Orthopedic Sales Help Buoy Greatbatch Q2 Performance

The orthopedic business of Frisco, Texas-based Greatbatch Inc. helped to offset slower sales in other sectors during the company’s second quarter (ended July 4).

Greatbatch’s brands include Greatbatch Medical, Electrochem and QiG Group. The company develops and manufactures medical device technologies for the cardiac, neuromodulation, vascular and orthopedic markets; and batteries for high-end niche applications in the portable medical, energy, military and environmental markets.

Orthopedic sales of $37.9 million for the second quarter of 2014 increased 17 percent compared to the prior year, which included a benefit from foreign currency exchange rate fluctuations of approximately $1.5 million. On an organic constant currency basis, orthopedic product line sales increased 12 percent in compared to the prior year second quarter. Company officials report growth across all of the firm’s orthopedic products, which due to “sales force productivity, marketing efforts and market growth,” officials said.

“As we continue to invest and execute our global strategy, we are seeing results in line with our year to date expectations,” said Thomas J. Hook, president and CEO. “As expected, our key growth drivers, orthopedics and vascular, continue to deliver double digit growth, and although the second quarter 2014 total revenue was flat when compared with the prior year second quarter, on a year to date basis, organic constant currency growth is 8 percent. For the 2014 second quarter, adjusted operating income improved by 7 percent to $23.8 million and adjusted diluted earnings per share totaled 60 cents.”

During the quarter (in June), Greatbatch received CE mark for its Algovita spinal cord stimulator (formerly called Algostim). The company is waiting for the U.S. Food & Drug Administration to approve the company’s Algovita pre-market application, submitted in December last year.

For the company’s other sectors: Cardiac/neuromodulation sales were $80 million, down 4 percent; portable medical devices were $16.7 million, a drop of 24 percent; and—significantly—sales for the vascular segment were up 25 percent to $15.3 million.

Total company sales were flat at $172.1 million, compared to $171.3 million. Net research, development and engineering costs for Q2 14 of $12.8 million decreased $1.3 million compared to the second quarter of 2013. This decrease primarily was attributable to a lower level of medical device costs, company leadership noted. Income for the second quarter of 2014 increased 14 percent to $19.5 million, compared to $17.1 million for the 2013 second quarter.

Portable medical sales for the second quarter of 2014 declined $5.4 million, 24 percent, in comparison to Q2 2013.

“We are refocusing our product line offerings in the portable medical space to products that have increased profitability,” officials noted. “Correspondingly, we have discontinued or reduced volumes in certain of our lower-margin products, which is expected to negatively impact our sales for the remainder of 2014. As part of our investment in capacity and capabilities and to better align our resources to meet our customers’ needs, we announced plans to transfer our portable medical operations into a new facility located in Tijuana, Mexico. We remain optimistic about this product line and continue to see our pipeline of customer opportunities grow.”