Under the plan, the company will centralize the research and development activities supporting each of the company’s three main product families, as follows: Activities associated with North American diagnostic neurology product lines will be consolidated at the Xltek facility in Oakville, Ontario, Canada; Activities associated with newborn hearing screening and diagnostic hearing product lines will be consolidated at the Bio-logic facility in Mundelein, Illinois; and activities associated with other newborn care products will be consolidated at the Olympic Medical facility in Seattle, Washington.
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 during the year will be largely offset by severance costs, which the company expects to total approximately $800,000. The plan is expected to result in a net cost reduction before tax of approximately $2.4 million in 2009.
Jim Hawkins, president and CEO of Natus, said: “This plan should also enable us to reduce our research and development costs to approximately nine percent of revenue, in line with the target we have referenced for more than a year.”