Greatbatch, Inc. (NYSE:GB), today announced results for its first
quarter ended April 1, 2016.
|
Three Months Ended |
|
As Reported |
|
Comparable Basis |
(Dollars in thousands, except per share data) |
April 1, |
|
April 3, |
|
% |
|
April 1, |
|
April 3, |
|
% |
2016 |
|
2015 |
|
Change |
|
2016(a) |
|
2015(b) |
|
Change |
Sales |
$ |
332,238 |
|
|
$ |
161,320 |
|
|
106 |
% |
|
$ |
331,058 |
|
|
$ |
357,867 |
|
|
(7 |
)% |
Organic Constant Currency Sales Decrease |
(16 |
)% |
|
(7 |
)% |
|
|
|
(7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted EPS |
$ |
(0.41 |
) |
|
$ |
0.31 |
|
|
N/A |
|
$ |
(0.30 |
) |
|
$ |
0.15 |
|
|
N/A |
Adjusted Diluted
EPS(c) |
$ |
0.34 |
|
|
$ |
0.65 |
|
|
(48 |
)% |
|
$ |
0.42 |
|
|
$ |
0.71 |
|
|
(41 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
$ |
37,268 |
|
|
$ |
20,118 |
|
|
85 |
% |
|
$ |
42,191 |
|
|
$ |
57,377 |
|
|
(26 |
)% |
Adjusted EBITDA(c) |
$ |
61,705 |
|
|
$ |
30,428 |
|
|
103 |
% |
|
$ |
65,370 |
|
|
$ |
72,045 |
|
|
(9 |
)% |
Adjusted EBITDA as a %
Sales |
18.6 |
% |
|
18.9 |
% |
|
|
|
19.7 |
% |
|
20.1 |
% |
|
|
(a) Comparable basis amounts for
2016 exclude the results of Nuvectra Corporation (“Nuvectra”) prior
to its spin-off on March 14, 2016.(b) Comparable basis
amounts for 2015 exclude the results of Nuvectra and include the
results of the former Lake Region Medical. Our historical pro forma
information presentation, which was filed with the SEC on Form 8-K
on February 29, 2016, contains a reconciliation of 2015 comparable
amounts to as reported amounts.(c) Refer to Tables A
and B at the end of this release for reconciliations of as reported
adjusted amounts to GAAP.
Executive Summary
- Revenue of $331 million on a comparable basis was in-line with
our guidance of $335 million. GAAP revenue was $332 million;
- Achieved adjusted diluted EPS of $0.42 and adjusted EBITDA of
$65 million or 19.7% of sales on a comparable basis. GAAP diluted
EPS and EBITDA was a loss of ($0.41) per share and $37 million,
respectively;
- Merger synergies tracking as planned. Realized approximately $5
million of synergies in the first quarter. We have
successfully implemented phase 2 of our synergy plan in March and
expect at least $25 million of synergies for the full-year;
- Completed the spin-off of Nuvectra on March 14, 2016;
- Revenue for Q2 is expected to be between $355 million - $360
million; and
- Guidance for full-year sales ($1.425 billion - $1.475 billion),
adjusted EBITDA ($320 million - $335 million) and adjusted diluted
EPS ($3.00 - $3.35) remains unchanged.
“The first quarter results were in-line with our
expectations,” said Thomas J. Hook, Greatbatch president and chief
executive officer. “We made significant progress on the integration
of Lake Region Medical, with the initial focus on combining our
infrastructures into a single cohesive company. The next phase of
the integration will focus on supply chain and global footprint
optimization. We will continue to execute on our cost savings
commitments and delivering improved organic growth. With the added
vascular, orthopedic and advanced surgical products &
capabilities, we are well positioned to leverage this comprehensive
product portfolio to deliver innovative, cost-effective solutions
for our customers and long-term returns to our shareholders.”
First Quarter 2016 Results
Throughout this press release, we are providing
comparable basis amounts, which adjust as reported 2016 amounts to
exclude the results of Nuvectra prior to its spin-off on March 14,
2016 and adjust 2015 as reported amounts to exclude the results of
Nuvectra and include the results of the former Lake Region Medical.
See our historical pro forma information presentation, which was
filed with the SEC on Form 8-K on February 29, 2016, for a
reconciliation of 2015 comparable basis amounts to as reported
amounts.
First quarter 2016 sales of $331.1 million
decreased 7% on a comparable constant currency basis. Foreign
currency exchange rates had a negative $1.6 million impact on
revenue during the first quarter in comparison to the prior year.
On an as reported basis, revenue increased $170.9 million or 106%
due to the acquisition of Lake Region Medical in October 2015,
which added approximately $198 million to current quarter revenue.
On an as reported organic constant currency basis, revenue declined
16% primarily due to the continuing impact of end of life products,
specific customers’ working down their inventory levels in the
quarter, price concessions made in return for long-term volume
commitments, and the continuing impact of the slowdown in the
energy markets. These decreases were partially offset by growth in
our neuromodulation business. Legacy Lake Region Medical revenues
were consistent with the prior year.
First quarter 2016 diluted EPS was a loss of
$0.41 and $0.30 per share on an as reported and comparable basis,
respectively, compared to income of $0.31 and $0.15 per share,
respectively, for the 2015 first quarter. These decreases were
primarily due to $23.0 million of consolidation, IP related
litigation, acquisition, integration and spin-off related expenses
incurred during the first quarter of 2016 compared to $8.6 million
in the 2015 first quarter. Adjusted diluted EPS for the first
quarter of 2016, which excludes these expenses as well as other
items, was $0.34 and $0.42 on an as reported and comparable basis,
respectively, compared to $0.65 and $0.71, respectively, for the
2015 first quarter. These decreases were primarily due to the
decrease in revenue as discussed above partially offset by a
reduction in SG&A expenses as we realized approximately $5
million of synergies during the first quarter, which is expected to
ramp up as the year progresses. We are still on track to achieve at
least $25 million in annual synergies for 2016, which is expected
to increase to at least a $60 million annual run rate by 2018. The
$0.08 per share difference between as reported and comparable
adjusted diluted EPS for the first quarter of 2016 is due to
excluding the losses of Nuvectra prior to its spin-off on March 14,
2016. Refer to Table A at the end of this release for a
reconciliation of GAAP diluted EPS to adjusted amounts and the “Use
of Non-GAAP Financial Information” section below.
Consistent with revenue and adjusted diluted
EPS, adjusted EBITDA on a comparable basis decreased 9% to $65.4
million from $72.0 million. Refer to Table B at the end of this
release for a reconciliation of GAAP net income (loss) to adjusted
EBITDA amounts and the “Use of Non-GAAP Financial Information”
section below.
Product Line SalesThe following
table summarizes our sales by major product lines (dollars in
thousands):
|
Three Months Ended |
|
As Reported |
|
Comparable Basis |
Product
Line |
April 1, 2016 |
|
April 3, 2015 |
|
% Change |
|
April 1, 2016(a) |
|
April 3, 2015(b) |
|
% Change |
Advanced
Surgical, Orthopedics, and Portable Medical |
$ |
91,329 |
|
|
$ |
52,638 |
|
|
74 |
% |
|
$ |
91,329 |
|
|
$ |
105,773 |
|
|
(14 |
)% |
Cardio
and Vascular |
133,650 |
|
|
10,356 |
|
|
N/A |
|
133,650 |
|
|
138,084 |
|
|
(3 |
)% |
Cardiac/Neuromodulation |
97,075 |
|
|
80,616 |
|
|
20 |
% |
|
95,895 |
|
|
98,866 |
|
|
(3 |
)% |
Electrochem |
11,672 |
|
|
17,710 |
|
|
(34 |
)% |
|
11,672 |
|
|
17,710 |
|
|
(34 |
)% |
Elimination of interproduct line sales |
(1,488 |
) |
|
— |
|
|
N/A |
|
(1,488 |
) |
|
(2,566 |
) |
|
(42 |
)% |
Total
Sales |
$ |
332,238 |
|
|
$ |
161,320 |
|
|
106 |
% |
|
$ |
331,058 |
|
|
$ |
357,867 |
|
|
(7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Organic Constant
Currency Sales Increase (Decrease) |
(16 |
)% |
|
(7 |
)% |
|
|
|
(7 |
)% |
|
|
|
|
Organic Constant
Currency Sales Increase (Decrease) - Advanced Surgical, Orthopedics
and Portable Medical |
(25 |
)% |
|
2 |
% |
|
|
|
(12 |
)% |
|
|
|
|
(a) Comparable basis amounts for
2016 exclude $1.2 million of net Nuvectra revenue recognized prior
to its spin-off.(b) Comparable basis amounts for 2015 exclude
the net revenue of Nuvectra and include the results of the former
Lake Region Medical. See the historical pro forma information
presentation, which was filed with the SEC on Form 8-K on February
29, 2016, for a reconciliation of 2015 comparable basis amounts to
as reported amounts.
In connection with our acquisition of Lake
Region Medical, we have recast our revenue by product line into the
following four categories:
- Advanced Surgical, Orthopedics, and Portable Medical - Includes
legacy Greatbatch Orthopedics and Portable Medical product line
sales plus the legacy Lake Region Medical Advanced Surgical product
line sales.
- Cardio and Vascular - Includes the legacy Greatbatch Vascular
product line sales plus the legacy Lake Region Medical Cardio and
Vascular product line sales less the legacy Lake Region Medical
Cardiac/Neuromodulation sales.
- Cardiac/Neuromodulation - Includes the legacy Greatbatch
Cardiac/Neuromodulation and QiG sales plus the legacy Lake Region
Medical Cardiac/Neuromodulation sales previously included in their
Cardio and Vascular product line sales.
- Electrochem - Includes the legacy Greatbatch Energy, Military
and Environmental product line sales.
We are currently in the process of re-evaluating
our reporting structure, which may change our product line and
segment reporting in the future. This process is expected to
be finalized in 2016.
Product Line Sales
HighlightsFirst quarter 2016 Advanced Surgical,
Orthopedics, and Portable Medical sales of $91.3 million decreased
12% on a comparable constant currency basis. Foreign currency
exchange rates had a negative $1.4 million impact on this product
line revenue during the first quarter in comparison to the prior
year. This decrease was primarily due to portable medical customers
building safety stock in the fourth quarter of 2015 in anticipation
of our product line transfers, thus lowering orders in the first
quarter of 2016; the timing of orthopedic customer product
launches, which increased first quarter 2015 sales; customer
inventory adjustments; and price concessions made in return for
long-term volume commitments.
First quarter 2016 Cardio and Vascular sales of
$133.7 million decreased 3% on a comparable constant currency
basis. Foreign currency exchange rates had a negative $0.2 million
impact on this product line revenue during the first quarter in
comparison to the prior year. This decrease was primarily due to
specific customer’s working down their inventory levels in the
quarter.
First quarter 2016 Cardiac/Neuromodulation sales
of $95.9 million decreased 3% on a comparable constant currency
basis. Foreign currency exchange rates did not materially impact
this product line during the quarter. This decrease was primarily
due to the continuing impact of the runoff of end of life products,
specific customers’ working down their inventory levels in the
quarter, and price concessions in return for long-term volume
commitments. These factors were largely offset by growth in our
neuromodulation business.
First quarter 2016 Electrochem sales of $11.7
million declined 34% on an as reported and comparable basis.
Foreign currency exchange rates did not materially impact this
product line during the quarter. This decrease was primarily due to
the continued impact of the slowdown in the energy markets, which
has caused customers to reduce drilling, pipeline inspection and
exploration volumes. We expect the slowdown in the energy markets
to continue to impact year over year comparables in the second
quarter of 2016 but will have less of an impact in the second half
of 2016 reflecting the reductions of inventory and reduced orders
that occurred in the second half of 2015. We currently believe that
the impact of the downturn in the energy markets on our business
has bottomed, but we do not expect a rebound in our Electrochem
business until at least 2017.
Cash Flow and Balance Sheet
InformationCash flows provided by operating activities for
the first quarter of 2016 were approximately $30 million and
capital expenditures were approximately $19 million. Cash flows
from operations during the first quarter of 2016 were negatively
impacted by $23.0 million of consolidation, IP related litigation,
acquisition, integration and spin-off related expenses, which are
predominantly cash expenditures. During the first quarter of 2016,
we repaid $7.25 million on our outstanding term loans.
Additionally, cash balances decreased $28.4 million during the
first quarter of 2016 as $76 million of cash was spun-off with
Nuvectra, which was funded with cash on hand as well as $55 million
of borrowings on our revolving line of credit.
Second Quarter and Full-Year 2016 Sales and Earnings
Guidance
For the second quarter, we currently expect revenue to be in the
range of $355 million to $360 million. For the full-year 2016, we
are reiterating our previously reported guidance of revenue in the
range of $1.425 billion to $1.475 billion, adjusted EBITDA in the
range of $320 million to $335 million, and adjusted earnings per
diluted share in the range of $3.00 to $3.35 per share.
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
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 $75 million or approximately $2.40 per diluted share.
Additionally, our revenue and adjusted EPS guidance excludes the
results of Nuvectra prior to its spin-off on March 14, 2016 of $1.2
million and a loss of $0.08 per share, respectively.
Our adjusted effective tax rate for the first
quarter of 2016 was approximately 42% as a result of the
Company tax affecting its adjustments at the statutory rate,
consistent with its adjusted diluted EPS methodology, but at the
lower expected full-year effective tax rate for GAAP purposes as
required. The impact from these differences is expected to reverse
over the remaining three quarters and our full-year adjusted
effective tax rate is expected to be 30%. Cash taxes are expected
to be approximately $10 million for 2016. The first quarter 2016
GAAP effective tax rate includes a $1.3 million discrete charge
related to non-deductible spin-related expenses, which is added
back for adjusted diluted EPS purposes.
Conference Call
The Company will host a conference call on
Thursday, April 28, 2016 at 5:00 p.m. E.T. to discuss these
results. The scheduled conference call will be webcast live and is
accessible through our website at www.greatbatch.com or by dialing
866-562-8327 and the participant passcode is 67902849. An audio
replay will also be available beginning from 8:00 p.m. E.T. on
April 28, 2016 until May 5, 2016. To access the replay, dial
855-859-2056 and enter the passcode 67902849.
About Greatbatch, Inc.Greatbatch, Inc.
(NYSE:GB) is one of the largest medical device outsource (MDO)
manufacturers in the world serving the cardiac, neuromodulation,
orthopedics, 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. In
October 2015, Greatbatch, Inc. completed its acquisition of Lake
Region Medical, with the combined company expected to be renamed
Integer Holdings Corporation later this year (subject to
shareholder approval).
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, earnings before interest taxes depreciation and amortization
(“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 (loss) 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
during the period. 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. Comparable basis
amounts for 2016 exclude the results of Nuvectra prior to its
spin-off on March 14, 2016. Comparable basis amounts for 2015
exclude the results of Nuvectra and include the results of the
former Lake Region Medical. We believe that the presentation of
adjusted net income, adjusted diluted earnings per share, EBITDA,
adjusted EBITDA, organic constant currency sales growth rates and
comparable basis amounts 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 StatementsSome
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
release. 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; 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 our Annual Report on Form 10-K and
in other periodic filings with the SEC. We assume 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 (Loss) and Diluted EPS
Reconciliation
|
Three Months Ended |
|
April 1, 2016 |
|
April 3, 2015 |
(in thousands
except per share amounts) |
NetIncome |
|
PerDilutedShare |
|
NetIncome |
|
PerDilutedShare |
Net income (loss) as
reported |
$ |
(12,660 |
) |
|
$ |
(0.41 |
) |
|
$ |
8,008 |
|
|
$ |
0.31 |
|
Adjustments: |
|
|
|
|
|
|
|
Amortization of intangibles(a)(c) |
6,691 |
|
|
0.21 |
|
|
2,366 |
|
|
0.09 |
|
IP
related litigation (SG&A)(b)(c) |
1,240 |
|
|
0.04 |
|
|
455 |
|
|
0.02 |
|
Consolidation and optimization expenses (OOE)(c)(d) |
5,314 |
|
|
0.17 |
|
|
5,538 |
|
|
0.21 |
|
Acquisition and integration expenses (OOE)(c)(e) |
6,511 |
|
|
0.21 |
|
|
46 |
|
|
— |
|
Asset
dispositions, severance and other (OOE)(c)(f) |
4,226 |
|
|
0.14 |
|
|
434 |
|
|
0.02 |
|
Gain on
cost and equity method investments, net (other income,
net)(c)(g) |
(846 |
) |
|
(0.03 |
) |
|
(324 |
) |
|
(0.01 |
) |
R&D
Tax Credit(h) |
— |
|
|
— |
|
|
400 |
|
|
0.02 |
|
Adjusted
net income and diluted EPS(i) |
$ |
10,476 |
|
|
$ |
0.34 |
|
|
$ |
16,923 |
|
|
$ |
0.65 |
|
Adjusted diluted
weighted average shares(j) |
31,253 |
|
|
|
|
26,219 |
|
|
|
(a) As a result of 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.(b) In 2013,
we filed suit against AVX Corporation alleging they were infringing
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. This matter proceeded to trial during the first quarter of
2016 and a federal jury awarded Greatbatch $37.5 million in
damages. To date, no gains have been recognized in connection with
this litigation. Prior period adjusted amounts have been
recalculated to exclude IP related litigation costs.(c) Net
of tax amounts computed using a 35% U.S., Mexico, Germany and
France statutory tax rate, a 0% Swiss tax rate, a 25% Uruguay
statutory tax rate, and a 12.5% Ireland statutory tax rate.
Expenses that are not deductible for tax purposes (i.e. permanent
tax differences) are added back at 100%.(d) During 2016 and
2015, we incurred costs primarily related to the transfer of our
Beaverton, OR portable medical and Plymouth, MN vascular
manufacturing operations to Tijuana, Mexico. Additionally, with the
acquisition of Lake Region Medical, 2016 costs also include
expenses incurred in connection with the closure of Lake Region
Medical’s Arvada, CO site and the consolidation of its two Galway,
Ireland sites, which was initiated by Lake Region Medical in
2014.(e) During 2016, we incurred acquisition and integration
costs related to the acquisition of Lake Region Medical, which was
acquired in October 2015. During 2015, we incurred costs related to
the integration of CCC Medical Devices, which was acquired in
August 2014.(f) Costs primarily include legal and
professional fees incurred in connection with the spin-off of
Nuvectra, which was completed in March 2016.(g) Pre-tax
amount is a gain of $1.3 million and $0.5 million for the 2016 and
2015 periods, respectively.(h) The 2015 Federal R&D tax
credit was enacted during the fourth quarter of 2015 and has been
permanently reinstated. Amounts assume that the tax credit was
effective at the beginning of the year for 2015. (i)
The per share data in this table has been rounded to the
nearest $0.01 and therefore may not sum to the total.(j)
First quarter 2016 adjusted diluted weighted average shares
includes 535,000 shares related to outstanding equity awards that
were not dilutive for GAAP diluted EPS purposes.
Table B: Adjusted EBITDA Reconciliation*
|
Three Months Ended |
|
April 1, |
|
April 3, |
(dollars in
thousands) |
2016 |
|
2015 |
Net income (loss) as
reported |
$ |
(12,660 |
) |
|
$ |
8,008 |
|
|
|
|
|
Interest expense |
27,617 |
|
|
1,120 |
|
Provision (benefit) for
income taxes |
(102 |
) |
|
1,812 |
|
Depreciation |
12,949 |
|
|
5,791 |
|
Amortization |
9,464 |
|
|
3,387 |
|
EBITDA |
37,268 |
|
|
20,118 |
|
|
|
|
|
IP related
litigation |
1,907 |
|
|
700 |
|
Stock-based
compensation |
2,029 |
|
|
2,253 |
|
Consolidation and
optimization expenses |
6,649 |
|
|
7,160 |
|
Acquisition and
integration expenses |
9,965 |
|
|
66 |
|
Asset dispositions,
severance and other |
4,526 |
|
|
629 |
|
Noncash (gain) loss on
cost and equity method investments |
(639 |
) |
|
(498 |
) |
Adjusted
EBITDA |
$ |
61,705 |
|
|
$ |
30,428 |
|
Adjusted
EBITDA as a % of sales |
18.6 |
% |
|
18.9 |
% |
* During the third quarter of 2015, 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 and with 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 (loss) 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 |
|
April 1, |
|
April 3, |
|
2016 |
|
2015 |
Sales |
$ |
332,238 |
|
|
$ |
161,320 |
|
Cost of sales |
240,770 |
|
|
108,922 |
|
Gross
profit |
91,468 |
|
|
52,398 |
|
Operating
expenses: |
|
|
|
Selling,
general and administrative expenses |
41,888 |
|
|
22,609 |
|
Research,
development and engineering costs, net |
17,306 |
|
|
12,545 |
|
Other
operating expenses, net |
21,140 |
|
|
7,855 |
|
Total
operating expenses |
80,334 |
|
|
43,009 |
|
Operating
income |
11,134 |
|
|
9,389 |
|
Interest expense |
27,617 |
|
|
1,120 |
|
Other income, net |
(3,721 |
) |
|
(1,551 |
) |
Income
(loss) before provision (benefit) for income taxes |
(12,762 |
) |
|
9,820 |
|
Provision (benefit) for
income taxes |
(102 |
) |
|
1,812 |
|
Net
income (loss) |
$ |
(12,660 |
) |
|
$ |
8,008 |
|
|
|
|
|
Earnings (loss) per
share: |
|
|
|
Basic |
$ |
(0.41 |
) |
|
$ |
0.32 |
|
Diluted |
$ |
(0.41 |
) |
|
$ |
0.31 |
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
Basic |
30,718 |
|
|
25,264 |
|
Diluted |
30,718 |
|
|
26,219 |
|
CONDENSED CONSOLIDATED BALANCE SHEETS -
Unaudited |
(in thousands) |
|
|
|
As of |
ASSETS |
April 1, |
|
January 1, |
2016 |
|
2016 |
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
54,123 |
|
|
$ |
82,478 |
|
Accounts
receivable, net |
183,563 |
|
|
207,342 |
|
Inventories |
267,380 |
|
|
252,166 |
|
Refundable income taxes |
11,099 |
|
|
11,730 |
|
Prepaid
expenses and other current assets |
18,241 |
|
|
20,888 |
|
Total
current assets |
534,406 |
|
|
574,604 |
|
Property, plant and
equipment, net |
381,460 |
|
|
379,492 |
|
Amortizing intangible
assets, net |
894,553 |
|
|
893,977 |
|
Indefinite-lived
intangible assets |
90,288 |
|
|
90,288 |
|
Goodwill |
979,501 |
|
|
1,013,570 |
|
Deferred income
taxes |
3,537 |
|
|
3,587 |
|
Other assets |
29,238 |
|
|
26,618 |
|
Total
assets |
$ |
2,912,983 |
|
|
$ |
2,982,136 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Current
portion of long-term debt |
$ |
29,000 |
|
|
$ |
29,000 |
|
Accounts
payable |
83,306 |
|
|
84,362 |
|
Income
taxes payable |
3,447 |
|
|
3,221 |
|
Accrued
expenses |
100,756 |
|
|
97,257 |
|
Total
current liabilities |
216,509 |
|
|
213,840 |
|
Long-term debt |
1,733,547 |
|
|
1,685,053 |
|
Deferred income
taxes |
218,969 |
|
|
221,804 |
|
Other long-term
liabilities |
11,501 |
|
|
10,814 |
|
Total
liabilities |
2,180,526 |
|
|
2,131,511 |
|
Stockholders’
equity: |
|
|
|
Preferred
stock |
— |
|
|
— |
|
Common
stock |
31 |
|
|
31 |
|
Additional paid-in capital |
627,343 |
|
|
620,470 |
|
Treasury
stock |
(5,880 |
) |
|
(3,100 |
) |
Retained
earnings |
90,466 |
|
|
231,854 |
|
Accumulated other comprehensive income |
20,497 |
|
|
1,370 |
|
Total
stockholders’ equity |
732,457 |
|
|
850,625 |
|
Total
liabilities and stockholders’ equity |
$ |
2,912,983 |
|
|
$ |
2,982,136 |
|
Contact Information
Anthony Borowicz
VP Business Development
Greatbatch, Inc.
716-759-5809
tborowicz@greatbatch.com
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