Greatbatch, Inc. (NYSE:GB) Q3 2016 Earnings Conference Call - Final Transcript
Oct 27, 2016 • 05:00 pm ET
Matt Mishan, KeyBanc.
Mike, could you give us a little bit more color around the change in adjusted EBITDA, and exactly what were the moving pieces of that $10 million?
The moving pieces of the $10 million -- as we bridge from the GAAP EBITDA that we have calculated to the adjusted EBITDA, and updated our estimates, we made changes in terms of the income taxes and depreciation and amortization. Roughly about $6 million of it is associated with the depreciation and amortization, as we reconciled that and updated our estimate; and the balance of it is how we have to recognize for adjusted, based on our income taxes.
We continue to believe that our cash taxes for the year will be in the $8 million to $10 million range. In fact, we think we will be a little bit closer to the $8 million range. So that tax change really did not impact our expectation in terms of how much cash we will pay.
I think I'm going to have to follow-up with you off-line on that one. All right. I kind of understand the issues with the cardiac rhythm management and Electrochem. I think those were pretty well explained. I'm not fully sure why some of the other segments, the other two segments, are flat to down, given the robustness of the end markets. Could you put a little bit more color around why orthopedic, advanced surgical, portable medical is down, and why cardio and vascular is relatively flat this year?
Well, I'll start with our advanced surgical and portable medical product line, Matt. As you know, we have been actively moving this product line from our Beaverton, Oregon, operations down to our operations in Tijuana at Integer. To accomplish that change, we had to do a ramp and last-time manufacturing in our Beaverton operations, and did make available those last-time purchases from that location. That flattened out our revenue opportunities in 2016 until we had our Mexican facility in Tijuana online to be able to ship portable medical products.
So as we look at the product lines for advanced surgical and portable medical, in combination, it's suffering from having some of those product shipments being lighter in 2016 than they were in the 2015 time frame. Our expectation is, as the facility that's brand-new down in Tijuana is fully qualified, which will happen between now and the end of 2016, that 2017 will be a year that's returning back to normal in growth; and that, hence, will then help that product line, in totality, show a more normal revenue trajectory.
The second point that you'd pick up from advanced surgical and orthopedics is variable -- is both advanced surgical and orthopedics are a product line that's prone to launch-driven revenue. We did not have many launches for advanced surgical or orthopedics in 2016. We've won several product and project wins with key customers for 2017. We expect launches to be more of a driver for growth