Reports suggest that it is possible Siemens may try to acquire part or all of HearUSA (NYSE Amex: EAR) subsequent to a dispute over payments reportedly owed to Siemens. In an SEC filing, Siemens warned HearUSA shareholders that an acquisition of some or all of HearingUSA could cause the stock to be delisted. “It is possible they may do so on terms that do not involve the payment of any material amount of consideration to holders of common stock,” says the SEC filing from Siemens. Shares of HearUSA on Tuesday fell by one-third, to 56 cents per share from 90 cents.
According to the SEC filing, on December 22, Siemens representatives spoke with HearUSA CEO Stephen J. Hansbrough and CFO Frank Punal regarding payment of $1.9 million due at the end of December, and $2.2 million at the end of January. HearUSA reportedly said that, if this payment was indeed owed, they would not be able to pay it, then requested financial assistance from Siemens. Siemens allowed deferment of $1 million of the $1.9 million due at the end of December to the end of January, but declined further support. “Subsequent to these communications with Mr. Hansbrough, [Siemens has] requested additional information regarding the issuer’s financial condition and prospects,” the SEC filing stated. “After [Siemens] receives and analyzes that information, they may decide to take no further action with respect to [HearUSA]. Alternatively, [Siemens] may seek to pursue a transaction in which they or their affiliates would acquire [HearingUSA] or some or all of its assets.”
Siemens already owns 14.1% of the company, according to financial reports, and it supplies most of the hearing aids dispensed by HearUSA’s reported 2,000 offices, 176 of which are company-owned centers. HearingUSA is the administrator of the AARP Hearing Care program that was introduced nationwide in May 2010. Early in 2010, Siemens AG briefly flirted with selling its hearing instruments division, then later balked when its asking price of 2 billion euros (US$2.73 billion) was about a half-billion more than any of the prospective purchasers’ bids. Since that time, industry veterans Roger Radke and Brian Kinnerk have been appointed to lead Siemens Audiologische Technik (SAT) in Erlangen, Germany, and Siemens Hearing Instruments in Piscataway, NJ, respectively.
Yesterday, HearUSA responded to the Siemens’ SEC filing with the following press release:
HearUSA, Inc responded this afternoon to statements made by Siemens Hearing Instruments, Inc. in a Schedule 13D filed by Siemens earlier today.
“We are very disappointed that Siemens has taken this negative and heavy-handed approach,” said Stephen J. Hansbrough, chairman and CEO of HearUSA. “We are also concerned that the statements made by Siemens in its Schedule 13D fail to provide all of the facts about our relationship with them and our position. We raised legitimate contract issues with our strategic partner concerning their approach to our commercial relationship in what we understood was a confidential discussion on December 22, 2010. In spite of our disagreement with their positions, we continued our attempts to resolve the commercial issues and we clearly advised Siemens of our commitment to meet our obligations to them.”
HearUSA plans to issue its fourth quarter and year-end full year financial results on or about March 24, 2011. “We have not yet finalized our year-end financial statements and our audit is ongoing. We expect to report top line revenues for the fourth quarter of 2010 of approximately $21.5 million, bringing top line fiscal year revenues to approximately $83.4 million. We expect to report a loss for the quarter and the year. We have taken appropriate actions to realign our cost structure with our anticipated cash flows. Average daily order dollars in the first quarter of 2011 are running approximately 13% ahead of the year-ago quarter. HearUSA is confident that with the actions it has taken it will return to profitability in 2011, and we remain committed to growing shareholder value,” concluded Hansbrough.