Slide 1: 2014 Third Quarter Earnings Call
2014 Third Quarter Earnings Call October 30, 2014 1
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 2014 Highlights Strategic Update Michael Dinkins Third Quarter and YTD 2014 Financial Results 2014 Guidance Update Question & Answer 4
Slide 5: Strategic Update
STRATEGIC UPDATE ($ in millions except for EPS) Disciplined investment driving Adjusted ROIC of 8.4% in 2014…130 Bps improvement over the last two years. Discrete customer projects, independent development and investment in start-ups Employing 300 engineers working on approximately 100 projects
Slide 6: Expanding Intellectual Property
EXPANDING INTELLECTUAL PROPERTY Issued Patents 1995 to 2014 YTD 1800 Med Device Patents 1600 Issued 197 1,443 Patents Pending 267 1400 1200 465 (255 US) Patents Pending 1000 800 545 Patents 600 400 200 116 Patents 0 US Total OUS Total WW Total 6
Slide 7: Long-Term Agreements
LONG-TERM AGREEMENTS Greatbatch Medical revenue under LTAs 70% Current (through 2014) 50% - 54% Through 2015 40% - 48% Beyond … in addition, product lifecycle / replacements drive core growth and protection Consistent with 2013 Investor Day 7 7
Slide 8: Neuromodulation Markets
NEUROMODULATION MARKETS EMERGING Deep Brain Stim: Obesity, Stroke Recovery, FDA APPROVED Depression Deep Brain Stim: Cortical Stim: Epilepsy Parkinson’s Disease, Dystonia, Peripheral Nerve Stim: Migraines, Extremity Pain Essential Tremor, Epilepsy, Obsessive Compulsive Disorder Carotid Artery, Sinus
Slide 9: Neuromodulation
NEUROMODULATION ($ in millions except for EPS) Completed CCC Medical Devices acquisition…Strong strategic fit…accretive year 1 Technology Allows Greatbatch to partner broadly with existing customers and emerging companies developing new therapies Leverages QiG and Greatbatch core capabilities an
Slide 10: Q3 Year to Date
Q3 YEAR TO DATE ($ in millions except for EPS) 2014 2013 Variance *Sales $518.1 $487.3 6% Adjusted: Operating Income $68.6 $63.5 8% Operating Margin 13.2% 13.0% 20 Bps NI $45.9 $39.1 17% Diluted EPS $1.77 $1.56 13% EBITDA $96.4 $90.2 7% EBITDA Margin 18.6% 18.5% 10 Bps ROIC 8.4% 8.3% 10 Bps **GAAP N
Slide 11: Organic Sales Growth
ORGANIC SALES GROWTH ($ in thousands) QTD YTD R4Q Organic Organic Organic Product Lines Growth Growth Growth Greatbatch Medical Cardiac/Neuromodulation -1% 5% 8% *Orthopaedics 8% 13% 18% Portable Medical -11% -12% -14% Vascular 21% 23% 14% Energy & Other 0% 2% 5% *Total Greatbatch Medical 1% 5% 7% T
Slide 12: Cardiac/Neuromodulation
CARDIAC/NEUROMODULATION Q3 YTD R4Q Revenue $85,618 $252,403 $337,811 % of Total Revenue 50% 49% 49% Organic Growth -1% 5% 8% Batteries and shield assemblies continue to deliver double digit growth Current quarter customer launches partially offset by customer order patterns Continue to secure
Slide 13: Orthopaedics
ORTHOPAEDICS Q3 YTD R4Q Revenue $32,489 $106,785 $144,990 % of Total Revenue 19% 21% 21% *Organic Growth 8% 13% 18% Growth continues to outpace the market Strong implant franchise … ~9% YTD growth partially offset by FX headwinds Double digit growth continues in instruments…winning with our cutt
Slide 14: Portable Medical
PORTABLE MEDICAL Q3 YTD R4Q Revenue $17,199 $53,139 $71,506 % of Total Revenue 10% 10% 10% Organic Growth -11% -12% -14% Expected headwind continues … should taper in Q4 Executing the shift to higher value technologies Pipeline building with nine new technology development programs Investing in
Slide 15: Vascular
VASCULAR Q3 YTD R4Q Revenue $14,903 $43,210 $56,415 % of Total Revenue 9% 8% 8% Organic Growth 21% 23% 14% Focused on high growth sectors Winning with steerable catheter technology Delivering value to customers … product moves on track 15
Slide 16: EME
EME Q3 YTD R4Q Revenue $19,016 $58,499 $79,050 % of Total Revenue 11% 11% 11% Organic Growth 0% 2% 5% Customer order patterns in line with expectations and market growth Winning with battery technology … rechargeable battery packs 16
Slide 17: Financial Update
FINANCIAL UPDATE ($ in millions except for EPS) 17
Slide 18: Selected 2014 Highlights
SELECTED 2014 HIGHLIGHTS Winning with technology…YTD organic growth of 5%* Growth in line with or above market across all product lines except portable medical Productivity… Adjusted Operating Margin up 20 bps YTD Lower taxes because of higher income in low tax jurisdictions Earnings growth contin
Slide 19: Third Quarter
THIRD QUARTER ($ in millions except for EPS) 2014 2013 Variance *Sales $171.7 $167.7 2% Adjusted: Operating Income $22.4 $22.0 2% Operating Margin 13.1% 13.1% 0 Bps NI $16.5 $14.5 14% Diluted EPS $0.64 $0.57 12% EBITDA $31.7 $30.8 3% EBITDA Margin 18.5% 18.4% 10 Bps ROIC 8.4% 8.6% -20 Bps **GAAP NI
Slide 20: Third Quarter Variance Analysis
THIRD QUARTER VARIANCE ANALYSIS ($ in millions except for EPS) Adj. EPS Comments 2013 Adjusted EPS $ 0.57 Gross margin 0.06 Favorable performance based compensation $0.04 and lower RD&E $0.02; partially offset by DVT initiatives Operating expenses (0.03) and lower NRE ($0.05), higher sales and marke
Slide 21: Q3 Year to Date
Q3 YEAR TO DATE ($ in millions except for EPS) 2014 2013 Variance *Sales $518.1 $487.3 6% Adjusted: Operating Income $68.6 $63.5 8% Operating Margin 13.2% 13.0% 20 Bps NI $45.9 $39.1 17% Diluted EPS $1.77 $1.56 13% EBITDA $96.4 $90.2 7% EBITDA Margin 18.6% 18.5% 10 Bps ROIC 8.4% 8.3% 10 Bps **GAAP N
Slide 22: Q3 YTD Variance Analysis
Q3 YTD VARIANCE ANALYSIS ($ in millions except for EPS) Adj. EPS Comments 2013 Adjusted EPS $ 1.56 Gross margin 0.32 Favorable performance based compensation $0.04, lower G&A $0.03 and RD&E $0.02; partially offset by Operating expenses (0.17) DVT initiatives and lower NRE ($0.15) and higher sales an
Slide 23: 2014 Guidance
2014 GUIDANCE ($ in millions except for EPS) 23
Slide 24: Raising 2014 Guidance
RAISING 2014 GUIDANCE ($ in millions except for EPS) Revised 2013 2014 Guidance Change Guidance Sales $663.9 $685 - $705 3 - 6% $695 - $705 Adjusted Operating Margin(1) 12.5% 13.0 - 13.3% 50 - 80bps ~13% Adjusted Diluted EPS(1) $2.10 $2.25 - $2.35 7 - 12% $2.32 – $2.38 Adj. Operating Cash Flows (2)
Slide 25: Appendix
APPENDIX 25 $83 Greatbatch
Slide 26: Q3 and YTD Financial Results
Q3 AND YTD FINANCIAL RESULTS ($ in thousands except for EPS) Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, 2014 2013 2014 2013 Sales $ 171,699 $ 167,730 $ 518,061 $ 487,326 Cost of sales 113,581 111,853 343,877 325,398 Gross profit 58,118 55,877 174,184 161,9
Slide 27: QTD Operating Cash Flow
QTD OPERATING CASH FLOW ($ in millions) Net income $14.0 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 9.4 Debt related amortization included in interest expense 0.2 Stock-based compensation 3.8 Other non-cash gains (3.3) De
Slide 28: YTD Operating Cash Flow
YTD OPERATING CASH FLOW ($ in millions) Net income $41.3 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 27.9 Debt related amortization included in interest expense 0.6 Stock-based compensation 10.5 Other non-cash gains (7.2)
Slide 29: GAAP Reconciliation
GAAP RECONCILIATION Operating Income Reconciliation – 3 Months Three Months Ended Greatbatch Medical QiG Unallocated Total Oct. 3, Sept. 27, Oct. 3, Sept. 27, Oct. 3, Sept. 27, Oct. 3, Sept. 27, (dollars in thousands) 2014 2013 2014 2013 2014 2013 2014 2013 Sales $ 169,225 $ 167,052 $ 2,474 $ 678 $
Slide 30: GAAP Reconciliation
GAAP RECONCILIATION Operating Income Reconciliation – 9 Months Nine Months Ended Greatbatch Medical QiG Unallocated Total Oct. 3, Sept. 27, Oct. 3, Sept. 27, Oct. 3, Sept. 27, Oct. 3, Sept. 27, (dollars in thousands) 2014 2013 2014 2013 2014 2013 2014 2013 Sales $ 514,036 $ 485,168 $ 4,025 $ 2,158 $
Slide 31: GAAP Reconciliation
GAAP RECONCILIATION Net Income (loss) and Diluted EPS Reconciliation Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, 2014 2013 2014 2013 Per Per Per Per Net Diluted Net Diluted Net Diluted Net Diluted (in thousands except per share amounts) Income Share Income
Slide 32: GAAP Reconciliation
GAAP RECONCILIATION Adjusted EBITDA reconciliation Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, (dollars in thousands) 2014 2013 2014 2013 Sales $ 171,699 $ 167,730 $ 518,061 $ 487,326 Adjusted operating income* $ 22,446 $ 22,012 $ 68,556 $ 63,515 Add: Depre
Slide 33: 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 33