Exhibit 99.1
Greatbatch, Inc. Reports Fourth Quarter and Full-Year 2005 Results
CLARENCE, N.Y.--(BUSINESS WIRE)--Feb. 22, 2006--Greatbatch, Inc.
(the "Company") (NYSE: GB) today reported its results for the fourth
quarter and year ended December 31, 2005.
2005 Highlights
-- Achieved record sales for:
-- Total Company - sales of $241 million, an increase of 20%
compared to $200 million in 2004
-- Implantable Medical Components - sales of $208 million, an
increase of 20% compared to $173 million in 2004
-- Commercial - sales of $33 million, an increase of 21%
compared to $27 million in 2004
-- Successfully started up operations in two new facilities in
Alden, New York and Tijuana, Mexico and consolidated both
existing and new manufacturing operations into these locations
with minimal disruption
-- Met all of the milestones for the consolidation of filtered
feedthrough operations in Carson City, Nevada to the facility
in Tijuana, Mexico
-- Commenced the plan to consolidate feedthrough manufacturing
from Columbia, Maryland to Tijuana and consolidate all medical
research and development into the Technology Development
Center in Clarence, New York
-- Cash and short-term investments increased by $20 million to
$112 million as of December 31, 2005
Net sales totaled $58.9 million during the fourth quarter of 2005,
an increase of 27% compared to $46.5 million in the fourth quarter of
2004. For the full year 2005, net sales totaled $241.1 million
compared to $200.1 million in 2004, an increase of 20%.
Net income for the fourth quarter was $.068 million, or $0.00 per
diluted share, compared to a loss of $0.18 million, or $0.01 per
diluted share in 2004. Reported results for the fourth quarter of 2005
include charges for plant consolidations, relocations and asset
dispositions, which total $4.4 million (pre-tax), or $0.13 per diluted
share. Excluding these charges, net earnings for the fourth quarter
2005 were $2.9 million or $0.13 per diluted share.
Net income for the full year 2005 was $10.1 million, or $0.46 per
diluted share, compared to $14.2 million, or $0.66 per diluted share
in 2004. Reported results for 2005 include charges for plant
consolidations, relocations, asset dispositions, severance and legal
settlement charges, which total $18.6 million (pre-tax), or $0.56 per
diluted share. Excluding these charges, net earnings for the full year
2005 were $22.3 million or $1.02 per diluted share.
Commenting on full-year results, Edward Voboril, Chairman and
Chief Executive Officer said: "I am very pleased with our performance
during 2005. We achieved record sales in both our medical and
commercial segments, which speaks to our broad-based success. In many
respects, 2005 was a very dynamic and challenging year. Our financial
results are indicative of our ability to respond to increased customer
requirements, while at the same time effectively executing on our key
strategic initiatives."
"The advancements we have made in establishing a new manufacturing
footprint, coupled with the various new product initiatives underway
in the areas of Cardiac Rhythm Management, Neurostimulation and
Commercial markets have us well positioned for continued growth going
forward," Voboril concluded.
4th Quarter Sales Summary
The following table summarizes the Company's sales by business
unit and major product line for the fourth quarters of 2005 and 2004
(in thousands):
Business Unit/Product Lines 2005 2004 %
4th Qtr 4th Qtr Change
- ----------------------------------------------------------------------
Implantable Medical Components ("IMC"):
- ----------------------------------------------------------------------
ICD Batteries $11,020 $ 8,469 +30%
- ----------------------------------------------------------------------
Pacemaker & Other Batteries 4,791 4,285 +12%
- ----------------------------------------------------------------------
ICD Capacitors 5,109 3,231 +58%
- ----------------------------------------------------------------------
Feedthroughs 13,283 11,866 +12%
- ----------------------------------------------------------------------
Enclosures 5,097 5,539 -8%
- ----------------------------------------------------------------------
Other Medical 11,878 7,043 +69%
- ----------------------------------------------------------------------
Total Implantable Medical Components 51,178 40,433 +27%
- ----------------------------------------------------------------------
Electrochem Commercial Power ("ECP") 7,679 6,042 +27%
- ----------------------------------------------------------------------
Total Sales $58,857 $46,475 +27%
- ----------------------------------------------------------------------
The increase in IMC sales is attributable to organic growth,
incremental assembly volume, impact of the marketplace field actions
and higher 2005 versus 2004 volume from one customer. Furthermore, the
decrease in Enclosures is due to a shift in the reporting of $1.6
million in sales of shield enclosures to the "Other Medical" product
line as the product is now being assembled and shipped from the
Tijuana facility. The increase in ECP sales is due to higher volume in
the seismic, military and oil & gas markets.
4th Quarter Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statements of operations for the fourth
quarters in 2005 and 2004 (in thousands):
2005 2004 %
4th Qtr 4th Qtr Change
- ----------------------------------------------------------------------
Gross Profit $19,468 $16,327 +19%
- ----------------------------------------------------------------------
Gross Margin 33.1% 35.1%
- ----------------------------------------------------------------------
SG&A Expenses $ 7,439 $ 6,492 +15%
- ----------------------------------------------------------------------
SG&A Expenses, as % of Sales 12.6% 14.0%
- ----------------------------------------------------------------------
RD&E Expenses, net $ 5,543 $ 3,751 +48%
- ----------------------------------------------------------------------
RD&E Expenses, net as % of Sales 9.4% 8.1%
- ----------------------------------------------------------------------
Other Operating Expense $ 4,367 $ 1,061 +312%
- ----------------------------------------------------------------------
Operating Income $ 1,161 $ 3,946 -71%
- ----------------------------------------------------------------------
Operating Margin 2.0% 8.5%
- ----------------------------------------------------------------------
The decrease in gross margin is primarily due to increased
warranty expense and lower selling prices, partially offset by
favorable manufacturing overhead absorption due to increased
production volume.
The increase in SG&A expenses is primarily due to costs related to
the Tijuana facility and incentive compensation, partially offset by
lower Sarbanes-Oxley costs.
The increase in RD&E expenses is primarily due to decreased
reimbursement on new product development projects in the 2005 fourth
quarter compared to last year.
The Other operating expense in the current quarter consists of:
-- Tijuana, Alden and Carson City consolidations/relocations $2.7
million
-- Columbia and Advanced Research Lab consolidations $1.1 million
-- Asset dispositions and other $0.6 million
The high effective tax rate for the quarter, which resulted in an
annual effective tax rate of 34.6%, was primarily due to the change in
the estimate of the benefit related to Extra Territorial Income.
Full-Year 2006 Financial Guidance
-- The Company expects 2006 net sales to be in the range of $245
million to $265 million, an increase of 2% to 10%. This
projection takes into consideration the effect of the
marketplace field actions that occurred in 2005 and resulted
in incremental sales for Greatbatch of $10 million to $15
million.
-- The Company expects GAAP earnings per diluted share for 2006
to be in the range of $0.40 to $0.60, including the impact of
stock-based compensation under FAS123R of $0.15 to $0.18 and
plant relocation/asset dispositions of $0.30 to $0.38.
Excluding the impact of the stock-based compensation and plant
consolidations/asset dispositions, the target range for the
full-year 2006 earnings per diluted share is $0.95 to $1.15.
-- The effective tax rate is expected to be approximately 34%.
-- The number of diluted shares is expected to be approximately
22 million for the full year of 2006. The effect of the
conversion of the convertible notes into common stock is
expected to be anti-dilutive in 2006; therefore, it will not
impact the share count.
-- Capital spending is expected to be in the range of $22 million
to $27 million.
Conference Call
The Company will host a conference call tomorrow, Thursday,
February 23, 2006 at 11:00 a.m. E.T. to discuss its quarterly results.
The scheduled 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 1:00 p.m. E.T. on February 23,
2006 until March 2, 2006. To access the replay, dial 888-286-8010
(U.S.) or 617-801-6888 (International) and enter the passcode
81517078.
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 and plant
consolidation 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, integrate and protect
against liabilities arising from 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, 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 ended Year ended
December 31, December 31,
2005 2004 * 2005 2004 *
---- ------ ---- ------
Sales $58,857 $46,475 $241,097 $200,119
Cost of sales 39,389 30,148 151,543 119,397
-------- -------- --------- ---------
Gross profit 19,468 16,327 89,554 80,722
Selling, general and
administrative expenses 7,439 6,492 31,528 26,719
Research, development and
engineering costs, net 5,543 3,751 18,725 18,476
Amortization of intangible assets 958 1,077 3,841 4,002
Other operating expense, net 4,367 1,061 18,574 4,585
-------- -------- --------- ---------
Operating income 1,161 3,946 16,886 26,940
Interest expense 1,137 1,087 4,613 4,535
Interest income (1,089) (433) (3,113) (1,235)
Other (income) expense, net (9) (17) (78) (92)
-------- -------- --------- ---------
Income before income taxes 1,122 3,309 15,464 23,732
Provision for income taxes 1,054 3,489 5,357 9,514
-------- -------- --------- ---------
Net income $ 68 $ (180) $ 10,107 $ 14,218
======== ======== ========= =========
Diluted earnings per share $ 0.00 $ (0.01) $ 0.46 $ 0.66
Diluted weighted average shares
outstanding 21,925 21,539 21,810 21,540
* Restated for a $2,039 increase in the provision for income taxes and
a corresponding decrease in refundable income taxes.
GREATBATCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
ASSETS December 31, December 31,
2005 2004 *
---- ------
Current assets:
Cash and cash equivalents $ 46,403 $ 34,795
Short-term investments 65,746 57,437
Accounts receivable, net 29,997 24,288
Inventories 45,184 34,027
Refundable income taxes 928 1,634
Deferred income taxes 6,257 3,622
Prepaid expenses and other current assets 1,488 4,637
------------ -----------
Total current assets 196,003 160,440
Property, plant, and equipment, net 97,705 92,210
Intangible assets, net 60,143 63,984
Goodwill 155,039 155,039
Other assets 4,021 4,493
------------ -----------
Total assets $ 512,911 $ 476,166
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,678 $ 8,971
Accrued expenses and other current
liabilities 29,903 18,109
Current portion of long-term debt 464 1,000
------------ -----------
Total current liabilities 44,045 28,080
Long-term debt, net of current portion - 652
Convertible subordinated notes 170,000 170,000
Deferred income taxes 30,261 23,296
------------ -----------
Total liabilities 244,306 222,028
------------ -----------
Stockholders' equity:
Preferred stock - -
Common stock 22 21
Additional paid-in capital 217,104 212,131
Deferred stock-based compensation (1,490) (833)
Treasury stock, at cost - (95)
Retained earnings 53,039 42,932
Accumulated other comprehensive loss (70) (18)
------------ -----------
Total stockholders' equity 268,605 254,138
------------ -----------
Total liabilities and stockholders' equity $ 512,911 $ 476,166
============ ===========
* Restated for a $2,039 increase in the provision for income taxes and
a corresponding decrease in refundable income taxes.
CONTACT: Greatbatch, Inc.
Anthony W. Borowicz, 716-759-5809
tborowicz@greatbatch.com