-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GDFjfPitrMCIKi+AQeoftkhOc0g2hSf1K7kv/mupyU4Jien1Fi44yGFTuL5oFWWl krHc4ZaMnUzelTML7Cqk0g== 0001157523-05-009875.txt : 20051109 0001157523-05-009875.hdr.sgml : 20051109 20051109084644 ACCESSION NUMBER: 0001157523-05-009875 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20051104 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051109 DATE AS OF CHANGE: 20051109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREATBATCH, INC. CENTRAL INDEX KEY: 0001114483 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 161531026 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-16137 FILM NUMBER: 051187924 BUSINESS ADDRESS: STREET 1: 9645 WEHRLE DRIVE CITY: CLARENCE STATE: NY ZIP: 14031 BUSINESS PHONE: 716-759-5600 MAIL ADDRESS: STREET 1: 9645 WEHRLE DRIVE CITY: CLARENCE STATE: NY ZIP: 14031 FORMER COMPANY: FORMER CONFORMED NAME: WILSON GREATBATCH TECHNOLOGIES INC DATE OF NAME CHANGE: 20000511 8-K 1 a5016065.txt GREATBATCH, INC. 8-K U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) November 4, 2005 ---------------- GREATBATCH, INC. ---------------- (Exact name of registrant as specified in its charter) Delaware 1-16137 16-1531026 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 9645 Wehrle Drive, Clarence, New York 14031 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (716) 759-5600 -------------- Not Applicable - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425). [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240 14a-12). [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)). Item 2.02. Results of Operations and Financial Condition --------------------------------------------- On November 9, 2005 Greatbatch, Inc. (the "Company") issued a press release announcing its results for the fiscal quarter ended September 30, 2005. A copy of the release is furnished with this report as Exhibit 99.1 and is incorporated by reference into this Item 2.02. The information contained in this report under Item 2.02 is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section. The information contained in this report under Item 2.02 shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related ------------------------------------------------------------------- Audit Report or Completed Interim Review. ----------------------------------------- The Company will amend its 2004 Form 10-K as well as its first and second quarter 2005 Form 10-Qs to reflect a correction in the classification of auction rate securities from cash and cash equivalents to short-term investments. Auction rate securities are securities that have stated maturities beyond three months, but are priced and traded as short-term investments due to the liquidity provided through the auction mechanism that generally resets interest rates every 7 to 35 days. Although management had determined the risk of failure of an auction process to be remote, the definition of a cash equivalent in Statement of Financial Accounting Standards ("SFAS") No. 95, Statement of Cash Flows, requires reclassification as short-term investments. In addition, the Company has determined that it did not account for a deferred tax asset related to net operating losses from the Company's acquisition of NanoGram in 2004. These net operating loss carryforwards relate to net operating losses incurred prior to the acquisition date, the tax effect of which should have been reflected in the Company's balance sheet as of December 31, 2004. The recording of the net operating losses will be reflected in the amended Form 10-K and 10-Qs to be filed by the Company and will decrease long-term deferred income tax liabilities and correspondingly decrease goodwill. The expected restatements to be made to the Company's previously issued balance sheets and cash flow statements are attached as Exhibit 99.2. None of the above mentioned corrections impact the Company's previously reported net income or equity. As of November 4, 2005, Company management concluded that the financial statements presented in the Company's 2004 Form 10-K and Form 10-Qs for the periods ended March 31, 2005 and June 30, 2005 should not be relied upon until they have been amended to reflect the adjustments discussed above. The Company expects to file the necessary amendments to its 2004 Form 10-K and 2005 Form 10-Qs by the end of November, 2005. The Company's management discussed the matters disclosed in this Item 4.02 with Deloitte & Touche LLP, its independent registered public accounting firm. Item 9.01. Financial Statements and Exhibits --------------------------------- (c) Exhibits 99.1 Press Release dated November 9, 2005. 99.2 Supplemental Information SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: November 9, 2005 GREATBATCH, INC. By: /s/ Thomas J. Mazza ------------------- Thomas J. Mazza Senior Vice President & Chief Financial Officer EXHIBIT NUMBER DESCRIPTION - ------- ----------- 99.1 Press Release of Greatbatch, Inc. dated November 9, 2005. 99.2 Supplemental Information. EX-99.1 2 a5016065ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Greatbatch, Inc. Reports Third Quarter Results; Sales Increase by 38%; Company Raises 2005 Financial Guidance CLARENCE, N.Y.--(BUSINESS WIRE)--Nov. 9, 2005--Greatbatch, Inc. (the "Company") (NYSE: GB) today reported its results for the third quarter ended September 30, 2005. Business Summary -- Achieved sales growth of 38% for the third quarter of 2005, compared to the prior year; consisting of 43% growth in Implantable Medical Components and 11% growth in Commercial products. -- Installation of the remaining assembly equipment at the Greatbatch Mexico facility is expected to be completed in the fourth quarter of 2005. The move of the filtered feedthrough operation in Carson City to Tijuana is progressing. Manufacturing equipment is currently being installed and validated. The project continues to move according to plan and is expected to be completed in its entirety during the first half of 2006. -- The move of the manufacturing equipment from the existing capacitor plant to the Alden facility is in process. The move is expected to be substantially complete by the end of the fourth quarter of 2005. Due to increased capacitor volume, the final manufacturing equipment moves may extend into next year to ensure production requirements are met. -- Entered into a royalty-based licensing agreement with Medtronic, Inc. with respect to certain intellectual property pertaining to tantalum capacitors. The use of tantalum technology and any purchase of tantalum capacitors by Medtronic are subject to their further evaluation. The Company does not expect any significant near-term financial impact from this agreement. -- Raised 2005 full year financial guidance as follows: -- Full year 2005 projected sales were increased to a range of $235 - $240 million. -- Full year 2005 EPS estimates were increased to a range of $0.45 - $0.55, inclusive of charges of $0.58 per share, representing costs for the Alden and Greatbatch Mexico startups, restructuring charges and various asset write-offs and $0.23 per share in excess capacity costs pertaining to the Tijuana and capacitor plants. Net sales totaled $62.4 million during the third quarter of 2005, an increase of 38% from the third quarter of 2004. Net income totaled $0.8 million and diluted earnings per share were $0.03; compared to $3.0 million and $0.14 per diluted share in the prior year. During the third quarter of 2005, the Company recorded a $4.5 million charge for the disposition of certain manufacturing and building related assets. In addition, the Company incurred on-going consolidation and relocation costs for its Tijuana, Alden and Carson City facilities totaling $3.3 million, which were in line with previously announced estimates. Excluding these items, net earnings for the third quarter were $6.2 million or $0.28 per diluted share, an increase of 100% over the $0.14 per diluted share in the third quarter of 2004. Edward F. Voboril, Chairman and Chief Executive Officer commented, "We are very pleased with our results for the third quarter, highlighted by the 43% growth in our Implantable Medical Components segment. As previously discussed, we most likely received some on-going benefit in this quarter from the marketplace field actions. However, we believe that our growth is also being driven by a number of sustainable factors as well. First, the underlying cardiac rhythm management market remains very robust, in both the domestic and international markets. Second, we are beginning to see increased market penetration for a number of our medical products, specifically batteries, capacitors and feedthrough products. Third, sales of assembly products are progressing as planned. Lastly, the Commercial segment continues to exhibit broad-based growth across the oil and gas, oceanographic and military markets. All of these growth drivers contributed to the significant operating leverage we achieved in the quarter," Voboril concluded. Sales Summary The following table summarizes the Company's sales by business unit and major product line for the third quarters of 2005 and 2004 (in thousands): Business Unit/Product Lines 2005 2004 % 3rd Qtr 3rd Qtr Change - ------------------------------------------- -------- -------- -------- Implantable Medical Components ("IMC"): - ------------------------------------------- -------- -------- -------- ICD Batteries $11,345 $7,734 +47% - ------------------------------------------- -------- -------- -------- Pacemaker & Other Batteries 5,424 4,092 +33% - ------------------------------------------- -------- -------- -------- ICD Capacitors 5,349 4,103 +30% - ------------------------------------------- -------- -------- -------- Feedthroughs 16,386 9,533 +72% - ------------------------------------------- -------- -------- -------- Enclosures 6,203 5,631 +10% - ------------------------------------------- -------- -------- -------- Other Medical 9,378 6,653 +41% ------ ------ ---- - ------------------------------------------- -------- -------- -------- Total Implantable Medical Components 54,085 37,746 +43% - ------------------------------------------- -------- -------- -------- Electrochem Commercial Power ("ECP") 8,273 7,431 +11% ----- ----- ---- - ------------------------------------------- -------- -------- -------- Total Sales $62,358 $45,177 +38% - ------------------------------------------- -------- -------- -------- The increase in IMC sales is primarily attributable to organic growth in the core products, specifically batteries, ICD capacitors and feedthrough products. Additionally, the third quarter of 2004 was negatively impacted by lower sales volume to one major CRM customer. These growth factors were partially offset by an average 1% reduction in selling prices. The increase in ECP sales is primarily due to higher demand for power sources used in oil and gas, oceanographic and military and applications. Profit & Loss Summary The following table summarizes selected information derived from the condensed consolidated statements of operations for the third quarters in 2005 and 2004 (in thousands): 2005 2004 % 3rd Qtr 3rd Qtr Change - ------------------------------------------- -------- -------- -------- Gross Profit $24,180 $17,402 +39% - ------------------------------------------- -------- -------- -------- Gross Margin 38.8% 38.5% - ------------------------------------------- -------- -------- -------- - ------------------------------------------- -------- -------- -------- SG&A Expenses $8,842 $6,913 +28% - ------------------------------------------- -------- -------- -------- SG&A Expenses as % of Sales 14.2% 15.3% - ------------------------------------------- -------- -------- -------- - ------------------------------------------- -------- -------- -------- RD&E Expenses, net $5,124 $4,156 +23% - ------------------------------------------- -------- -------- -------- RD&E Expenses, net as % of Sales 8.2% 9.2% - ------------------------------------------- -------- -------- -------- - ------------------------------------------- -------- -------- -------- Other Operating Expense $7,818 $346 - ------------------------------------------- -------- -------- -------- - ------------------------------------------- -------- -------- -------- Operating Income $1,429 $4,913 -71% - ------------------------------------------- -------- -------- -------- Operating Margin 2.3% 10.9% - ------------------------------------------- -------- -------- -------- - ------------------------------------------- -------- -------- -------- Effective Tax Rate 30.0% 25.5% - ------------------------------------------- -------- -------- -------- The increase in gross margin is primarily due to the favorable effect of spreading fixed manufacturing expenses over higher volume. This factor contributed to a 550 basis point improvement in gross margins. This increase was partially offset by a 340 basis point reduction in gross margin due to the excess capacity costs at the Greatbatch Mexico and tantalum capacitor facilities and a 110 basis point percentage reduction due to lower medical selling prices. 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 increase in RD&E expenses is primarily due to increased personnel costs for research and development programs, coupled with decreased reimbursement on new product development projects in the current quarter compared to last year. The other operating expense in the current quarter consists of: -- Tijuana, Alden and Carson City consolidations/relocations $3.3 million -- Asset dispositions $4.5 million Outlook Considering the Company's third quarter performance and the continued strength of the core Medical and Commercial segments, the Company now expects 2005 sales to be in the range of $235 to $240 million, compared to $220 to $235 million as previously announced. The Company is also increasing its earnings per share guidance and is now anticipating 2005 earnings per share in the range of $0.45 to $0.55. This is inclusive of charges of $0.58 per share, representing costs for the Alden and Greatbatch Mexico startups, restructuring charges and various asset write-offs and $0.23 per share in excess capacity costs pertaining to the Tijuana and existing capacitor plants. Capital spending in 2005 is expected to be in the range of $27 to $32 million, compared to $30 to $35 million as previously announced. 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. Restatements Classification of Auction Rate Securities Effective September 30, 2005 we restated the classification of our auction rate securities from cash and cash equivalents to short-term investments in accordance with guidance issued by the U.S. Securities and Exchange Commission. Auction rate securities (ARS) are securities that have stated maturities beyond three months, but are priced and traded as short-term investments due to the liquidity provided through the auction mechanism that generally resets interest rates every 7 to 35 days. Recording of Net Operating Loss Carryforward During the quarter ended September 30, 2005, the Company determined that it had not accounted for a deferred tax asset related to net operating losses from the Company's acquisition of NanoGram in 2004. These net operating loss carryforwards relate to net operating losses incurred prior to the acquisition date. The recording of the net operating losses decreased long-term deferred income tax liabilities and correspondingly decreased goodwill by $1.7 million. As a result of these restatements, the consolidated Balance Sheet as of December 31, 2004 and the Consolidated Statement of Cash Flows for the nine months ended September 30, 2004 have been amended. These restatements had no impact on our results of operations or changes in stockholders' equity. The Company will be issuing revisions to applicable prior period financial statements in the near future. Conference Call The Company will host a conference call today, Wednesday, November 9, at 11:00 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 1:00 p.m. E.T. on Wednesday, November 9, 2005 until Wednesday, November 16. To access the replay, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter the passcode 24535384. 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, 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 ended Nine months ended September 30, September 30, 2005 2004 2005 2004 --------- -------- --------- --------- Sales $ 62,358 $45,177 $182,240 $153,644 Cost of sales 38,178 27,775 112,154 89,249 --------- -------- --------- --------- Gross profit 24,180 17,402 70,086 64,395 Selling, general and administrative expenses 8,842 6,913 24,089 20,227 Research, development and engineering costs, net 5,124 4,156 13,182 14,725 Amortization of intangible assets 967 1,074 2,883 2,925 Other operating expense, net 7,818 346 14,207 3,524 --------- -------- --------- --------- Operating income 1,429 4,913 15,725 22,994 Interest expense 1,154 1,144 3,476 3,448 Interest income (796) (244) (2,024) (802) Other (income) expense, net (9) (75) (69) (75) --------- -------- --------- --------- Income before income taxes 1,080 4,088 14,342 20,423 Provision for income taxes 324 1,042 4,303 6,025 --------- -------- --------- --------- Net income $ 756 $ 3,046 $ 10,039 $ 14,398 ========= ======== ========= ========= Diluted earnings per share $ 0.03 $ 0.14 $ 0.46 $ 0.65 GREATBATCH, INC. CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (In thousands) ASSETS September 30, December 31, 2005 2004 ------------- ------------ Current assets: Cash and cash equivalents $ 39,316 $ 34,795 Short-term investments 62,762 57,437 Accounts receivable, net 34,600 24,288 Inventories 36,157 34,027 Refundable income taxes 5,629 3,673 Deferred income taxes 3,622 3,622 Prepaid expenses and other current assets 4,883 4,637 ------------- ------------ Total current assets 186,969 162,479 Property, plant, and equipment, net 99,535 92,210 Intangible assets, net 61,100 63,984 Goodwill 155,039 155,039 Other assets 4,310 4,493 ------------- ------------ Total assets $ 506,953 $ 478,205 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 12,260 $ 8,971 Accrued expenses and other current liabilities 24,400 18,109 Current portion of long-term debt 762 1,000 ------------- ------------ Total current liabilities 37,422 28,080 Long-term debt, net of current portion - 652 Convertible subordinated notes 170,000 170,000 Deferred income taxes 29,230 23,296 ------------- ------------ Total liabilities 236,652 222,028 ------------- ------------ Stockholders' equity: Preferred stock - - Common stock 22 21 Additional paid-in capital 216,766 212,131 Deferred stock-based compensation (1,419) (833) Treasury stock, at cost - (95) Retained earnings 55,010 44,971 Accumulated other comprehensive loss (78) (18) ------------- ------------ Total stockholders' equity 270,301 256,177 ------------- ------------ Total liabilities and stockholders' equity $ 506,953 $ 478,205 ============= ============ CONTACT: Greatbatch, Inc. Anthony W. Borowicz, 716-759-5809 tborowicz@greatbatch.com EX-99.2 3 a5016065ex99_2.txt EXHIBIT 99.2 Exhibit 99.2 Supplemental Restatement Information (Unaudited) The Company utilizes a fifty-two, fifty-three week fiscal year ending on the Friday nearest December 31st. For 52-week years, each quarter contains 13 weeks. For clarity of presentation, the Company describes all periods as if each quarter end is March 31st, June 30th and September 30th and as if the year-end is December 31st.
As Previously Changes in condensed consolidated statements of cash flows Reported As Restated - ---------------------------------------------------------- -------- ----------- Six months ended June 30, 2005 Net cash used in investing activities $(18,626) $ (21,263) Net increase (decrease) in cash and cash equivalents (6,437) (9,074) Three months ended March 31, 2005 Net cash used in investing activities (12,611) (3,986) Net increase (decrease) in cash and cash equivalents (10,613) (1,988) Year ended December 31, 2004 Net cash used in investing activities (75,011) (34,163) Net increase (decrease) in cash and cash equivalents (30,013) 10,835 Six months ended June 30, 2004 Net cash used in investing activities (52,197) (17,977) Net increase (decrease) in cash and cash equivalents (39,635) (5,415) Three months ended March 31, 2004 Net cash used in investing activities (48,209) (10,491) Net increase (decrease) in cash and cash equivalents (45,233) (7,515) Year ended December 31, 2003 Net cash used in investing activities (20,643) (116,169) Net increase (decrease) in cash and cash equivalents 114,878 19,352
As Previously Changes in condensed consolidated balance sheets Reported As Restated - ------------------------------------------------ -------- ----------- June 30, 2005 Cash and cash equivalents $ 83,036 $ 25,721 Short-term investments 5,107 62,422 Goodwill 156,772 155,039 Deferred income taxes 28,955 27,222 March 31, 2005 Cash and cash equivalents 78,860 32,807 Short-term investments 6,876 52,929 Goodwill 156,772 155,039 Deferred income taxes 26,988 25,255 December 31, 2004 Cash and cash equivalents 89,473 34,795 Short-term investments 2,759 57,437 Goodwill 156,772 155,039 Deferred income taxes 25,029 23,296 September 30, 2004 Cash and cash equivalents 77,801 19,125 Short-term investments 6,064 64,740 June 30, 2004 Cash and cash equivalents 79,851 18,545 Short-term investments 3,070 64,376 March 31, 2004 Cash and cash equivalents 74,253 16,445 Short-term investments 7,649 65,457 December 31, 2003 Cash and cash equivalents 119,486 23,960 Short-term investments 11,559 107,085
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