Greatbatch, Inc. Reports 2013 Fourth Quarter and Full Year Results FRISCO, Texas--(BUSINESS WIRE)

Inc. Reports 2013 Fourth Quarter and Full Year Results

FRISCO, Texas--(BUSINESS WIRE)--February 24, 2014--Greatbatch, Inc.

(NYSE:GB), today announced results for its fourth quarter and full-year

ended January 3, 2014 highlighted by 5% constant currency organic

revenue growth for the full year 2013; 12% year over year improvement in

adjusted operating income; and 19% improvement in adjusted diluted EPS

"We are pleased with our 2013 performance having finished the year in

line with our revenue and EPS expectations, which delivered 5% organic

constant currency revenue growth, a 12% increase in adjusted operating

income and $2.10 adjusted diluted EPS," stated Thomas J. Hook, president

and CEO. "Along with achieving our financial targets for 2013, we also

made significant progress and achieved numerous milestones on our

long-term strategic imperatives. This included our PMA filing for our

spinal cord stimulation system to treat chronic intractable pain of the

trunk and/or limbs. We subsequently filed for CE Mark approval in

January of this year. Our intellectual property portfolio continues to

expand with one third of the portfolio representing medical device

patents. Through our new functional organization, we were able to

improve and expand our sales and marketing efforts and deliver

productivity improvements. We are renewed in our belief that our RD&E

and sales and marketing investments, coupled with our operating

discipline, position Greatbatch to meet its long term objectives of

maintaining 5% organic constant currency growth and double digit

adjusted diluted EPS growth."

"We ended the year with record revenues, excellent cash flows and

delivered $2.10 adjusted diluted EPS. With 13% organic constant currency

growth in the fourth quarter we achieved our targeted 5% organic

constant currency revenue growth in 2013. Operating cash flow, when

adjusted for tax payments related to the retirement of our convertible

debt, totaled $86 million," commented Michael Dinkins, executive vice

president and chief financial officer. "Leveraging the Company's revenue

growth, adjusted operating income margin improved 110 basis points for

the year although fourth quarter adjusted operating income was down 8%

versus the same period in 2012 driven by several contributing factors

including the planned increase in sales and marketing, higher medical

device spending, expenses associated with filing intellectual property,

and the timing of customer reimbursements for engineering projects."

Mr. Dinkins continued, "We are confirming our 2014 guidance of 3% to 6%

organic constant currency revenue growth and 7% to 12% adjusted diluted

Fourth Quarter and Full Year Results

In connection with the realignment of the Company's operating structure

in 2013 to optimize profitable growth, which included changing our

management and reporting structure, the Company reevaluated its

operating and reporting segments. Beginning in the fourth quarter of

2013, the Company determined that it has two operating segments.

Greatbatch Medical designs and manufactures products where Greatbatch

either owns the intellectual property or has unique manufacturing and

assembly expertise and includes the financial results of the former

Implantable Medical and Electrochem segments, excluding our QiG Group

("QiG"). QiG focuses on developing medical device systems for some of

health care's most pressing challenges. Through the research and

development professionals in QiG, the Company is now investing in three

areas - new medical device systems commercialization, collaborative

programs with OEM customers, and strategic equity positions in start-up

companies - to grow a diversified and distinctive portfolio. The medical

device systems developed by QiG are manufactured by Greatbatch Medical.

We have reclassified certain prior year amounts to conform them to the

new segment presentation.

Fourth quarter and full year results for 2013 include an additional week

of operations in comparison to the same periods of 2012 as the Company

utilizes a fifty-two, fifty-three week fiscal year, which ends on the

Friday nearest December 31st. Although this additional week of

operations may have impacted certain financial statement line items,

management believes that when combined with the additional holiday and

weather related shutdowns, this additional week did not materially

impact our net operating results.

Fourth quarter 2013 sales increased 11% to $176.6 million. After

adjusting sales by $3.1 million for the divestiture of certain non-core

orthopaedic product lines during the first quarter of 2013 and

approximately $1 million for the positive impact of foreign currency

exchange rate fluctuations in comparison to the prior year, sales

increased $19.5 million or 13% organically. This growth was primarily

due to strong organic constant currency growth from our

cardiac/neuromodulation (17%) and orthopaedic (33%) product lines due to

market share gains resulting from our increased sales and marketing

investment, customer product launches and the release of backlog

stemming from our Swiss consolidation and has not been adjusted for the

additional week of sales. This growth was partially offset by an 18%

decline in portable medical sales due to the tough comparable versus the

fourth quarter of 2012 as well as our pricing discipline, which resulted

in the loss of some low-margin business. For the year, sales increased

5% on an organic constant currency basis to a record $663.9 million,

and, similar to our fourth quarter results, this increase was driven by

above market growth from our cardiac/neuromodulation (6%) and

orthopaedic (20%) product lines. This 5% increase is consistent with our

long-term organic constant currency growth target.

Gross profit increased 11% to $57.4 million in the fourth quarter of

2013, compared to $51.9 million for the comparable 2012 period due to

our higher sales volumes. In comparison to the prior year quarter, gross

profit as a percentage of sales remained consistent at 32.5%. For the

year, gross profit increased 9% to $219.3 million over 2012 and was

driven by increased operational leverage due to our higher sales volumes

and productivity initiatives, as well as a favorable sales mix of higher

margin products. As a result, our gross profit as a percentage of sales

for 2013 increased 180 basis points to 33.0% from 31.2% for 2012.

Selling, general and administrative ("SG&A") expenses increased $3.3

million to $24.2 million for the fourth quarter of 2013 compared to

$20.9 million for the same period of 2012. This increase is attributable