Greatbatch, Inc. Updated Guidance 2016
March 09 2016 - 7:46PM
Greatbatch, Inc. (NYSE:GB), announced today that it has updated
guidance for 2016.
Thomas J. Hook, president & chief executive officer,
commented, “With the completion of the acquisition of Lake Region
Medical and the spin-off of Nuvectra, Greatbatch is now optimally
positioned to focus on sustainable growth and profitability.
We have the scale, full systems capabilities and broad product
offerings that will allow us to deepen our customer partnerships
and establish ourselves as the world’s leading medical device
outsource manufacturer. With the integration plans off to
such a productive start, we are well positioned to accelerate our
strategic growth plans and provide long term benefits for our
shareholders, customers and our associates. Over the past month, I
have been visiting our locations and meeting with many of our major
customers to share the Greatbatch story and get valuable
feedback.”
Hook concluded, “I’m extremely pleased with the way the
integration of Lake Region Medical is progressing. The new
Greatbatch leadership team has been in place for approximately one
month and is highly focused on assimilating the business and
executing our strategic growth initiatives. We have a clear
line of sight to deliver the targeted $25 million of integration
synergies for 2016 with the primary focus on organization
structures, contracts spend and infrastructure costs. Our longer
term focus will be manufacturing footprint optimization, continued
supply chain optimization and process improvements. Given our
established track record of integrating operations, I remain
confident that we will be able to exceed our long term synergy
expectations. We look forward to meeting with shareholders over the
next several months to further reinforce our strategic
direction.”
First Quarter Sales and Full-Year 2016 Sales and
Earnings Guidance:
- For the full year 2016, on a constant currency basis, the
Company expects net sales to be in the $1.425 billion range to
$1.475 billion versus its prior guidance of approximately $1.47
billion. For the first quarter of 2016 the Company expects constant
currency revenue to be in the range of $335 million.
- For the full year 2016, the Company expects Adjusted EBITDA to
be in the range of $320 million to $335 million versus its previous
guidance of approximately $327 million.
- For the full year 2016, we expect adjusted earnings per diluted
share to be in the range of $3.00 to $3.35 on 31.5 million fully
diluted shares outstanding. Note, adjusted EPS guidance was not
previously provided.
- Adjusted EPS for 2016 is expected to consist of GAAP EPS
excluding items such as intangible amortization (approximately $40
million), IP related litigation costs, and Nuvectra results prior
to the spin-off, consolidation, acquisition, integration, and asset
disposition/write down charges totaling approximately $110 million.
The after tax impact of these items is estimated to be
approximately $77 million or approximately $2.44 per diluted
share.
Selected Financial Guidance Items Affecting Cash
Flow
- Maintenance Capital Expenditures to be in the range of $50
million - $60 million per year.
- Depreciation & Amortization is expected to be $100 million
- $105 million for 2016.
- Stock compensation expense is expected to be approximately $14
million for 2016.
- Working Capital is expected to be consistent with the prior
year.
- The 2016 adjusted effective tax rate is expected to be
approximately 30%; cash taxes are expected to be approximately $10
million for the full year 2016.
- Other Operating expense is expected to be $55 million - $65
million for the full year 2016.
- Cash payment for Nuvectra Spin-off is $75 million.
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. Adjusted net income and adjusted earnings per diluted
share 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 for the period.
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 items (ix), and (x), (ii)
GAAP stock-based compensation, interest expense, and depreciation,
(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.
About Greatbatch, Inc.
Greatbatch, Inc. (NYSE:GB) is one of the largest
medical device outsource 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.
Contact Information
Anthony Borowicz
VP Business Development
Greatbatch, Inc.
716-759-5809
tborowicz@greatbatch.com
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