Greatbatch, Inc. (NYSE:GB), today announced results for its third
quarter ended October 2, 2015.
|
Three Months
Ended |
(Dollars in thousands, except per share
data) |
October 2, 2015 |
October 3, 2014 |
% Change |
Sales |
$ 146,637 |
$ 171,699 |
(15)% |
Organic Constant Currency Sales Growth |
(13)% |
1% |
|
|
|
|
|
GAAP Diluted EPS |
$ — |
$ 0.54 |
(100)% |
Adjusted Diluted EPS* |
$ 0.58 |
$ 0.75 |
(23)% |
|
|
|
|
EBITDA* |
$ 14,578 |
$ 29,246 |
(50)% |
Adjusted EBITDA* |
$ 31,398 |
$ 39,826 |
(21)% |
Adjusted EBITDA as a % Sales |
21.4% |
23.2% |
|
|
* Refer to Tables A and B at the
end of this release for a reconciliation of adjusted amounts to
GAAP. |
CEO Comments
"We are disappointed by our current quarter results, however we
remain very optimistic about the future growth prospects of
Greatbatch," said Greatbatch president and CEO, Thomas J. Hook. "We
had several discrete factors impacting our third quarter results,
which do not change the long-term growth prospects of our company.
We continue to drive the implementation of our strategy to create
shareholder value, which includes our transformative acquisition of
Lake Region Medical, as well as the spin-off of Nuvectra. The
acquisition of Lake Region Medical will provide a substantially
more comprehensive portfolio of technologies and services for our
customers while the spin-off will provide both Greatbatch and
Nuvectra with the focus and flexibility needed to execute their
distinct strategies," continued Hook.
CFO Comments
"Our customer relationships continue to be strong and we are
well positioned to achieve a record fourth quarter performance.
There are several distinct factors and external headwinds that
drove our revenue decline for the quarter," said Michael Dinkins,
executive vice president and CFO of Greatbatch. "The discrete
factors included the timing of new product introductions and end of
life products, which do not always line up on a quarterly basis.
During the third quarter of 2015, we experienced a net negative
impact. One of the external headwinds we are facing is that our
customers continue to reduce their inventory levels, the majority
of the impact of which we believe is behind us. Additionally, our
revenues continue to be impacted by foreign currency exchange rates
and the slowdown in the energy markets. These were the primary
factors driving our lowered full year revenue forecast of $685
million to $695 million. However, we are maintaining our adjusted
diluted EPS guidance range with the expectation of being at the
lower end of that range as we expect the impact of our reduced
revenue will be partially offset by our cost savings and
consolidation initiatives."
Third Quarter Results
Third quarter 2015 sales of $146.6 million decreased 15% in
comparison to the prior year period. This decrease was primarily
due to lower cardiac and neuromodulation, orthopaedic, and energy
sales, which were impacted by faster than anticipated runoff of end
of life products, customer inventory management programs, as well
as a slowdown in the energy markets. Additionally, sales for the
quarter continued to be impacted by foreign currency exchange rate
fluctuations which reduced sales by $2.5 million ($12 million
year-to-date) in comparison to the prior year. We expect fourth
quarter sales to improve significantly in comparison to the prior
year fourth quarter as customer ordering patterns recover, sales of
new product introductions continue to ramp and customers build
safety stock in anticipation of our vascular and portable medical
product line transfers to our Tijuana, Mexico facilities.
Gross profit of $51.6 million for the third quarter of 2015
decreased 11% in comparison to the prior year period. This decrease
was primarily due to our lower sales partially offset by lower
performance-based compensation. As a result, our gross profit as a
percentage of sales for the third quarter of 2015 increased 137
basis points to 35.2% in comparison to the third quarter of
2014.
Selling, general and administrative ("SG&A") expenses for
the third quarter of 2015 remained consistent with the prior year
period as higher costs associated with our acquisition of CCC
Medical Devices ($0.5 million) and legal fees in connection with
intellectual property ("IP") related litigation ($0.2 million) were
offset by lower performance-based compensation and cost savings
from our various consolidation initiatives.
Net research, development and engineering ("RD&E") costs for
the third quarter of 2015 of $14.3 million increased 5% in
comparison to the third quarter of 2014. This increase was
primarily due to a decrease in customer cost reimbursements due to
the timing of achievement of customer milestones.
Other operating expenses, net ("OOE") for the third quarter of
2015 increased $7.7 million to $13.8 million. This increase was
primarily due to costs incurred in connection with our acquisition
of Lake Region Medical ($5.1 million) and our proposed spin-off of
Nuvectra ($3.1 million). We currently expect OOE to be
approximately $55 million to $60 million for 2015, primarily due to
approximately $25 million of Lake Region Medical transaction costs
expected to be recorded in the fourth quarter of 2015.
Interest expense for the third quarter of 2015 increased $4.8
million to $5.8 million. This increase was due to $4.8 million of
transaction costs (i.e. debt commitment fees, interest rate swap
termination costs) incurred in connection with our acquisition of
Lake Region Medical.
The 2015 year-to-date effective tax rate as of October 2, 2015
was 20.4% compared to 30.1% for the same period of 2014. This
decrease was primarily attributable to higher income in lower tax
rate jurisdictions. The 2015 and 2014 GAAP effective tax rates do
not include the benefit of the Federal research and development tax
credit, but we assume the benefit of this credit when calculating
our adjusted diluted EPS. If enacted, the research and development
tax credit would benefit the current year GAAP provision for income
taxes by approximately $1.6 million or $400 thousand per quarter
and would be recognized in the quarter the legislation is
enacted.
GAAP and adjusted diluted EPS for the third quarter of 2015 were
$0.00 and $0.58, respectively, compared to $0.54 and $0.75,
respectively, for the third quarter of 2014. Refer to Table A at
the end of this release for a reconciliation of GAAP net income and
diluted EPS to adjusted amounts and the "Use of Non-GAAP Financial
Information" section below.
Cash flows provided by operating activities for the third
quarter of 2015 of $8.5 million decreased from $28.2 million in the
comparable 2014 period. This quarter over quarter decrease was due
to higher cash outflow from working capital accounts ($10.5
million), primarily inventory in anticipation of higher fourth
quarter sales, and lower cash operating income ($9.2 million). Our
third quarter 2015 capital expenditures were $9.1 million compared
to prior year third quarter capital expenditures of $4.1
million. This increase was primarily due to our investments in
capacity and capabilities, including transferring our portable
medical product manufacturing to a new facility in Tijuana, Mexico.
During the third quarter of 2015, we repaid $2.5 million of our
long-term debt.
Product Line Sales
The following table summarizes the Company's sales by major
product lines (dollars in thousands):
|
Three Months
Ended |
Product Line |
October 2, 2015 |
October 3, 2014 |
% Change |
Greatbatch Medical |
|
|
|
Cardiac/Neuromodulation |
$ 72,961 |
$ 85,618 |
(15)% |
Orthopaedic |
27,752 |
32,489 |
(15)% |
Portable Medical |
17,224 |
17,199 |
—% |
Vascular |
14,107 |
14,903 |
(5)% |
Energy, Military, Environmental |
11,977 |
19,016 |
(37)% |
Total Greatbatch Medical |
144,021 |
169,225 |
(15)% |
QiG |
2,776 |
2,474 |
12% |
Elimination of Intersegment Sales* |
(160) |
— |
NA |
Total Sales |
$ 146,637 |
$ 171,699 |
(15)% |
|
|
|
|
Organic Constant Currency Sales Growth |
(13)% |
1% |
|
Orthopaedic Organic Constant Currency Sales
Growth |
(7)% |
8% |
|
Greatbatch Medical Constant Currency Sales
Growth |
(13)% |
1% |
|
QiG Organic Constant Currency Sales
Growth |
(2)% |
35% |
|
|
|
|
|
* Intersegment sales between
Greatbatch Medical and QiG are eliminated in consolidation and are
included in Greatbatch Medical's cardiac and neuromodulation
product line. |
Product Line Sales Highlights
Cardiac and neuromodulation sales for the third quarter of 2015
declined 15% to $73.0 million in comparison to the prior year third
quarter. This decrease reflects the impact of customer inventory
management programs, faster than anticipated runoff of end of life
products, as well as tough comparables versus the prior year. These
decreases were partially offset by new product introductions. It
should be noted that revenue from end of life products can be lumpy
in nature and tend to run off over several years. We expect fourth
quarter 2015 cardiac and neuromodulation sales to improve
significantly in comparison to the prior year fourth quarter as
customer ordering patterns recover, new product introductions ramp,
and due to easier comparables versus the 2014 fourth quarter.
Growth in our cardiac and neuromodulation product line for 2016
will continue to be negatively impacted by the end of life on
legacy products, as well as continued pressure from our customer's
inventory management initiatives. However, the impact of these
headwinds is expected to be partially mitigated by growth from new
products, and in particular, neuromodulation new product
introductions.
Orthopaedic sales for the third quarter of 2015 declined 15% to
$27.8 million. Foreign currency exchange rate fluctuations
reduced orthopaedic sales by approximately $2.5 million in
comparison to the prior year third quarter ($12 million
year-to-date) due to the strengthening dollar versus the Euro. On
an organic constant currency basis, in comparison to the prior year
third quarter our orthopaedic sales decreased 7%. This decrease
reflects the impact of customer inventory management programs, as
well as the timing of customer product launches. Orthopaedic sales
are expected to improve in the fourth quarter as instrument sales
tend to be lumpy and are typically tied to customer product
launches. We expect foreign currency exchange rate fluctuations to
reduce full year 2015 orthopaedic revenue by $14 to $15
million.
Our portable medical sales have stabilized and were consistent
with the third quarter of 2014. We are 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. As part of
our investment in capacity and capabilities and to better align our
resources, during 2014, we announced plans to transfer our portable
medical operations into a new facility located in Tijuana, Mexico,
which is expected to be substantially completed by the end of the
first quarter of 2016. We expect this product line to resume growth
in the fourth quarter as customers build safety stock in
anticipation of the product line transfer.
Vascular sales for the third quarter of 2015 declined 5% to
$14.1 million in comparison to the prior year third quarter
primarily due to end of life on legacy products. We expect this
product line to resume growth in the fourth quarter as customers
build safety stock in anticipation of the product line transfer and
as new product introductions begin to ramp. As part of our
investment in capacity and capabilities and to better align our
resources, during 2014, we announced plans to transfer our catheter
and introducer operations into our Tijuana, Mexico facility, which
is expected to be substantially completed by the first half of
2016.
EME sales for the third quarter of 2015 declined 37% to $12.0
million in comparison to the prior year third quarter primarily due
to the slowdown in the energy markets, which has caused customers
to reduce drilling and exploration volumes and is expected to be a
headwind for at least the next three quarters.
QiG revenue for the third quarter of 2015 increased 12% to $2.8
million in comparison to the prior year third quarter. Sales for
the third quarter of 2015 include a full quarter of sales from CCC
Medical Devices, which was acquired in August 2014.
Financial Guidance |
|
We are estimating the following for
2015: |
|
|
|
Sales |
$685 - $695 million |
Foreign Currency Impact on Sales |
$14 - $15 million |
|
|
Capital Expenditures |
$40 - $50 million |
|
|
GAAP Effective Tax Rate |
~22% |
Adjusted Effective Tax Rate |
~20% - 22% |
|
|
Previous Adjusted Diluted EPS
Guidance |
$2.61 - $2.71 |
Intangible Amortization |
$0.35 - $0.35 |
New Adjusted Diluted EPS Guidance |
$2.96 - $3.06 |
GAAP Diluted EPS |
$1.32 - $1.42 |
|
|
Diluted Weighted Average Shares |
26,500,000 |
- We expect to be at the lower end of our Adjusted Diluted EPS
guidance as we expect the impact of our reduced revenue will be
partially offset by our cost savings and consolidation
initiatives.
- The above guidance does not include the impact of the Lake
Region Medical acquisition, which is expected to be dilutive to
GAAP Diluted EPS due to approximately $25 million of transaction
related expenses that is expected to be incurred in the fourth
quarter of 2015. Additionally, we expect the Lake Region Medical
acquisition to be 5% to 10% dilutive to our Adjusted Diluted EPS
for 2015 due to higher incremental interest expense related to the
debt incurred and approximately 5.1 million shares issued in
connection with the transaction.
- Given our acquisition of Lake Region Medical and in order to
present our financial results in a form more comparable to other
medical device and less acquisitive companies, our Adjusted Diluted
EPS guidance now adds back the amortization of intangible assets of
approximately $0.35 per diluted share for 2015, which does not
include the additional intangible amortization expense expected
from Lake Region Medical.
- Our Adjusted Diluted EPS guidance excludes the following:
- Consolidation and optimization, acquisition and integration,
asset write-down, and spin-off related charges of approximately $35
million ($28.5 million net of tax) or $1.08 per diluted share;
- IP related litigation SG&A expenses of approximately $4.5
million ($2.9 million net of tax) or $0.11 per diluted share;
- Lake Region Medical transaction related expenses incurred
during the third quarter of 2015 and included in interest expense
of approximately $6.8 million ($4.4 million net of tax) or $0.17
per diluted share; and
- Gain on investment of cost and equity method investments of
approximately $5.1 million ($3.3 million net of tax) or $0.13 per
diluted share.
- Our Adjusted Diluted EPS guidance includes the benefit of the
Federal research and development tax credit of approximately $1.6
million or $0.06 per diluted share, which has not yet been enacted
for 2015.
- We continue to expect to receive FDA approval for our Algovita
spinal cord stimulator in the fourth quarter of 2015 and expect
that we will spin-off Nuvectra shortly thereafter. Once effective,
the spin-off will deliver Greatbatch improved financial performance
through our long-term manufacturing agreement with Nuvectra for the
supply of Algovita and other platform products and lower operating
expenses estimated in the range of $12 million to $16 million on an
annualized basis.
Conference Call
The Company will host a conference call on Thursday, October 29,
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 866-562-8327
and the participant passcode is 52772884. An audio replay will also
be available beginning from 8:00 p.m. E.T. on October 29, 2015
until November 5, 2015. To access the replay, dial 855-859-2056 and
enter the pass code 52772884.
About Greatbatch, Inc.
Greatbatch, Inc. (NYSE:GB) is one of the largest medical device
outsource (MDO) manufacturers in the world serving the cardiac,
neuromodulation, orthopaedics, vascular, advanced surgical and
portable medical markets. The company provides innovative,
high quality medical technologies that enhance the lives of
patients worldwide. In addition, it develops batteries for high-end
niche applications in energy, military, and environmental markets.
The company's brands include Greatbatch Medical, Lake Region
Medical and Electrochem. 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 net
income, adjusted earnings per diluted share, EBITDA, 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) amortization of intangible assets
(iii) facility consolidation, optimization, manufacturing transfer
and system integration charges, (iv) asset write-down and
disposition charges, (v) charges in connection with corporate
realignments or a reduction in force, (vi) certain litigation
expenses, charges and gains, (vii) unusual or infrequently
occurring items, (viii) gain/loss on cost and equity method
investments, (ix) the income tax (benefit) related to these
adjustments and (x) certain tax items related to the Federal
research and development tax credit which are outside the normal
benefit received. Adjusted earnings per diluted share are
calculated by dividing adjusted net income by diluted weighted
average shares outstanding. Adjusted EBITDA consists of GAAP net
income plus (i) the same adjustments as listed above except for
(ix) and (x), (ii) GAAP stock-based compensation, interest expense,
depreciation and amortization (less adjustments already excluded in
the items listed above), (iii) GAAP provision (benefit) for income
taxes and (iv) cash gains received from cost and equity method
investments. 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 net income, adjusted diluted earnings per
share, EBITDA, 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 contained in this press release and other
written and oral statements made from time to time by us and our
representatives are not statements of historical or current fact.
As such, they 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. We have based these forward-looking statements on our
current expectations, and these statements are subject to known and
unknown risks, uncertainties and assumptions. Forward-looking
statements include statements relating to:
- future sales, expenses and profitability;
- future development and expected growth of our business and
industry;
- our ability to execute our business model and our business
strategy;
- our ability to identify trends within our industries and to
offer products and services that meet the changing needs of those
markets; and
- projected capital expenditures.
You can identify forward-looking statements 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 statements are only predictions.
Actual events or results may differ materially from those stated or
implied by these forward-looking statements. In evaluating these
statements and our prospects, you should carefully consider the
factors set forth below. All forward-looking statements
attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary factors and to
others contained throughout this report. We are under no duty to
update any of the forward-looking statements after the date of this
release or to conform these statements to actual results.
Although it is not possible to create a comprehensive list of
all factors that may cause actual results to differ from the
results expressed or implied by our forward-looking statements or
that may affect our future results, some of these factors include
the following: our high level of indebtedness following the
acquisition of Lake Region Medical, our inability to pay principal
and interest on this high level of outstanding indebtedness, and
the risk that this high level of indebtedness limits our ability to
invest in our business and overall financial flexibility; our
dependence upon a limited number of customers; customer ordering
patterns; product obsolescence; our inability to market current or
future products; pricing pressure from customers; our ability to
timely and successfully implement cost reduction and plant
consolidation initiatives; our reliance on third party suppliers
for raw materials, products and subcomponents; fluctuating
operating results; our inability to maintain high quality standards
for our products; challenges to our intellectual property rights;
product liability claims; product field actions or recalls; our
inability to successfully consummate and integrate acquisitions,
including the acquisition of Lake Region Medical, and to realize
synergies and benefits from these acquisitions and to operate these
acquired businesses in accordance with expectations; our
unsuccessful expansion into new markets; our failure to develop new
products including system and device products; the timing, progress
and ultimate success of pending regulatory actions and approvals,
including with respect to Algovita; risks associated with the
proposed spin-off of Nuvectra including our ability to execute the
spin-off successfully, the timing and taxable nature of the
spin-off, and the performance of Nuvectra post spin-off; our
inability to obtain licenses to key technology; regulatory changes,
including Health Care Reform, or consolidation in the healthcare
industry; global economic factors including currency exchange rates
and interest rates; the resolution of various legal actions brought
against the Company; and other risks and uncertainties that arise
from time to time and are described in Item 1A "Risk Factors"
of 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: Net Income and Diluted EPS
Reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
October 2,
2015 |
October 3,
2014 |
October 2,
2015 |
October 3,
2014 |
(in thousands except per share
amounts) |
Net Income |
Per Diluted
Share |
Net
Income |
Per Diluted
Share |
Net Income |
Per Diluted
Share |
Net Income |
Per Diluted
Share |
Net income as reported |
$ 22 |
$ — |
$ 14,012 |
$ 0.54 |
$ 17,313 |
$ 0.66 |
$ 41,282 |
$ 1.60 |
Adjustments: |
|
|
|
|
|
|
|
|
Amortization of intangibles(a)(c) |
2,271 |
0.09 |
2,379 |
0.09 |
6,996 |
0.27 |
7,205 |
0.28 |
Inventory step-up amortization
(COS)(c) |
— |
— |
57 |
— |
— |
— |
57 |
— |
IP related litigation
(SG&A)(b)(c) |
733 |
0.03 |
503 |
0.02 |
2,136 |
0.08 |
998 |
0.04 |
Consolidation and optimization expenses
(OOE)(c)(d) |
4,523 |
0.17 |
2,508 |
0.10 |
15,422 |
0.58 |
3,763 |
0.15 |
Acquisition and integration (income)
expenses (OOE)(c)(e) |
4,845 |
0.18 |
87 |
— |
4,961 |
0.19 |
(161) |
(0.01) |
Asset dispositions, severance and other
(OOE)(c)(f) |
2,468 |
0.09 |
1,489 |
0.06 |
3,600 |
0.14 |
2,276 |
0.09 |
Lake Region Medical transaction costs
(interest expense)(c)(g) |
3,112 |
0.12 |
— |
— |
3,112 |
0.12 |
— |
— |
Gain on cost and equity method
investments, net (other income, net)(c)(h) |
(2,976) |
(0.11) |
(2,044) |
(0.08) |
(3,327) |
(0.13) |
(2,551) |
(0.10) |
R&D Tax Credit(i) |
400 |
0.02 |
400 |
0.02 |
1,200 |
0.05 |
1,200 |
0.05 |
Adjusted net income and diluted
EPS(j) |
$ 15,398 |
$ 0.58 |
$ 19,391 |
$ 0.75 |
$ 51,413 |
$ 1.95 |
$ 54,069 |
$ 2.09 |
Adjusted diluted weighted average shares |
26,441 |
|
25,923 |
|
26,372 |
|
25,850 |
|
|
|
|
|
|
|
|
|
|
(a) Given our acquisition
of Lake Region Medical in the fourth quarter of 2015 and in order
to present our financial results in a form more comparable to other
medical device companies and less acquisitive companies, during the
third quarter of 2015 we began excluding intangible asset
amortization for purposes of calculating adjusted net income and
adjusted diluted EPS. Prior period adjusted amounts have been
recalculated to exclude intangible amortization for all periods
presented. |
(b) In 2013, we filed suit
against one of our cardiac/neuromodulation competitors alleging
they were infringing on our intellectual property. Given the
complexity and significant costs incurred pursuing this litigation,
during the second quarter of 2015 we began excluding these
litigation expenses from adjusted amounts. Total costs expected to
be incurred in connection with this litigation in 2015 is between
$4 million and $5 million pre-tax. We expect this matter to proceed
to trial during the first quarter of 2016. Prior period adjusted
amounts have been recalculated to exclude these costs for all
periods presented. |
(c) Net of tax amounts
computed using a 35% U.S., Mexico, and France statutory tax rate, a
25% Uruguay statutory tax rate, and a 0% tax rate for Swiss
adjustments. Expenses that are not deductible for tax purposes
(i.e. permanent tax differences) are added back at 100%. |
(d) During 2015 and 2014,
we incurred costs primarily related to the transfer of our portable
medical and vascular manufacturing operations to Tijuana,
Mexico. |
(e) During 2015, we
incurred transaction costs related to the acquisition of Lake
Region Medical ($5.1 million pre-tax) and the integration of CCC
Medical Devices. During 2014, we incurred costs (income) related to
the integration of CCC Medical Devices and NeuroNexus
Technologies. |
(f) 2015 costs primarily
include legal and professional fees incurred in connection with the
proposed spin-off of Nuvectra ($3.1 million pre-tax during the
third quarter of 2015 and $4.6 million pre-tax for the first nine
months of 2015). 2014 costs primarily include costs in connection
with our business reorganization to realign our contract
manufacturing operations. |
(g) During the third
quarter of 2015, we recorded $4.8 million pre-tax of transaction
costs (i.e. debt commitment fees, interest rate swap termination
costs) in connection with our acquisition of Lake Region
Medical. |
(h) Pre-tax amount is a
gain of $4.6 million and $5.1 million for the 2015 quarter and
year-to-date periods, respectively, and a gain of $3.1 million and
$3.9 million for the 2014 quarter and year-to-date periods,
respectively. |
(i) The Federal R&D tax
credit has not yet been extended for 2015. The 2014 Federal R&D
tax credit was enacted in the fourth quarter of 2014. Amounts
assume that the tax credit was effective at the beginning of the
year for 2015 and 2014. |
(j) The per share data in
this table has been rounded to the nearest $0.01 and therefore may
not sum to the total. |
Table B: Adjusted EBITDA
Reconciliation* |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
(dollars in thousands) |
October 2, 2015 |
October 3, 2014 |
October 2, 2015 |
October 3, 2014 |
Net income as reported |
$ 22 |
$ 14,012 |
$ 17,313 |
$ 41,282 |
|
|
|
|
|
Interest expense |
5,825 |
1,051 |
8,151 |
3,208 |
Provision (benefit) for income taxes |
(16) |
4,888 |
4,448 |
17,811 |
Depreciation |
5,504 |
5,808 |
16,933 |
17,405 |
Amortization |
3,243 |
3,487 |
10,008 |
10,451 |
EBITDA |
14,578 |
29,246 |
56,853 |
90,157 |
|
|
|
|
|
Inventory step-up amortization |
— |
87 |
— |
87 |
IP related litigation |
1,127 |
773 |
3,286 |
1,535 |
Stock-based compensation |
3,027 |
3,509 |
8,999 |
10,238 |
Consolidation and optimization expenses |
5,473 |
3,752 |
19,202 |
6,970 |
Acquisition and integration expenses
(income) |
5,202 |
133 |
5,366 |
(248) |
Asset dispositions, severance and other |
3,169 |
2,291 |
4,881 |
3,501 |
Noncash (gain) loss on cost and equity method
investments |
(1,178) |
35 |
(1,718) |
(745) |
Adjusted EBITDA |
$ 31,398 |
$ 39,826 |
$ 96,869 |
$ 111,495 |
Adjusted EBITDA as a % of sales |
21.4% |
23.2% |
20.1% |
21.5% |
|
* During the current quarter we
changed our calculation and presentation of Adjusted EBITDA in
order to present our financial results in a form more consistent
with other medical device companies, as well as our debt covenant
calculations. The primary difference between the current and former
calculation is that stock-based compensation is now added back to
GAAP net income to derive Adjusted EBITDA. Prior period adjusted
amounts have been recalculated to be presented on a comparable
basis. |
|
|
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS - Unaudited |
(in thousands
except per share data) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
October 2, 2015 |
October 3, 2014 |
October 2, 2015 |
October 3, 2014 |
Sales |
$ 146,637 |
$ 171,699 |
$ 482,847 |
$ 518,061 |
Cost of sales |
94,991 |
113,581 |
320,852 |
343,877 |
Gross profit |
51,646 |
58,118 |
161,995 |
174,184 |
Operating expenses: |
|
|
|
|
Selling, general and administrative
expenses |
22,308 |
22,121 |
69,021 |
65,753 |
Research, development and engineering
costs, net |
14,299 |
13,638 |
39,907 |
39,962 |
Other operating expenses, net |
13,844 |
6,176 |
29,449 |
10,223 |
Total operating expenses |
50,451 |
41,935 |
138,377 |
115,938 |
Operating income |
1,195 |
16,183 |
23,618 |
58,246 |
Interest expense |
5,825 |
1,051 |
8,151 |
3,208 |
Other income, net |
(4,636) |
(3,768) |
(6,294) |
(4,055) |
Income before provision (benefit) for
income taxes |
6 |
18,900 |
21,761 |
59,093 |
Provision (benefit) for income taxes |
(16) |
4,888 |
4,448 |
17,811 |
Net income |
$ 22 |
$ 14,012 |
$ 17,313 |
$ 41,282 |
|
|
|
|
|
Earnings per share: |
|
|
|
|
Basic |
$ — |
$ 0.56 |
$ 0.68 |
$ 1.67 |
Diluted |
$ — |
$ 0.54 |
$ 0.66 |
$ 1.60 |
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
Basic |
25,536 |
24,899 |
25,424 |
24,784 |
Diluted |
26,441 |
25,923 |
26,372 |
25,850 |
|
|
CONDENSED CONSOLIDATED
BALANCE SHEETS - Unaudited |
(in
thousands) |
|
|
|
|
As
of |
ASSETS |
October 2, 2015 |
January 2, 2015 |
Current assets: |
|
|
Cash and cash equivalents |
$ 68,594 |
$ 76,824 |
Accounts receivable, net |
108,278 |
124,953 |
Inventories |
164,236 |
129,242 |
Refundable income taxes |
3,447 |
1,716 |
Deferred income taxes |
6,490 |
6,168 |
Prepaid expenses and other current
assets |
12,103 |
11,780 |
Total current assets |
363,148 |
350,683 |
Property, plant and equipment, net |
156,009 |
144,925 |
Amortizing intangible assets, net |
55,329 |
65,337 |
Indefinite-lived intangible assets |
20,288 |
20,288 |
Goodwill |
354,139 |
354,393 |
Deferred income taxes |
2,415 |
2,626 |
Other assets |
31,181 |
17,757 |
Total assets |
$ 982,509 |
$ 956,009 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Current portion of long-term debt |
$ 15,000 |
$ 11,250 |
Accounts payable |
56,277 |
46,436 |
Income taxes payable |
2,567 |
2,003 |
Deferred income taxes |
339 |
588 |
Accrued expenses |
40,076 |
48,384 |
Total current liabilities |
114,259 |
108,661 |
Long-term debt |
165,000 |
176,250 |
Deferred income taxes |
50,024 |
53,195 |
Other long-term liabilities |
7,371 |
4,541 |
Total liabilities |
336,654 |
342,647 |
Stockholders' equity: |
|
|
Preferred stock |
— |
— |
Common stock |
26 |
25 |
Additional paid-in capital |
383,691 |
366,073 |
Treasury stock |
(2,279) |
(1,307) |
Retained earnings |
256,761 |
239,448 |
Accumulated other comprehensive
income |
7,656 |
9,123 |
Total stockholders' equity |
645,855 |
613,362 |
Total liabilities and stockholders'
equity |
$ 982,509 |
$ 956,009 |
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