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Greatbatch Inc (GB)
Q4 2013 Results Earnings Conference Call
February 25, 2014 / 8:30 A.M. E. T.
Betsy Cowell – VP, Finance & Treasurer
Tom Hook – President & CEO
Michael Dinkins – EVP & CFO
Charles Haff – Craig-Hallum Capital Group
Dan Rutter – Paragon Investment Management
Previous Statements by GB
» Greatbatch's CEO Discusses Q3 2013 Results - Earnings Call Transcript
» Greatbatch, Inc. Discusses Q3 2013 Results (Webcast)
» Greatbatch Inc (GB) CEO Discusses Q2 2013 Results - Earnings Call Transcript
» Greatbatch's CEO Discusses Q1 2013 Results - Earnings Call Transcript
The statements are based upon Greatbatch, Inc.'s, current expectations and actual results could differ materially from those stated or implied. The Company issues no obligations to update forward-looking information included in this conference call to reflect change in assumptions, the occurrence of unanticipated events, or changes in future operating results, financial conditions, or prospects.
I’d now like to turn the call over to today's host, Vice President of Finance and Treasurer, Betsy Cowell. Please go ahead.
Hello, everyone, and thank you for joining us today for our 2013 earnings call. With us on the call are Thomas J. Hook, President and Chief Executive Officer; and Michael Dinkins, Executive Vice President and Chief Financial Officer.
In terms of today's agenda, Tom will start us off with an overview of the 2013 results and the strategic initiatives contributing to our financial performance, including remarks on our product lines. Michael will then provide initial comments on the 2013 financial results and discuss our 2014 guidance. We will then open the call up to Q&A.
As we have done in the past, we are including slide visuals to accompany this presentation, which you can access at our website, www.greatbatch.com. Now, let me turn your call over to Tom Hook.
Thank you, Betsy, and good morning to all of you who are joining our call today.
Last evening we reported 2013 record total year revenue of $663.9 million, which represents organic constant currency growth of 5%. We saw continued momentum from our orthopedics and cardiac rhythm management neuromodulation product lines, which grew 20% and 6%, respectively, during 2013. I will talk more about the sales performance drivers later in the presentation.
Adjusted diluted earnings per share improved 19% to $2.10 for the year. Fourth-quarter sales totaled $176.6 million, a 13% organic constant currency increase over the prior year. Adjusted earnings per share were $0.55 for the fourth quarter and represented the sixth consecutive quarterly increase over the prior year.
Turning to other key metrics. Adjusted operating income improved 12% to $82.9 million and the adjusted operating margin increased 110 basis points to 12.5%. Adjusted cash flows from operations totaled $85.5 million, a 32% increase after taking into account the $29 million tax payment associated with the retirement of the convertible notes.
Our accomplishments in 2013 established a basis for continued progress in 2014. As expected, we filed the Algostim PMA in 2013 and the CE Mark in January of this year. The CE Mark quality check and ISO audits are underway, as is the review of the design dossier. We fully expect that as the year progresses we will continue to move smoothly through the required approval process steps.
We remain committed to maintaining a healthy intellectual property portfolio, which is the foundation of our business model. Our broad and deep intellectual property has enabled the securing of long-term customer contracts that deliver value to our customers. This positive trend continues to enhance the stability of Greatbatch.
During the last two years, we've expanded our medical device patent portfolio to 537 patents, now 36% of the total patent portfolio. Consistent with 2012, the Greatbatch Medical portfolio grew 18%, bringing our total patent and patent-pending portfolio to almost 1,500.
During 2013, we reorganized the Greatbatch executive team under one sales and marketing executive, consolidated our operations group, and streamlined other functions. This enhanced the quality of our decision-making and enables the Company to more effectively leverage resources.
Our investments in sales and marketing have allowed us greater insights into the diverse markets we serve, which enable us to drive greater adoption of our product lines by blue-chip global companies. Upgrading our salesforce and locating resources closer to our customers is an investment that we consider vital to sustain our commitment to 5% revenue growth. We believe these changes will aid us in delivering results consistent with our strategy and position Greatbatch for the future.
Now I would like to provide some comments relative to our various product offerings.
Cardiac rhythm management and neuromodulation annual growth aggregated 6% versus 2012 and 17% in the fourth quarter. During 2013, we experienced double-digit growth in capacitors and lead wires, along with high single-digit growth in batteries and shield assemblies.
The long-cycle nature of the CRMN product line projects necessitates the measurement of our results over a four-quarter rolling average. As you can see from the chart, Greatbatch sales continue to track with the market. This represents the long-standing partnerships with our customer to develop and design new component technologies, which can take over three years to bring to market.
Our orthopedic product line delivered another double-digit quarter of growth, ending the year at 20% organic constant currency growth. We enjoy a balanced growing portfolio of offerings from hip and shoulder implants to delivery systems and instruments backed by intellectual property. Through innovation, new market programs, and an expanded salesforce, we are confident we will be able to sustain our growth objectives and deliver quality innovative products to our expanding customer base.