Exhibit 99.1
Greatbatch, Inc. Reports Third Quarter Results
CLARENCE, N.Y.--(BUSINESS WIRE)--Nov. 5, 2007--Greatbatch, Inc.
(the "Company") (NYSE: GB) today reported its results for the third
quarter ended September 28, 2007.
Business Highlights
- -- Recorded record sales of $79.0 million for the quarter, an increase
of 14% compared to $69.3 million in 2006.
-- Implantable Medical Components ("IMC") - sales of $67.0
million, an increase of 18% compared to $57.0 million in 2006.
Includes $10.0 million of sales from the former Enpath Medical,
Inc. ("Enpath") acquired at the end of the second quarter of
2007.
-- Electrochem Commercial Power ("ECP") - sales of $12.0 million,
which were consistent with last year.
- -- Columbia, Maryland shutdown scheduled to be completed during the
first quarter of 2008.
- -- Electrochem Commercial Power facility expansion on schedule for
completion in mid - 2008.
- -- Earnings per share for the quarter were $0.22. Excluding charges
related to acquired in-process research and development and other
non-operating expenses, earnings per share were $0.26. (See Table C
for reconciliation to GAAP).
- -- Subsequent to the end of the quarter, Greatbatch announced the
following:
-- Signing a definitive asset purchase agreement to acquire Quan
Emerteq, LLC for approximately $55.0 million. Quan Emerteq's
products include:
-- Delivery Systems for use in multiple cardiology
applications that cover the coronary, peripheral, and
neurovascular market space.
-- Stimulation Catheters that aid access for devices in
Cardiac Resynchronization Therapy, and Ablation therapies,
including the rapidly growing AF segment.
-- Leadwires including stimulation lead design, development,
and manufacturing to support cardiac and neurostimulation
markets.
-- Micro Components and Assemblies providing micro molded and
machined components and assemblies for use in OEM build
processes.
-- Signing a definitive asset purchase agreement to acquire EAC
for approximately $12.0 million.
-- EAC is a leading provider of custom battery solutions and
electronics integration focused on secondary, or
rechargeable, battery systems for the commercial and external
medical markets.
-- Acquiring IntelliSensing for $3.9 million.
-- Intellisensing designs and manufacturers battery-powered
wireless sensing solutions for the oil & gas industry and
other industrial applications.
Thomas J. Hook, President & Chief Executive Officer, stated:
"These recently announced acquisitions, combined with the earlier
acquisitions of Enpath and Biomec, are enhancing the overall
capabilities of Greatbatch including 1) increasing our CRM,
neurostimulation and commercial market presence, 2) enhancing our
product offering by providing new competencies in the areas of
rechargeable cells, wireless sensors, enhanced design and prototyping
capabilities, regulatory expertise and established important clinical
relationships and 3) giving us entree into the therapy delivery
markets, which brings new growth opportunities and several new blue
chip customers allowing for cross selling opportunities. The business
model of the acquired companies is very synergistic with the strategic
direction of Greatbatch - technology leadership through proprietary
innovation - and supports our device field of view of becoming an even
more important OEM supplier through added customer content and
capabilities."
3rd Quarter Sales Summary
The following table summarizes the Company's sales by business
unit and major product line for the third quarters of 2007 and 2006
(in thousands):
Business Unit/Product Lines 2007 2006 %
3rd Qtr. 3rd Qtr. Change
- ----------------------------------------------------------------------
Implantable Medical Components ("IMC"):
ICD Batteries $12,265 $11,456 7%
Pacemaker & Other Batteries 4,701 4,439 6%
ICD Capacitors 5,782 4,499 29%
Feedthroughs 14,448 17,355 -17%
Enclosures 4,584 5,698 -20%
Introducers, Catheters and Leads 10,047 - N/A
Other Medical 15,176 13,560 12%
---------- ----------
Total Implantable Medical Components 67,003 57,007 18%
Electrochem Commercial Power ("ECP") 12,006 12,287 -2%
---------- ----------
Total Sales $79,009 $69,294 14%
========== ==========
3rd Quarter Profit & Loss Summary
The following table summarizes selected information derived from
the condensed consolidated statements of operations for the third
quarters in 2007 and 2006 (in thousands):
2007 2006 %
3rd Qtr. 3rd Qtr. Change
- ----------------------------------------------------------------------
Cost of Sales $ 49,869 $ 43,657 14%
Cost of Sales as % of Sales 63.1% 63.0%
SG&A Expenses $ 11,362 $ 9,311 22%
SG&A Expenses as % of Sales 14.4% 13.4%
RD&E Expenses, net $ 8,423 $ 6,022 40%
RD&E Expenses, net as % of Sales 10.7% 8.7%
Operating Income $ 10,340 $ 4,065 154%
Operating Margin 13.1% 5.9%
Effective Tax Rate 48.7% 24.3%
The cost of sales as a percentage of sales was consistent with
last year and includes $1.1 million of inventory step-up amortization
related to the Enpath acquisition. Excluding this amortization, our
cost of sales percentage improved to 61.7% as we continue to benefit
from our various manufacturing initiatives.
The increase in SG&A percentage is primarily due to the inclusion
of Enpath operations for the full quarter.
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:
- -- Columbia closure/relocations $ 1.0 million
- -- ECP building expansion $ 0.1 million
- -- Asset dispositions and other $ 0.2 million
As a result of $13.8 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 48%.
Full-Year 2007 Financial Guidance
We are in the process of preparing our purchase accounting
valuations; correspondingly, our earnings guidance has not been
updated to reflect the impact of these acquisitions.
Sales (000's) $305,000 - $315,000
GAAP EPS (1)(4) $0.67 - $0.71
EPS - adjusted (1)(2)(3)(4)(5) $1.37 - $1.41
Diluted weighted average shares
outstanding (000's) 24,500
Effective tax rate 48%
Capital spending (000's) (6) $20,000 - $35,000
(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 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
$0.63 and $0.04 for other acquisition related adjustments.
(6) Includes expansion of Electrochem Commercial Power facility of
approximately $10 million.
Table A: Operating Income Reconciliation (in thousands):
2007 2006 2007 2006
3rd Qtr. 3rd Qtr. YTD YTD
- ----------------------------------------------------------------------
Operating income as reported: $ 10,340 $ 4,065 $14,595 $21,244
In-process Research and Development (2,260) - 16,093 -
-------- -------- ------- -------
Sub-total 8,080 4,065 30,688 21,244
-------- -------- ------- -------
Adjustments:
Carson City facility
closure/relocation 10 411 584 2,450
Columbia facility closure/relocation 1,030 1,225 3,705 3,546
Medical power facility
closure/relocation - - - 567
ECP building expansion 126 - 408 -
Asset dispositions & other 109 4,603 99 5,188
Corporate development expenses - - - 800
-------- -------- ------- -------
Operating Income - adjusted $ 9,355 $ 10,304 $35,484 $33,795
======== ======== ======= =======
Operating margin - adjusted 11.8% 14.9% 15.1% 16.2%
======== ======== ======= =======
Table B: Net Income Reconciliation (in thousands):
2007 2006 2007 2006
3rd Qtr. 3rd Qtr. YTD YTD
- ----------------------------------------------------------------------
Net income as reported: $ 5,000 $ 3,239 $ 12,270 $14,732
In-process Research and Development (2,260) - 15,361 -
Tax cost for IPR&D 2,312 - (841) -
-------- -------- -------- -------
Sub-total 5,052 3,239 26,790 14,732
-------- -------- -------- -------
Adjustments:
Carson City facility
closure/relocation 7 311 394 1,654
Columbia facility closure/relocation 695 927 2,501 2,393
Medical power facility
closure/relocation - - - 383
ECP building expansion 85 - 275 -
Asset dispositions & other 74 3,485 67 3,502
Corporate development expenses - - - 540
-------- -------- -------- -------
Sub-total 5,913 7,962 30,027 23,204
-------- -------- -------- -------
Gain on extinguishment of debt - - (3,019) -
-------- -------- -------- -------
Net income adjusted $ 5,913 $ 7,962 $ 27,008 $23,204
======== ======== ======== =======
Note: 1) Tax rate utilized was 32.5% for 2007 and YTD 2006, except for
the IPR&D write-off, and 24.3% for the 3rd Qtr. of 2006.
2) YTD 2007 includes $2.6 million in net after tax gain on sale
of investment.
Table C: GAAP EPS Reconciliation:
2007 2006 2007 2006
3rd Qtr. 3rd Qtr. YTD YTD
- ----------------------------------------------------------------------
Diluted EPS as reported: $ 0.22 $ 0.15 $ 0.54 $ 0.65
In-process Research and Development (0.09) - 0.62 -
Remaining tax cost for IPR&D 0.10 - (0.03) -
-------- -------- ------- -------
Sub-total 0.23 0.15 1.13 0.65
-------- -------- ------- -------
Adjustments:
Carson City facility
closure/relocation - 0.01 0.02 0.06
Columbia facility closure/relocation 0.03 0.04 0.10 0.09
Medical power facility
closure/relocation - - - 0.01
ECP building expansion - - 0.01 -
Asset dispositions & other - 0.16 - 0.14
Corporate development expenses - - - 0.02
-------- -------- ------- -------
Sub-total 0.26 0.36 1.26 0.97
-------- -------- ------- -------
Gain on extinguishment of debt - - (0.12) -
-------- -------- ------- -------
Diluted EPS adjusted $ 0.26 $ 0.36 $ 1.14 $ 0.97
======== ======== ======= =======
Shares outstanding (000's) 23,900 22,000 24,700 26,200
======== ======== ======= =======
Note: 1) Tax rate utilized was 32.5% for 2007 and YTD 2006, except for
the IPR&D write-off, and 24.3% for the 3rd Qtr. of 2006
2) YTD 2007 includes $0.11 gain on sale of investment.
Conference Call
The Company will host a conference call on Tuesday November 6,
2007 at 8:30 a.m. E.T. to discuss these quarterly results. The
scheduled conference call will be webcast live and is accessible
through the Company's Web site at www.greatbatch.com. An audio replay
will also be available beginning from 11:00 a.m. E.T. on November 6,
2007 until November 13, 2007. To access the replay, dial 888-286-8010
(U.S.) or 617-801-6888 (International) and enter the passcode
31267685.
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, vascular and
interventional radiology markets. Additionally, Electrochem Commercial
Power, a subsidiary of Greatbatch, is a world leader in the design and
manufacture of lithium cells and battery packs for demanding
applications such as oil and gas exploration, pipeline inspection,
military, asset tracking, oceanography and seismic surveying.
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. 28, Sept. 29, Sept. 28, Sept. 29,
2007 2006 2007 2006
--------- --------- --------- ---------
Sales $ 79,009 $ 69,294 $234,331 $207,999
Cost and expenses:
Cost of sales - excluding
amortization of intangible
assets 48,647 42,709 141,697 125,087
Cost of sales - amortization
of intangible assets 1,222 948 3,164 2,864
Selling, general and
administrative expenses 11,362 9,311 32,130 28,191
Research, development and
engineering costs, net 8,423 6,022 21,856 18,062
Purchased in-process research
and development (2,260) - 16,093 -
Other operating expense, net 1,275 6,239 4,796 12,551
--------- --------- --------- ---------
Operating income 10,340 4,065 14,595 21,244
Interest expense 2,112 1,135 5,345 3,433
Interest income (1,586) (1,521) (6,028) (4,066)
Gain on sale of investment
security - - (4,001) -
Gain on extinguishment of debt - - (4,473) -
Other expense, net 70 171 156 51
--------- --------- --------- ---------
Income before provision for
income taxes 9,744 4,280 23,596 21,826
Provision for income taxes 4,744 1,041 11,326 7,094
--------- --------- --------- ---------
Net income $ 5,000 $ 3,239 $ 12,270 $ 14,732
========= ========= ========= =========
Earnings per share:
Basic $ 0.23 $ 0.15 $ 0.55 $ 0.68
Diluted $ 0.22 $ 0.15 $ 0.54 $ 0.65
Weighted average shares
outstanding:
Basic 22,200 21,800 22,150 21,800
Diluted 23,900 22,000 24,700 26,200
GREATBATCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - Unaudited
(In thousands)
ASSETS September 28, December 29,
2007 2006
------------- --------------
Current assets:
Cash and cash equivalents $ 95,979 $ 71,147
Short-term investments 19,774 71,416
Accounts receivable, net 44,108 31,285
Inventories 68,565 57,667
Refundable income taxes - 1,569
Deferred income taxes 6,597 5,899
Prepaid expenses and other current
assets 3,063 2,343
------------- --------------
Total current assets 238,086 241,326
Property, plant, and equipment, net 103,208 91,869
Intangible assets, net 81,177 56,330
Goodwill 208,786 155,039
Other assets 13,605 3,263
------------- --------------
Total assets $ 644,862 $ 547,827
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,009 $ 12,657
Accrued expenses and other current
liabilities 29,417 29,618
------------- --------------
Total current liabilities 53,426 42,275
Convertible subordinated notes 240,902 170,000
Deferred income taxes 31,740 35,859
Other long-term liabilities 127 -
------------- --------------
Total liabilities 326,195 248,134
------------- --------------
Stockholders' equity:
Preferred stock - -
Common stock 22 22
Additional paid-in capital 237,210 227,187
Treasury stock - (205)
Retained earnings 81,435 69,165
Accumulated other comprehensive income - 3,524
------------- --------------
Total stockholders' equity 318,667 299,693
------------- --------------
Total liabilities and stockholders'
equity $ 644,862 $ 547,827
============= ==============
CONTACT: Greatbatch, Inc.
Anthony W. Borowicz, 716-759-5809
Treasurer and Director, Investor Relations
tborowicz@greatbatch.com