Greatbatch
's (
GB
) fourth-quarter fiscal 2011 adjusted (excluding one-time items)
earnings per share of 39 cents came in line with the Zacks
Consensus Estimate and trailed the year-ago adjusted earnings of 46
cents.
Profit (as reported) tumbled 59% year over year to roughly $5.6
million (or 24 cents a share). The New York-based company's profits
in the year-ago quarter were boosted by a $9.5 million gain
stemming from the settlement of a lawsuit related to its
Electrochem unit.
For the fiscal, adjusted earnings of $1.68 a share also matched
the Zacks Consensus Estimate while surpassing the year-ago earnings
of $1.51.
Revenues
Revenues rose 6% year over year to $141.7 million in the fourth
quarter, beating the Zacks Consensus Estimate of $140 million. For
the full year, sales climbed 7% year over year to $568.8 million,
also ahead of the Zacks Consensus Estimate of $566 million.
Greatbatch saw solid double-digit growth across its Vascular
Access business and the Electrochem division in the fourth quarter,
in part offset by a weak CRM/Neuromodulation business. Revenues for
the quarter benefited from roughly $3 million of medical
devices sales and the company's takeover of Micro Power Electronics
in late 2011. Foreign currency movements contributed roughly $8
million to sales in fiscal 2011.
Segment Review
Revenues from the larger Greatbatch Medical division inched up
2% year over year to $121.3 million in the fourth quarter. Within
Greatbatch Medical, CRM/Neuromodulation sales edged down 2% year
over year to $77.2 million, impacted by sustained pricing headwind
and general sluggishness in the market. Greatbatch expects revenues
from this business to be lower in first-half 2012 with a recovery
expected in the back half.
Orthopedic revenues crept up 3% to $31.6 million. Currency
exchange swings did not have a material impact on orthopedic sales
in the quarter. Revenues from Vascular Access soared 28% to
$12.5 million on the back of growth in the underlying market and
increased market share.
Revenues from Greatbatch's smaller Electrochem segment, which
offers high performance commercial batteries, zoomed 44% year over
year to $20.5 million. The division's sales were boosted by the
contributions from the Micro Power acquisition. Excluding the
contribution, Electrochem sales jumped 27%.
Margins
Gross margin, excluding inventory step-up amortization related
to acquisition, dipped to 31.7% from 33.4% a year ago. The decline
is attributable to pricing concessions made to large customers and
an unfavorable mix.
Selling, general and administrative expenses, as a percentage of
sales, increased to 13.1% from 11.5% in the prior-year quarter, as
a result of higher legal and consulting expenses, increased
performance based compensation and unfavorable currency exchange
impact. Net research, development and engineering costs (RD&E),
as a percentage of sales, inched up to 9% from 8.6% a year ago.
Adjusted operating margin fell to 11.1% from 13.3% a year ago.
Balance Sheet and Cash Flows
Greatbatch ended the fiscal with cash and cash equivalents of
roughly $36.5 million, up 59% year over year. Operating cash flows
increased six-fold year over year to $31 million in the fourth
quarter (up 17% year over year to $90 million for the year).
The company repaid long-term debt worth $40 million during
fiscal 2011 and borrowed $45 million to partly finance the Micro
Power buyout. Its long-term debt increased roughly 7% year over
year to $236 million at the end of the year.
Guidance and Recommendation
Moving ahead, Greatbatch expects revenues for fiscal 2012 in the
band of $645 million to $665 million, a 13%-17% year-over-year
growth. The forecast assumes sales of up to $15 million from
medical devices.
The company expects revenues from CRM & Neuromodulation to
be flat to down 3% in 2012. Vascular access sales are forecast to
climb 10%-20% while orthopedic revenues are expected to increase
5%-15%. Revenues from the Electrochem segment is expected to grow
roughly 5% in 2012.
Greatbatch expects adjusted earnings per share in the range of
$1.75 to $1.85. Moreover, Greatbatch foresees adjusted operating
margin of 11.5%-12.5% for the year. The current Zacks Consensus
Estimates for revenue and earnings per share for fiscal 2012 are
$611 million and $1.82, respectively.
Greatbatch is a leading producer and supplier of batteries,
capacitors and components used in implantable medical devices. The
company's top customers include
Boston Scientific
(
BSX
),
Johnson & Johnson
(
JNJ
),
Medtronic
(
MDT
) and
St. Jude Medical
(
STJ
).
Greatbatch has been acquiring complementary businesses over the
last few years. Its pipeline is healthy with a number of products
currently in development that are expected to support growth in the
long run.
We feel that operating results will be supported by strength at
the company's Orthopedic business and strategic investments.
However, a soft CRM market and pricing pressure remain as
headwinds. Currently, we have an Outperform rating on the
stock.
BOSTON SCIENTIF (
BSX
): Free Stock Analysis Report
GREATBATCH INC (
GB
): Free Stock Analysis Report
JOHNSON & JOHNS (
JNJ
): Free Stock Analysis Report
MEDTRONIC (
MDT
): Free Stock Analysis Report
ST JUDE MEDICAL (
STJ
): Free Stock Analysis Report
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