Acquisitions boost sales, profits at Greatbatch
Greatbatch Inc.’s profits rebounded sharply during the second quarter, easily topping analysts’ forecasts, as sales shot up by 81 percent because of a string of acquisitions the Clarence-based medical battery and component maker made over the last year.
Greatbatch’s profits jumped to $5.8 million, or 25 cents per share, compared with a loss of $3.4 million, or 15 cents per share, a year earlier.
Excluding costs related to the acquisitions, as well as integration and consolidation expenses, Greatbatch earned $7 million, or 30 cents per share, down from $9.8 million, or 42 cents per share a year ago, but well above the 24 cents per share that analysts surveyed by Thomson Financial/First Call were expecting.
Greatbatch’s sales rose to $141.6 million from $78.5 million, as the string of acquisitions added $64.2 million to the company’s revenues during the quarter. Without those acquisitions, sales from Greatbatch’s existing operations rose by 1 percent.
That caused Greatbatch’s stock to jump Tuesday by 13 percent, or $2.63, to $23.03, its highest since February.
Part of the improvement came from the company’s efforts to reduce costs by consolidating operations and cut overhead in the wake of the seven acquisitions the company has made since the start of last year.
As part of that plan, Greatbatch last month completed the long-anticipated shutdown of its factory in Columbia, Md., and plans to close the IntelliSensing site in Orchard Park that it acquired last year and integrate that operation into its existing facilities by September.
Greatbatch also will close an Engineered Assemblies Corp. plant in Suzhou, China, by the end of September.
In addition, the company, which employs about 800 people in the Buffalo Niagara region, eliminated 40 jobs by consolidating its research and development functions into a new building in Clarence that also will house its administrative operations.
As those efforts continue, operating profit margins, which improved to 10 percent during the second quarter, could strengthen by as much as two percentage points a year during each of the next three years, said Thomas Mazza, Greatbatch’s chief financial officer.
Thomas G. Hook, Greatbatch’s president and chief executive officer, said he remains comfortable with the company’s previous earnings guidance that operating profits, excluding onetime items, will range between $1.20 and $1.50 per share. Sales are still expected to range between $490 million and $530 million.
The acquisitions have broadened Greatbatch’s product line, which traditionally have been centered in cardiac rhythm management products, such as batteries for pacemakers and implantable cardiac defibrillators, to new areas, such as orthopedic products and catheters. Cardiac rhythm management products, which accounted 85 percent of Greatbatch’s revenues a year ago, now make up less than 50 percent of its sales.
Cardiac rhythm management sales weakened during the second quarter, dropping by 2 percent to $65 million as capacitor and coated component sales weakened.
Sales of Greatbatch’s therapy delivery products, which have been bolstered by recent acquisitions, totaled $15.8 million, up from $1.6 million a year ago, but down from $16.5 million in the first quarter because of lower sales of introducers and leads.
Orthopedic product sales, which had been hurt by production backlogs during the first quarter, rebounded strongly during the spring to $41 million, compared with $27.8 million in the first quarter.
Strong demand from the oil and natural gas market caused the company’s commercial sales to jump by 85 percent to $20.1 million, including $7.4 million in revenues from the Engineered Assemblies acquisition. Excluding that deal, commercial sales rose 17 percent.
