Greatbatch, Inc. (NYSE:GB) Q2 2015 Earnings Conference Call - Final Transcript

Jul 30, 2015 • 05:00 pm ET


Greatbatch, Inc. (NYSE:GB) Q2 2015 Earnings Conference Call - Final Transcript


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Welcome, everyone, to the Second Quarter 2015 Greatbatch, Inc. Conference Call.

(Forward-Looking Cautionary Statements)

I would now like to turn the call over to today's host, Vice President, Finance and Treasurer, Betsy Cowell.

Betsy Cowell

Hello, everyone, and thank you for joining us today for our second quarter 2015 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.

As we've done in the past, we are including slide visuals to accompany this presentation, which you can access at our website, Once Tom and Michael have completed their presentations, we will then open up the call for a Q&A session.

Let me now turn the call over to Tom Hook.

Thomas Hook

Thank you, Betsy, and good afternoon to everyone joining the call today. We are very satisfied with the second quarter results, which were consistent with our expectations. As previously communicated, we expect to finish the year strong, based upon new and existing customer business pipelines, and carry this momentum into 2016.

Second half 2015 customer ramp plans for new products and technologies will offset end-of-life revenue impacts. We are confirming guidance for 2015. And later in this presentation, we will provide some insight on our 2016 expectations.

We continue to make progress during the second quarter against our strategic plan. Earlier today, we filed a Form 10 registration statement with the US Securities and Exchange Commission for the proposed spinoff of Nuvectra. This is an important milestone towards our strategic imperative commercializing complete medical device systems.

Investments in technology, capacity and capabilities are on schedule to deliver improved operating performance into 2016. CCC Medical Devices, acquired in August of 2014, continues to generate an exciting pipeline of neuromodulation opportunities, where we can broadly leverage our integrated engineering services and comprehensive manufacturing capabilities.

Let's turn to the financials starting with slide six, summarizing our key performance metrics for the second quarter. We delivered solid quarterly performance, which is consistent with our expectations. On a sequential quarter-to-quarter basis our key measurements improved. For the second quarter we delivered sales growth of 4% on a constant currency organic basis, adjusted operating margins of 12.7%, adjusted earnings per share of $0.64, and adjusted EBITDA of $31.2 million or 17.9%.

An analysis of adjusted earnings per share is also highlighted in the presentation materials. Most notable is the favorable impact of a lower tax rate of 20.7% for the quarter. We believe we can sustain lower tax rates, and our guidance for the total year is approximately 23.6%.

The next several slides will review each product line and provide insight to their performance. Negative mix for products sold to OEM customers resulted in a gross margin decline in the quarter by 90 basis points when compared to the prior year. This is not an issue for the total year results, and we continue to expect gross margin and operating margin improvements for the total year. As expected, second quarter 2015 operating