EX-99.1 2 a4949617ex991.txt EXHIBIT 99.1 Exhibit 99.1 Greatbatch, Inc. Reports Record Quarterly Sales; Increases Sales and Earnings Guidance for 2005 CLARENCE, N.Y.--(BUSINESS WIRE)--Aug. 9, 2005--Greatbatch, Inc. (the "Company") (NYSE: GB) today reported its results for the second quarter ended June 30, 2005. Business Summary -- As previously announced, the Company: -- Reported all-time record sales results of $63.5 million, led by strong sales of implantable medical components and commercial power sources. -- Changed the name of the Company to Greatbatch, Inc., from its former name of Wilson Greatbatch Technologies, Inc. -- Celebrated the grand opening of the world-class manufacturing facility in Tijuana, Mexico. -- Appointed Thomas J. Hook as President and Chief Operating Officer. -- Installation of the remaining assembly equipment at the Greatbatch Mexico facility is proceeding as planned, with completion expected in the fourth quarter of 2005. Consolidation plan finalized for move of Carson City operations to Tijuana. Expect to complete the move by the first quarter of 2006. -- Substantially completed the move of the medical battery manufacturing equipment to new Alden, NY facility in accordance with plan. Began moving the manufacturing equipment from the existing capacitor plant. Completion of the move expected by the end of the fourth quarter of 2005. -- The Company's existing $20 million Senior Secured Credit Facility was successfully replaced with a new three-year $50 million revolving credit facility. Net sales totaled $63.5 million during the second quarter of 2005, an increase of 20% from the second quarter of 2004. Net income totaled $5.3 million and diluted earnings per share were $0.23; compared to $4.7 million and $0.21 per diluted share in the prior year. Edward F. Voboril, Chairman and Chief Executive Officer commented, "We are pleased to report our second consecutive record quarterly sales results. The second quarter was positively impacted to a certain extent by short-term increased ICD component demand from our CRM customers due to various ICD-related field issues in the marketplace. However, we continue to see increasing demand in the underlying CRM and Commercial markets with strength across our entire customer base. Demand for our products remains high, providing positive momentum heading into the second half of the year." "We demonstrated increased operating leverage in the quarter from the higher sales volume. We achieved earnings per share of $0.23, inclusive of pre-tax costs of $4 million, or $0.11 per share after tax, in other operating expenses associated with the facility moves and other costs. The plant moves and consolidation efforts are proceeding as planned and once these become fully implemented, we expect further operational improvements," Voboril concluded. Sales Summary The following table summarizes the Company's sales by business unit and major product line for the second quarters of 2005 and 2004 (in thousands): Business Unit/Product Lines 2005 2004 % 2nd Qtr 2nd Qtr Change --------------------------------------------------- -------- -------- Implantable Medical Components ("IMC"): --------------------------------------------------- -------- -------- ICD Batteries $12,608 $10,119 +25% --------------------------------------------------- -------- -------- Pacemaker & Other Batteries 6,315 5,361 +18% --------------------------------------------------- -------- -------- ICD Capacitors 5,954 6,239 -5% --------------------------------------------------- -------- -------- Feedthroughs 15,859 12,261 +29% --------------------------------------------------- -------- -------- Enclosures 6,019 5,142 +17% --------------------------------------------------- -------- -------- Other Medical 8,031 7,077 +13% ---------------------------------------------=====----=====------==== Total Implantable Medical Components 54,786 46,199 +19% --------------------------------------------------- -------- -------- Electrochem Commercial Power ("ECP") 8,738 6,743 +30% ---------------------------------------------=====----=====------==== Total Sales $63,524 $52,942 +20% --------------------------------------------------- -------- -------- The increase in IMC sales is attributable to strong underlying market conditions combined with increased short-term ICD component demand by CRM customers. The increase in ECP sales is primarily due to increased sales and marketing efforts and higher demand for power sources used in oil and gas, oceanographic and seismic markets. Profit & Loss Summary The following table summarizes selected information derived from the condensed consolidated statements of operations for the second quarters in 2005 and 2004 (in thousands): 2005 2004 % 2nd Qtr 2nd Qtr Change --------------------------------------------------- -------- -------- Gross Profit $25,119 $23,818 +5% --------------------------------------------------- -------- -------- Gross Margin 39.5% 45.0% --------------------------------------------------- -------- -------- --------------------------------------------------- -------- -------- SG&A Expenses $8,481 $6,389 +33% --------------------------------------------------- -------- -------- SG&A Expenses as % of Sales 13.4% 12.1% --------------------------------------------------- -------- -------- --------------------------------------------------- -------- -------- RD&E Expenses, net $3,657 $5,688 -36% --------------------------------------------------- -------- -------- RD&E Expenses, net as % of Sales 5.8% 10.7% --------------------------------------------------- -------- -------- --------------------------------------------------- -------- -------- Other Operating Expense $4,001 $2,957 +35% --------------------------------------------------- -------- -------- --------------------------------------------------- -------- -------- Operating Income $8,022 $7,708 +4% --------------------------------------------------- -------- -------- Operating Margin 12.6% 14.6% --------------------------------------------------- -------- -------- --------------------------------------------------- -------- -------- Effective Tax Rate 30.0% 30.5% --------------------------------------------------- -------- -------- Approximately 2.9 percentage points of the 5.5 percentage point decrease in gross margin was due to excess capacity costs at the Greatbatch Mexico plant and at the wet tantalum capacitor facility. The balance of the decrease was due to lower medical selling prices, increased incentive and profit sharing compensation as well as higher platinum costs. The increase in SG&A expenses is primarily due to increased incentive compensation and higher selling and marketing costs from the planned expansion of the medical and commercial sales forces. The decrease in RD&E expenses is primarily due to increased reimbursement on new product development projects and engineering cost reduction measures. The other operating expense in the current quarter consists of: -- Tijuana, Alden and Carson City consolidations/relocations $1.8 million -- Discontinuation of a drug pump development agreement $1.2 million -- Asset write-downs $1.0 million Outlook Considering the Company's second quarter performance and the prevailing strength of the core Medical and Commercial segments, the Company now expects 2005 sales to be in the range of $220 to $235 million, an increase of $10 million from the previous sales guidance range. The Company is also increasing its earnings per share guidance and is now anticipating 2005 earnings per share in the range of $0.20 to $0.34, inclusive of charges of $0.68 - $0.73 per share representing costs for the Alden and Greatbatch Mexico startups, excess capacity, restructuring charges, Carson City plant consolidation and various asset write-offs. Capital spending in 2005 is expected to be in the range of $30 to $35 million, unchanged from the Company's previous guidance. Earnings per share guidance for 2005 excludes the effect of expensing stock options. Consistent with the Securities and Exchange Commission's announcement amending the compliance dates for Financial Accounting Standards Board Statement ("FAS") 123R, the Company will begin implementing FAS123R when it becomes effective, which is currently anticipated to be the in first quarter of 2006. Conference Call Greatbatch will host a conference call scheduled today, Tuesday, August 9, at 5:00 p.m. EDT, to discuss its quarterly results. The 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. EDT on Tuesday, August 9, 2005 until 12:00 a.m. on Wednesday, August 17. To access the replay, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter the passcode 90120705. 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 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, including Exhibit 99.1 thereto, 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 STATEMENT OF OPERATIONS (Unaudited) (In thousands except per share amounts) Three months Six months ended ended June 30, June 30, 2005 2004 2005 2004 Sales $63,524 $52,942 $119,882 $108,467 Cost of sales 38,405 29,124 73,976 61,474 -------- -------- --------- --------- Gross profit 25,119 23,818 45,906 46,993 Selling, general and administrative expenses 8,481 6,389 15,247 13,314 Research, development and engineering costs, net 3,657 5,688 8,058 10,569 Amortization of intangible assets 958 1,076 1,916 1,851 Other operating expense, net 4,001 2,957 6,389 3,178 -------- -------- --------- --------- Operating income 8,022 7,708 14,296 18,081 Interest expense 1,191 1,144 2,322 2,304 Interest income (652) (245) (1,227) (558) Other expense (income), net (60) (2) (60) - -------- -------- --------- --------- Income before income taxes 7,543 6,811 13,261 16,335 Provision for income taxes 2,263 2,078 3,978 4,983 -------- -------- --------- --------- Net income $5,280 $4,733 $9,283 $11,352 ======== ======== ========= ========= Diluted earnings per share $0.23 $0.21 $0.42 $0.50 GREATBATCH, INC. CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (In thousands) ASSETS June December 30, 31, 2005 2004 Current assets: Cash and cash equivalents $83,036 $89,473 Short-term investments 5,107 2,759 Accounts receivable, net 35,515 24,288 Inventories 33,672 34,027 Refundable income taxes 3,783 3,673 Deferred income taxes 3,622 3,622 Prepaid expenses and other current assets 6,094 4,637 --------- --------- Total current assets 170,829 162,479 Property, plant, and equipment, net 100,901 92,210 Intangible assets, net 62,058 63,984 Goodwill 156,772 156,772 Other assets 4,496 4,493 --------- --------- Total assets $495,056 $479,938 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $7,850 $8,971 Accrued expenses and other current liabilities 18,703 18,109 Current portion of long-term debt 1,001 1,000 --------- --------- Total current liabilities 27,554 28,080 Long-term debt, net of current portion 58 652 Convertible subordinated notes 170,000 170,000 Deferred income taxes 28,955 25,029 --------- --------- Total liabilities 226,567 223,761 --------- --------- Stockholders' equity: Preferred stock - - Common stock 21 21 Additional paid-in capital 215,912 212,131 Deferred stock-based compensation (1,579) (833) Treasury stock, at cost - (95) Retained earnings 54,254 44,971 Accumulated other comprehensive loss (119) (18) --------- --------- Total stockholders' equity 268,489 256,177 --------- --------- Total liabilities and stockholders' equity $495,056 $479,938 ========= ========= CONTACT: Greatbatch, Inc. Investor Relations: Anthony W. Borowicz, 716-759-5809 tborowicz@greatbatch.com