Slide 1: 2014 Fourth Quarter and Total Year Earnings Call
2014 Fourth Quarter and Total Year Earnings Call February 24, 2015
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 Michael Dinkins Fourth Quarter and Total Year 2014 Financial Results 2015 Guidance Update Question & Answer 4
Slide 5: Selected 2014 Highlights
SELECTED 2014 HIGHLIGHTS Strong Operating Performance Record revenues of $688 million 33.6% gross margin … +60 BPS 120 BPS improvement in operating expenses as % of sales Adjusted operating margin 13.3% … +80 BPS Lower taxes because of higher income in low tax jurisdictions 15.2% earnings gr
Slide 6: 2014 vs 2013
2014 vs 2013 ($ in millions (Amounts exceptexcept in millions for EPS) for EPS) 2014 2013 Variance *Sales $687.8 $663.9 3.6% Adjusted: Operating Income $91.2 $82.9 10.0% Operating Margin 13.3% 12.5% 80 BPS Net Income $62.9 $53.2 18.3% Diluted EPS $2.42 $2.10 15.2% EBITDA $128.4 $118.9 8.0% EBITDA Ma
Slide 7: Organic Sales Growth
ORGANIC SALES GROWTH Q4 TY Organic Organic Product Lines Growth Growth Greatbatch Medical Cardiac/Neuromodulation -19% -1% *Orthopaedics 10% 12% Portable Medical -13% -12% Vascular 18% 22% EME 13% 5% *Total Greatbatch Medical -6% 2% Total QiG FAV FAV *Total Sales -5% 3% * Constant Currency and acqui
Slide 8: Cardiac/Neuromodulation
CARDIAC/NEUROMODULATION ($000) Q4 TY Revenue $69,016 $321,419 % of Total Revenue 41% 47% Organic Growth -19% -1% Performance reflect near-term challenges Customer inventory reduction initiatives End of life of two legacy products and tough Q4 comparable Partially offset by new product releases
Slide 9: Orthopaedics
ORTHOPAEDICS ($000) Q4 TY Revenue $40,511 $147,296 % of Total Revenue 24% 21% *Organic Growth 10% 12% Strong sustained growth Robust double digit growth continues in cutting and bone preparation instruments Implants grew 8% New and expanding customer base * Constant Currency 9
Slide 10: Portable Medical
PORTABLE MEDICAL ($000) Q4 TY Revenue $15,904 $69,043 % of Total Revenue 9% 10% Organic Growth -13% -12% Repositioning of the product line New facility in Mexico qualified by end of year 2015 Executing the shift to higher value opportunities Development programs underway in wireless and batter
Slide 11: Vascular
VASCULAR ($000) Q4 TY Revenue $15,560 $58,770 % of Total Revenue 9% 9% Organic Growth 18% 22% Sustained success driving towards high growth Steerable catheter technology continued to provide positive results with double digit growth Positive customer perceptions driving strong sales 11
Slide 12: EME
EME ($000) Q4 TY Revenue $23,258 $81,757 % of Total Revenue 14% 12% Organic Growth 13% 5% Growth in line with expectations Rechargeable battery pack technology drove growth Energy grew 6% 12
Slide 13: Financial Update
FINANCIAL UPDATE ($ in millions except for EPS) 13
Slide 14: Fourth Quarter
FOURTH QUARTER ($ in millions (Amounts exceptexcept in millions for EPS) for EPS) 2014 2013 Variance *Sales $169.7 $176.6 -3.9% Adjusted: Operating Income $22.7 $19.4 16.7% Operating Margin 13.3% 11.0% 230 BPS Net Income $17.0 $14.0 21.3% Diluted EPS $0.65 $0.55 18.2% EBITDA $32.0 $28.7 11.4% EBITDA
Slide 15: Fourth Quarter Variance Analysis
FOURTH QUARTER VARIANCE ANALYSIS ($ in millions except for EPS) Adj. EPS Comments 2013 Adjusted EPS $ 0.55 Lower RD&E $0.10 and higher NRE $0.05; partially RD&E 0.12 offset by 2013 DVT initiatives ($0.03) Impact of CCC Medical Devices ($0.02) and higher Operating expenses (0.02) G&A ($0.01) partiall
Slide 16: 2014 vs 2013
2014 vs 2013 ($ in millions (Amounts except in millions for EPS) except for EPS) 2014 2013 Variance *Sales $687.8 $663.9 3.6% Adjusted: Operating Income $91.2 $82.9 10.0% Operating Margin 13.3% 12.5% 80 BPS Net Income $62.9 $53.2 18.3% Diluted EPS $2.42 $2.10 15.2% EBITDA $128.4 $118.9 8.0% EBITDA M
Slide 17: 2014 Variance Analysis
2014 VARIANCE ANALYSIS ($ in millions except for EPS) Adj. EPS Comments 2013 Adjusted EPS $ 2.10 Gross margin 0.36 Higher sales and marketing ($0.12), and impact of CCC Medical Devices ($0.02) partially offset by Operating expenses (0.06) lower G&A $0.02 and lower performance based compensation 2013
Slide 18: Working Capital
WORKING CAPITAL ($ in millions except for EPS) 2014 2013 Receivables $125.0 $113.7 Inventory 129.2 118.4 A/P and accrued expenses 94.8 91.2 > 30 Days Past Due as a % of AR 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Accounts Receivable up y-o-y but
Slide 19: 2015 Guidance
2015 GUIDANCE ($ in millions except for EPS) 19
Slide 20: 2015 Guidance
2015 GUIDANCE ($ in millions except for EPS) 2014 2015 Guidance Sales $687.8 $715 - $730 Adjusted Operating Margin(1) 13.3% 13.7 - 14.0% Adjusted Diluted EPS(1) $2.42 $2.61 - $2.71 Operating Cash Flows $81.3 $80 - $100 Capex $24.8 $35 - $45 ROIC 8.4% 9.0% (1) See appendix for a reconciliation of GAA
Slide 21: Appendix
APPENDIX 21 $83 Greatbatch
Slide 22: Q4 Financial Results
Q4 FINANCIAL RESULTS Three Months Ended January 2, January 3, % October 3, % (Dollars in thousands, except per share data) 2015 2014 Change 2014 Change Sales $ 169,726 $ 176,619 (4)% $ 171,699 (1)% Organic Constant Currency Sales Growth (5 )% 13% 1% GAAP Operating Income $ 17,408 $ 12,863 35% $ 16,1
Slide 23: YTD Financial Results
YTD FINANCIAL RESULTS Year Ended January 2, January 3, % ($ in thousands, except per share data) 2015 2014 Change Sales $ 687,787 $ 663,945 4% Organic Constant Currency Sales Growth 3% 5% GAAP Operating Income $ 75,654 $ 61,339 23% GAAP Operating Income as % of Sales 11.0 % 9.2 % Adjusted Operating
Slide 24: QTD Operating Cash Flow
QTD OPERATING CASH FLOW ($ in millions) Net income $14.2 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and Amortization 9.5 Debt related Amortization included on Int Expense 0.2 Stock Based Compensation/Discount Amortization 2.7 Other non-ca
Slide 25: YTD Operating Cash Flow
YTD OPERATING CASH FLOW ($ in millions) Net income $55.5 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and Amortization 37.5 Debt related Amortization included on Int Expense 0.8 Stock Based Compensation/Discount Amortization 13.2 Other non-
Slide 26: GAAP Reconciliation
GAAP RECONCILIATION Operating Income Reconciliation – 3 Months Three Months Ended Greatbatch Medical QiG Unallocated Total Jan. 2, Jan. 3, Jan. 2, Jan. 3, Jan. 2, Jan. 3, Jan. 2, Jan. 3, ($ in thousands) 2015 2014 2015 2014 2015 2014 2015 2014 Sales $ 164,249 $ 175,733 $ 5,477 $ 886 $ — $ — $ 169,72
Slide 27: GAAP Reconciliation
GAAP RECONCILIATION Operating Income Reconciliation – 12 Months Year Ended Greatbatch Medical QiG Unallocated Total Jan. 2, Jan. 3, Jan. 2, Jan. 3, Jan. 2, Jan. 3, Jan. 2, Jan. 3, ($ in thousands) 2015 2014 2015 2014 2015 2014 2015 2014 Sales $ 678,285 $ 660,902 $ 9,502 $ 3,043 $ — $ — $ 687,787 $ 6
Slide 28: GAAP Reconciliation
GAAP RECONCILIATION Net Income (loss) and Diluted EPS Reconciliation Three Months Ended Year Ended January 2, January 3, January 2, January 3, 2015 2014 2015 2014 Impact Impact Impact Impact Per Per Per Per Net Diluted Net Diluted Net Diluted Net Diluted ($ in thousands; except per share amounts) In
Slide 29: GAAP Reconciliation
GAAP RECONCILIATION Adjusted EBITDA reconciliation Three Months Ended Year ended January 2, January 3, January 2, January 3, ($ in thousands) 2015 2014 2015 2014 Sales $ 169,726 $ 176,619 $ 687,787 $ 663,945 Adjusted operating income* $ 22,655 $ 19,407 $ 91,211 $ 82,922 Add: Depreciation and amortiz
Slide 30: 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 30