Greatbatch Inc. (GB) filed Quarterly Report for the period ended 2009-10-02.
Greatbatch, Inc., is a leading developer and manufacturer of critical components used in implantable medical devices and other technically demanding applications. Greatbatch Inc. has a market cap of $434.7 million; its shares were traded at around $18.75 with a P/E ratio of 11.6 and P/S ratio of 0.8.
Highlight of Business Operations:
Consolidated sales for the nine months and third quarter ended October 2, 2009 were $396.0 million and $121.5 million, respectively, a decrease of 1% and 11% respectively, over the comparable 2008 periods. For the first three quarters of 2009, sales included CRM and Neuromodulation growth and the benefit of a full period of Orthopaedic operations (approximately $8 million) as compared to the 2008 period. In the third quarter of 2009, CRM and Neuromodulation growth moderated to more normal growth levels due to the timing of customer product launches and inventory adjustments. Offsetting these increases were lower Electrochem revenue due to a slow-down in the energy and portable medical markets and lower Orthopaedic sales due to the uncertain regulatory and economic environment. During the first half of 2009, Orthopaedic sales were impacted by the strong U.S. dollar, which reduced revenue by approximately $4 million. Additionally, 2008 sales included the release of backlog of approximately $3 million in both the second and third quarters. The higher mix of CRM/Neuromodulation revenue, as well as our ongoing consolidation initiatives, have positively impacted our gross profit percentage in 2009.
We have initiated various consolidation initiatives aimed at streamlining our operations and improving operating profitability. These initiatives have allowed us to maintain SG&A expenses constant in 2009. Additionally, we continue to increase research and development expenditures, as evidenced by the increase in gross RD&E to 9% of sales, in order to develop new technologies and provide solutions to our customers and ultimately create long-term growth opportunities. Operating results for the third quarter of 2009 included a $34.5 million litigation charge related to the Company s Electrochem business (See “Litigation”). Additionally, operating income for the first nine months and third quarter of 2009 included $8.3 million and $3.1 million, respectively, of acquisition related charges, consolidation costs and integration expenses, compared to $7.5 million and $3.6 million, respectively, for the same periods in 2008.
As of the end of the third quarter of 2009, cash and cash equivalents totaled $29.5 million. These funds, along with the cash generated from operations and the $128 million available under our line of credit, are sufficient to meet our operating and investment activities for the foreseeable future, including cash expenditures related to our consolidation initiatives, repayment of debt and potential litigation settlements. During the first three quarters of 2009, we repaid $25 million, or 19%, of the outstanding balance of our line of credit.
The total cost for the 2007 & 2008 facility shutdowns and consolidations is expected to be approximately $15.5 million to $18.3 million, of which $13.8 million has been incurred through October 2, 2009. The major categories of costs consisted of the following:
All categories of costs are considered to be cash expenditures, except accelerated depreciation and asset write-offs. For the nine months ended October 2, 2009, costs relating to these initiatives of $1.5 million and $3.4 million were included in the Greatbatch Medical and Electrochem business segments, respectively. Costs incurred during the first nine months of 2008 of $0.4 million, $1.5 million and $1.1 million were included in unallocated Corporate expenses, Greatbatch Medical and Electrochem business segments, respectively.
GB is in the portfolios of PRIMECAP Management.
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