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Its stock slips as earnings rise but are below expectations

Greatbatch Inc.'s profits jumped by 54 percent during the third quarter as the Clarence-based medical component manufacturer's June acquisition of Enpath Medical helped push up its sales by 14 percent.

But Greatbatch's earnings fell short of analysts' forecasts after eliminating a series of one-time expenses, while sales from its existing businesses were roughly flat.

Greatbatch's profits rose to $5 million, or 22 cents per share, from $3.2 million, or 15 cents per share, a year earlier. But excluding a series of one-time expenses, such as a write-off of in-process research and development efforts and costs associated with the ongoing shutdown of its Columbia, Md., factory, Greatbatch earned 26 cents per share, down from 36 cents a year earlier and less than the 29 cents per share that analysts surveyed by Thomson Financial/First Call were expecting.

Greatbatch shares fell 4 percent, or $1.03, on Tuesday to close at a 52-week low of $22.25. Greatbatch's sales rose by 14 percent to a record $79 million from $69.3 million a year earlier. All of the increase came from the Enpath acquisition, which added $10 million in revenues during the quarter, said Thomas Mazza, the company's chief financial officer.

The company's implantable medical components business, which accounts for 85 percent of Greatbatch's revenues, grew by 18 percent to $67 million. That helped offset a 2 percent drop in sales of its commercial power products, which generated $12 million in revenues.

Thomas G. Hook, Greatbatch's president and chief executive officer, said Tuesday that the five acquisitions that Greatbatch has made this year -- including three since the beginning of last week -- should push the company's sales to around $400 million next year, up from around $360 million this year, after adjusting for the recent acquisitions.

He predicted that the company's sales of cardiac rhythm management and neuro-stimulation products would rise about 5 percent, while sales of therapy delivery products, mainly through its Enpath and Quan Emerteq acquisitions, would grow by 12 percent. Commercial power sales are forecast to grow by about 7 percent.

But Hook declined to provide any guidance on how profitable he expects Greatbatch to be in 2008 as the company integrates its latest acquisitions and develops detailed plans for those businesses. He said the company would discuss its profit outlook early next year.

Greatbatch's profits continue to be hurt by the costs of operating its Columbia, Md., factory, which the company is in the process of closing and shifting its work to a sister plant in Mexico. While most of the plant's work has been moved, some product lines remain there while their customers obtain regulatory approval to shift those products. The plant is expected to be shut down early next year, Hook said during a conference call.


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