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Form 8-K NATUS MEDICAL INC For: Apr 20

April 20, 2016 6:02 AM EDT



 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): March 31, 2016
 

 Natus Medical Incorporated
(Exact name of registrant as specified in its charter)
 
000-33001
(Commission File Number)
 
 
 
 
Delaware
 
77-0154833
(State or other jurisdiction
of Incorporation)
 
(I.R.S. Employer
Identification No.)
6701 Koll Center Parkway, Suite 120
Pleasanton, CA 94566
(Address of principal executive offices)
925-223-6700
(Registrant’s telephone number, including area code)
 
 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
 
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







Item 2.02.
Results of Operations and Financial Condition
On April 20, 2016, Natus Medical Incorporated (the “Company”) is issuing a press release and holding a conference call regarding its financial results for the first quarter ended March 31, 2016 and other financial information. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Item 2.02 and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
 
Item 9.01.
Financial Statements and Exhibits
(d) Exhibits.
 
Exhibit No.
  
Description
99.1
  
Press release dated April 20, 2016 describing the Company's results for its first quarter ended March 31, 2016 and other financial information.




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.
 
 
 
 
 
NATUS MEDICAL INCORPORATED
(Registrant)
 
 
 
 
Dated: April 20, 2016
 
 
 
By:
 /s/ Jonathan A. Kennedy
 
 
 
 
Senior Vice President Finance and Chief Financial Officer




Exhibit Index
 
Exhibit No.
  
Description
99.1
  
Press release dated April 20, 2016 describing the Company's results for its first quarter ended March 31, 2016 and other financial information.









Natus Medical Announces Record First Quarter 2016 Financial Results

Record first quarter non-GAAP earnings per share of $0.34
Achieves non-GAAP gross margin of 63.1%
Updates revenue and earnings guidance for the second quarter and fiscal year 2016

PLEASANTON, Calif. (April 20, 2016) - Natus Medical Incorporated (NASDAQ: BABY) today announced financial results for the three months ended March 31, 2016.

For the first quarter ended March 31, 2016, the Company reported revenue of $87.3 million, a decrease of 2.3% compared to $89.4 million reported for the first quarter 2015. GAAP Gross profit margin increased to 62.1% vs. 60.0% reported for the first quarter 2015. GAAP net income was $8.5 million, or $0.26 per diluted share, compared with GAAP net income of $8.6 million, or $0.26 per diluted share in the first quarter 2015.

The Company reported non-GAAP net income of $11.1 million for the first quarter ended March 31, 2016, an increase of 7.8% over the prior year's non-GAAP income of $10.3 million. Non-GAAP earnings per diluted share increased 9.7% to $0.34 for the first quarter 2016, compared to $0.31 in the first quarter 2015.

Cash and cash equivalents decreased by $1.2 million to $81.3 million during the quarter. The Company repurchased $9.1 million of its stock and paid $4.7 for acquisitions during the first quarter of 2016. Cash flow from operations for the first quarter was $18.4 million.

"I am very pleased with both our record first quarter non-GAAP earnings per share and non-GAAP gross profit margin that increased to 63.1% from 60.7% last year. As previously announced, pushouts of key orders in both our newborn care and neurodiagnostic business units led to weaker than expected revenue in the first quarter. We believe these orders will be realized in the future and have not been lost to competitors," said Jim Hawkins, President and Chief Executive Officer of the Company.

"Our improved gross profit margin was driven by favorable mix, continued operating efficiencies and our ability to maintain pricing even with the strong dollar. We remain committed to achieving our full year 2016 non-GAAP operating margin goal of 20%." said Hawkins.


Financial Guidance

The Company provided revenue and earnings guidance for the second quarter and updated its revenue and earnings guidance for the full year 2016 to exclude all revenue and earnings from its Medix subsidiary's contract with the government of Venezuela.

For the second quarter of 2016, the Company is providing revenue guidance of $92.0 million to $93.0 million and non-GAAP earnings per share guidance of $0.35 to $0.36.

Full year 2016 revenue guidance is being reduced to $378 million to $382 million compared to previous guidance of $445 million to $450 million. The updated revenue guidance excludes $60 million of previously

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guided annual revenue from the Venezuela contract. Full year 2016 earnings guidance is being updated to non-GAAP earnings per share of $1.61 to $1.65.

In October 2015, the Company announced that its Medix subsidiary in Argentina had entered into a $232.5 million, 3-year supply agreement with the Venezuelan Ministry of Health. The terms of the agreement required certain pre-payments from the Ministry of Health prior to shipments of products or the beginning of services. While the agreement remains in place, the Ministry of Health has not made the required pre-payments. Given the uncertainty resulting from the current political and economic situation in Venezuela, the Company will no longer include revenue or earnings from the agreement in its guidance until there is more clarity as to the expected performance under the agreement.

The Company's non-GAAP earnings guidance excludes amortization of acquisition related intangibles, acquisition related charges, restructuring charges, and their related tax effects. Non-GAAP earnings guidance includes the impact of expensing employee share based compensation. All non-GAAP earnings per share amounts are on a diluted basis.

 
Use of Non-GAAP Financial Measures

The Company's non-GAAP earnings results exclude amortization expense associated with certain acquisition-related intangibles, restructuring charges, certain discreet tax items, direct costs of acquisitions and the related tax effects. A reconciliation between non-GAAP and GAAP financial measures is included in this press release.

The Company believes that the presentation of results excluding these charges provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results. Therefore, the Company believes these non-GAAP financial measures facilitate comparison of operating results across reporting periods.

The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated.


Conference Call

Natus has scheduled an investment-community conference call to discuss this announcement beginning at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) today, April 20, 2016. Individuals interested in listening to the conference call may do so by dialing 1-888-765-3164 for domestic callers, or 1-503-406-4075 for international callers, and entering reservation code 80936622. A telephone replay will be available for 48 hours following the conclusion of the call by dialing 1-855-859-2056 for domestic callers, or 1-404-537-3406 for international callers, and entering reservation code 80936622.The conference call also will be available real-time via the Internet at http://investor.natus.com, and a recording of the call will be available on the Company’s Web site for 90 days following the completion of the call.


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About Natus Medical Incorporated

Natus is a leading provider of healthcare products and services used for the screening, detection, treatment, monitoring and tracking of common medical ailments in neurological dysfunction, epilepsy, sleep disorders, newborn care, hearing impairment and balance and mobility disorders.

Additional information about Natus Medical can be found at www.natus.com.


Forward-Looking Statements

This press release 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 statements regarding our long term goals of revenue growth, improved margins, and revenue and non‑GAAP profitability for the second quarter and full year 2016. These statements relate to estimates and assumptions regarding future events including Natus' future financial performance. These statements 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 its future results or the results implied by the forward-looking statements will meet expectations. Our future results could differ materially due to a number of factors, including the effects of competition, the demand for our products and services, the impact of adverse global economic conditions on our target markets, negative effects of currency exchange rates, our ability to maintain current sales levels in a mature domestic market, our ability to control costs, risks associated with bringing new products to market and integrating acquired businesses, risks associated with bringing new products to market and integrating acquired businesses, risks associated with our Venezuela contract, risks associated with product recalls and our ability to fulfill product orders on a timely basis. 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, 2015 and in other reports filed from time to time by Natus with the U.S. Securities and Exchange Commission.


Natus Medical Incorporated
Jonathan A. Kennedy
Sr. Vice President and Chief Financial Officer
(925) 223-6700



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NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
 
 
 
 
 
 Quarter Ended
 
March 31, 2016
 
March 31, 2015
Revenue
$
87,329

 
$
89,395

Cost of revenue
32,469

 
35,105

Intangibles amortization
601

 
682

  Gross profit
54,259

 
53,608

Gross profit margin
62.1
%
 
60.0
%
Operating expenses:
 
 
 
  Marketing and selling
20,596

 
20,742

  Research and development
7,802

 
6,857

  General and administrative
12,480

 
11,552

  Intangibles amortization
2,135

 
955

  Restructuring
35

 
156

    Total operating expenses
43,048

 
40,262

Income from operations
11,211

 
13,346

Other income/(expense), net
456

 
(829
)
Income before tax
11,667

 
12,517

Provision for income tax expense
3,129

 
3,920

Net income
$
8,538

 
$
8,597

Earnings per share:

 
 
  Basic
$
0.26

 
$
0.27

  Diluted
$
0.26

 
$
0.26

Weighted-average shares:
 
 
 
  Basic
32,606

 
32,127

  Diluted
33,222

 
33,097




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NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
 
 
 
 
 
March 31,
 
December 31,
 
2016
 
2015
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
81,285

 
$
82,469

Accounts receivable, net
90,013

 
99,080

Inventories
45,691

 
48,572

Other current assets
11,360

 
11,235

Total current assets
228,349

 
241,356

 
 
 
 
Property and equipment, net
17,624

 
16,967

Goodwill and intangible assets
196,413

 
194,002

Deferred income tax
12,695

 
12,782

Other assets
17,649

 
14,389

Total assets
$
472,730

 
$
479,496

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
19,418

 
$
23,660

Accrued liabilities
36,911

 
42,137

Deferred revenue
11,460

 
11,311

Total current liabilities
67,789

 
77,108

 
 
 
 
Long-term liabilities:
 
 
 
Deferred income tax
3,881

 
3,897

Other long-term liabilities
8,708

 
7,781

Total liabilities
80,378

 
88,786

Total stockholders’ equity
392,352

 
390,710

Total liabilities and stockholders’ equity
$
472,730

 
$
479,496
















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NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
 
 
 
 Quarter Ended
 
March 31, 2016
 
March 31, 2015
Operating activities:
 
 
 
Net income
$
8,538

 
$
8,597

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for losses on accounts receivable
352

 
276

Excess tax benefit on the exercise of stock options

 
(1,054
)
Depreciation and amortization
4,223

 
2,983

Impairment of intangible assets

 

Impairment of property and equipment
15

 

Warranty reserve
929

 
876

Share-based compensation
2,901

 
1,731

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
10,266

 
413

Inventories
(903
)
 
(1,243
)
Prepaid expenses and other assets
(15
)
 
778

Accounts payable
(3,790
)
 
1,079

Accrued liabilities
(4,688
)
 
(2,492
)
Deferred revenue
446

 
159

Deferred income tax
108

 
1,709

Liabilities acquired in acquisitions

 

Net cash provided by operating activities
18,382

 
13,812

Investing activities:
 
 
 
Acquisition of businesses, net of cash acquired
(4,649
)
 
(12,078
)
Purchases of property and equipment
(1,921
)
 
(1,399
)
Purchase of intangible assets
2

 

Net cash used in investing activities
(6,568
)
 
(13,477
)
Financing activities:
 
 
 
Proceeds from stock option exercises and Employee Stock Purchase Program purchases
623

 
1,319

Excess tax benefit on the exercise of stock options

 
1,054

Repurchase of common stock
(9,063
)
 
(1,312
)
Taxes paid related to net share settlement of equity awards
(2,017
)
 
(460
)
Contingent consideration earn-out
(1,284
)
 

Proceeds from short-term borrowings
6,000

 

Payments on borrowings
(6,000
)
 

Net cash used in financing activities
(11,741
)
 
601

Exchange rate changes effect on cash and cash equivalents
(1,257
)
 
(495
)
Net increase in cash and cash equivalents
(1,184
)
 
441

Cash and cash equivalents, beginning of period
82,469

 
66,558

Cash and cash equivalents, end of period
$
81,285

 
$
66,999



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NATUS MEDICAL INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP ADJUSTMENTS (UNAUDITED)
(in thousands, except per share amounts)
 
 
 
 
 
 
 
 
 Quarter Ended
 
March 31, 2016
 
March 31, 2015
GAAP based results:
 
 
 
Income before provision for income tax
$
11,667

 
$
12,517

 
 
 
 
Non-GAAP adjustments:
 
 
 
Intangibles Amortization - Cost of revenue
601

 
682

Intangibles Amortization - Operating expense
2,135

 
955

Intangible asset impairment - Operating expense

 

Recall Accrual
267

 

Restructuring
35

 
156

Non-GAAP income before provision for income tax
14,705

 
14,310

 
 
 
 
Income tax expense, as adjusted
3,575

 
4,036

 
 
 
 
Non-GAAP net income
$
11,130

 
$
10,274

 Non-GAAP earnings per share:
 
 
 
  Basic
$
0.34

 
$
0.32

  Diluted
$
0.34

 
$
0.31

 
 
 
 
 Weighted-average shares
 
 
 
  used to compute
 
 
 
   Basic non-GAAP earnings per share
32,606

 
32,127

   Diluted non-GAAP earnings per share
33,222

 
33,097

 
 
 
 
GAAP Gross profit
54,259

 
53,608

Amortization of intangibles
601

 
682

Recall Accrual
267

 

Non-GAAP Gross Profit
55,127

 
54,290

Non-GAAP Gross Margin
63.1
%
 
60.7
%
 
 
 
 
GAAP Operating profit
11,211

 
13,346

Amortization of intangibles
2,736

 
1,637

Recall Accrual
267

 

Restructuring and other charges
35

 
156

Non-GAAP Operating profit
14,249

 
15,139

Non-GAAP Operating margin
16.3
%
 
16.9
%

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