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.
Net research, development and engineering ("RD&E") costs for
the 2014 fourth quarter decreased $5.2 million, or 35% in
comparison to the prior year period. This decrease was primarily a
result of lower costs incurred in connection with the development
of our Algovita Spinal Cord Stimulation ("SCS") system, including
design verification testing ("DVT") costs, as a result of the
filing of our PMA submission to the FDA in December 2013.
Additionally, this decrease was due to a $1.9 million increase in
customer cost reimbursements compared to the prior year, due to the
timing of achievement of milestones on various projects. For the
year, RD&E expenses decreased $4.2 million, or 8%, primarily
due to lower DVT costs. QiG's medical device technology investment
is primarily focused on successfully commercializing Algovita,
which continues to progress as planned, with PMA approval on track
for the first half of 2015.
The net result of the above variances is that GAAP and adjusted
operating income for the fourth quarter of 2014 increased $4.5
million, or 35%, and $3.2 million, or 17%, respectively, in
comparison to the prior year. Adjusted operating income excludes
net other operating expenses, inventory step-up amortization and
DVT costs (2013 only). For the year, GAAP and adjusted operating
income increased $14.3 million, or 23%, and $8.3 million, or 10%,
respectively, in comparison to the prior year. Refer to Table A at
the end of this release for a reconciliation of GAAP operating
income to adjusted operating income and the "Use of Non-GAAP
Financial Information" section below. As a result of our increased
operational leverage, as well as our various consolidation and
productivity initiatives implemented over the past year, our
adjusted operating income as a percentage of sales for 2014
increased 80 basis points over the prior year to 13.3%.
The 2014 full-year GAAP effective tax rate was 27.6% compared to
25.7% for the same period of 2013. This increase was primarily
attributable to the reinstatement of the R&D tax credit in 2013
retroactive back to 2012. As a result, the 2013 GAAP effective tax
rate includes the benefit of both the 2012 and 2013 R&D tax
credit. Excluding the 2012 R&D tax credit, the effective tax
rate for 2013 would have been 29.0% as 2014 had a higher level of
income in lower tax rate jurisdictions.
GAAP diluted EPS for the fourth quarter and full-year 2014 were
$0.54 and $2.14, respectively, compared to $0.38 and $1.43 for the
respective 2013 periods, which represents increases of 42% and 50%,
respectively. GAAP net income for the quarter and year includes
higher income from our cost and equity method investments of $0.5
million and $5.1 million, respectively, as well as higher foreign
currency exchange rate gains of $1.0 million and $1.4 million,
respectively, as a result of the strengthening dollar versus the
euro. Adjusted diluted EPS for the fourth quarter and full-year
2014 were $0.65 and $2.42, respectively, compared to $0.55 and
$2.10 for the corresponding 2013 periods. These represent increases
of 18% and 15%, respectively, and exceeded our long-term adjusted
diluted EPS growth target of 10%. Refer to Table B at the end of
this release for a reconciliation of GAAP net income to adjusted
net income and the "Use of Non-GAAP Financial Information" section
below.
Cash flow from operating activities for the fourth quarter and
full-year 2014 were $26.6 million and $81.3 million, respectively,
compared to $40.7 million and $56.8 million, respectively, for the
comparable 2013 periods. The quarter over quarter decrease was a
result of higher working capital balances, primarily due to the
timing of collection on accounts receivable partially offset by a
higher level of cash operating income. During the fourth quarter
and full-year 2013, the Company made estimated tax payments related
to the retirement of its convertible subordinated notes in 2013 of
$8.2 million and $28.8 million, respectively. Excluding these
payments, cash flow from operating activities for 2014 were
slightly below 2013 as the increased level of cash operating income
were more than offset by the increase in working capital levels.
Our 2014 fourth quarter and full year capital expenditures were
$8.8 million and $24.8 million, respectively, compared to prior
year capital expenditures of $3.6 million and $18.6 million,
respectively.
Product Line Sales
The following table summarizes the Company's sales by major
product lines (dollars in thousands):
|
|
|
|
|
|
|
|
|
Product Line |
2014 4th Qtr. |
2013 4th Qtr. |
% Chg. |
2014 3rd Qtr. |
% Chg. |
2014 Year |
2013 Year |
% Chg. |
Greatbatch Medical |
|
|
|
|
|
|
|
|
Cardiac/Neuromodulation |
$ 69,016 |
$ 85,408 |
(19)% |
$ 85,618 |
(19)% |
$ 321,419 |
$ 325,412 |
(1)% |
Orthopaedic |
40,511 |
38,204 |
6% |
32,489 |
25% |
147,296 |
130,247 |
13% |
Portable Medical |
15,904 |
18,367 |
(13)% |
17,199 |
(8)% |
69,043 |
78,743 |
(12)% |
Vascular |
15,560 |
13,205 |
18% |
14,903 |
4% |
58,770 |
48,357 |
22% |
Energy, Military, Environmental |
23,258 |
20,549 |
13% |
19,016 |
22% |
81,757 |
78,143 |
5% |
Total Greatbatch Medical |
164,249 |
175,733 |
(7)% |
169,225 |
(3)% |
678,285 |
660,902 |
3% |
QiG |
5,477 |
886 |
518% |
2,474 |
121% |
9,502 |
3,043 |
212% |
Total Sales |
$ 169,726 |
$ 176,619 |
(4)% |
$ 171,699 |
(1)% |
$ 687,787 |
$ 663,945 |
4% |
|
|
|
|
|
|
|
|
|
Organic Constant Currency Sales Growth |
(5)% |
13% |
|
1% |
|
3% |
5% |
|
Orthopaedic Organic Constant Currency Sales
Growth |
10% |
33% |
|
8% |
|
12% |
20% |
|
QiG Organic Constant Currency Sales
Growth |
39% |
12% |
|
35% |
|
21% |
24% |
|
Product Line Sales Highlights
Cardiac/neuromodulation sales for the fourth quarter and
full-year 2014 decreased 19% and 1%, respectively, over the prior
year periods. Beginning in the second quarter of 2014, our
cardiac/neuromodulation revenue began to be negatively impacted by
the end of life for two legacy products. Additionally, fourth
quarter 2014 cardiac/neuromodulation sales were impacted by
inventory adjustments by one of our larger OEM customers. Going
forward, growth in our cardiac/neuromodulation product line will
continue to be negatively impacted by these two legacy products,
which we expect will be mitigated by continued acceleration of
recently launched products, as well as current and projected
product development opportunities with our cardiac/neuromodulation
customers.
Orthopaedic sales for the fourth quarter and full-year 2014
increased 6% and 13%, respectively, in comparison to the fourth
quarter and full-year of 2013. Foreign currency exchange rate
fluctuations negatively impacted current quarter orthopaedic sales
by approximately $1.5 million in comparison to the prior year, but
increased full-year 2014 orthopaedic revenue by approximately $1
million. Excluding the impact of foreign currency fluctuations,
orthopaedic product line sales increased 10% and 12% in comparison
to the prior year fourth quarter and full-year, respectively. Going
forward, foreign currency exchange rate fluctuations are expected
to be a headwind for the first half of 2015 due to the
strengthening dollar versus the euro. The current quarter and full
year organic constant currency growth were primarily in orthopaedic
implants and instruments and were driven by our increased sales and
marketing efforts and market growth.
Fourth quarter and full-year 2014 portable medical sales
decreased 13% and 12%, respectively, compared to their respective
2013 periods. During the second half of 2013 we began refocusing
our product line offerings in the portable medical space to
products that have higher profitability. Correspondingly, we have
discontinued or reduced volumes in certain of our lower margin
products, which is expected to continue to negatively impact our
sales through the first half of 2015. As part of our investment in
capacity and capabilities and to better align our resources, during
the second quarter of 2014, we announced plans to transfer our
portable medical operations into a new facility located in Tijuana,
Mexico. We remain optimistic about this product line and continue
to see our pipeline of customer opportunities grow as we invest in
new technologies to meet our customers' needs and to expand our
overall market opportunity.
Vascular sales for the 2014 fourth quarter and full-year
increased 18% and 22%, respectively, in comparison to the prior
year and reflects the continued adoption of our products and the
relaunch of a vascular medical device near the end of 2013, which,
as previously communicated, was voluntarily recalled in the fourth
quarter of 2012.
QiG revenue for the fourth quarter and full-year 2014 includes
sales from CCC Medical Devices which we acquired on August 12, 2014
and contributed $4.2 million and $5.8 million to sales,
respectively. CCC Medical Devices is an active implantable medical
device systems developer and manufacturer that designs and produces
a range of devices for some of the world's top medical device
companies, including implantable pulse generators, programmer
systems, battery chargers, patient wands and leads. Excluding the
revenue acquired from CCC Medical Devices, QiG revenue increased
39% and 21%, respectively, in comparison to the prior year, due to
increased adoption of our thin film electrode technology and new
product launches.
Financial Guidance
Greatbatch estimates the following for 2015:
Sales |
$715 - $730 million |
|
|
GAAP Operating Income as a % of Sales |
10.7% - 11.0% |
Adjusted Operating Income as a % of
Sales |
13.7% - 14.0% |
|
|
Capital Expenditures |
$35 - $45 million |
|
|
GAAP Effective Tax Rate |
~25% |
Adjusted Effective Tax Rate |
~26% |
|
|
GAAP Diluted EPS |
$2.02 - $2.12 |
Adjusted Diluted EPS |
$2.61 - $2.71 |
Adjusted operating income for 2015 is expected to consist of
GAAP operating income excluding items such as acquisition,
consolidation, integration, and asset disposition/write-down
charges totaling approximately $22 million. The after tax impact of
these items is estimated to be $14 million or approximately $0.54
per diluted share. Adjusted amounts also include the benefit of the
Federal R&D tax credit of approximately $0.06 per diluted share
which has not yet been enacted for 2015.
We continue to evaluate commercialization options and therefore
our guidance does not reflect the commercialization of Algovita.
Our guidance also does not include the impact of additional
acquisitions.
Conference Call
The Company will host a conference call on Tuesday, February 24,
2015 at 5:00 p.m. E.T. to discuss these results. The scheduled
conference call will be webcast live and is accessible through the
Company's website at www.greatbatch.com or by dialing 866-510-0712
and the participant passcode is 45330889. An audio replay will also
be available beginning from 9:00 p.m. E.T. on February 24, 2015
until March 3, 2015. To access the replay, dial 888-286-8010 and
enter the pass code 26092052.
About Greatbatch, Inc.
Greatbatch, Inc. (NYSE:GB) provides top-quality technologies to
industries that depend on reliable, long-lasting performance
through its brands Greatbatch Medical, Electrochem and QiG Group.
The company develops and manufactures critical medical device
technologies for the cardiac, neuromodulation, vascular and
orthopaedic markets; and batteries for high-end niche applications
in the portable medical, energy, military, and environmental
markets. Additional information is available at
www.greatbatch.com.
Use of Non-GAAP Financial Information
In addition to our results reported in accordance with generally
accepted accounting principles ("GAAP"), we provide adjusted
operating income and margin, adjusted net income, adjusted earnings
per diluted share, adjusted EBITDA and organic constant currency
sales growth rates. These adjusted amounts, other than adjusted
EBITDA and organic constant currency sales growth rates, consist of
GAAP amounts adjusted for the following to the extent occurring
during the period: (i) acquisition-related charges, (ii) facility
consolidation, optimization, manufacturing transfer and system
integration charges, (iii) asset write-down and disposition
charges, (iv) severance charges in connection with corporate
realignments or a reduction in force, (v) litigation charges and
gains, (vi) the impact of certain non-cash charges to interest
expense, (vii) unusual or infrequently occurring items, (viii)
for 2013, certain R&D expenditures (such as medical device DVT
expenses in connection with developing our neuromodulation
platform), (ix) gain/loss on the sale of investments, (x) the
income tax (benefit) related to these adjustments and (xi) certain
tax items related to the Federal R&D Tax Credit which are
outside the normal benefit received. Adjusted earnings per diluted
share were calculated by dividing adjusted net income by diluted
weighted average shares outstanding. Adjusted EBITDA consists of
adjusted operating income plus GAAP depreciation and amortization
less adjustments included in GAAP depreciation and amortization
already excluded from adjusted operating income. To calculate
organic constant currency sales growth rates, which exclude the
impact of changes in foreign currency exchange rates, as well as
the impact of any acquisitions or divestitures of product lines on
sales growth rates, we convert current period sales from local
currency to U.S. dollars using the previous periods' foreign
currency exchange rates and exclude the amount of sales
acquired/divested during the period from the current/previous
period amounts, respectively. We believe that the presentation of
adjusted operating income and margin, adjusted net income, adjusted
diluted earnings per share, adjusted EBITDA and organic constant
currency sales growth rates provides important supplemental
information to management and investors seeking to understand the
financial and business trends relating to our financial condition
and results of operations.
Forward-Looking Statements
Some of the statements in this press release, including the
information provided under the caption "Financial Guidance," are
"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 number
of risks and uncertainties. These forward-looking statements can be
identified by terminology such as "may," "will," "should," "could,"
"expects," "intends," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue," or variations
or the negative of these terms or other comparable terminology.
These forward-looking statements are based on the Company's current
expectations. The Company's actual results could differ materially
from those stated or implied in such forward-looking statements.
Risks and uncertainties that could cause actual results to differ
materially from those stated or implied by such forward-looking
statements include, among others, the following matters affecting
the Company: our dependence upon a limited number of customers;
customer ordering patterns; product obsolescence; our inability to
market current or future products; pricing/vertical integration
pressure from customers; our ability to timely and successfully
implement our cost reduction and plant consolidation initiatives;
our reliance on third party suppliers for raw materials, products
and subcomponents; our inability to maintain high quality standards
for our products; challenges to our intellectual property rights;
product liability claims; our inability to successfully consummate
and integrate acquisitions and to realize synergies; our
unsuccessful expansion into new markets; our ability to realize a
return on our substantial RD&E investments, including system
and device products; changes in and challenges related to
compliance with governmental laws and regulations, including
regulations of the U.S. Food and Drug Administration and foreign
government agencies regulating medical device approvals; our
inability to obtain licenses to key technology; regulatory changes
or consolidation in the healthcare industry; global economic
factors including currency exchange rates and interest rates; the
resolution of various legal actions and other risks and
uncertainties described in the Company's Annual Report on Form 10-K
and in other periodic filings with the Securities and Exchange
Commission. The Company assumes no obligation to update
forward-looking statements in this press release whether to reflect
changed assumptions, the occurrence of unanticipated events or
changes in future operating results, financial conditions or
prospects, or otherwise.
Table A: Operating Income
Reconciliation: |
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Greatbatch
Medical |
QiG |
Unallocated |
Total |
(dollars in thousands) |
Jan. 2, 2015 |
Jan. 3, 2014 |
Jan. 2, 2015 |
Jan. 3, 2014 |
Jan. 2, 2015 |
Jan. 3, 2014 |
Jan. 2, 2015 |
Jan. 3, 2014 |
Sales |
$ 164,249 |
$ 175,733 |
$ 5,477 |
$ 886 |
$ — |
$ — |
$ 169,726 |
$ 176,619 |
|
|
|
|
|
|
|
|
|
Operating income (loss) as reported |
$ 27,624 |
$ 27,210 |
$ (4,374) |
$ (8,806) |
$ (5,842) |
$ (5,541) |
$ 17,408 |
$ 12,863 |
Adjustments: |
|
|
|
|
|
|
|
|
Inventory step-up |
— |
— |
173 |
— |
— |
— |
$ 173 |
$ — |
Medical device DVT expenses (RD&E)
(a) |
— |
— |
— |
1,314 |
— |
— |
$ — |
$ 1,314 |
Consolidation and optimization costs |
4,015 |
4,151 |
203 |
6 |
— |
266 |
$ 4,218 |
$ 4,423 |
Acquisition and integration expenses
(income) |
117 |
98 |
18 |
(260) |
116 |
— |
$ 251 |
$ (162) |
Asset dispositions, severance and
other |
2,224 |
1,048 |
28 |
114 |
(1,647) |
(193) |
$ 605 |
$ 969 |
Adjusted operating income (loss) |
$ 33,980 |
$ 32,507 |
$ (3,952) |
$ (7,632) |
$ (7,373) |
$ (5,468) |
$ 22,655 |
$ 19,407 |
Adjusted operating margin |
20.7% |
18.5% |
N/A |
N/A |
N/A |
N/A |
13.3% |
11.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended |
|
Greatbatch
Medical |
QiG |
Unallocated |
Total |
(dollars in thousands) |
Jan. 2, 2015 |
Jan. 3, 2014 |
Jan. 2, 2015 |
Jan. 3, 2014 |
Jan. 2, 2015 |
Jan. 3, 2014 |
Jan. 2, 2015 |
Jan. 3, 2014 |
Sales |
$ 678,285 |
$ 660,902 |
$ 9,502 |
$ 3,043 |
$ — |
$ — |
$ 687,787 |
$ 663,945 |
|
|
|
|
|
|
|
|
|
Operating income (loss) as reported |
$ 126,312 |
$ 111,805 |
$ (23,256) |
$ (30,484) |
$ (27,402) |
$ (19,982) |
$ 75,654 |
$ 61,339 |
Adjustments: |
|
|
|
|
|
|
|
|
Inventory step-up amortization (COS) |
— |
— |
260 |
— |
— |
— |
260 |
— |
Medical device DVT expenses (RD&E)
(a) |
— |
— |
— |
5,793 |
— |
— |
— |
5,793 |
Consolidation and optimization costs |
10,051 |
13,388 |
882 |
86 |
255 |
1,284 |
11,188 |
14,758 |
Acquisition and integration expenses
(income) |
196 |
187 |
(713) |
(690) |
520 |
1 |
3 |
(502) |
Asset dispositions, severance and
other |
2,493 |
1,187 |
634 |
540 |
979 |
(193) |
4,106 |
1,534 |
Adjusted operating income (loss) |
$ 139,052 |
$ 126,567 |
$ (22,193) |
$ (24,755) |
$ (25,648) |
$ (18,890) |
$ 91,211 |
$ 82,922 |
Adjusted operating margin |
20.5% |
19.2% |
N/A |
N/A |
N/A |
N/A |
13.3% |
12.5% |
|
|
|
|
|
|
|
|
|
(a) As a result of the
Company's PMA submission to the FDA for Algovita in December 2013,
the Company no longer is excluding DVT costs associated with this
system from adjusted operating income and adjusted diluted EPS. DVT
costs incurred in connection with the development of Algovita
during the three and twelve month periods ended January 2, 2015
were $146 thousand and $1.6 million, respectively. |
|
|
Table B: Net Income and
Diluted EPS Reconciliation |
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
Year
Ended |
|
January 2,
2015 |
January 3,
2014 |
January 2,
2015 |
January 3,
2014 |
(in thousands except per share
amounts) |
Net Income |
Impact Per Diluted
Share |
Net Income |
Impact Per Diluted
Share |
Net Income |
Impact Per Diluted
Share |
Net Income |
Impact Per Diluted
Share |
Net income as reported |
$ 14,176 |
$ 0.54 |
$ 9,781 |
$ 0.38 |
$ 55,458 |
$ 2.14 |
$ 36,267 |
$ 1.43 |
Adjustments: |
|
|
|
|
|
|
|
|
Inventory step-up amortization
(COS)(a) |
131 |
0.01 |
— |
— |
195 |
0.01 |
— |
— |
Medical device DVT expenses
(RD&E)(a) |
— |
— |
854 |
0.03 |
— |
— |
3,765 |
0.15 |
Consolidation and optimization
costs(a) |
2,804 |
0.11 |
2,853 |
0.11 |
6,567 |
0.25 |
10,602 |
0.42 |
Acquisition and integration expenses
(income)(a) |
222 |
0.01 |
(105) |
— |
61 |
— |
(326) |
(0.01) |
Asset dispositions, severance and
other(a) |
1,187 |
0.05 |
608 |
0.02 |
3,463 |
0.13 |
997 |
0.04 |
(Gain) loss on cost and equity method
investments, net(a)(b) |
(290) |
(0.01) |
43 |
— |
(2,841) |
(0.11) |
451 |
0.02 |
CSN conversion option discount and
deferred fee accelerated amortization(a)(c) |
— |
— |
— |
— |
— |
— |
3,007 |
0.12 |
R&D Tax Credit(d) |
(1,200) |
(0.05) |
— |
— |
— |
— |
(1,600) |
(0.06) |
Adjusted net income and diluted EPS(e) |
$ 17,030 |
$ 0.65 |
$ 14,034 |
$ 0.55 |
$ 62,903 |
$ 2.42 |
$ 53,163 |
$ 2.10 |
Adjusted diluted weighted average shares |
26,071 |
|
25,510 |
|
25,975 |
|
25,323 |
|
|
|
|
|
|
|
|
|
|
(a) Net of tax amounts
computed using a 35% U.S., Mexico and France statutory tax rate for
the 2014 and 2013 periods and a 0% Switzerland tax rate for the
2014 and 2013 periods. For 2014, net of tax amounts computed using
a 25% Uruguay statutory tax rate. |
(b) Pre-tax amounts are a
net gain of $445 thousand and $4.4 million for the 2014 quarter and
full-year, respectively, and a net loss of $66 thousand and $694
thousand for the 2013 quarter and full-year periods,
respectively. |
(c) Pre-tax amount is $4.6
million for the 2013 full-year period. |
(d) The Federal R&D tax
credit was enacted for 2014 during the fourth quarter of 2014
retroactive to the beginning of the year. The 2013 amount relates
to the 2012 portion of the R&D tax credit which was reinstated
in the first quarter of 2013 retroactive to the beginning of 2012.
As required, the impact of the R&D tax credit relating to 2014
and 2012 was recognized in the period the legislation was
enacted. |
(e) The per share data in
this table has been rounded to the nearest $0.01 and therefore may
not sum to the total. |
|
|
Table C: Adjusted EBITDA
Reconciliation |
|
|
|
|
|
|
Three Months
Ended |
Year
ended |
(dollars in thousands) |
January 2, 2015 |
January 3, 2014 |
January 2, 2015 |
January 3, 2014 |
Sales |
$ 169,726 |
$ 176,619 |
$ 687,787 |
$ 663,945 |
|
|
|
|
|
Adjusted operating income* |
$ 22,655 |
$ 19,407 |
$ 91,211 |
$ 82,922 |
|
|
|
|
|
Add: Depreciation and amortization |
9,514 |
9,308 |
37,457 |
35,966 |
Less adjustments included in depreciation and
amortization: |
|
|
|
|
Inventory step-up amortization |
173 |
— |
260 |
— |
Adjusted EBITDA |
$ 31,996 |
$ 28,715 |
$ 128,408 |
$ 118,888 |
Adjusted EBITDA as a % of sales |
18.9% |
16.3% |
18.7% |
17.9% |
|
|
|
|
|
* Refer to table A for a
reconciliation of GAAP to adjusted amounts. |
|
|
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS - Unaudited |
(in thousands
except per share data) |
|
|
Three Months
Ended |
Year
Ended |
|
January 2, 2015 |
January 3, 2014 |
January 2, 2015 |
January 3, 2014 |
Sales |
$ 169,726 |
$ 176,619 |
$ 687,787 |
$ 663,945 |
Cost of sales |
112,512 |
119,234 |
456,389 |
444,632 |
Gross profit |
57,214 |
57,385 |
231,398 |
219,313 |
Operating expenses: |
|
|
|
|
Selling, general and administrative
expenses |
24,849 |
24,198 |
90,602 |
88,107 |
Research, development and engineering
costs, net |
9,883 |
15,094 |
49,845 |
54,077 |
Other operating expenses, net |
5,074 |
5,230 |
15,297 |
15,790 |
Total operating expenses |
39,806 |
44,522 |
155,744 |
157,974 |
Operating income |
17,408 |
12,863 |
75,654 |
61,339 |
Interest expense |
1,044 |
1,313 |
4,252 |
11,261 |
(Gain) loss on cost and equity method
investments, net |
(445) |
66 |
(4,370) |
694 |
Other (income) expense, net |
(677) |
267 |
(807) |
546 |
Income before provision for income
taxes |
17,486 |
11,217 |
76,579 |
48,838 |
Provision for income taxes |
3,310 |
1,436 |
21,121 |
12,571 |
Net income |
$ 14,176 |
$ 9,781 |
$ 55,458 |
$ 36,267 |
|
|
|
|
|
Earnings per share: |
|
|
|
|
Basic |
$ 0.57 |
$ 0.40 |
$ 2.23 |
$ 1.51 |
Diluted |
$ 0.54 |
$ 0.38 |
$ 2.14 |
$ 1.43 |
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
Basic |
24,948 |
24,235 |
24,825 |
23,991 |
Diluted |
26,071 |
25,510 |
25,975 |
25,323 |
|
|
CONDENSED CONSOLIDATED
BALANCE SHEETS - Unaudited |
(in
thousands) |
|
|
As
of |
ASSETS |
January 2, 2015 |
January 3, 2014 |
Current assets: |
|
|
Cash and cash equivalents |
$ 76,824 |
$ 35,465 |
Accounts receivable, net |
124,953 |
113,679 |
Inventories |
129,242 |
118,358 |
Refundable income taxes |
1,716 |
2,306 |
Deferred income taxes |
6,168 |
6,008 |
Prepaid expenses and other current
assets |
11,780 |
6,717 |
Total current assets |
350,683 |
282,533 |
Property, plant and equipment, net |
144,925 |
145,773 |
Amortizing intangible assets, net |
65,337 |
76,122 |
Indefinite-lived intangible assets |
20,288 |
20,288 |
Goodwill |
354,393 |
346,656 |
Deferred income taxes |
2,626 |
2,933 |
Other assets |
17,757 |
16,398 |
Total assets |
$ 956,009 |
$ 890,703 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Current portion of long-term debt |
$ 11,250 |
$ — |
Accounts payable |
46,436 |
46,508 |
Income taxes payable |
2,003 |
— |
Deferred income taxes |
588 |
613 |
Accrued expenses |
48,384 |
44,681 |
Total current liabilities |
108,661 |
91,802 |
Long-term debt |
176,250 |
197,500 |
Deferred income taxes |
53,195 |
52,012 |
Other long-term liabilities |
4,541 |
7,334 |
Total liabilities |
342,647 |
348,648 |
Stockholders' equity: |
|
|
Preferred stock |
— |
— |
Common stock |
25 |
24 |
Additional paid-in capital |
366,073 |
344,915 |
Treasury stock |
(1,307) |
(1,232) |
Retained earnings |
239,448 |
183,990 |
Accumulated other comprehensive
income |
9,123 |
14,358 |
Total stockholders' equity |
613,362 |
542,055 |
Total liabilities and stockholders'
equity |
$ 956,009 |
$ 890,703 |
CONTACT: Betsy Cowell
VP Finance and Treasurer
Greatbatch, Inc.
214.618.4982
ecowell@greatbatch.com
Integer (NYSE:ITGR)
Historical Stock Chart
From Mar 2024 to Apr 2024
Integer (NYSE:ITGR)
Historical Stock Chart
From Apr 2023 to Apr 2024