) fourth-quarter 2013 adjusted earnings per share of 55 cents
exceeded the year-ago level of 53 cents by 3.8% but missed the
Zacks Consensus Estimate by a penny. Adjusted net earnings rose
11.5% to $14.0 million from $12.6 million in the fourth quarter
On a reported basis, GB earned $9.8 million or 38 cents per share
in the quarter in contrast to a loss of $5.6 million or 23 cents
per share. Following the release of earning results, shares of
the company rose 1.1%.
For full year 2013, GB's adjusted net earnings per share rose
18.6% to $2.10 from $1.77 a year ago while adjusted net earnings
grew 25.1% to $53.2 million from $42.5 million in 2012.
Net revenues in the quarter improved 11.0% (13% on an organic
constant currency basis) to $176.6 million, which was almost in
line with the Zacks Consensus Estimate of $176.0 million.
The increase in revenues was attributable to higher
cardiac/neuromodulation and orthopaedic product lines sales
driven by market share gains due to increased sales and marketing
investment, customer product launches and the release of backlog
owing to the Swiss consolidation. These were partially offset by
an 18% decline in portable medical sales due to the tough
comparable versus the year-ago quarter as well as our pricing
discipline, which led to a loss of some low-margin businesses.
Net revenues in the year inched up 2.7% (5% on an organic
constant currency basis) to $663.9 million driven by above
mentioned improvements due to cardiac/neuromodulation and
orthopaedic product lines sales.
Results by Product Lines
product went up 17.1% and 6.1% to $85.4 million and $325.4
million, for the fourth quarter and full year 2013, respectively.
The increase was driven by solid market performance and strong
relationships with OEM partners. GB witnessed strong growth in
batteries, capacitors, leads, and assembly revenues in the
product increased 23.3% and 6.7% to $38.2 million and $130.2
million for the fourth quarter and 2013, respectively. Revenues
from orthopaedic were reduced by $3 million and $15 million in
the fourth quarter and full year, respectively due to divestment
of certain non-core orthopaedic product lines in the first
quarter of 2013.
On a constant currency organic basis, orthopaedic product line
revenues increased 33% and 20% in the fourth quarter and
full-year, respectively, driven by above market growth rates on
the back of increased sales and marketing efforts, market share
gains, product launches, as well as the release of backlog built
up owing to the company's consolidation of Swiss orthopaedic
facility at the end of 2012.
product dipped nearly 7.0% in both the quarter and the year to
$13.2 million and $48.4 million, respectively due to voluntary
recall of two vascular medical devices in the fourth quarter of
dipped 17.7% and 3.6% to $18.4 million and $78.7 million in the
fourth quarter and 2013-full year, respectively. This product
line business was adversely impacted by higher pricing discipline
leading to a loss of some low-margin businesses.
business rose 3.2% to$13.5 million in the quarter but declined
2.9% to $52.5 million in the year. Revenues from Other product
lines surged 43.4% to $7.12 million in the quarter but fell 6.0%
to $25.7 million in the year.
Overall, revenues from
(which includes the above-mentioned product lines) escalated
10.9% to $175.7 million and rose 2.7% to $660.9 million in the
year. Revenues from
, which includes sales of neural interface technology, components
and systems to the neuroscience and clinical markets, spiked
12.4% to $886 thousand in the quarter and 24% to $3.0 million in
the year, driven by revenues from NeuroNexus Technologies, Inc.,
which was acquired in February 2012, as well as the high growth
nature of the neuroscience and clinical markets.
Gross profit scaled up 10.6% to $57.4 million in the quarter
driven by higher sales volumes. Gross margin remained almost
unchanged at 32.5% compared with the 2012-fourth quarter. For the
year, gross profit increased 8.8% to $219.3 million driven by
higher operational leverage on the back of higher sales volumes
and productivity initiatives, as well as a favorable sales mix of
higher margin products. Gross margin for the year increased 180
basis points (bps) to 33.0% from 31.2% in 2012.
Adjusted operating income, which excludes other operating and DVT
expenses, rose 8.1% to $19.4 million in the quarter and 12.2% to
$82.9 million in the year. Adjusted operating margin decreased
230 bps to 11.0% in the quarter but rose 110 bps to 12.5% in the
year due to increased operational leverage as well as various
consolidation and productivity initiatives implemented over the
Balance Sheet and Cash Flows
GB had cash and cash equivalents of roughly $35.5 million as of
Jan 3, 2014, up from $20.3 at the end of 2012. Long-term debt was
$197.5 million compared with $225.4 million at the end of 2012.
Long-term debt to capitalization ratio fell 520 bps to 26.7% as
of Jan 3, 2014 from 31.9% as of Dec 28, 2012.
Cash flow from operating activities for the fourth quarter and
full-year of 2013 were $40.7 million and $56.8 million,
respectively, versus $25.3 million and $64.8 million,
respectively, for the comparable periods in 2012. The quarter
over quarter increase was primarily driven by increase in cash
GB expects revenues in the range of $685 to $705 million,
reflecting a 3 to 6% rise over 2013. The Zacks Consensus Estimate
of $691 million for the year lies within the guided range.
GB anticipates adjusted operating margin between 13.0 and 13.3%,
reflecting a 50 to 80 bps rise from 2012. Capital expenditures
are expected in the range of $25 to $35 million for the year.
Finally, GB expects adjusted earnings per share in the range of
$2.25-$2.35, indicating a 7 to 12% rise over 2013. The current
Zacks Consensus Estimate of $2.30 lies within the guided range.
We remain impressed by GB's double-digit bottom line growth in
earnings on the back of strategic restructuring efforts along
accretive investments in sales and marketing. We believe that the
company's realignment plan will help it to focus on investing in
its core business as well as develop innovative products by
combining the resources of the integrated unit. However, lack of
earnings surprise in the quarter compels us to take a bearish
stance at the same time.
Currently, GB retains a Zacks Rank #3 (Hold). Some better-ranked
stocks in the broader medical products sector include
). Both Enzymotec and NuVasive carry a Zacks Rank #1 (Strong
Buy), while Covidien carries a Zacks Rank #2 (Buy).
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