Greatbatch, Inc. (NYSE:GB) Q3 2016 Earnings Conference Call - Final Transcript
Oct 27, 2016 • 05:00 pm ET
So coming in the future, you would expect that as inventories have stabilized already, and demand -- because of the price of oil and oil services companies -- the demand is slowly increasing, we are going to be very tightly coupled with customers. We are not planning on any inventory build with customers in 2017. And there will just be a slow recovery over the course of the year.
Okay. And then just to touch on the synergies, you guys said that you are accelerating synergies to now $30 million to $35 million for 2016. Have you changed your outlook of hopefully above $60 million in 2018, or by 2018?
Okay. I was just going to ask that. And one more question. You mentioned that part of your guys' cost-saving strategies is working on reducing your direct and indirect materials costs. And I was just curious if you -- how are you guys working on doing that, and if you could elaborate on that?
I'll start with indirect spend first. So we have -- both legacy companies had many contracts for service providers that would be anything from telecom to office supplies. Many of those contracts have a one-year period of time in which we have to wait for that contract to end for us to negotiate an Integer level with more savings embodied into the contract, due to the magnitude of our purchases. The same effect for direct materials also exists. We have current contracts that are reaching maturity. And they are being replaced by centrally negotiated, leveraging the broader manufacturing output the Company has in demand levels, and negotiating better prices in terms of their key supply chain partners.
So, while that effect has not been a large effect for our 2016 synergies, it is growing in importance as we bring the synergy level in 2017 up to a higher level. The direct material spend from renegotiating contracts that are reaching fruition, and indirect spend and more services type agreements are being negotiated to provide more productivity. So we still will have benefits from other areas to drive synergies, but the direct material and indirect spend are planned prominently in our 2017 synergy plans.
That is all the time we have for questions today. Thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone have a great day.