Greatbatch, Inc. (NYSE:GB) Q3 2016 Earnings Conference Call - Final Transcript
Oct 27, 2016 • 05:00 pm ET
The final and third variable would be the constant price pressure that -- this is a very competitive space; in particular, orthopedics, medical device outsource manufacturing. So we've seen a lot of price pressure in this space. We have seen some other medical device outsource manufacturers being sold to new buyers in this space, so it's a changing landscape. But the pricing pressure in this market is still very high. And it's a very competitive marketplace. So that's a third variable that is a constant. And it did hurt our ability to grow in 2016, and we expect that to be a variable going forward, as well.
And the cardio and vascular?
Cardio and vascular is -- the cardio and vascular segment is traditionally a low-single-digit grower from a medical device outsourcing perspective. It has a very small effect in that we are finishing up our transition from our Plymouth, Minnesota, facility to -- also down to Mexico operation for manufacturing. That has largely been completed, as well as our facility in Arvada, Colorado, being transitioned to our Juarez, Mexico, facility.
Those moves have taken place throughout 2016. There has been some shipments of that product throughout 2016. But in the production -- in the new facilities that's just coming online it has stunted growth somewhat. So the moves of both our Arvada and Plymouth facility is that first variable in cardio and vascular.
The second variable is really regarding a major product launch that we had won at Integer years ago that has already completed development, and is just waiting on launching from a customer. That program that was set to launch at the beginning of the year was delayed progressively to the end of the year. However, we have received the green light to commence manufacturing ramp for commercialization, and will be, late in the fourth quarter.
So that has been a revenue drag for us in the cardiovascular product line all year because the facility has been built; it's qualified. The production team is on board and waiting to build product. But we are unable to start because the customer's regulatory process has not been completed. So that's the second variable.
The third variable is also price in the cardio and vascular segment. It has traditionally been a variable that we fight across that product line. It's not any higher than has been normally. But it's still -- as a medical device outsourcer, it is a barrier to revenue growth that we have to overcome.
Okay, great. That's very insightful. And then just last question for me, and maybe a multi-part question, but around your net debt level. Are you confident, given all the moving pieces, that the net debt has peaked and should be moving lower sequentially now from here? And then also, are there any asset sales that you could pursue that would help you de-lever more quickly?
Yes. We are reasonably confident that from here, our net debt should go down sequentially.