Slide 1: Third Quarter 2013 Earnings Call
THIRD QUARTER 2013 EARNINGS CALL October 24, 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 - Executive Vice President & CFO Betsy Cowell - Vice President Finance & Treasurer 3
Slide 4: Agenda
AGENDA Thomas J. Hook - Third Quarter 2013 Highlights Michael Dinkins - Third Quarter 2013 Financial Results - Guidance Update Question & Answer 4
Slide 5: Selected Q3 Highlights
Selected Q3 Highlights ($ in millions except for EPS) Q3 2013 Q3 2012 Change Sales $167.7 $161.3 4% Adjusted EBITDA * $30.8 $28.0 10% Adjusted EBITDA Margin* 18.4% 17.3% 110bps Adjusted Operating Margin* 13.1% 11.6% 150bps Adjusted Diluted EPS* $0.57 $0.46 24% Capex $3.4 $9.5 (64%) Adjusted ROIC 8.6
Slide 6: Q3 2013 Organic Growth
Q3 2013 Organic Growth ($ in millions) Q3 Q3 % Organic* Product Lines 2013 2012 Change Growth Implantable Medical Cardiac/Neuromodulation $86,980 $80,246 8% 8% Orthopaedics 30,079 27,173 11% 22% Vascular 12,279 13,674 -10% -10% Total Implantable Medical 129,338 121,093 7% 9% Electrochem Portable Med
Slide 7: Q3 Performance: Cardiac/Neuromodulation
Q3 Performance Cardiac/Neuromodulation: (52% total revenues; 8% organic growth) Expanded and better managed sales force Continued CRM and Neuromodulation IPG component deal success - Leveraging IP and manufacturing excellence Continue to outperform market growth Greatbatch CRM/Neuro Companies
Slide 8: Q3 Performance: Orthopaedics
Q3 Performance Orthopaedics: (18% of total revenues; 22% organic growth) Expanded and better managed sales force New wins in MIS hip arthroplasty Enhanced ability to expand customer base in cases and trays Good market growth in unit sales for large joints (e.g. Hips) … ~6 - 7%* on unit basis
Slide 9: Q3 Performance: Portable Medical, Energy, Vascular
Q3 Performance Portable Medical: (12% total revenues; -4% organic growth) Driving improved product line profitability/ROIC … Loss of low margin book of business impacting organic growth currently and into 2014 New product introductions in Q4 as expected Energy, Environmental and Military: (11% t
Slide 10: Update on Initiatives
$3 Greatbatch UPDATE on INITIATIVES Targeted | Acquisitions }
Slide 11: Initiatives – Update
Initiatives – Update Algostim Design verification and testing progressing as planned √ Regulatory filings (FDA/CE Mark) progressing as planned √ Operational processes advancing as planned √ Commercialization process proceeding as planned √ Orthopaedics Fully operational √ Exceeding financial expecta
Slide 12: Financial Performance
$3 Greatbatch FINANCIAL PERFORMANCE Targeted | Acquisitions }
Slide 13: Q3 Financial Results
Q3 Financial Results ($ in thousands except for EPS) Three Months Ended (Dollars in thousands, except per share September 27, September 28, % June 28, % data) 2013 2012 Change 2013 Change Sales $ 167,730 $ 161,340 4% $ 171,331 -2% Constant Currency Organic Sales Growth 5% 8% 6% GAAP Operating Income
Slide 14: Q3 Variance Analysis
Q3 Variance Analysis Adj. EPS Comments Q3 2012 Adjusted EPS $ 0.46 Gross margin improvement $0.12; Swiss Productivity 0.21 orthopaedic consolidations $0.06; medical device initiatives $0.03 Performance based compensation (0.08) Paid 62% targeted bonus in 2012 Sales and marketing investments (0.02) R
Slide 15: Operating Cash Flow
Operating Cash Flow ($ in thousands) Cash flows from operating activities Nine months ended September 27, 2013 Net income $26,486 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 26,658 Debt related amortization included in int
Slide 16: 2013 Guidance
$3 Greatbatch Innovative Medical Devices “| 2013 GUIDANCE Targeted Acquisitions }
Slide 17: 2013 Guidance
2013 Guidance ($ in millions except for EPS) 2012 2013E Update/Comments Guiding toward the lower end Sales $646 $660 – $680 of the range Adjusted Operating Margin 11.4% 12% – 12.5% ~13% Adjusted Diluted EPS $1.77 $2.05 - $2.15 Middle to upper end Targeted initiatives on track Operating Cash Flows (1
Slide 18: Appendix
$3 Greatbatch Innovative Medical Devices APPENDIX Targeted Acquisitions |
Slide 19: Selected September YTD Highlights
Selected September YTD Highlights ($ in millions except for EPS) 2013 2012 Change Sales $487.3 $487.0 0.1% Adjusted EBITDA $90.2 $81.8 10% Adjusted EBITDA margin 18.5% 16.8% 170bps Adjusted Operating Margin 13.0% 10.8% 220bps Adjusted Diluted EPS $1.56 $1.25 25% Capex $15.0 $33.6 (55%) Adjusted ROIC
Slide 20: September YTD Organic Growth
September YTD Organic Growth ($ in millions) YTD YTD % Organic Product Lines 2013 2012 Change Growth* Implantable Medical Cardiac/Neuromodulation $242,161 $235,406 3% 3% Orthopaedics 92,043 91,079 1% 15% Vascular 35,152 37,791 -7% -7% Total Implantable Medical 369,356 364,276 1% 5% Electrochem Porta
Slide 21: September YTD Variance Analysis
September YTD Variance Analysis Adj. EPS Comments YTD 2012 Adjusted EPS $ 1.25 Gross margin improvement $0.24; Swiss Productivity 0.57 orthopaedic consolidations $0.24; medical device initiatives $0.09 Performance based compensation (0.21) Paid 62% targeted bonus in 2012 Sales and marketing investme
Slide 22: GAAP Reconciliation: Operating Income
GAAP Reconciliation Table A: Operating Income Reconciliation Three Months Ended Implantable Medical Electrochem Unallocated Total Sept. 27, Sept. 28, Sept. 27, Sept. 28, Sept. 27, Sept. 28, Sept. 27, Sept. 28, (dollars in thousands) 2013 2012 2013 2012 2013 2012 2013 2012 Sales $ 129,338 $ 121,093 $
Slide 23: GAAP Reconciliation: Operating Income – Nine Months
GAAP Reconciliation Operating Income Reconciliation – Nine Months Nine Months Ended Implantable Medical Electrochem Unallocated Total Sept. 27, Sept. 28, Sept. 27, Sept. 28, Sept. 27, Sept. 28, Sept. 27, Sept. 28, (dollars in thousands) 2013 2012 2013 2012 2013 2012 2013 2012 Sales $ 369,356 $ 364,2
Slide 24: GAAP Reconciliation: Net Income and Diluted EPS
GAAP Reconciliation Table B: Net Income (loss) and Diluted EPS Reconciliation Three Months Ended Nine Months Ended September 27, September 28, September 27, September 28, 2013 2012 2013 2012 Impact Impact Impact Impact Per Per Per Per Net Diluted Net Diluted Net Diluted Net Diluted (in thousands exc
Slide 25: GAAP Reconciliation: Adjusted EBITDA
GAAP Reconciliation Table C: Adjusted EBITDA Reconciliation Three Months Ended Nine Months Ended September September September September 27, 28, 27, 28, (dollars in thousands) 2013 2012 2013 2012 Sales $ 167,730 $ 161,340 $ 487,326 $ 486,991 Adjusted operating income* $ 22,012 $ 18,664 $ 63,515 $ 52
Slide 26: Other Operating Expenses
Other Operating Expenses Three Months Ended Nine Months Ended September September September September 27, 28, 27, 28, 2013 2012 2013 2012 2013 operating unit realignment $ 2,214 $ - $ 3,066 $ - Orthopaedic facility optimization 1,420 12,452 6,723 14,774 Medical device facility optimization 52 388 28
Slide 27: Contact Information
Contact Information Betsy Cowell Vice President Finance & Treasurer Greatbatch 2595 Dallas Parkway Suite 310 Frisco, Texas 75034 214 618 4982 ecowell@greatbatch.com www.greatbatch.com 27