CLARENCE, N.Y., Oct. 30, 2002 (PRIMEZONE) -- Wilson Greatbatch Technologies, Inc. (the "Company") (NYSE:GB), a leading developer and manufacturer of batteries, capacitors, components and enclosures used in implantable medical devices and specialty batteries used in demanding non-medical operations, today reported record revenues for the third quarter of 2002.
Third Quarter Results
Total revenues for the third quarter were $45.4 million, a quarterly record and an increase of 18% over the third quarter of last year. Net income for the third quarter was $2.5 million compared to $3.3 million in the third quarter of last year, and diluted earnings per share were $0.12 versus $0.16 last year.
Special Charges
As announced on October 7th, the Company's third quarter earnings were impacted by two separate non-recurring, non-cash charges. The first charge, amounting to $1.7 million on a pre-tax basis, represented the write-off of the unamortized non-compete agreement with Fred Hittman, the founder of what is now the Company's Greatbatch-Hittman operating division. Mr. Hittman passed in September. The second charge, amounting to $1.5 million on a pre-tax basis, represented the write-off of an investment in an unrelated entity made during 1998.
In addition to these two charges, the Company's third quarter earnings were impacted by purchase accounting related to the July 2002 acquisition of Globe Tool & Manufacturing Company ("Globe"). In accordance with generally accepted accounting principles, Globe's inventory was increased in purchase accounting by $0.6 million on a pre-tax basis, and this entire amount was charged to cost of revenues during the third quarter as the inventory was sold to outside customers.
These special charges aggregate to $3.8 million on a pre-tax basis, or $0.12 per diluted share on an after-tax basis. Excluding the impact of these special charges, gross margin would have been 43% and net income per diluted share would have been $0.24.
Third Quarter Revenues
Total revenues were a record $45.4 million, an increase of 18% over the same quarter of last year. Medical technology revenues increased by 21% and commercial power sources increased by 3% versus the third quarter of last year.
The following table summarizes the Company's revenues by product line for the 3rd Quarters in 2002 and 2001 (in thousands):
2002 2001
3rd Qtr 3rd Qtr
------- -------
Product Lines
Medical Technology:
Medical Batteries:
ICDs $ 7,650 $ 5,454
Pacemakers 5,049 5,851
Other Devices 798 800
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Total Medical Batteries 13,497 12,105
Capacitors 5,894 6,400
Components 19,308 13,365
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Total Medical Technology 38,699 31,870
Commercial Power Sources 6,651 6,455
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Total Revenues $ 45,350 $ 38,325
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Commenting on the reported revenues, Edward F. Voboril, the Company's Chairman, President and Chief Executive Officer said, "We are pleased with the strong third quarter revenues. Clearly, the growth catalyst for us is our broad product offering supporting the Cardiac Rhythm Management ("CRM") marketplace, which is experiencing significant growth. Sales of our Implantable Cardioverter Defibrillator ("ICD") batteries increased by 40% versus last year, which reflects the expanding clinical acceptance of ICDs to treat cardiac disease."
"We are also seeing strong CRM-related growth in our component products. Sales of our Greatbatch-Sierra filtered feedthroughs increased sequentially by 48% versus the second quarter of 2002. I am pleased to report that the production yield issues we faced during the first half of 2002 at Greatbatch-Sierra have been resolved. We are meeting the increased customer demand at significantly higher gross margins," Voboril added.
"Demand for our proprietary wet tantalum capacitors remains very strong, despite the lower sales this quarter versus last year, which is a timing issue with respect to our customer order flow. For the nine months ended September 2002, our capacitor sales have increased 21% over the prior year. We anticipate commencing shipment of capacitors to our second customer during the fourth quarter of 2002. Furthermore, during the third quarter we reached an agreement with a third capacitor customer, and we anticipate commencing shipment of capacitors to the third customer during the second half of 2003. We have now reached agreements with three of the five major worldwide ICD manufacturers to supply wet tantalum capacitors. We believe this evidences that the performance of wet tantalum capacitors is demonstrably better than other technologies and we anticipate that wet tantalum capacitors will evolve into the industry standard for ICDs," Voboril stated.
"Turning to our pacemaker batteries, sales declined by 14% compared with last year. We continue to be negatively impacted by inventory actions at certain of our major customers and product mix issues. We now expect these sales to remain relatively flat for the remainder of the year, but indications are that we should return to normal single digit growth in 2003 as our customer inventory levels stabilize. Although our pacemaker battery sales remain soft, our pacemaker filtered feedthrough sales have been strong as U.S. device manufacturers continue to add EMI filtering technology to their pacemaker products," Voboril added.
"Finally, in our commercial power source segment, I am pleased with the growth of 3% we experienced in the quarter compared to last year. Through the first half of the year sales in this non-medical segment declined by approximately 10%, but it now appears the oil and gas market is slowly beginning to recover," Voboril stated.
Globe Acquisition
On July 9, 2002, the Company announced the acquisition of Globe, which is based in Minneapolis, Minnesota and is the leading manufacturer of enclosures and related components used in implantable medical devices. Globe's sales are included in the "Medical Components" category above. "The acquisition of Globe is strategically important for a number of reasons," stated Mr. Voboril. "First, Globe further strengthens our product offering and positioning in the CRM market. Their core competencies in material science and precision manufacturing have added to our already strong capabilities. Finally, Globe provides us with a strategic 'beachhead' in Minneapolis, where many of our primary customers in the CRM market are located," Voboril added.
Profit & Loss Summary
The following table summarizes selected profit & loss ("P&L") statement amounts for the 3rd Quarters in 2002 and 2001 (in thousands):
2002 2001
3rd Qtr 3rd Qtr
Selected P&L Amounts
--------------------
Total Revenues $38,328 $32,987
Gross Profit $18,872 $16,648
Gross Margin 42% 43%
SG&A Expenses $ 6,300 $ 4,695
SG&A Expenses as % of Revenues 14% 12%
RD&E Expenses, net $ 3,470 $ 3,237
RD&E Expenses, net as % of Revenues 8% 9%
Amortization Expense $ 1,037 $ 2,169
Write-off of Non-Compete Agreement $ 1,723 --
Total Operating Expenses $12,530 $10,101
Total Operating Expenses as a % of Revenues 28% 26%
The reported gross margin percentage in the third quarter was 42%. Excluding the aforementioned impact for the purchase accounting write up to Globe's inventory, the adjusted gross margin would have been 43%. "The most significant gross margin improvement in the quarter came from our Greatbatch-Sierra operations. We not only met the increased product demand, but we significantly improved the gross margins as well. Gross profit was marginal throughout the first half of the year at Greatbatch-Sierra. We expect to continue making progress in the near-term and to ultimately achieve gross margins similar to that of our other product lines." Voboril stated.
Operating expenses for the third quarter were $12.5 million or 28% of revenues versus $10.1 million or 26% in the prior year. The majority of the increase is due to the previously discussed write-off of the non-compete agreement, as well as investments made in support of the Six Sigma(tm) quality initiative and in the general infrastructure to support the company growth. These investments are being implemented this year and therefore are not in the comparable period last year.
Nine Months Ended September 27, 2002
Year to date, the Company reported total revenues of $120.0 million, an increase of 19% versus the prior year. Gross Profit increased to $50.4 million or 42% of revenues, compared with $45.3 million and 45% last year. The decrease in the margin is primarily attributable to the first half 2002 manufacturing yield issues at Greatbatch-Sierra. Operating expenses increased by 14% to $32.4 million, but declined as a percent to sales from 28% to 27%. This is partly attributable to the adoption of SFAS 142 relative to the cessation of goodwill amortization. This change caused net income to increase by $1.7 million and earnings per diluted share by $0.08 for the year.
Net income of $9.4 million increased by 60% compared with last year and fully diluted earnings per share increased by 47% to $0.44 including the impact of the $0.12 per share in special charges described earlier.
Outlook for Remainder of 2002
"With our visibility for sales in the fourth quarter, we are reaffirming our previous guidance that sales for the year will be in the range of $160 to $165 million and net income will be in the range of $0.65 to $0.70 per diluted share," Mr. Voboril concluded.
About Wilson Greatbatch Technologies
Wilson Greatbatch Technologies, Inc. (NYSE:GB) is a leading developer and manufacturer of batteries, capacitors, precision components and cases used in implantable medical devices and other technically demanding applications. The Company has operations in New York, Maryland, Massachusetts, Nevada and Minnesota. Additional information about the Company is available at www.greatbatch.com.
Conference Call
Mr. Voboril and Lawrence P. Reinhold, the Company's Executive Vice President and Chief Financial Officer, will discuss third quarter 2002 financial results in a conference call scheduled for today, Wednesday October 30, at 4:30 p.m. EDT. Investors will have the opportunity to listen to the conference call on the Internet at www.vcall.com/Eventpage.asp?ID=45922. To listen to the conference call via the Internet, please go to the website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available two hours after the call and will remain available on the Internet until the next conference call.
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; product obsolescence; inability to market current or future products; pricing pressure from customers; 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 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.
Wilson Greatbatch Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands except per share amounts)
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2002 2001 2002 2001
------- ------- -------- --------
Revenues $45,350 $38,325 $119,981 $100,883
Cost of revenues 26,478 21,677 69,558 55,615
------- ------- -------- --------
Gross profit 18,872 16,648 50,423 45,268
Gross margin 42% 43% 42% 45%
Selling, general and
administrative expenses 6,300 4,695 17,310 13,007
Research, development and
engineering costs, net 3,470 3,237 10,514 9,797
Intangible amortization 1,037 2,169 2,809 5,519
Write-off of noncompete
agreement 1,723 -- 1,723 --
------- ------- -------- --------
Operating income 6,342 6,547 18,067 16,945
Interest expense 1,098 1,360 2,702 2,830
Interest and investment
income (34) (201) (314) (231)
Write-off of investment
in unrelated company 1,547 -- 1,547 --
Other expense, net 34 52 99 138
------- ------- -------- --------
Income before income taxes
and extraordinary loss 3,697 5,336 14,033 14,208
Provision for income taxes 1,220 2,024 4,631 5,328
------- ------- -------- --------
Income before extraordinary
loss 2,477 3,312 9,402 8,880
Extraordinary loss on
retirement of debt,
net of tax -- -- -- (2,994)
------- ------- -------- --------
Net income $ 2,477 $ 3,312 $ 9,402 $ 5,886
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Basic earnings per share:
Income before
extraordinary loss $ 0.12 $ 0.17 $ 0.45 $ 0.46
Extraordinary loss on
retirement of debt -- -- -- (0.15)
------- ------- -------- --------
Net income $ 0.12 $ 0.17 $ 0.45 $ 0.31
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Diluted earnings per share:
Income before
extraordinary loss $ 0.12 $ 0.16 $ 0.44 $ 0.45
Extraordinary loss on
retirement of debt -- -- -- (0.15)
------- ------- -------- --------
Net income $ 0.12 $ 0.16 $ 0.44 $ 0.30
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Weighted average shares
outstanding
Basic 20,966 20,044 20,922 19,157
Diluted 21,265 20,426 21,263 19,529
Wilson Greatbatch Technologies, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
Sept. 27, Dec. 28,
2002 2001
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ASSETS
Current assets:
Cash and cash equivalents $ 3,325 $ 43,272
Accounts receivable, net 22,303 17,373
Inventories 32,307 29,026
Prepaid expenses and other current assets 3,768 2,316
Deferred income taxes 2,916 2,888
-------- --------
Total current assets 64,619 94,875
Property, plant and equipment, net 58,313 44,149
Intangible assets, net 177,878 137,135
Deferred income taxes 4,061 5,417
Other assets 1,825 1,944
-------- --------
Total assets $306,696 $283,520
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,813 $ 6,553
Accrued expenses and other
current liabilities 13,864 13,721
Current maturities of long-term debt 4,250 13,005
-------- --------
Total current liabilities 22,927 33,279
Long-term debt 81,500 61,000
Other long-term liabilities 397 397
-------- --------
Total liabilities 104,824 94,676
-------- --------
Stockholders' equity:
Common stock 21 21
Capital in excess of par value 202,258 200,880
Retained earnings (accumulated deficit) 467 (8,935)
Treasury stock, at cost (874) (3,122)
-------- --------
Total stockholders' equity 201,872 188,844
-------- --------
Total liabilities and stockholders' equity $306,696 $283,520
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