Exhibit 99.1
Wilson Greatbatch Technologies, Inc. Reports Third Quarter Results
CLARENCE, N.Y.--(BUSINESS WIRE)--Nov. 9, 2004--Wilson Greatbatch
Technologies, Inc. (the "Company") (NYSE: GB) today reported its
results for the third quarter ended September 30, 2004.
Business Summary
-- As previously announced -
-- Executed a new supply agreement with Medtronic, Inc. to
provide sub-assembly for most of its Cardiac Rhythm
Management ("CRM") and Neurostimulation devices.
-- Extended the current supply agreement with St. Jude
Medical, Inc. ("St. Jude") through the end of 2008.
-- Amended the current supply agreement with Guidant
Corporation to include QHR cell pricing, our next
generation medical battery technology.
-- Hired Thomas J. Hook as Executive Vice President and Chief
Operating Officer.
-- Experienced a 20% decline in sales during the quarter
primarily due to lower sales volume to one major CRM customer.
-- On schedule to complete construction of new advanced battery
manufacturing plant in Alden, New York and assembly plant in
Tijuana, Mexico in the first quarter of 2005.
-- Successfully implemented the ERP business platform at three
plants during the quarter and implemented the final existing
plant last week.
Net sales totaled $45.2 million during the third quarter of 2004,
a decrease of 20% from the third quarter of 2003. Net income totaled
$3.0 million, a decrease of 61% from the prior year, and diluted
earnings per share were $0.14, a decrease of 61% from the prior year.
Edward F. Voboril, Chairman, President and Chief Executive Officer
commented, "Our financial performance was ahead of expectations. The
expense controls that were put in place during the second quarter were
effective in partially mitigating the impact of the lower demand and
reflect our ability to quickly adjust spending to changes in sales
volume. In terms of our long-term strategic initiatives, the extension
of our supply agreement with St Jude through 2008 reinforces our
long-standing relationship, which spans over twenty-five years. I'm
also pleased to report that we remain on track with the construction
of our new Tijuana, Mexico assembly plant and with our new advanced
battery manufacturing plant, both of which are scheduled to come
on-line during the first quarter of 2005. Furthermore, we expect to
deliver implantable QHR batteries in the fourth quarter of 2004. QHR
represents a major advancement in Implantable Cardioverter
Defibrillator ("ICD") battery technology. All of these initiatives
represent important progress in the Company's strategic direction,"
Voboril concluded.
Sales Summary
The following table summarizes the Company's sales by business
unit and major product line for the third quarters in 2004 and 2003
(in thousands):
Business Unit/Product Lines 2004 2003 %
3rd Qtr 3rd Qtr Change
- ----------------------------------------------------------------------
Implantable Medical Components ("IMC"):
- ----------------------------------------------------------------------
ICD Batteries 7,687 $10,603 -28%
- ----------------------------------------------------------------------
Pacemaker & Other Batteries 4,116 6,121 -33%
- ----------------------------------------------------------------------
ICD Capacitors 4,103 7,869 -48%
- ----------------------------------------------------------------------
Feedthroughs 9,533 14,086 -32%
- ----------------------------------------------------------------------
Enclosures 5,631 6,235 -10%
- ----------------------------------------------------------------------
Other 6,676 4,693 +42%
- ----------------------------------------------------------------------
Total Implantable Medical Components 37,746 49,607 -24%
- ----------------------------------------------------------------------
Electrochem Power Solutions ("EPS") 7,431 6,728 +10%
- ----------------------------------------------------------------------
Total Sales $45,177 $56,335 -20%
- ----------------------------------------------------------------------
Volume accounted for 21% of the 24% decrease in IMC sales, and
price reductions accounted for the remaining 3%. The 10% increase in
EPS sales represents higher volume from customers in the oil and gas
industry.
Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statement of operations for the third
quarters in 2004 and 2003 (in thousands):
2004 2003 %
3rd Qtr 3rd Qtr Change
- ----------------------------------------------------------------------
Gross Profit $17,402 $23,960 -27%
- ----------------------------------------------------------------------
Gross Margin 38.5% 42.5%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
SG&A Expenses $6,913 $7,290 - 5%
- ----------------------------------------------------------------------
SG&A Expenses as % of Sales 15.3% 12.9%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
RD&E Expenses, net $4,156 $3,953 +5%
- ----------------------------------------------------------------------
RD&E Expenses, net as % of Sales 9.2% 7.0%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Operating Income $4,913 $11,796 -58%
- ----------------------------------------------------------------------
Operating Margin 10.9% 20.9%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Effective Tax Rate 25.5% 28.8%
- ----------------------------------------------------------------------
Approximately 280 basis points of the 400 basis point decrease in
overall gross margin were related to the price decreases in the IMC
product lines. The remaining decrease in the gross margin was
primarily related to the unfavorable impact of spreading fixed
manufacturing costs over lower production volumes in the IMC segment.
The lower SG&A expense is primarily due to the continued effect of
cost controls put in place during the second quarter of 2004.
The higher RD&E expense is primarily due to the inclusion of the
former NanoGram Devices, which was acquired during the first quarter
of 2004.
The lower effective income tax rate is due to various state
planning initiatives realized in the current quarter. The year-to-date
effective tax rate is 29.5%.
Outlook
The Company expects total sales for 2004 to be in the range of
$195-$200 million, compared to $195-$205 million as previously
projected. The Company expects fully diluted earnings per share for
2004 to be in the range of $0.64-$0.68, compared to $0.50-$0.57 as
previously projected. The Company expects capital spending for 2004 of
$45-$50 million.
For the full year 2005, based on current expectations, the Company
is projecting sales of $200-$220 million, compared to a range of $207
to $230 million as previously projected. The Company anticipates
updating this projection as well as providing profitability and
capital spending guidance for 2005 at a later date.
Financial Discussion
The Emerging Issues Task Force ("EITF") recently reached a
consensus that will require the Company to account for the dilutive
effect of its $170 million contingently convertible debt in its
diluted earnings per share computations, regardless of whether the
market price contingency has been met. When the Company adopts this
consensus in the fourth quarter of 2004, it anticipates it will
restate its diluted earnings per share for the 2nd, 3rd and 4th
quarters of 2003, the full year 2003, and the 1st and 2nd quarters of
2004. For the 3rd quarter of 2004 and for the anticipated results of
the 4th quarter and full year 2004, the impact would be anti-dilutive
and therefore will not be adjusted.
During October 2004 the President signed the American Jobs
Creation Act of 2004. Among other provisions, this Act significantly
changes the tax treatment of foreign sales activities and domestic
manufacturing operations. The Company is currently analyzing the
impact of this change on its future operating results.
Conference Call
Mr. Voboril and Lawrence P. Reinhold, the Company's Executive Vice
President and Chief Financial Officer, will discuss third quarter 2004
financial results in a conference call scheduled for today, Tuesday,
November 9, 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; 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 September 30, December 31,
2004 2003
Current assets:
Cash and cash equivalents $ 77,801 $119,486
Short-term investments 6,064 11,559
Accounts receivable, net 28,777 23,726
Inventories 33,348 28,598
Prepaid expenses and other current assets 1,328 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 154,656 194,364
Property, plant, and equipment, net 83,146 63,735
Intangible assets, net 65,061 51,441
Goodwill 156,759 119,521
Deferred income taxes 2,896 2,896
Other assets 5,009 6,286
-------- --------
Total assets $467,527 $438,243
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,077 $ 4,091
Accrued expenses and other current liabilities 18,147 18,968
Current portion of long-term debt 809 850
-------- --------
Total current liabilities 22,033 23,909
Long-term debt, net of current portion 1,138 928
Convertible subordinated notes 170,000 170,000
Deferred income taxes 20,026 7,251
Other long-term liabilities - 815
-------- --------
Total liabilities 213,197 202,903
-------- --------
Stockholders' equity:
Preferred stock - -
Common stock 21 21
Additional paid-in capital 211,812 207,969
Deferred stock-based compensation (615) (1,185)
Treasury stock, at cost - (179)
Retained earnings 43,112 28,714
-------- --------
Total stockholders' equity 254,330 235,340
-------- --------
Total liabilities and stockholders' equity $467,527 $438,243
======== ========
WILSON GREATBATCH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
Three months Nine months
ended ended
September 30, September 30,
2004 2003(*) 2004 2003(*)
Sales $45,177 $56,335 $153,644 $166,994
Cost of sales 27,775 32,375 89,249 97,004
------- ------- -------- --------
Gross profit 17,402 23,960 64,395 69,990
Selling, general and
administrative expenses 6,913 7,290 20,227 23,127
Research, development and
engineering costs, net 4,156 3,953 14,725 13,148
Amortization of intangible assets 1,074 796 2,925 2,424
Other operating expense, net 346 125 3,524 272
------- ------- -------- --------
Operating income 4,913 11,796 22,994 31,019
Interest expense 1,144 1,154 3,448 2,952
Interest income (244) (253) (802) (384)
Early extinguishment of debt - - - 1,603
Other expense (income), net (75) (25) (75) (113)
------- ------- -------- --------
Income before income taxes 4,088 10,920 20,423 26,961
Provision for income taxes 1,042 3,144 6,025 8,196
------- ------- -------- --------
Net income $ 3,046 $ 7,776 $ 14,398 $ 18,765
======= ======= ======== ========
Diluted earnings per share $ 0.14 $ 0.36 $ 0.67 $ 0.87
Diluted average shares outstanding 21,495 21,623 21,517 21,507
(*) 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