Item
2.05
Costs Associated with Exit or
Disposal Activities.
On February 6, 2008, Natus Medical Incorporated (the "Company") adopted
an integration and restructuring plan (together, the "Plan") that is
designed to eliminate redundant costs resulting from prior acquisitions
and to improve efficiencies in operations. Under the plan, the company
will centralize the research and development activities supporting each
of the Company’s three main product families.
In addition, the Company will eliminate redundancies in North American
field sales and service personnel resulting from the acquisition of
Xltek. Finally, the Company will eliminate certain production resources
as it continues to outsource assemblies to contract manufacturers. In
addition to the termination of employees in some facilities, the Plan
provides for the hiring of new employees in others to staff up the
required functions.
These actions will be phased in during the first nine months of 2008.
The Company expects these actions to be essentially cost neutral in
2008, as savings will be offset by the personnel cost of existing
employees during the transition, severance costs for those employees,
and a temporary duplication of personnel costs caused by the hiring of
new employees in the locations where functions will be consolidated.
The Plan will result in a net staff reduction of approximately 45
employees for which Natus will record approximately $800,000 of
severance and other integration charges ratably during the transition
period. The combined workforce of the Company is expected to be
approximately 400 employees once the Plan is completed.
To the extent severance and integration costs relate to the Xltek
business and meet certain criteria, an amount will be recorded on the
opening balance sheet in purchase accounting in accordance with Emerging
Issues Task Force ("EITF") Issue No. 95-3,
Recognition of
Liabilities in Connection with a Purchase Business Combination
.
Consequently, to the extent severance and integration costs of Xltek
meet the criteria of EITF 95-03 they will not impact earnings.
A copy of the press release announcing the Plan is attached as Exhibit
99.1 hereto.
In addition to historical information, this Current Report on Form 8-K
contains forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995, particularly statements regarding the
expectations, beliefs, plans, intentions and strategies of Natus. These
forward-looking statements include, but are not limited to, statements
regarding the cost of the Plan, revenue and profitability of the Company
in 2008 and the reduction in annual operating costs in 2009. These
statements relate to future events or Natus' future financial
performance or results, and involve known and unknown risks,
uncertainties and other factors that may cause actual results, levels of
activity, performance, or achievements to differ materially from those
expressed or implied by the forward-looking statements. Forward-looking
statements are only predictions and the actual events or results may
differ materially. Natus cannot provide any assurance that the future
results or the results implied by the forward-looking statements will
meet expectations. The results could differ materially due to a number
of factors, including the effects of competition, challenges incurred in
integrating acquired companies, the demand for products and services,
the ability to expand sales in international markets, the ability to
maintain current sales levels in a mature domestic market, the ability
to control costs, and risks associate with bringing new products to
market. Natus disclaims any obligation to update information contained
in any forward-looking statement.
More information about potential risk factors that could affect the
business and financial results of Natus is included in Natus' annual
report on Form 10-K for the year ended December 31, 2006, and its
quarterly reports on Form 10-Q, and in other reports filed from time to
time by Natus with the U.S. Securities and Exchange Commission.