Slide 1: Second Quarter 2013 Earnings Call
SECOND QUARTER 2013 EARNINGS CALL July 25, 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 - Second Quarter 2013 Highlights - Organic Growth - Strategic Update Michael Dinkins - Second Quarter 2013 Financial Results - Guidance Update Question & Answer 4
Slide 5: Selected Q2 Highlights
Selected Q2 Highlights ($ in millions except for EPS) Q2 2013 Q2 2012 Change Sales $171.3 $166.5 3% Adjusted EBITDA $31.3 $28.5 10% Adjusted EBITDA margin 18.3% 17.1% 120bps Adjusted Operating Margin 13.0% 11.2% 180bps Adjusted Diluted EPS $0.56 $0.43 30% Capex $5 $14 (64%) Adjusted ROIC 8.7% 7.5% 1
Slide 6: Q2 Organic Growth
Q2 Organic Growth ($ in millions) Q2 Q2 % Organic* Product Lines 2013 2012 Change Growth Implantable Medical Cardiac/Neuromodulation $84.0 $80.0 5% 5% Orthopaedics 32.3 32.9 -2% 14% Vascular 12.2 12.5 -2% -2% Total Implantable Medical 128.6 125.4 3% 6% Electrochem Portable Medical 22.2 20.4 9% 9% En
Slide 7: Q2 Performance
Q2 Performance Cardiac/Neuromodulation: (49% total revenues; 5% organic growth) Broad based market performance and expanding customer relations Orthopaedics: (19% of total revenues; 14% organic growth) Worldwide orthopaedic implant share gains and customer wins Divestiture of non-core product
Slide 8: Strategic Update
$3 Greatbatch inovative Medical Devices / STRATEGIC UPDATE Targeted Acquisitions |
Slide 9: Key Message Points
Key Message Points Long-term agreements cover large percentage of revenue Leverage Reputation for innovation Strong Operational excellence Foundational Strong Blue Chip customer base Business Enter strong markets with significant growth opportunity Drive Leveraging extensive Intellectual Property po
Slide 10: Algostim – Update
Algostim – Update Development Design verification and testing (DVT) progressing as planned FDA Chronic animal studies progressing as planned for FDA PMA submission CE Mark Completed 3 of 5 phase modular submission, remainder scheduled for early 2014 Other Finalizing key component supplier ag
Slide 11: Orthopaedic – Update
Orthopaedic – Update Completed Milestones Transferred instruments and reamer from Switzerland Divested $15M in non-profitable sales Completed customer supplier certification audits at new manufacturing locations First production and shipment of transferred reamers Q1 2013 Plant transfers a
Slide 12: Financial Performance
$3 Greatbatch FINANCIAL PERFORMANCE Targeted Acquisitions |
Slide 13: Q2 Financial Results
Q2 Financial Results Three Months Ended June 28, June 29, % March 29, % (Dollars in thousands, except per share data) 2013 2012 Change 2013 Change Sales $ 171,331 $ 166,548 3% $ 148,265 16% Constant Currency Organic Sales Growth 6% 1% -4% GAAP Operating Income $ 17,135 $ 11,091 54% $ 14,339 19% GAAP
Slide 14: Q2 Variance Analysis
Q2 Variance Analysis Adj. EPS Q2 2012 EPS $0.43 Gross Margin Improvements (excl. Swiss) 0.11 Swiss Orthopaedic Improvement 0.09 2013 R&D Tax Credit 0.02 Interest Expense 0.02 Medical Devices Initiatives 0.01 Performance Based Compensation (0.10) Investment in Sales and Marketing (0.02) Q2 2013 EPS $
Slide 15: Cash Flow – Working Capital
Cash Flow – Working Capital Q2 2013 Accounts receivable $ (14.1) Inventory (3.9) A/P; Accrued Expenses 5.9 $ (12.1) Accounts receivable – $139 million Timing of shipments … Added resources to improve future performance Inventory – $122 million Pre-buys of critical materials Safety stock replen
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 (1) 11.4% 12% – 12.5% ~13% Adjusted Diluted EPS (1) $1.77 $1.90 – $2.00 $2.05 - $2.15 Targeted initiatives to get on Adj. Operating Cash
Slide 18: Appendix
$3 Greatbatch Innovative Medical Devices APPENDIX Targeted Acquisitions |
Slide 19: Selected June YTD Highlights
Selected June YTD Highlights ($ in millions except for EPS) 2013 2012 Change Sales $319.6 $325.7 (2%) Adjusted EBITDA $59.4 $53.9 10% Adjusted EBITDA margin 18.6% 16.5% 210bps Adjusted Operating Margin 13.0% 10.5% 250bps Adjusted Diluted EPS $0.99 $0.79 25% Capex $12 $24 (50%) Adjusted ROIC 8.1% 6.9
Slide 20: June YTD Organic Growth
June YTD Organic Growth ($ in millions) YTD YTD % Organic* Product Lines 2013 2012 Change Growth Implantable Medical Cardiac/Neuromodulation $155.2 $155.2 0% 0% Orthopaedics 62.0 63.9 -3% 12% Vascular 22.9 24.1 -5% -5% Total Implantable Medical 240.1 243.2 -1% 2% Electrochem Portable Medical 41.1 39
Slide 21: June YTD Variance Analysis
June YTD Variance Analysis Adj. EPS 1st Half 2012 EPS $0.79 Swiss Orthopaedic Improvement 0.18 Gross Margin Improvement (excl. Swiss) 0.12 Medical Devices Initiatives 0.06 2013 R&D Tax Credit 0.03 Interest Expense 0.01 Performance Based Compensation (0.13) Investment in Sales and Marketing (0.04) Ot
Slide 22: GAAP Reconciliation
GAAP Reconciliation Table A: Operating Income Reconciliation: Three Months Ended Implantable Medical Electrochem Unallocated Total June 28, June 29, June 28, June 29, June 28, June 29, June 28, June 29, (dollars in thousands) 2013 2012 2013 2012 2013 2012 2013 2012 Sales $ 128,604 $ 125,366 $ 42,727
Slide 23: GAAP Reconciliation
GAAP Reconciliation Operating Income Reconciliation – Six Months Six Months Ended Implantable Medical Electrochem Unallocated Total June 28, June 29, June 28, June 29, June 28, June 29, June 28, June 29, (dollars in thousands) 2013 2012 2013 2012 2013 2012 2013 2012 Sales $ 240,018 $ 243,183 $ 79,57
Slide 24: GAAP Reconciliation
GAAP Reconciliation Table B: Net Income and Diluted EPS Reconciliation Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, 2013 2012 2013 2012 Impact Impact Impact Impact Per Per Per Per Net Diluted Net Diluted Net Diluted Net Diluted (in thousands except per share amounts) Incom
Slide 25: GAAP Reconciliation
GAAP Reconciliation Table C: Adjusted EBITDA Reconciliation Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (dollars in thousands) 2013 2012 2013 2012 Sales $ 171,331 $ 166,548 $ 319,596 $ 325,651 Adjusted operating income* $ 22,192 $ 18,589 $ 41,503 $ 34,104 Add: Depreciatio
Slide 26: Other Operating Expenses
Other Operating Expenses Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, 2013 2012 2013 2012 2013 operating unit realignment $ 852 $ - $ 852 $ - Orthopaedic facility optimization 2,667 1,978 5,303 2,322 Medical device facility optimization 125 565 230 894 ERP system upgrade 6
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