Slide 1: Greatbatch FY 2016 First Quarter Earnings Call
Greatbatch FY 2016 First Quarter Earnings Call April 28, 2016 1
Slide 2: Forward-Looking Statement
Forward-Looking Statement Some of the statements made in the 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 Securities Exchange Act of 1934, as amended, and involve a number of r
Slide 3: Q1 Earnings Call Presenters
Q1 Earnings Call Presenters Thomas J. Hook Michael Dinkins President & CEO Executive Vice President & Chief Financial Officer 3
Slide 4: Agenda
Agenda Michael Dinkins Financial Review Guidance update Thomas J. Hook Summary Strategic Priorities 1. Drive Organic Growth 2. Integration of acquired companies to expand product offering 3. Growth through innovation of complete medical systems Question & Answer 4
Slide 5: Key Financial Metrics – Comparable Basis
Key Financial Metrics – Comparable Basis Three Months Ended April 1, April 3, % (Dollars in thousands, except per share data) 2016(1) 2015(2) Change Sales $ 331,058 $ 357,867 (7 )% Organic Constant Currency Sales Growth (7 )% GAAP Diluted EPS $ (0.30) $ 0.15 N/A Adjusted Diluted EPS(3) $ 0.42 $ 0.71
Slide 6: Product Category Revenues
Product Category Revenues Three Months Ended Comparable Basis April 1, April 3, % Product Line 2016(1) 2015(2) Change Advanced Surgical, Orthopedics, and Portable $ 91,329 $ 105,773 (14 )% Medical Cardio and Vascular 133,650 138,084 (3 )% Cardiac/Neuromodulation 95,895 98,866 (3 )% Electrochem 11,67
Slide 7: Advanced Surgical, Orthopedics, and Portable Medical
Advanced Surgical, Orthopedics, and Portable Medical (Sales in $ millions) Q1 R4Q Prior Qtr Sales $91 $404 $105 % total Company 27% 28% 29% Growth (Comparable Basis) -14% -7% -13% Implant Reamer Negative impact due to safety stock build-up last year supporting manufacturing transfer Timing of Or
Slide 8: Cardio and Vascular
Cardio and Vascular (Sales in $ millions) Amounts in millions Q1 R4Q Prior Qtr Sales $134 $558 $133 Amounts in millions % total Company 40% 39% 37% Steerable Sheath Growth (Comparable Basis) -3% -3% 1% Price concessions to secure long term volume commitments Customers working off EOL product inv
Slide 9: Cardiac/Neuromodulation
Cardiac/Neuromodulation (Sales in $ millions) Q1 R4Q Prior Qtr Sales $96 $411 $111 % total Company 29% 29% 31% Growth (Comparable Basis) -3% 5% -12% Battery Feedthrough Continued YoY growth in Neuromodulation Enclosure Customers tightened inventory, timing of product introductions and end of lif
Slide 10: Electrochem
Electrochem (Sales in $ thousands) Q1 R4Q Prior Qtr Sales Amounts in millions $12 $53 $13 % total Company 4% 4% 4% Growth (Comparable Basis) -34% -34% -12% Battery Cells Continued weakness in the global Energy market Battery Packs Battery Chargers 10
Slide 11: Balance Sheet Metrics
Balance Sheet Metrics ($ in millions except for EPS) (in $ millions except ratios) Q1’16 2015* (in $ millions except ratios) Q1’16 2015* Working Capital $318 $361 Total Debt $1,763 $1,714 Working Capital Turnover** 4.5 4.0 Net Leverage Ratio (<6.5)*** 5.4 5.2 Account Receivables $184 $207 Interest C
Slide 12: Guidance
Guidance The company reconfirms its revenue, Adjusted EBITDA and Adjusted EPS guidance. The revenue guidance is $1.425 billion to $1.475 billion The Adjusted EBITDA guidance is $320 million to $335 million. For the full year 2016, we expect adjusted net income per diluted share to be in the ra
Slide 13: Guidance
Guidance Selected Financial Guidance Items Affecting Cash Flow: Maintenance Capital Expenditures to be in the range of $50 million - $60 million per year. Depreciation & Amortization is expected to be $100 million - $105 million for 2016. Stock compensation expense is expected to be approximat
Slide 14: Agenda
Agenda Michael Dinkins Financial Review Guidance update Thomas J. Hook Summary Strategic Priorities 1. Integration of acquired companies 2. Drive Organic Growth 3. Growth through innovation of complete medical systems Question & Answer 14
Slide 15: Executive Summary
Executive Summary Q1 Financial Results in line with expectations Difficult comparables to last year CRM, Energy & FX headwinds continue to negatively affect results Neuromodulation growth largely offsetting decline in CRM 2016 Guidance remains unchanged 15
Slide 16: Key Strategic Priorities
Key Strategic Priorities Drive Core product organic growth. Integration of acquired companies. Growth through complete medical device systems in partnership with customers. 16
Slide 17: Core Product Organic Growth
Core Product Organic Growth Strengthen Customer Partnerships Changed from functional to align with customer markets INTEGER will use a single (sales) point of contact for our top strategic customers responsible for strategic relationship management Global Accounts will coordinate all activitie
Slide 18: Integration Update
Integration Update Tracking Extremely Well Three organizational phases of integration completed On track to achieve at least $25M of savings in 2016 Line of sight to achieve annual savings of $50M in 2017 and at least $60M in 2018 Years 2-3 largely driven by supply chain and manufacturing
Slide 19: Growth through Complete Medical Device Systems
Growth through Complete Medical Device Systems The Integer strategy is to significantly increase our value to our customers by increasing the amount of business we VALUE have on the right side of the product continuum. SOLUTION COMPLEXITY Engineered Differentiated Engineered Medical Medical Medical
Slide 20: Current Product Continuum Revenue Mix
Current Product Continuum Revenue Mix Legacy GB % of Sales Product Integer % of Sales Solutions, 20.4% Product Technical Solutions, Solutions, 18.9% 79.6% Legacy LRM % of Sales Technical Solutions, Product 81.1% Solutions, 17.6% Technical Solutions, 82.4% 20
Slide 21: Technology Solutions
Technology Solutions LRM provides… Greatbatch provides… INTEGER will provide… Electrode Machining Electrode Coating Value added lead assembly Cardiac Lead Components Cardiac Leads & MRI IP Vertically integrated lead solutions Neuro connectors SCS Leads and Adaptors Vertically integrated lead solutio
Slide 22: Product Solutions
Product Solutions LRM provides… Greatbatch provides… INTEGER will provide… Sensor Enabled Guidewires Catheter Shafts Peripheral Navigation Solutions Microcatheter Solutions Hub and Valve molding Neurovascular and Drug Delivery Systems Laparoscopic Tools Rechargeable Batteries Portfolio of Tools with
Slide 23: Questions & Answers
[INTEGER Questions & Answers
Slide 24: Appendix
[INTEGER Appendix
Slide 25: 2016 Annual and Q1 Effective Tax Rate Analysis
2016 Annual and Q1 Effective Tax Rate Analysis 2016 Annual Effective Tax Rate (AETR): Adjusted AETR is currently forecasted at ~30% Our ETR is generated from the mix of income and tax rates in the various jurisdictions in which we do business: ̶ US (35%) ; Mexico (~30%); Ireland (12.5%) ; German
Slide 26: GAAP Reconciliation
GAAP Reconciliation Three Months Ended Net Income and Diluted EPS Reconciliation April 1, April 3, 2016 2015 Per Per Net Diluted Net Diluted (in thousands except per share amounts) Income Share Income Share Net income (loss) as reported $ (12,660) $ (0.41) $ 8,008 $ 0.31 Adjustments: Amortization of
Slide 27: GAAP Reconciliation
GAAP Reconciliation Adjusted EBITDA reconciliation Three Months Ended April 1, April 3, (dollars in thousands) 2016 2015 Net income (loss) as reported $ (12,660) $ 8,008 Interest expense 27,617 1,120 Provision (benefit) for income taxes (102) 1,812 Depreciation 12,949 5,791 Amortization 9,464 3,387
Slide 28: Other Operating Expenses 2016
Other Operating Expenses 2016 (in $ millions) Q1’15 Q2’15 Q3’15 Q4’15 2015 Q1’16 Portable Medical and 2014 Investments and $6.5 $6.3 $5.1 $5.2 $23.0 $4.2 Vascular product line Capacity and Capabilities transfers Orthopaedic Optimization $0.5 $0.5 $0.4 $1.4 $0.1 Legacy Lake Region Consolidation and $
Slide 29: Contact Information
Contact Information Tony Borowicz Vice President Business Development & Investor Relations Greatbatch tborowicz@greatbatch.com Work: 716-759-5809 Mobile: 716-572-9972 www.greatbatch.com 29