Exhibit 99.1
Wilson Greatbatch Technologies, Inc. Reports Second Quarter Results
CLARENCE, N.Y.--(BUSINESS WIRE)--Aug. 5, 2004--Wilson Greatbatch
Technologies, Inc. (the "Company") (NYSE: GB) today reported its results for the
second quarter ended June 30, 2004.
Business Summary
-- The Company received additional notification that a major customer
will further reduce its orders for the balance of this year. As a
result, the Company has revised its sales guidance for the full year
2004 to between $195-$205 million, compared to its previous sales
guidance range of $220 to $230 million.
-- In response to the reduced sales forecasts, management implemented a
7% workforce reduction during June, which resulted in a one-time
severance charge of $0.8 million during the quarter and the
elimination of approximately $8 million from the Company's ongoing
cost structure.
-- The Company signed a long-term agreement with a major diversified CRM
device manufacturer to provide value-added sub-assembly of most of
their implantable medical devices for Cardiac Rhythm Management
("CRM") and other applications. It is currently anticipated that sales
will commence in the second quarter of 2005.
-- Construction on the new advanced battery manufacturing facility is on
schedule.
-- Integration of the NanoGram Devices Corporation ("NDC") acquisition is
proceeding as planned. The first Nano-Silver Vanadium Oxide ("SVO")
cells were successfully manufactured in June and are on test.
-- During the quarter the Company acquired certain patents that cover how
capacitors are used in an Implantable Cardioverter Defibrillator
("ICD"). Although management believes the patents could have been
successfully challenged in court proceedings, a decision was made to
acquire the patents and remove this as a potential obstacle for
existing customers to more fully adopt wet tantalum technology and for
potential customers to initially adopt the technology. The Company
recorded a $2 million pre-tax charge associated with these patents.
-- The Company began construction on a new manufacturing facility in
Tijuana, Mexico. This facility will initially house the Company's new
value-added assembly operations. The Company anticipates that it will
incur approximately $3 million in start-up expenses in 2004 pertaining
to the construction of this facility.
Net sales totaled $52.9 million during the second quarter of 2004, a
decrease of 5% from the second quarter of 2003. Net income for the second
quarter decreased by 4% to $4.7 million from $5.0 million a year ago, and
diluted earnings per share decreased by 4% to $0.22 compared with $0.23 in the
prior year. The current quarter includes one-time pre-tax charges of $2.8
million for the aforementioned severance and patent acquisition costs.
Edward F. Voboril, Chairman, President and Chief Executive Officer
commented, "We are disappointed with the reduction in sales volume and the
impact it will have on this year's earnings. However, we have taken the
necessary actions to mitigate the volume shortfall with the implementation of a
corporate-wide cost reduction plan. Looking ahead, we have entered into an
important long-term agreement with a major CRM device manufacturer for
value-added sub-assembly of most of their implantable medical devices. The
assemblies will contain components manufactured by the Company, components
presently manufactured by the customer as well as other components purchased
from third parties. We welcome the opportunity to broaden this relationship by
taking on this very important work for them and using it as the basis for
expanding our value-added assembly capability. In addition, we added another wet
tantalum capacitor customer in the second quarter. This customer is not part of
our traditional customer base and the device involves an entirely new
therapeutic approach, which could represent a very large market segment in the
future."
"Overall, the CRM market continues to exhibit strong underlying growth. The
technology investments we have made in developing the next generation ICD
battery, the emerging area of nanotechnology, combined with our sophisticated
value-added assembly operation will enable us to maintain our leadership
position. Furthermore, we are significantly expanding our business with a major
CRM device manufacturer, and we continue to work closely with all of our
customers on new business opportunities," Voboril concluded.
Sales Summary
The following table summarizes the Company's sales by business unit and
major product line for the second quarters in 2004 and 2003 (in thousands):
Business Unit/Product Lines 2004 2003 %
2nd Qtr 2nd Qtr Change
- ----------------------------------------------------------------------
Implantable Medical Components:
- ----------------------------------------------------------------------
ICD Batteries $10,119 $11,278 -10%
- ----------------------------------------------------------------------
Pacemaker & Other Batteries 5,361 7,022 -24%
- ----------------------------------------------------------------------
ICD Capacitors 6,239 7,849 -21%
- ----------------------------------------------------------------------
Feedthroughs 12,261 12,108 +1%
- ----------------------------------------------------------------------
Enclosures 5,142 6,310 -19%
- ----------------------------------------------------------------------
Other 7,077 4,454 +59%
- ----------------------------------------------------------------------
Total Implantable Medical Components 46,199 49,021 -6%
- ----------------------------------------------------------------------
Electrochem Power Solutions 6,743 6,781 -1%
- ----------------------------------------------------------------------
Total Sales $52,942 $55,802 -5%
- ----------------------------------------------------------------------
Profit & Loss Summary
The following table summarizes selected information derived from the
condensed consolidated statements of operations for the second quarters in 2004
and 2003 (in thousands):
2004 2003 %
2nd Qtr 2nd Qtr Change
- ----------------------------------------------------------------------
Gross Profit $23,818 $23,217 +3%
- ----------------------------------------------------------------------
Gross Margin 45.0% 41.6%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
SG&A Expenses $6,389 $8,146 -22%
- ----------------------------------------------------------------------
SG&A Expenses as % of Sales 12.1% 14.6%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
RD&E Expenses, net $5,688 $4,635 +23%
- ----------------------------------------------------------------------
RD&E Expenses, net as % of Sales 10.7% 8.3%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Other Operating Expense $2,957 $77 3740%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Operating Income $7,708 $9,546 -19%
- ----------------------------------------------------------------------
Operating Margin 14.6% 17.1%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Effective Tax Rate 30.5% 31.5% -1%
- ----------------------------------------------------------------------
The gross margin improvement is primarily due to improvements in scrap from
Six Sigma and Lean Manufacturing initiatives, improved cost structure for
commercial batteries from the consolidation of manufacturing operations, volume
mix changes for certain medical products and lower manufacturing incentive
compensation expenses. It is expected, however, that gross margins will decrease
from current levels in the second half due to the anticipated lower production
volume.
Lower SG&A expense is primarily due to the elimination of certain general
management positions resulting from an internal reorganization from four
business units to two business units and from lower incentive compensation.
RD&E expenses include incremental development costs from the Greatbatch
Technologies Advanced Research Lab, which was created from the acquisition of
NanoGram Devices Corporation during March, as well as additional RD&E management
personnel, net of lower incentive compensation.
Other expense is comprised of the $2 million charge for the capacitor
patents and $0.8 million in severance costs related to the cost reduction plan.
The income tax rate reduction results primarily from the benefits from
various federal and state planning initiatives.
Outlook
Management expects total sales for 2004 to be in the range of $195-$205
million. The Company now expects fully diluted earnings per share for 2004 of
$0.51-$0.58, inclusive of the $5.8 million in pre-tax expenses pertaining to the
severance charge, acquired patents and the anticipated start-up costs of the
Mexico facility.
The Company anticipates capital spending to be in the range of $47-$52
million in 2004. The majority of this spending is for the construction of the
new advanced battery facility, leasehold improvements on the Mexico facility and
for spending on Information Technology projects.
For the full year 2005, based on current expectations, the Company is
projecting sales of $207-$230 million. The Company anticipates updating this
projection and providing profitability and capital spending guidance for 2005 at
a later date.
Conference Call
Mr. Voboril and Lawrence P. Reinhold, the Company's Executive Vice
President and Chief Financial Officer, will discuss second quarter 2004
financial results in a conference call scheduled for today, Thursday, 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, including those statements
made under the headings "Revised 2004 Guidance", 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;
customer ordering patterns; 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 99.1 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 critical components used in implantable medical devices and
other technically demanding applications. Additional information about the
Company is available at www.greatbatch.com.
WILSON GREATBATCH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
ASSETS June 30, December 31,
2004 2003
Current assets:
Cash and cash equivalents $ 79,851 $119,486
Short-term investments 3,070 11,559
Accounts receivable, net 29,354 23,726
Inventories 32,989 28,598
Prepaid expenses and other current assets 2,474 3,591
Refundable income taxes 575 583
Deferred income taxes 3,163 3,163
Asset available for sale 3,600 3,658
--------- --------
Total current assets 155,076 194,364
Property, plant, and equipment, net 74,994 63,735
Intangible assets, net 66,079 51,441
Goodwill 156,825 119,521
Deferred income taxes 2,896 2,896
Other assets 6,000 6,286
--------- --------
Total assets $ 461,870 $438,243
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,641 $ 4,091
Accrued expenses and other current
liabilities 13,491 18,968
Current portion of long-term debt 1,182 850
--------- --------
Total current liabilities 20,314 23,909
Long-term debt, net of current portion 939 928
Convertible subordinated notes 170,000 170,000
Deferred income taxes 18,786 7,251
Other long-term liabilities 815 815
--------- --------
Total liabilities 210,854 202,903
--------- --------
Stockholders' equity:
Preferred stock - -
Common stock 21 21
Additional paid-in capital 211,778 207,969
Deferred stock-based compensation (849) (1,185)
Treasury stock, at cost - (179)
Retained earnings 40,066 28,714
--------- --------
Total stockholders' equity 251,016 235,340
--------- --------
Total liabilities and stockholders' equity $ 461,870 $438,243
========= ========
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,
2004 2003* 2004 2003*
Sales $52,942 $55,802 $108,467 $110,659
Cost of sales 29,124 32,585 61,474 64,629
------- ------- -------- --------
Gross profit 23,818 23,217 46,993 46,030
Selling, general and
administrative expenses 6,389 8,146 13,314 15,837
Research, development and
engineering costs, net 5,688 4,635 10,569 9,195
Amortization of intangible assets 1,076 813 1,851 1,628
Other operating expense, net 2,957 77 3,178 147
------- ------- -------- --------
Operating income 7,708 9,546 18,081 19,223
Interest expense 1,144 867 2,304 1,798
Interest income (245) (122) (558) (131)
Early extinguishment of debt - 1,603 - 1,603
Other expense (income), net (2) (30) - (88)
------- ------- -------- --------
Income before income taxes 6,811 7,228 16,335 16,041
Provision for income taxes 2,078 2,276 4,983 5,052
------- ------- -------- --------
Net income $ 4,733 $ 4,952 $ 11,352 $ 10,989
======= ======= ======== ========
Diluted earnings per share $ 0.22 $ 0.23 $ 0.53 $ 0.51
Diluted average shares outstanding 21,496 21,535 21,562 21,416
* Reclassed for consistency with 2004 presentation.
CONTACT: Wilson Greatbatch Technologies, Inc.
Lawrence P. Reinhold, 716-759-5602
lreinhold@greatbatch.com
or
Anthony W. Borowicz, 716-759-5809
tborowicz@greatbatch.com