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Greatbatch's profits drop by 11% despite 6% increase in revenues

Greatbatch Inc.'s fourth-quarter profits slid by 11 percent as price concessions to some of its biggest customers and a less lucrative mix of sales in its cardiac rhythm management products offset a 6 percent increase in its revenues.

The earnings were in line with analyst forecasts, and executives from the Clarence-based medical device and battery maker said they expect profits this year to rise by about 7 percent.

Greatbatch executives had predicted that its second half of last year would be slower than the opening six months of the year, which had been bolstered by an inventory buildup early in the year by some of its big cardiac rhythm management customers.

Company officials said Thursday they expect revenues from its Greatbatch Medical business to be down during the first half of this year and rebound during the final six months.

"I think the comparisons in the first half are going to be difficult, and then we'll build on that," Thomas J. Mazza, Greatbatch's senior vice president and chief financial officer, said during a conference call.

Greatbatch's adjusted operating profits fell to $15.8 million, or 39 cents per share, from $17.8 million, or 46 cents per share, a year earlier.

The company's sales grew by 6 percent to $141.7 million from $133.1 million, as a 44 percent surge in revenues from its commercial battery business helped offset a 2 percent dip in sales at its cardiac rhythm management unit, which accounts for more than half of Greatbatch's overall revenues.

Greatbatch's sales of orthopedic products grew by 3 percent, while revenues from its relatively small vascular access unit jumped by 28 percent. The surge in commercial battery sales came partly from its acquisition of Micro Power, which added $2.5 million to its revenues. Excluding that acquisition, commercial battery sales grew by 27 percent.

For this year, Greatbatch said it expects its profits to range between $1.75 and $1.85 per share, which is at the low end of the $1.84 per share that analysts were forecasting.

The company said it expects its sales to rise by about 15 percent to between $645 million and $665 million, compared with $569 million last year. Revenues from its cardiac rhythm management business are expected to be flat or down as much as 3 percent, while vascular product sales are forecast to jump by 10 percent to 20 percent. Sales from its orthopedic products are expected to rise by 5 percent to 15 percent, while commercial battery revenues are forecast to increase 5 percent.