Betsy Cowell – VP, Finance and Treasurer Thomas Hook – President and Chief Executive Officer Michael Dinkins – Executive Vice President and Chief Financial Officer.

Matthew Mishan – KeyBanc Capital Markets Julia Kaufman - RBC Capital Markets Charles Haff – Craig-Hallum.

Welcome everyone to the Third Quarter 2014 Greatbatch Incorporated Conference Call. Before we begin, I would like to read the Safe Harbor statement. This presentation and our press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties.

These risks and uncertainties are described in the Company’s Annual Report on Form 10-K. The statements are based upon Greatbatch Incorporated 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 would now like to turn the call over to today’s host, Vice President of Finance and Treasurer, Betsy Cowell..

Hello, everyone and thank you for your patience today. We appreciate you joining us for our third quarter 2014 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.

In terms of today’s agenda, Tom will start us off with an overview of both the quarter and first nine months of the year and a strategic update along with discussion on our product lines. Michael will then provide additional comments on the third quarter and year to date 2014 financial results as well as discuss our 2014 guidance.

We will then open up the call to Q&A. As we have done in the past, we are including slide visuals to accompany this presentation, which you can access on our website, www.greatbatch.com. Now, let me turn the call over to Tom Hook..

Thank you, Betsy and good afternoon to all of you who are joining our call today. We continued to advance our business and financial performance in line with our strategic objectives. The company's improved ROIC is a result of our disciplined approach to investment opportunities both organic and inorganic.

Working with our customers, we continue to invest in discrete proprietary technologies to enhance existing and next-generation products. We are also expanding our partnerships via both equity and cash investments with development in start-up companies to fuel early-stage innovation.

We have over 300 engineers working on 100 current and future projects and a $12 million of technology-oriented equity investments. Our patent portfolio has been expanded to include 200 plus patents in 2014, including over 120 medical device patents.

We maintain a healthy portfolio of long-term customer agreements or LTAs which represents approximately 70% of our business. These agreements range from 18 months to as many of 8 years in length. We value our customers’ confidence in Greatbatch and together we will deliver innovation to pursue market opportunities.

The neuromodulation market is large and growing with a market size of approximately $2.9 billion. Greatbatch is focused on spinal cord stimulation, a $1.5 billion market growing approximately 6% annual. Our success ranges from discrete product development products to fully integrated medical device systems.

We continue to expand these product offerings with a wider array of business in the neuromodulation markets. We’re pleased to welcome the CCC Medical Devices business and its associates to Greatbatch. CCC Medical Devices history in the neuromodulation space enhances Greatbatch connection to early-stage innovative companies.

Our strategy is to partner with companies who are employing neuromodulation technology across many fields to find and provide effective implantable therapies. Coupling the deep intellectual property and capability of both Greatbatch and CC Medical Devices together will allow us to continue to accelerate growth in this market.

Our Algovita project remains on track along both the regulatory approval pathway and early EU commercialization planning. With regard to our financial performance. Revenue growth is at or above the industry growth in all product lines, with the exception of Portable Medical as a result of the strategy changes we communicated in late 2013.

Our business fundamentals and financial results demonstrate our commitment to 5% revenue growth and adjusted EPS growth of at least 2x our organic growth. Year-to-date revenues grew 5%. On an organic constant currency basis an adjusted EPS is 13% ahead of 2013.

Leveraging volume, realizing manufacturing efficiencies and containing operating costs has resulted in an adjusted operating margin of 13.2% on a year-to-date basis.

We continue our commitment to innovating and developing novel intellectual property protected products and utilizing our strong cash position to fund organic and inorganic growth opportunities. Now I would like to provide some comments relative to our various product lines. The chart on Slide 11 highlights our organic growth performance.

As we have mentioned before, from quarter to quarter we can have significant changes in our organic growth driven by the inventory management efforts of our customers and that our quarter end dates do not always align.

This quarter we delivered 1% organic growth but the best way to evaluate our performance is to look at the rolling four-quarter performance of 7% organic growth which is outpacing the markets that we serve. We are obviously very pleased with our orthopedic and vascular performance of double-digit organic growth.

Clearly cardiac rhythm management year-to-date growth of 5% is outpacing the clinical market, which based on recent – and we announced competitive data reflecting the clinical market is growing closer to 1% to 1.4%. CRM and nuro sales of $85.6 million were slightly below Q3 2013.

Several of our customers repositioned inventory quantities during the quarter pressuring the quarter-over-quarter growth rates. Additionally we continue the process of transitioning a few end-of-life discrete products in the third quarter. We offset these effects with our battery and shield assembly product double-digit growth.

This is due to customers launching new products and favorable customer ordering patterns. We continue to believe we're positioned to grow this category faster than the overall market growth, although when measured quarter over quarter there will be some variation in our performance.

Third quarter orthopedic product line sales on an organic constant currency basis grew 85% when compared to the same period in 2013. Our instrument business grew in excess of 30% while implants were up over 4%. Q3 2014 delivery system revenue was impacted by the timing of product launches when compared with the level of Q3 2013 product launches.

Year-to-date revenues increased 13% on a constant currency basis. We are forecasting low double digit growth for the year excluding $1 million to $2 million of negative foreign currency impact in Q4. Our portable medical product line third quarter revenue totaled $17.2 million.

The headwinds associated with the strategy change will begin to taper into fourth quarter. We’ve secured nine new product wins implementing our new power charging and battery management technologies. The transfer of our portable medical operations to the expanded facilities in Tijuana, Mexico is on track to be completed in late 2015.

Our vascular product line grew double digits for the third consecutive quarter, plus 21% in the current quarter. Our products serve several markets, including electrophysiology and peripheral interventions where our technology is well received and we're outpacing the market in these therapeutic areas.

We anticipate continued strength in our vascular performance for the remainder of the year. The energy, military and environmental product line sales totaled $19.0 million for the quarter, flat with the prior year quarter attributable to customer ordering patterns.

Favorable trends continue in both our rechargeable battery assembly technology and power source techs [ph], particularly in the energy segment as customers become more aware of the benefits of rechargeable applications.

I'll now turn the call over to Michael for a more insight in the quarter and year-to-date financial performance and explain our new guidance..

First, as you know we increased our sales and marketing resources which drive our organic growth. The impact of our adjusted EPS of adding these resources is $0.11. There are several factors impacting our D&E. Last year before we filed the PMA for Algovita, we adjusted our performance for the DVT.

Since having filed the PMA, we do not make an adjustment for DVT. The year-to-date impact of this change accounts for $0.12 dilution to adjusted EPS. We have adjusted our R&D spending a positive $0.02 impact to adjusted EPS year-to-date. However we have seen an NRE reduction of approximately $0.03.

This NRE reduction was caused by the timing of milestone payments associated with our technology programs. With the 100 plus programs underway we will see reimbursements for the collaboration programs in the coming months and through 2015.

Along with the R&D reduced spending, our focus on continuous improvement in productivity resulted in a pickup of $0.03 in general and administrative costs. Lastly, the timing for the performance based accruals helped to offset the year-to-date change in operating expenses.

Below the operating line, we have a positive $0.06 improvement with our lower interest because of reduced debt levels and favorable interest rates. The effective adjusted tax rate through September was 30% compared with 32.4% during the first nine months of 2013, accounted for $0.06 improvement to adjusted EPS.

The headwinds from the rise in diluted shares outstanding due to the increase in our stock price has caused this $0.06. We expect our adjusted effective tax rate for the remainder of the year will approximate 30% to 32%. Now I would like to provide comments on operating cash flow.

For the first nine months of 2014, we generated $54.7 million positively impacted by a stronger operating income and lower tax payments that in 2013 were paid when we retired the convertible debt. Capital expenditures were $16 million year-to-date. We will -- we expect to be at the lower end of our guidance for total year capital expenditures.

Turning to our 2014 outlook which is on Slide 24. We are raising our adjusted EPS guidance to $2.32 to $2.38. We're also tightening the revenue guidance targeting revenues to be between 695 million to 705 million.

We are providing the range because we have several large customers and their inventory management efforts can significantly impact our results especially when their quarter end does not align with our quarter end. With that, let me now turn the call back over to the moderator to take - so we can take questions..

(Operator Instructions) And your first question is from Matthew Mishan from KeyBanc..

I think my first question is on CRM.

I was just curious if you could quantify the headwind of the two legacy programs that you are facing over the next several quarters? And when do you think you’re going to be comping positive again in that segment?.

Matt, this is Tom Hook, is periodically over the course of a decade of being at Greatbatch at any one time we see end-of-life products come in and out and obviously launches along with that. It’s a little more rare to see them happen at the exact same time.

It usually takes three quarters or so of effect for it to bleed over, depending on the launch plans as well as the production transfer plans, and that’s pretty typical a nine-month period of time for that transition to occur, as kind of out with the old, then with the new, so that – as those technologies change over, we on last quarter conference call kind of had – I put the headlights on that over the second half of this year and into next year, those few products are going to be going through that transition period.

And so we’ve entered that period of time. We have offsets for that still in the CRM and the neuro categories which are making up for the loss of those end of life products. And we continue to see that swap so to speak take place over the next couple of quarters as well..

And then portable medical and in the press release I think there was a little bit of change as far as some of the headwinds you’re facing there, before or it was through the end of 2014 and I think now it said also through maybe the first half of 2015 as well.

Did you do some adjustments on some additional programs that you may have given up?.

No, we’ve been doing – the portable medical team, following the shift in strategy which obviously also incorporated a project in which we’re in our production for those product lines down to an expansion of the facility in our Tijuana, Mexico location.

And that strategy has implemented smoothly and they’ve been doing a very good job of new project wins. So it is literally just a transitioning timeframe where we’re not going to continue – we’re not going to move on profitable business.

We’ve already gotten a lot of traction to get ourselves back into that transition period over the course of this year and we expect as those products move into production next year that we will start getting back on to a favorable comparable growth rate to the period of time before we implement that strategy change.

So I would expect that, that effect will start in the first half of 2015 and then it will become stronger effect as we move into the New Mexico facility late in 2015. And then we will get a full year effect of that starting late next year. But the positive effect of the product development lens has already begun..

And on CapEx, it looks like you revised it down – did you push – did a project get pushed off – what was the reasoning for that?.

No, I think as we always encourage the operating managers and certainly Mike in the financial organization, looks very carefully at any payments we are making at, any contracts that we have with regard to the capital products.

And if there is opportunities for us to be more judicious with the payments on those, we are and that's just reflective really of just good management but the projects are all on time and it’s just that we’re managing the expenditures appropriately like we should..

And just last question for me, on any color on Europe and maybe some clinical updates on Algovita?.

Matt, we’re really anxious to give you all kinds of information but at this point in time everything is on schedule, after six years ago starting this initiative in the company there is a lot of anxiousness to be able to talk about it.

But we’re going to be quiet at it for the current time but I do look forward to answering that question in the future..

And your next question is from the line of Glenn Navarro of RBC Capital Markets..

Hi this is Julia Kaufman calling in for Glenn Navarro.

I just wanted to see if you could speak about -- a little bit more about CCC, what’s a reasonable growth rate and can we assume that third quarter on a prorated basis is an appropriate run rate going forward?.

CCC which was primarily owned by the Fiandra family -- and we’ve been in contact with them over the course of 2014 and negotiate this deal, as a really nice complement for us in the neuromodulation area.

And we’re not going to breakout really specifically on the CCC business in terms of what our projections are, we’re going to aggregate that into our overall guidance.

But what we've seen thus far and a few months is a tremendously complementary business and opening up the advantages of the innovation engine that CCC Medical Devices has along with the deep intellectual property bench as well as production capabilities of Greatbatch, so the lines will quickly blur of what was traditional CCC Medical Devices and it will all quickly be integrated together and it’s naturally coming together very effectively.

And we will be able to bring the capabilities of Greatbatch to the CCC Medical Devices customers very quickly and we've already started that process.

So it really doesn't make sense to kind of guide specifically to their business because we actually see that the combination of companies is going to increase the growth rate for neuromodulation for us as a combined company.

So that’s one of the reasons why we continue to be bullish on neuromodulation beyond just Algovita, that the CCC Medical Devices acquisition does a good job of positioning us even deeper in that market and it’s going to continue to accelerate the growth in those product lines for ones that they brought and the ones that we have..

And then sort of back to Algovita, what’s left in terms of the FDA review process – are we just waiting on a decision or is there any some more back and forth on in terms of questions or any more data that you guys – sort of guide us into what we are still looking for?.

There’s still a few steps of the process that are -- that usually occur late in the PMA process, when certain final inspections and reviews of labeling have to occur, we’re at those steps. We really are answering any questions that we receive and we’re in routine correspondence with regards to the project.

But no signs of it, not moving along the timelines that we’ve already indicated. It's just progressing like it should both from the project regulatory approval as well as from a rollout perspective in Europe and we expect the same thing to occur over the next several months between now and our conference call early next year..

And then is there any sort of timeline that you could give us on when we can expect to hear progress on the commercial partner?.

We will from a – we will update when it makes sense. We have plans putting in place with regards to that segment of the project. We are not at liberty to disclose them now as we advance the.

But you can expect along with the PMA announcements and that we expect a timeline to be completed early next year, we will clarify our commercialization plans at around the same time interval, it’s not the exact same time..

And then just to switch back on your base business, in CRM you sort of spoke about new product development opportunities, can you expand on those comments, what specifically can you do to get the business growing above the market?.

One of my deep frustrations over the 10 years I've been here as chief executive is our inability to speak specifically to our customer wins.

The reason our CRM and neuro categories have done very well is because they’ve innovated with our current OEMs put in place development and long-term agreements and we’re really developing some very innovative discrete product technology that is driving their end market innovation.

Those teams within Greatbatch have done an excellent job of winning that business over the past three to four years that is now precipitating into revenue over the last year and what we predict is going to also in the future.

So despite some of the end-of-life products, the new projects that we won years ago and have completed product development and our customers, the OEMs are launching now, we’re simply winning a higher percentage of them and they are drawing that deeper set of intellectual property based products from us that drive more value which is fundamentally why we can grow slightly higher rate than those and clinical markets.

And at the end of the day it’s all winning based on renovation of those underlying discrete product -- projects and I don't see that trend stopping, I see it continuing in the cardiac rhythm management, I can see it continuing in neuromodulation at a discrete product level both..

And then just lastly on portable medical, so we have – you’re divesting lower margin product, you’re moving operations to Tijuana, can you speak to some of the tailwinds that are going to offset the negative impacts?.

I think the easiest way to understand is once we’ve made the decision to put our operations in Tijuana, Mexico we can have the commercial teams leveraging from a project win standpoint us comprehending products with the capabilities of our Mexico facility both from a product design capability as well as manufacturing cost standpoint.

So it allows us to be much more aggressive and because we have a lower cost basis of the production that will be brought online in late 2015, will be more profitable out those product lines and more competitive, that puts us in a position today to go win business and do the product developments and prepare things for operations that as they are implemented into production we know that we will have that tailwind.

So as we move to bring on that production volume it gives us the opportunity to leverage that both revenue and profitability.

In the short run, the investments we've made in sales and marketing and the portable medical team that have already won deals are actually being produced out of our Beaverton, Oregon operations, those product development wins will start cascading into production in early next year.

So while we don't have the profit advance of picking up, ultimately they will move down to the Mexico operation and we will get both the revenue and the profit leverage.

So we view it as a continuum sales and marketing and project rationalization first which we’ve done, sales marketing investments which are winning product development opportunities and precipitating the product development projects quickly which precipitates into the revenue streams and eventually moving that all down to Mexico which would precipitate into the revenue and margin leverage.

And we’re walking along that path on that project very smoothly and we’re right on time or ahead of milestones in every aspect of the project..

And your next question comes from the line of Charles Haff from Craig-Hallum..

Thanks for taking my question. There is lot of background too by the way on the call. But I wanted to ask you a couple of questions here. You talked about portable medical tapering or the headwinds tapering in the fourth quarter and you obviously have an extremely easy comp in portable medical in the fourth quarter.

So was wondering if your comments were driven more to the easier comp, or are there some inherent changes or things that are changing that make the business get stronger in the fourth quarter or less weak?.

Actually thank you for pointing out the easier comp, I really don't focus on that, I felt Charles but is where I look at is fundamentally the investment of what we’re doing in portable medical are just going to start flowing and returning.

First and foremost the investments in expanding and deepening the sales marketing teams and the product development wins that come through, some of those products can have long timeframes but up to two years but some of them can have shorter timeframes.

So those improvements start to move into affecting our financial performance in the fourth quarter of this year.

You don’t get obviously full-year effects on them until they are really – the other revenue streams ramp up and we get multiple projects, but other leading indicators -- the deal funnel for portable medical installed, we’re getting good sales wins, the product development teams are very busy working on those projects and they are starting to precipitate off into revenue for those projects within our Beaverton operations.

Now ultimately they'll end up down in Mexico but that won’t occur for another four to five quarters as they qualify it.

So the leverage I am not is bullish on in the near-term because we will be leveraging our current production facility that’s qualified not the new one but over the next four quarters to five quarters as we move all of these operations and manufacturing down to our New Mexico capabilities we will be able to see both the topline and bottom line pushed through.

So we know we are working off a tough period of time, as we get through the middle of this, we will have easier comparables, but I am going to more track the leading indicators of the business which is sales activity, product development activity and how they are going line up to be moved into the production schedule and all those are very positives and we will start to see some of that positive effect in the fourth quarter but it won't be an instantaneous turnaround, it will take the course of 2015 to get us back on the trajectory that’s consistent with 5% and 2x profitability as a company.

We expect portable medical to be a double digit grower along the run and we’re making the investments to be able to do that..

Another question that I had was – on an area we don't talk about too much the energy line item, it’s about 8% of total revenues.

But do you have another – do you have an easy comp there as well in the fourth quarter? And was wondering how we should maybe think about the energy line for the remainder of the year, anything that's going on there in terms of strengthening or challenges to the business?.

Nothing out of the ordinary, I think as the biggest variable we tend to have is within many of our lines of business is you sell to your exclusive providers of technology to specific oilfield services companies and as they push and pull inventory around the year-end that will be the largest individual effect as we see the remainder the year.

But in terms of the market, oil and gas markets are obviously healthy and while there is perturbation in price of gas and oil we still see the oil services companies very busy in drawing upon technology as they go to deeper depths, still are expanding in the areas of fracing in North American drilling for – in particular for gas and we don't see that trend stopping.

So fundamentally I still see the same market trends occurring and our same trajectory and our plans are to continue to have that as a growth product line for us as a company.

And unless there is unforeseen changes we see in inventory or other pieces that our customers haven’t informed us of, which will be very untypical, I expect that we continue to perform and grow in that area over the longer run..

A question for you on the CRM side, I understand about the two legacy CRM products that are kind of rolling off and that should continue for the next couple of quarters as you explain to an earlier question, Tom. But in terms of materiality I realize you don't want to mention what the products are and so forth.

But in terms of percentage of the CRM business or dollar basis, are these two legacy products pretty material to your total CRM business or just any way you could help us think about this would be helpful?.

As a CEO every penny to me is material, because we are pushing the operating teams to be successful in winning the business.

The definition of materiality from a financial viewpoint obviously Michael would give a different response but our job is to manage the business to grow in 2x leverage to the bottom line and part of life and any high-technology market is end-of-life and product introduction and it occurs all the time.

So no matter what the size you look at this way there is a large end-of-life product and a lot of revenues rolling off, that means there's a new product launch that’s rolling in, in so many times those I’d say two-thirds to three quarters of the time those products align, it’s old generation out, a new generation in but a quarter of the time they don't align, there is a technology being eliminated and there is a different project and a different product area that’s being introduced and that's more of the case here, that’s occurring over the course of these three quarters.

So it's a bit unusual but again as the management team is offsetting it with previously won projects and they are professionally ramping down one and ramping up an unrelated project, at the same time to make sure we’re not shrinking, I see that you trend continuing.

It’s the challenging transition, we have the operating teams to be able to do it and I still maintain our ability to be efficient and profitable – they’ve done a nice job on it.

But we certainly wouldn’t be highlighting it if it was insignificant event of a few hundred thousand dollars, I mean we would only highlight it, it was something we felt was meaningful and that meaningful means materiality for you, then I think it's material..

If I can squeeze one more in on sales and marketing expenses, as you made the comment that you saw the leverage that you're getting on sales and marketing efforts but the expenses were running a little bit higher than you would expect or were planning on, can you just clarify that a little bit? I just want to make sure I have that right and are you still building headcount in sales and marketing or how should we think about that?.

The sales and marketing expenses are not higher than we had planned or right on target where we had planned for the year. If anything sales and marketing expense tends to be based on success, so we plan it to support the 5% revenue growth rate and 2x profitability.

We know what that trajectory looks like and when our sales and marketing expense may be increasing because we expect to sell more in the future, that is just an indicator that they are winning, their variable compensation plans are paying them and we’re recognizing the expense and it’s a good indicator that we’re winning deals that are moving into product development that will eventually get into the revenue streams and the P&L performance for Greatbatch, anywhere from a year to three years out.

So I don't see them higher, I see them moving higher because they are winning more deals and we are going to continue to make investments in sales and marketing and expand it. But they are not above what our plans are, they are supporting exactly what we need to be doing..

Okay.

So this level as a percentage of sales should we be planning on this for the next few quarters or how should we think about from a modelling perspective?.

I think that’s a good way to think about it, I think of it more on an absolute basis but when you tend to see – there is multiple effects in there when you expand the team it can go up. When that sales and marketing expense goes up, it could be an indicator that you’ve won a lot of deals, that will precipitate to faster growth rates.

And of course if you’ve not hit your targets, it can tend to go down but for projection purposes is that you have seen our adjusted guidance, we’re moving the revenue range and profitability range up and we plan on being at the same trajectory for expense control and including sales and marketing that reflect that..

Just on last, we’ve not fully built out our sales and marketing team, so when you look to a year-over-year comparison it’s an explanation of an increase of 2013 actual.

It is not above what we expected, and it's pretty much at the run rate that we expect going forward and to Tom’s point so this is a variable compensation piece there, let’s hope it goes up because that means revenue is going up even more..

There are no further questions at this time..

Thank you everyone and I would like to remind you about both the audio portion of the call as well as the slide visuals will be archived on our website at www.greatbatch.com. It will be accessible for the next 30 days. Appreciate everyone joining us and have a good evening..