Exhibit 99.1
Wilson Greatbatch Technologies, Inc. Reports Results for Fourth Quarter
and Full Year 2004
CLARENCE, N.Y.--(BUSINESS WIRE)--Feb. 17, 2005--Wilson Greatbatch
Technologies, Inc. (the "Company") (NYSE:GB) today reported its
results for the fourth quarter and full year ended December 31, 2004.
Business Summary
-- As previously announced, we entered into an agreement whereby
Guidant made a commitment to purchase minimum specified
quantities of wet tantalum capacitors from the Company during
2005.
-- We are on schedule to complete phase one construction in
Tijuana, Mexico, which includes offices, supporting systems
and clean room operations. The first shipments of value-add
assembly products are scheduled for mid-March.
-- The interior construction of the new advanced battery plant in
Alden, N.Y. has been completed. We are currently in the
process of validating the new automated assembly equipment. We
expect the equipment to be qualified by mid-2005.
-- We were named in Interventional Rhythm Management's ("IRM")
press release as the exclusive developer of the batteries and
capacitor that will power IRM's intravascular defibrillator.
-- We successfully completed the implementation of the base ERP
system at all locations.
Net sales totaled $46.5 million during the fourth quarter of 2004,
a decrease of 6% from the fourth quarter of 2003. Net income totaled
$1.9 million, and diluted earnings per share were $0.09, a decrease of
57% from the prior year.
Net sales totaled $200.1 million for the full year 2004, a
decrease of 8% over the prior full year. Net income for the full year
2004 totaled $16.3 million, or $0.75 per diluted share, compared to
$23.3 million or $1.05 per diluted share, in the prior full year.
The Company adopted EITF 04-8, "The Effect of Contingently
Convertible Instruments on Diluted Earnings Per Share" in the fourth
quarter of 2004. As a result, the Company is including the effect of
the conversion of the convertible subordinated notes into common stock
in the weighted average share and diluted earnings per share
calculations using the if-converted method, as long as the effect is
dilutive. There was no impact on the fourth quarter of 2003, fourth
quarter 2004 or the full year 2004. The impact on the full year of
2003 resulted in a restatement of diluted earnings per share of $0.03,
from $1.08 to $1.05 per share.
Edward F. Voboril, Chairman, President and Chief Executive Officer
commented, "The results for the quarter were ahead of expectations due
to the cost containment initiatives we implemented throughout the
second half of 2004. We took further action in January of 2005 and
implemented a 4% workforce reduction. These actions were taken after
careful consideration on how to best achieve our near and long-term
strategic goals."
"As we look ahead into next year and beyond, we have enhanced our
infrastructure to enable significant growth. We continue to believe
that our newly launched QHR and QMR battery technology represents
product leadership for implantable batteries. We continue to
demonstrate further significant advances in the performance of
tantalum capacitors and EMI filtering components. The dramatic growth
of our coated components business underscores our ability to leverage
our expertise in advanced materials. This expertise coupled with our
recent nanotechnology acquisition will be leveraged across all product
areas to ensure continuing technology and market leadership."
"Our new facility in Tijuana represents an important strategic
resource which our customers can use to help simplify their supply
chains by outsourcing significant device assembly. This will in turn
pull through substantial proprietary component technology from WGT,"
Voboril added.
Sales Summary
The following table summarizes the Company's sales by business
unit and major product line for the fourth quarters of 2004 and 2003
(in thousands):
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Business Unit/Product Lines 2004 2003 %
4th Qtr 4th Qtr Change
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Implantable Medical Components ("IMC"):
- ----------------------------------------------------------------------
ICD Batteries $ 8,420 $ 8,853 -5%
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Pacemaker & Other Batteries 4,328 5,060 -14%
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ICD Capacitors 3,231 8,802 -63%
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Feedthroughs 11,866 10,816 +10%
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Enclosures 5,539 5,289 +5%
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Other 7,048 4,745 +49%
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Total Implantable Medical Components 40,432 43,565 -7%
- ----------------------------------------------------------------------
Electrochem Power Solutions ("EPS") 6,043 5,806 +4%
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Total Sales $ 46,475 $ 49,371 -6%
- ----------------------------------------------------------------------
Volume accounted for approximately 6% of the 7% decrease in IMC
sales, primarily due to lower demand by a major customer for wet
tantalum capacitors. The balance of the decrease (1%) was attributable
to lower selling prices. The decrease in volume of batteries and
capacitors was partially offset by increased volume of other IMC
products, primarily coated components. The 4% increase in EPS sales is
due to volume, resulting from increased demand in the oil and gas
market both domestically and internationally.
Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statement of operations for the fourth
quarters in 2004 and 2003 (in thousands):
- ----------------------------------------------------------------------
2004 2003 %
4th Qtr 4th Qtr Change
- ----------------------------------------------------------------------
Gross Profit $ 16,327 $ 19,838 -18%
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Gross Margin 35.1% 40.2%
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SG&A Expenses $ 6,492 $ 7,257 - 11%
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SG&A Expenses as % of Sales 14.0% 14.7%
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RD&E Expenses, net $ 3,751 $ 3,843 -2%
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RD&E Expenses, net as % of Sales 8.1% 7.8%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Operating Income $ 3,946 $ 7,181 -45%
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Operating Margin 8.5% 14.5%
- ----------------------------------------------------------------------
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Effective Tax Rate 43.8% 28.8%
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The decrease in gross margin of 510 basis points was due to lower
IMC selling prices, charges for increased warranty and obsolescence
reserves for two non-CRM products, and increased period costs
resulting from excess capacity at our wet tantalum capacitor
manufacturing plant.
The lower SG&A expense is primarily due to the cost reduction
measures put in place in the second half of 2004. These cost reduction
initiatives more than offset significant incremental costs related to
Sarbanes-Oxley 404 compliance.
The increased R&D expenses for the Advanced Research Lab (formerly
referred to as Nanogram Devices) were offset by the effect of
increased development efforts for projects whereby the company is
reimbursed for achieving certain development milestones.
The higher effective income tax rate is due to the establishment
of a valuation allowance for certain U.S. state deferred tax assets.
Outlook
Management offers the following guidance for 2005:
-- Total sales are expected to be in the range of $205-$220
million.
-- Diluted earnings per share is expected to be in the range of
$0.25 to $0.30, inclusive of selective charges of $0.45 per
share. The charges consist of approximately $5 million for
plant start-up and relocation expenses for the Alden and
Tijuana facilities; approximately $7 million in excess
capacity costs at the existing Capacitors facility and the new
Tijuana facility; and approximately $2 million for
restructuring charges related to various cost reduction
initiatives.
-- The number of fully diluted shares are expected to be
approximately 21.6 million for the full year of 2005. The
effect of the conversion of the convertible notes into common
stock is expected to be anti-dilutive in 2005; therefore, it
will not impact the shares outstanding.
-- The effective tax rate is not expected to exceed 30%.
-- Capital spending is expected to be in the range of $30-$35
million. This includes approximately $20 million related to
the completion of the Alden and Tijuana facility construction
projects.
The foregoing earnings projection does not include the impact of
expensing share-based compensation, which becomes mandatory in the
Company's third quarter pursuant to Financial Accounting Standards
Board Statement No.123(R). The Company will initiate the expensing of
stock options at that time and expects to provide the estimated impact
of this change in accounting treatment on earnings per share guidance
in its second-quarter earnings conference call.
Voboril continued, "We expect sales in 2005 to be in the range of
$205 million to $220 million, which represents a significant
improvement over the 2004 second half annual sales run rate of
approximately $183 million. Our earnings guidance of $0.25 - $0.30 per
share includes projected spending of $0.45 per share or $14 million
(pre-tax) for the start-up of our Alden and Tijuana facilities,
various restructuring plans and an increase in near-term fixed costs
associated with the underutilization of facilities that are in
transition."
"The very significant investments made in 2004 and continuing into
2005, including product R&D, technology, facilities and information
technology provide the framework for supporting future growth. We
believe our market and technology leadership positions, combined with
the exciting industry growth outlook in both CRM and neurostimulation,
has us well positioned to provide enhanced value for our customers,
employees and shareholders," Voboril concluded.
Conference Call
Mr. Voboril and Lawrence P. Reinhold, the Company's Executive Vice
President and Chief Financial Officer, will discuss fourth quarter
2004 financial results in a conference call scheduled for today,
Thursday, February 17, at 10:00 a.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; our ability to
timely and successfully implement our cost reduction initiatives;
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 STATEMENT OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
Three months ended Year Ended
December 31, December 31,
2004 2003 2004 2003
Sales $ 46,475 $ 49,371 $200,119 $216,365
Cost of sales 30,148 29,533 119,397 126,537
--------- -------- -------- --------
Gross profit 16,327 19,838 80,722 89,828
Selling, general and
administrative expenses 6,492 7,257 26,719 30,384
Research, development and
engineering costs, net 3,751 3,843 18,476 16,991
Amortization of intangible
assets 1,077 793 4,002 3,217
Other operating expense, net 1,061 764 4,585 1,036
--------- -------- -------- --------
Operating income 3,946 7,181 26,940 38,200
Interest expense 1,087 1,149 4,535 4,101
Interest income (433) (318) (1,235) (702)
Early extinguishment of debt - - - 1,603
Other expense (income), net (17) (5) (92) (118)
--------- -------- -------- --------
Income before income taxes 3,309 6,355 23,732 33,316
Provision for income taxes 1,450 1,832 7,475 10,028
--------- -------- -------- --------
Net income $ 1,859 $ 4,523 $ 16,257 $ 23,288
========= ======== ======== ========
Diluted earnings per share $ 0.09 $ 0.21 $ 0.75 $ 1.05
WILSON GREATBATCH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
ASSETS December 31, December 31,
2004 2003
Current assets:
Cash and cash equivalents $ 89,473 $ 119,486
Short-term investments 2,759 11,559
Accounts receivable, net 24,288 23,726
Inventories 34,027 28,598
Prepaid expenses and other current assets 1,037 3,591
Refundable income taxes 3,673 583
Deferred income taxes 3,622 3,163
Asset available for sale 3,600 3,658
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Total current assets 162,479 194,364
Property, plant, and equipment, net 92,210 63,735
Intangible assets, net 63,984 51,441
Goodwill 156,772 119,521
Deferred income taxes - 2,896
Other assets 4,493 6,286
----------- ------------
Total assets $ 479,938 $ 438,243
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,971 $ 4,091
Accrued expenses and other current
liabilities 18,109 18,968
Current portion of long-term debt 1,000 850
----------- ------------
Total current liabilities 28,080 23,909
Long-term debt, net of current portion 652 928
Convertible subordinated notes 170,000 170,000
Deferred income taxes 25,029 7,251
Other long-term liabilities - 815
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Total liabilities 223,761 202,903
----------- ------------
Stockholders' equity:
Preferred stock - -
Common stock 21 21
Additional paid-in capital 212,131 207,969
Deferred stock-based compensation (833) (1,185)
Treasury stock, at cost (95) (179)
Retained earnings 44,953 28,714
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Total stockholders' equity 256,177 235,340
----------- ------------
Total liabilities and stockholders' equity $ 479,938 $ 438,243
=========== ============
CONTACT: Wilson Greatbatch Technologies, Inc.
Lawrence P. Reinhold, 716-759-5602
lreinhold@greatbatch.com
or
Anthony W. Borowicz, 716-759-5809
tborowicz@greatbatch.com