Greatbatch, Inc. Reports 2014 Fourth Quarter And Full Year Results

FRISCO, Texas, Feb. 24, 2015 (GLOBE NEWSWIRE) -- Greatbatch, Inc. (NYSE:GB), today announced results for its fourth quarter and full-year ended January 2, 2015 highlighted by 10% year over year improvement in adjusted operating income and 15% improvement in adjusted diluted EPS over 2013.

	Year Ended
(Dollars in thousands, except per share data)	January 2, 2015	January 3, 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 Income*	$ 91,211	$ 82,922	10%
Adjusted Operating Income as % of Sales	13.3%	12.5%
GAAP Diluted EPS	$ 2.14	$ 1.43	50%
Adjusted Diluted EPS*	$ 2.42	$ 2.10	15%
Adjusted EBITDA*	$ 128,408	$ 118,888	8%
Adjusted EBITDA as a % Sales	18.7%	17.9%

	Three Months Ended
(Dollars in thousands, except per share data)	January 2, 2015	January 3, 2014	% Change	October 3, 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%	$ 16,183	8%
GAAP Operating Income as % of Sales	10.3%	7.3%		9.4%
Adjusted Operating Income*	$ 22,655	$ 19,407	17%	$ 22,446	1%
Adjusted Operating Income as % of Sales	13.3%	11.0%		13.1%
GAAP Diluted EPS	$ 0.54	$ 0.38	42%	$ 0.54	—%
Adjusted Diluted EPS*	$ 0.65	$ 0.55	18%	$ 0.64	2%
Adjusted EBITDA*	$ 31,996	$ 28,715	11%	$ 31,741	1%
Adjusted EBITDA as a % Sales	18.9%	16.3%		18.5%
* Refer to Tables A, B and C at the end of this release for a reconciliation of GAAP to adjusted amounts.

CEO Comments

"2014 saw Greatbatch execute on a number of our strategic imperatives to further position us for continued profitable growth," said Thomas J. Hook, president and chief executive officer. "Profitable growth allowed us to bolster our pipeline, improve our margin and execute our strategic acquisition of CCC Medical Devices in August of last year. We also achieved a significant regulatory milestone with our Spinal Cord Stimulation system to treat chronic intractable pain in the trunk and/or limbs, Algovita, which received CE Mark from the European Notified Body TÜV SÜD."

"We expect 2015 to be a transformative year. FDA PMA approval of Algovita is expected in the first half of the year. In addition, we are leveraging our broad intellectual property portfolio to be a leading manufacturer for the neuromodulation market with complete systems and component projects," Hook continued. "Furthermore, we expect to enhance our competitive position as we bring on line a new facility for our Portable Medical category and transfer other production lines to an existing facility in Mexico. We are focused on delivering our 2015 commitments as we recognize that most of the benefits of these initiatives will impact 2016 and beyond."

CFO Comments

"We are pleased with our strong operating performance and our achievement of over 15% adjusted diluted EPS growth for a second year in a row," said Michael Dinkins, executive vice president and chief financial officer. "Despite unfavorable performance in our portable medical and cardiac and neuromodulation product lines, we returned modest top line growth led by double digit improvements in orthopaedics and vascular. Our gross margin continued to improve with a 60 basis points increase year over year and our adjusted EBITDA margins improved 80 basis points."

"Our strategic imperatives remain unchanged to deliver five percent top line revenue growth and return at least two times that to our shareholders through a healthy and diverse core business. As a result we are providing 2015 sales guidance, excluding our plans for Algovita, of $715-$730 million and adjusted diluted EPS guidance of $2.61-$2.71," concluded Dinkins.

Fourth Quarter and Full Year Results

The Company utilizes a fifty-two, fifty-three week fiscal year, which ends on the Friday nearest December 31st. As a result, the fourth quarter and full year results for 2013 include an additional week of operations in comparison to the same periods of 2014. Although this additional week of operations may have impacted certain financial statement line items, management believes that when combined with the additional holiday and weather related shutdowns in 2013, this additional week did not materially impact our 2013 net operating results.

Fourth quarter 2014 sales of $169.7 million decreased 4% from the prior year period and 5% on an organic constant currency basis. Sales for the fourth quarter of 2014 include $4.2 million from the acquisition of CCC Medical Devices in August 2014 and were negatively impacted by approximately $1.5 million due to the strengthening U.S. dollar versus the euro. The organic constant currency sales decrease in comparison to the prior year period was primarily driven by continued weakness in our portable medical product line and lower cardiac/neuromodulation revenue due to customer inventory reduction initiatives, the end of life impact for two legacy products and tough year over year comparables. Partially offsetting these decreases was double digit organic constant currency growth in our orthopaedic and vascular product lines, as we continue to realize the benefits of our sales force productivity, marketing efforts, and market growth. For the year, sales increased 4% (3% organic constant currency) to a record $687.8 million, and similar to our fourth quarter results, was primarily driven by above market growth from our orthopaedic (13%) and vascular (22%) product lines. CCC Medical Devices and favorable foreign currency exchange rate fluctuations added $5.8 million and $1 million, respectively, to 2014 sales.

Gross profit for the fourth quarter of 2014 of $57.2 million remained consistent with the prior year period as the decrease in sales for the period was offset by improved operating leverage. Gross profit as a percentage of sales increased 120 basis points to 33.7% for the fourth quarter of 2014. This increase was primarily a result of higher production efficiencies, which more than offset the impact of contractual price concessions granted to our customers in exchange for long-term agreements and a higher mix of lower margin sales. For the year, gross profit increased 6% to $231.4 million and gross profit as a percentage of sales increased 60 basis points to 33.6% over 2013. These increases were driven by increased operational leverage due to higher sales volumes and our various productivity initiatives.

Selling, general and administrative ("SG&A") expenses increased $0.6 million, or 3%, to $24.8 million for the fourth quarter of 2014 compared to the same period of 2013. This increase is primarily attributable to our acquisition of CCC Medical Devices, which added $0.6 million to SG&A costs. For the year, SG&A expenses increased $2.5 million, or 3%, to $90.6 million, primarily due to the impact of CCC Medical Devices ($0.9 million), the investments we have made in sales and marketing, as well as higher legal fees, which includes intellectual property related costs. The impact of these increases was partially offset by our various consolidation initiatives, including our operating unit realignment which began in the second quarter of 2013, as well as a lower level of performance-based compensation.

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