Exhibit 99.1
Greatbatch, Inc. Reports First Quarter 2007 Results of 43 Cents per Share
Quarterly Sales Reach All-time Record High of $77 million
CLARENCE, N.Y.--(BUSINESS WIRE)--April 26, 2007--Greatbatch, Inc.
(the "Company") (NYSE: GB) today reported its results for the first
quarter ended March 30, 2007.
Business Highlights
-- Total Company - record sales of $76.9 million, an increase of
13% compared to $68.1 million in 2006.
-- Implantable Medical Components ("IMC") - record sales of
$65.2 million, an increase of 13% compared to $57.6 million
in 2006, driven by growth of ICD capacitors, feedthroughs and
assembly products partially offset by a decrease in ICD
battery sales.
-- Electrochem Commercial Power ("ECP") - sales of $11.7
million, an increase of 11% compared to $10.5 million in
2006, driven by growth in oil & gas, pipeline inspection, and
military products.
-- Earnings per share increased by 54% to $0.43, inclusive of an
$0.11 gain on the exchange of $118 million of convertible
debentures.
-- Final production run for Carson City plant is scheduled for
June '07.
-- Columbia, Maryland shutdown scheduled to be completed by the
third quarter of 2007.
-- Completed the acquisition of Biomec, Inc. for $11.4 million on
April 3, 2007.
-- ECP expansion on track for completion in mid - 2008.
-- Completed the exchange of $118 million of the existing $170
million convertible subordinated debentures outstanding.
Issued an additional $80 million of new convertible
subordinated debentures and received cash of $74 million (net
of fees and discount).
-- Received commitments for a new revolving bank credit facility
of $235 million with the ability to expand to $335 million.
Commenting on the first quarter results, Thomas Hook, President &
Chief Executive Officer, said: "I'm very pleased with the start to the
new year. We achieved broad-based sales growth in our medical and
commercial segments. Our Medical Power team did a great job in
responding to the surge in ICD capacitor demand we experienced in the
first quarter. On the commercial side, we continue to see double-digit
growth rates due to market growth and share gains.
"On a strategic front, we completed a number of important
transactions in the first quarter that are key to fuel our continued
growth. First, we successfully exchanged approximately 70% of our
existing subordinated notes and concurrently issued an additional $80
million of new convertible debentures. Second, we have received
commitments to replace our existing revolving credit line with a new
$235 million facility, which combined with our existing cash and
investments, gives us over $400 million of cost-effective liquidity to
fund our organic and in-organic growth strategies. The exchange
offering and the 2nd quarter sale of an investment, combined with
operations as planned have allowed us to increase our guidance for the
year.
"In April we completed the acquisition of Biomec, Inc., a medical
device design and engineering company, located in Cleveland, Ohio.
With the addition of Biomec we are now in position to offer our
customers a suite of value add services that include system design and
integration, rapid prototyping and assembly services," Hook concluded.
1st Quarter Sales Summary
The following table summarizes the Company's sales by business
unit and major product line for the first quarters of 2007 and 2006
(in thousands):
2007 2006 %
Business Unit/Product Lines 1st Qtr. 1st Qtr. Change
- ----------------------------------------------------------------------
Implantable Medical Components:
ICD Batteries $11,651 $12,679 -8%
Pacemaker & Other Batteries 5,845 5,787 +1%
ICD Capacitors 8,514 3,568 +139%
Feedthroughs 18,393 16,288 +13%
Enclosures 5,706 6,340 -10%
Other Medical 15,087 12,918 +17%
--------- ---------
Total Implantable Medical Components 65,196 57,580 +13%
Electrochem Commercial Power 11,664 10,527 +11%
--------- ---------
Total Sales $76,860 $68,107 +13%
========= =========
1st Quarter Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statements of operations for the first
quarters in 2007 and 2006 (in thousands):
2007 2006 %
1st Qtr. 1st Qtr. Change
- ----------------------------------------------------------------------
Cost of Sales $48,236 $40,473 +19%
Cost of Sales as % of Sales 62.8% 59.4%
SG&A Expenses $10,033 $9,015 +11%
SG&A Expenses as % of Sales 13.1% 13.2%
RD&E Expenses, net $6,452 $5,898 +9%
RD&E Expenses, net as % of Sales 8.4% 8.7%
Operating Income $10,606 $10,052 +6%
Operating Margin 13.8% 14.8%
Effective Tax Rate 32.5% 34.5%
The cost of sales percentage increased from last year due to
unfavorable product mix and lower ICD battery production volume in the
current quarter.
The increase in SG&A expenses is primarily due to legal fees,
non-cash directors' fees, executive transition costs and sales &
marketing costs.
The increase in net RD&E expenses is primarily due to a planned
increase in spending on new development programs.
The other operating expense in the current quarter consists of:
- -- Carson City and Columbia closures/relocations $ 1.7 million
- -- ECP building expansion $ 0.1 million
- -- Asset dispositions and other ($ 0.3) million
As a result of an estimated increase in R&D tax credits and the
Qualified Production Activities Deduction for 2007, the effective tax
rate for 2007 is now expected to be approximately 32.5%.
Full-Year 2007 Financial Guidance
Our GAAP EPS guidance for 2007 has been increased by $0.24 to
include the following:
1) Gain on exchange of converts - $0.11; 2) 2nd quarter gain on
sale of investment - $0.11; 3) Favorable tax rate change - $0.04; 4)
Net interest expense - ($0.04); and 5) EPS impact of converts $0.02
Current Previous
- ----------------------------------------------------------------------
Sales (000's) $295,000 - $305,000 $295,000 - $305,000
GAAP EPS (1)(4) $1.40 - $1.46 $1.16 - $1.22
EPS - adjusted (1)(2)(3)(4) $1.41 - $1.48 $1.28 - $1.35
Diluted weighted average
shares outstanding (000's) 24,500 26,000
Effective tax rate 32.5% less than 35%
Capital spending (000's) (5) $35,000 - $45,000 $35,000 - $45,000
(1) Includes the impact of stock-based compensation under
FAS123(R) 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.
(3) Excludes gain on exchange of debentures of $0.11.
(4) Current guidance includes $0.11 gain on sale of investment
realized in Q2 2007.
(5) Includes expansion of commercial power facility of
approximately $20 million.
Table A: GAAP EPS Reconciliation
2007 2006
1st Qtr. 1st Qtr.
-------------------------------------------------------------------
GAAP EPS: $0.43 $0.28
Carson City facility closure/relocation 0.01 0.03
Columbia facility closure/relocation 0.03 0.02
Medical Power closure/relocation - 0.01
ECP building expansion 0.01 -
Asset dispositions and other (0.01) 0.01
---------- ----------
Sub-total other operating expense 0.04 0.07
Gain on exchange of debentures (0.11) ---
---------- ----------
EPS - adjusted (1) $0.36 $0.35
========== ==========
Diluted weighted average shares outstanding
(000's) 26,500 26,100
========== ==========
(1) Includes stock-based compensation $0.04 in Q1 2007 and $0.03 in Q1
2006.
Table B: Operating Income Reconciliation (in thousands):
2007 2006
1st Qtr. 1st Qtr.
- ----------------------------------------------------------------------
Operating Income as reported: $10,606 $10,052
Carson City facility closure/relocation 386 1,228
Columbia facility closure/relocation 1,303 922
Medical power facility closure/relocation - 515
ECP building expansion 137 -
Asset dispositions & other (293) 4
---------- ---------
Sub-total other operating expense 1,533 2,669
---------- ---------
Operating income - adjusted $12,139 $12,721
========== =========
Operating margin - adjusted 15.8% 18.7%
========== =========
Conference Call
The Company will host a conference call on Friday, April 27, 2007
at 8:00 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 11:00 a.m. E.T. on April 27, 2007 until May
4, 2007. To access the replay, dial 888-286-8010 (U.S.) or
617-801-6888 (International) and enter the passcode 31168389.
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
March 30, March 31,
2007 2006
--------- ---------
Sales $ 76,860 $ 68,107
Cost and expenses:
Cost of sales - excluding amortization of
intangible assets 47,287 39,515
Cost of sales - amortization of intangible assets 949 958
Selling, general and administrative expenses 10,033 9,015
Research, development and engineering costs, net 6,452 5,898
Other operating expense, net 1,533 2,669
--------- ---------
Operating income 10,606 10,052
Interest expense 1,144 1,135
Interest income (1,856) (1,192)
Gain on extinguishment of debt (4,473) -
Other income, net (16) (44)
--------- ---------
Income before provision for income taxes 15,807 10,153
Provision for income taxes 5,138 3,503
--------- ---------
Net income $ 10,669 $ 6,650
========= =========
Earnings per share:
Basic $ 0.48 $ 0.31
Diluted $ 0.43 $ 0.28
Weighted average shares outstanding:
Basic 22,000 21,700
Diluted 26,500 26,100
GREATBATCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - Unaudited
(In thousands)
ASSETS March 30, December 29,
2007 2006
----------- ------------
Current assets:
Cash and cash equivalents $ 147,128 $ 71,147
Short-term investments 78,614 71,416
Accounts receivable, net 38,505 31,285
Inventories 54,483 57,667
Refundable income taxes - 1,569
Deferred income taxes 6,021 5,899
Prepaid expenses and other current assets 1,523 2,343
----------- ------------
Total current assets 326,274 241,326
Property, plant, and equipment, net 89,674 91,869
Intangible assets, net 55,382 56,330
Goodwill 155,039 155,039
Other assets 6,159 3,263
----------- ------------
Total assets $ 632,528 $ 547,827
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,161 $ 12,657
Accrued expenses and other current
liabilities 32,373 29,618
----------- ------------
Total current liabilities 51,534 42,275
Convertible subordinated notes 240,111 170,000
Deferred income taxes 25,490 35,859
----------- ------------
Total liabilities 317,135 248,134
----------- ------------
Stockholders' equity:
Preferred stock - -
Common stock 22 22
Additional paid-in capital 232,239 227,187
Treasury stock - (205)
Retained earnings 79,834 69,165
Accumulated other comprehensive income 3,298 3,524
----------- ------------
Total stockholders' equity 315,393 299,693
----------- ------------
Total liabilities and stockholders' equity $ 632,528 $ 547,827
=========== ============
CONTACT: Greatbatch, Inc.
Anthony W. Borowicz, 716-759-5809
Treasurer and Director, Investor Relations
tborowicz@greatbatch.com