Slide 1: Greatbatch March 27, 2013
® Greatbatch March 27, 2013
Slide 2: Cautionary Statement
Cautionary Statement This presentation contains forward-looking statements, refers to non-GAAP financial measures and provides industry and market data. Please refer to the appendix to this presentation for more information and cautionary language regarding these statements, financial measures and d
Slide 3: Our Vision / Our Strategy
Our Vision Greatbatch will be the definitive leader in critical technologies by infusing integrity, innovation, and operational excellence into the medical device and commercial markets. Our Strategy Extend partnerships with key OEM customers beyond discrete components to include medical device syst
Slide 4: Key Message Points
Key Message Points Strong Long-term agreements cover large percentage of revenue Foundational Strong Core Reputation for innovation & operational excellence Business Strong Blue Chip customer base Business Strong markets with significant growth opportunity Grow Leveraging extensive Intellectual Prop
Slide 5: Sustainable Long-Term Growth
Sustainable Long-Term Growth ~ 5% Top Organic Growth Line Leverage IP Pipeline Innovation Bottom Line ~ 2x Top Line Growth Adjusted EPS 5
Slide 6: Greatbatch Today
Greatbatch Today Other 2% Energy $646M 10% Vascular 2012 Revenue 8% Cardiac & Neuromodulation Portable 48% Medical 88% 13% Revenues from Orthopaedics Medical Device Market 19% 6
Slide 7: Cardiac & Neuromodulation, Orthopaedics, Vascular, Portable Medical
Cardiac & Neuromodulation Orthopaedics Batteries | Capacitors | Catheters | Stimulation Leads | Feedthroughs | Implants | Instruments | Delivery Systems Device Enclosures & Cases | Device Headers | Device Assembly Feedthrough Reamer Handle Header Reamer Battery Delivery System Handles Enclosure Stim
Slide 8: Portable Medical to Greatbatch
Portable Medical to Greatbatch Portable Medical Devices Powered, external medical devices which enable movement and portability for the medical professional, patient and / or caregiver Greatbatch’s Focus Greatbatch is committed to providing reliable, high quality power supplies, charging systems, an
Slide 9: Sustainable Organic Growth
Sustainable Organic Growth Targeted Sales Force Markets Emphasis Supported Strategic Business Model Investments 9
Slide 10: Greatbatch Market Opportunities: Medical
Greatbatch Market Opportunities: Medical Cardiac & Neuromodulation Orthopaedics GB Opportunity: $1.5B GB Opportunity: $3B GB Revenue: $309M GB Revenue: $122M Avg. Market CAGR: 3% Avg. Market CAGR: 5.5% Pacemakers Peripheral Nerve Fracture Repair Extremities ICDs and CRT-D Stimulation Joint Arthrosco
Slide 11: Aggregate Opportunity
Aggregate Opportunity Multi Billion Dollar end markets served Greatbatch Share $6.8B Total Greatbatch Opportunity $565M GB Share of Opportunity (8.7%) Greatbatch Opportunity Major growth opportunity through market share capture 11
Slide 12: Supported Business Model
Supported Business Model Targeted Sales Force Markets Emphasis Supported Strategic Business Model Investments 12
Slide 13: Blue Chip Customer Base
Blue Chip Customer Base Bost Scientific ane mee ST. JUDE MEDICAL ann MOR INTRO! SS RISK. E CONTRI LEss RISK Medtronic Gotmonsfofmuon 2 BIOTRONIK (J)nmmer SORIN ah ° Ed COvIDIEN Baxter 7y smith&nephew Carestream HALLIBURTON ieoM=il5 ZOLL. $88 Greatbatch 13
Slide 14: Expanding Intellectual Property
Expanding Intellectual Property Issued Patents: 1990 to 2012 1400 1,179 Patents 1200 Med Device Patents Issued: 160 1000 Pending: 57 800 500 Patents 600 158 Patents 593 (307 US) 400 Patents Pending 200 0 1992 1997 2002 2007 2012 US Total OUS Total WW Total 14
Slide 15: Long-Term Agreements
Long-Term Agreements 71% Greatbatch Medical revenue under LTAs › Current (through 2013) Terms 65% - 70% Through 2014 50%+ Through 2015 35% - 40% Beyond … in addition, product lifecycle / replacements drive core growth and protection 15
Slide 16: Portable Medical: Long Product Life Cycles
Portable Medical: Long Product Life Cycles Design wins early with key OEMs & in emerging segments fuel long term growth Long Product Life Cycles Support Double-Digit Growth Product Millions Revenue Design Post Launch Service & Production Support Phase 0 1 3 4 7 8 10 Years 16
Slide 17: Portable Medical: Long Product Life Cycles
Portable Medical: Long Product Life Cycles Focus on Portfolio Management and IP wins generational development Growth of AED and Defibrillator Battery Markets Replacements Drive Revenue Support Drives Revenue Number of Batteries Revenue Gen 3 Gen 2 Gen 1 0 5 10 15 0 5 10 15 Year Year P1 Replacements
Slide 18: Strategic Investments
Strategic Investments Targeted Sales Force Markets Emphasis Supported Strategic Business Model Investments 18
Slide 19: Operations Efficiency & Investment
Operations Efficiency & Investment 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Investment Raynham Warsaw Plymouth Med Device Tijuana II Alden I Tijuana I Alden II Clarence Indianapolis Fort Wayne R&D Center 2 sites into 2 sites into Consolidation 2 sites into Tijuana Corgemont Clarence R&D & C
Slide 20: Quality: A Competitive Advantage
Quality: A Competitive Advantage Medical Device Integrate > Harmonize > Optimize Infrastructure Investment in leadership Over 100 years medical device quality leadership experience Harmonized quality systems Nine ISO 13485 certified facilities Common enterprise quality metrics Eight FDA registered f
Slide 21: Acquisition Strategy
Acquisition Strategy Focus on innovative technologies in our medical markets Aligned with therapy areas Alignment with Technology to leverage and fill gaps Strategy Increasing market share via ‘tuck-ins’ Differentiated product or procedures Address Technology Proprietary positioning of products Need
Slide 22: Sales Force Emphasis
Sales Force Emphasis Targeted Sales Force Markets Emphasis Supported Strategic Business Model Investments 22
Slide 23: Sales Force Optimization
Sales Force Optimization Organized for Equipped with Impactful Excellence Tools & Talent Results Investment in leadership Focus on winning generational development programs Customer relationship enhancement Enhanced customer relationships & touch points Distinct technical sales & account executives
Slide 24: Commercialize Medical Device Innovation
Commercialize Medical Device Innovation Leverage Strong Capabilities Value Proposition Technology Innovation Addressing Future Unmet Opportunities Needs Commercialize Medical Device Innovation 24
Slide 25: Algostim System
Paddle Leads Algostim System Perc Leads Patient Programmer Patient Feedback Tool Clinician Programmer Charger PFT CP PPC Pocket Programmer External PoP Pulse Generator EPG Anchors Extensions Trial Cable Implantable Pulse Generators IPG Commercialize Medical Device Innovation 25
Slide 26: Neurostimulation Market Sizes
Neurostimulation Market Sizes Market Revenues (W.W.) Average Market CAGR: 11% (7% - 17%) 2015: $3.6B 2012: $2.6 B Other $125M Other $190M VNS $220M VNS $345M SNS $400M SCS SCS SNS $630M $1.4B $1.7B DBS $430M DBS $690M SCS: Spinal Cord SNS: Sacral Nerve Source: Neuromodulation company earnings releas
Slide 27: SCS Market Growth & Share
SCS 12 Year Market Growth & Share 9% 9% $1,600 10% 13% $1.4B REVENUE MILLIONS $1,400 11% $1.3B 15% $1.2B MARKET SHARE $1,200 15% $1.1B 26% 19% 26% $952M 26% $1,000 16% $854M 27% 24% 26% $745M 26% 31% $800 $647M 24% $544M 33% 20% 32% $600 $469M 5% 15% 27% 31% $378M 24% 25% $300M 22% 24% $400 15% 19%
Slide 28: Algostim Timeline
Algostim Timeline 2013 2014 2015 DVT Development completion Animal Study Regulatory Cycle Phased approach (CE mark) PMA process (FDA) Manufacturing Revenue Screening Greatbatch Commercialization ROI Partners Commercialization By partner Commercialize Medical Device Innovation 28
Slide 29: Impact to Customer Groups
Impact to Customer Groups Physicians Patients No change to implant Long list of Safety Features Portable & Discrete procedures Highly visual & intuitive External Products Improved body compliant programmers Simple and familiar user lead design & steering control Intraoperative visibility and interfa
Slide 30: Value Proposition
Value Proposition “A highly differentiated complete SCS system and platform with extensive offering of innovation, IP, advanced safety features, and future generation capabilities in the fast growing $1.4B SCS market” 1% market share represents $17M revenue to partner in 2015 Highly under penetrated
Slide 31: Drive Profitable Growth
Drive Profitable Growth Increasing ~ 5% Organic Margins Revenue Growth Strong Balance Sheet & Cash Flow Targeted Med Device M&A Upside Drive Profitable Growth 31
Slide 32: Selected Total Year Highlights
Selected Total Year Highlights ($ 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 33: 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 33
Slide 34: Strength of Core Business
Strength of Core Business 2012 Performance of Core Business Exclusive of Medical Device Initiative Spend 11.4% 15.8% $1.77 $2.55 2012 2012 2012 2012 (As Reported) (Excluding (As Reported) (Excluding Med Device) Med Device) Adjusted Op Margin* Adjusted EPS* *See appendix of this presentation for a re
Slide 35: 2013 Guidance
2013 Guidance Increasing ~ 5% Organic Margins Revenue Growth Strong Balance Sheet & Cash Flow Targeted Med Device M&A Upside Drive Profitable Growth 35
Slide 36: 2013 Assumptions
2013 Assumptions Assumptions Completion of Swiss Consolidation in Q1 2013 No acquisitions are included although we are actively engaged in looking for accretive deals that will improve our operating revenue growth performance Impact of R&D commercialization not included in guidance (Algostim, MRI, S
Slide 37: Revenue Growth
Revenue Growth ($ in millions) 2012 2013E Annual 2013E Revenue Growth Revenue Revenue Cardiac & $309 0 – 2% $309 – 315 Neuromodulation Orthopaedic (1) $122 (5) – 0% $116 – 122 Portable Medical $82 15 – 20% $94 – 98 Vascular Access $52 7 – 13% $55 – 59 Energy & Other $81 6% $86 – 86 Total Sales $646
Slide 38: 2013 Guidance
2013 Guidance ($ in millions except for EPS) 2013E w/o 2012 2013E Change Device Spend Sales $646 $660 – 680 2 – 5% $660 – 680 Adjusted Operating Margin (1) 11.4% 12 – 12.5% 60 – 110 bps 16 – 17% Adjusted Diluted EPS (1) $1.77 $1.90 – 2.00 7 – 13% $2.62 – 2.67 Adj. Operating Cash Flows (2) $80 ~$90 1
Slide 39: EPS Improvement
EPS Improvement $.06 - $.09 $.20 - $.22 $.19 - $.30 $1.90 - $2.00 $(.27) - $(.31) $1.77 $(.05) - $(.07) 7% to 13% Earnings Growth 2012 Actual Orthopaedics Productivity Medical Device Performance Investment in 2013 Guidance Adj. EPS Consolidation Efficiencies in Spend Based Sales & Adj. EPS Initiativ
Slide 40: Strength of Core Business
Strength of Core Business 2013 Estimate of Core Business Algostim & targeted M&A represent additional upside $1.90 - $2.62 - 12 – 12.5% 16 - 17% $2.67 $2.00 2013E 2013E 2013E 2013E (Excluding (Excluding Med Device) Med Device) Adjusted Op Margin* Adjusted EPS* *See appendix of this presentation for
Slide 41: Sustainable Long Term Growth
Sustainable Long Term Growth 5% Organic Growth Top Line Leverage IP Pipeline Innovation Bottom Line ~ 2x Organic Growth Adjusted EPS growth 41
Slide 42: Contact Information
Contact Information Michael Dinkins Sr. Vice President & CFO Greatbatch, Inc. 2595 Dallas Parkway Suite 310 Frisco, TX 75034 Tel: 214-618-5242 mdinkins@greatbatch.com www.greatbatch.com 42
Slide 43: Appendix
Appendix a Greatbatch 43
Slide 44: Cardiac & Neuromodulation
Cardiac & Neuromodulation GB Opportunity: $1.5B Avg. Market CAGR: 3% Cardiac & Neuro Markets Implantable Pulse Generator Leads & Lead Components Market Size / Estimated CAGR CRM NEURO Established GB Market Participation Batteries CRM Leads Pacemaker $3.5B / (2%) ICD $5.9B / (2%) Spinal Cord Stim $1.
Slide 45: Orthopaedics
Orthopaedics Greatbatch Participation $3B Greatbatch Opportunity Avg. Market CAGR: 5.5% Competitive 2012 Implants Instruments Delivery Greatbatch Systems 2012 Strategies 100’s of Suppliers Secure LTAs and improved pricing discipline Improved sales force productivity in core products & through produc
Slide 46: Portable Medical
Portable Medical Greatbatch Opportunity: Portable Medical Markets: $1B Power Supply Market Market Size / Estimated CAGR Avg. Market CAGR: 6% Established GB Market Participation Auto CPR $50M / 13% $82M Staplers / Clips $1.8B / 4% Defib (AEDs) $1.6B / 8% O2 Concentrators $0.8B / 7% $1B Expanding GB M
Slide 47: Vascular
Vascular $1.3B Greatbatch Opportunity Specialty Catheter Markets Avg. Market CAGR: 3.5% Greatbatch Participation Electrophysiology Specialty Catheters Market Size $125M CAGR: 12% Vascular Introducers Specialty Catheter Peripheral Vascular Market Opportunity: Market Size $430M CAGR: 4% Greatbatch $1.
Slide 48: Orthopaedic Update
Orthopaedic Update Completed milestones Transferred instruments and reamers from Switzerland › Net $4M Gross Profit improvement Divested $15M in non-profitable sales Successfully completed customer supplier certification audits at new manufacturing locations First production and shipment of transfer
Slide 49: Medical Device Investment
Medical Device Investment Medical Device Manufacturing: Plymouth, MN Total Expansion: 27,000 sq ft Controlled Environment [Class 7]: 4,000 sq ft of space Adjacent Molding & Electrical Development Space FDA Registered Facility / Regulatory: ISO13485:2003, CMDCAS, AIMD & MDD 49
Slide 50: Organic Sales
Organic Sales ($ in thousands) FX & % Acquisition % Product Lines 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 51: Forward Looking Statement
Forward Looking Statement The statements made in this presentation and in the oral remarks accompanying these slides that are not statements of current or historical fact are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
Slide 52: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation contains non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP. In this presentation: “adjusted” amounts consist of GAAP am
Slide 53: Industry and Market Data
Industry and Market Data The industry and market data used in this presentation was obtained from our own research, internal surveys and studies conducted by third parties, independent industry associations or general publications and other publicly available information. Third party providers of th
Slide 54: Trademarks / Tradename
Trademarks / Tradename These presentation slides include trademarks, servicemarks and tradenames owned by other companies, including companies that are our customers, suppliers and competitors. All trademarks, servicemarks and tradenames included in these slides are the property of their respective
Slide 55: GAAP Reconciliation
GAAP Reconciliation Areconciliation of GAAP operating income to adjusted amounts is as follows (dollars in millions): 2013 Estimate 2012 2011 Total sales $ 660.0-680.0 $ 646.2 568.8 Operating income as reported $ 65.2-73.5 $ 25.8 61.7 Adjustments: Inventory step-up amortization (COS) - 0.5 0.2 Execu
Slide 56: GAAP Reconciliation
GAAP Reconciliation A reconciliation of GAAP net income (loss) and diluted EPS to adjusted amounts i: follows (in millions, except per share amounts): 2013 Estimate 2012 2011 2010 Net Income Impact per (Loss) Diluted Share Net Income (Loss) Impact per Diluted Share Impact per Net Income Diluted (Los