Exhibit 99.1
Greatbatch, Inc. Reports Record Quarterly
Sales; Increases Sales and Earnings Guidance for 2006; Margins Show
Strong Improvement on Solid Sales Growth Over Prior Year
CLARENCE, N.Y.--(BUSINESS WIRE)--April 26, 2006--Greatbatch, Inc.
(the "Company") (NYSE: GB) today reported its results for the first
quarter ended March 31, 2006.
Business Highlights
-- Achieved record quarterly sales for:
-- Total Company - sales of $68.1 million, up 21 percent from
$56.4 million in the first quarter of 2005
-- Implantable Medical Components - sales of $57.6 million,
up 20% in the first quarter, driven by strong sales of
batteries, feedthroughs and assembly products
-- Electrochem Commercial Power - sales of $10.5 million, up
24% led by strong growth in the oil and gas, ocean and
seismic markets
-- Diluted earnings per share under U.S. Generally Accepted
Accounting Principles (GAAP) increased by 47% to $0.28.
Earnings per share, excluding move-related expenses, severance
costs and stock-based compensation under FAS123R, increased by
37% to $0.37. (See Table A for reconciliation to GAAP).
-- Operating margin, excluding move-related expenses, severance
costs and stock-based compensation, improved by 470 basis
points in the first quarter to 20.1%. (See TableB for
reconciliation).
-- Facilities update - moves of shield assembly, filtered
feedthroughs (Carson City) and feedthroughs (Columbia) to
Tijuana are proceeding as planned. Carson City move expected
to be complete by the middle of 2006 and Columbia move
expected to be complete in 1st half of 2007. Currently working
with an existing customer on the planning phase for additional
assembly volume to be completed in Q4 2006.
-- Signed a new supply agreement with Sorin/ELA. This new
comprehensive agreement represents a significant incremental
revenue opportunity over the 5-year term, as it includes
provisions for all of the Greatbatch technologies. The
renewable agreement has an initial term ending on December 31,
2010.
-- Raising 2006 full year financial guidance as follows:
-- Full year 2006 projected sales are being increased to a
range of $260 - $270 million
-- Full year 2006 Earnings Per Share (EPS) estimates are
being increased to a range of $1.15 - $1.25, exclusive of
charges for move-related expenses and incremental
stock-based compensation under FAS123R (see TableA for
reconciliation to GAAP).
Edward F. Voboril, Chairman and Chief Executive Officer commented,
"We are extremely pleased with the record sales results and the strong
start to 2006. We delivered better than expected sales results across
the breadth of our medical and commercial products. We experienced
solid growth from both our domestic and international customer base,
which reflects the strength of our position in these markets.
The improving margins reflect greater operating leverage from the
increased sales volume. In addition, the consolidation of our medical
power manufacturing operations coupled with improved utilization at
our Tijuana facility, combined to increase our operating margins in
the quarter (exclusive of move-related expenses and stock-based
compensation) to approximately 20%. Given the strong start to the
year, we are increasing our 2006 financial outlook, for both sales and
earnings. We remain confident that the strategic initiatives we have
put in place to expand our product offering and reduce our
manufacturing costs will allow us to continue to advance our
competitive position in the marketplace," Voboril concluded.
Sales Summary
The following table summarizes the Company's sales by business
unit and major product line for the first quarters of 2006 and 2005
(in thousands):
Business Unit/Product Lines 2006 2005 %
1st Qtr 1st Qtr Change
- ----------------------------------------------------------------------
Implantable Medical Components ("IMC"):
ICD Batteries $12,679 $10,751 +18%
Pacemaker & Other Batteries 5,787 5,255 +10%
ICD Capacitors 3,568 4,297 -17%
Feedthroughs 16,288 13,682 +19%
Enclosures 6,340 6,547 -3%
Other Medical 12,918 7,333 +76%
------ ------ ----
Total Implantable Medical Components 57,580 47,865 +20%
Electrochem Commercial Power ("ECP") 10,527 8,493 +24%
------ ------ ----
Total Sales $68,107 $56,358 +21%
====== ======
Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statement of operations for the first
quarters in 2006 and 2005 (in thousands):
2006 2005 %
1st Qtr 1st Qtr Change
- ----------------------------------------------------------------------
Gross Profit(1) $27,634 $19,829 +39%
Gross Margin 40.6% 35.2%
SG&A Expenses $9,015 $6,766 +33%
SG&A Expenses as % of Sales 13.2% 12.0%
RD&E Expenses, net $5,898 $4,401 +34%
RD&E Expenses, net as % of Sales 8.7% 7.8%
Operating Income $10,052 $6,274 +60%
Operating Margin 14.8% 11.1%
Effective Tax Rate 34.5% 30.0%
(1) Gross profit has been revised to include the effect of
amortization of intangible assets, which was previously included
in operating expenses below the gross profit calculation.
The increase in gross margin of 540 basis points was primarily due
to lower assembly manufacturing costs at the Tijuana facility, reduced
excess capacity costs due to the closure of the former capacitor plant
and favorable manufacturing volume variances.
The increase in SG&A expenses is primarily due to stock based
compensation, increased cost at our Tijuana location, as well as
higher selling and marketing related expenses.
The increase in RD&E expenses is primarily due to increased
headcount in support of new development programs and decreased
reimbursement on new product development projects. RD&E as a
percentage of sales is expected to continue to increase to a range of
9% to 10% for the full year 2006, in support of new development
initiatives.
Outlook
Considering the first quarter performance, the Company is revising
its guidance as follows (in millions, except per share amounts):
Current Previous
- ----------------------------------------------------------------------
Sales: Medical $224 - $232 $210 - $228
Commercial $ 36 - $ 38 $ 35 - $ 37
----------- -----------
Total Sales $260 - $270 $245 - $265
GAAP EPS $0.60 - $0.70 $0.40 - $0.60
Adjusted EPS $1.15 - $1.25 $0.95 - $1.15
Effective tax rate 34% 34%
Capital expenditures $22 - $27 $22 - $27
Table A: GAAP EPS Reconciliation
- ----------------------------------------------------------------------
2006 2005 2006
1st Quarter 1st Quarter Full Yr
Guidance
- ----------------------------------------------------------------------
GAAP earnings per share: $0.28 $0.19 $0.60 - $0.70
Carson City facility
closure/relocation 0.03 0.01 0.06 - 0.06
Columbia facility
closure/relocation 0.02 - 0.17 - 0.18
Medical power facility
closure/relocation 0.01 - 0.02 - 0.03
Asset dispositions and other 0.01 0.07 0.08 - 0.13
---- ---- -----------
Sub-total other operating
expense 0.07 0.08 0.33 - 0.40
Incremental stock-based
compensation 0.02 - 0.12 - 0.15
Earnings per share - adjusted $0.37 $0.27 $1.15 - $1.25
Diluted weighted average shares
outstanding (000's) 26,000(1) 22,000 22,000
(1) Includes 4.2 million shares for the dilutive effect of the
convertible notes into common stock
Table B: Operating Income Reconciliation ($000's)
- ----------------------------------------------------------------------
2006 2005 2006
1st Quarter 1st Quarter Full Yr Guidance
- ----------------------------------------------------------------------
Operating Income as reported: $10,052 $6,274 $21,000 - $26,000
Carson City facility
closure/relocation 1,228 195 2,000 - 2,000
Columbia facility
closure/relocation 922 - 5,700 - 6,000
Medical power facility
closure/relocation 515 33 700 - 1,000
Asset dispositions & other 4 2,160 2,700 - 4,300
- ----- -------------
Sub-total other operating
expense 2,669 2,388 11,100 - 13,300
Incremental stock-based
compensation (1) 950 - 4,000 - 5,000
Operating Income - adjusted $13,671 $8,662 $39,500 - $43,000
Operating margin - adjusted 20.1% 15.4% 15% - 16%
(1) Approximately 80% in SG&A; 12% RD&E; 8% Cost of Sales
Conference Call
The Company will host a conference call today, Wednesday, April
26, 2006 at 5:00 p.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. The webcast will
also include presentation visuals. The webcast will be archived on
both websites for future on-demand replay. An audio replay will also
be available beginning from 7:00 p.m. E.T. on April 26, 2006 until May
5, 2006. To access the replay, dial 888-286-8010 (U.S.) or
617-801-6888 (International) and enter the passcode 41002347.
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
March 31,
2006 2005
--------- --------
Sales $68,107 $56,358
Cost of sales 39,515 35,571
Amortization of intangible assets - cost of sales 958 958
Selling, general and administrative expenses 9,015 6,766
Research, development and engineering costs, net 5,898 4,401
Other operating expense, net 2,669 2,388
--------- --------
Operating income 10,052 6,274
Interest expense 1,135 1,131
Interest income (1,192) (575)
Other (income) expense, net (44) -
--------- --------
Income before income taxes 10,153 5,718
Provision for income taxes 3,503 1,715
--------- --------
Net income $ 6,650 $ 4,003
========= ========
Diluted earnings per share $ 0.28 $ 0.19
GREATBATCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
ASSETS March 31, December 31,
2006 2005
--------- ------------
Current assets:
Cash and cash equivalents $ 38,888 $ 46,403
Short-term investments 66,018 65,746
Accounts receivable, net 39,857 29,997
Inventories 48,200 45,184
Refundable income taxes - 928
Deferred income taxes 6,257 6,257
Prepaid expenses and other current assets 1,601 1,488
--------- ------------
Total current assets 200,821 196,003
Property, plant, and equipment, net 97,368 97,705
Intangible assets, net 59,185 60,143
Goodwill 155,039 155,039
Other assets 4,399 4,021
--------- ------------
Total assets $516,812 $512,911
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,501 $ 13,678
Accrued expenses and other current
liabilities 19,352 29,903
Current portion of long-term debt 165 464
--------- ------------
Total current liabilities 35,018 44,045
Long-term debt, net of current portion - -
Convertible subordinated notes 170,000 170,000
Deferred income taxes 31,969 30,261
--------- ------------
Total liabilities 236,987 244,306
--------- ------------
Stockholders' equity:
Preferred stock - -
Common stock 22 22
Additional paid-in capital 220,158 215,614
Retained earnings 59,690 53,039
Accumulated other comprehensive loss (45) (70)
--------- ------------
Total stockholders' equity 279,825 268,605
--------- ------------
Total liabilities and stockholders' equity $516,812 $512,911
========= ============
CONTACT: Greatbatch, Inc.
Anthony W. Borowicz, 716-759-5809
tborowicz@greatbatch.com