Greatbatch, Inc. (NYSE:GB) Q1 2016 Earnings Conference Call - Final Transcript
Apr 28, 2016 • 05:00 pm ET
Welcome, everyone to the First Quarter 2016 Greatbatch Incorporated Conference Call. Before we begin, I would like to read the safe harbor statements.
(Forward-Looking Cautionary Statements) I would like to turn the call over to today's host, VP, Business Development and Director of IR, Tony Borowicz.
Great, thank you, and hello, everyone, and thanks for joining us on the call today. With us are Thomas J. Hook, President and CEO; and Michael Dinkins, EVP and CFO.
As we've done in the past, we are including slide visuals with this presentation, which you can access now on our website at greatbatch.com. In terms of the agenda for today's call, Michael will review the first quarter financial results and provide second quarter revenue guidance and will reiterate our full year revenue, adjusted EBITDA and adjusted EPS guidance as previously issued.
Next, Tom Hook will discuss our three key strategic priorities, which are; one, to drive organic product growth in our core products; two, integrate the legacy Greatbatch and Lake Region Medical businesses; and three, to drive growth through complete medical device systems in partnerships with our customers.
With that, now let me turn the call over to Michael Dinkins.
Thanks, Tony, and good afternoon, everyone. My comments today will include our operating performance, balance sheet metrics and guidance for the second quarter and full year.
My comments will focus on comparable basis amounts for 2016, which excludes the results of Nuvectra Corporation prior to its spin-off on March 14. The comparable basis amount for 2015 exclude the results of Nuvectra and includes the results of the former Lake Region Medical for the entire year.
Our historical pro forma information presentation, which was filed with the SEC on Form 8-K on February 29, contains a reconciliation of 2015 comparable amounts to as reported amounts.
Please refer to Tables A and B at the end of our press release for a reconciliation of as reported adjusted amounts to GAAP. The first quarter results were in line with our expectations.
In terms of comparison to 2015, we knew it was going to be a tough comparison because last year's first quarter does not reflect the full effect of the downturn in energy markets, the headwinds in CRM markets or the FX impact from the declining euro.
If you look at the variance analysis provided on Slide 5, you will see that these factors contribute to the negative sales volume variance of $0.13 per share in the quarter.
In addition the first quarter sales variance price as compared to productivity improvements achieved is a net negative, partially due to price concessions made in the quarter for long-term commitments and lower production volumes, which resulted in lower fixed costs overhead absorption.
We believe that higher revenue volume in the second half of the year combined with integration synergies will result in gross margins returning to the 28% to 29% range.
This improvement in gross margins, along with achieving the balance of the current year synergies of at least