Welcome everyone to the third quarter 2013 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 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'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 would like to now turn the call over to today's host, Vice President, Finance and Treasurer, Betsy Cowell.

Thank you, Brae. Hello, everyone, and thank you for joining us today for our 2013 third quarter earnings call. With us today on the call is Thomas J. Hook, President and Chief Executive Officer; and Michael Dinkins, Executive Vice President and CFO. In terms of today's agenda, Tom Hook will start us off with a few comments regarding our third quarter. After that, Michael will provide additional comments on the third quarter performance, including comments on our working capital, cash flow and 2013 guidance. We will then the open the call to Q&A. As we have done in the past, we are including slide visual accompanying this presentation, which you can access on our website, www.greatbatch.com. With that, let me turn the call over to Tom Hook.

Thank you, Betsy, and welcome to all of you who are listening to our call today. We are pleased to be able to share with you our results for the third quarter. Sales for the quarter totaled $167.7 million, growing 5% organically when accounting for the impact of foreign exchange and the divestiture of non-core orthopedic products in 2012. Three product lines contributed to this growth; orthopedics is up 22%, cardiac rhythm management, plus 8%; and energy, plus 4%. I will talk more about the sales performance drivers later in the presentation. Adjusted diluted earnings per share increased for the third quarter to $0.57 per share, a 24% increase over the third quarter 2012 and the fifth consecutive quarter-over-quarter improvement. These results were fueled by; our organic constant currency revenue growth of 5%; a 170 basis point improvement in gross margin; lower medical device spending; and an effective tax rate of 28.8% for the quarter. This resulted in 110 basis point improvement in our return on invested capital performance to 8.6%. Our cash flow from operations for the quarter totaled $25 million bringing our year-to-date cash flow total to $60 million. This quarter's performance was driven by higher operating income. As expected, we issued an estimated tax payment of $8 million during the quarter in conjunction with the retirement of our convertible subordinated notes. This brings our total estimated tax payment for the debt retirement to $20 million for the year. Excluding this tax payment, our quarterly operating cash flow totaled $33 million or $36 million year-to-date. Michael will discuss the changes and programs in place that continue to improve our cash flow performance, later in the call. Slide 6, shows our constant currency organic growth by product line for the quarter. Most notably were the continued growth in our…

Thanks, Tom, and good afternoon, everyone. I am pleased to be on the call today to provide a brief update on our third quarter 2013 results and update you on our full year guidance. For more specific details regarding our financial results for the quarter, we refer you to our press release that we issued earlier today. Slide 13. The key highlights for the quarter are as follows: 5% constant currency organic sales growth; gross margin improvement to 33.3% in line with prior periods of 2013; and 170 basis points up from the third quarter 2012. Plan funding reallocations to sales and marketing, lower medical device spending and reduction in our other operating expenses shown in reconciliation of other operating expense in the appendix of our presentation. Adjusted diluted EPS, up 24% to $0.57 per share and 18.4% adjusted EBITDA margin or $30.8 million, up 10% over prior year. Cash flow from operating activities is $24.7 million, up 54% over prior year. On Slide 14, we provide EPS reconciliation for the quarter compared with third quarter 2012. Our global operations continues to perform exceptionally well and the decision to consolidate our orthopedic business has delivered positive results of $0.06 in the quarter. We have funded sales and marketing through reduced spending in our medical device initiatives and lower interest expenses. Our performance based compensation tracks with our total year revenue and adjusted operating income expectations. As our fully diluted share count moves higher with the higher stock price, this also impacted quarterly EPS. On Slide 15, we have some details of our cash flow performance. Cash flow from operations for the first nine month of the year totaled $16.1 million, including the $20 million tax payments made in connection with the retirement of the convertible note. Excluding the tax payment,…

(Operator Instructions) And your first question comes from the line of Dan Rutter with Paragon Investment.

I'm wondering, if you could talk a little bit about the expectations for the headwind for military over the next couple of quarters?

Military for us is a small product line. We have a couple of key accounts, especially in the communication space and those are areas where we have long-term agreements with customers for those product lines on more or less an exclusive basis. So it's a small piece of EME or energy, military and environmental product line that we report. So on a consolidated basis it does not have a big effect. So we remain cautious on military, given what's happening globally. But we still have a long-term agreement in place that secures a reasonable portion of that business and it's been relatively predictable. The second driver ends up being, as we have won some new pieces of military business, which will start coming on stream in 2014, which will also buffer and mitigate some of the volume loss that occurs as the military retracts its purchasing patters. Hopefully that answers your question, Dan.

Can you elaborate a little bit more on the progress around Algostim and partnering?

Right now, I'm going to limit my comments on Algostim partnering specifically to that we even have an engagement that is put ourselves in a position where we're screening partners and have evaluated our alternatives. We have not made any choices, especially because as we're approaching the actual submissions for FDA, PMA submission as well as the CE Mark, and we recognize that's a very important milestone. So they've progressed all along in the regulatory submission path and we're on schedule with completion of the design verification testing in those submissions. We have not submitted them yet, but we will provide information when we do. And the process of finding a commercial partner continues and we don't have any news to report, because we're still in the middle of that process. And don't plan any particular updates until we're ready to make a selection on what our strategy is going to be.

Can you give us a little more guidance as to when the submissions may be?

We've provided commentary that we intend to make the PMA submission by the end of this year for Algostim, and then early next year we would plan finishing the process for CE Marking in Europe. And as you heard in my prepared remarks is that we're on schedule with those timelines and we're progressing forward along those still.

And your next question comes from the line of Chris Sassouni with Eagle Asset Management.

On the topic of Algostim, if you're going to do the CE Mark by next year some time, would you also expect to gain approval next year and actually be able to market that?

I think the CE Marking timeline we project to have a shorter approval lengths of time than the PMA submission of the FDA. So yes, Chris, we would be in a position, obviously, there is multiple other things that need to take at place, manufacturing, predations as well as precipitation of our partnering discussions. But it is feasible that CE Marking could be received before the end of 2014. But we're taking a very conservative approach. As we've said before we're counting on an early 2015 PMA approval and a late 2014 CE Mark approval. But, they could come sooner, to your point.

And at this point, refresh my memory, this is a literature-based PMA, correct?

It is a PMA that many people call a literature-based PMA, correct, although that's a informal descriptor.

So, can the FDA decide post-submission that they've changed their mind or would want you to do clinicals, or what are the nodes on the decision tree? I mean you submit; what are the possible outcomes from FDA? Could they just come back and say during the normal timeline, yes, you're approved? But, is it also possible that they would come back and say, we accept what you have so far, but we want additional clinicals?

So the PMA process for the Algostim submission, when we give it to the FDA and obviously communicate with them, the FDA couldn't ask for a wide range of information and data up to and including clinical information. So we're following the guidelines and the path that's been followed by virtually all other neurostimulation companies. And we've already been in communication with regards to our approach. Obviously, we'll find out more once we have the submission in the 100-day review, specifically what feedback we'll get. We're taking a very straight forward approach in terms of our submission. And planned of, as you call it or it's commonly referred to, literature-based approach, which the last two major systems have been approved under, we plan on taking the exact same approach.

And then on the subject of, I don't know what you would call it, discontinuing or low-margin businesses. I missed the early part of your introductory remarks. At this point, have you decided, which businesses and/or which customers you would like to discontinue?

I think one of the things that we do as a company very actively now to grow is we're being very conscious and deliberate on growing profitably. And our whole strategy is built around profitable growth. And one of the investments that we've made as a company under the last 10 years of investing in IT systems is then to be able to look deeply product-by-product, customer-by-customer, really platform-by-platform and stratify which pieces in product lines we do not have profitable growth opportunities and we're to reallocate those resources to more better opportunities. We are stepping away from those product lines consciously and searching a place to deploy our resources that can grow and grow profitably. So it's their conscious decision not to quote, chase price, and most of those opportunities have a common theme. And it's simply our intellectual property portfolio is now strong. So base of our business strategy is around profitable growth to leverage our intellectual property portfolio and our manufacturing excellence and that's where we want to steer our investments. And we are consciously and in areas where we do not have strong intellectual property, if those margins are not acceptable, we're going step out of that business and look for better opportunities to grow, and that's as simple as that.

So when or how are you going to reveal, which businesses will stay and which businesses will not stay?

It's not a question of businesses or product lines. It's a question of literally individual components for individual customers and individual platforms. It's a very granular deal-by-deal analysis. So we're not exiting any wholesale product line. We do see great opportunities in all of our product categories.

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

I've been toggling in between different earnings calls here. So if you already answered this and I missed it, I apologize. But, on CRM and neuro, your previous guidance was 0% to 2% and now that looks to be pretty conservative. Any thoughts on how we should be thinking about this?

I'd still we think of it the same way as low-single digit channels. If you look over a rolling 12-month basis, we track ourselves as 1% above the market that we track, while the market is shrinking about 1%, we're tracking about positive 1% above that. As you know that's over 15% of our revenues as a company. So it's a huge impact for us. So we think we pegged the rolling 12 months growth rate directly in that 0% to 2% range. We know we're growing faster than the market. And we are widely represented in all five cardiac rhythm management companies. And we also serve an ever increasing number of neuro stimulation companies. And of course, we plan obviously making our components for our own neurostimulators, which haven't achieved revenue yet. So from a guidance perspective I think we're right where we should be, certainly through the year, we're a little bit ahead of the pace. But we track those obviously on a quarterly basis and we track those on a rolling 12-month basis. So while the nine months is 3% and we're quite happy with that, a little bit of above of what we projected. The rolling 12-months is about 1% and we feel pretty good about that too.

And then my other question is regarding portable medical negative 4% growth, it hat seems a little bit weaker than you previously expected. Are there some things going on here that we should be aware of or how should we be thinking about this?

It's a weaker because we, as I said in my prepared remarks, exited $9 million of business that we were not making acceptable returns on the investments that we've been making. We had weak intellectual property position. We decided not to decrease our prices and go meet price milestones that were given to us. So we exited that business and redeployed the resources under new projects where our profit margins are more acceptable. So it's definitely a hit to our revenue growth for the portable medical segment, which we're not satisfied with. But it allows us to make investments to grow revenue and margins more profitably and other opportunities in the portable medical area. But that takes a gestation time to win those businesses and turn them into revenue. So it's about three to six quarter lag depending on the opportunities. But it's a right thing to do for our profitability, but it does show up as weakness in our revenue growth.

And is any of this business that came through the Micro Power acquisition or is this kind of outside of the Micro Power acquisition that you brought in?

That's all Micro Power acquired product lines that we made those decisions on.

And your next question comes from the line of Glenn Novarro with RBC Capital Markets.

This is Julia Kufman calling in for Glenn. So my first question relates to your base business, if you could speak.

Could you speak up please? We can't hear you.

So my first question relates to your base business and if you could speak to some of the underlying trends this quarter and specifically CRM and orthopedics, what's driving the growth of the market? And if you could also discuss your thinking on long-term agreements and if there has been anything incremental since your last update?

From a core business perspective, in cardiac rhythm management and neuro, we're doing a very good job of working with our customers to get designed into their platforms. And cardiac rhythm management is obviously, historically very significant set of product lines for us. They are secured by long-term agreements and we have very deep and longstanding relationships with OEMs. However, the real growth opportunities for us is certainly are going to come in neurostimulation. We historically have had a much lower revenues in neuro. They're very similar technologies from a discreet product standpoint that are used. So combined with winning new CRM products with our current OEM customers and adding incremental wins in the neuromodulation space will continue to allow us to grow slightly faster than the underlying unit growth in that market. We've got the strategy and the technology underneath that to back it up. And what gives us confidence is our signing of long-term agreements that secure that business for multiple years some times three-to-five and some times as long as eight years in length for our both CRM and neurostimulation. So on the CRM side while that's a slower growth market, we've got very deep penetration of the OEMs and they've leveraged our intellectual property footprint very heavily. So we don't expect that to generate the 5% revenue growth target we have as a company, but we do expect to be able to grow faster than the underlying markets through customer engagement and incremental wins in neuro in particular. There are multiple long-term agreements that are perpetually renewing in cardiac rhythm management and neuromodulation. Every year there is new ones that have been renewed. Fortunately, we've successfully renewed all of those that are in the near-term expiration. And we're on track to renew the ones that will…

I don't know if you touched on this on the call. But is the transition for your manufacturing and the discontinuation of the product lines, is that a 100% done in online? Meaning the manufacturing online and the divestitures completed?

It's not a 100% done. The facilities are effectively phased out, except for a handful of people in Switzerland. We have moved completely from our Columbia City operations into our Fort Wayne facility. However, we still have backlog that we're relieving. It was a result of that transition process that we're still completing. I mean we still have other regulatory and customer approval processes that have to be done. So while the overwhelming majority of the transition is completed, we still have pieces to complete between now and the end of the year to finalize it.

And my last question relates to sort of, you guys mentioned a lot on Algostim. But I think in the past you mentioned that you have a few other medical device initiatives in the pipeline. Are you ready to disclose any more details on that front or do you have timing when you are ready?

I'm not prepared to disclose anything more than we've already disclosed. Yes, there is multiple other medical device platforms. One of those at our Investor Day, we did disclosed is a cardiac monitor called CARDIOMONIX. And other than that, we're not providing any other guidance or information on those programs at this time. But in the future as we reach milestones and are prepared to communicate on them, we plan on doing so.

And sort of back to Algostim, is there an opportunity to see a commercial agreement in advance of a PMA or CE Mark or is that expected after the two milestones are reached?

We have left our options open. And we've been working with our Board of Directors as well as potential partners along with JPMorgan as our partners to compare a option in which we would sign a partner pre-PMA approval versus waiting for the PMA or the CE Mark to be granted and then structuring a deal. So we're considering all options and we're not going to make a choice prematurely because we feel we've still got a lot of work left to go. And we're in a strong position with regards to how we would like to monetize it. So we're going to not make that choice purposely.

And that concludes today's question-and-answer session. I'd like to turn the call back over to Betsy Cowell for any closing remarks.

Thanks, Brae. I would like to remind you both, that both the audio portion of the call as well as the slide visuals will be archived on our website at greatbatch.com. And then will also be accessible for the next 30 days. Thank you, again, for everyone joining us. And have a good afternoon.

Thank you for your participation. That concludes today's conference call.