Greatbatch Performs Better Than Wall Street Expected in Fourth Quarter

For the fourth quarter, Greatbatch Inc. beat earnings estimates but fell a little short in revenue.

The company recorded adjusted earnings per share (EPS) of 65 cents in the quarter ended Jan. 2, 2015, which beat the analysts’ estimates by 6 cents and grew 18.2 percent from the same quarter in 2014.

The growth, according to the company, primarily was driven by strong margin expansion. Revenues for Q4, however, fell short of Wall Street’s estimates, decreasing almost 4 percent year over year to $169.7 million. Wall Street had expected sales of approximately $178 million. Sales for the fourth quarter of 2014 include $4.2 million from the acquisition of CCC Medical Devices in August 2014 and were negatively impacted by approximately $1.5 million due to the strengthening U.S. dollar versus the euro.

Greatbatch, based in Frisco, Texas, develops and manufactures components for implantable medical devices and batteries for the portable medical, energy, military, and environmental markets. The company operates in two segments: Greatbatch Medical and Electrochem Solutions. Greatbatch Medical manufactures primarily for the cardiac rhythm management, neuromodulation, vascular access and orthopedic markets.

For the quarter, orthopedic products helped buoy results. Revenues from orthopedic products came in at $40.5 million, up 6 percent.

In the quarter, robust double-digit growth continued in cutting and bone preparation instruments, while implants grew 8 percent, company officials reported.

“2014 saw Greatbatch execute on a number of our strategic imperatives to further position us for continued growth,” said Thomas J. Hook, president and CEO. “Profitable growth allowed us to bolster our pipeline, improve our margin and execute our strategic acquisition of CCC Medical Devices in August of last year. We also achieved a significant regulatory milestone with our spinal cord stimulation system to treat chronic intractable pain in the trunk and/or limbs, Algovita, which received CE mark from the European notified body TUV SUD.”

Hook said he expects 2015 to be a “transformative year,” with U.S. Food and Drug Administration approval of Algovita expected in the first half of the year.

“In addition, we are leveraging our intellectual property portfolio to be a manufacturer for the neuromodulation market with complete systems and component projects,” Hook added. “Furthermore, we expect to enhance our competitive position as we bring on line a new facility for our Portable Medical category and transfer other production lines to an existing facility in Mexico. We are focused on delivering our 2015 commitments as we recognize that most of the benefits of these initiatives will impact 2016 and beyond.”

“Despite unfavorable performance in our portable medical and cardiac and neuromodulation product lines, we returned modest top-line growth led by double-digit improvements in orthopedics and vascular,” said Michael Dinkins, executive vice president and chief financial officer. “Our strategic imperatives remain unchanged to deliver 5 percent top-line revenue growth and return at least two times that to our shareholders through a healthy and diverse core business. As a result we are providing 2015 sales guidance, excluding our plans for Algovita, of $715 million-$730 million and adjusted diluted EPS guidance of $2.61-$2.71.”

For the year, sales increased 4 percent (3 percent in constant currency) to a record $687.8 million, and similar to fourth-quarter results, was driven by growth in both the orthopedic (up 13 percent to $147.3 million) and vascular (up 22 percent to $58.7 million) product lines. CCC Medical Devices and favorable foreign currency exchange rate fluctuations added $5.8 million and $1 million, respectively, to 2014 sales.

For the year, EBITDA (earnings before interest, taxes, depreciation and amortization) were up 8 percent to $128.4 million. For the quarter, EBITDA was $31.9 million, up 11 percent.