Exhibit 99.1
Greatbatch, Inc. Reports Record Quarterly Sales of $78 million
CLARENCE, N.Y.--(BUSINESS WIRE)--Aug. 7, 2007--Greatbatch, Inc.
(the "Company") (NYSE: GB) today reported its results for the second
quarter ended June 29, 2007.
Business Highlights
-- Total Company - record sales of $78.5 million, an increase of
11% compared to $70.6 million in 2006.
-- Implantable Medical Components ("IMC") - record sales of
$67.6 million, an increase of 13% compared to $59.8
million in 2006, driven by growth of ICD batteries, ICD
capacitors and feedthroughs.
-- Electrochem Commercial Power ("ECP") - sales of $10.9
million, which were consistent with last year.
-- Acquired Biomec, Inc. for $11.4 million.
-- Biomec is a medical device design and engineering company,
located in Cleveland, Ohio.
-- Acquired Enpath Medical Inc. for approximately $105 million.
-- Enpath is a medical products company engaged in designing,
developing, manufacturing and marketing single use medical
device products for the cardiac rhythm management ("CRM"),
neuromodulation and interventional radiology markets.
Annual sales for 2006 were approximately $37 million
-- Carson City, Nevada plant ceased operations on July 15, 2007
with all manufacturing successfully transferred to the Tijuana
facility.
-- Columbia, Maryland shutdown scheduled to be completed by the
end of the fourth quarter of 2007.
-- Electrochem Commercial Power facility expansion initiated and
scheduled for completion in mid - 2008.
-- Realized pretax gain of $4.0 million on sale of non-strategic
investment.
-- Finalized Boston Scientific supply agreement for batteries,
capacitors and enclosures through 2010.
-- Earnings per share for the quarter were $0.51, excluding $0.66
in charges related to the write-off of acquired in-process
research and development related to the above mentioned
acquisitions, compared to $0.21 for 2006.
Commenting on the second quarter results, Thomas J. Hook,
President & Chief Executive Officer, said: "I'm very pleased with the
results for the first half of 2007. We had two consecutive quarters of
record sales. This increased sales volume combined with our
manufacturing initiatives have led to increased operating margins.
"On a strategic front, we completed two key acquisitions in the
quarter. The Biomec acquisition gives us design capabilities and
establishes some key clinical relationships in the emerging
neurostimulation market. Enpath represents an exciting opportunity
that further expands our product and service offerings to the CRM and
neurostimulation marketplaces. This acquisition broadens our market
reach into the vascular segment with the introducer product line as
well as adding several major new OEM customers. These acquisitions are
key steps in our long-term growth strategy."
2nd Quarter Sales Summary
The following table summarizes the Company's sales by business
unit and major product line for the second quarters of 2007 and 2006
(in thousands):
Business Unit/Product Lines 2007 2006 %
2nd Qtr. 2nd Qtr. Change
- ---------------------------------------------------------------------
Implantable Medical Components ("IMC"):
ICD Batteries $13,741 $10,994 25%
Pacemaker & Other Batteries 5,903 5,930 0%
ICD Capacitors 7,892 5,339 48%
Feedthroughs 17,010 14,301 19%
Enclosures 5,994 7,105 -16%
Introducers, Catheters and Leads 1,585 - N/A
Other Medical 15,467 16,087 -4%
--------- --------
Total Implantable Medical Components 67,592 59,756 13%
Electrochem Commercial Power ("ECP") 10,870 10,842 0%
--------- --------
Total Sales $78,462 $70,598 11%
========= ========
2nd Quarter Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statements of operations for the second
quarters in 2007 and 2006 (in thousands):
2007 2006 %
2nd Qtr. 2nd Qtr. Change
- ---------------------------------------------------------------------
Cost of Sales $46,756 $43,821 7%
Cost of Sales as % of Sales 59.6% 62.1%
SG&A Expenses $10,735 $9,865 9%
SG&A Expenses as % of Sales 13.7% 14.0%
RD&E Expenses, net $6,981 $6,142 14%
RD&E Expenses, net as % of Sales 8.9% 8.7%
Operating Income $(6,351) $7,127 -189%
Operating Margin -8.1% 10.1%
Effective Tax Rate NA 34.5%
The cost of sales percentage decreased from last year primarily
due to favorable mix- and volume- related variances. Sales were higher
in the product lines that typically carry better margins.
The increase in SG&A expenses is primarily due to higher sales &
marketing expenses and the inclusion of Enpath operations for two
weeks.
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 $ 1.6 million
- -- ECP building expansion $ 0.1 million
- -- Asset dispositions and other $ 0.3 million
As a result of $16.1 million of the in-process research and
development write-off not being deductible for tax purposes, the
effective tax rate for 2007 is now expected to be approximately 47.5%.
Full-Year 2007 Financial Guidance
We are increasing our sales guidance by $20 million to $25 million
to reflect the inclusion of six months of Enpath sales and increased
sales to CRM customers.
We are increasing our adjusted guidance by a net of $0.16 per
share based on our strong first half results. This is net of increased
hiring and manpower costs related to investment in development
projects primarily in the areas of MRI compatibility, leads and other
technologies in the range of $0.05 and $0.08.
Our GAAP EPS guidance for 2007 has been decreased by approximately
$0.62, which includes the write-off of in-process research and
development related to the acquisitions of Biomec and Enpath of $0.72
and $0.04 for other acquisition related adjustments.
Current Previous
- ------------------------------------------------- -------------------
Sales (000's) $320,000 - $325,000 $295,000 - $305,000
GAAP EPS (1)(4) $0.78 - $0.82 $1.40 - $1.46
EPS - adjusted (1)(2)(3)(4)(5) $1.57 - $1.64 $1.41 - $1.48
Diluted weighted average
shares outstanding (000's) 24,500 24,500
Effective tax rate 47.5% 32.5%
Capital spending (000's) (6) $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 $0.14 to $0.16.
Includes continued excess capacity costs associated with delayed
closure of filtered feedthrough facility.
(3) Excludes gain on exchange of debentures of $0.12.
(4) Includes $0.11 gain on sale of investment realized in Q2 2007.
(5) Excludes write-off of in-process research and development costs
of $0.72 and $0.04 for other acquisition related adjustments.
(6) Includes expansion of Electrochem Commercial Power facility of
approximately $20 million.
Table A: Operating Income Reconciliation (in thousands):
2007 2006 2007 2006
2nd Qtr. 2nd Qtr. YTD YTD
- ---------------------------------------------------------------------
Operating income (loss) as
reported: $ (6,351) $ 7,127 $ 4,255 $ 17,179
In-process Research and
Development 18,353 - 18,353 -
---------- --------- -------- --------
Sub-total 12,002 7,127 22,608 17,179
---------- --------- -------- --------
Adjustments:
Carson City facility
closure/relocation 188 850 574 2,078
Columbia facility
closure/relocation 1,372 1,410 2,675 2,333
Medical power facility
closure/relocation - 52 - 567
ECP building expansion 145 - 282 -
Asset dispositions & other 283 540 (10) 534
Corporate development expenses - 791 - 800
---------- --------- -------- --------
Operating Income - adjusted $ 13,990 $ 10,770 $ 26,129 $ 23,491
========== ========= ======== ========
Operating margin - adjusted 17.8% 15.3% 16.8% 16.9%
========== ========= ======== ========
Table B: Net Income Reconciliation (in thousands):
2007 2006 2007 2006
2nd Qtr. 2nd Qtr. YTD YTD
- ---------------------------------------------------------------------
Net income (loss) as reported:$ (3,399) $ 4,843 $ 7,270 $ 11,493
In-process Research and
Development 17,621 - 17,621 -
Remaining tax cost for IPR&D (3,152) - (3,152) -
---------- --------- -------- --------
Sub-total 11,070 4,843 21,739 11,493
---------- --------- -------- --------
Adjustments:
Carson City facility
closure/relocation 127 561 387 1,371
Columbia facility
closure/relocation 926 931 1,806 1,540
Medical power facility
closure/relocation - 34 - 374
ECP building expansion 98 - 190 -
Asset dispositions & other 191 356 (7) 352
Corporate development expenses - 522 - 528
---------- --------- -------- --------
Sub-total 12,412 7,247 24,115 15,658
---------- --------- -------- --------
Gain on extinguishment of debt - - (3,019) -
---------- --------- -------- --------
Net income adjusted $ 12,412 $ 7,247 $ 21,096 $ 15,658
========== ========= ======== ========
Note:
1) Tax Rate utilized was 34% for 2006 and 32.5% for 2007 except for
the IPR&D write-off.
2) 2nd quarter 2007 includes $2.7 million in net after tax gain on
sale of investment.
Table C: GAAP EPS Reconciliation:
2007 2006 2007 2006
2nd Qtr. 2nd Qtr. YTD YTD
- ---------------------------------------------------------------------
Diluted EPS as reported: $ (0.15) $ 0.21 $ 0.33 $ 0.50
In-process Research and
Development 0.80 - 0.80 -
Remaining tax cost for IPR&D (0.14) - (0.14) -
--------- --------- -------- --------
Sub-total 0.51 0.21 0.99 0.50
--------- --------- -------- --------
Adjustments:
Carson City facility
closure/relocation 0.01 0.02 0.02 0.05
Columbia facility
closure/relocation 0.04 0.04 0.08 0.06
Medical power facility
closure/relocation - - - 0.01
ECP building expansion - - 0.01 -
Asset dispositions & other 0.01 0.01 - 0.01
Corporate development expenses - 0.02 - 0.02
--------- --------- -------- --------
Sub-total 0.57 0.30 1.10 0.65
--------- --------- -------- --------
Gain on extinguishment of debt - - (0.14) -
--------- --------- -------- --------
Diluted EPS adjusted $ 0.57 $ 0.30 $ 0.96 $ 0.65
========= ========= ======== ========
Note:
1) Tax Rate utilized was 34% for 2006 and 32.5% for 2007 except for
the IPR&D write-off.
2) 2nd quarter 2007 includes $0.12 gain on sale of investment.
3) Assumes shares outstanding of 22 million for 2007 and 26 million
for 2006
Conference Call
The Company will host a conference call on Wednesday, August 8,
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 August 8, 2007 until
August 15, 2007. To access the replay, dial 888-286-8010 (U.S.) or
617-801-6888 (International) and enter the passcode 11475636.
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 medical devices for the
cardiac rhythm management, neurostimulation and interventional
radiology markets. Additionally, Greatbatch supplies commercial power
sources for 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 Six months
ended ended
June 29, June 30, June 29, June 30,
2007 2006 2007 2006
-------- -------- -----------------
Sales $ 78,462 $ 70,598 $155,322 $138,705
Cost and expenses:
Cost of sales - excluding
amortization
of intangible assets 45,762 42,863 93,050 82,378
Cost of sales - amortization of
intangible assets 994 958 1,942 1,916
Selling, general and administrative
expenses 10,735 9,865 20,768 18,880
Research, development and
engineering costs, net 6,981 6,142 13,433 12,040
Acquired in-process research and
development 18,353 - 18,353 -
Other operating expense, net 1,988 3,643 3,521 6,312
-------- -------- -------- --------
Operating income (loss) (6,351) 7,127 4,255 17,179
Interest expense 2,089 1,163 3,233 2,298
Interest income (2,586) (1,353) (4,442) (2,545)
Gain on sale of investment
security (4,001) - (4,001) -
Gain on extinguishment of debt - - (4,473) -
Other (income) expense, net 102 (76) 86 (120)
-------- -------- -------- --------
Income (loss) before provision for
income taxes (1,955) 7,393 13,852 17,546
Provision for income taxes 1,444 2,550 6,582 6,053
-------- -------- -------- --------
Net income (loss) $(3,399) $ 4,843 $ 7,270 $ 11,493
======== ======== ======== ========
Earnings (loss) per share:
Basic $ (0.15) $ 0.22 $ 0.33 $ 0.53
Diluted $ (0.15) $ 0.21 $ 0.33 $ 0.50
Weighted average shares
outstanding:
Basic 22,200 21,800 22,100 21,800
Diluted 22,200 26,200 22,350 26,200
GREATBATCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - Unaudited
(In thousands)
ASSETS June 29, December 29,
2007 2006
----------- -------------
Current assets:
Cash and cash equivalents $ 81,509 $ 71,147
Short-term investments available for sale 39,290 71,416
Accounts receivable, net 34,980 31,285
Inventories 63,953 57,667
Refundable income taxes - 1,569
Deferred income taxes 6,948 5,899
Prepaid expenses and other current assets 3,473 2,343
----------- -------------
Total current assets 230,153 241,326
Property, plant, and equipment, net 101,003 91,869
Intangible assets, net 81,292 56,330
Goodwill 207,378 155,039
Other assets 13,671 3,263
----------- -------------
Total assets $ 633,497 $ 547,827
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,898 $ 12,657
Accrued expenses and other current
liabilities 27,658 29,618
----------- -------------
Total current liabilities 50,556 42,275
Convertible subordinated notes 240,506 170,000
Deferred income taxes 30,193 35,859
Other long-term liabilities 141 -
----------- -------------
Total liabilities 321,396 248,134
----------- -------------
Stockholders' equity:
Preferred stock - -
Common stock 22 22
Additional paid-in capital 235,644 227,187
Treasury stock - (205)
Retained earnings 76,435 69,165
Accumulated other comprehensive income - 3,524
----------- -------------
Total stockholders' equity 312,101 299,693
----------- -------------
Total liabilities and stockholders' equity $ 633,497 $ 547,827
=========== =============
CONTACT: Greatbatch, Inc.
Anthony W. Borowicz
Treasurer and Director, Investor Relations
716-759-5809
tborowicz@greatbatch.com