Exhibit 99.1
Greatbatch, Inc. Reports Third Quarter Sales and Earnings
CLARENCE, N.Y.--(BUSINESS WIRE)--Oct. 25, 2006--Greatbatch, Inc.
(the "Company") (NYSE: GB) today reported results for the third
quarter ended September 29, 2006.
Business Highlights
-- Total Company - sales of $69.3 million, up 11% from $62.4
million in the third quarter of 2005.
-- Implantable Medical Components - sales of $57.0 million,
up 5% from $54.1 million in the third quarter of 2005.
-- The increase was primarily due to sales of new
assembly products and continued growth in coated
electrodes and molded components.
-- 2005 sales included approximately $3 to $5 million of
additional revenue related to customer field actions,
primarily impacting ICD batteries and capacitors.
Adjusting for this effect, sales increased by
approximately 14%.
-- Electrochem Commercial Power - record sales of $12.3
million, up 49% from $8.3 million in the third quarter of
2005, led by continued strength in the oil and gas and
seismic markets. Approximately $2 million of the increase
was due to customer inventory stocking and seasonality in
the seismic market.
-- Diluted Earnings Per Share (EPS) under U.S. Generally Accepted
Accounting Principles (GAAP) were $0.15. Adjusted EPS,
excluding facilities move-related expenses, asset dispositions
and stock-based compensation under FAS123R, were $0.39 (See
Table A for reconciliation to GAAP), which compares to $0.28
in the third quarter of 2005.
-- Facilities update
-- The final closure of the Carson City facility was delayed
to accommodate pending customer regulatory approval.
-- The move of the Columbia facility is on-going. The
construction of the class 10,000 clean room is complete
and validated; manufacturing equipment for the first
manufacturing line is installed and going through
installation qualification. This move is scheduled for
completion in mid-2007, as originally planned.
-- The Tijuana facility has been recommended for ISO
13485:2003 certification. This is the internationally
recognized standard for medical device development and
manufacturing, which acknowledges that the facility meets
medical device quality standards.
-- Maintaining 2006 Guidance as follows:
-- Full year 2006 projected sales range of $270 - $280
million
-- Full year 2006 Adjusted EPS estimates range of $1.18 -
$1.30
Thomas Hook, President and Chief Executive Officer commented, "I
am very pleased with our third quarter results. We have delivered six
consecutive quarters of double-digit top-line growth, during a period
which can be characterized as uncertain in terms of the ICD
marketplace. Our growth demonstrates the multiple levers we have to
drive our performance. These growth catalysts include market share
penetration, new product introductions, international expansion, a
robust commercial business and an emerging neurostimulation market
opportunity. Our multi-faceted strategy continues to position the
Company to achieve our long-term goal of growing faster than the
markets we participate in. Looking to 2007, our early indications
suggest our top-line growth should be approximately 10%," Hook
concluded.
Sales Summary
The following table summarizes the Company's sales by business
unit and major product line for the third quarters of 2006 and 2005
(dollars in thousands):
2006 2005 %
Business Unit/Product Lines 3rd Qtr. 3rd Qtr. Change
- ---------------------------------------- -------- -------- ------
Implantable Medical Components ("IMC"):
ICD Batteries $11,456 $11,345 +1%
Pacemaker & Other Batteries 4,439 5,424 -18%
ICD Capacitors 4,499 5,349 -16%
Feedthroughs 17,355 16,386 +6%
Enclosures 5,698 6,203 -8%
Other Medical 13,560 9,378 +45%
-------- --------
Total Implantable Medical Components 57,007 54,085 +5%
Electrochem Commercial Power ("ECP") 12,287 8,273 +49%
-------- --------
Total Sales $69,294 $62,358 +11%
======== ======== ======
Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statement of operations for the third
quarters in 2006 and 2005 (dollars in thousands):
2006 2005 %
3rd Qtr. 3rd Qtr. Change
- ---------------------------------------- -------- -------- ------
Cost of Sales(1) $43,657 $39,145 +12%
Cost of Sales as % of Sales 63.0% 62.8%
SG&A Expenses $9,311 $8,842 +5%
SG&A Expenses as % of Sales 13.4% 14.2%
RD&E Expenses, net $6,022 $5,124 +18%
RD&E Expenses, net as % of Sales 8.7% 8.2%
Operating Income $4,065 $1,429 +184%
Operating Margin 5.9% 2.3%
Effective Tax Rate 24.3% 30.0%
(1) Cost of sales 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.
The cost of sales percentage 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 development programs, coupled with lower
customer reimbursements for development charges in the current quarter
compared to the third quarter last year.
The increase in the operating margin is primarily due to lower
costs associated with the facility moves and higher sales volume.
The decrease in the effective tax rate from 30.0% to 24.3% is a
result of adjusting the income accounts to reflect the filing of the
2005 income tax returns. The year-to-date, expected fourth quarter and
full year effective tax rate is 32.5%.
Outlook
Considering the performance of the first three quarters, the
Company is updating its full year guidance as follows (dollars in
millions, except per share amounts):
Current Previous
- ----------------------------------------------------- --------------
Sales: Medical $228 - $236 $231 - $239
Commercial 42 - 44 39 - 41
-------------- --------------
Total Sales $270 - $280 $270 - $280
GAAP EPS $0.71 - $0.77 $0.70 - $0.83
Adjusted EPS (excluding move &
FAS123R) $1.18 - $1.30 $1.18 - $1.30
Effective tax rate 32.5% 34.0%
Capital expenditures $16 - $20 $22 - $27
Table A: GAAP EPS Reconciliation
2006 2005 2006
3rd Qtr. 3rd Qtr. Full Yr. Guidance
- ------------------------------- --------- --------- -----------------
GAAP EPS: $0.15 $0.03 $0.71 - $0.77
Carson City facility
closure/relocation 0.01 0.05 0.07 - 0.08
Columbia facility
closure/relocation 0.04 - 0.11 - 0.13
Medical power facility
closure/relocation - 0.05 0.01
Corporate development expenses - - 0.02
Asset dispositions and other 0.16 0.15 0.16
--------- --------- -----------------
Other operating expense 0.21 0.25 0.37 - 0.40
Incremental stock-based
compensation 0.03 - 0.10 - 0.13
--------- --------- -----------------
EPS - adjusted $0.39 $0.28 $1.18 - $1.30
========= ========= =================
Diluted weighted average shares
outstanding (000's) 22,000 22,000 26,200
========= ========= =================
(Other operating expense and stock-based compensation tax-affected
at: 24.3%; 30.0% and 32.5% for Q3 2006, Q3 2005 and full year guidance
respectively).
Table B: Operating Income Reconciliation (dollars in thousands):
2006 2005 2006
3rd Qtr. 3rd Qtr. Full Yr. Guidance
- ------------------------------- -------------------------------------
Operating Income as reported: $4,065 $1,429 $22,000 - $25,000
Carson City facility
closure/relocation 411 1,595 2,700 - 3,100
Columbia facility
closure/relocation 1,225 - 4,100 - 4,900
Medical power facility
closure/relocation - 1,428 500
Asset dispositions & other 4,603 4,795 6,200
Corporate development expenses - - 800
--------- -------- ------------------
Other operating expense 6,239 7,818 14,300 - 15,500
Incremental stock-based
compensation (1) 1,061 - 4,000 - 5,000
--------- -------- ------------------
Operating Income - adjusted $11,365 $9,247 $40,000 - $45,000
========= ======== ==================
Operating margin - adjusted 16.4% 14.8% 14.8% - 16.1%
========= ======== ==================
(1) Approximately 80% in SG&A 12% RD&E 8% Cost of Sales
Conference Call
The Company will host a conference call today, Wednesday, October
25, 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 6:30 p.m. E.T. on October 25, 2006
until November 1, 2006. To access the replay, dial 888-286-8010 (U.S.)
or 617-801-6888 (International) and enter the passcode 30421839.
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 Nine months ended
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2006 2005 2006 2005
Sales $ 69,294 $62,358 $207,999 $182,240
Cost and expenses:
Cost of sales - excluding
amortization of intangible
assets 42,709 38,178 125,087 112,154
Cost of sales - amortization
of intangible assets 948 967 2,864 2,883
Selling, general and
administrative expenses 9,311 8,842 28,191 24,089
Research, development and
engineering costs, net 6,022 5,124 18,062 13,182
Other operating expense,
net 6,239 7,818 12,551 14,207
--------- --------- --------- ---------
Operating income 4,065 1,429 21,244 15,725
Interest expense 1,135 1,154 3,433 3,476
Interest income (1,521) (796) (4,066) (2,024)
Other (income) expense, net 171 (9) 51 (69)
--------- --------- --------- ---------
Income before provision
for income taxes 4,280 1,080 21,826 14,342
Provision for income taxes 1,041 324 7,094 4,303
--------- --------- --------- ---------
Net income $ 3,239 $ 756 $ 14,732 $ 10,039
========= ========= ========= =========
Earnings per share:
Basic $ 0.15 $ 0.03 $ 0.68 $ 0.47
Diluted $ 0.15 $ 0.03 $ 0.65 $ 0.46
Weighted average shares
outstanding:
Basic 21,800 21,600 21,800 21,600
Diluted 22,000 21,900 26,200 21,700
GREATBATCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - Unaudited
(In thousands)
ASSETS Sept. 29, Dec. 30,
2006 2005
Current assets:
Cash and cash equivalents $ 55,792 $ 46,403
Short-term investments 72,426 65,746
Accounts receivable, net 35,856 29,997
Inventories 54,657 45,184
Refundable income taxes - 928
Deferred income taxes 5,635 6,257
Prepaid expenses and other current assets 3,074 1,488
--------- ---------
Total current assets 227,440 196,003
Property, plant, and equipment, net 92,090 97,705
Intangible assets, net 57,279 60,143
Goodwill 155,039 155,039
Other assets 3,449 4,021
--------- ---------
Total assets $535,297 $512,911
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,697 $ 13,678
Accrued expenses and other current liabilities 23,649 29,903
Current portion of long-term debt - 464
--------- ---------
Total current liabilities 37,346 44,045
Convertible subordinated notes 170,000 170,000
Deferred income taxes 34,468 30,261
--------- ---------
Total liabilities 241,814 244,306
--------- ---------
Stockholders' equity:
Preferred stock - -
Common stock 22 22
Additional paid-in capital 223,034 215,614
Retained earnings 67,771 53,039
Accumulated other comprehensive income (loss) 2,656 (70)
--------- ---------
Total stockholders' equity 293,483 268,605
--------- ---------
Total liabilities and stockholders' equity $535,297 $512,911
========= =========
CONTACT: Greatbatch, Inc.
Anthony W. Borowicz, 716-759-5809
Treasurer and Director, Investor Relations
tborowicz@greatbatch.com