Exhibit 99.1
Greatbatch, Inc. Reports Record Quarterly
Sales; Increases Sales and Earnings Guidance for 2005
CLARENCE, N.Y.--(BUSINESS WIRE)--Aug. 9, 2005--Greatbatch, Inc.
(the "Company") (NYSE: GB) today reported its results for the second
quarter ended June 30, 2005.
Business Summary
-- As previously announced, the Company:
-- Reported all-time record sales results of $63.5 million,
led by strong sales of implantable medical components and
commercial power sources.
-- Changed the name of the Company to Greatbatch, Inc., from
its former name of Wilson Greatbatch Technologies, Inc.
-- Celebrated the grand opening of the world-class
manufacturing facility in Tijuana, Mexico.
-- Appointed Thomas J. Hook as President and Chief Operating
Officer.
-- Installation of the remaining assembly equipment at the
Greatbatch Mexico facility is proceeding as planned, with
completion expected in the fourth quarter of 2005.
Consolidation plan finalized for move of Carson City
operations to Tijuana. Expect to complete the move by the
first quarter of 2006.
-- Substantially completed the move of the medical battery
manufacturing equipment to new Alden, NY facility in
accordance with plan. Began moving the manufacturing equipment
from the existing capacitor plant. Completion of the move
expected by the end of the fourth quarter of 2005.
-- The Company's existing $20 million Senior Secured Credit
Facility was successfully replaced with a new three-year $50
million revolving credit facility.
Net sales totaled $63.5 million during the second quarter of 2005,
an increase of 20% from the second quarter of 2004. Net income totaled
$5.3 million and diluted earnings per share were $0.23; compared to
$4.7 million and $0.21 per diluted share in the prior year.
Edward F. Voboril, Chairman and Chief Executive Officer commented,
"We are pleased to report our second consecutive record quarterly
sales results. The second quarter was positively impacted to a certain
extent by short-term increased ICD component demand from our CRM
customers due to various ICD-related field issues in the marketplace.
However, we continue to see increasing demand in the underlying CRM
and Commercial markets with strength across our entire customer base.
Demand for our products remains high, providing positive momentum
heading into the second half of the year."
"We demonstrated increased operating leverage in the quarter from
the higher sales volume. We achieved earnings per share of $0.23,
inclusive of pre-tax costs of $4 million, or $0.11 per share after
tax, in other operating expenses associated with the facility moves
and other costs. The plant moves and consolidation efforts are
proceeding as planned and once these become fully implemented, we
expect further operational improvements," Voboril concluded.
Sales Summary
The following table summarizes the Company's sales by business
unit and major product line for the second quarters of 2005 and 2004
(in thousands):
Business Unit/Product Lines 2005 2004 %
2nd Qtr 2nd Qtr Change
- --------------------------------------------------- -------- --------
Implantable Medical Components ("IMC"):
- --------------------------------------------------- -------- --------
ICD Batteries $12,608 $10,119 +25%
- --------------------------------------------------- -------- --------
Pacemaker & Other Batteries 6,315 5,361 +18%
- --------------------------------------------------- -------- --------
ICD Capacitors 5,954 6,239 -5%
- --------------------------------------------------- -------- --------
Feedthroughs 15,859 12,261 +29%
- --------------------------------------------------- -------- --------
Enclosures 6,019 5,142 +17%
- --------------------------------------------------- -------- --------
Other Medical 8,031 7,077 +13%
- ---------------------------------------------=====----=====------====
Total Implantable Medical Components 54,786 46,199 +19%
- --------------------------------------------------- -------- --------
Electrochem Commercial Power ("ECP") 8,738 6,743 +30%
- ---------------------------------------------=====----=====------====
Total Sales $63,524 $52,942 +20%
- --------------------------------------------------- -------- --------
The increase in IMC sales is attributable to strong underlying
market conditions combined with increased short-term ICD component
demand by CRM customers. The increase in ECP sales is primarily due to
increased sales and marketing efforts and higher demand for power
sources used in oil and gas, oceanographic and seismic markets.
Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statements of operations for the second
quarters in 2005 and 2004 (in thousands):
2005 2004 %
2nd Qtr 2nd Qtr Change
- --------------------------------------------------- -------- --------
Gross Profit $25,119 $23,818 +5%
- --------------------------------------------------- -------- --------
Gross Margin 39.5% 45.0%
- --------------------------------------------------- -------- --------
- --------------------------------------------------- -------- --------
SG&A Expenses $8,481 $6,389 +33%
- --------------------------------------------------- -------- --------
SG&A Expenses as % of Sales 13.4% 12.1%
- --------------------------------------------------- -------- --------
- --------------------------------------------------- -------- --------
RD&E Expenses, net $3,657 $5,688 -36%
- --------------------------------------------------- -------- --------
RD&E Expenses, net as % of Sales 5.8% 10.7%
- --------------------------------------------------- -------- --------
- --------------------------------------------------- -------- --------
Other Operating Expense $4,001 $2,957 +35%
- --------------------------------------------------- -------- --------
- --------------------------------------------------- -------- --------
Operating Income $8,022 $7,708 +4%
- --------------------------------------------------- -------- --------
Operating Margin 12.6% 14.6%
- --------------------------------------------------- -------- --------
- --------------------------------------------------- -------- --------
Effective Tax Rate 30.0% 30.5%
- --------------------------------------------------- -------- --------
Approximately 2.9 percentage points of the 5.5 percentage point
decrease in gross margin was due to excess capacity costs at the
Greatbatch Mexico plant and at the wet tantalum capacitor facility.
The balance of the decrease was due to lower medical selling prices,
increased incentive and profit sharing compensation as well as higher
platinum costs.
The increase in SG&A expenses is primarily due to increased
incentive compensation and higher selling and marketing costs from the
planned expansion of the medical and commercial sales forces.
The decrease in RD&E expenses is primarily due to increased
reimbursement on new product development projects and engineering cost
reduction measures.
The other operating expense in the current quarter consists of:
-- Tijuana, Alden and Carson City
consolidations/relocations $1.8 million
-- Discontinuation of a drug pump development
agreement $1.2 million
-- Asset write-downs $1.0 million
Outlook
Considering the Company's second quarter performance and the
prevailing strength of the core Medical and Commercial segments, the
Company now expects 2005 sales to be in the range of $220 to $235
million, an increase of $10 million from the previous sales guidance
range. The Company is also increasing its earnings per share guidance
and is now anticipating 2005 earnings per share in the range of $0.20
to $0.34, inclusive of charges of $0.68 - $0.73 per share representing
costs for the Alden and Greatbatch Mexico startups, excess capacity,
restructuring charges, Carson City plant consolidation and various
asset write-offs. Capital spending in 2005 is expected to be in the
range of $30 to $35 million, unchanged from the Company's previous
guidance.
Earnings per share guidance for 2005 excludes the effect of
expensing stock options. Consistent with the Securities and Exchange
Commission's announcement amending the compliance dates for Financial
Accounting Standards Board Statement ("FAS") 123R, the Company will
begin implementing FAS123R when it becomes effective, which is
currently anticipated to be the in first quarter of 2006.
Conference Call
Greatbatch will host a conference call scheduled today, Tuesday,
August 9, at 5:00 p.m. EDT, to discuss its quarterly results. The
conference call will be webcast live and is accessible through the
Company's website at www.greatbatch.com. An audio replay will also be
available beginning from 7:00 p.m. EDT on Tuesday, August 9, 2005
until 12:00 a.m. on Wednesday, August 17. To access the replay, dial
888-286-8010 (U.S.) or 617-801-6888 (International) and enter the
passcode 90120705.
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 Greatbatch, Inc.
Greatbatch, 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.
GREATBATCH, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
Three months Six months
ended ended
June 30, June 30,
2005 2004 2005 2004
Sales $63,524 $52,942 $119,882 $108,467
Cost of sales 38,405 29,124 73,976 61,474
-------- -------- --------- ---------
Gross profit 25,119 23,818 45,906 46,993
Selling, general and
administrative expenses 8,481 6,389 15,247 13,314
Research, development and
engineering costs, net 3,657 5,688 8,058 10,569
Amortization of intangible assets 958 1,076 1,916 1,851
Other operating expense, net 4,001 2,957 6,389 3,178
-------- -------- --------- ---------
Operating income 8,022 7,708 14,296 18,081
Interest expense 1,191 1,144 2,322 2,304
Interest income (652) (245) (1,227) (558)
Other expense (income), net (60) (2) (60) -
-------- -------- --------- ---------
Income before income taxes 7,543 6,811 13,261 16,335
Provision for income taxes 2,263 2,078 3,978 4,983
-------- -------- --------- ---------
Net income $5,280 $4,733 $9,283 $11,352
======== ======== ========= =========
Diluted earnings per share $0.23 $0.21 $0.42 $0.50
GREATBATCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
ASSETS June December
30, 31,
2005 2004
Current assets:
Cash and cash equivalents $83,036 $89,473
Short-term investments 5,107 2,759
Accounts receivable, net 35,515 24,288
Inventories 33,672 34,027
Refundable income taxes 3,783 3,673
Deferred income taxes 3,622 3,622
Prepaid expenses and other current assets 6,094 4,637
--------- ---------
Total current assets 170,829 162,479
Property, plant, and equipment, net 100,901 92,210
Intangible assets, net 62,058 63,984
Goodwill 156,772 156,772
Other assets 4,496 4,493
--------- ---------
Total assets $495,056 $479,938
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,850 $8,971
Accrued expenses and other current liabilities 18,703 18,109
Current portion of long-term debt 1,001 1,000
--------- ---------
Total current liabilities 27,554 28,080
Long-term debt, net of current portion 58 652
Convertible subordinated notes 170,000 170,000
Deferred income taxes 28,955 25,029
--------- ---------
Total liabilities 226,567 223,761
--------- ---------
Stockholders' equity:
Preferred stock - -
Common stock 21 21
Additional paid-in capital 215,912 212,131
Deferred stock-based compensation (1,579) (833)
Treasury stock, at cost - (95)
Retained earnings 54,254 44,971
Accumulated other comprehensive loss (119) (18)
--------- ---------
Total stockholders' equity 268,489 256,177
--------- ---------
Total liabilities and stockholders' equity $495,056 $479,938
========= =========
CONTACT: Greatbatch, Inc.
Investor Relations:
Anthony W. Borowicz, 716-759-5809
tborowicz@greatbatch.com