Page 3 of 22
<PAGE> 4
PART I - FINANCIAL INFORMATION
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 1, 1998 JANUARY 26, 1997
---------------- ----------------
<S> <C> <C>
Net sales $ 22,250,661 $ 20,268,504
Costs and expenses:
Cost of products sold 9,700,283 8,791,361
Research and product development 2,595,742 2,456,138
Selling, general and administrative 7,467,567 6,883,759
Interest 109,599 163,955
Non-recurring expense 2,149,910
Other expense 36,829 9,209
------------ ------------
19,910,020 20,454,332
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 2,340,641 (185,828)
Income tax provision (benefit) 655,000 (250,000)
------------ ------------
NET INCOME $ 1,685,641 $ 64,172
============ ============
Per common share amounts:
Basic $ 0.21 $ 0.01
Diluted $ 0.18 $ 0.01
Weighted average common shares outstanding:
Basic 7,928,820 6,929,115
Diluted 9,377,118 8,309,694
</TABLE>
See accompanying notes.
Page 4 of 22
<PAGE> 5
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS FEBRUARY 1, 1998 APRIL 27, 1997
------ ---------------- --------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,447,870 $ 236,808
Accounts receivable, less
allowance for losses of $250,000 7,803,964 8,328,515
Inventories:
Finished products 2,299,743 1,741,426
Work in process 1,904,261 1,851,736
Materials 3,252,164 3,241,653
------------ ------------
7,456,168 6,834,815
Deferred income taxes, net 2,575,000 2,450,000
Prepaid expenses 413,609 313,220
------------ ------------
TOTAL CURRENT ASSETS 19,696,611 18,163,358
Equipment 8,329,325 7,683,006
Accumulated depreciation (deduction) (5,837,777) (5,396,091)
------------ ------------
2,491,548 2,286,915
License, technology, patents and other 7,832,370 7,849,401
Accumulated amortization (deduction) (3,701,225) (3,675,242)
------------ ------------
4,131,145 4,174,159
Deferred income taxes, net 1,868,000 2,600,000
------------ ------------
$ 28,187,304 $ 27,224,432
============ ============
</TABLE>
See accompanying notes.
Page 5 of 22
<PAGE> 6
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - (CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY FEBRUARY 1, 1998 APRIL 27, 1997
- ------------------------------------ ---------------- --------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 1,520,554 $ 2,058,142
Accrued expenses 1,174,843 2,299,709
Current portion of capital lease obligations 33,441 79,380
Current portion of long-term debt 2,895,000
------------ ------------
TOTAL CURRENT LIABILITIES 2,728,838 7,332,231
Capital lease obligations, less current portion 96,929 198,942
Long-term debt, less current portion 583,333
Redeemable Preferred Stock, $1 par value,
40,000 shares at redemption and liquidation value 1,000,000
at April 27, 1997
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value, authorized
20,000,000 shares, issued 9,151,445
at February 1, 1998 and 7,525,539 at April 27, 1997,
including 338,452 Treasury shares 91,514 75,255
Additional paid-in capital 34,301,928 28,737,217
Retained-earnings deficit (6,544,867) (8,215,508)
Treasury stock (2,487,038) (2,487,038)
------------ ------------
25,361,537 18,109,926
------------ ------------
$ 28,187,304 $ 27,224,432
============ ============
</TABLE>
See accompanying notes.
Page 6 of 22
<PAGE> 7
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
FEBRUARY 1, 1998 JANUARY 26, 1997
---------------- ----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 1,685,641 $ 64,172
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Depreciation 441,913 320,555
Amortization 398,690 393,894
Deferred income tax expense (benefit) 607,000 (280,000)
Increases (decreases) in cash flows as
a result of changes in operating assets and liabilities:
Accounts receivable 577,802 (1,952,173)
Inventories (621,353) (781,955)
Prepaid expenses (100,389) (196,356)
Accounts payable (537,588) 690,852
Accrued expenses (1,124,866) 1,000,691
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,326,850 (740,320)
INVESTING ACTIVITIES
Purchases of equipment (646,546) (936,589)
Purchases of license, technology, patents and other (408,927) (84,714)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (1,055,473) (1,021,303)
FINANCING ACTIVITIES
Proceeds from borrowings 1,420,000
Principal payments on borrowings (3,626,285) (403,262)
Dividends on Preferred Stock (15,000) (22,500)
Net proceeds from sales of Common Stock 4,580,970 651,819
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 939,685 1,646,057
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,211,062 (115,566)
Cash and cash equivalents at beginning of period 236,808 283,003
----------- -----------
Cash and cash equivalents at end of period $ 1,447,870 $ 167,437
=========== ===========
NON-CASH INVESTING ACTIVITIES:
Capital lease obligation $ 325,387
</TABLE>
See accompanying notes.
Page 7 of 22
<PAGE> 8
NOVAMETRIX MEDICAL SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FEBRUARY 1, 1998
NOTE 1 -- BASIS OF PRESENTATION: The accompanying unaudited condensed
consolidated financial statements of Novametrix Medical Systems Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
Operating results for the quarter and nine months ended February 1, 1998 are
not necessarily indicative of the results that may be expected for the year
ending May 3, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended April 27, 1997.
NOTE 2 -- PER SHARE AMOUNTS: In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share". The Statement simplifies the standards for computing
earnings per share and improves their comparability to international standards.
The Company adopted this Standard during the fiscal quarter ended February 1,
1998 as required and has restated earnings per share for all prior periods
presented to conform to this Standard.
Basic earnings per share is computed by dividing net income less Preferred Stock
dividends paid by the weighted average number of shares of Common Stock
outstanding during the period. Diluted earnings per share is computed by
dividing net income by the weighted average number of shares of Common Stock and
dilutive common stock equivalents outstanding during the period. Common stock
equivalents consist of the Company's Preferred Stock, stock options, warrants
and shares subscribed under the Company's employee stock purchase plan. The
computations of dilutive common stock equivalents are based on the if-converted
method for the Preferred Stock and on the treasury stock method for the other
common stock equivalents using the average market price for each period
presented.
NOTE 3 - CONTINGENCIES: The Company is a party to various legal proceedings
generally incidental to its business. Management believes that none of such
legal proceedings will have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.
NOTE 4 - CAPITAL STOCK: On September 26, 1997, 40,000 shares of Preferred Stock,
Series B, held by the Company's primary lender, were converted into 444,444
shares of the Company's Common Stock.
Page 8 of 22
<PAGE> 9
NOVAMETRIX MEDICAL SYSTEMS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Operating results for both the quarter and nine months ended February 1,
1998 improved compared to the corresponding periods of the prior fiscal year
ended January 26, 1997. Net income for the quarter ended February 1, 1998
increased to approximately $535,000 or $0.06 per basic and diluted share
compared to a loss of approximately $(1,280,000) or ($0.18) per share (basic and
diluted) for the quarter ended January 26, 1997. Excluding a write-off
associated with a planned merger and the recognition of a deferred income tax
benefit, net income for the third quarter of the prior year would have been
approximately $525,000 or $0.06 per share on a fully taxed and diluted basis.
Net income for the nine months ended February 1, 1998 increased to approximately
$1,686,000 or $0.21 per basic share and $0.18 per diluted share compared to net
income of approximately $64,000 or $0.01 per share (basic and diluted) for the
nine months ended January 26, 1997. Net income for the first nine months of
fiscal 1997, excluding the write-off for the planned merger and deferred income
tax benefits, would have been approximately $1,257,000 or $0.15 per share on a
fully taxed and diluted basis.
Net sales for the third quarter of fiscal 1998 increased 2% to
approximately $7,378,000 compared to net sales of approximately $7,255,000 for
the third quarter of fiscal 1997. The increase primarily resulted from an
increase in domestic sales partially offset by an expected decrease in sales to
original equipment manufacturers (OEM). Net sales for the nine months ended
February 1, 1998 increased 10% to approximately $22,250,000 compared to net
sales of approximately $20,268,000 for the first nine months of fiscal 1997.
Domestic Sales rebounded in the third quarter to return to the same level as
the prior year for the nine-month comparisons. The increase in net sales for
the nine-month period was primarily led by an increase in OEM sales and
international sales.
Cost of products sold as a percentage of net sales was approximately 44.8%
and 43.6%, respectively, for the third quarter and first nine months of fiscal
1998 as compared to 44.3% and 43.4% for the comparative periods of the prior
fiscal year. The Company is continuing to pursue cost of sales improvements
through engineering enhancements and manufacturing efficiencies.
Research and product development ("R&D") expenses increased by
approximately $70,000 or 9% for the three months ended February 1, 1998 and
$140,000 or 6% for the nine months ended February 1, 1998 compared to the
corresponding periods of the prior fiscal year. The increase for both periods
was primarily due to higher levels of salaries and related fringe benefits,
partially offset by reduced expenses for outside professional services. The
Company expects to maintain approximately the same levels of R&D expense as a
percentage of sales for the remainder of the fiscal year.
Selling, general and administrative ("S,G&A") expenses increased
approximately $91,000 or 4% for the third quarter of fiscal 1998 compared to the
third quarter of fiscal 1997. The increase was primarily generated by marketing
promotional related expenditures and administrative expenses
Page 9 of 22
<PAGE> 10
including legal, accounting and insurance related costs. S,G & A expenses
increased approximately $584,000 or 8% for the first nine months of fiscal 1998
compared to the first nine months of fiscal 1997. Increased sales and marketing
expenses, including salaries, related fringe benefits and promotional
expenditures, and increased administrative expenses, including salaries, related
fringe benefits and insurance, were partially offset by reduced service overhead
expenses.
Interest expense decreased by approximately $60,000 and $54,000,
respectively, for the quarter and nine months ended February 1, 1998 as compared
to the quarter and nine months ended January 26, 1997 reflecting the Company's
elimination of its bank debt and a portion of its capital lease obligations
during October 1997.
Income taxes of $208,000 and $655,000, respectively, are recorded on a
fully taxed basis for the three months and nine months ended February 1, 1998.
Net deferred tax benefits of $50,000 and $250,000 were recorded for the three
months and nine months ended January 26, 1997 as a result of a reduction in the
Company's deferred tax asset valuation allowance. Due to improvements in the
Company's business performance, the Company reduced its valuation allowance
during fiscal 1996 and fiscal 1997 totaling $1,020,000 and $3,864,000,
respectively, and began recording income tax expense on a fully-taxed basis for
financial reporting purposes during the first quarter of fiscal 1998. Due to
significant net operating loss carryforwards for federal income tax purposes,
the Company expects income taxes payable to be minimal for fiscal 1998.
Except for orders pursuant to long-term OEM agreements, the Company
traditionally ships its products on a current basis. As such, the Company does
not consider its backlog levels to be a meaningful indicator of future sales.
LIQUIDITY AND SOURCES OF CAPITAL
The Company had working capital of approximately $16,968,000 at February 1,
1998 compared to approximately $10,831,000 at April 27, 1997. The increase in
working capital of approximately $6,137,000 was primarily generated by funds
provided from operations; the exercises of options and warrants; increases in
inventory of approximately $525,000; decreases in accrued expenses and accounts
payable of approximately $1,662,000; and debt payments of approximately
$3,626,000 which were partially offset by decreases in accounts receivable of
approximately $525,000. As a result, the Company's current ratio increased to
7.2 to 1 at February 1, 1998 from 2.5 to 1 at April 27, 1997.
Approximately $1,327,000 of cash was provided by operations for the nine
months ended February 1, 1998 as compared to approximately $740,000 of cash used
by operations for the corresponding period of the prior fiscal year. Income
before income taxes, depreciation and amortization and decreases in accounts
receivable, partially offset by increases in inventory and reductions in
accounts payable and accrued expenses, were primarily responsible for the
improvement.
The Company expects cash from operations to adequately fund its planned
operating requirements for the balance of fiscal 1998 and believes, that
additional funds, if needed, could be obtained from the Company's revolving
credit facility and from other available sources on commercially reasonable
terms.
Page 10 of 22
<PAGE> 11
This Quarterly Report contains forward-looking statements about the
Company's projected operating results. Shareholders and potential investors are
cautioned that such statements are predictions and that actual events or results
may vary significantly. The Company's ability to achieve its projected results
is dependent upon a variety of factors, many of which are outside of
management's control. The Company does not intend to update publicly any of the
forward-looking statements contained herein.
Page 11 of 22
<PAGE> 12
PART II- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibits: The exhibits required to be filed as part of the Quarterly Report on
Form 10-Q are listed in the attached Index to Exhibits.
Reports on Form 8-K: There were no reports filed on Form 8-K filed during the
quarter ended February 1, 1998.
Page 12 of 22
<PAGE> 13
SIGNATURES
Pursuant to the requirements 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.
NOVAMETRIX MEDICAL SYSTEMS INC.
Dated: March 16, 1998 s/WILLIAM J. LACOURCIERE
-------------- -----------------------------
William J. Lacourciere
Chairman of the Board,
President and
Chief Executive Officer
Dated: March 16, 1998 s/JEFFERY A. BAIRD
-------------- -----------------------------
Jeffery A. Baird
Chief Financial Officer and
Principal Accounting Officer
Page 13 of 22
<PAGE> 14
INDEX TO EXHIBITS
PAGE
10 (ii) Amendment dated as of November 24, 1997 to Employment 15
Agreement dated as of June 1, 1988 between the Company
and William J. Lacourciere
11 Statement Re: Computation of Per Share Earnings 20
27 Financial Data Schedule 22
Page 14 of 22
<PAGE> 1
AMENDMENT TO EMPLOYMENT AGREEMENT
Amendment dated as of November 24, 1997 to Employment
Agreement (the "Employment Agreement") dated as of June 1, 1988 between
NOVAMETRIX MEDICAL SYSTEMS INC., a Delaware corporation (the "Company"), and
WILLIAM J. LACOURCIERE (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has been employed by the Company since
1978, has been President of the Company since 1986 and has been Chairman,
President and Chief Executive Officer of the Company since 1991; and
WHEREAS, in view of his long service to the Company and in
consideration of his continued service to the Company, the Company desires to
provide the Employee with a retirement benefit on the terms hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises, the Company
and the Employee hereby agree as follows:
A. Section 6 of the Employment Agreement is hereby
amended by adding a new Section 6.8 at the end thereof which
shall read as follows:
"6.8 Retirement. (a) The Employee may retire from the Company
upon, or at any time subsequent to, his attaining age 65. In the event
of retirement of the Employee as provided in this Section 6.8(a),
whether during the term of this Agreement or at any time subsequent to
the expiration or termination of this Agreement, the Company shall pay
the Employee a Retirement Benefit in an amount (the "Normal Retirement
Benefit") equal to three times the Employee's average annual cash
compensation (salary and bonus) during the five (5) most recent taxable
years of the Company ending prior to the date of retirement.
Page 15 of 22
<PAGE> 2
2
(b) The Employee may also retire from the Company upon, or at
any time subsequent to, his attaining age 62, and prior to his
attaining age 65, upon six (6) months' prior notice to the Company. In
the event of retirement of the Employee as provided in this Section
6.8(b), whether during the term of this Agreement or at any time
subsequent to the expiration or termination of this Agreement, the
Company shall pay the Employee a Retirement Benefit in an amount equal
to the Applicable Percentage (as determined below) of three times the
Employee's average annual cash compensation (salary and bonus) during
the five (5) most recent taxable years of the Company ending prior to
the date of retirement:
Applicable
If Retirement Occurs Percentage
-------------------- ----------
Upon or after attaining age 62 90.00%
but before attaining age 63
Upon or after attaining age 63 93.33%
but before attaining age 64
Upon or after attaining age 64 96.66%
but before attaining age 65
(c) The Retirement Benefit shall be payable in thirty-six (36)
equal monthly installments commencing on the first day of the month
following the month in which the date of retirement occurs and
continuing thereafter on the first day of each succeeding month until
paid in full. The Employee may elect to have the Retirement Benefit
paid over a longer period than thirty-six (36) months (but not
exceeding one hundred twenty (120) months), such election to be made by
notice to the Company given not later than the date of retirement. If
the Employee dies following commencement of payment of the Retirement
Benefit but before payment of all installments of the Retirement
Benefit, the remaining installments shall be paid by the Company to the
Employee's spouse or, if she shall not be then living or if she dies
before payment of all such installments, to the Employee's estate,
until paid in full.
(d) In the event of the death of the Employee after the date
hereof while employed by the Company and prior to commencement of
payment of the Retirement Benefit, whether during the term of this
Agreement or at any time subsequent to the expiration or termination of
this Agreement, and
Page 16 of 22
<PAGE> 3
3
notwithstanding the provisions of Section 6.1 of this Agreement, the
Company shall pay a Survivor's Retirement Benefit to the Employee's
spouse or, if she shall not be then living, to the Employee's estate.
The Survivor's Retirement Benefit shall be in the same amount as the
Retirement Benefit which would have been payable to the Employee if he
had retired on the date of his death, except that if the Employee dies
prior to attaining age 62 the Survivor's Retirement Benefit shall be an
amount determined as if the Employee had attained age 62 on the date of
his death. The Survivor's Retirement Benefit shall be payable in
thirty-six (36) equal monthly installments commencing on the first day
of the month following the month in which the date of death of the
Employee occurs and continuing thereafter on the first day of each
succeeding month until paid in full. If the Employee's spouse dies
before payment of all installments of the Survivor's Retirement
Benefit, the remaining installments shall be paid by the Company to the
Employee's spouse's estate, until paid in full.
(e) The obligation of the Company to pay the Retirement
Benefit to the Employee, his spouse or his estate is an unfunded
promise of the Company. Payment of the Retirement Benefit shall be made
from the general assets of the Company. No person shall have or acquire
any interest in any specific assets of the Company as a result of this
Agreement. The rights of the Employee, his spouse and his estate under
this Agreement shall be no greater than the rights of an unsecured
general creditor of the Company.
(f) The Employee, his spouse and his estate shall not have any
power or right to transfer, assign, anticipate, hypothecate or
otherwise encumber any part or all of the Retirement Benefit payable
hereunder. The Retirement Benefit shall not be subject to seizure by
any creditor of the Employee, his spouse or his estate, by a proceeding
at law or in equity. The Retirement Benefit is not transferable by
operation of law in the event of the bankruptcy or insolvency of the
Employee, his spouse or his estate. Any such attempted assignment or
transfer shall be void."
B. Section 19 of the Employment Agreement is hereby amended by
adding the following clause after the words "termination of this Agreement" and
before the words "shall survive":
Page 17 of 22
<PAGE> 4
4
" . . . and under Section 6.8 of this Agreement in the event
of retirement or death of the Employee subsequent to the
expiration or termination of this Agreement, . . ."
C. The Employment Agreement as hereby amended
continues in full force and effect.
D. This Amendment may be executed in counterparts.
* * *
Page 18 of 22
<PAGE> 5
5
IN WITNESS WHEREOF, the Company and the Employee have executed
this Amendment.
NOVAMETRIX MEDICAL SYSTEMS INC.
By /s/ Joseph A. Vincent
-----------------------------
Executive Vice President and
Chief Operating Officer
/s/ William J. Lacourciere
-----------------------------
William J. Lacourciere
Page 19 of 22
<PAGE> 1
EXHIBIT 11
NOVAMETRIX MEDICAL SYSTEMS INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (1)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
02-01-98 01-26-97 02-01-98 01-26-97
----------- ----------- ----------- -----------
BASIC EARNINGS PER SHARE:
<S> <C> <C> <C> <C>
Net income (loss) $ 534,995 $(1,279,860) $ 1,685,641 $ 64,172
Preferred Stock dividends (7,500) (15,000) (22,500)
----------- ----------- ----------- -----------
Income (loss) available to common
shareholders 534,995 (1,287,360) 1,670,641 41,672
Weighted average number of shares of
Common Stock outstanding 8,650,811 7,168,117 7,928,820 6,929,115
Per common share amounts: $ 0.06 $ (0.18) $ 0.21 $ 0.01
=========== =========== =========== ===========
DILUTED EARNINGS PER SHARE:
Net income (loss) $ 534,995 $(1,279,860) $ 1,685,641 $ 64,172
Weighted average number of shares of
Common Stock outstanding 8,650,811 7,168,117 7,928,820 6,929,115
Net effect of dilutive common stock
equivalents (2),(3) 685,499 1,448,298 1,380,579
----------- ----------- ----------- -----------
Total weighted average number of
shares of Common Stock and dilutive
common stock equivalents 9,336,310 7,168,117 9,377,118 8,309,694
Per common share amounts: $ 0.06 $ (0.18) $ 0.18 $ 0.01
=========== =========== =========== ===========
</TABLE>
Page 20 of 22
<PAGE> 2
NOVAMETRIX MEDICAL SYSTEMS INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (CONTINUED)
(1) The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" as required during the third quarter ended
February 1, 1998. Accordingly, all prior periods presented have been
restated.
(2) Common stock equivalents consist of the Company's Preferred Stock,
stock options, warrants and shares subscribed under the Company's
employee stock purchase plan. The computation of dilutive common stock
equivalents for the diluted earnings per share calculation is based on
the if-converted method for the Preferred Stock and on the treasury
stock method for the other common stock equivalents using the average
market price.
(3) For the quarter ended January 26, 1997, the calculation of diluted
earnings per share excludes common stock equivalents. Due to the loss
reported for the period, the effect of including the common stock
equivalents would have been anti-dilutive.
Page 21 of 22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED NOVAMETRIX MEDICAL SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME FOR THE NINE MONTHS ENDED FEBRUARY 1, 1998 AND THE CONDENSED CONSOLIDATED
BALANCE SHEETS AT FEBRUARY 1, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-27-1998
<PERIOD-END> FEB-01-1998
<CASH> 1,447,870
<SECURITIES> 0
<RECEIVABLES> 8,053,964
<ALLOWANCES> (250,000)
<INVENTORY> 7,456,168
<CURRENT-ASSETS> 19,696,611
<PP&E> 8,329,325
<DEPRECIATION> (5,837,777)
<TOTAL-ASSETS> 28,187,304
<CURRENT-LIABILITIES> 2,728,838
<BONDS> 96,929
0
0
<COMMON> 91,514
<OTHER-SE> 25,270,023
<TOTAL-LIABILITY-AND-EQUITY> 28,187,304
<SALES> 22,250,661
<TOTAL-REVENUES> 22,250,661
<CGS> 9,700,283
<TOTAL-COSTS> 9,700,283
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109,599
<INCOME-PRETAX> 2,340,641
<INCOME-TAX> 655,000
<INCOME-CONTINUING> 1,685,641
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,685,641
<EPS-PRIMARY> .21
<EPS-DILUTED> .18
</TABLE>
