Slide 1: Fourth Quarter 2012 Earnings Call
FOURTH QUARTER 2012 EARNINGS CALL February 25, 2013
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Some of the statements made in this presentation whether written or oral may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and involve a numbe
Slide 3: Earnings Call Participants
EARNINGS CALL PARTICIPANTS Thomas J. Hook - President & CEO Michael Dinkins - Senior Vice President & CFO Tom Mazza - Vice President & Corporate Controller 3
Slide 4: Agenda
AGENDA Thomas J. Hook - Fourth Quarter 2012 Highlights - Strategic Focus Michael Dinkins - Fourth Quarter 2012 Financial Results - Financial Guidance Question & Answer 4
Slide 5: Selected Q4 Highlights
Selected Q4 Highlights ($ in millions except for EPS) 4Q 2012 4Q 2011 Change Sales $159 $142 12% Adjusted Operating Margin 13.3% 11.1% 220bps Adjusted Diluted EPS $0.53 $0.39 36% Adj. Operating Cash Flows (a) $29 $33 (12%) Capex $7 $4 75% Adj. ROIC 8.5% 6.8% 170bps (a) Excludes impact of Other Opera
Slide 6: Strengthening Our Core, Expanding Our Pipeline
Strengthening Our Core, Expanding Our Pipeline Core • IP portfolio Pipeline • Mfg. excellence • Sales & Marketing • Customer R&D projects Deepen relationships with New customers, expanded strategic OEMs through geography intellectual property and long term agreements OEM funded research 6
Slide 7: Orthopaedic Update
Orthopaedic Update Successfully completed customer supplier certification audits Swiss manufacturing of reamers ceased January 31st Mexico First shipments out of Mexico made in February with aggressive ramp-up plan in place Additional low volume reamer models are still in transfer process
Slide 8: Strategic Focus
$8 Greatbatch STRATEGIC FOCUS \ Bie Devices | Targeted Acquisitions a
Slide 9: Strategic Focus
STRATEGIC FOCUS Strengthen Core Business Sustainable 5% core organic sales growth opportunity Improve earnings growth Commercialize Algostim for additional upside 9
Slide 10: Strategic Focus: Strengthen Core Business
STRATEGIC FOCUS Strengthen Core Business - Driver of our financial performance - Protected by long-term contracts - Expanded Neuromodulation component agreement with key customer - Quality system to support medical device growth - Enhanced Orthopaedic operating margins by divesting low margin produc
Slide 11: Strategic Focus: Sustainable 5% Core Organic Sales Growth
STRATEGIC FOCUS Sustainable 5% core organic sales growth opportunity - Upside growth potential exists in each core market - New & optimized sales organization will drive productivity & new contract wins…geographic expansion and new market segments - M&A will supplement organic growth strategy 11
Slide 12: Strategic Focus: Improve Earnings Growth
STRATEGIC FOCUS Improve earnings growth - Driving operating margin improvement via: - Orthopaedic margin improvement - Manufacturing productivity improvements - Leveraging SG&A…ERP implementation - Partially offset by increased Sales & Marketing investment - Algostim product development spend decrea
Slide 13: Strategic Focus: Commercialize Algostim for Additional Upside
STRATEGIC FOCUS Commercialize Algostim for additional upside - Update at Investor Day on March 18 - Represents upside to the core business growth 13
Slide 14: Strategic Focus
STRATEGIC FOCUS Strengthen Core Business Sustainable 5% core organic sales growth opportunity Improve earnings growth Commercializing Algostim for additional upside 14
Slide 15: Financial Performance
$3 Greatbatch FINANCIAL PERFORMANCE Targeted Acquisitions
Slide 16: Selected Total Year Highlights
Selected Total Year Highlights ($ in millions except for EPS) 2012 2011 Change Sales $646 $569 14% Adjusted Operating Margin 11.4% 11.9% -50bps Adjusted Diluted EPS $1.77 $1.68 5% Adj. Operating Cash Flows(a) $80 $93 (14%) Capex $41 $22 86% ROIC 7.4% 7.3% 10bps (a) Excludes Other Operating Expense a
Slide 17: Organic Sales
Organic Sales ($ in thousands) FX & % Acquis ition % Product Line s 2011 2012 Change 2012 2012 Change Implantable Medical CRM/Neuromodulation $303,690 $309,124 2% $2,455 $306,669 1% Vascular 45,098 51,980 15% - 51,980 15% Orthopaedics 140,277 122,061 -13% (6,300) 128,361 -8% Total 489,065 483,165 -1
Slide 18: 2012 Variance Analysis
2012 Variance Analysis Adj EPS 2011 Results $ 1.68 Medical Devices Initiatives (0.17) Swiss Ortho Operating Issues (0.16) Investment in Sales & Marketing (0.10) Other 0.06 Performance Based Compensation 0.08 Volume/Productivity* 0.38 2012 Results $ 1.77 * Includes Impact of Acquistions 18
Slide 19: 2013 Outlook
$88 Greatbatch = 2013 Outlook == @”™ a
Slide 20: 2013 Guidance
2013 Guidance Revenue Organic growth 5% - 8% Stronger second half performance Adjusted Operating Margin Productivity and consolidation benefit 12.0% - 12.5% Partially offset by: •Continue investment in sales and marketing •Performance base compensation Other Metrics – Other operating expense Finishi
Slide 21: Appendix
$8 Greatbatch APPENDIX Innovative Medical Devices ~ Targeted Acquisitions ee
Slide 22: GAAP Reconciliation
GAAP Reconciliation Three months ended Implantable Medical Electrochem Unallocated Total Dec. 28, Dec. 30, Dec. 28, Dec. 30, Dec. 28, Dec. 30, Dec. 28, Dec. 30, 2012 2011 2012 2011 2012 2011 2012 2011 Sales $ 118,889 $ 121,292 $ 40,297 $ 20,454 $ - $ - $ 159,186 $ 141,746 Operating income (loss) as
Slide 23: GAAP Reconciliation
GAAP RECONCILIATON Year ended Implantable Medical Electrochem Unallocated Total Dec. 28, Dec. 30, Dec. 28, Dec. 30, Dec. 28, Dec. 30, Dec. 28, Dec. 30, 2012 2011 2012 2011 2012 2011 2012 2011 Total sales $ 483,165 $ 489,065 $ 163,012 $ 79,757 $ - $ - $ 646,177 $ 568,822 Operating income (loss) as re
Slide 24: GAAP Reconciliation
GAAP Reconciliation Three months ended Year ended December 28, December 30, December 28, December 30, 2012 2011 2012 2011 Net income (loss) as reported $ (5,556) $ (0.23) $ 5,639 $ 0.24 $ (4,799) $ (0.20) $ 33,122 $ 1.40 Adjustments:(a) Inventory step-up amortization (COS) - - 115 - 346 0.01 115 - M
Slide 25: Contact Information
CONTACT INFORMATION Michael Dinkins Senior Vice President & CFO Greatbatch 2595 Dallas Parkway Suite 310 Frisco, Texas 75034 214 618 5242 mdinkins@greatbatch.com www.greatbatch.com For Investor Day Invitation Please contact: Lynn Bergman lbergman@greatbatch.com 214 618 5243 25