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Greatbatch, Inc. Reports 2011 Fourth Quarter And Full Year Results

Forward-Looking Statements

Some of the statements in this press release, including the information provided under the caption “Financial Guidance,” 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: our dependence upon a limited number of customers; customer ordering patterns; product obsolescence; our inability to market current or future products; pricing/vertical integration pressure from customers; our ability to timely and successfully implement our cost reduction and plant consolidation initiatives; our reliance on third party suppliers for raw materials, products and subcomponents; our inability to maintain high quality standards for our products; challenges to our intellectual property rights; product liability claims; our inability to successfully consummate and integrate acquisitions and to realize synergies; our unsuccessful expansion into new markets; our ability to realize a return on our substantial RD&E investments, including system and device products; our inability to obtain licenses to key technology; regulatory changes or consolidation in the healthcare industry; global economic factors including currency exchange rates and interest rates; the resolution of various legal actions 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.

Table A: Operating Income Reconciliation:

 
A reconciliation of GAAP operating income to adjusted amounts is as follows (in thousands):
       
Three months ended Year ended
December 30, December 31, December 30, December 31,
2011 2010 2011 2010
Operating income as reported $ 12,542 $ 24,512 $ 61,699 $ 68,994
Adjustments:
Inventory step-up amortization (COS) 177 - 177 -
Executive death benefits (SG&A) - - - 885
Neuromodulation platform DVT expense (RD&E) 2,270 - 5,133 -
Litigation settlement - (9,500) - (9,500)
Consolidation costs - 493 425 1,573
Integration costs - (93) - 42
Asset dispositions, severance and other   759   2,346   168   2,943
Adjusted operating income $ 15,748 $ 17,758 $ 67,602 $ 64,937
Adjusted operating margin   11.1%   13.3%   11.9%   12.2%
 

Table B: Net Income and Diluted EPS Reconciliation

 
A reconciliation of GAAP net income and diluted EPS to adjusted amounts is as follows (in thousands, except per share amounts):
       
Three months ended Year ended
December 30, December 31, December 30, December 31,
2011 2010 2011 2010
Income before taxes as reported $ 8,562 $ 20,520 $ 48,392 $ 49,325
Adjustments:
Inventory step-up amortization (COS) 177 - 177 -
Executive death benefits (SG&A) - - - 885
Neuromodulation platform DVT expense
(RD&E) 2,270 - 5,133 -
Litigation settlement - (9,500) - (9,500)
Consolidation costs - 493 425 1,573
Integration costs - (93) - 42
Asset dispositions, severance and other 759 2,346 168 2,943
(Gain) loss on cost method investments, net - 150 (4,232) 150
Note conversion option discount amortization   2,180   2,024   8,483   7,876
Adjusted income before taxes 13,948 15,940 58,546 53,294
Adjusted provision for income taxes   4,808   5,078   18,824   17,576
Adjusted net income $ 9,140 $ 10,862 $ 39,722 $ 35,718
Adjusted diluted EPS $ 0.39 $ 0.46 $ 1.68 $ 1.51
Number of shares 23,607 23,532 23,636 23,802

 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
(in thousands except per share data)
       
Three months ended Year ended
December 30, December 31, December 30, December 31,
2011 2010 2011 2010
 
Sales $ 141,746 $ 133,111 $ 568,822 $ 533,425
Cost of sales   97,074   88,647   388,469   359,844
Gross profit 44,672 44,464 180,353 173,581
Operating expenses:
Selling, general and administrative expenses 18,568 15,290 72,548 64,510
Research, development and engineering costs, net 12,803 11,416 45,513 45,019
Litigation settlement - (9,500) - (9,500)
Other operating (income) expenses, net   759   2,746   593   4,558
Total operating expenses 32,130 19,952 118,654 104,587
Operating income 12,542 24,512 61,699 68,994
Interest expense 4,126 3,655 16,928 18,519
Interest income (12) (1) (21) (10)
(Gain) loss on cost method investments, net - 150 (4,232) 150
Other (income) expense, net   (134)   188   632   1,010
Income before provision for income taxes 8,562 20,520 48,392 49,325
Provision for income taxes   2,923   6,681   15,270   16,187
Net income $ 5,639 $ 13,839 $ 33,122 $ 33,138
 
Earnings per share:
Basic $ 0.24 $ 0.60 $ 1.42 $ 1.44
Diluted $ 0.24 $ 0.59 $ 1.40 $ 1.40
 
Weighted average shares outstanding:
Basic 23,309 23,099 23,258 23,070
Diluted 23,607 23,532 23,636 23,802

 
CONDENSED CONSOLIDATED BALANCE SHEETS - Unaudited
(in thousands)
   
As of
ASSETS December 30, December 31,
2011 2010
Current assets:
Cash and cash equivalents $ 36,508 $ 22,883
Accounts receivable, net 101,946 70,947
Inventories 109,913 101,440
Refundable income taxes 1,292 2,763
Deferred income taxes 7,828 7,398
Prepaid expenses and other current assets   7,469   6,078
Total current assets 264,956 211,509
Property, plant and equipment, net 145,806 146,380
Amortizing intangible assets, net 100,258 75,114
Indefinite-lived intangible assets 20,288 20,288
Goodwill 338,653 307,451
Deferred income taxes 2,450 2,427
Other assets   8,936   13,807
Total assets $ 881,347 $ 776,976
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 40,665 $ 27,989
Deferred income taxes 845 514
Accrued expenses   52,539   32,084

Total current liabilities

94,049 60,587
Long-term debt 235,950 220,629
Deferred income taxes 75,203 64,290
Other long-term liabilities   8,862   4,641
Total liabilities 414,064 350,147
Stockholders’ equity:
Preferred stock - -
Common stock 23 23
Additional paid-in capital 307,196 298,405
Treasury stock (1,387) (1,469)
Retained earnings 152,522 119,400
Accumulated other comprehensive income   8,929   10,470
Total stockholders’ equity   467,283   426,829
Total liabilities and stockholders’ equity $ 881,347 $ 776,976




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