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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 3, 1997
--------------------------------
HEALTHDYNE TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Georgia 0-21776 52-1756497
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1255 Kennestone Circle, Marietta, Georgia 30066
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 4991212
-----------------------------
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
1. On January 30, 1997, the Board of Directors of Healthdyne Technologies,
Inc. (the "Company") amended its Shareholder Rights Agreement dated May 22, 1995
between the Company and SunTrust Bank, Atlanta, as rights agent (the "Rights
Agreement") to allow the Board of Directors to designate when the Rights will be
evidenced by separate rights certificates after a tender or exchange offer is
first published or sent. The amendment to the Rights Agreement is attached
hereto as Exhibit 99.1 and is hereby incorporated by reference into this Report.
2. On February 3, 1997, the Company issued a press release which announced
financial results for the fourth quarter and year ended December 31, 1996 and
reviewed the Company's strategic initiatives. The press release is attached
hereto as Exhibit 99.2 and is hereby incorporated by reference into this Report.
3. In connection with the "safe harbor" provisions of the Private
Litigation Reform Act of 1995, the Company is hereby filing as Exhibit 99.3 and
incorporating by reference into this Report cautionary statements identifying
important factors that could cause the Company's actual results to differ
materially from those projected in forward looking statements of the Company
made by, or on behalf of the Company.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits.
99.1 Amendment dated January 30, 1997 to the Company's
Shareholder Rights Agreement;
99.2 Press release dated February 3, 1997; and
99.3 Cautionary Statement for Purposes of the "Safe
Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995.
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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 hereunto duly authorized.
Healthdyne Technologies, Inc.
-----------------------------
Registrant
By: /s/ M. Wayne Boylston
-----------------------------------------
M. Wayne Boylston
Vice President - Finance, Chief Financial
Officer and Treasurer
Date: February 3, 1997
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EXHIBIT INDEX
Exhibit
Number Description
99.1 Amendment dated January 30, 1997 to the Company's Shareholder Rights
Agreement;
99.2 Press release dated February 3, 1997; and
99.3 Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995.
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EXHIBIT 99.1
HEALTHDYNE TECHNOLOGIES, INC.
AMENDMENT NO. 1
HEALTHDYNE TECHNOLOGIES, INC. RIGHTS AGREEMENT
This Amendment No. 1 to the Healthdyne Technologies, Inc. Rights
Agreement dated as of May 22, 1995 ("Rights Agreement") between Healthdyne
Technologies, Inc. (the "Company") and SunTrust Bank, Atlanta (formerly Trust
Company Bank), Rights Agent, amends the terms and provisions of the Rights
Agreement as follows:
I.
Amend the first sentence of Section 3(a) by deleting such sentence in
its entirety and substituting in lieu thereof the following language:
(a) Until the earlier of (i) the close of business on the tenth day
after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date) or (ii) at such time, as the Company's Board of Directors may
designate, after the date that a tender or exchange offer by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would be the Beneficial Owner of 20% or more
of the shares of Common Stock then outstanding (the earlier of (i) and (ii), as
either of such periods may be extended pursuant to the provisions of Section 26
hereof, being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of paragraph (b) of this Section 3)
by the certificates for the Common Stock registered in the names of the holders
of the Common Stock (which certificates for Common Stock shall be deemed also to
be certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company).
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II.
This Amendment No. 1 shall be effective as of the date of its adoption
by the Board of Directors of the Company and shall be executed by the Rights
Agent upon delivery of a certificate signed by a Continuing Director (as defined
in the Plan) which states that the amendment is in compliance with the terms of
Section 26 of the Rights Agreement.
IN WITNESS WHEREOF, the Company and the Rights Agent have caused this
amendment to the Rights Agreement to be duly executed this _____ day of January,
1997.
Attest: HEALTHDYNE TECHNOLOGIES, INC.
By:
- -------------------------------- ----------------------------------
Name: Name:
Title: Title:
Attest: SUNTRUST BANK, ATLANTA
By:
- -------------------------------- -----------------------------------
Name: Name:
Title: Title:
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EXHIBIT 99.2
MONDAY FEBRUARY 3, 1997
HEALTHDYNE TECHNOLOGIES ANNOUNCES 1996 FINANCIAL RESULTS AND REVIEWS STRATEGIC
INITIATIVES
MARIETTA, Ga., Feb. 3/PRNewswire/ -- Healthdyne Technologies Inc. today
announced financial results for the fourth quarter and year ended December 31,
1996.
For the fourth quarter of 1996, revenues were $33.1 million, an increase of 14%
from the $29.0 million reported in last year's fourth quarter. Net income for
the quarter $1.4 million, or $0.11 per share, compared to $1.8 million, or $0.14
per share, in the same period last year.
For the year ended December 31, 1996, revenues were $118.3 million, a 7%
increase over the $110.5 million reported for the same period a year ago. Net
income for the year was $5.7 million, or $0.44 per share, compared to $6.3
million, or $0.50 per share, in 1995.
In 1996, the Company faced several specific events which led to poorer results
than the Company expected. These events included the impact of the Company's
status with Apria Healthcare Group as a supplier of oxygen concentrators and
sleep therapy devices, concerns over Medicare reimbursement changes for oxygen
delivery systems, and delays in scheduled orders for the Company's asthma
products from major pharmaceutical companies due to slower than expected FDA
drug approvals.
Craig B. Reynolds, President and Chief Executive Officer, stated, "We are
pleased with our revenue growth in the fourth quarter, particularly in light of
difficult market conditions. We are also pleased with the resurgence of our
international sales. We look forward to implementing our strategic plan
described in more detail in today's release."
STRATEGIC INITIATIVES
The Company's core strengths include a history of identifying new market
opportunities, acquiring the technology, personnel and distribution channels
necessary to capitalize on these opportunities and harnessing the manufacturing
and marketing efforts to successfully bring new products to the medical device
market. These strengths have been demonstrated most recently with the
introduction of Quantum, our non-invasive ventilator, which has reached over $12
million in revenue in the first full year since the product's launch. In early
1995, Healthdyne Technologies recognized the changing market dynamics that would
result in: a consolidation of its customers; a shift toward alternate care
points for large segments of its patient populations; and the requirement for
cost-effective solutions due to the revisions occurring in healthcare
reimbursement.
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While many of the companies in the respiratory industry approached these
challenges through aggressive acquisition programs, Healthdyne Technologies
methodically pursued a strategy of leveraging its existing position as a market
leader to expand into related markets with products designed to provide more
cost-effective care in lower cost settings. Healthdyne Technologies' four point
strategic plan includes:
1) Acquiring proprietary technologies that provide solutions for chronic high
cost diseases and costly medical procedures;
2) Recruiting or partnering with personnel and other companies with a proven
record of successful product and market development;
3) Strengthening and reorganizing its distribution in combination with the
formation of strategic distribution allowances where necessary; and
4) Transitioning products away from commodity-based applications and toward
innovative designs that would provide cost savings to its customers and
higher gross margins to the Company.
The Company has applied its resources toward implementing this plan during the
last two years and is now strategically positioned to create one of the most
comprehensive product lines for the respiratory, sleep disorders and ventilation
markets. To support its strategic plan, the Company has made significant
investments in research and development, sales and marketing and manufacturing
resources. These efforts have resulted in a significant number of new products
scheduled for introduction throughout 1997 and 1998. As previously reported, the
Company believes these new products will expand the markets served by the
Company from approximately $575 million in 1996 to over $1.2 billion in 1998. In
addition to accelerating revenue growth, the Company believes that these new
products should have higher gross margins which will further drive the expansion
of the Company's profits. Selected new products and markets are discussed below.
Ventilation Market
The ventilation market is estimated by the Company to be approximately $300
million worldwide consisting of acute care, portable and non-invasive
ventilators. The market is undergoing rapid technological and clinical change,
moving away from acute care ventilation in the hospital to lower cost settings
within the hospital and to new alternate sites of care such as sub-acute
facilities and the home. The technology of ventilators has not changed
significantly in many years. Consequently, current ventilation products do not
have several of the features required by the more acute patients receiving care
in these alternate settings.
The Company licensed proprietary technology in April of 1996 for the sub-acute
ventilator, the first in a family of ventilators to be introduced in 1997 and
1998. The ventilation team
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assembled in connection with this project has collectively over 100 years of
experience in ventilator development, marketing, manufacturing and management.
In November, Healthdyne Technologies announced a strategic alliance with Siemens
Medical System to distribute Quantum, its non-invasive ventilator, throughout
the United States and Canada. The Company recently entered into a Letter of
Intent to broaden its relationship with Siemens, to provide for strategic joint
research and development efforts in the areas of sub-acute and homecare
ventilator products to be distributed by both companies. The Letter of Intent
also contemplates Healthdyne Technologies' distribution of certain Siemens new
ventilator products as well as patient monitoring products for the homecare and
alternate site markets.
The Company believes that, with its newly acquired technology, its ventilation
development expertise and superior distribution channels, it is poised to enter
this market successfully in the United States and abroad. The Company's existing
ventilation product, the Quantum, is also poised for continued growth in 1997.
Factors fueling the growth are increased sales to the hospital market from our
distribution agreement with Siemens, the recent international introduction of
the Quantum and the continued penetration into the major home care national
accounts.
Asthma
The asthma market is estimated by the Company to be approximately $60 million
worldwide, comprised primarily of peak flows meters and spacer products. The
Company currently holds a number one position in the market for peak flow
meters, a market estimated by the Company to grow at an annual rate of
approximately 20%. In early 1997, the Company is introducing its new spacer
device, tripling the market potential for the Company for asthma products. The
Company plans to distribute this device through an exclusive network of
specialty hospital distributors. The Company is complementing the market
introduction of its spacer device with a number of other proprietary products to
be introduced in the first quarter of 1997.
The Company recently entered into a strategic relationship with Allegiance
Healthcare to distribute several of the Company's asthma products. This
arrangement will strengthen the Company's distribution in hospital national
accounts and the overall hospital market. Allegiance, recently spun-off from
Baxter International, is a $4 billion provider of laboratory and medical and
surgical products and services. Allegiance recently entered into a multi-year
agreement with Premier - a national health system representing approximately 30%
of United States acute care hospitals.
The Company's expanded asthma management product line, its strengthened
distribution capabilities and its increased opportunities for shipment of orders
from pharmaceutical companies position it well for 1997 and beyond.
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Sleep Disorders
The sleep disorders market is estimated by the Company to be $250 million
worldwide and growing at a rate of 25% per year. The Company currently holds a
number two position in the sleep therapy market and a number one position in the
sleep diagnostic markets. Healthdyne Technologies plans to introduce in 1997 a
new multi-level device for the treatment of sleep apnea, a next generation
"Auto" CPAP system, and next generation diagnostic products for the hospital and
home.
The Company believes that, following introduction of these new products, it will
have the most comprehensive sleep disorders product line in the market. As
previously announced, the Company was recently awarded co-primary supplier
status for sleep therapy products by Apria Healthcare Group. To complement this
growing product line, Healthdyne Technologies is commencing distribution of the
CNS Breathe Right strips as an exclusive distributor for the professional
medical market. The Company believes that, with these initiatives, it is well
poised for continued success in the market.
Fetal Oximetry
The Company believes that the potential market for fetal oximetry is
approximately $250 million annually. The current technology utilized for
determining fetal well-being is monitoring fetal heart rate, which is
approximately 50% reliable as a measure of fetal distress. There is currently no
fetal oxygen information available in the United States, resulting in a higher
than necessary rate of cesarean deliveries and increased medical-legal exposure.
The Company plans to introduce its new fetal oximetry product in the
international market in 1997, with domestic introduction following FDA premarket
approval. The Company is utilizing proprietary technology. This product, while
not scheduled for United States introduction until 1998 or later, represents a
significant new market opportunity for the Company.
Jaundice Detection
Sixty percent of births in the United States exhibit jaundice, caused by
elevated levels of bilirubin in the blood. Severe jaundice can result in brain
damage to affected children. The current method of diagnosing jaundice is a
"heel stick," a painful and time consuming procedure. In 1996, the Company
acquired the North American rights to patented technology form SpecRx, Inc. for
a non-invasive method of measuring the level of bilirubin in the blood, allowing
diagnosis of jaundice to occur in the entire spectrum of care from the hospital
to the home. The Company believes that this new product, currently scheduled for
introduction in late 1997 or early 1998, has a market potential of approximately
$50 million annually and will complement its existing product line for the
treatment of jaundice, which was acquired in the summer of 1996.
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Oxygen Delivery Systems
The combined worldwide markets for oxygen concentrators and liquid oxygen
systems are estimated by the Company to be approximately $325 million annually,
with the liquid oxygen market representing $100 million of the total and the
oxygen concentrator market representing the balance. The Company plans to
leverage its current market position in oxygen concentrators by introducing a
liquid oxygen system in 1997. The Company also plans to introduce a lower cost
oxygen concentrator in 1997 in order to improve margins in a market increasingly
dominated by large national accounts and commodity pricing. The combination of a
competitive liquid oxygen product and a lower cost oxygen concentrator will
allow the Company to bundle the sale of its products to national accounts,
regional and local distributors and to increase the overall margins and
profitability of the entire product line.
Summary
"The Company is well positioned to capitalize on the new markets and high
growth, higher margin products scheduled for introduction in 1997 and 1998,"
said Reynolds. "The Company has constructed a powerful technology platform for
near term product launches and has a core strength in low-cost manufacturing and
new technology integration. We have strengthened our distribution channels,
combining an excellent homecare distribution organization with powerful hospital
partners. The Company has also assembled an experienced management team and is
poised to execute its strategic plan."
"The Company is on the verge of reaping the benefits from its strategic
initiatives and investments made in 1995 and 1996," continued Reynolds. "The
Company has assembled the technology, talent, and strategic partners for success
in 1997 and beyond. We believe our shareholders need to better understand our
strategic plan, and we look forward to delivering the intrinsic value inherent
in our plan to our shareholders."
Healthdyne Technologies designs, manufactures and markets technologically
advanced medical devices for use in the home, as well as other specialized
clinical settings. The Company's products include diagnostic and therapeutic
devices for the evaluation and treatment of sleep disorders, non-invasive
ventilators, oxygen concentrators and medication nebulizers for the treatment of
respiratory disorders, monitors for infants at risk for SIDS, and products for
asthma management.
This press release contains forward-looking statements that involve risks and
uncertainties, including development in the healthcare industry, development and
introduction of new products on a timely basis, favorable resolution of
intellectual property matters, third-party reimbursement policies and practices
and regulatory requirements affecting the approval and sale of medical devices,
as well as other risks detailed from time to time in the Company's reports filed
with the Securities and Exchange Commission, including its Reports on Form 8-K
and on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and
September 30, 1996.
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HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
1996 1995 1996 1995
(Unaudited)
<S> <C> <C> <C> <C>
Revenues ..................................... $33,052 28,965 118,318 110,494
Cost of revenues ............................. 20,644 16,951 70,981 66,692
Gross profit ................................. 12,408 12,014 47,337 43,802
Selling and administrative expenses .......... 8,235 7,259 29,971 26,888
Research and development expenses ............ 1,389 1,267 5,751 4,705
Operating earnings ........................... 2,784 3,488 11,615 12,209
Interest income .............................. 130 79 368 318
Interest expense ............................. (615) (617) (2,398) (2,117)
Other expense, net ........................... (21) (11) (55) (21)
Earnings before income taxes ................. 2,278 2,939 9,530 10,389
Income tax expense ........................... 911 1,159 3,805 4,102
Net earnings ................................. 1,367 1,780 5,725 6,287
Net earnings per common share and common share
equivalent ................................... .11 .14 .44 .50
Weighted average number of common shares and
common share equivalents outstanding ......... 12,785 12,875 12,919 12,694
</TABLE>
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in Thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash and short term investments................................. $ 3,041 287
Trade accounts and notes receivable.............................. 36,164 32,401
Inventories...................................................... 18,593 19,934
Deferred income taxes............................................ 1,523 1,744
Prepaid expenses and other current assets........................ 2,296 2,000
Total current assets............................................. 61,617 56,366
</TABLE>
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<TABLE>
<S> <C> <C>
Property and equipment, net...................................... 9,294 7,104
Excess of cost over net assets of businesses acquired............ 20,911 17,146
Intangible assets................................................ 5,410 2,053
Other assets..................................................... 846 207
Total............................................................ 98,078 82,876
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt........................... $ 2,610 2,982
Accounts payable, principally trade.............................. 12,375 9,285
Accrued liabilities.............................................. 9,745 7,458
Total current liabilities........................................ 24,730 19,725
Long-term debt................................................... 29,078 26,250
Total liabilities................................................ 53,808 45,975
Shareholders' equity............................................. 44,270 36,901
Total............................................................ $98,078 82,876
</TABLE>
SOURCE Healthdyne Technologies, Inc.
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EXHIBIT 99.3
CAUTIONARY STATEMENTS
Information provided by Healthdyne Technologies, Inc. (the "Company")
from time to time may contain certain "forward-looking" information, as that
term is defined in the Private Securities Litigation Reform Act of 1995, as the
same may be amended (herein the "Act") and in releases made by the Securities
and Exchange Commission ("SEC") from time to time. These Cautionary Statements
are being made pursuant to the Act, with the intention of obtaining the benefits
of the "Safe Harbor" provisions of the Act. The Company cautions investors that
any forward-looking statements made by the Company are not guarantees of future
performance and that actual results may differ materially from those in the
forward-looking statements as a result of various factors.
These Cautionary Statements are being made and filed with the SEC
contemporaneously with the Company's release of a detailed strategic plan (the
"Plan") for the Company. Success of the Plan depends upon the successful
completion of a number of actions which the Company expects will improve its
future financial performance. It is possible, however, that certain of these
actions may not be successfully completed for a variety of reasons, and
therefore that future financial results may differ materially from those
anticipated by the Company. The Company wishes to advise investors of the
following risks to the Plan:
The Company has announced the planned introduction of numerous new
products in 1997 and 1998. These actions are scheduled to be completed on an
accelerated timetable. Timely introduction of products is dependent on several
factors, including but not limited to, timely completion of design and
engineering work, successful tested prototypes, clinical device testing,
clearance or approval where necessary by the FDA, intellectual property matters
and availability of materials and components from suppliers. There can be no
assurances that each of these products will be introduced, the products will be
introduced in accordance with planned schedules, or that, once introduced,
products will be commercially successful. The anticipated rapid development
cycle also may result in higher than anticipated warranty claims, which also
could adversely affect future financial performance.
The Company competes in a highly competitive environment with numerous
competitors which are financially strong and capable of competing effectively
with the Company in the marketplace. Such competitors may take actions to meet
the Company's new product introductions and other initiatives. Some competitors
may be willing to accept lower margins and to reduce prices to compete with the
Company. As a result, the Company could fail to achieve anticipated sales
increases, to realize anticipated price increases, or otherwise fail to meet its
anticipated results. Any of such circumstances would likely have an adverse
effect on future financial performance, which effect could be material.
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The Company anticipates achieving higher margins for certain of its new
products. The Company operates in a highly competitive industry, and its ability
to improve margins may be limited due to competitive pressures. A failure to
achieve better margins would likely have an adverse effect on future financial
performance, which effect could be material.
The Company's success is dependent to a large extent upon the ability
of its customers to obtain adequate reimbursement from third-party payors, such
as government and private insurance programs, for procedures using the Company's
products. As discussed in previous reports filed with the SEC by the Company,
congressional and regulatory proposals for reducing reimbursement for oxygen
concentrators have adversely affected the Company's sales and margins for oxygen
concentrator products. Similar initiatives as a result of the governmental focus
on achieving cost-effective healthcare delivery could also adversely affect the
Company's business.
The Company's business may also be affected by changes in government
regulation to which the Company's products are subject or changes in the manner
in which such regulations are enforced or medical devices are approved. The
Food and Drug Administration ("FDA") has published for comment proposed
performance standards for monitors for infants at risk for SIDS. The Company is
unable to predict whether, or in what form, these performance standards
ultimately will be adopted, but anticipates that it should be able to design and
manufacture products that will comply with any such standards.
Consolidation in the healthcare industry has and may continue to
adversely affect the Company's business, as customers of the Company merge and
competition for their business becomes more intense. In August 1995, the
Company's two largest home care dealer-customers merged. The Company expects
that the consolidation among home care dealers is likely to continue; however,
the Company cannot predict the effect of such mergers and consolidations on its
business or distribution channels.
The Company has in the past acquired other companies in an effort to
expand its product offerings and may continue to do so in the future. No
assurance can be given that any such acquisitions will be consummated by the
Company or if consummated that they will be financially or operationally
successful.
The Company enters into license agreements from time to time in
connection with the introduction of new products or enhancements of existing
products. These agreements generally do not require the expenditure of material
sums; however, if the commercial introduction of the licensed product is
successful, the license product may be important to future Company revenue and
products. No assurances may be given that any such license agreements will
result in the commercial introduction of a viable product or that the product,
once introduced, will be financially or operationally successful.
Other factors which could potentially have a material adverse effect on
the Company's business include the costs and other effects of legal and
administrative cases and proceedings
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(whether civil, such as environmental and product related, or criminal),
settlements and investigations, claims, and changes in those items, and
developments or assertions by or against the Company relating to intellectual
property rights and intellectual property licenses.
The information contained herein is not intended to be an exhaustive
description of the risks and uncertainties inherent in the Company's business or
in the Plan. For further information, reference is made to the Company's reports
filed with the SEC, including its reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996.
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