Greatbatch, Inc. (GB)

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Greatbatch Inc. (GB)

Q4 2008 Earnings Call

March 3, 2009; 05:00 pm ET


Thomas Hook - President & Chief Executive Officer

Thomas Mazza - Senior Vice President & Chief Financial Officer

Marco Benedetti - Corporate Controller


Tim Lee - Piper Jaffray

Jason Mills - Canaccord Adams

Keay Nakae - Collin Stewart

Stan Manne - Manne Family Investments



Welcome everyone to the fourth quarter Greatbatch Incorporated conference call. Before we begin I would like to read the Safe Harbor statement. This presentation and our press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. These risks and uncertainties are described in the company’s annual report on Form 10-K.

The statements are based upon Greatbatch Incorporated’s current expectation and actual results could differ materially from those stated or implied. The company assumes no obligations to update forward-looking information included in this conference call to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects.

I would now like to turn the call over to today’s host, Corporate Controller, Marco Benedetti; please proceed.

Marco Benedetti

Thank you. On the call today are Thomas J. Hook, President and Chief Executive Officer, and Thomas J. Mazza, Senior Vice President and Chief Financial Officer.

In terms of today’s agenda, Tom Hook will start by providing a few brief comments regarding our fourth quarter and year end results and then he will provide comments relative to our major strategic initiatives. After that, Tom Mazza will provide further comments on our fourth quarter and year end results, as well as our 2009 guidance release today. We will then open up the floor to Q-and-A. As we have done in the past, we are including slide visuals that will go along with this presentation, which you can access on our website.

Let me now turn the call over to our President and Chief Executive Officer, Tom Hook.

Thomas Hook

Thank you, Marco. I’d like to thank everyone listening for joining our earnings call. We are pleased to able to share with you our results for the fourth quarter and full year. I am proud of our accomplishments in 2008 and the fourth quarter capped off what has been a very successful year for Greatbatch.

Furthermore, this year provides additional evidence of our execution and progress towards achieving our long term strategic initiatives of growing and diversifying our revenue base, delivering innovative solutions to our customers and driving improved operating performance.

2008 was a year of focus, execution and momentum building for Greatbatch. We met both our operational and financial goals set for the year and made solid progress towards our long term strategic initiatives. I believe that our portfolio of intellectual property, great operational capabilities and diverse revenue base has built a strong foundation for the company to carry us into 2009 and beyond.

During 2008, we continued to deliver solid revenue growth with sales increasing 71% over the prior year, which correspondingly drove adjusted operating income to increase from $43.7 million to $58.1 million or 33%. From the first half to the second half of 2008, we saw growth in our operating margin driven by streamlining operations and improving manufacturing and administrative efficiencies.

We remain committed to ongoing improvements in our operating performance through continued facility consolidation and integration, optimizing our production efficiency and product development activities focused on high value added products. Tom Mazza will provide additional detail in our fourth quarter financial results later in the call.

We are particularly proud of our strategic acquisitions and the progress we have made in integrating them. The acquisitions have enhanced the overall diversification of our business and will create additional opportunities to leverage the core operational and product development strengths of the company.

Our diversification strategy is one of our key long term strategic initiatives that has created opportunities within a variety of new markets, including the orthopedic and vascular access markets. Through these acquisitions, we have added proprietary technologies and product lines to our portfolio, as well as strategic manufacturing and product development capabilities. In addition, we have expanded and diversified our global customer relationships.

Although the acquisitions clearly diversified our customer base and reduced our concentration with a few key accounts, it has also created additional opportunities to sell a broader product portfolio across multiple divisions within these key accounts. Instead of selling solely to the Cardiac Rhythm Management sector who have been one of our key customers, we now have the capabilities to sell to the orthopedics, neuromodulation for Vascular Access businesses as well.

We have taken great strides in diversifying Greatbatch and will continue to integrate these new businesses and look for cross selling opportunities that will drive both near term and long term revenue gains.

Another key element for our strategy is focused on streamlining our operational efficiencies and optimizing our production. Over the past four years, we have built a reputation of successfully optimizing and consolidating our operations and we have continued this performance in the past year.

During 2008, Industry will recognize our Alden, New York facility as being one of the top 10 best plants in North America. Additionally, the State of Massachusetts recognized our Raynham facility with an Economic Impact Award.

In 2008, we also implemented six and initiated another four consolidation projects to enhance the operating performance of our new businesses and move closer to the overall Greatbatch operating model. As evidenced by the improvement in our operating margin from the first half to the second half of 2008, we have already begun to realize several of the benefits. We have approached these initiatives on several different fronts and I want to briefly provide a review of some of the accomplishments during 2008.

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