BlueLine Answers Questions on Criticare Consent Solicitation
September 26 2006 - 12:33PM
PR Newswire (US)
DANVILLE, Calif., Sept. 26 /PRNewswire-FirstCall/ -- In connection
with its solicitation of written consents at Criticare Systems,
Inc. (AMEX:CMD), BlueLine Partners has identified the following
common questions: 1. Does BlueLine intend to seek a sale of the
company? In December 2005, BlueLine purchased a large block of
shares from Oxford Bioscience at $4.54 per share. We purchased
those shares believing the company's prospects would lead to a
significantly higher share price. We have been disappointed, but
BlueLine believes such results are still possible -- and we are
prepared to roll-up our sleeves to help make it happen. BlueLine
believes that it -- along with all other stockholders -- stands to
make a lot more money from its investment by fixing the company and
raising the stock price than would be the case from seeking a sale
of the company at today's prices. 2. Does BlueLine plan to seek
cuts in Criticare's R&D spending? Absolutely not. Over the last
two years, BlueLine has made more than a dozen SEC filings
detailing areas where it believes Criticare's performance can be
improved. Not once in these filings or in any discussion with
management, the board of directors or other stockholders has
BlueLine suggested any cuts in R&D spending. In fact, BlueLine,
like many other observers of the company, believes that Criticare's
R&D capabilities represent one of its most valuable assets.
Were other expenses more in line and were management more
successful in developing the company's OEM strategy, BlueLine
believes R&D spending would be and should be higher. 3. Does
BlueLine intend to seek changes in Criticare's management?
BlueLine's focus is not on management, it is on performance.
BlueLine believes the company is failing to execute on its current
opportunities due to weaknesses in the company's ability to
manufacture products efficiently, to sell its products, and to
manage its new relationships with larger strategic partners.
BlueLine also believes that with 2006 to be the first year since
1995 where the company will report a profit, Criticare's cost
structure is too high and must be brought under better control
before investors are likely to receive meaningful benefit from the
company's continued operations. Criticare's R&D and product
development strengths can only take the company so far -- if other
departments cannot execute as required, personnel changes will
likely be required. 4. Why is BlueLine seeking to re-form
Criticare's board? According to the company's recent press release,
the most recently completed quarter will be the fourth in a row in
which the Company has fallen short of analyst guidance. In Q4, the
company will report revenue of $7.1 million; this misses analyst
revenue expectations by almost 30% and is down more than 10% from
the $8.0 million reported a year earlier. Since the company lost
money in Q3 on $7.8 million in revenue, BlueLine expects losses to
increase in Q4. In filings and press releases, management
highlights a "near record" year in 2006 while failing to note the
declines in revenue and earnings during the second half of the
year. Despite management's efforts, Criticare's stock price
declined from $5.10 in May 2006 to less than $2.80 in August 2006.
Most of the rise since then occurred immediately after BlueLine
announced its plans to seek changes at the company. BlueLine
believes the company has had sufficient time to reform its
operations but has failed to do so and is currently executing well
below its potential. BlueLine believes this conclusion is supported
by the company's own statements. For example, in its April 27, 2005
press release, Criticare announced a $7.7 million purchase order
from Medrad for product to be delivered during the first two
quarters of fiscal 2006. Recent company filings disclose that
Medrad sales for all four quarters of fiscal 2006 were only $5.18
million. In late 2005, Criticare's CEO twice stated that a second
major gas bench OEM relationship was expected by year-end. Now, ten
months later, no second contract has been announced and no
explanation has been given. Even the 17% revenue growth experienced
in fiscal 2006 is disappointing, BlueLine believes, once it is
noted that the improvement was off a 2005 revenue base ($26.8
million) that was lower than reported by Criticare for 12 of the
last 14 years. Between 1998 and the "near-record" year in 2006,
Criticare's average growth rate is only 1.46%. BlueLine believes
that management's descriptions of Criticare's future potential are
no longer sufficient and the company's stockholders must take
action to protect their interests and to preserve the value
inherent in the company's business. BlueLine's intention is to
re-form Criticare's board of directors to include individuals with
the experience and commitment necessary to determine why the
Medrad, Alaris and gas bench initiatives have not developed as
expected and what can be done to improve the situation. BlueLine
believes that its nominees are more capable of this task than are
the company's current directors. BlueLine's nominees include Robert
Munzenrider, the former CFO of St Jude Medical, an international
medical device manufacturing and marketing company. Mr. Munzenrider
also currently serves as a director of two other public medical
device companies. In addition to his healthcare expertise, Mr.
Munzenrider has extensive financial and operating experience. Mr.
Munzenrider has agreed to serve as audit committee chairman.
According to company filings, Criticare's current audit committee
chairman, Steven Tannenbaum, has no experience with any other
public company boards and his principal business experience is as
president of a one-partner accounting firm that is not currently
authorized to practice before the Public Company Accounting
Oversight Board. Another BlueLine nominee, Cindy Collier, has for
the last 20 years worked as a consultant to medical practitioners
and hospitals. Ms. Collier is expected to provide expertise and
assistance in better managing customer- facing issues, including
addressing the company's inability to date to gain access into
various hospital buying groups. Higgins Bailey, the company's
chairman and one of the directors Ms. Collier would replace, has
for the last 15 years been the business manager for a three lawyer
personal injury law firm in Palm Springs, Calif. In addition, until
recently Mr. Bailey served as President and Chief Executive Officer
and then Chairman of the Board of Entropin, Inc., a
development-stage pharmaceutical company. Since being founded 22
years ago, Entropin has earned no revenue and has more than $38
million in cumulative losses. Entropin, along with Mr. Bailey and
another officer, are currently defendants in state and federal
class action securities fraud lawsuits alleging false statements
relating to the future business prospects of that company.
BlueLine's third nominee, William Moore, has spent his entire
career working for medical device companies including Johnson &
Johnson, Nellcor, Arzco and Natus Medical, a company he co-founded
in 1990. Mr. Moore currently serves as a Chairman of the
Compensation Committee and member of the Governance &
Nominating Committees of Natus. Mr. Moore currently directs
BlueLine's healthcare investments. Stockholders should consider who
has greater motivation to pursue value for the company's
stockholders, a director affiliated with the company's largest
stockholder today, or the director affiliated with Oxford, which
sold all of its shares last year. 5. How can stockholders vote in
favor of BlueLine's proposals? BlueLine has made the consent
solicitation statement and voting instructions available on its
website at http://www.bluelinepartners.com/. Stockholders who hold
their shares through a broker or other nominee (i.e., in "street
name") and wish to vote for BlueLine's proposals will need to
forward the consent to their broker with instructions that their
shares be voted in favor of BlueLine's proposals. In most cases,
this can be done via email. Anyone requiring assistance should
contact Scott Shuda of BlueLine at 925-648-2085. Additional
Information and Where to Find It BlueLine has filed a consent
solicitation statement and other relevant materials with the
Securities and Exchange Commission ("SEC"). Before making any
voting decision with respect to the proposed solicitation,
Criticare stockholders are urged to read the consent solicitation
statement and other relevant materials because they will contain
important information about the proposed solicitation. The consent
solicitation statement and other relevant materials, and any other
documents filed by BlueLine with the SEC, may be obtained free of
charge at the SEC's website at http://www.sec.gov/. In addition,
copies of the consent statement are available at BlueLine's website
at http://www.bluelinepartners.com/ or by mail to BlueLine, 4115
Blackhawk Plaza Circle, Danville, CA 94506, attention: Scott A.
Shuda, telephone: 925-648-2085. You may also read and copy any
reports, statements and other information filed with the SEC at the
SEC public reference room at 100 F Street N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC's
website for further information on its public reference room.
Interests of Certain Persons in the Solicitation BlueLine and its
officers may be deemed to be participants in the solicitation of
consents from Criticare stockholders in favor of the proposed
consent solicitation. William M. Moore, an officer of BlueLine, has
interests in the transaction that may differ from the interests of
Criticare stockholders generally, inasmuch as he will be elected to
the Criticare board of directors if the consent solicitation is
successful. These interests are described in the consent
solicitation statement. DATASOURCE: BlueLine Partners, LLC CONTACT:
Scott Shuda of BlueLine, +1-925-648-2085 Web site:
http://www.bluelinepartners.com/
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