Exhibit 99.1
Greatbatch, Inc. Reports Record Quarterly Sales; Increases Sales and Earnings
Guidance for 2006
CLARENCE, N.Y.--(BUSINESS WIRE)--July 26, 2006--Greatbatch, Inc.
(the "Company") (NYSE: GB) today reported its results for the second
quarter ended June 30, 2006.
Business Highlights
-- Achieved record quarterly sales for:
-- Total Company - sales of $70.6 million, up 11% from $63.5
million in the second quarter of 2005.
-- Implantable Medical Components - sales of $59.8 million,
up 9% from $54.8 million in the second quarter of 2005.
-- 2005 sales included approximately $3 million of
additional revenue related to customer field actions,
primarily impacting ICD batteries and capacitors.
Adjusting for this effect, sales increased by 15%.
-- The increase was primarily due to sales of new
assembly products and continued growth in coated
electrodes.
-- Electrochem Commercial Power - sales of $10.8 million, up
24% led by continued strength in the oil and gas market.
-- Diluted Earnings Per Share (EPS) under U.S. Generally Accepted
Accounting Principles (GAAP) were $0.21. Adjusted EPS,
excluding move-related expenses, severance costs and
stock-based compensation under FAS123R, were $0.32. (See Table
A for reconciliation to GAAP), which compares to $0.33 in the
second quarter of 2005. The current quarter's results reflect
the impact of the planned increase in net RD&E costs of $2.5
million (pre-tax).
-- Facilities update - The initial planned shield assembly moves
have been completed with all quality and financial goals
achieved. The final move of the filtered feedthrough product
line from Carson City is scheduled to be completed during the
third quarter of 2006. The move of the Columbia feedthrough
facility is on-going. The construction of the manufacturing
area is complete and the class 10,000 clean room is in the
process of being validated. This move is scheduled for
completion in mid-2007, as originally planned.
-- Raising 2006 full year financial guidance as follows:
-- Full year 2006 projected sales are being increased to a
range of $270 - $280 million.
-- Full year 2006 EPS estimates are being increased to a
range of $0.70 - $0.83 from the previous guidance numbers
of $0.60 - $0.70.
Edward F. Voboril, Chairman and Chief Executive Officer commented,
"Our second quarter results reflect the continued strength across both
our medical and commercial product lines. This quarter's sales
performance came on the heels of a first quarter record. Despite the
volatility in our markets, our growth continues, which reflects our
success in increasing our competitive position in the marketplace. A
key driver in leveraging our earnings growth is the successful
completion of our various consolidation initiatives. I'm pleased to
report that to date, we continue to meet both our own internal
facility consolidation goals as well as the requirements of our
customers. These operating initiatives, combined with our new product
investments and extensive search for new market opportunities, has us
strategically positioned for long-term growth," Voboril concluded.
Sales Summary
The following table summarizes the Company's sales by business
unit and major product line for the second quarters of 2006 and 2005
(dollars in thousands):
Business Unit/Product Lines 2006 2005 %
2nd Qtr. 2nd Qtr. Change
- ---------------------------------------------------------------------
Implantable Medical Components ("IMC"):
ICD Batteries $10,994 $12,608 -13%
Pacemaker & Other Batteries 5,930 6,315 -6%
ICD Capacitors 5,339 5,954 -10%
Feedthroughs 14,301 15,859 -10%
Enclosures 7,105 6,019 +18%
Other Medical 16,087 8,031 +100%
-------- --------
Total Implantable Medical Components 59,756 54,786 +9%
Electrochem Commercial Power ("ECP") 10,842 8,738 +24%
-------- --------
Total Sales $70,598 $63,524 +11%
======== ========
Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statement of operations for the second
quarters in 2006 and 2005 (dollars in thousands):
2006 2005 %
2nd Qtr. 2nd Qtr. Change
- ---------------------------------------------------------------------
Gross Profit(1) $26,777 $24,161 +11%
Gross Margin 37.9% 38.0%
SG&A Expenses $9,865 $8,481 +16%
SG&A Expenses as % of Sales 14.0% 13.4%
RD&E Expenses, net $6,142 $3,657 +68%
RD&E Expenses, net as % of Sales 8.7% 5.8%
Operating Income $7,127 $8,022 -11%
Operating Margin 10.1% 12.6%
Effective Tax Rate 34.5% 30.0%
(1) Gross profit in 2005 has been revised to include the effect of
amortization of intangible assets of $1.0 million, which was
previously included in operating expenses below the gross profit
calculation.
Gross margin remained relatively unchanged from last year as lower
manufacturing costs offset unfavorable product mix stemming from
higher sales of assembly products and lower medical battery sales
volume.
The increase in SG&A expenses is primarily due to the expensing of
stock options under FAS123R.
The increase in net RD&E expenses is primarily due to a planned
increase in spending on new research and development programs ($1.5
million), coupled with lower customer reimbursements for development
charges in the current quarter compared to the second quarter last
year ($1.0 million). RD&E as a percentage of sales is expected to
continue to increase to a range of 9% to 9.5% for the full year 2006.
Outlook
Considering the performance of the first two quarters, the Company
is revising its guidance as follows (dollars in millions, except per
share amounts):
Current Previous
- ---------------------------------------------------------------------
Sales: Medical $231 - $239 $224 - $232
Commercial $ 39 - $ 41 $ 36 - $ 38
-------------- --------------
Total Sales $270 - $280 $260 - $270
GAAP EPS $0.70 -$0.83 $0.60 -$0.70
Adjusted EPS (excluding move & FAS123R) $1.18 -$1.30 $1.15 -$1.25*
Effective tax rate 34% 34%
Capital expenditures $ 22 - $ 27 $ 22 - $ 27
* Previous guidance for Adjusted EPS would have been $1.08 to
$1.17 assuming 26 million shares outstanding as in the current period.
Table A: GAAP EPS Reconciliation
- ---------------------------------------------------------------------
2006 2005 2006
2nd Qtr. 2nd Qtr. Full Yr. Guidance
- ---------------------------------------------------------------------
GAAP EPS: $0.21 $0.23 $0.70 -$0.83
Carson City facility
closure/relocation 0.02 0.02 0.06 - 0.06
Columbia facility
closure/relocation 0.04 - 0.14 - 0.15
Medical power facility
closure/relocation - 0.02 0.02 - 0.02
Asset dispositions and other 0.01 0.06 0.07 - 0.11
Corporate development expenses 0.02 - 0.02 - 0.02
---------- ---------- ------------------
Other operating expense 0.09 0.10 0.31 - 0.36
Incremental stock-based
compensation 0.02 - 0.10 - 0.13
---------- ----------
EPS - adjusted $0.32 $0.33 $1.18 -$1.30
========== ==========
Diluted weighted average
shares outstanding (000's) 26,200(1) 26,100(1) 26,200(1)
========== ==========
(1) Includes 4.2 million shares for the dilutive effect of the
convertible notes into common stock.
Table B: Operating Income Reconciliation (dollars in thousands):
- ---------------------------------------------------------------------
2006 2005 2006
2nd Qtr. 2nd Qtr. Full Yr. Guidance
- ---------------------------------------------------------------------
Operating Income as reported: $7,127 $8,022 $24,000 -$28,500
Carson City facility
closure/relocation 850 677 2,200 - 2,200
Columbia facility
closure/relocation 1,400 - 5,700 - 6,000
Medical power facility
closure/relocation 52 818 700 - 1,000
Asset dispositions & other 540 2,506 3,200 - 4,800
Corporate development expenses 801 - 800 - 800
---------- ---------- ------------------
Other operating expense 3,643 4,001 12,600 - 14,800
Incremental stock-based
compensation(1) 900 - 4,000 - 5,000
---------- ----------
Operating Income -
adjusted $11,670 $12,023 $42,000 -$48,000
========== ==========
Operating margin -
adjusted 16.5% 18.9% 15% - 17%
========== ==========
(1) Approximately 80% in SG&A; 12% RD&E; 8% Cost of Sales
Conference Call
The Company will host a conference call today, Wednesday, July 26,
2006 at 4:30 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 the Company's
website for future on-demand replay. An audio replay will also be
available beginning from 7:00 p.m. E.T. on July 26, 2006 until August
5, 2006. To access the replay, dial 888-286-8010 (U.S.) or
617-801-6888 (International) and enter the passcode 64311831.
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 STATEMENTS OF OPERATIONS - Unaudited
(In thousands except per share amounts)
Three months ended Six months ended
------------------ ----------------
June 30, July 1, June 30, July 1,
2006 2005 2006 2005
Sales $70,598 $63,524 $138,705 $119,882
Cost and expenses:
Cost of sales - excluding
amortization
of intangible assets 42,863 38,405 82,378 73,976
Amortization of intangible
assets - cost of sales 958 958 1,916 1,916
Selling, general and
administrative expenses 9,865 8,481 18,880 15,247
Research, development and
engineering costs, net 6,142 3,657 12,040 8,058
Other operating expense,
net 3,643 4,001 6,312 6,389
---------------- ------------------
Operating income 7,127 8,022 17,179 14,296
Interest expense 1,163 1,191 2,298 2,322
Interest income (1,353) (652) (2,545) (1,227)
Other income, net (76) (60) (120) (60)
---------------- ------------------
Income before provision
for income taxes 7,393 7,543 17,546 13,261
Provision for income
taxes 2,550 2,263 6,053 3,978
---------------- ------------------
Net income $4,843 $5,280 $11,493 $9,283
================ ==================
Earnings per share:
Basic $0.22 $0.24 $0.53 $0.43
Diluted $0.21 $0.23 $0.50 $0.42
Weighted average shares
outstanding:
Basic 21,800 21,600 21,800 21,500
Diluted 26,200 26,100 26,200 25,900
GREATBATCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - Unaudited
(In thousands)
ASSETS June 30, December 30,
2006 2005
Current assets:
Cash and cash equivalents $44,180 $46,403
Short-term investments 71,639 65,746
Accounts receivable, net 40,854 29,997
Inventories 51,612 45,184
Refundable income taxes - 928
Deferred income taxes 5,615 6,257
Prepaid expenses and other current assets 2,929 1,488
--------- ---------
Total current assets 216,829 196,003
Property, plant, and equipment, net 96,963 97,705
Intangible assets, net 58,227 60,143
Goodwill 155,039 155,039
Other assets 3,650 4,021
--------- ---------
Total assets $530,708 $512,911
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 15,725 13,678
Accrued expenses and other current liabilities 23,730 29,903
Current portion of long-term debt - 464
--------- ---------
Total current liabilities 39,455 44,045
Convertible subordinated notes 170,000 170,000
Deferred income taxes 32,542 30,261
--------- ---------
Total liabilities 241,997 244,306
--------- ---------
Stockholders' equity:
Preferred stock - -
Common stock 22 22
Additional paid-in capital 221,405 215,614
Retained earnings 64,532 53,039
Accumulated other comprehensive income (loss) 2,752 (70)
--------- ---------
Total stockholders' equity 288,711 268,605
--------- ---------
Total liabilities and stockholders' equity $530,708 $512,911
========= =========
CONTACT: Greatbatch, Inc.
Anthony W. Borowicz, 716-759-5809
Treasurer and Director, Investor Relations
tborowicz@greatbatch.com