Wilson Greatbatch Technologies, Inc. Reports Record Second Quarter Sales
CLARENCE, N.Y., Aug. 5 /PRNewswire-FirstCall/ -- Wilson Greatbatch
Technologies, Inc. (the "Company") (NYSE: GB), a leading developer and
manufacturer of batteries, capacitors, components and enclosures used in
implantable medical devices and specialty batteries used in demanding
non-medical operations, today announced record sales for the second fiscal
quarter of 2003. The Company reported sales of $55.8 million, an increase of
46% compared to the $38.3 million reported in the second quarter of 2002.
Operating income increased to $9.5 million, an increase of 60% over the prior
year. The Company also reported net income of $5.0 million, or $0.23 per
diluted share, compared to $3.6 million, or $0.17 per diluted share, in the
prior year. The second quarter results include a one-time after-tax charge of
approximately $1 million, or $0.05 per diluted share, from the write-off of
deferred financing fees associated with the early extinguishment of debt,
discussed below.
"We are pleased with our strong results this quarter" stated Edward F.
Voboril, the Company's Chairman, President and Chief Executive Officer. "Our
cardiac rhythm management ("CRM") business continues to experience strong
growth. In the second quarter our implantable cardioverter defibrillator
("ICD") battery and capacitor sales increased by 50%, indicative of the robust
nature of this CRM market segment. During the quarter we also completed a
significant transaction that positions us to support further growth, both
organically and by acquisition. We issued $170 million of contingent
convertible subordinated notes, $72 million of which was used to extinguish
our existing floating-rate debt. With interest rates at historically low
levels, we have locked-in a fixed interest rate at 21/4 percent and as of
June 30 had in excess of $102 million of cash equivalents and short-term
investments on our balance sheet," Voboril added.
Three Months Ended June 30, 2003
Sales
The following table summarizes the Company's sales revenue by product line
for the second quarters of 2003 and 2002 (in thousands):
2003 2002 %
2nd Qtr 2nd Qtr Change
Medical Technology:
ICD batteries $11,278 $7,188 +57%
Pacemaker batteries 6,418 5,185 +24%
Other batteries 741 675 +10%
ICD capacitors 7,849 5,550 +41%
Components 22,735 13,040 +74%
Total Medical Technology 49,021 31,638 +55%
Commercial Power Sources 6,781 6,690 +1%
Total Sales $55,802 $38,328 +46%
"In our medical technology segment, our ICD battery sales again reached
record levels in the quarter, increasing by 57%. Pacemaker battery sales also
continued the strong growth exhibited last quarter, increasing by 24% over the
second quarter of 2002. As previously discussed, this sales increase is
primarily attributable to the resumption of orders from certain customers that
in 2002 were reducing their inventory levels. Our ICD capacitor sales
remained strong, growing by 41%. We continue to expect sales from additional
ICD capacitor customers to commence in the second half of the year," Voboril
commented.
Medical component product sales growth was also strong in the quarter,
increasing by 26%, excluding the effect of Greatbatch-Globe sales, which was
acquired in the third quarter of last year. "Organic growth remains very
strong, particularly in our proprietary electro-magnetic interference ("EMI")
filtering technology. During the second quarter we completed the sale of our
non-medical EMI assets, providing us with the capacity to support the
increased demand for medical EMI products," Voboril stated.
"In our non-medical, commercial battery segment, sales increased by 1%
compared to a relatively strong quarter last year. Sales growth in the first
half has increased by 7%, representing a modestly higher than expected growth.
We continue to see steady demand from our customers in the oil and gas
exploration market," Voboril concluded.
Profit & Loss Summary
The following table summarizes selected information derived from the
profit & loss ("P&L") statements for the 2nd quarters of 2003 and 2002
(in thousands):
2003 2002
2nd Qtr 2nd Qtr
Gross Profit $23,171 $15,599
Gross Margin 41.5% 40.7%
SG&A Expenses $8,177 $5,354
SG&A Expense as % of Sales 14.7% 14.0%
RD&E Expenses, net $4,635 $3,390
RD&E Expenses, net as % of Sales 8.3% 8.9%
Operating Income $9,546 $5,969
Operating Margin 17.1% 15.6%
The higher overall gross margin in the quarter was primarily due to
significantly improved gross margins for our EMI filtered feedthroughs
manufactured at our Carson City, Nevada plant. "We have made many
improvements in our manufacturing operations at this plant which have enabled
us to meet the higher demand while lowering our overall manufacturing costs,"
Voboril observed.
Partially offsetting the improved margins on EMI filtered feedthroughs
were (a) costs incurred in the consolidation of the commercial battery
operations, (b) on-going implementation of lean manufacturing initiatives at
all plants, and (c) the impact of lower-margin sales of Greatbatch-Globe
enclosures. "The consolidation of the commercial battery operation was
completed on schedule in June, and all commercial battery production is now
consolidated in our Canton, Massachusetts plant. As we scale up manufacturing
in the consolidated plant, we expect to see the benefits in terms of improved
gross margins starting in the fourth quarter of this year," Voboril commented.
"In terms of lean manufacturing, we have incurred additional manufacturing
costs for most products in the first half of this year from conversion of
manufacturing lines into lean cells, and the short-term inefficiencies of
conversion resulted in lower gross margins during the second quarter as this
inventory was sold through to customers. We are more than halfway through the
lean manufacturing implementation in most plants and expect to have completed
this process at all plants by the end of this year. Accordingly, we expect to
see improved gross margins in 2004," Voboril commented. "Finally, as in
previous quarters, the inclusion of Greatbatch-Globe enclosures in our product
mix has decreased overall margins due to inherently lower margins on enclosure
products," Voboril added.
Operating expenses during the quarter increased by 42% compared to last
year in absolute dollars, but as a percent of sales decreased from 25.1% to
24.4% of sales compared to last year as sales growth has outpaced spending.
Six Months Ended June 30, 2003
Year to date sales of $110.7 million increased by 48% compared to last
year. Excluding the effect of Greatbatch-Globe sales, medical technology
sales grew organically by 35%, while commercial power sources sales increased
by 7%. Gross profit increased by 46% versus the prior year and represented a
gross margin of 41.6%. Operating expenses increased by 34.6% compared to last
year in absolute dollars, but as a percent of sales decreased from 26.6% to
24.1% of sales compared to last year as sales growth has outpaced spending.
Net income and diluted earnings per share totaled $11.0 million and
$0.51 per share, respectively, reflecting growth of 59% and 55% compared with
last year.
Outlook for the Reminder of the Year
Given its strong first half results and the continued momentum heading
into the second half of the year, the Company is raising its full year 2003
guidance. The Company expects medical technology sales for the year to grow
in the range of 24%-26% (including Greatbatch-Globe sales as if it had been in
the Company's results for the full year 2002) to a total of $188 million to
$192 million. The Company expects commercial power source sales for the year
to grow between 5%-7% to a total of $26 to $27 million. On a Company-wide
basis, this amounts to an overall sales growth of 21%-24% for the year, to a
total of $215-$220 million. This compares to previous guidance of
$200-$208 million.
Based on the aforementioned anticipated sales growth, the Company expects
diluted earnings per share of $1.03-$1.07, inclusive of the $0.05 charge for
the 2003 second quarter write-off of deferred financing fees from the early
extinguishment of debt. Our previously reported full year guidance was
$0.98-$1.06.
Gross margins are expected to improve modestly in the second half of 2003.
"The investments made in the consolidation of our commercial battery
operations, the lean manufacturing start-up costs and the inclusion of
Greatbatch-Globe for the entire year has resulted in a lower gross margin than
anticipated. With the majority of these costs behind us, we believe we are
well positioned to deliver on our target of 100 basis point per year gross
margin improvement commencing in 2004," Voboril stated.
Capital spending for 2003 is expected to be in the range of
$13-$16 million, compared to $20.5 million last year. Capital spending during
the first half of 2003 was approximately $5.1 million. The lower overall
spending for the first half of this year is due to the construction of an R&D
facility as well as the purchase of a new battery plant building during 2002.
Capital spending will increase significantly in the second half of 2003 with
the commencement of major information technology and infrastructure
initiatives. Capital spending is expected to continue at elevated levels
during 2004 due to the continuing impact of information technology and
infrastructure initiatives as well as the build-out of the new medical battery
plant. We anticipate the additional spending to be funded with the proceeds
from the convertible subordinated notes and from internally generated cash.
Conference Call
Edward F. Voboril and Lawrence P. Reinhold, the Company's Executive
Vice President and Chief Financial Officer, will discuss second quarter 2003
financial results in a conference call scheduled for today, Tuesday, August 5,
at 5:00 p.m. EDT. The conference call will be webcast live and is accessible
through the Company's website at www.greatbatch.com or at CCBN's individual
investor center at www.companyboardroom.com. The webcast will also include
presentation visuals. The webcast will be archived on both websites for
future on-demand replay.
Forward-Looking Statements
Some of the statements in this press release and other written and oral
statements made from time to time by the company and its representatives are
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and section 21E of the Securities Exchange
Act of 1934, as amended, and involve a number of risks and uncertainties.
These statements can be identified by terminology such as "may," "will,"
"should," "could," "expects," "intends," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue" or the negative of these
terms or other comparable terminology. These statements are based on the
Company's current expectations. The Company's actual results could differ
materially from those stated or implied in such forward-looking statements.
Risks and uncertainties that could cause actual results to differ materially
from those stated or implied by such forward-looking statements include, among
others, the following matters affecting the Company: dependence upon a limited
number of customers; product obsolescence; inability to market current or
future products; pricing pressure from customers; reliance on third party
suppliers for raw materials; products and subcomponents; fluctuating operating
results; inability to maintain high quality standards for our products;
challenges to our intellectual property rights; product liability claims;
inability to successfully consummate and integrate acquisitions; unsuccessful
expansion into new markets; competition; inability to obtain licenses to key
technology; regulatory changes or consolidation in the healthcare industry;
and other risks and uncertainties described in the Company's Annual Report on
Form 10-K, including Exhibit 99.2 thereto, and in other periodic filings with
the Securities and Exchange Commission. The company assumes no obligation to
update forward-looking information in this press release whether to reflect
changed assumptions, the occurrence of unanticipated events or changes in
future operating results, financial conditions or prospects, or otherwise.
About Wilson Greatbatch Technologies
Wilson Greatbatch Technologies, Inc. (NYSE: GB) is a leading developer and
manufacturer of batteries, capacitors, precision components and enclosures
used in implantable medical devices and other technically demanding
applications. The Company has operations in New York, Maryland,
Massachusetts, Nevada and Minnesota. Additional information about the Company
is available at www.greatbatch.com.
Wilson Greatbatch Technologies, Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
(In thousands except per share amounts)
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
Sales $55,802 $38,328 $110,659 $74,631
Cost of sales 32,631 22,729 64,675 43,080
Gross profit 23,171 15,599 45,984 31,551
Selling, general and
administrative expenses 8,177 5,354 15,868 11,010
Research, development and
engineering costs, net 4,635 3,390 9,195 7,044
Amortization of intangible assets 813 886 1,628 1,772
Operating income 9,546 5,969 19,293 11,725
Interest expense 867 713 1,798 1,604
Interest income (122) (135) (131) (280)
Early extinguishment of debt 1,603 -- 1,603 --
Other (income) expense, net (30) 38 (18) 65
Income before income taxes 7,228 5,353 16,041 10,336
Provision for income taxes 2,276 1,767 5,052 3,411
Net income $ 4,952 $ 3,586 $10,989 $ 6,925
Diluted earnings per share $ 0.23 $ 0.17 $ 0.51 $ 0.33
Diluted average shares outstanding 21,535 21,255 21,416 21,261
Wilson Greatbatch Technologies, Inc.
Condensed Consolidated Balance Sheet
(Unaudited)
(In thousands)
ASSETS June 30, December 31,
2003 2002
Current assets:
Cash, cash equivalents and short-term
investments $102,465 $ 4,608
Accounts receivable, net 26,725 19,310
Inventories 32,648 34,908
Prepaid expenses and other current assets 849 3,339
Refundable income taxes 2,887 3,038
Deferred income taxes 3,349 3,349
Total current assets 168,923 68,552
Property, plant, and equipment, net 65,270 64,699
Intangible assets, net 53,042 55,804
Goodwill 119,521 119,407
Other assets 7,146 3,789
Total assets $413,902 $312,251
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,996 $ 5,726
Accrued expenses and other current
liabilities 15,600 13,872
Current portion of long-term debt 475 8,750
Total current liabilities 20,071 28,348
Long-term debt, net of current portion 170,970 76,250
Other long-term liabilities 813 790
Total liabilities 191,854 105,388
Stockholders' equity:
Preferred stock -- --
Common stock 21 21
Additional paid-in capital 206,716 202,279
Deferred stock-based compensation (1,104) --
Retained earnings 16,415 5,426
Treasury stock, at cost -- (863)
Total stockholders' equity 222,048 206,863
Total liabilities and stockholders' equity $413,902 $312,251
SOURCE Wilson Greatbatch Technologies, Inc.
-0- 08/05/2003
/CONTACT: Lawrence P. Reinhold, Executive Vice President and Chief
Financial Officer, +1-716-759-5602, lreinhold@greatbatch.com, or Anthony W.
Borowicz, Treasurer and Director, Investor Relations, +1-716-759-5809,
tborowicz@greatbatch.com, both of Wilson Greatbatch Technologies, Inc./
/Web site: http://www.greatbatch.com /
(GB)
CO: Wilson Greatbatch Technologies, Inc.
ST: New York, Massachusetts, Nevada, Minnesota
IN: HEA MTC OIL CPR
SU: ERN CCA