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Greatbatch's (GB) CEO Thomas Hook on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Results Earnings Conference Call

April 28, 2016, 05:00 PM ET

Executives

Tony Borowicz - Vice President, Business Development and Director, Investor Relations

Thomas Hook - President and Chief Executive Officer

Michael Dinkins - Executive Vice President and Chief Financial Officer

Analysts

Matt Mishan - KeyBanc

George Santo - RBC Capital Markets

Charles Haff - Craig-Hallum Capital

Operator

Welcome everyone to the First Quarter 2016 Greatbatch Incorporated Conference Call. Before we begin, I would like to read the Safe Harbor statement.

This presentation and our press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involves a number of risks and uncertainties. These risks and uncertainties are described in the company’s annual report on Form 10-K.

These statements are based upon Greatbatch Incorporated’s current expectations and actual results could differ materially from those stated or implied. The company assumes no obligations to update forward-looking information, included in this conference call to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects.

I will like to turn the call over to today’s host, Vice President, Business Development and Director of Investor Relations, Tony Borowicz.

Tony Borowicz

Great, thank you, and hello everyone and thanks for joining us on our call today. With us are Thomas J. Hook, President and Chief Executive Officer and Michael Dinkins, Executive Vice President and Chief Financial Officer. As we have done in the past, we are including slide visuals with this presentation which you can access now on our website at greatbatch.com.

The 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 and our core products; two, integrate our legacy Greatbatch and Lake Region Medical businesses; and three, to drive growth through complete medical device systems and partnerships with our customers.

With that, now let me turn the call over to Michael Dinkins.

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 spinoff on March 14. The comparable basis amounts for 2015 excluding results of Nuvectra and include the results of the former Lake Region Medical for the entire year.

Our historical pro forma information presentation which were filed with the SEC on Form 8-K on February 29, contains the reconciliation of 2015 comparable amounts to as reported amounts. Please refer to tables A and B at the end of our press release where reconciliations 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 the energy market, the headwinds in CRM markets or the FX impacts from the declining euro.

If you look at the variance analyses provided on Slide 5, you will see that these factors contributed 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.