Slide 1: First Quarter 2013 Earnings Call
FIRST QUARTER 2013 EARNINGS CALL April 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 - Senior Vice President & CFO Tom Mazza - Vice President & Corporate Controller Betsy Cowell - Vice President Finance & Treasurer 3
Slide 4: Agenda
AGENDA Thomas J. Hook - First Quarter 2013 Highlights - Organic Growth - Strategic Update Michael Dinkins - First Quarter 2013 Financial Results - Guidance Update Question & Answer 4
Slide 5: Selected Q1 Highlights
Selected Q1 Highlights ($ in millions except for EPS) Q1 2013 Q1 2012 Change Sales $148 $159 (7%) Adjusted EBITDA $28 $25 11% Adjusted EBITDA margin 18.9% 15.9% 300bps Adjusted Operating Margin 13.0% 9.8% 320bps Adjusted Diluted EPS $0.44 $0.37 19% Capex $7 $10 (30%) Adjusted ROIC 7.5% 6.2% 130bps C
Slide 6: Q1 Organic Growth
Q1 Organic Growth ($ in thousands) Q1 Q1 % Organic Product Lines 2012 2013 Change Growth Implantable Medical Cardiac/Neuromodulation $75,135 $71,167 -5% -5% Vascular 11,636 10,624 -9% -9% Orthopaedics 31,046 29,623 -5% 11% Total Implantable Medical 117,817 111,414 -5% -2% Electrochem Portable Medica
Slide 7: Q1 Performance - Implantable Medical
Q1 Performance - Implantable Medical Cardiac/Neuromodulation: Market performance Customer Inventory management OEM market share shifts Vascular: Customer inventory adjustments Orthopaedics: Sale of non-core product lines previously produced in Switzerland Worldwide orthopaedic implant sh
Slide 8: Key Drivers for Balance of the Year - Implantable Medical
Key Drivers for Balance of the Year - Implantable Medical Cardiac/Neuromodulation: Battery product launch in second half Expanding OEM relationships Vascular: Product re-launches in second half Orthopaedics: Release of Instruments and Reamers backlog following plant validations Continued s
Slide 9: Q1 Performance - Electrochem
Q1 Performance - Electrochem Portable Medical Strong customer product launch Higher customer inventory positions impact expected replenishments Energy, Environmental and Military Delayed customer demand and higher customer inventory positions impact expected replenishments Pricing actions 9
Slide 10: Key Drivers for Balance of the Year - Electrochem
Key Drivers for Balance of the Year - Electrochem Portable Medical New product launches and redesigned products Adding new customers and further account penetration Selected pricing actions Energy, Environmental and Military Product rationalization Pricing actions 10
Slide 11: Strategic Update
$3 Greatbatch STRATEGIC UPDATE Targeted | Acquisitions }
Slide 12: Key Message Points
Key Message Points Strong Long-term agreements cover large percentage of revenue Foundational Reputation for innovation & operational excellence Business Strong Blue Chip customer base Strong markets with significant growth opportunity Grow Leveraging extensive Intellectual Property portfolio the In
Slide 13: Algostim - Update
Algostim - Update Development Completion of multiple ongoing DVT activities including real time and aged units FDA Two chronic animal studies underway for FDA PMA submission CE Mark Completed first 3 phases of 5 phase modular submission with TUV Other Executing key component supplier agreeme
Slide 14: Orthopaedic - Update
Orthopaedic - Update Completed Milestones Transferred instruments and reamers from Switzerland Divested $15M in non-profitable sales Successfully completed customer supplier certification audits at new manufacturing locations First production and shipment of transferred reamers Feb. 2013 Pen
Slide 15: Financial Performance
$3 Greatbatch FINANCIAL PERFORMANCE Targeted | Acquisitions }
Slide 16: Continued operational excellence in gross margin, operating income and EPS expansion
Continued operational excellence as reflected in gross margin, operating income and EPS expansion Strong Gross margin increased 340 basis points to 32.9% Foundational Business Continue RD&E rationalization … spend down $2.8M 11% organic Orthopaedic growth Grow the 1% organic Portable Medical growth
Slide 17: Q1 Variance Analysis
Q1 Variance Analysis Adj EPS 1Q 2012 Results $ 0.37 Productivity Net of Volume Decrease 0.02 Swiss Orthopaedic Margin Improvement 0.05 Medical Devices Initiatives 0.04 Investment in Sales & Marketing (0.02) Performance Based Compensation (0.03) Other 0.01 1Q 2013 Results $ 0.44 17
Slide 18: Selected Balance Sheet Analysis
Selected Balance Sheet Analysis ($ in m illions) March 29, December 28, % 2013 2012 Change Accounts receivable, net $125 $121 3% Inventories 118 107 10% Accounts payable/ Accrued expenses (71) (91) -22% Accounts receivable Timing of customer payments Inventory Safety stock replenishments Raw m
Slide 19: 2013 Guidance
$3 Greatbatch Innovative Medical Devices “| 2013 GUIDANCE Targeted Acquisitions }
Slide 20: 2013 Guidance
2013 Guidance ($ 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 21: EPS Improvement
EPS Improvement Adj EPS 2012 Actual Adjusted EPS $1.77 Orthopaedics Consolidation Initiatives $0.19 - $0.30 Productivity Efficiencies in Core Business $0.20 - $0.22 Medical Device Spend $0.06 - $ 0.09 Performance Based Compensation $(0.27) - $(0.31) Investment in Sales & Marketing $(0.05) - $(0.07)
Slide 22: Appendix
$3 Greatbatch Innovative Medical Devices APPENDIX Targeted Acquisitions |
Slide 23: GAAP Reconciliation
8.8 Greatbatch GAAP Reconciliation Three Months Ended Implantable Medical Electrochem Unallocated Total Mar.29, Mar.30, Mar.29, Mar.30, Mar.29, Mar.30, Mar.29, = Mar. 30, 2013 2012 2013 2012 2013 2012 2013 2012 Sales S$ 111.414$ 117,817 $ 36,851 $ 41,286 $ -$ -$ 148.265$ 159,103 Operating income (lo
Slide 24: GAAP Reconciliation
8.8 Greatbatch GAAP Reconciliation Three Months Ended March 29, March 30, 2013 2012 Impact Impact Net Per Net Per Income Diluted Income _ Diluted (oss) Share (Loss) Share Net income as reported $ 5663 $ 023 $ 4467 $ 0.19 Adjustments: Inventory step-up amortization (COS) - - 346 0.01 Medical device D
Slide 25: GAAP Reconciliation
$88 Greatbatch GAAP Reconciliation Areconciliation of adjusted operating income to adjusted EBITDA is as follows (in thousands): Three Months Ended March 29, March 30, 2013 2012 Adjusted operating income (Table A) $ 19.311 $ 15,515 Add: GAAP depreciation and amortization 8.764 11,119 Less: Adjustmen
Slide 26: 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 26