Exhibit 99.1
Greatbatch, Inc. Reports Fourth Quarter and Full-Year 2006 Results
Sales for Year Grow by 12% to Record Level
CLARENCE, N.Y.--(BUSINESS WIRE)--Feb. 8, 2007--Greatbatch, Inc.
(the "Company") (NYSE: GB) today reported its results for the fourth
quarter and year ended December 29, 2006.
2006 Highlights
-- Achieved record sales for:
-- Total Company - sales of $271 million, an increase of 12%
compared to $241 million in 2005
-- Implantable Medical Components ("IMC") - sales of $227
million, an increase of 9% compared to $208 million in 2005
-- Electrochem Commercial Power ("ECP") - sales of $44 million,
an increase of 33% compared to $33 million in 2005
-- Met all of the milestones for the consolidation of feedthrough
manufacturing from Columbia, Maryland to Tijuana, Mexico and
medical research and development into the Technology
Development Center in Clarence, New York.
-- Received ISO 13485 Certification for our Tijuana, Mexico
facility.
-- Executed a plan in November 2006 for consolidating our
corporate and business unit organization structure.
-- Operating Income, excluding selected charges and incremental
FAS 123R expenses, increased by 24% to $44 million compared to
$35 million in 2005 (See Table B for reconciliation to GAAP).
-- Cash and short-term investments increased by $30 million to
$143 million as of December 29, 2006.
Results for Quarter
-- Total Company - sales of $63 million, up 7% from $59 million
in the fourth quarter of 2005.
-- IMC - sales of $53 million, up 4% from $51 million in the
fourth 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 $5 million of additional
revenue related to customer field actions, primarily
impacting ICD batteries and capacitors. Adjusting for this
effect, sales increased by 15%.
-- ECP - sales of $10 million, up 31% from $7.7 million in the
fourth quarter of 2005, led by continued strength in the oil
and gas and telematics markets.
-- Diluted Earnings Per Share ("EPS") was $0.06. Adjusted EPS,
which excludes facilities move-related expenses, asset
dispositions, severance costs associated with November's
consolidation and incremental stock-based compensation under
FAS123R, was $0.28 (See Table A for reconciliation to GAAP),
which compares to adjusted EPS of $0.13 in the fourth quarter
of 2005.
Commenting on full-year results, Thomas Hook, Chief Executive
Officer, said: "I am very pleased with the improvements we are seeing
in our operating and financial metrics. Despite a soft underlying ICD
market, we achieved record sales results in both our medical and
commercial segments. We grew faster than our markets by capturing
share and we continue to introduce new product offerings that enhance
our competitive market position. Looking ahead to 2007, we expect
sales growth of 10%, which reflects our confidence to continue to grow
faster than the underlying markets.
"With respect to our consolidation plan, we are about two-thirds
of the way through our three-year planned initiatives and expect to
conclude these activities in 2007. We continue to make significant
progress and fully anticipate achieving the long-term cost savings
targets. In addition, based on our continued success in growing our
commercial business, we are launching a new initiative to expand our
manufacturing capacity and capabilities for commercial power sources.
We anticipate completing this expansion in early 2008," Hook
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 2006 and 2005
(in thousands):
2006 2005 %
Business Unit/Product Lines 4th Qtr. 4th Qtr. Change
- ---------------------------------------------------------------------
Implantable Medical Components:
ICD Batteries $10,011 $11,020 -9%
Pacemaker & Other Batteries 4,934 4,791 +3%
ICD Capacitors 3,374 5,109 -34%
Feedthroughs 16,634 13,283 +25%
Enclosures 4,761 5,097 -7%
Other Medical 13,350 11,878 +12%
---------- ----------
Total Implantable Medical Components 53,064 51,178 +4%
Electrochem Commercial Power 10,079 7,679 +31%
---------- ----------
Total Sales $63,143 $58,857 +7%
========== ==========
4th Quarter Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statements of operations for the fourth
quarters in 2006 and 2005 (in thousands):
2006 2005 %
4th Qtr. 4th Qtr. Change
- ---------------------------------------------------------------------
Cost of Sales $40,747 $40,347 +1%
Cost of Sales as % of Sales 64.5% 68.6%
SG&A Expenses $10,594 $7,439 +42%
SG&A Expenses as % of Sales 16.8% 12.6%
RD&E Expenses, net $6,163 $5,543 +11%
RD&E Expenses, net as % of Sales 9.8% 9.4%
Operating Income $1,132 $1,161 -2%
Operating Margin 1.8% 2.0%
The cost of sales percentage improved from last year as lower
manufacturing costs and lower excess capacity costs more than offset
the change in product mix stemming from higher sales of lower margin
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, CEO transition costs and an increased
level of incentive compensation.
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 fourth quarter of last year.
The other operating expense in the current quarter consists of:
-- Carson City and Columbia consolidations/relocations $1.9
million
-- Asset dispositions and other $0.1 million
-- Severance for November 2006 Consolidation $2.5 million
Full-Year 2007 Financial Guidance
2007
Guidance % Change
- ----------------------------------------------------------------------
Sales (000's) $295,000 - $305,000 +9% - +13%
GAAP EPS (1) $1.16 - $1.22 +59% - +67%
EPS - adjusted (2) $1.28 - $1.35 +9% - +15%
Diluted weighted average shares
outstanding (000's) 26,000
Effective tax rate less than 35%
Capital spending (000's) (3) $35,000 - $45,000
(1) Includes the impact of stock-based compensation under FAS123R of
$0.12 to $0.15.
(2) Excludes plant relocation/asset dispositions of $0.10 to $0.13.
Includes continued excess capacity costs associated with delayed
closure of filtered feedthrough facility.
Includes expansion of commercial power facility of approximately
(3) $20 million.
Table A: GAAP EPS Reconciliation
2006 2005 2006 2005
4th Qtr. 4th Qtr. Year Year
- ----------------------------------------------------------------------
GAAP EPS: $0.06 $0.00 $0.73 $0.46
Carson City facility
closure/relocation 0.01 0.05 0.07 0.13
Columbia facility
closure/relocation 0.06 0.03 0.13 0.03
Medical power facility
closure/relocation - 0.01 0.02 0.09
Asset dispositions and other 0.01 0.02 0.14 0.18
Severance 0.09 - 0.06 0.05
Corporate development expenses - - 0.02 -
Tijuana start-up costs - 0.02 - 0.04
Costs to exit a development
agreement - - - 0.04
--------- --------- -------- --------
Other operating expense 0.17 0.13 0.44 0.56
Incremental stock-based
compensation 0.05 - 0.12 -
--------- --------- -------- --------
EPS - adjusted $0.28 $0.13 $1.29 $1.02
========= ========= ======== ========
Diluted weighted average shares
outstanding (000's) 22,100 21,900 26,300 21,800
========= ========= ======== ========
(Other operating expense and stock-based compensation tax-affected
at: 18.4% for Q4 2006, 31.5% for full year 2006 and 34.6%, full year
rate, for 2005 periods.)
Table B: Operating Income Reconciliation (dollars in thousands):
2006 2005 2006 2005
4th Qtr. 4th Qtr. Year Year
- ----------------------------------------------------------------------
Operating Income as reported: $1,132 $1,161 $22,376 $16,886
Carson City facility
closure/relocation 288 1,713 2,743 4,440
Columbia facility
closure/relocation 1,579 1,055 5,125 1,134
Medical power facility
closure/relocation 56 483 623 2,806
Asset dispositions & other 90 579 5,272 6,104
Severance 2,494 - 2,494 1,505
Corporate development expenses - - 801 -
Tijuana start-up costs - 537 - 1,402
Costs to exit development
agreement - - - 1,183
--------- --------- -------- --------
Other operating expense 4,507 4,367 17,058 18,574
Incremental stock-based
compensation (1) 1,445 - 4,366 -
--------- --------- -------- --------
Operating income - adjusted $7,084 $5,528 $43,800 $35,460
========= ========= ======== ========
Operating margin - adjusted 11.2% 9.4% 16.2% 14.7%
========= ========= ======== ========
(1) Approximately 80% in SG&A 12% RD&E 8% Cost of Sales
Conference Call
The Company will host a conference call today, Thursday, February
8, 2007 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. An audio replay
will also be available beginning from 7:00 p.m. E.T. on February 8,
2007 until February 15, 2007. To access the replay, dial 888-286-8010
(U.S.) or 617-801-6888 (International) and enter the passcode
42567570.
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 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
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 Year ended
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
2006 2005 2006 2005
Sales $ 63,143 $ 58,857 $271,142 $241,097
Cost and expenses:
Cost of sales - excluding
amortization of intangible
assets 39,798 39,389 164,885 151,543
Cost of sales - amortization
of intangible assets 949 958 3,813 3,841
Selling, general and
administrative expenses 10,594 7,439 38,785 31,528
Research, development and
engineering costs, net 6,163 5,543 24,225 18,725
Other operating expense, net 4,507 4,367 17,058 18,574
--------- --------- --------- ---------
Operating income 1,132 1,161 22,376 16,886
Interest expense 1,172 1,137 4,605 4,613
Interest income (1,709) (1,089) (5,775) (3,113)
Other (income) expense, net (39) (9) 12 (78)
--------- --------- --------- ---------
Income before provision for
income taxes 1,708 1,122 23,534 15,464
Provision for income taxes 314 1,054 7,408 5,357
--------- --------- --------- ---------
Net income $ 1,394 $ 68 $ 16,126 $ 10,107
========= ========= ========= =========
Earnings per share:
Basic $ 0.06 $ - $ 0.74 $ 0.47
Diluted $ 0.06 $ - $ 0.73 $ 0.46
Weighted average shares
outstanding:
Basic 21,900 21,700 21,800 21,600
Diluted 22,100 21,900 26,300 21,800
GREATBATCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - Unaudited
(In thousands)
ASSETS Dec. 29, Dec. 30,
2006 2005
Current assets:
Cash and cash equivalents $ 71,147 $ 46,403
Short-term investments 71,416 65,746
Accounts receivable, net 31,285 29,997
Inventories 57,667 45,184
Refundable income taxes 1,569 928
Deferred income taxes 5,899 6,257
Prepaid expenses and other current assets 2,343 1,488
---------- ----------
Total current assets 241,326 196,003
Property, plant, and equipment, net 91,869 97,705
Intangible assets, net 56,330 60,143
Goodwill 155,039 155,039
Other assets 3,263 4,021
---------- ----------
Total assets $ 547,827 $ 512,911
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,657 $ 13,678
Accrued expenses and other current
liabilities 29,618 29,903
Current portion of long-term debt - 464
---------- ----------
Total current liabilities 42,275 44,045
Convertible subordinated notes 170,000 170,000
Deferred income taxes 35,859 30,261
---------- ----------
Total liabilities 248,134 244,306
---------- ----------
Stockholders' equity:
Preferred stock - -
Common stock 22 22
Additional paid-in capital 227,187 215,614
Treasury stock (205) -
Retained earnings 69,165 53,039
Accumulated other comprehensive income
(loss) 3,524 (70)
---------- ----------
Total stockholders' equity 299,693 268,605
---------- ----------
Total liabilities and stockholders' equity $ 547,827 $ 512,911
========== ==========
CONTACT: Greatbatch, Inc.
Anthony W. Borowicz
Treasurer and Director, Investor Relations
716-759-5809
tborowicz@greatbatch.com