<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant /X/
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 Section 240.14a-11(c) or Section
240.14a-12
HEALTHDYNE TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
INVACARE CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
------------------------------------------------------------------------
/ / 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:
------------------------------------------------------------------------
<PAGE>
HEALTHDYNE TECHNOLOGIES, INC.
Presentation to Shareholders
July 14, 1997
Confidential
- -----------------
Salomon Brothers
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<PAGE>
DON'T BE FOOLED - HEALTHDYNE'S BOARD
STILL REFUSES TO AUCTION THE COMPANY
- -----------------
Salomon Brothers 1
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<PAGE>
IT'S TIME TO ELECT DIRECTORS TO ACT ON YOUR BEHALF
Invacare's Board Nominees are committed to considering all bona fide
offers for Healthdyne in a prompt auction and sale.
o Over the past six months, Healthdyne has repeatedly asserted that the
Company is not for sale
o Recent comments by Healthdyne have indicated that it hoped to announce a
"value enhancing transaction" - what do they want shareholders to think
they mean by this?
o In any case, these comments still reflect no commitment on the part of the
--
Board to sell the Company
o Since January, Invacare has made every attempt to talk to management and
negotiate a transaction
o Healthdyne refused to talk for six months and then imposed onerous
conditions on Invacare that would force us to drop the tender and the
proxy contest in order to speak to the Company
o As a result, Invacare has been unfairly excluded from whatever "process"
Healthdyne is conducting to "evaluate its options"
o By contrast, Invacare's nominees are committed to promptly auctioning the
Company and achieving the best available price and terms for shareholders
to the best of their ability
o Invacare's auction process would be open to and would solicit all
---
interested parties
o Invacare's Proposals would facilitate the prompt auction and sale of
Healthdyne
o After all, it is Invacare's actions in pursuing Healthdyne that have
propelled the stock; without us, this stock would quickly return to the
sleepy status quo
ELECT INVACARE'S BOARD NOMINEES AND VOTE FOR ITS PROPOSALS TO ASSURE THAT
THE BOARD PURSUES A SALE OF THE COMPANY AND SEEKS THE BEST AVAILABLE PRICE
AND TERMS FOR SHAREHOLDERS.
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Salomon Brothers 2
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<PAGE>
DECIDE FOR YOURSELF IF HEALTHDYNE'S BOARD IS ACTING IN YOUR BEST INTERESTS
o Prior to Invacare showing any interest in Healthdyne, the Company
consistently underperformed its market comparables
o On an operating basis, Healthdyne is smaller, less profitable and slower
growing than its comparables
o For 8 straight quarters, Healthdyne had been unable to meet the market's
expectations
o First and second quarter 1997 results managed to surpass Wall Street
estimates by only $0.02 and $0.03, and then only after ignoring
surprisingly large charges ostensibly related to resisting Invacare's
premium offer
o In a period in which management was attempting to thwart Invacare's
premium offer, there are indications that they used extraordinary efforts
to bolster short term results
o Healthdyne's management and Board have used every method possible -
including appealing to the Georgia legislature and defending the "dead
hand" provision - to try to entrench themselves and take away the
shareholders' right to choose
o Can shareholders afford to trust management's ability to meet future
estimates . .
o . . . Particularly in an industry that is consolidating, and in which
short term product advantages are quickly overtaken by competitors?
o In May 1996, Petit sold 17% of his holdings at prices between $13.00 and
$14.25 per share, prices significantly less than Invacare's $15 per share
offer, which Petit and the rest of the Board termed "grossly inadequate"
o Because of the Healthdyne Board's entrenching actions, Invacare can't give
you the full choice of director Nominees you deserve at the Annual Meeting
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Salomon Brothers 3
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<PAGE>
AN AUCTION WILL ASSURE THE BEST RESULT FOR ALL SHAREHOLDERS
...Your best option is to vote for Invacare's four Nominees to
constitute a majority of the Board and to vote for Invacare's
Proposals.
o As a major shareholder of Healthdyne stock, Invacare is also interested in
achieving the best available price and terms for the Company in excess of
its offer
o Invacare owns 4.7% of Healthdyne
o In the event that a better offer is not obtained, Invacare's current offer
of $15.00 remains an excellent opportunity for shareholders
o Invacare's current offer represents a premium of approximately 70% over
Healthdyne's $8.88 closing price on December 31, 1996, the day before
Invacare made its initial acquisition proposal to Healthdyne
o This offer represents superior value for the Company and is a significant
premium when compared to current comparable public market and private
market multiples
o INVACARE'S OUTSTANDING OFFER IS ALL CASH, FULLY FINANCED AND HAS CLEARED
ANTI-TRUST REVIEW; INVACARE COULD EXECUTE A TRANSACTION EXPEDITIOUSLY
THANKS TO INVACARE'S OFFER, HEALTHDYNE'S SHARE PRICE HAS RESISTED THE
RECENT MARKET COLLAPSE.
HOW LONG WOULD THIS LAST IF INVACARE WENT AWAY?
INVACARE'S GOAL IS TO PRESENT THE SHAREHOLDERS WITH THE BEST AVAILABLE
OPTION FOR THE SALE OF HEALTHDYNE, EVEN IF INVACARE IS NOT THE SUCCESSFUL
BIDDER.
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Salomon Brothers 4
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<PAGE>
HEALTHDYNE'S STOCK PERFORMANCE
Shortly after Petit sold shares last summer, the company's stock price plummeted
to $9 per share on disappointing earnings. It stayed at this range until
Invacare rescued it by launching its premium offer in January.
[Graph of Healthdyne's daily
Stock Price and Trading Volume
from 4/11/96 through 7/10/97]
(a) 05/07/96 - 05/29/96: Petit sells 17% of his holdings at prices between
$13.00 and $14.25 per share.
(b) 06/26/96: Petit disposes of an additional 23% of his holdings for "exchange
fund" interests.
(c) 07/10/97: Stock falls 33% in a week on disappointing earnings expectations.
(d) 10/16/96: Stock rises on speculation of Apria contract. Confirmed next day.
(e) 01/02/97: Invacare makes $12.50 per share acquisition proposal privately to
Healthdyne.
(f) 01/10/97: Invacare publicly announces $12.50 per share offer to Healthdyne.
(g) 01/27/97: Invacare launches $13.00 per share tender offer.
(h) 02/03/97: Healthdyne announces disappointing fourth quarter earnings.
(i) 03/20/97: Amendment proposed to Georgia corporate law intended to thwart the
offer.
(j) 03/25/97: Georgia House of Representatives rejects amendment by 2-1
majority.
(k) 03/31/97: Invacare increases offer to $13.50 per share.
(l) 04/08/97: Healthdyne announces 1st quarter "window dressed" results of $0.16
per share, pro forma for $0.06 per share charge related to costs
associated with the offer.
(m) 06/04/97: Invacare increases offer to $15.00 per share.
(n) 06/23/97: In response to Invacare's pressure, Healthdyne announces it will
"explore alternatives" to offer, but reaffirms that company is not
for sale.
(o) 07/10/97: Healthdyne announces 2nd quarter results of $0.20 per share, pro
forma for $0.04 per share charge relating to costs associated with
the offer.
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Salomon Brothers 5
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<PAGE>
A GLIMPSE OF WHAT WOULD HAPPEN IF INVACARE WENT AWAY
During the management-entrenchment legislative initiative, Healthdyne traded
down to $11 level because the proposed legislation might have been enacted. But
as soon as the legislation was defeated, Healthdyne's stock rebounded to its
prior levels reflecting Invacare's premium bid.
[Graph showing Healthdyne's daily high, low, open and close Stock Prices from
3/10/97 through 4/4/97 with 3/21/97 (the day Healthdyne attempted to change
Georgia Legislation), 3/25/97 (the day the Georgia House voted overwhelmingly
not to accept the proposal) and 3/28/97 (Good Friday and the day the Legislation
died in committee) specially marked]
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Salomon Brothers 6
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<PAGE>
COMPARABLE TRADING OVER THE PAST YEAR
Until Invacare made its offer, Healthdyne's stock had under-performed its
comparables.
[Graph showing weekly data of Price as a Percentage of Base Period for
Healthdyne, the Home Healthcare Index (NELL, RESP, RESM, SMD, VITL) and the
S&P Industrial Average (400 Stocks) from 1/6/95 through 12/27/96]
Summary Statistics:
High Low Average Latest
Healthdyne Tech, Inc. 136% 76% 108% 87%
Home Healthcare Index: (NELL, RESP, RESM, SMD, VTL) 167% 100% 142% 148%
S&P Industrial Average (400 Stocks) 162% 100% 131% 162%
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Salomon Brothers 7
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<PAGE>
HEALTHDYNE TECHNOLOGIES, A LACKLUSTER PERFORMER
Healthdyne is...
smaller, less profitable, and slower growing
LTM REVENUES LTM EBITDA MARGIN 3 YEAR REVENUE GROWTH
NELL $737 NELL 30.6% NELL 57.9%
SMD 660 SMD 22.6 SMD 26.8
RESP 161 RESP 19.9 RESP 19.5
HDTC 136 HDTC 16.8 HDTC 15.3
VITL 92 VITL 13.6 VITL 11.9
RESM 46 RESM 9.5 RESM 3.2
- --------------------------------------------------------------------------------
LTM REVENUES LTM EBITDA MARGIN 3 YEAR REVENUE GROWTH
NELL $60 NELL 20.9% NELL 91.2%
SMD 19 SMD 15.1 SMD 51.6
RESP 19 RESP 11.9 RESP 40.9
HDTC 7 HDTC 8.1 HDTC 25.9
VITL 6 VITL 5.5 VITL 5.7
RESM 2 RESM 0.3 RESM (32.7)
- --------------------------------------------------------------------------------
Note: LTM is as of 3/31/97 for all companies except Healthdyne. For illustrative
purposes, operating statistics for Healthdyne reflect results as of
6/30/97.
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Salomon Brothers 8
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<PAGE>
FLUCTUATING RESULTS
(Dollars in Millions, Except per Share Data)
Healthdyne has failed to achieve steady quarter-to-quarter or year-to-year
growth in revenues and earnings.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
- ------------------------------------------------------------------------------------------------------------------------------------
6/30/95 6/30/96 % Change 9/30/95 9/30/96 % Change 12/31/95 12/31/96 % Change 3/31/96 3/31/97 % Change
-------------------------- -------------------------- ---------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 28.2 $ 28.6 1.4% $ 25.7 $ 29.2 13.7% $ 29.0 $ 33.1 14.1% $ 27.5 $ 35.7 29.8%
Gross Profit 10.8 11.4 5.5% 10.4 12.0 15.2% 12.0 12.4 3.3% 11.5 13.8 20.5%
Gross Margins 38.5% 40.0% 40.7% 41.2% 41.5% 37.5% 41.7% 38.7%
Operating Income $ 3.2 $ 2.7 (15.7%) $ 2.6 $ 2.7 4.5% $ 3.5 $ 2.8 (20.2%) $ 3.4 $ 4.0 15.4%
Operating Margins 11.4% 9.5% 10.0% 9.2% 12.0% 8.4% 12.5% 11.1%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THREE MONTHS ENDED
- ----------------------------------------------
6/30/96 6/30/97 % Change
---------------------------
Revenues $ 28.6 $ 38.1 38.1%
Gross Profit 11.4 16.0 39.9%
Gross Margins 40.0% 42.1%
Operating Income $ 2.7 $ 5.1 89.6%
Operating Margins 9.5% 13.5%
- ----------------------------------------------
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
- ---------------------------------------------------------------------------------------------------------------------------------
12/31/93 12/31/94 % Change 12/31/94 12/31/95 % Change 12/31/95 12/31/96 % Change
-------------------------------- --------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 68.6 $ 89.0 29.8% $ 89.0 $ 110.5 24.1% $ 110.5 $ 118.3 7.1%
Gross Profit 28.1 33.6 19.5% 33.6 43.8 30.5% 43.8 47.3 8.1%
Gross Margins 41.0% 37.7% 37.7% 39.6% 39.6% 40.0%
Operating Income $ 9.2 $ 8.7 (5.3%) $ 8.7 $ 12.2 40.1% $ 12.2 $ 11.6 (4.9%)
Operating Margin 13.4% 9.8% 9.8% 11.0% 11.0% 9.8%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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Salomon Brothers 9
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<PAGE>
HEALTHDYNE'S INABILITY TO MAKE ESTIMATES
For 8 straight quarters, Healthdyne had been unable to meet the market's
expectations. In the first two quarters of 1997, Healthdyne's pro forma
EPS finally met Wall Street's estimates, but only after ignoring
surprisingly large charges ostensibly related to Invacare's premium offer.
[Graph showing quarterly data of Healthdyne's Normalized EPS from December 1993
through June 1997 and First Call Estimates 1- quarter prior from December 1993
through December 1997]
Given management's poor track record, and the fact that the first two
quarters surpassed estimates by only $0.02 and $0.03 in a period in which
management was attempting to thwart Invacare's offer and get re-elected,
can you afford to trust management's ability to meet future estimates?
Note: *Pro Forma for per share charges relating to costs associated with
Invacare's offer [denotes Healthdyne's EPS for first, second and
third quarter of 1997 of $0.16, $0.16 and $0.20, respectively].
- ----------------
Salomon Brothers 10
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<PAGE>
RELATIVE VALUATION
Invacare's current offer is approximately 70% above Healthdyne's stock
price on December 31, 1996 immediately prior to its initial offer. It also
represents a premium to public trading values in Healthdyne's sector.
<TABLE>
<CAPTION>
Premium/ Price/Earnings Firm Value/LTM
------------------ Equity Firm LTM LTM -------------- ----------------------
Market 52 Wk. Low Value(a) Value(b) Sales Net Inc. LTM Sales EBITDA EBIT
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Healthdyne Technologies
Pre-Offer (12/31/96) @ $8.875 0% 16% $113 $142 $114 $6 20.2x 1.4x 10.1x 12.9x
Current Tender Offer @ $15.00 69 97 $202 $231 $136 $7(c) 26.5x(c) 1.7x 12.5x 15.8x
--------------------------------------------------------------------------------------------------------------------------------
Public Comparables
Nellcor Puritan Bennett $1,185 $1,156 $737 $60 18.7x 1.6x 9.3x 12.5x
ResMed 174 147 46 7 24.2 3.2 16.2 21.7
Respironics 479 484 161 19 24.8 3.0 13.3 16.3
Sunrise Medical 285 482 660 2 NM 0.7 7.7 17.1
Vital Signs 224 210 92 19 11.6 2.3 7.4 8.4
--------------------------------------------------------------------------------------------------------------------------------
LTM Mean @ 12/16/96 20.9x 2.2x 11.6x 16.0x
LTM Mean @ 07/10/97 19.8x 2.2x 10.8x 15.2x
--------------------------------------------------------------------------------------------------------------------------------
Change: Increase (Decline) (5.2%) (1.9%) (7.1%) (5.1%)
--------------------------------------------------------------------------------------------------------------------------------
Invacare
$24.00 @ 07/10/97 $735 $899 $637 $40 18.2x 1.4x l0.4x 13.3x
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Equity Value is based on the purchase of all fully diluted shares at the
offer price less any option proceeds. Includes 600,000 shares already
purchased.
(b) Firm Value equals Equity Value plus straight debt, minority interest,
straight preferred stock, all out-of-the-money convertibles, less cash.
(c) As of June 30, 1997. Pro Forma for a $0.04 per share charge related to
costs associated with the offer.
Note: 1997 & 1998 estimates are based on First Call estimates. Stock prices as
of 7/10/97.
LTM with respect to the Pre-offer is 9/30/96. LTM with respect to the Current
Offer is 3/31/97.
LTM for comparable companies is as of 3/31/97. LTM for Healthdyne is as of
6/30/97.
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Salomon Brothers 11
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<PAGE>
ACTING IN YOUR BEST INTERESTS
Although Healthdyne's financials do not readily disclose any extraordinary
efforts to boost short term earnings, we note that in the first two
quarters ....
o INVACARE HAS BEEN INFORMED THAT CERTAIN OF HEALTHDYNE'S MAJOR INDEPENDENT
SALES REPS HAD THEIR COMMISSIONS SUMMARILY REDUCED IN EARLY JANUARY AND
THAT, AS SOON AS THE FIRST QUARTER ENDED, HEALTHDYNE'S CHAIRMAN PETIT
PERSONALLY CALLED THE REPS AND REINSTATED THEIR COMMISSIONS - - WILL
HEALTHDYNE RESTATE THE FIRST QUARTER?
o INVENTORY DAYS DROPPED SHARPLY IN THE FIRST QUARTER, POSSIBLY AS A RESULT
OF CHANNEL-LOADING. INVACARE HAS BEEN INFORMED THAT SOME OF HEALTHDYNE'S
MAJOR CUSTOMERS WERE PERSUADED TO PURCHASE NOT ONLY FIRST QUARTER
REQUIREMENTS, BUT ALSO FUTURE REQUIREMENTS, THROUGH AN EXTENDED DATING
PAYMENT PROGRAM, WITH HEALTHDYNE PAYING STORAGE COSTS.
o INVACARE HAS BEEN TOLD THAT HEALTHDYNE HAS OFFERED EXTENDED PAYMENT TERMS
TO SELECT CUSTOMERS. ACCOUNTS RECEIVABLE DAYS HAVE INCREASED AND THE
COMPANY HAS PAID ITS BILLS SLOWER AS WELL. DAYS PAYABLE INCREASED FROM 47
DAYS TO 73 DAYS(A) AS THE COMPANY ATTEMPTED TO MANAGE ITS WORKING CAPITAL.
o SG&A APPEARED TO DECLINE TO 23% FROM 26%(A), BUT WAS ANY SG&A REALLY
ALLOCATED TO "MERGER-RELATED" EXPENSES AND, THEREFORE, DISREGARDED?
(a) 2nd quarter 1997 from 2nd quarter 1996.
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Salomon Brothers 12
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<PAGE>
CONSTANT DISAPPOINTMENTS
Healthdyne consistently disappointed Wall Street for 8 straight quarters
and the analysts have been embarrassed into lowering their estimates again
and again, often more than once in the same period. An instructive example
from Michael J. Weber at Wheat First Butcher Singer:
o NOVEMBER 3, 1995
"Estimates reduced somewhat. Despite some offset from the potential
of higher margins (in part due to beginning sales of the
higher-margin bi-level ventilator), we are reducing our 1996 EPS
projection from $0.79 to $0.74. We are also fine-tuning our 1995
estimate to $0.50 from $0.52."
o FEBRUARY 26, 1996
"EPS estimates somewhat reduced; still looking for notable
growth.... Thus, we are fine-tuning our 1996 estimate downward by
four cents to $0.70. We are introducing a preliminary 1997
projection of $0.85."
o MAY 3, 1996
"With the quarter, we are reducing our estimate for 1996 to $0.68
from $0.70 to reflect continued softness in the concentrator market
and the results from the first quarter In addition, we are
fine-tuning our 1997 estimate downward to $0.84....".
o OCTOBER 30, 1996
"We have further fine-tuned our EPS estimates downward for the next
five quarters.... We are taking our 1997 projection down five cents
to $0.65 (within a range of $0.60 to $0.70)".
o JANUARY 6, 1997
"We are lowering (again) our Q4 and 1997 estimates.... We are
dropping our 1997 projections from $0.65 to $0.60 to (1) build in
even more conservatism; and (2) amid very early indications of
additional pricing pressures in the industry."
CONSTANT DISAPPOINTMENTS LIKE THESE CAN'T BE CURED WITH ONLY A
COUPLE OF ON-TARGET QUARTERS.
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Salomon Brothers 13
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<PAGE>
HEALTHDYNE'S MANAGEMENT DOESN'T SEEM TO TRUST YOU
Management has taken numerous actions meant to prevent you not only from
accepting Invacare's offer, but also from exercising your right to elect
directors at the upcoming 1997 Annual Meeting and other critical
shareholder rights.
AMONG OTHER THINGS, MANAGEMENT HAS:
o IMPLEMENTED AND DEFENDED A DIRECTOR-ENTRENCHING "DEAD-HAND"
PROVISION IN THEIR POISON PILL WHICH PURPORTS TO RESERVE ONLY TO THE
CURRENT DIRECTORS OR THEIR HAND-PICKED SUCCESSORS THE RIGHT TO PULL
THE PILL - RESULTING IN INVACARE ONLY BEING ABLE TO NOMINATE
CANDIDATES FOR A MAJORITY OF THE BOARD WHILE IT PURSUES AN APPEAL
o TRIED TO ENGINEER ANTI-SHAREHOLDER LEGISLATION IN GEORGIA THAT WOULD
HAVE STRIPPED YOUR RIGHTS TO ELECT A FULL BOARD AT THE ANNUAL
MEETING AND TO REMOVE DIRECTORS AT ANY TIME WITH OR WITHOUT CAUSE
o DELAYED THE ANNUAL MEETING AS LONG AS POSSIBLE
o AMENDED THE BY-LAWS TO PERMIT MANAGEMENT TO DELAY A SPECIAL MEETING
OF SHAREHOLDERS FOR MORE THAN FOUR MONTHS AFTER RECEIVING THE
REQUISITE LEVEL OF VALID SHAREHOLDER DEMANDS
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Salomon Brothers 14
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<PAGE>
COERCION OF SHAREHOLDER VOTING FOR DIRECTORS
The Director-Entrenching "Dead Hand" Provision
o The current Board adopted a poison pill which has a "dead hand"
provision - A PROVISION WHICH STRIPS FROM ANY DULY ELECTED
DIRECTORS, OTHER THAN THE INCUMBENTS AND THEIR HAND-PICKED
SUCCESSORS, THE ABILITY TO REDEEM OR AMEND THE RIGHTS
o If the "dead hand" is enforced, shareholders would be reluctant to
elect a completely new Board, even if they wanted an auction of the
company and preferred Invacare's nominees, BECAUSE A NEW BOARD
WITHOUT ANY INCUMBENTS WOULD LACK THE ABILITY TO DISARM THE POISON
PILL AND PERMIT A SALE TO GO FORWARD
o THE CURRENT DIRECTORS ARE BLATANTLY ATTEMPTING TO COERCE
SHAREHOLDERS INTO RE-ELECTING THEM, by trying to strip from
Invacare's nominees the one power they will need as Healthdyne
directors to fulfill their mandate to auction and sell the company
at the best available price and terms
o Although many people, including Invacare, believe "dead hands" to be
illegal and unenforceable, Healthdyne's board has vigorously
defended it and a Georgia federal district court recently ruled that
it would not enjoin it. INVACARE IS APPEALING THAT DECISION AS
EXPEDITIOUSLY AS POSSIBLE.
o Nonetheless, Invacare has been forced to reduce its slate to a
simple majority in order to leave "continuing directors" on the
Board (because until the "dead hand" is overturned, they will be the
only directors empowered to disarm the pill) - thus proving the
director-entrenching nature of the "dead hand."
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Salomon Brothers 15
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<PAGE>
OUTRAGEOUS ENTRENCHMENT ATTEMPT THROUGH LEGISLATION
Just as flagrant and objectionable was management's effort to entrench
itself by attempting to engineer eleventh-hour anti-shareholder
legislation in Georgia at the expense of its own shareholders and the
shareholders of every public Georgia corporation.
o ON MARCH 20, 1997, THE SAME DAY INVACARE ANNOUNCED A SLATE OF
DIRECTOR NOMINEES FOR HEALTHDYNE'S 1997 ANNUAL MEETING, A GEORGIA
STATE SENATOR FROM HEALTHDYNE'S DISTRICT, ON BEHALF OF HEALTHDYNE,
INTRODUCED LEGISLATION DESIGNED TO ENTRENCH THE HEALTHDYNE
DIRECTORS. AMENDMENT WOULD HAVE:
o Imposed staggered board scheme on all publicly-traded Georgia
corporations, permitting only the corporation's board to
opt-out prior to March 31, 1999
o Eliminated right of shareholders to remove directors for poor
performance (other than extreme circumstances such as felony
conviction and gross dereliction of duty)
o Eliminated other crucial shareholder rights, including to
control the size of the board and to restrict the discretion
or power of the board through by-law amendments
o HEALTHDYNE USED EVERY "STEALTH" TACTIC IT COULD TO TRY TO CRAM THE
LEGISLATION THROUGH WITHOUT DUE CONSIDERATION BY THE GEORGIA
LEGISLATURE.
o The legislation was introduced as an amendment to an otherwise
uncontroversial corporate law bill already passed by the House
o The amendment was proposed late in the afternoon, shortly
prior to consideration of the full bill, with no advance
notice or warning and no opportunity for normal hearings and
study. There were only five full workdays remaining in the
legislative session
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Salomon Brothers 16
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<PAGE>
OUTRAGEOUS ENTRENCHMENT ATTEMPT THROUGH LEGISLATION (CONTINUED)
o EVEN AFTER THE GEORGIA HOUSE REJECTED THE LEGISLATION BY MORE THAN A
2-1 MAJORITY AND MAJOR PUBLIC OPPOSITION, including by Institutional
Shareholder Services, the National Association of Corporate
Directors, many major institutional Investors, the Georgia state
auditor (controller of the Georgia state pension fund) and the
Chairman of the Georgia State Bar Corporate Code Revisions
Committee, Healthdyne's management and its legislative cronies
desperately continued to try to push the legislation through.
o The Atlanta Constitution lambasted it as a "stealth amendment"
gathering speed like a "runaway train" without full debate or
consideration.
o The Atlanta Journal decried the "legislative meddling in a
takeover battle" which would "dramatically change the state's
whole investment climate", and opined that "this is the sort
of thing the shareholders of a company ought to decide."
o EVEN THOUGH IT FAILED, THIS EXPENSIVE EFFORT TO STRIP YOU OF
CRITICAL RIGHTS HAS ALREADY COST YOU - IT WAS FUNDED BY HEALTHDYNE
AND CHARGED AGAINST ITS FIRST QUARTER EARNINGS.
This legislation would have been bad policy, bad law and bad process with
only one goal: to entrench Healthdyne's management at the expense of
shareholders of all Georgia corporations, including you.
- ----------------
Salomon Brothers 17
- ----------------
<PAGE>
THE OFFER
Invacare has been seeking to negotiate a mutually advantageous merger with
Healthdyne for nearly a year. In January, Invacare took its offer to
Healthdyne's shareholders.
- --------------------------------------------------------------------------------
HISTORY: SINCE SUMMER 1996 - Frequent contact attempts rebuffed
DECEMBER 1996 - Stock price closed at $8.88 on December 31,
1996
JANUARY 1997 - Letter to Board offering $12.50 per share,
subsequently made public Premium tender offer
commenced at $13.00 per share
APRIL 1997 - Offer raised to $13.50 per share
JUNE 1997 - Offer raised to $15.00 per share (expires August
1, 1997 unless extended)
- --------------------------------------------------------------------------------
KEY CONDITIONS: 1. Acquisition of at least 51% of the voting power, on a fully
diluted basis;
2. Healthdyne's "poison-pill" rights being invalidated or
becoming inapplicable; and
3. Inapplicability, invalidation or satisfaction of the
Georgia anti-takeover statutes.
- --------------------------------------------------------------------------------
- ----------------
Salomon Brothers 18
- ----------------
<PAGE>
MARKET PERFORMANCE SINCE THE OFFER
Thanks to Invacare's premium offer, Healthdyne's stock has resisted the industry
wide decline in values and multiples since January.
[Graph showing daily data of Price as a Percentage of Base Period for
Healthdyne, the Home Healthcare Index (NELL, RESP, RESM, SMD, VITL) and the S&P
Industrial Average (400 Stocks) from 1/1/97 through 7/10/97]
Price/Earnings Firm Value/LTM
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LTM Sales EBITDA EBIT
================================================================================
Healthdyne Technologies
Pre-Offer (12/31/96) @ $8.875 20.2x 1.4x 10.1x 12.9x
Current Tender Offer @ $15.00 (c) 26.5x (c) 1.7x 12.5x 15.8x
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Public Comparables
LTM Mean @ 12/16/96 20.9x 2.2x 11.6x 16.0x
LTM Mean @ 07/10/97 19.8x 2.2x 10.8x 15.2x
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Change:Increase (Decline) (5.2%) (1.9%) (7.1%) (5.1%)
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(a) 01/02/97: Invacare makes $12.50 per share acquisition proposal privately to
Healthdyne.
(b) 01/10/97: Invacare publicly announces $12.50 per share offer to Healthdyne.
(c) 01/27/97: Invacare launches $13.00 per share tender offer.
(d) 02/03/97: Healthdyne announces disappointing fourth quarter earnings.
(e) 03/20/97: Amendment proposed to Georgia corporate law intended to thwart the
offer.
(f) 03/25/97: Georgia House of Representatives rejects amendment by 2-1
majority.
(g) 03/31/97: Invacare increases offer to $13.50 per share.
(h) 04/08/97: Healthdyne announces 1st quarter "window dressed" results of $0.16
per share, pro forma for $0.06 per share charge related to costs
associated with the offer.
(i) 05/16/97: Invacare files a Motion for a Preliminary Injunction ordering the
elimination of "dead-hand pill" restrictions.
(j) 06/04/97: Invacare increases offer to $15.00 per share.
(k) 06/23/97: Healthdyne announces it will "explore alternatives" to offer, but
reaffirms that that the company is not for sale.
(l) 07/10/97: Healthdyne announces 2nd quarter results of $0.20 per share, pro
forma for a $0.04 per share charge related to costs associated
with the offer.
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<PAGE>
INVACARE'S PROPOSALS
NUMBER OF DIRECTORS PROPOSAL
o Limit the Healthdyne Board to current seven seats
o Prevent current Board from trying to manipulate Board size to their
advantage - they've admitted they may need to increase Board size
for "reasons unrelated to the Invacare offer"
o Ensure that, if elected, Invacare's Nominees will constitute a
majority of the Board
DEAD-HAND ELIMINATION PROPOSAL
o Require Healthdyne board to amend rights agreement to remove the
"dead hand" provisions, thus permitting a newly elected board to
disarm the poison pill to permit a sale transaction to go forward
o District court has ruled that the Proposal will not be binding under
Georgia law; decision is being appealed
o If appeal is successful, adoption of the Proposal will eliminate the
"dead hand"
o In any case, Invacare believes that, if approved, the Proposal
should still be presented at the Annual Meeting and will serve, at
the least, as a shareholder demand that the Board remove the "dead
hand"
o Healthdyne is trying to use court's decision to avoid permitting any
vote on the Proposal, forcing Invacare to go back to court just to
let the shareholders voice their opinion
BY-LAWS REPEAL PROPOSAL
o Repeal all by-laws amendments adopted by current Board after March
20, 1997, the day Invacare delivered its notice to Healthdyne
o Designed to prevent current Board from attempting to manipulate the
corporate landscape to their advantage
o Only direct effect known at this time: repeal amendments they
adopted permitting them to delay calling a special meeting for more
than four months after receiving a valid shareholder demand
SPECIAL MEETING PROPOSAL
o Reduce level of shareholders needed to demand a special meeting from
60% to 10%, require the Board to hold the meeting within 45 days of
receiving valid demands, and otherwise streamline the special
meeting process
o Permit shareholders to demand special meetings promptly, without
need for two separate proxy/consent solicitations
o Give shareholders more effective power of oversight over future
Boards, including Invacare's Nominees
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<PAGE>
SUGGESTED ACTIONS
VOTE FOR INVACARE'S NOMINEES AND PROPOSALS AT THE ANNUAL MEETING
o ELECT A MAJORITY OF DIRECTORS WHO ARE COMMITTED TO PROMPTLY AUCTION
THE COMPANY FOR THE BEST AVAILABLE PRICE AND TERMS TO THE BEST OF
THEIR ABILITY
o APPROVE PROPOSALS WHICH WILL FURTHER FACILITATE THE PROMPT AUCTION
AND SALE OF THE COMPANY AND YOUR ABILITY TO OVERSEE IT
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<PAGE>
APPENDIX
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<PAGE>
WHO IS INVACARE?
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<PAGE>
WHO IS INVACARE?
Invacare is the largest and fastest-growing maker of home health care
products, and has quickly reached a leading position in every market that
it has entered. Healthdyne's product lines will complement Invacare's.
Product Lines Invacare Healthdyne
- --------------------------------------------------------------------------------
Respiratory Products
Oxygen Concentrators X X
Nebulizer Compressors X X
Liquid Oxygen Systems X
Sleep Apnea Products X
Wheelchairs X
Scooters X
Ambulatory Aids X
Home Care Beds X
Seating and Positioning Products X
Mattress Overlays X
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LTM Sales $637 million $127 million
- --------------------------------------------------------------------------------
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<PAGE>
INVACARE MARKET PERFORMANCE
According to a financial management survey of 10,000 public companies last
January, Invacare is one of the 100 best performing companies in America,
measured by growth and returns.
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Seven Year Performance
- --------------------------------------------------------------------------------
[Graph showing weekly data of Price as a Percentage of Base Period for
Healthdyne and the S&P Industrial Average (400 Stocks) from 7/6/90 through
7/4/97]
Summary Statistics:
High Low Average Latest
Invacare Corporation 892% 85% 447% 670%
S&P Industrial Average (400 Stocks) 249% 83% 138% 247%
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<PAGE>
CONSISTENT GROWTH
(Dollars in Millions, Except per Share Data)
Invacare's growth and returns met or exceeded Wall Street's expectations
for 29 consecutive quarters (seven consecutive years).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
- ------------------------------------------------------------------------------------------------------------------------------------
6/30/95 6/30/96 % Change 9/30/95 9/30/96 % Change 12/31/95 12/31/96 % Change 3/31/96 3/31/97 % Change
-------------------------- -------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $122.3 $159.2 30.1% $130.5 $158.1 21.1% $143.5 $167.7 16.9% $134.5 $151.5 12.7%
Gross Profit 40.1 51.4 28.1% 43.9 53.2 21.2% 48.9 55.3 13.0% 41.6 44.2 6.2%
Gross Margins 32.8% 32.3% 33.6% 33.6% 34.1% 33.0% 31.0% 29.2%
Operating Income $13.0 $16.7 28.9% $15.7 $18.0 15.0% $17.3 $20.5 18.4% $10.2 $12.5 22.4%
Operating Margins 10.6% 10.5% 12.0% 11.4% 12.0% 12.2% 7.6% 8.3%
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</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
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12/31/93 12/31/94 % Change 12/31/94 12/31/95 % Change 12/31/95 12/31/96 % Change
------------------------------------ ---------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $365.5 $411.1 12.5% $411.1 $504.0 22.6% $504.0 $619.5 22.9%
Gross Profit 118.5 133.1 12.3% 133.1 166.3 25.0% 166.3 201.5 21.1%
Gross Margins 32.4% 32.4% 32.4% 33.0% 33.0% 32.5%
Operating Income $36.9 $43.7 18.6% $43.7 $54.1 23.8% $54.1 $65.4 20.8%
Operating Margin 10.1% 10.6% 10.6% 10.7% 10.7% 10.6%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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