INTEGER HOLDINGS CORP, 10-Q filed on 11/10/2015
Quarterly Report
Document and Entity Information
9 Months Ended
Oct. 2, 2015
Nov. 10, 2015
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
GREATBATCH, INC. 
 
Entity Central Index Key
0001114483 
 
Document Type
10-Q 
 
Document Period End Date
Oct. 02, 2015 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q3 
 
Current Fiscal Year End Date
--01-01 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
30,557,396 
Condensed Consolidated Balance Sheets - Unaudited (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Current assets:
 
 
Cash and cash equivalents
$ 68,594 
$ 76,824 
Accounts receivable, net of allowance for doubtful accounts of $1.3 million in 2015 and $1.4 million in 2014
108,278 
124,953 
Inventories
164,236 
129,242 
Refundable income taxes
3,447 
1,716 
Deferred income taxes
7,603 
6,168 
Prepaid expenses and other current assets
12,103 
11,780 
Total current assets
364,261 
350,683 
Property, plant and equipment, net
156,009 
144,925 
Amortizing intangible assets, net
55,329 
65,337 
Indefinite-lived intangible assets
20,288 
20,288 
Goodwill
354,139 
354,393 
Deferred income taxes
2,415 
2,626 
Other assets
31,181 
17,757 
Total assets
983,622 
956,009 
Current liabilities:
 
 
Current portion of long-term debt
15,000 
11,250 
Accounts payable
56,277 
46,436 
Income taxes payable
2,567 
2,003 
Deferred income taxes
339 
588 
Accrued expenses
43,256 
48,384 
Total current liabilities
117,439 
108,661 
Long-term debt
165,000 
176,250 
Deferred income taxes
51,137 
53,195 
Other long-term liabilities
4,191 
4,541 
Total liabilities
337,767 
342,647 
Stockholders’ equity:
 
 
Preferred stock, $0.001 par value, authorized 100,000,000 shares; no shares issued or outstanding in 2015 or 2014
Common stock, $0.001 par value, authorized 100,000,000 shares; 25,623,439 shares issued and 25,576,138 shares outstanding in 2015; 25,099,293 shares issued and 25,070,931 shares outstanding in 2014
26 
25 
Additional paid-in capital
383,691 
366,073 
Treasury stock, at cost, 47,301 shares in 2015 and 28,362 shares in 2014
(2,279)
(1,307)
Retained earnings
256,761 
239,448 
Accumulated other comprehensive income
7,656 
9,123 
Total stockholders’ equity
645,855 
613,362 
Total liabilities and stockholders’ equity
$ 983,622 
$ 956,009 
Condensed Consolidated Balance Sheets - Unaudited (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Current assets:
 
 
Allowance for doubtful accounts
$ 1.3 
$ 1.4 
Stockholders’ equity:
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
100,000,000 
100,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
25,623,439 
25,099,293 
Common stock, shares outstanding
25,576,138 
25,070,931 
Treasury stock, shares
47,301 
28,362 
Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Income Statement [Abstract]
 
 
 
 
Sales
$ 146,637 
$ 171,699 
$ 482,847 
$ 518,061 
Cost of sales
94,991 
113,581 
320,852 
343,877 
Gross profit
51,646 
58,118 
161,995 
174,184 
Operating expenses:
 
 
 
 
Selling, general and administrative expenses
22,308 
22,121 
69,021 
65,753 
Research, development and engineering costs, net
14,299 
13,638 
39,907 
39,962 
Other operating expenses, net
13,844 
6,176 
29,449 
10,223 
Total operating expenses
50,451 
41,935 
138,377 
115,938 
Operating income
1,195 
16,183 
23,618 
58,246 
Interest expense, net
5,825 
1,051 
8,151 
3,208 
Other income, net
(4,636)
(3,768)
(6,294)
(4,055)
Income before provision (benefit) for income taxes
18,900 
21,761 
59,093 
Provision (benefit) for income taxes
(16)
4,888 
4,448 
17,811 
Net income
22 
14,012 
17,313 
41,282 
Earnings per share:
 
 
 
 
Basic
$ 0.00 
$ 0.56 
$ 0.68 
$ 1.67 
Diluted
$ 0.00 
$ 0.54 
$ 0.66 
$ 1.60 
Weighted average shares outstanding:
 
 
 
 
Basic
25,536 
24,899 
25,424 
24,784 
Diluted
26,441 
25,923 
26,372 
25,850 
Comprehensive Income
 
 
 
 
Net income
22 
14,012 
17,313 
41,282 
Foreign currency translation gain (loss)
144 
(3,211)
(1,467)
(2,422)
Net change in cash flow hedges, net of tax
689 
(49)
114 
Other comprehensive income (loss)
833 
(3,260)
(1,467)
(2,308)
Comprehensive income
$ 855 
$ 10,752 
$ 15,846 
$ 38,974 
Condensed Consolidated Statements of Cash Flows - Unaudited (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Cash flows from operating activities:
 
 
Net income
$ 17,313 
$ 41,282 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
26,941 
27,943 
Debt related amortization included in interest expense
5,368 
580 
Stock-based compensation
9,044 
10,531 
Other non-cash gains, net
(1,549)
(7,191)
Deferred income taxes
(3,614)
(3,000)
Changes in operating assets and liabilities:
 
 
Accounts receivable
17,395 
(8,460)
Inventories
(34,992)
(7,111)
Prepaid expenses and other current assets
(1,371)
(23)
Accounts payable
3,347 
(1,311)
Accrued expenses
(5,823)
(3,627)
Income taxes
(1,074)
5,070 
Net cash provided by operating activities
30,985 
54,683 
Cash flows from investing activities:
 
 
Acquisition of property, plant and equipment
(31,307)
(16,029)
Proceeds from sale of orthopaedic product lines (Note 9)
2,655 
(Purchase of) proceeds from sale of cost method investments
(6,300)
4,306 
Acquisitions, net of cash acquired (Note 2)
15,801 
Other investing activities
732 
Net cash used in investing activities
(36,875)
(24,869)
Cash flows from financing activities:
 
 
Principal payments of long-term debt
(7,500)
(7,500)
Issuance of common stock
5,988 
5,705 
Other financing activities
(318)
(1,059)
Net cash used in financing activities
(1,830)
(2,854)
Effect of foreign currency exchange rates on cash and cash equivalents
(510)
(843)
Net increase (decrease) in cash and cash equivalents
(8,230)
26,117 
Cash and cash equivalents, beginning of period
76,824 
35,465 
Cash and cash equivalents, end of period
$ 68,594 
$ 61,582 
Condensed Consolidated Statement of Stockholders' Equity - Unaudited (USD $)
In Thousands, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Treasury Stock [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Balance at Jan. 02, 2015
$ 613,362 
$ 25 
$ 366,073 
$ (1,307)
$ 239,448 
$ 9,123 
Balance, shares at Jan. 02, 2015
 
25,099 
 
(28)
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Stock-based compensation
7,051 
 
7,051 
 
 
 
Net shares issued under stock incentive plans, shares
 
524 
 
(91)
 
 
Net shares issued under stock incentive plans
5,676 
10,115 
(4,440)
 
 
Shares contributed to 401(k), shares
 
 
 
72 
 
 
Shares contributed to 401(k) Plan
3,920 
 
452 
3,468 
 
 
Net income
17,313 
 
 
 
17,313 
 
Total other comprehensive loss, net
(1,467)
 
 
 
 
(1,467)
Balance at Oct. 02, 2015
$ 645,855 
$ 26 
$ 383,691 
$ (2,279)
$ 256,761 
$ 7,656 
Balance, shares at Oct. 02, 2015
 
25,623 
 
(47)
 
 
Summary of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation – The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a full presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of Greatbatch, Inc. and its subsidiaries (collectively “Greatbatch” or the “Company”) for the periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ materially from these estimates. The January 2, 2015 condensed consolidated balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended January 2, 2015. The Company utilizes a fifty-two, fifty-three week fiscal year ending on the Friday nearest December 31. The third quarter and first nine month periods of 2015 and 2014 each contained 13 weeks and 39 weeks, respectively, and ended on October 2, and October 3, respectively.
Nature of Operations The Company has two reportable segments: Greatbatch Medical and QiG Group (“QiG”). Greatbatch Medical designs and manufactures medical devices and components where Greatbatch either owns the intellectual property or has unique manufacturing and assembly expertise. Greatbatch Medical provides medical devices, components, design engineering services, and value-added assembly to the cardiac/neuromodulation, orthopaedics, portable medical, vascular, and energy, military and environmental markets. QiG is a medical device company formed in 2008 to develop and commercialize a neurostimulation technology platform for treatment of various disorders by stimulating tissues associated with the nervous system.
On July 30, 2015, Greatbatch announced a proposed spin-off of a portion of its QiG segment through a tax-free distribution of all of the shares of its QiG Group LLC subsidiary to the stockholders of Greatbatch on a pro rata basis (the “Spin-off”). Immediately prior to completion of the Spin-off, QiG Group LLC will be converted into a corporation organized under the laws of Delaware and change its name to Nuvectra Corporation (“Nuvectra”). The Spin-off is expected to be completed in the first quarter of 2016. See Note 15 “Business Segment, Geographic and Concentration Risk Information” for further description of this transaction and the entities included in the Spin-off.
On October 27, 2015, the Company acquired all of the outstanding common stock of Lake Region Medical Holdings, Inc. (“Lake Region Medical”) for a total purchase price including debt assumed of approximately $1.77 billion. Lake Region Medical offers fully integrated outsourced manufacturing and engineering services, contract manufacturing, finished device assembly, original device development and supply chain management services from concept to point-of-care in the cardio & vascular and advanced surgical markets. After completing the acquisition, Greatbatch is one of the largest medical device outsource (“MDO”) manufacturers in the world. As a result of the Lake Region Medical acquisition and proposed Spin-off, the Company is reevaluating its operating and reporting segments. See Note 17 “Subsequent Events” for further description of this transaction and the significant impact it will have on the Company’s financial position and results of operations.
Acquisition
ACQUISITION
ACQUISITION
On August 12, 2014, the Company purchased all of the outstanding common stock of Centro de Construcción de Cardioestimuladores del Uruguay (“CCC”), headquartered in Montevideo, Uruguay. CCC is an active implantable neuromodulation medical device systems developer and manufacturer that produces a range of medical devices including implantable pulse generators, programmer systems, battery chargers, patient wands and leads. This acquisition allows the Company to more broadly partner with development stage medical device companies, complements the Company’s core discrete technology offerings and enhances the Company’s medical device innovation efforts. This transaction was accounted for under the acquisition method of accounting. Accordingly, the operating results of CCC have been included in the Company’s QiG segment from the date of acquisition. Once the medical devices developed by CCC receive regulatory approval and reach significant production levels, the responsibility for manufacturing these products may be transferred to Greatbatch Medical. The aggregate purchase price of $19.8 million was funded with cash on hand.
The cost of the acquisition was allocated to the assets acquired and liabilities assumed of CCC based on their fair values as of the closing date of the acquisition, with the amount exceeding the fair value of the net assets acquired being recorded as goodwill. The valuation of the assets acquired and liabilities assumed was finalized during the first quarter of 2015 and did not result in a material adjustment to the original valuation of net assets acquired, including goodwill.
The following table summarizes the allocation of the CCC purchase price to the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Assets acquired
 
Current assets
$
10,670

Property, plant and equipment
1,131

Amortizing intangible assets
6,100

Goodwill
8,296

Total assets acquired
26,197

Liabilities assumed
 
Current liabilities
4,842

Deferred income taxes
1,590

Total liabilities assumed
6,432

Net assets acquired
$
19,765



The fair values of the assets acquired were determined using one of three valuation approaches: market, income or cost. The selection of a particular method for a given asset depended on the reliability of available data and the nature of the asset, among other considerations.
The market approach estimates the value for a subject asset based on available market pricing for comparable assets. The income approach estimates the value for a subject asset based on the present value of cash flows projected to be generated by the asset. The projected cash flows were discounted at a required rate of return that reflects the relative risk of the asset and the time value of money. The projected cash flows for each asset considered multiple factors from the perspective of a marketplace participant including revenue projections from existing customers, attrition trends, technology life-cycle assumptions, marginal tax rates and expected profit margins giving consideration to historical and expected margins. The cost approach estimates the value for a subject asset based on the cost to replace the asset and reflects the estimated reproduction or replacement cost for the asset, less an allowance for loss in value due to depreciation or obsolescence, with specific consideration given to economic obsolescence if indicated. These fair value measurement approaches are based on significant unobservable inputs, including management estimates and assumptions.
Current Assets and Liabilities – The fair value of current assets and liabilities, excluding inventory, was assumed to approximate their carrying value as of the acquisition date due to the short-term nature of these assets and liabilities.
The fair value of in-process and finished goods inventory acquired was estimated by applying a version of the market approach called the comparable sales method. This approach estimates the fair value of the assets by calculating the potential revenue generated from selling the inventory and subtracting from it the costs related to the completion and sale of that inventory and a reasonable profit allowance. Based upon this methodology, the Company recorded the inventory acquired at fair value resulting in an increase in inventory of $0.3 million.
Intangible Assets – The purchase price was allocated to intangible assets as follows (dollars in thousands):
Amortizing Intangible Assets
 
Fair
Value
Assigned
 
Weighted
Average
Amortization
Period (Years)
 
Weighted
Average
Discount
Rate
Technology
 
$
1,400

 
10
 
18%
Customer lists
 
4,600

 
10
 
18%
Trademarks and tradenames
 
100

 
2
 
18%
 
 
$
6,100

 
10
 
18%

Technology – Technology consists of technical processes, unpatented technology, manufacturing know-how, trade secrets and the understanding with respect to products or processes that have been developed by CCC and that will be leveraged in current and future products. The fair value of technology acquired was determined utilizing the relief from royalty method, a form of the income approach, with a royalty rate of 3%. The weighted average amortization period of the technology is based upon management’s estimate of the product life cycle associated with the technology before they will be replaced by new technologies.
 
Customer Lists – Customer lists represent the estimated fair value of non-contractual customer relationships CCC has as of the acquisition date. The primary customers of CCC include medical device companies in various geographic locations around the world. These relationships were valued separately from goodwill at the amount that an independent third party would be willing to pay for these relationships. The fair value of customer lists was determined using the multi-period excess-earnings method, a form of the income approach. The weighted average amortization period of the existing customer base was based upon the historical customer annual attrition rate of 15%, as well as management’s understanding of the industry and product life cycles.
Trademarks and Tradenames – Trademarks and tradenames represent the estimated fair value of CCC’s corporate and product names. These tradenames were valued separately from goodwill at the amount that an independent third party would be willing to pay for use of these names. The fair value of the trademarks and tradenames was determined by utilizing the relief from royalty method, a form of the income approach, with a 0.5% royalty rate.
Goodwill – The excess of the purchase price over the fair value of net tangible and intangible assets acquired and liabilities assumed was allocated to goodwill. Various factors contributed to the establishment of goodwill, including the value of CCC’s highly trained assembled work force and management team, the incremental value that CCC’s technology will bring to QiG’s medical devices, and the expected revenue growth over time that is attributable to increased market penetration from future products and customers. The goodwill acquired in connection with the CCC acquisition was allocated to the QiG segment and is not deductible for tax purposes.
Pro Forma Results
The following pro forma information presents the consolidated results of operations of the Company and CCC as if that acquisition occurred as of the beginning of fiscal year 2013 (in thousands, except per share amounts):
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 3, 2014
 
October 3, 2014
Sales
 
$
173,413

 
$
526,631

Net income
 
14,219

 
42,165

Earnings per share:
 
 
 
 
Basic
 
$
0.57

 
$
1.70

Diluted
 
$
0.55

 
$
1.63


The results prior to the acquisition date have been adjusted to include the pro forma impact of the amortization of acquired intangible assets based on the purchase price allocations and the impact of income taxes on the pro forma adjustments utilizing the applicable statutory tax rate. The pro forma consolidated basic and diluted earnings per share calculations are based on the consolidated basic and diluted weighted average shares of Greatbatch.
The pro forma results are presented for illustrative purposes only and do not reflect the realization of potential cost savings or any related integration costs. Certain cost savings may result from the acquisition; however, there can be no assurance that these cost savings will be achieved. These pro forma results do not purport to be indicative of the results that would have been obtained in the periods presented, or to be indicative of results that may be obtained in the future.
Subsequent Event
On October 27, 2015, the Company acquired all the outstanding shares of Lake Region Medical, for a total purchase price including debt assumed of approximately $1.77 billion. See Note 17 “Subsequent Events” for further description of this transaction and the significant impact it will have on the Company’s financial position and results of operations.
Supplemental Cash Flow Information
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
 
Nine Months Ended
(in thousands)
October 2, 2015
 
October 3, 2014
Noncash investing and financing activities:
 
 
 
Common stock contributed to 401(k) Plan
$
3,920

 
$
4,341

Property, plant and equipment purchases included in accounts payable
892

 
2,618

Deferred financing costs included in accounts payable
7,922

 

Acquisition of noncash assets
$

 
$
21,282

Liabilities assumed
$

 
$
5,464

Inventories
INVENTORIES
INVENTORIES
Inventories are comprised of the following (in thousands):
 
As of
 
October 2, 2015
 
January 2, 2015
Raw materials
$
85,040

 
$
73,354

Work-in-process
52,101

 
38,930

Finished goods
27,095

 
16,958

Total
$
164,236

 
$
129,242

Intangible Assets
INTANGIBLE ASSETS
INTANGIBLE ASSETS
Amortizing intangible assets are comprised of the following (in thousands):
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Foreign
Currency
Translation
 
Net
Carrying
Amount
At October 2, 2015
 
 
 
 
 
 
 
Purchased technology and patents
$
95,776

 
$
(80,429
)
 
$
1,966

 
$
17,313

Customer lists
72,857

 
(36,739
)
 
1,374

 
37,492

Other
4,534

 
(4,813
)
 
803

 
524

Total amortizing intangible assets
$
173,167

 
$
(121,981
)
 
$
4,143

 
$
55,329

At January 2, 2015
 
 
 
 
 
 
 
Purchased technology and patents
$
95,776

 
$
(75,894
)
 
$
1,966

 
$
21,848

Customer lists
72,857

 
(31,460
)
 
1,374

 
42,771

Other
4,534

 
(4,619
)
 
803

 
718

Total amortizing intangible assets
$
173,167

 
$
(111,973
)
 
$
4,143

 
$
65,337


Aggregate intangible asset amortization expense is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Cost of sales
$
1,324

 
$
1,567

 
$
4,240

 
$
4,696

Selling, general and administrative expenses
1,831

 
1,756

 
5,474

 
5,190

Research, development and engineering costs, net
88

 
164

 
294

 
565

Total intangible asset amortization expense
$
3,243

 
$
3,487

 
$
10,008

 
$
10,451


Estimated future intangible asset amortization expense based on the carrying value as of October 2, 2015 is as follows (in thousands):
 
Estimated
Amortization
Expense
Remainder of 2015
$
2,979

2016
10,795

2017
9,520

2018
7,114

2019
5,431

Thereafter
19,490

Total estimated amortization expense
$
55,329


Indefinite-lived intangible assets are comprised of the following (in thousands):
 
Trademarks
and
Tradenames
At January 2, 2015
$
20,288

At October 2, 2015
$
20,288

The change in goodwill is as follows (in thousands):
 
Greatbatch Medical
 
QiG
 
Total
At January 2, 2015
$
304,297

 
$
50,096

 
$
354,393

Foreign currency translation
(254
)
 

 
(254
)
At October 2, 2015
$
304,043

 
$
50,096

 
$
354,139

Debt
DEBT
DEBT
Long-term debt is comprised of the following (in thousands):
 
As of
 
October 2, 2015
 
January 2, 2015
Variable rate term loan
$
180,000

 
$
187,500

Revolving line of credit

 

Total debt
180,000

 
187,500

Less current portion of long-term debt
15,000

 
11,250

Total long-term debt
$
165,000

 
$
176,250


Credit Facility – As of October 2, 2015, the Company had a credit facility (the “Credit Facility”) that provided a $300 million revolving credit facility (the “Revolving Credit Facility”), a $180 million term loan (the “Term Loan”), a $15 million letter of credit subfacility, and a $15 million swingline subfacility. The principal of the Term Loan was payable in quarterly installments. In connection with the acquisition of Lake Region Medical, the Company replaced the Credit Facility and Term Loan with new senior secured credit facilities and completed a senior notes offering. See Note 17 “Subsequent Events” for further description of this transaction and the significant impact it will have on the Company’s outstanding debt.
Interest rates on the Revolving Credit Facility and Term Loan were, at the Company’s option, either at: (i) the prime rate plus the applicable margin, which ranged between 0.0% and 0.75%, based on the Company’s total leverage ratio or (ii) the applicable LIBOR rate plus the applicable margin, which ranged between 1.375% and 2.75%, based on the Company’s total leverage ratio. The Company was required to pay a commitment fee, which varied between 0.175% and 0.25%, depending on the Company’s total leverage ratio.
The Credit Facility required the Company to maintain a rolling four quarter ratio of adjusted EBITDA to interest expense of at least 3.0 to 1.0, and a total leverage ratio of not greater than 4.5 to 1.0. The calculation of adjusted EBITDA and total leverage ratio excluded non-cash charges, extraordinary, unusual, or non-recurring expenses or losses, non-cash stock-based compensation, and non-recurring expenses or charges incurred in connection with permitted acquisitions. As of October 2, 2015, the Company was in compliance with all covenants under the Credit Facility.
As of October 2, 2015, the weighted average interest rate on borrowings under the Credit Facility, which did not take into account the impact of the Company’s interest rate swaps, was 1.59%.
Interest Rate SwapsThe Company entered into interest rate swap agreements in order to hedge against potential changes in cash flows on the outstanding borrowings on the Credit Facility. The variable rate received on the interest rate swaps and the variable rate paid on the debt had the same rate of interest, excluding the credit spread, indexed to the one-month LIBOR rate and reset and paid interest on the same date. During 2012, the Company entered into a three-year $150 million interest rate swap, which amortized $50 million per year. During 2014, the Company entered into an additional interest rate swap. The first $45 million of notional amount of the swap was effective February 20, 2015, and the second $45 million of notional amount was scheduled to be effective February 22, 2016. The notional amount of the swap was scheduled to amortize $10 million per year beginning on February 21, 2017. These swaps were accounted for as cash flow hedges.
Information regarding the Company’s outstanding interest rate swaps as of October 2, 2015 is as follows (dollars in thousands):
Instrument
 
Type of
Hedge
 
Notional
Amount
 
Start
Date
 
End
Date
 
Pay
Fixed
Rate
 
Current
Receive
Floating
Rate
 
Fair Value
 
Balance
Sheet Location
Interest rate swap
 
Cash flow
 
$
50,000

 
Feb 2013
 
Feb 2016
 
0.573
%
 
0.216
%
 
$
(64
)
 
Accrued Expenses
Interest rate swap
 
Cash flow
 
$
90,000

 
Feb 2015
 
Sept 2019
 
1.921
%
 
0.216
%
 
$
(2,724
)
 
Accrued Expenses

As a result of the Lake Region Medical acquisition, the forecasted cash flows that the Company’s interest rate swaps were hedging were no longer expected to occur. Therefore, during the third quarter of 2015, the Company recognized an additional $2.8 million in Interest Expense relating to the termination of the contracts. Subsequently, in October 2015, in connection with the financing of the Lake Region Medical acquisition, the Company terminated its outstanding interest rate swap agreements resulting in a $2.8 million payment to the interest rate swap counterparty. No portion of the change in fair value of the Company’s interest rate swaps during the nine months ended October 2, 2015 and October 3, 2014 was considered ineffective. The amount recorded as Interest Expense during the nine months ended October 2, 2015 and October 3, 2014 related to the Company’s interest rate swaps was $3.5 million and $0.3 million, respectively.
Deferred Financing Fees The change in deferred financing fees is as follows (in thousands):
At January 2, 2015
$
3,087

Financing costs deferred
7,922

Amortization during the period
(2,580
)
At October 2, 2015
$
8,429


During the third quarter of 2015, the Company recorded deferred financing fees related to the Lake Region Medical acquisition. Refer to Note 17 “Subsequent Events” for further discussion regarding the Company’s financing of the Lake Region Medical acquisition.
Benefit Plans
BENEFIT PLANS
BENEFIT PLANS
The Company is required to provide its employees located in Switzerland, Mexico, and France certain statutorily mandated defined benefits. These benefits accrue to employees based upon years of service, position, age, and compensation. The defined benefit pension plan provided to the Company’s employees located in Switzerland is a funded contributory plan, while the plans that provide benefits to the Company’s employees located in Mexico and France are unfunded and noncontributory. The liability and corresponding expense related to these benefit plans is based on actuarial computations of current and future benefits for employees.
The change in net defined benefit plan liability is as follows (in thousands):
At January 2, 2015
$
2,406

Net defined benefit cost
309

Foreign currency translation
(157
)
At October 2, 2015
$
2,558


Net defined benefit cost is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Service cost
$
76

 
$
51

 
$
233

 
$
155

Interest cost
15

 
18

 
45

 
57

Amortization of net loss
13

 
6

 
39

 
17

Expected return on plan assets
(2
)
 

 
(8
)
 

Net defined benefit cost
$
102

 
$
75

 
$
309

 
$
229

Stock-Based Compensation
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
The components and classification of stock-based compensation expense were as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Stock options
$
697

 
$
595

 
$
1,979

 
$
1,811

Restricted stock and restricted stock units
1,701

 
1,850

 
5,081

 
5,008

401(k) Plan stock contribution
674

 
1,357

 
1,984

 
3,712

Total stock-based compensation expense
$
3,072

 
$
3,802

 
$
9,044

 
$
10,531

 
 
 
 
 
 
 
 
Cost of sales
$
685

 
$
1,129

 
$
2,039

 
$
3,187

Selling, general and administrative expenses
1,981

 
1,951

 
5,890

 
5,872

Research, development and engineering costs, net
361

 
429

 
1,070

 
1,179

Other operating expenses
45

 
293

 
45

 
293

Total stock-based compensation expense
$
3,072

 
$
3,802

 
$
9,044

 
$
10,531


The weighted average fair value and assumptions used to value options granted are as follows:
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
Weighted average fair value
$
12.18

 
$
16.43

Risk-free interest rate
1.55
%
 
1.73
%
Expected volatility
26
%
 
39
%
Expected life (in years)
5

 
5

Expected dividend yield
%
 
%

The following table summarizes time and performance-vested stock option activity:
 
Number of
Stock
Options
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life
(In Years)
 
Aggregate
Intrinsic
Value
(In Millions)
Outstanding at January 2, 2015
1,590,337

 
$
25.17

 
 
 
 
Granted
301,547

 
49.20

 
 
 
 
Exercised
(257,316
)
 
23.27

 
 
 
 
Forfeited or expired
(37,302
)
 
39.59

 
 
 
 
Outstanding at October 2, 2015
1,597,266

 
$
29.67

 
6.1
 
$
45.9

Exercisable at October 2, 2015
1,165,675

 
$
24.56

 
5.1
 
$
39.5


The following table summarizes time-vested restricted stock and restricted stock unit activity:
 
Time-Vested
Activity
 
Weighted
Average
Fair Value
Nonvested at January 2, 2015
67,832

 
$
36.22

Granted
42,497

 
49.52

Vested
(13,320
)
 
33.21

Forfeited
(11,084
)
 
31.55

Nonvested at October 2, 2015
85,925

 
$
43.86

The following table summarizes performance-vested restricted stock and restricted stock unit activity:
 
Performance-
Vested
Activity
 
Weighted
Average
Fair Value
Nonvested at January 2, 2015
716,163

 
$
19.57

Granted
179,940

 
32.92

Vested
(270,198
)
 
15.30

Forfeited
(40,713
)
 
25.99

Nonvested at October 2, 2015
585,192

 
$
25.20

Other Operating Expenses, Net
OTHER OPERATING EXPENSES, NET
OTHER OPERATING EXPENSES, NET
Other Operating Expenses, Net is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
2014 investments in capacity and capabilities
$
5,116

 
$
2,787

 
$
17,854

 
$
5,005

Orthopaedic optimization costs
357

 
996

 
1,348

 
1,032

2013 operating unit realignment

 
(31
)
 

 
1,004

Other consolidation and optimization income, net

 

 

 
(71
)
Acquisition and integration costs (income)
5,202

 
133

 
5,366

 
(248
)
Asset dispositions, severance and other
3,169

 
2,291

 
4,881

 
3,501

 
$
13,844

 
$
6,176

 
$
29,449

 
$
10,223


2014 investments in capacity and capabilities. In 2014, the Company announced several initiatives to invest in capacity and capabilities and to better align its resources to meet its customers’ needs and drive organic growth and profitability. These included the following:
Functions performed at the Company’s facility in Plymouth, MN to manufacture catheters and introducers will transfer into the Company’s existing facility in Tijuana, Mexico. This initiative is expected to be substantially completed in the first half of 2016 and is dependent upon our customers’ validation and qualification of the transferred products.
Functions performed at the Company’s facilities in Beaverton, OR and Raynham, MA to manufacture products for the portable medical market will transfer to a new facility in Tijuana, Mexico. This initiative is expected to be substantially completed by the end of the first quarter of 2016 and is dependent upon our customers’ validation and qualification of the transferred products. Products currently manufactured at the Beaverton facility, which do not serve the portable medical market, are planned to transfer to the Company’s Raynham facility.
The design engineering responsibilities previously performed at the Company’s Cleveland, OH facility were transferred to the Company’s facilities in Minnesota in 2014.
Realignment of the Company’s commercial sales operations. This initiative builds upon the investment the Company made in its global sales and marketing function and is expected to be completed during 2015.
The total capital investment expected for these initiatives is between $25.0 million and $28.0 million, of which $19.4 million has been expended through October 2, 2015. Total restructuring charges expected to be incurred in connection with these initiatives are between $29.0 million and $34.0 million, of which $26.8 million has been incurred through October 2, 2015. Expenses related to these initiatives are recorded within the applicable segment and corporate cost centers to which the expenditures relate and include the following:
  
Severance and retention: $5.0 million - $7.0 million;
Accelerated depreciation and asset write-offs: $2.0 million - $3.0 million; and
Other: $22.0 million - $24.0 million
Other expenses primarily consist of costs to relocate equipment and personnel, duplicate personnel costs, disposal and travel expenditures. All expenses are cash expenditures, except accelerated depreciation and asset write-offs.
The change in accrued liabilities related to the 2014 investments in capacity and capabilities is as follows (in thousands):
 
Severance and
Retention
 
Accelerated
Depreciation/Asset
Write-offs
 
Other
 
Total
At January 2, 2015
$
1,163

 
$

 
$
1,066

 
$
2,229

Restructuring charges
2,469

 
235

 
15,150

 
17,854

Write-offs

 
(235
)
 

 
(235
)
Cash payments
(1,650
)
 

 
(15,943
)
 
(17,593
)
At October 2, 2015
$
1,982


$

 
$
273

 
$
2,255


Orthopaedic optimization costs. In 2010, the Company began updating its Indianapolis, IN facility to streamline operations, consolidate two buildings, increase capacity, further expand capabilities and reduce dependence on outside suppliers. This initiative was completed in 2011.
In 2011, the Company began construction on an orthopaedic manufacturing facility in Fort Wayne, IN and transferred manufacturing operations being performed at its Columbia City, IN location into this new facility. This initiative was completed in 2012.
During 2012, the Company transferred manufacturing and development operations performed at its facilities in Orvin and Corgemont, Switzerland into existing facilities in Fort Wayne, IN and Tijuana, Mexico. In connection with this consolidation, in 2013, the Company sold assets related to certain non-core Swiss orthopaedic product lines to an independent third party. The purchase agreement provided the Company with an earn-out payment based upon the amount of inventory consumed by the purchaser within one year after the close of the transaction. As a result of this earn out, a cash payment of $2.7 million was received and a gain of $2.7 million was recorded in Other Operating Expenses, Net in the first two quarters of 2014. During 2014, the Company transferred $2.1 million of assets relating to its Orvin, Switzerland facility to held for sale and recognized a $0.4 million impairment charge in the fourth quarter of 2014. During the second quarter of 2015, the Company sold $0.6 million of these assets held for sale with no additional gain or loss recognized.
During 2013, the Company began a project to expand its Chaumont, France facility in order to enhance its capabilities and fulfill larger volume customer supply agreements. This initiative is expected to be completed over the next two years.
The total capital investment expected to be incurred for these initiatives is between $30 million and $35 million, of which $25.9 million has been expended through October 2, 2015. Total expense expected to be incurred for these initiatives is between $45 million and $48 million, of which $43.8 million has been incurred through October 2, 2015. All expenses have been and will be recorded within the Greatbatch Medical segment and are expected to include the following:
   
Severance and retention: approximately $11 million;
Accelerated depreciation and asset write-offs: approximately $13 million; and
Other: $21 million$24 million
Other expenses include production inefficiencies, moving, revalidation, personnel, training, consulting, and travel costs. All expenses are cash expenditures, except accelerated depreciation and asset write-offs.
The change in accrued liabilities related to the orthopaedic facility optimization is as follows (in thousands):
 
Severance
and
Retention
 
Accelerated
Depreciation/Asset
Write-offs
 
Other
 
Total
At January 2, 2015
$

 
$

 
$
287

 
$
287

Restructuring charges

 
88

 
1,260

 
1,348

Write-offs

 
(88
)
 

 
(88
)
Cash payments

 

 
(1,547
)
 
(1,547
)
At October 2, 2015
$

 
$

 
$

 
$


2013 operating unit realignment. In 2013, the Company initiated a plan to realign its operating structure in order to optimize its continued focus on profitable growth. As part of this initiative, the sales and marketing and operations groups of its former Implantable Medical and Electrochem Solutions reportable segments were combined into one sales and marketing group and one operations group each serving Greatbatch Medical. This initiative was completed during 2014. Total restructuring charges incurred in connection with this realignment were $6.6 million. Expenses related to this initiative were recorded within the applicable segment to which the expenditures relate and included the following:
  
Severance and retention: $5.0 million; and
Other: $1.6 million

Other expenses primarily consisted of relocation and travel expenditures. All expenses were cash expenditures.

Acquisition and integration costs (income). During the third quarter of 2015, the Company incurred $5.1 million in transaction costs related to its acquisition of Lake Region Medical. These costs primarily relate to professional and consulting fees incurred in connection with due diligence efforts of this acquisition of which $3.7 million were accrued as of October 2, 2015. These costs were recorded to corporate unallocated expenses. Refer to Note 17 “Subsequent Events” for additional information on the Lake Region Medical acquisition. During 2015 and 2014, the Company incurred costs (income) related to the integration of CCC and NeuroNexus Technologies, Inc. (“NeuroNexus”). These expenses were primarily for travel costs in connection with integration efforts, consulting, training, and the change in fair value of the contingent consideration recorded in connection with the NeuroNexus acquisition, which resulted in a gain of $0.8 million during the first nine months of 2014.
Asset dispositions, severance and other. During 2015 and 2014, the Company recorded losses in connection with various asset disposals. Additionally, during the first nine months of 2015, the Company incurred legal and professional costs in connection with the proposed Spin-off of $4.6 million. Expenses related to the Spin-off were recorded within the applicable segment and corporate cost centers to which the expenditures relate. The proposed transaction is expected to be completed in the first quarter of 2016. Deal related costs for the Spin-off are estimated to be between $10 million and $12 million. Refer to Note 15 “Business Segment, Geographic and Concentration Risk Information” for additional information on the proposed Spin-off.
During the first nine months of 2014, the Company recorded $2.0 million of charges in connection with its business reorganization to align its contract manufacturing operations. Those costs primarily related to consulting and IT development projects, which were completed in the fourth quarter of 2014. Additionally, during the third quarter of 2014, the Company also incurred $0.8 million of expense related to the separation from service of its Senior Vice President, Human Resources.
Income Taxes
INCOME TAXES
INCOME TAXES
The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including changes in the mix of pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, business reorganizations, the timing of recognition of discrete items, and settlements with taxing authorities. The effective tax rate for the first nine months of 2015 and 2014 was 20.4% and 30.1%, respectively. This decrease in effective tax rate was primarily due to higher income in lower tax rate jurisdictions.
As of October 2, 2015, the balance of unrecognized tax benefits is approximately $1.8 million. It is reasonably possible that a reduction of up to $0.2 million of the balance of unrecognized tax benefits may occur within the next twelve months. Approximately $1.4 million of the balance of unrecognized tax benefits would favorably impact the effective tax rate, net of federal benefit on state issues, if recognized.
Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
Litigation The Company is a party to various legal actions arising in the normal course of business. While the Company does not expect that the ultimate resolution of any of these pending actions will have a material effect on its consolidated results of operations, financial position, or cash flows, litigation is subject to inherent uncertainties. As such, any pending legal action, which the Company currently believes to be immaterial, may become material in the future.
Product Warranties The Company generally warrants that its products will meet customer specifications and will be free from defects in materials and workmanship. The change in product warranty liability was comprised of the following (in thousands):
At January 2, 2015
$
660

Additions to warranty reserve
790

Warranty claims paid
(216
)
At October 2, 2015
$
1,234


Purchase CommitmentsContractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on the Company and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum, or variable price provisions, and the approximate timing of the transaction. The Company’s purchase orders are normally based on its current manufacturing needs and are fulfilled by its vendors within short time horizons. The Company also enters into blanket orders with vendors that have preferred pricing and terms; however, these orders are normally cancelable without penalty. The Company also enters into contracts for outsourced services; however, the obligations under these contracts generally contain clauses allowing for cancellation without significant penalty. As of October 2, 2015, these contractual obligations totaled approximately $35.2 million and will be financed by existing cash and cash equivalents, cash generated from operations, or the Company’s credit facilities.
Workers’ Compensation Trust – The Company was a member of a group self-insurance trust that provided workers’ compensation benefits to its employees in Western New York (the “Trust”). Under the Trust agreement, each participating organization has joint and several liability for Trust obligations if the assets of the Trust are not sufficient to cover those obligations. During 2011, the Company was notified by the Trust of its intentions to cease operations at the end of 2011 and was assessed a pro-rata share of future costs related to the Trust. Based on actual experience, the Company could receive a refund or be assessed additional contributions for workers’ compensation claims insured by the Trust. Since 2011, the Company has utilized a traditional insurance provider for workers’ compensation coverage.
Operating Leases – The Company is a party to various operating lease agreements for buildings, machinery, equipment, and software. The Company primarily leases buildings, which accounts for the majority of the future lease payments. Minimum future estimated operating lease expenses as of October 2, 2015 are as follows (in thousands):
Remainder of 2015
$
1,546

2016
6,009

2017
3,924

2018
3,491

2019
3,418

Thereafter
13,938

Total estimated operating lease expense
$
32,326


Foreign Currency ContractsThe Company entered into forward contracts to purchase Mexican pesos in order to hedge the risk of peso-denominated payments associated with operations at its Tijuana, Mexico facility. The impact to the Company’s results of operations from these forward contracts was as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Addition (reduction) in cost of sales
$
562

 
$
(48
)
 
$
1,226

 
$
(204
)
Ineffective portion of change in fair value

 

 

 


Information regarding outstanding foreign currency contracts as of October 2, 2015 is as follows (dollars in thousands):
Instrument
 
Type of
Hedge
 
Aggregate
Notional
Amount
 
Start
Date
 
End
Date
 
$/Peso
 
Fair
Value
 
Balance Sheet Location
FX Contract
 
Cash flow
 
$
4,220

 
Jan 2015
 
Dec 2015
 
0.0734

 
$
(808
)
 
Accrued Expenses
FX Contract
 
Cash flow
 
$
787

 
Mar 2015
 
Dec 2015
 
0.0656

 
$
(75
)
 
Accrued Expenses
FX Contract
 
Cash flow
 
$
15,081

 
Jan 2016
 
Dec 2016
 
0.0656

 
$
(1,675
)
 
Accrued Expenses

In connection with the Lake Region Medical acquisition, in October 2015, the Company terminated its outstanding foreign currency contracts resulting in a $2.4 million payment to the foreign currency contract counterparty. See Note 17 “Subsequent Events” for further description of this transaction.
Self-Insured Medical Plan The Company self-funds the medical insurance coverage provided to its U.S.-based employees. The Company has specific stop loss coverage for claims incurred during 2015 exceeding $250 thousand per associate with no annual maximum aggregate stop loss coverage. As of October 2, 2015, the Company had $1.5 million accrued related to the self-insurance of its medical plan. This accrual is recorded in Accrued Expenses in the Condensed Consolidated Balance Sheet and is primarily based upon claim history.
Earnings Per Share (EPS)
EARNINGS PER SHARE (EPS)
EARNINGS PER SHARE (“EPS”)
The following table illustrates the calculation of Basic and Diluted EPS (in thousands, except per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Numerator for basic and diluted EPS:
 
 
 
 
 
 
 
Net income
$
22

 
$
14,012

 
$
17,313

 
$
41,282

Denominator for basic EPS:
 
 
 
 
 
 
 
Weighted average shares outstanding
25,536

 
24,899

 
25,424

 
24,784

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options, restricted stock and restricted stock units
905

 
1,024

 
948

 
1,066

Denominator for diluted EPS
26,441

 
25,923

 
26,372

 
25,850

Basic EPS
$

 
$
0.56


$
0.68

 
$
1.67

Diluted EPS
$

 
$
0.54

 
$
0.66

 
$
1.60


The diluted weighted average share calculations do not include the following securities, which are not dilutive to the EPS calculations or the performance criteria have not been met:
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Time-vested stock options, restricted stock and restricted stock units
260,000

 
163,000

 
268,000

 
177,000

Performance-vested restricted stock units
10,800

 
4,400

 
9,800

 
3,600

Accumulated Other Comprehensive Income
ACCUMULATED OTHER COMPREHENSIVE INCOME
ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated Other Comprehensive Income is comprised of the following (in thousands):
 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
At July 3, 2015
$
(1,181
)
 
$
(3,619
)
 
$
9,839

 
$
5,039

 
$
1,784

 
$
6,823

Unrealized loss on cash flow hedges

 
(1,670
)
 

 
(1,670
)
 
584

 
(1,086
)
Realized loss on foreign currency hedges

 
562

 

 
562

 
(197
)
 
365

Realized loss on interest rate swap hedges

 
2,169

 

 
2,169

 
(759
)
 
1,410

Foreign currency translation gain

 

 
144

 
144

 

 
144

At October 2, 2015
$
(1,181
)
 
$
(2,558
)
 
$
9,983

 
$
6,244

 
$
1,412

 
$
7,656

 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
At January 2, 2015
$
(1,181
)
 
$
(2,558
)
 
$
11,450

 
$
7,711

 
$
1,412

 
$
9,123

Unrealized loss on cash flow hedges

 
(3,857
)
 

 
(3,857
)
 
1,350

 
(2,507
)
Realized loss on foreign currency hedges

 
1,226

 

 
1,226

 
(429
)
 
797

Realized loss on interest rate swap hedges

 
2,631

 

 
2,631

 
(921
)
 
1,710

Foreign currency translation loss

 

 
(1,467
)
 
(1,467
)
 

 
(1,467
)
At October 2, 2015
$
(1,181
)
 
$
(2,558
)
 
$
9,983

 
$
6,244

 
$
1,412

 
$
7,656


 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
At July 4, 2014
$
(672
)
 
$
(218
)
 
$
15,741

 
$
14,851

 
$
459

 
$
15,310

Unrealized loss on cash flow hedges

 
(133
)
 

 
(133
)
 
46

 
(87
)
Realized gain on foreign currency hedges

 
(48
)
 

 
(48
)
 
17

 
(31
)
Realized loss on interest rate swap hedges

 
106

 

 
106

 
(37
)
 
69

Foreign currency translation loss

 

 
(3,211
)
 
(3,211
)
 

 
(3,211
)
At October 3, 2014
$
(672
)
 
$
(293
)
 
$
12,530

 
$
11,565

 
$
485

 
$
12,050

 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
At January 3, 2014
$
(672
)
 
$
(468
)
 
$
14,952

 
$
13,812

 
$
546

 
$
14,358

Unrealized gain on cash flow hedges

 
35

 

 
35

 
(12
)
 
23

Realized gain on foreign currency hedges

 
(204
)
 

 
(204
)
 
71

 
(133
)
Realized loss on interest rate swap hedges

 
344

 

 
344

 
(120
)
 
224

Foreign currency translation loss

 

 
(2,422
)
 
(2,422
)
 

 
(2,422
)
At October 3, 2014
$
(672
)
 
$
(293
)
 
$
12,530

 
$
11,565

 
$
485

 
$
12,050


The realized (gain) loss relating to the Company’s foreign currency and interest rate swap hedges were reclassified from Accumulated Other Comprehensive Income and included in Cost of Sales and Interest Expense, respectively, in the Condensed Consolidated Statements of Operations.
Fair Value Measurements
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Fair value measurement standards apply to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period). For the Company, these financial assets and liabilities include its derivative instruments. The Company does not have any nonfinancial assets or liabilities that are measured at fair value on a recurring basis.
Foreign Currency Contracts – The fair value of foreign currency contracts were determined through the use of cash flow models that utilize observable market data inputs to estimate fair value. These observable market data inputs included foreign exchange rate and credit spread curves. In addition, the Company received fair value estimates from the foreign currency contract counterparty to verify the reasonableness of the Company’s estimates. The Company’s foreign currency contracts are categorized in Level 2 of the fair value hierarchy. The fair value of the Company’s foreign currency contracts will be realized as Cost of Sales as the inventory, which the contracts are hedging the cash flows to produce, is sold, of which approximately $2.1 million is expected to be realized within the next twelve months.
Interest Rate Swaps – The fair value of the Company’s interest rate swaps outstanding at October 2, 2015 were determined through the use of a cash flow model that utilized observable market data inputs. These observable market data inputs included LIBOR, swap rates, and credit spread curves. In addition, the Company received a fair value estimate from the interest rate swap counterparty to verify the reasonableness of the Company’s estimate. This fair value calculation was categorized in Level 2 of the fair value hierarchy.
The following table provides information regarding liabilities recorded at fair value on a recurring basis (in thousands):
 
 
Fair Value Measurements Using
 
 
At 
 October 2,
 
Quoted
Prices in
Active Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
Description
 
2015
 
(Level 1)
 
(Level 2)
 
(Level 3)
Liabilities
 
 
 
 
 
 
 
 
Foreign currency contracts (Note 11)
 
$
2,558

 
$

 
$
2,558

 
$

Interest rate swaps (Note 6)
 
2,788

 

 
2,788

 


Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Fair value standards also apply to certain assets and liabilities that are measured at fair value on a nonrecurring basis. The carrying amounts of cash, accounts receivable, accounts payable, accrued expenses, and current portion of long-term debt approximate fair value because of the short-term nature of these items. As of October 2, 2015, the fair value of the Company’s variable rate long-term debt approximated its carrying value and is categorized in Level 2 of the fair value hierarchy. A summary of the valuation methodologies for assets and liabilities measured on a nonrecurring basis is as follows:
Long-lived Assets – The Company reviews the carrying amount of its long-lived assets to be held and used, other than goodwill and indefinite-lived intangible assets, for potential impairment whenever certain indicators are present such as: a significant decrease in the market price of the asset or asset group; a significant change in the extent or manner in which the long-lived asset or asset group is being used or in its physical condition; a significant change in legal factors or in the business climate that could affect the value of the long-lived asset or asset group, including an action or assessment by a regulator; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction; a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of the long-lived asset or asset group; or a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent.
Potential recoverability is measured by comparing the carrying amount of the asset or asset group to its related total future undiscounted cash flows. If the carrying value is not recoverable, the asset or asset group is considered to be impaired. Impairment is measured by comparing the asset or asset group’s carrying amount to its fair value. When it is determined that useful lives are shorter than originally estimated, and no impairment is present, the rate of depreciation is accelerated in order to fully depreciate the assets over their new shorter useful lives. The Company did not record any impairment charges related to its long-lived assets during the first nine months of 2015 or 2014.
Goodwill and Indefinite-lived Intangible Assets – Goodwill and other indefinite lived intangible assets recorded are not amortized but are periodically tested for impairment. The Company assesses goodwill for impairment on the last day of each fiscal year, or more frequently if certain events occur as described above. Goodwill is evaluated for impairment through the comparison of the fair value of the reporting units to their carrying values. When evaluating goodwill for impairment, the Company may first perform an assessment of qualitative factors to determine if the fair value of the reporting unit is more-likely-than-not greater than its carrying amount. This qualitative assessment is referred to as a “step zero approach. If, based on the review of the qualitative factors, the Company determines it is more-likely-than-not that the fair value of the reporting unit is greater than its carrying value, the required two-step impairment test can be bypassed. If the Company does not perform a step zero assessment or if the fair value of the reporting unit is more-likely-than-not less than its carrying value, the Company must perform a two-step impairment test, and calculate the estimated fair value of the reporting unit. If, based upon the two-step impairment test, it is determined that the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill within the reporting unit is less than its carrying value. Under the two-step approach, fair values for reporting units are determined based on discounted cash flows and market multiples.
Other indefinite lived intangible assets are assessed for impairment on the last day of each fiscal year, or more frequently if certain events occur as described above, by comparing the fair value of the intangible asset to its carrying value. The fair value is determined by using the income approach.
The Company did not record any impairment charges related to its indefinite-lived intangible assets, including goodwill, during the first nine months of 2015 or 2014, respectively. See Note 5 “Intangible Assets” for additional information on the Company’s intangible assets.
Cost and Equity Method Investments – The Company holds investments in equity and other securities that are accounted for as either cost or equity method investments, which are classified as Other Assets. The total carrying value of these investments is reviewed quarterly for changes in circumstance or the occurrence of events that suggest the Company’s investment may not be recoverable. The fair value of cost or equity method investments is not adjusted if there are no identified events or changes in circumstances that may have a material effect on the fair value of the investments. Gains and losses realized on cost and equity method investments are recorded in Other Income, Net, unless separately stated. The aggregate recorded amount of cost and equity method investments at October 2, 2015 and January 2, 2015 was $22.6 million and $14.5 million, respectively. The Company’s equity method investment is in a Chinese venture capital fund focused on investing in life sciences companies. This fund accounts for its investments at fair value with the unrealized change in fair value of these investments recorded as income or loss to the fund in the period of change. As of October 2, 2015, the Company owned 6.6% of this fund.
During the nine month periods ended October 2, 2015 and October 3, 2014, the Company did not recognize any impairment charges related to its cost method investments. The fair value of these investments is determined by reference to recent sales data of similar shares to independent parties in an inactive market. This fair calculation is categorized in Level 2 of the fair value hierarchy. During the nine month periods ended October 2, 2015 and October 3, 2014, the Company recognized a net gain on cost and equity method investments of $5.1 million and $3.9 million, respectively, which is included in Other Income, Net. During the third quarter of 2015, the Company recognized $4.6 million of income from its equity method investment and received a $3.4 million cash distribution, which was classified as a cash flow from operating activities in the Condensed Consolidated Statement of Cash Flows as it represented a return on investment. During the third quarter of 2014, the Company sold one of its cost method investments, which resulted in a pre-tax gain of $3.2 million. The proceeds from the sale was classified as a cash flow from investing activities in the Condensed Consolidated Statement of Cash Flows.
Business Segment, Geographic and Concentration Risk Information
BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION
BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION
The Company has two reportable segments: Greatbatch Medical and QiG. Greatbatch Medical designs and manufactures medical devices and components where Greatbatch either owns the intellectual property or has unique manufacturing and assembly expertise. Greatbatch Medical provides medical devices and components to the following markets:
Cardiac/Neuromodulation: Products include complete implantable medical devices and components such as batteries, capacitors, filtered and unfiltered feed-throughs, engineered components, implantable stimulation leads, and enclosures.
Orthopaedic: Products include implants, instruments and delivery systems for large joint, spine, extremity and trauma procedures.
Portable Medical: Products include automated external defibrillators, portable oxygen concentrators, ventilators, and powered surgical tools.
Vascular: Products include introducers, steerable sheaths, and catheters that deliver therapies for various markets such as coronary and neurovascular disease, peripheral vascular disease, interventional radiology, vascular access, atrial fibrillation, and interventional cardiology, plus products for medical imaging and pharmaceutical delivery.
Energy, Military, and Environmental: Products include primary and rechargeable batteries and battery packs for demanding applications such as down hole drilling tools.
Greatbatch Medical also offers value-added assembly and design engineering services for medical devices that utilize its component products.
QiG is a medical device company formed in 2008 to develop and commercialize a neurostimulation technology platform for treatment of various disorders by stimulating tissues associated with the nervous system. QiG facilitates this development through the establishment of limited liability companies (“LLCs”). These LLCs do not own, but have the exclusive right to use the technology of Greatbatch in specific fields of use and have an exclusive manufacturing agreement with Greatbatch Medical. QiG currently owns 89% of two LLCs - Algostim, LLC (“Algostim”) and PelviStim LLC (“PelviStim”). Minority interests in these LLCs are held by key opinion leaders and clinicians. Under the agreements governing these LLCs, QiG funds 100% of the expenses incurred by the LLC. No distributions are made to the minority holders until QiG is reimbursed for these expenses. Once QiG has been fully reimbursed, any potential future distributions will be applied first to return contributions made by minority partners and thereafter will be made pro rata based upon ownership percentages.
Algostim is focused on the development and commercialization of its Algovita spinal cord stimulation (“SCS”) system (“Algovita”), the first application of QiG’s neurostimulation technology platform. Algovita is indicated for the treatment of chronic pain of the trunk and limbs. Algovita was submitted for premarket approval (“PMA”) to the United States Food & Drug Administration (“FDA”) in December 2013 and in January 2014 documentation for European CE Mark was submitted to the notified body, TÜV SÜD America. CE Mark approval was obtained on June 17, 2014. In April 2015, the Company announced receipt of a letter from the FDA informing it that its PMA application for Algovita is approvable subject to completion of an FDA inspection that finds that the manufacturing facilities, methods and controls used in the production of Algovita comply with the applicable requirements of the FDA’s Quality System Regulation. During the fourth quarter of 2015, the Company announced that it successfully completed its pre-PMA inspection. QiG expects to obtain final approval of its PMA application for Algovita in the fourth quarter of 2015 and to launch Algovita commercially in the United States shortly thereafter.
QiG is also in the process of developing additional applications for its neurostimulation technology platform for other emerging indications such as sacral nerve stimulation (“SNS”), and deep brain stimulation (“DBS”), among others. QiG’s PelviStim subsidiary is focused on the commercialization of QiG’s neurostimulation technology platform for SNS.
QiG revenue includes sales of neural interface technology, components and systems to the neuroscience and clinical markets from NeuroNexus, and a limited release of Algovita in Europe. As further discussed in Note 2 “Acquisition,” in August 2014, the Company acquired CCC, a neuromodulation medical device developer and manufacturer for development stage companies. As a result of this transaction, QiG revenue also includes sales of various medical device products such as implantable pulse generators, programmer systems, battery chargers, patient wands and leads to medical device companies. Once the medical devices developed by CCC reach significant production levels, the responsibility for manufacturing these products may be transferred to Greatbatch Medical.
On July 30, 2015, Greatbatch announced a proposed spin-off of a portion of its QiG segment through a tax-free distribution of all of the shares of its QiG Group LLC subsidiary to the stockholders of Greatbatch on a pro rata basis. Immediately prior to completion of the Spin-off, QiG Group LLC will be converted into a corporation and change its name to Nuvectra. The portion of the QiG segment being spun-off is expected to consist of QiG Group LLC and its subsidiaries: (i) Algostim, (ii) PelviStim, and (iii) Greatbatch’s NeuroNexus subsidiary. Upon completion of the Spin-off, Nuvectra will be an independent, publicly-traded company and Greatbatch will not own any shares of Nuvectra common stock but will retain the operations of QiG not spun-off, which includes CCC. The total financial impact of the Spin-off on the Company’s Condensed Consolidated Financial Statements cannot be determined at this time. However, if completed, deal related costs for the Spin-off are estimated to be between $10 million to $12 million. Once completed, the Spin-off is expected to deliver Greatbatch improved financial performance through its long-term manufacturing agreement with Nuvectra for the supply of Algovita and lower operating expenses estimated in the range of $12 million to $16 million on an annualized basis.
As a result of the Lake Region Medical acquisition and proposed Spin-off, the Company is reevaluating its operating and reporting segments. See Note 17 “Subsequent Events” for further description of this transaction and the significant impact it will have on the Company’s financial position and results of operations.
An analysis and reconciliation of the Company’s business segment, product line and geographic information to the respective information in the Condensed Consolidated Financial Statements follows. Sales by geographic area are presented by allocating sales from external customers based on where the products are shipped to (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Sales:
 
 
 
 
 
 
 
Greatbatch Medical
 
 
 
 
 
 
 
Cardiac/Neuromodulation
$
72,961

 
$
85,618

 
$
239,387

 
$
252,403

Orthopaedic
27,752

 
32,489

 
102,204

 
106,785

Portable Medical
17,224

 
17,199

 
48,591

 
53,139

Vascular
14,107

 
14,903

 
37,370

 
43,210

Energy, Military, Environmental
11,977

 
19,016

 
46,232

 
58,499

Total Greatbatch Medical
144,021

 
169,225

 
473,784

 
514,036

QiG
2,776

 
2,474

 
10,564

 
4,025

Elimination of Intersegment Sales(a)
(160
)
 

 
(1,501
)
 

Total sales
$
146,637

 
$
171,699

 
$
482,847

 
$
518,061


(a)
Intersegment sales between Greatbatch Medical and QiG are eliminated in consolidation and are included in Greatbatch Medical’s cardiac and neuromodulation product line.
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Segment income (loss) from operations:
 
 
 
 
 
 
 
Greatbatch Medical
$
21,512

 
$
31,121

 
$
72,179

 
$
98,688

QiG
(7,680
)
 
(6,796
)
 
(20,132
)
 
(18,882
)
Total segment income from operations
13,832

 
24,325

 
52,047

 
79,806

Unallocated operating expenses
(12,637
)
 
(8,142
)
 
(28,429
)
 
(21,560
)
Operating income as reported
1,195

 
16,183

 
23,618

 
58,246

Unallocated other expense
(1,189
)
 
2,717

 
(1,857
)
 
847

Income before provision for income taxes
$
6

 
$
18,900

 
$
21,761

 
$
59,093


 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Sales by geographic area:
 
 
 
 
 
 
 
United States
$
71,545

 
$
76,330

 
$
217,102

 
$
235,203

Non-Domestic locations:
 
 
 
 
 
 
 
Puerto Rico
26,816

 
34,581

 
98,247

 
101,064

Belgium
12,305

 
13,722

 
45,690

 
47,351

Rest of world
35,971

 
47,066

 
121,808

 
134,443

Total sales
$
146,637

 
$
171,699

 
$
482,847

 
$
518,061


Three customers accounted for a significant portion of the Company’s sales as follows:
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Customer A
17
%
 
19
%
 
20
%
 
19
%
Customer B
19
%
 
15
%
 
18
%
 
16
%
Customer C
10
%
 
11
%
 
12
%
 
12
%
Total
46
%
 
45
%
 
50
%
 
47
%

Long-lived tangible assets by geographic area are as follows (in thousands):
 
As of
 
October 2, 2015
 
January 2, 2015
United States
$
112,260

 
$
113,851

Rest of world
43,749

 
31,074

Total
$
156,009

 
$
144,925

Impact of Recently Issued Accounting Standards
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”), or other authoritative accounting bodies to determine the potential impact they may have on the Company’s Condensed Consolidated Financial Statements. Based upon this review, except as noted below, management does not expect any of the recently issued accounting pronouncements, which have not already been adopted, to have a material impact on the Company’s Condensed Consolidated Financial Statements.
In September 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments,” which amends the guidance for measurement-period adjustments related to business combinations. The amended guidance requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustments are determined. The acquirer will be required to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date and disclose what the amounts in the previous periods would have been if those changes were made as of the acquisition date. This guidance is effective for adjustments to provisional amounts that occur in annual periods and interim periods within those annual periods beginning after December 15, 2015. The Company is currently assessing the impact of adopting this ASU on its Condensed Consolidated Financial Statements.
In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory,” which simplifies the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This ASU is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company is currently assessing the impact of adopting this ASU on its Condensed Consolidated Financial Statements.
In April 2015, the FASB issued ASU No. 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which changes the presentation of debt issuance costs in the financial statements. Under this ASU, the Company will present debt issuance costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. The guidance in this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 with early adoption permitted. As disclosed in Note 6 “Debt,” as of October 2, 2015, the Company had $8.4 million of debt related deferred financing costs recorded within Other Assets in the Condensed Consolidated Balance Sheet, which would be reclassified as a deduction from Long-Term Debt upon adoption of this ASU.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The core principle behind ASU No. 2014-09 is that an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering goods and services. This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when the entity satisfies the performance obligations. This ASU allows two methods of adoption; a full retrospective approach where historical financial information is presented in accordance with the new standard, and a modified retrospective approach where this ASU is applied to the most current period presented in the financial statements. In August 2015, the FASB issued ASU No 2015-14 “Revenue from Contracts with Customers: Deferral of the Effective Date,” which deferred the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, with earlier application permitted as of annual reporting periods beginning after December 15, 2016. The Company is currently assessing the financial impact of adopting ASU 2014-09 and the methods of adoption; however, given the scope of the new standard, the Company is currently unable to provide a reasonable estimate regarding the financial impact or which method of adoption will be elected.
In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which amends the definition of a discontinued operation and requires entities to provide additional disclosures about disposal transactions that do not meet the discontinued operations criteria. The revised guidance changes how entities identify and disclose information about disposal transactions under U.S. GAAP. This ASU is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014, with early adoption permitted. This ASU is applicable for disposal transactions, if any, that the Company enters into after January 2, 2015. This ASU did not materially impact the Company’s Condensed Consolidated Financial Statements.
Subsequent Events
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS
On October 27, 2015, the Company acquired all of the outstanding common stock of Lake Region Medical for a total purchase price including debt assumed of approximately $1.77 billion. The aggregate consideration paid by the Company to the stockholders of Lake Region Medical consisted of approximately $478 million in cash, 5.0 million shares of Greatbatch common stock and approximately 120 thousand options to purchase shares of Greatbatch common stock. Concurrently with the closing of the acquisition, the Company repaid all of the outstanding debt of Lake Region Medical of approximately $1.0 billion. The Company believes that the combination of Greatbatch and Lake Region Medical brings together two highly complementary organizations that can provide a new level of industry leading capabilities and services to original equipment manufacturer customers while building value for shareholders. Through this acquisition, the Company believes that it will be at the forefront of innovating technologies and products that help change the face of healthcare, providing its customers with a distinct advantage as they bring complete systems and solutions to market. In turn, Greatbatch’s customers will be able to accelerate patient access to life enhancing therapies. The transaction is consistent with Greatbatch's strategy of achieving profitable growth and continuous improvement to drive margin expansion.
This transaction will be accounted for under the acquisition method of accounting. Accordingly, the cost of the acquisition will be allocated to the Lake Region Medical assets acquired and liabilities assumed based on their fair values as of the closing date of the acquisition, with the amount exceeding the fair value of the net assets acquired being recorded as goodwill. The goodwill acquired in connection with the Lake Region Medical acquisition is not expected to be deductible for tax purposes.
The following table summarizes the preliminary allocation of the Lake Region Medical purchase price to the assets acquired and liabilities assumed. The values presented below are preliminary and will change based upon, but not limited to, the following: recording the actual assets and liabilities acquired as of the acquisition date; completion of the tangible and intangible asset valuations; completion of the valuation of liabilities including defined benefit plan obligations; the finalization of the purchase price; and the calculation of pre-acquisition tax positions (in thousands):
Assets acquired
 
Current assets
$
267,059

Amortizing intangible assets
766,000

Goodwill
793,888

Other non-current assets
209,232

Total assets acquired
2,036,179

Liabilities assumed
 
Current liabilities
108,882

Long-term debt
1,034,125

Other long-term liabilities
164,806

Total liabilities assumed
1,307,813

Net assets acquired
$
728,366


The following pro forma information presents the consolidated results of operations of the Company, Lake Region Medical as if that acquisition occurred as of the beginning of fiscal year 2014, and CCC as if that acquisition occurred as of the beginning of fiscal year 2013 (in thousands, except per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Sales
$
349,999

 
$
372,194

 
$
1,086,350

 
$
1,070,597

Net income (loss)
(7,883
)
 
3,265

 
(5,360
)
 
(44,889
)
Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
(0.26
)
 
$
0.11

 
$
(0.18
)
 
$
(1.51
)
Diluted
$
(0.26
)
 
$
0.11

 
$
(0.18
)
 
$
(1.51
)


The results prior to the acquisition dates have been adjusted to include the pro forma impact of the amortization of acquired intangible assets based on the purchase price allocations, the incurrence of debt to fund the acquisition, and the impact of income taxes on the pro forma adjustments utilizing the applicable statutory tax rates. The pro forma consolidated basic and diluted earnings per share calculations are based on the consolidated basic and diluted weighted average shares of Greatbatch giving effect to the 5.0 million shares issued in connection with the Lake Region Medical acquisition. During the first half of 2014, Lake Region Medical recognized a trade name impairment and loss on extinguishment of debt of $26.8 million and $53.4 million, respectively, and are included in the above pro forma amounts for the nine months ended October 3, 2014.
In connection with the acquisition of Lake Region Medical, on October 27, 2015, the Company replaced the Credit Facility with new senior secured credit facilities (the “Senior Secured Credit Facilities”) consisting of (i) a $200 million revolving credit facility (the “New Revolving Credit Facility”), which remained undrawn at the close of the acquisition, (ii) a $375 million term loan A facility (the “TLA Facility”), and (iii) a $1,025 million term loan B facility (the “TLB Facility”). The Company also completed on October 27, 2015, a private offering of $360 million aggregate principal amount of 9.125% senior notes due on November 1, 2023 (the “Senior Notes”). The TLA Facility and TLB Facility were funded in full on October 27, 2015, and used, together with cash on hand and the net proceeds from the Senior Notes to fund the cash portion of the consideration transferred, to repay the outstanding debt of Lake Region Medical at closing, and to repay the Term Loan.
The New Revolving Credit Facility will mature on October 27, 2020, the TLA Facility will mature on October 27, 2021 and the TLB Facility will mature on October 27, 2022. Interest rates on the TLA Facility and the New Revolving Credit Facility are, at the Company’s option, either at: (i) the prime rate plus the applicable margin, which will range between 0.75% and 2.25%, based on the Company’s total leverage ratio or (ii) the applicable LIBOR rate plus the applicable margin, which will range between 1.75% and 3.25%, based on the Company’s total leverage ratio. Interest rates on the TLB Facility are, at the Company’s option, either at: (i) the prime rate plus 3.25% or (ii) the applicable LIBOR rate plus 4.25%, with LIBOR subject to a 1.00% floor.
The New Revolving Credit Facility also includes a $15 million sublimit for swingline loans and a $30 million sublimit for standby letters of credit (which will subsequently decrease to $25 million on April 27, 2016). Subject to certain conditions, commitments under the TLA Facility, TLB Facility and New Revolving Credit Facility may be increased through an incremental term loan/revolving facility so long as, on a pro forma basis, the Company’s first lien net leverage ratio does not exceed 4.25:1.00. The Company will be required to pay a commitment fee on the unused portion of the New Revolving Credit Facility, which will range between 0.175% and 0.25%, depending on the Company’s total leverage ratio.
The New Revolving Credit Facility and the TLA Facility contain covenants requiring (A) a maximum total net leverage ratio of 6.50:1.00, subject to step downs and (B) a minimum interest coverage ratio of adjusted EBITDA (as defined in the Senior Secured Credit Facilities) to interest expense of not less than 3.00:1.00. The Senior Secured Credit Facilities include mandatory prepayments customary for credit facilities of its nature. The Senior Secured Credit Facilities are secured by the non-realty assets including cash, accounts receivable and inventories, of the Company’s direct and indirect wholly-owned domestic subsidiaries.
The Senior Secured Credit Facilities contain negative covenants that restrict the Company’s ability to (i) incur additional indebtedness; (ii) create certain liens; (iii) consolidate or merge; (iv) sell assets, including capital stock of the Company’s subsidiaries; (v) engage in transactions with the Company’s affiliates; (vi) create restrictions on the payment of dividends or other amounts to Greatbatch Ltd. from the Company’s restricted subsidiaries; (vii) pay dividends on capital stock or redeem, repurchase or retire capital stock; (viii) pay, prepay, repurchase or retire certain subordinated indebtedness; (ix) make investments, loans, advances and acquisitions; (x) make certain amendments or modifications to the organizational documents of the Company or its subsidiaries or the documentation governing other senior indebtedness of the Company; and (xi) change the Company’s type of business. These negative covenants are subject to a number of limitations and exceptions that are described in the Senior Secured Credit Facilities agreement.
Interest on the Senior Notes is payable on May 1 and November 1 of each year, beginning on May 1, 2016. The Company may redeem the Senior Notes, in whole or in part, prior to November 1, 2018 at a price equal to 100% of the principal amount thereof plus a “make-whole” premium. Prior to November 1, 2018, the Company may redeem up to 40% of the aggregate principal amount of the Senior Notes using the proceeds from certain equity offerings at a redemption price equal to 109.125% of the aggregate principal amount of the Senior Notes.
The Senior Notes are senior unsecured obligations of the Company. The Senior Notes contain restrictive covenants that, among other things, limit the ability of the Company to: (i) incur or guarantee additional indebtedness or issue certain disqualified stock or preferred stock; (ii) create certain liens; (iii) pay dividends or make distributions in respect of capital stock; (iv) make certain other restricted payments; (v) enter into agreements that restrict certain dividends or other payments; (vi) enter into sale-leaseback agreements; (vii) engage in certain transactions with affiliates; and (viii) consolidate or merge with, or sell substantially all of their assets to, another person. These covenants are subject to a number of limitations and exceptions that are described in the indenture agreement of the Senior Notes. The Senior Notes provide for customary events of default.
Contractual maturities of the Company’s debt facilities for the next five years and thereafter, excluding any discounts or premiums, as of October 27, 2015 are as follows (in thousands):
2016
 
$
29,000

2017
 
31,344

2018
 
40,719

2019
 
47,750

2020
 
47,750

Thereafter
 
1,563,437

Total
 
$
1,760,000

Summary of Significant Accounting Policies (Policies)
The January 2, 2015 condensed consolidated balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended January 2, 2015.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a full presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of Greatbatch, Inc. and its subsidiaries (collectively “Greatbatch” or the “Company”) for the periods presented.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ materially from these estimates.
The Company utilizes a fifty-two, fifty-three week fiscal year ending on the Friday nearest December 31. The third quarter and first nine month periods of 2015 and 2014 each contained 13 weeks and 39 weeks, respectively, and ended on October 2, and October 3, respectively.
The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including changes in the mix of pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, business reorganizations, the timing of recognition of discrete items, and settlements with taxing authorities.
The Company reviews the carrying amount of its long-lived assets to be held and used, other than goodwill and indefinite-lived intangible assets, for potential impairment whenever certain indicators are present such as: a significant decrease in the market price of the asset or asset group; a significant change in the extent or manner in which the long-lived asset or asset group is being used or in its physical condition; a significant change in legal factors or in the business climate that could affect the value of the long-lived asset or asset group, including an action or assessment by a regulator; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction; a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of the long-lived asset or asset group; or a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent.
Potential recoverability is measured by comparing the carrying amount of the asset or asset group to its related total future undiscounted cash flows. If the carrying value is not recoverable, the asset or asset group is considered to be impaired. Impairment is measured by comparing the asset or asset group’s carrying amount to its fair value. When it is determined that useful lives are shorter than originally estimated, and no impairment is present, the rate of depreciation is accelerated in order to fully depreciate the assets over their new shorter useful lives. The Company did not record any impairment charges related to its long-lived assets during the first nine months of 2015 or 2014.
Goodwill and other indefinite lived intangible assets recorded are not amortized but are periodically tested for impairment. The Company assesses goodwill for impairment on the last day of each fiscal year, or more frequently if certain events occur as described above. Goodwill is evaluated for impairment through the comparison of the fair value of the reporting units to their carrying values. When evaluating goodwill for impairment, the Company may first perform an assessment of qualitative factors to determine if the fair value of the reporting unit is more-likely-than-not greater than its carrying amount. This qualitative assessment is referred to as a “step zero approach. If, based on the review of the qualitative factors, the Company determines it is more-likely-than-not that the fair value of the reporting unit is greater than its carrying value, the required two-step impairment test can be bypassed. If the Company does not perform a step zero assessment or if the fair value of the reporting unit is more-likely-than-not less than its carrying value, the Company must perform a two-step impairment test, and calculate the estimated fair value of the reporting unit. If, based upon the two-step impairment test, it is determined that the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill within the reporting unit is less than its carrying value. Under the two-step approach, fair values for reporting units are determined based on discounted cash flows and market multiples.
Other indefinite lived intangible assets are assessed for impairment on the last day of each fiscal year, or more frequently if certain events occur as described above, by comparing the fair value of the intangible asset to its carrying value. The fair value is determined by using the income approach.
The Company holds investments in equity and other securities that are accounted for as either cost or equity method investments, which are classified as Other Assets. The total carrying value of these investments is reviewed quarterly for changes in circumstance or the occurrence of events that suggest the Company’s investment may not be recoverable. The fair value of cost or equity method investments is not adjusted if there are no identified events or changes in circumstances that may have a material effect on the fair value of the investments. Gains and losses realized on cost and equity method investments are recorded in Other Income, Net, unless separately stated.
Acquisition (Tables)
The following table summarizes the allocation of the CCC purchase price to the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Assets acquired
 
Current assets
$
10,670

Property, plant and equipment
1,131

Amortizing intangible assets
6,100

Goodwill
8,296

Total assets acquired
26,197

Liabilities assumed
 
Current liabilities
4,842

Deferred income taxes
1,590

Total liabilities assumed
6,432

Net assets acquired
$
19,765

The purchase price was allocated to intangible assets as follows (dollars in thousands):
Amortizing Intangible Assets
 
Fair
Value
Assigned
 
Weighted
Average
Amortization
Period (Years)
 
Weighted
Average
Discount
Rate
Technology
 
$
1,400

 
10
 
18%
Customer lists
 
4,600

 
10
 
18%
Trademarks and tradenames
 
100

 
2
 
18%
 
 
$
6,100

 
10
 
18%
The following pro forma information presents the consolidated results of operations of the Company and CCC as if that acquisition occurred as of the beginning of fiscal year 2013 (in thousands, except per share amounts):
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 3, 2014
 
October 3, 2014
Sales
 
$
173,413

 
$
526,631

Net income
 
14,219

 
42,165

Earnings per share:
 
 
 
 
Basic
 
$
0.57

 
$
1.70

Diluted
 
$
0.55

 
$
1.63

Supplemental Cash Flow Information (Tables)
Schedule of Cash Flow, Supplemental Disclosures
 
Nine Months Ended
(in thousands)
October 2, 2015
 
October 3, 2014
Noncash investing and financing activities:
 
 
 
Common stock contributed to 401(k) Plan
$
3,920

 
$
4,341

Property, plant and equipment purchases included in accounts payable
892

 
2,618

Deferred financing costs included in accounts payable
7,922

 

Acquisition of noncash assets
$

 
$
21,282

Liabilities assumed
$

 
$
5,464

Inventories (Tables)
Schedule of Inventory, Current
Inventories are comprised of the following (in thousands):
 
As of
 
October 2, 2015
 
January 2, 2015
Raw materials
$
85,040

 
$
73,354

Work-in-process
52,101

 
38,930

Finished goods
27,095

 
16,958

Total
$
164,236

 
$
129,242

Intangible Assets (Tables)
Amortizing intangible assets are comprised of the following (in thousands):
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Foreign
Currency
Translation
 
Net
Carrying
Amount
At October 2, 2015
 
 
 
 
 
 
 
Purchased technology and patents
$
95,776

 
$
(80,429
)
 
$
1,966

 
$
17,313

Customer lists
72,857

 
(36,739
)
 
1,374

 
37,492

Other
4,534

 
(4,813
)
 
803

 
524

Total amortizing intangible assets
$
173,167

 
$
(121,981
)
 
$
4,143

 
$
55,329

At January 2, 2015
 
 
 
 
 
 
 
Purchased technology and patents
$
95,776

 
$
(75,894
)
 
$
1,966

 
$
21,848

Customer lists
72,857

 
(31,460
)
 
1,374

 
42,771

Other
4,534

 
(4,619
)
 
803

 
718

Total amortizing intangible assets
$
173,167

 
$
(111,973
)
 
$
4,143

 
$
65,337

Aggregate intangible asset amortization expense is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Cost of sales
$
1,324

 
$
1,567

 
$
4,240

 
$
4,696

Selling, general and administrative expenses
1,831

 
1,756

 
5,474

 
5,190

Research, development and engineering costs, net
88

 
164

 
294

 
565

Total intangible asset amortization expense
$
3,243

 
$
3,487

 
$
10,008

 
$
10,451

Estimated future intangible asset amortization expense based on the carrying value as of October 2, 2015 is as follows (in thousands):
 
Estimated
Amortization
Expense
Remainder of 2015
$
2,979

2016
10,795

2017
9,520

2018
7,114

2019
5,431

Thereafter
19,490

Total estimated amortization expense
$
55,329

Indefinite-lived intangible assets are comprised of the following (in thousands):
 
Trademarks
and
Tradenames
At January 2, 2015
$
20,288

At October 2, 2015
$
20,288

The change in goodwill is as follows (in thousands):
 
Greatbatch Medical
 
QiG
 
Total
At January 2, 2015
$
304,297

 
$
50,096

 
$
354,393

Foreign currency translation
(254
)
 

 
(254
)
At October 2, 2015
$
304,043

 
$
50,096

 
$
354,139

Debt (Tables)
Long-term debt is comprised of the following (in thousands):
 
As of
 
October 2, 2015
 
January 2, 2015
Variable rate term loan
$
180,000

 
$
187,500

Revolving line of credit

 

Total debt
180,000

 
187,500

Less current portion of long-term debt
15,000

 
11,250

Total long-term debt
$
165,000

 
$
176,250

Information regarding the Company’s outstanding interest rate swaps as of October 2, 2015 is as follows (dollars in thousands):
Instrument
 
Type of
Hedge
 
Notional
Amount
 
Start
Date
 
End
Date
 
Pay
Fixed
Rate
 
Current
Receive
Floating
Rate
 
Fair Value
 
Balance
Sheet Location
Interest rate swap
 
Cash flow
 
$
50,000

 
Feb 2013
 
Feb 2016
 
0.573
%
 
0.216
%
 
$
(64
)
 
Accrued Expenses
Interest rate swap
 
Cash flow
 
$
90,000

 
Feb 2015
 
Sept 2019
 
1.921
%
 
0.216
%
 
$
(2,724
)
 
Accrued Expenses
The change in deferred financing fees is as follows (in thousands):
At January 2, 2015
$
3,087

Financing costs deferred
7,922

Amortization during the period
(2,580
)
At October 2, 2015
$
8,429

Benefit Plans (Tables)
The change in net defined benefit plan liability is as follows (in thousands):
At January 2, 2015
$
2,406

Net defined benefit cost
309

Foreign currency translation
(157
)
At October 2, 2015
$
2,558

Net defined benefit cost is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Service cost
$
76

 
$
51

 
$
233

 
$
155

Interest cost
15

 
18

 
45

 
57

Amortization of net loss
13

 
6

 
39

 
17

Expected return on plan assets
(2
)
 

 
(8
)
 

Net defined benefit cost
$
102

 
$
75

 
$
309

 
$
229

Stock-Based Compensation (Tables)
The components and classification of stock-based compensation expense were as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Stock options
$
697

 
$
595

 
$
1,979

 
$
1,811

Restricted stock and restricted stock units
1,701

 
1,850

 
5,081

 
5,008

401(k) Plan stock contribution
674

 
1,357

 
1,984

 
3,712

Total stock-based compensation expense
$
3,072

 
$
3,802

 
$
9,044

 
$
10,531

 
 
 
 
 
 
 
 
Cost of sales
$
685

 
$
1,129

 
$
2,039

 
$
3,187

Selling, general and administrative expenses
1,981

 
1,951

 
5,890

 
5,872

Research, development and engineering costs, net
361

 
429

 
1,070

 
1,179

Other operating expenses
45

 
293

 
45

 
293

Total stock-based compensation expense
$
3,072

 
$
3,802

 
$
9,044

 
$
10,531

The weighted average fair value and assumptions used to value options granted are as follows:
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
Weighted average fair value
$
12.18

 
$
16.43

Risk-free interest rate
1.55
%
 
1.73
%
Expected volatility
26
%
 
39
%
Expected life (in years)
5

 
5

Expected dividend yield
%
 
%
The following table summarizes time and performance-vested stock option activity:
 
Number of
Stock
Options
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life
(In Years)
 
Aggregate
Intrinsic
Value
(In Millions)
Outstanding at January 2, 2015
1,590,337

 
$
25.17

 
 
 
 
Granted
301,547

 
49.20

 
 
 
 
Exercised
(257,316
)
 
23.27

 
 
 
 
Forfeited or expired
(37,302
)
 
39.59

 
 
 
 
Outstanding at October 2, 2015
1,597,266

 
$
29.67

 
6.1
 
$
45.9

Exercisable at October 2, 2015
1,165,675

 
$
24.56

 
5.1
 
$
39.5

The following table summarizes time-vested restricted stock and restricted stock unit activity:
 
Time-Vested
Activity
 
Weighted
Average
Fair Value
Nonvested at January 2, 2015
67,832

 
$
36.22

Granted
42,497

 
49.52

Vested
(13,320
)
 
33.21

Forfeited
(11,084
)
 
31.55

Nonvested at October 2, 2015
85,925

 
$
43.86

The following table summarizes performance-vested restricted stock and restricted stock unit activity:
 
Performance-
Vested
Activity
 
Weighted
Average
Fair Value
Nonvested at January 2, 2015
716,163

 
$
19.57

Granted
179,940

 
32.92

Vested
(270,198
)
 
15.30

Forfeited
(40,713
)
 
25.99

Nonvested at October 2, 2015
585,192

 
$
25.20

Other Operating Expenses, Net (Tables)
Other Operating Expenses, Net is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
2014 investments in capacity and capabilities
$
5,116

 
$
2,787

 
$
17,854

 
$
5,005

Orthopaedic optimization costs
357

 
996

 
1,348

 
1,032

2013 operating unit realignment

 
(31
)
 

 
1,004

Other consolidation and optimization income, net

 

 

 
(71
)
Acquisition and integration costs (income)
5,202

 
133

 
5,366

 
(248
)
Asset dispositions, severance and other
3,169

 
2,291

 
4,881

 
3,501

 
$
13,844

 
$
6,176

 
$
29,449

 
$
10,223

The change in accrued liabilities related to the 2014 investments in capacity and capabilities is as follows (in thousands):
 
Severance and
Retention
 
Accelerated
Depreciation/Asset
Write-offs
 
Other
 
Total
At January 2, 2015
$
1,163

 
$

 
$
1,066

 
$
2,229

Restructuring charges
2,469

 
235

 
15,150

 
17,854

Write-offs

 
(235
)
 

 
(235
)
Cash payments
(1,650
)
 

 
(15,943
)
 
(17,593
)
At October 2, 2015
$
1,982


$

 
$
273

 
$
2,255

The change in accrued liabilities related to the orthopaedic facility optimization is as follows (in thousands):
 
Severance
and
Retention
 
Accelerated
Depreciation/Asset
Write-offs
 
Other
 
Total
At January 2, 2015
$

 
$

 
$
287

 
$
287

Restructuring charges

 
88

 
1,260

 
1,348

Write-offs

 
(88
)
 

 
(88
)
Cash payments

 

 
(1,547
)
 
(1,547
)
At October 2, 2015
$

 
$

 
$

 
$

Commitments and Contingencies (Tables)
The change in product warranty liability was comprised of the following (in thousands):
At January 2, 2015
$
660

Additions to warranty reserve
790

Warranty claims paid
(216
)
At October 2, 2015
$
1,234

Minimum future estimated operating lease expenses as of October 2, 2015 are as follows (in thousands):
Remainder of 2015
$
1,546

2016
6,009

2017
3,924

2018
3,491

2019
3,418

Thereafter
13,938

Total estimated operating lease expense
$
32,326

The impact to the Company’s results of operations from these forward contracts was as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Addition (reduction) in cost of sales
$
562

 
$
(48
)
 
$
1,226

 
$
(204
)
Ineffective portion of change in fair value

 

 

 

Information regarding outstanding foreign currency contracts as of October 2, 2015 is as follows (dollars in thousands):
Instrument
 
Type of
Hedge
 
Aggregate
Notional
Amount
 
Start
Date
 
End
Date
 
$/Peso
 
Fair
Value
 
Balance Sheet Location
FX Contract
 
Cash flow
 
$
4,220

 
Jan 2015
 
Dec 2015
 
0.0734

 
$
(808
)
 
Accrued Expenses
FX Contract
 
Cash flow
 
$
787

 
Mar 2015
 
Dec 2015
 
0.0656

 
$
(75
)
 
Accrued Expenses
FX Contract
 
Cash flow
 
$
15,081

 
Jan 2016
 
Dec 2016
 
0.0656

 
$
(1,675
)
 
Accrued Expenses
Earnings Per Share (EPS) (Tables)
The following table illustrates the calculation of Basic and Diluted EPS (in thousands, except per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Numerator for basic and diluted EPS:
 
 
 
 
 
 
 
Net income
$
22

 
$
14,012

 
$
17,313

 
$
41,282

Denominator for basic EPS:
 
 
 
 
 
 
 
Weighted average shares outstanding
25,536

 
24,899

 
25,424

 
24,784

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options, restricted stock and restricted stock units
905

 
1,024

 
948

 
1,066

Denominator for diluted EPS
26,441

 
25,923

 
26,372

 
25,850

Basic EPS
$

 
$
0.56


$
0.68

 
$
1.67

Diluted EPS
$

 
$
0.54

 
$
0.66

 
$
1.60

The diluted weighted average share calculations do not include the following securities, which are not dilutive to the EPS calculations or the performance criteria have not been met:
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Time-vested stock options, restricted stock and restricted stock units
260,000

 
163,000

 
268,000

 
177,000

Performance-vested restricted stock units
10,800

 
4,400

 
9,800

 
3,600

Accumulated Other Comprehensive Income (Tables)
Schedule of Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income is comprised of the following (in thousands):
 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
At July 3, 2015
$
(1,181
)
 
$
(3,619
)
 
$
9,839

 
$
5,039

 
$
1,784

 
$
6,823

Unrealized loss on cash flow hedges

 
(1,670
)
 

 
(1,670
)
 
584

 
(1,086
)
Realized loss on foreign currency hedges

 
562

 

 
562

 
(197
)
 
365

Realized loss on interest rate swap hedges

 
2,169

 

 
2,169

 
(759
)
 
1,410

Foreign currency translation gain

 

 
144

 
144

 

 
144

At October 2, 2015
$
(1,181
)
 
$
(2,558
)
 
$
9,983

 
$
6,244

 
$
1,412

 
$
7,656

 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
At January 2, 2015
$
(1,181
)
 
$
(2,558
)
 
$
11,450

 
$
7,711

 
$
1,412

 
$
9,123

Unrealized loss on cash flow hedges

 
(3,857
)
 

 
(3,857
)
 
1,350

 
(2,507
)
Realized loss on foreign currency hedges

 
1,226

 

 
1,226

 
(429
)
 
797

Realized loss on interest rate swap hedges

 
2,631

 

 
2,631

 
(921
)
 
1,710

Foreign currency translation loss

 

 
(1,467
)
 
(1,467
)
 

 
(1,467
)
At October 2, 2015
$
(1,181
)
 
$
(2,558
)
 
$
9,983

 
$
6,244

 
$
1,412

 
$
7,656


 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
At July 4, 2014
$
(672
)
 
$
(218
)
 
$
15,741

 
$
14,851

 
$
459

 
$
15,310

Unrealized loss on cash flow hedges

 
(133
)
 

 
(133
)
 
46

 
(87
)
Realized gain on foreign currency hedges

 
(48
)
 

 
(48
)
 
17

 
(31
)
Realized loss on interest rate swap hedges

 
106

 

 
106

 
(37
)
 
69

Foreign currency translation loss

 

 
(3,211
)
 
(3,211
)
 

 
(3,211
)
At October 3, 2014
$
(672
)
 
$
(293
)
 
$
12,530

 
$
11,565

 
$
485

 
$
12,050

 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
At January 3, 2014
$
(672
)
 
$
(468
)
 
$
14,952

 
$
13,812

 
$
546

 
$
14,358

Unrealized gain on cash flow hedges

 
35

 

 
35

 
(12
)
 
23

Realized gain on foreign currency hedges

 
(204
)
 

 
(204
)
 
71

 
(133
)
Realized loss on interest rate swap hedges

 
344

 

 
344

 
(120
)
 
224

Foreign currency translation loss

 

 
(2,422
)
 
(2,422
)
 

 
(2,422
)
At October 3, 2014
$
(672
)
 
$
(293
)
 
$
12,530

 
$
11,565

 
$
485

 
$
12,050

Fair Value Measurements (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
The following table provides information regarding liabilities recorded at fair value on a recurring basis (in thousands):
 
 
Fair Value Measurements Using
 
 
At 
 October 2,
 
Quoted
Prices in
Active Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
Description
 
2015
 
(Level 1)
 
(Level 2)
 
(Level 3)
Liabilities
 
 
 
 
 
 
 
 
Foreign currency contracts (Note 11)
 
$
2,558

 
$

 
$
2,558

 
$

Interest rate swaps (Note 6)
 
2,788

 

 
2,788

 

Business Segment, Geographic and Concentration Risk Information (Tables)
Sales by geographic area are presented by allocating sales from external customers based on where the products are shipped to (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Sales:
 
 
 
 
 
 
 
Greatbatch Medical
 
 
 
 
 
 
 
Cardiac/Neuromodulation
$
72,961

 
$
85,618

 
$
239,387

 
$
252,403

Orthopaedic
27,752

 
32,489

 
102,204

 
106,785

Portable Medical
17,224

 
17,199

 
48,591

 
53,139

Vascular
14,107

 
14,903

 
37,370

 
43,210

Energy, Military, Environmental
11,977

 
19,016

 
46,232

 
58,499

Total Greatbatch Medical
144,021

 
169,225

 
473,784

 
514,036

QiG
2,776

 
2,474

 
10,564

 
4,025

Elimination of Intersegment Sales(a)
(160
)
 

 
(1,501
)
 

Total sales
$
146,637

 
$
171,699

 
$
482,847

 
$
518,061


(a)
Intersegment sales between Greatbatch Medical and QiG are eliminated in consolidation and are included in Greatbatch Medical’s cardiac and neuromodulation product line.
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Segment income (loss) from operations:
 
 
 
 
 
 
 
Greatbatch Medical
$
21,512

 
$
31,121

 
$
72,179

 
$
98,688

QiG
(7,680
)
 
(6,796
)
 
(20,132
)
 
(18,882
)
Total segment income from operations
13,832

 
24,325

 
52,047

 
79,806

Unallocated operating expenses
(12,637
)
 
(8,142
)
 
(28,429
)
 
(21,560
)
Operating income as reported
1,195

 
16,183

 
23,618

 
58,246

Unallocated other expense
(1,189
)
 
2,717

 
(1,857
)
 
847

Income before provision for income taxes
$
6

 
$
18,900

 
$
21,761

 
$
59,093

Three customers accounted for a significant portion of the Company’s sales as follows:
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Customer A
17
%
 
19
%
 
20
%
 
19
%
Customer B
19
%
 
15
%
 
18
%
 
16
%
Customer C
10
%
 
11
%
 
12
%
 
12
%
Total
46
%
 
45
%
 
50
%
 
47
%
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Sales by geographic area:
 
 
 
 
 
 
 
United States
$
71,545

 
$
76,330

 
$
217,102

 
$
235,203

Non-Domestic locations:
 
 
 
 
 
 
 
Puerto Rico
26,816

 
34,581

 
98,247

 
101,064

Belgium
12,305

 
13,722

 
45,690

 
47,351

Rest of world
35,971

 
47,066

 
121,808

 
134,443

Total sales
$
146,637

 
$
171,699

 
$
482,847

 
$
518,061

Long-lived tangible assets by geographic area are as follows (in thousands):
 
As of
 
October 2, 2015
 
January 2, 2015
United States
$
112,260

 
$
113,851

Rest of world
43,749

 
31,074

Total
$
156,009

 
$
144,925

Subsequent Events (Tables)
The following pro forma information presents the consolidated results of operations of the Company and CCC as if that acquisition occurred as of the beginning of fiscal year 2013 (in thousands, except per share amounts):
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 3, 2014
 
October 3, 2014
Sales
 
$
173,413

 
$
526,631

Net income
 
14,219

 
42,165

Earnings per share:
 
 
 
 
Basic
 
$
0.57

 
$
1.70

Diluted
 
$
0.55

 
$
1.63

Contractual maturities of the Company’s debt facilities for the next five years and thereafter, excluding any discounts or premiums, as of October 27, 2015 are as follows (in thousands):
2016
 
$
29,000

2017
 
31,344

2018
 
40,719

2019
 
47,750

2020
 
47,750

Thereafter
 
1,563,437

Total
 
$
1,760,000

The following table summarizes the preliminary allocation of the Lake Region Medical purchase price to the assets acquired and liabilities assumed. The values presented below are preliminary and will change based upon, but not limited to, the following: recording the actual assets and liabilities acquired as of the acquisition date; completion of the tangible and intangible asset valuations; completion of the valuation of liabilities including defined benefit plan obligations; the finalization of the purchase price; and the calculation of pre-acquisition tax positions (in thousands):
Assets acquired
 
Current assets
$
267,059

Amortizing intangible assets
766,000

Goodwill
793,888

Other non-current assets
209,232

Total assets acquired
2,036,179

Liabilities assumed
 
Current liabilities
108,882

Long-term debt
1,034,125

Other long-term liabilities
164,806

Total liabilities assumed
1,307,813

Net assets acquired
$
728,366

The following pro forma information presents the consolidated results of operations of the Company, Lake Region Medical as if that acquisition occurred as of the beginning of fiscal year 2014, and CCC as if that acquisition occurred as of the beginning of fiscal year 2013 (in thousands, except per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2015
 
October 3, 2014
 
October 2, 2015
 
October 3, 2014
Sales
$
349,999

 
$
372,194

 
$
1,086,350

 
$
1,070,597

Net income (loss)
(7,883
)
 
3,265

 
(5,360
)
 
(44,889
)
Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
(0.26
)
 
$
0.11

 
$
(0.18
)
 
$
(1.51
)
Diluted
$
(0.26
)
 
$
0.11

 
$
(0.18
)
 
$
(1.51
)
Summary of Significant Accounting Policies (Basis of Presentation) (Details) (USD $)
In Billions, unless otherwise specified
3 Months Ended 9 Months Ended 0 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Segment
Oct. 3, 2014
Oct. 27, 2015
Subsequent Event [Member]
Lake Region Medical [Member]
Accounting Policies [Abstract]
 
 
 
 
 
Fiscal Period Duration
91 days 
91 days 
273 days 
273 days 
 
Number of Reportable Segments
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
 
Total purchase price and debt assumed
 
 
 
 
$ 1.77 
Acquisition (Summary of Assets Acquired and Liabilities Assumed) (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Aug. 12, 2014
CCC [Member]
Assets acquired
 
 
 
Current assets
 
 
$ 10,670 
Property, plant and equipment
 
 
1,131 
Amortizing intangible assets
 
 
6,100 
Goodwill
354,139 
354,393 
8,296 
Total assets acquired
 
 
26,197 
Liabilities assumed
 
 
 
Current liabilities
 
 
4,842 
Deferred income taxes
 
 
1,590 
Total liabilities assumed
 
 
6,432 
Net assets acquired
 
 
$ 19,765 
Acquisition (Summary of Finite-Lived Intangible Assets Acquired) (Details) (CCC [Member], USD $)
In Thousands, unless otherwise specified
0 Months Ended
Aug. 12, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
 
Fair Value Assigned
$ 6,100 
Weighted Average Amortization Period (Years)
10 years 
Weighted Average Discount Rate
18.00% 
Technology And Patents [Member]
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Fair Value Assigned
1,400 
Weighted Average Amortization Period (Years)
10 years 
Weighted Average Discount Rate
18.00% 
Royalty Rate (Percent)
3.00% 
Customer Lists [Member]
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Fair Value Assigned
4,600 
Weighted Average Amortization Period (Years)
10 years 
Weighted Average Discount Rate
18.00% 
Customer Annual Attrition Rate
15.00% 
Trademarks And Tradenames [Member]
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Fair Value Assigned
$ 100 
Weighted Average Amortization Period (Years)
2 years 
Weighted Average Discount Rate
18.00% 
Royalty Rate (Percent)
0.50% 
Acquisition (Summary of Acquisition Pro Forma Results) (Details) (CCC [Member], USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 3, 2014
Oct. 3, 2014
CCC [Member]
 
 
Business Acquisition [Line Items]
 
 
Sales
$ 173,413 
$ 526,631 
Net income
$ 14,219 
$ 42,165 
Earnings per share:
 
 
Basic (in dollars per share)
$ 0.57 
$ 1.70 
Diluted (in dollars per share)
$ 0.55 
$ 1.63 
Acquisition (Narrative) (Details) (USD $)
0 Months Ended 0 Months Ended
Aug. 12, 2014
CCC [Member]
Aug. 12, 2014
CCC [Member]
Oct. 27, 2015
Lake Region Medical [Member]
Subsequent Event [Member]
Business Acquisition [Line Items]
 
 
 
Effective Date of Acquisition
Aug. 12, 2014 
 
 
Name of Acquired Entity
Centro de Construcción de Cardioestimuladores del Uruguay (“CCC”) 
 
 
Description of Acquired Entity
CCC is an active implantable neuromodulation medical device systems developer and manufacturer that produces a range of medical devices including implantable pulse generators, programmer systems, battery chargers, patient wands and leads. 
 
 
Reason for Acquisition
This acquisition allows the Company to more broadly partner with development stage medical device companies, complements the Company’s core discrete technology offerings and enhances the Company’s medical device innovation efforts. 
 
 
Cash Paid
$ 19,800,000 
 
$ 478,000,000 
Increase in Inventory
 
300,000 
 
Total purchase price and debt assumed
 
 
$ 1,770,000,000 
Supplemental Cash Flow Information (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Noncash investing and financing activities:
 
 
Common stock contributed to 401(k) Plan
$ 3,920 
$ 4,341 
Property, plant and equipment purchases included in accounts payable
892 
2,618 
Deferred financing costs included in accounts payable
7,922 
Acquisition of noncash assets
21,282 
Liabilities assumed
$ 0 
$ 5,464 
Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Inventory Disclosure [Abstract]
 
 
Inventory, Raw Materials
$ 85,040 
$ 73,354 
Inventory, Work in Process
52,101 
38,930 
Inventory, Finished Goods
27,095 
16,958 
Total Inventories
$ 164,236 
$ 129,242 
Intangible Assets (Schedule of Finite-Lived Intangible Assets, Major Class) (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Finite-Lived Intangible Assets [Line Items]
 
 
Finite-Lived Intangible Assets, Gross
$ 173,167 
$ 173,167 
Finite-Lived Intangible Assets, Accumulated Amortization
(121,981)
(111,973)
Foreign Currency Translation
4,143 
4,143 
Amortizing Intangible Assets, Net
55,329 
65,337 
Purchased Technology And Patents [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Finite-Lived Intangible Assets, Gross
95,776 
95,776 
Finite-Lived Intangible Assets, Accumulated Amortization
(80,429)
(75,894)
Foreign Currency Translation
1,966 
1,966 
Amortizing Intangible Assets, Net
17,313 
21,848 
Customer Lists [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Finite-Lived Intangible Assets, Gross
72,857 
72,857 
Finite-Lived Intangible Assets, Accumulated Amortization
(36,739)
(31,460)
Foreign Currency Translation
1,374 
1,374 
Amortizing Intangible Assets, Net
37,492 
42,771 
Other Intangible Assets [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Finite-Lived Intangible Assets, Gross
4,534 
4,534 
Finite-Lived Intangible Assets, Accumulated Amortization
(4,813)
(4,619)
Foreign Currency Translation
803 
803 
Amortizing Intangible Assets, Net
$ 524 
$ 718 
Intangible Assets (Schedule of Finite-Lived Intangible Assets, Amortization Expense) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Finite Lived Intangible Assets, Amortization Expense
$ 3,243 
$ 3,487 
$ 10,008 
$ 10,451 
Cost of Sales [Member]
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Finite Lived Intangible Assets, Amortization Expense
1,324 
1,567 
4,240 
4,696 
Selling General And Administrative Expense [Member]
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Finite Lived Intangible Assets, Amortization Expense
1,831 
1,756 
5,474 
5,190 
Research and Development Expense [Member]
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Finite Lived Intangible Assets, Amortization Expense
$ 88 
$ 164 
$ 294 
$ 565 
Intangible Assets Intangible Assets (Schedule of Finite-Lived Intangible Assets, Future Amortization Expense) (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
 
 
Remainder of 2015
$ 2,979 
 
2016
10,795 
 
2017
9,520 
 
2018
7,114 
 
2019
5,431 
 
Thereafter
19,490 
 
Amortizing Intangible Assets, Net
$ 55,329 
$ 65,337 
Intangible Assets (Schedule of Indefinite-Lived Intangible Assets and Goodwill) (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Oct. 2, 2015
Oct. 2, 2015
Greatbatch Medical [Member]
Oct. 2, 2015
QiG [Member]
Oct. 2, 2015
Trademarks And Tradenames [Member]
Jan. 2, 2015
Trademarks And Tradenames [Member]
Indefinite-Lived Intangible Assets [Roll Forward]
 
 
 
 
 
Indefinite-Lived Intangible Assets (Excluding Goodwill), Beginning
$ 20,288 
 
 
$ 20,288 
$ 20,288 
Indefinite-Lived Intangible Assets (Excluding Goodwill), Ending
20,288 
 
 
20,288 
20,288 
Goodwill [Roll Forward]
 
 
 
 
 
Goodwill
354,393 
304,297 
50,096 
 
 
Foreign currency translation
(254)
(254)
 
 
Goodwill
$ 354,139 
$ 304,043 
$ 50,096 
 
 
Debt (Schedule of Long-Term Debt) (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Debt Disclosure [Abstract]
 
 
Variable rate term loan
$ 180,000 
$ 187,500 
Revolving line of credit
Total debt
180,000 
187,500 
Less current portion of long-term debt
15,000 
11,250 
Total long-term debt
$ 165,000 
$ 176,250 
Debt (Credit Facility) (Details) (USD $)
9 Months Ended
Oct. 2, 2015
Jan. 2, 2015
Line of Credit Facility [Abstract]
 
 
Credit Facility Maximum Borrowing Capacity
$ 300,000,000 
 
Term Loan Maximum Borrowing Capacity
180,000,000 
187,500,000 
Letter of Credit Subfacility Maximum Borrowing Capacity
15,000,000 
 
Swingline Subfacility Maximum Borrowing Capacity
$ 15,000,000 
 
Credit Facility Interest Margin Above Prime Minimum
0.00% 
 
Credit Facility Interest Margin Above Prime Maximum
0.75% 
 
Credit Facility Interest Margin Above LIBOR Minimum
1.375% 
 
Credit Facility Interest Margin Above LIBOR Maximum
2.75% 
 
Line of Credit Facility Minimum Commitment Fee, Percentage
0.175% 
 
Line of Credit Facility Maximum Commitment Fee, Percentage
0.25% 
 
Line of Credit Covenant, Adjusted EBITDA to Interest Expense, Ratio Required
3.0 
 
Line of Credit Covenant, Leverage Ratio, Maximum
4.5 
 
Debt Instrument, Covenant Compliance
As of October 2, 2015, the Company was in compliance with all covenants under the Credit Facility.  
 
Debt Weighted Average Interest Rate
1.59% 
 
Debt (Schedule of Interest Rate Swaps and Details) (Details) (USD $)
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 1 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Interest Rate Swap [Member]
Oct. 2, 2015
Interest Rate Swap [Member]
Oct. 3, 2014
Interest Rate Swap [Member]
Oct. 2, 2015
Interest Rate Swap 1 [Member]
Dec. 28, 2012
Interest Rate Swap 1 [Member]
Oct. 2, 2015
Interest Rate Swap 1 [Member]
Accrued Expenses [Member]
Oct. 2, 2015
Interest Rate Swap 2 [Member]
Oct. 2, 2015
Interest Rate Swap 2 [Member]
Accrued Expenses [Member]
Oct. 2, 2015
Interest Rate Swap 2a [Member]
Oct. 2, 2015
Interest Rate Swap 2b [Member]
Oct. 31, 2015
Subsequent Event [Member]
Derivative [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Description Of Interest Rate Risk Exposure
 
 
 
 
 
The Company entered into interest rate swap agreements in order to hedge against potential changes in cash flows on the outstanding borrowings on the Credit Facility.  
 
 
 
 
 
 
 
 
 
Derivative, Term of Contract
 
 
 
 
 
 
 
 
3 years 
 
 
 
 
 
 
Notional Amount
 
 
 
 
 
 
 
$ 50,000,000 
$ 150,000,000 
 
$ 90,000,000 
 
$ 45,000,000 
$ 45,000,000 
 
Annual Notional Amortizing Amount
 
 
 
 
 
 
 
50,000,000 
 
 
10,000,000 
 
 
 
 
Description Of Interest Rate Cash Flow Hedge Accounting Method
 
 
 
 
 
These swaps were accounted for as cash flow hedges. 
 
Cash flow 
 
 
Cash flow 
 
 
 
 
Type of Hedge
 
 
 
 
 
 
 
Interest rate swap 
 
 
Interest rate swap 
 
 
 
 
Pay Fixed Interest Rate
 
 
 
 
 
 
 
0.573% 
 
 
1.921% 
 
 
 
 
Current Receive Variable Interest Rate
 
 
 
 
 
 
 
0.216% 
 
 
0.216% 
 
 
 
 
Fair Value
 
 
 
 
 
 
 
 
 
(64,000)
 
(2,724,000)
 
 
 
Interest Expense
5,825,000 
1,051,000 
8,151,000 
3,208,000 
2,800,000 
3,500,000 
300,000 
 
 
 
 
 
 
 
 
Payments for termination of interest rate swap agreements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,800,000 
Gain (Loss) Recognized In Income Ineffective Portion
 
 
 
 
 
$ 0 
$ 0 
 
 
 
 
 
 
 
 
Debt (Schedule of Deferred Financing Fees) (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Oct. 2, 2015
Deferred Finance Costs [Roll Forward]
 
Deferred Finance Costs, Net, Beginning Balance
$ 3,087 
Financing costs deferred
7,922 
Amortization during the period
(2,580)
Deferred Finance Costs, Net, Ending Balance
$ 8,429 
Benefit Plans (Schedule of Defined Benefit Plan, Change in Benefit Obligation) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
 
 
 
 
At January 2, 2015
 
 
$ 2,406 
 
Net defined benefit cost
102 
75 
309 
229 
Foreign currency translation
 
 
(157)
 
At October 2, 2015
$ 2,558 
 
$ 2,558 
 
Benefit Plans (Schedule of Net Defined Benefit Cost) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]
 
 
 
 
Service cost
$ 76 
$ 51 
$ 233 
$ 155 
Interest cost
15 
18 
45 
57 
Amortization of net loss
13 
39 
17 
Defined Benefit Plan, Expected Return on Plan Assets
(2)
(8)
Net defined benefit cost
$ 102 
$ 75 
$ 309 
$ 229 
Stock-Based Compensation (Allocation of Recognized Period Costs) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
$ 3,072 
$ 3,802 
$ 9,044 
$ 10,531 
Stock Option [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
697 
595 
1,979 
1,811 
Restricted Stock And Unit Awards [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
1,701 
1,850 
5,081 
5,008 
Retirement Plan [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
674 
1,357 
1,984 
3,712 
Cost of Sales [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
685 
1,129 
2,039 
3,187 
Selling General And Administrative Expense [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
1,981 
1,951 
5,890 
5,872 
Research and Development Expense [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
361 
429 
1,070 
1,179 
Other Operating Income (Expense) [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
$ 45 
$ 293 
$ 45 
$ 293 
Stock-Based Compensation (Valuation Assumptions) (Details)
9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
 
Weighted average fair value
$ 12.18 
$ 16.43 
Risk-free interest rate
1.55% 
1.73% 
Expected volatility
26.00% 
39.00% 
Expected life (in years)
5 years 0 months 0 days 
5 years 0 months 0 days 
Expected dividend yield
0.00% 
0.00% 
Stock-Based Compensation (Stock Options Activity) (Details) (USD $)
In Millions, except Share data, unless otherwise specified
9 Months Ended
Oct. 2, 2015
Stock Option Activity (in shares)
 
Options Outstanding, Beginning
1,590,337 
Granted
301,547 
Exercised
(257,316)
Forfeited or expired
(37,302)
Options Outstanding, Ending
1,597,266 
Options Exercisable
1,165,675 
Weighted Average Exercise Price (in dollars per share)
 
Options Outstanding, Beginning
$ 25.17 
Granted
$ 49.20 
Exercised
$ 23.27 
Forfeited or expired
$ 39.59 
Options Outstanding, Ending
$ 29.67 
Options Exercisable
$ 24.56 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
 
Options Outstanding, Weighted Average Remaining Contractual Term
6 years 1 month 0 days 
Options Exercisable, Weighted Average Remaining Contractual Term
5 years 1 month 0 days 
Options Outstanding, Intrinsic Value
$ 45.9 
Options Exercisable, Intrinsic Value
$ 39.5 
Stock-Based Compensation (Restricted Stock and Restricted Stock Units Activity) (Details) (USD $)
9 Months Ended
Oct. 2, 2015
Restricted Stock And Restricted Stock Units Time Based [Member]
 
Restricted Stock and Restricted Stock Unit Activity (in shares)
 
Nonvested, Beginning
67,832 
Granted
42,497 
Vested
(13,320)
Forfeited
(11,084)
Nonvested, Ending
85,925 
Restricted Stock and Restricted Stock Unit Weighted Average Fair Value (in dollars per share)
 
Nonvested, Beginning
$ 36.22 
Granted
$ 49.52 
Vested
$ 33.21 
Forfeited
$ 31.55 
Nonvested, Ending
$ 43.86 
Restricted Stock And Restricted Stock Units Performance Based [Member]
 
Restricted Stock and Restricted Stock Unit Activity (in shares)
 
Nonvested, Beginning
716,163 
Granted
179,940 
Vested
(270,198)
Forfeited
(40,713)
Nonvested, Ending
585,192 
Restricted Stock and Restricted Stock Unit Weighted Average Fair Value (in dollars per share)
 
Nonvested, Beginning
$ 19.57 
Granted
$ 32.92 
Vested
$ 15.30 
Forfeited
$ 25.99 
Nonvested, Ending
$ 25.20 
Other Operating Expenses, Net (Schedule of Other Operating Cost and Expense By Component) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Operating Expenses (Income), Net
$ 13,844 
$ 6,176 
$ 29,449 
$ 10,223 
Investments in Capacity and Capabilities [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Operating Expenses (Income), Net
5,116 
2,787 
17,854 
5,005 
Orthopaedic Facility Optimization [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Operating Expenses (Income), Net
357 
996 
1,348 
1,032 
Operating Unit Realignment [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Operating Expenses (Income), Net
(31)
1,004 
Other Restructuring [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Operating Expenses (Income), Net
(71)
Acquisition And Integration Costs [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Operating Expenses (Income), Net
5,202 
133 
5,366 
(248)
Asset Dispositions Severance And Other [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Operating Expenses (Income), Net
$ 3,169 
$ 2,291 
$ 4,881 
$ 3,501 
Other Operating Expenses, Net (Schedule of Restructuring Reserve By Type of Cost) (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Oct. 2, 2015
Investments in Capacity and Capabilities [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
$ 2,229 
Restructuring charges
17,854 
Write-offs
(235)
Cash payments
(17,593)
Restructuring Reserve, Ending Balance
2,255 
Orthopaedic Facility Optimization [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
287 
Restructuring charges
1,348 
Write-offs
(88)
Cash payments
(1,547)
Restructuring Reserve, Ending Balance
Severance And Retention [Member] |
Investments in Capacity and Capabilities [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
1,163 
Restructuring charges
2,469 
Write-offs
Cash payments
(1,650)
Restructuring Reserve, Ending Balance
1,982 
Severance And Retention [Member] |
Orthopaedic Facility Optimization [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
Restructuring charges
Write-offs
Cash payments
Restructuring Reserve, Ending Balance
Accelerated Depreciation And Asset Write Offs [Member] |
Investments in Capacity and Capabilities [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
Restructuring charges
235 
Write-offs
(235)
Cash payments
Restructuring Reserve, Ending Balance
Accelerated Depreciation And Asset Write Offs [Member] |
Orthopaedic Facility Optimization [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
Restructuring charges
88 
Write-offs
(88)
Cash payments
Restructuring Reserve, Ending Balance
Other Restructuring [Member] |
Investments in Capacity and Capabilities [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
1,066 
Restructuring charges
15,150 
Write-offs
Cash payments
(15,943)
Restructuring Reserve, Ending Balance
273 
Other Restructuring [Member] |
Orthopaedic Facility Optimization [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
287 
Restructuring charges
1,260 
Write-offs
Cash payments
(1,547)
Restructuring Reserve, Ending Balance
$ 0 
Other Operating Expenses, Net (Narrative) (Details) (USD $)
9 Months Ended 3 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Investments in Capacity and Capabilities [Member]
Oct. 2, 2015
Investments in Capacity and Capabilities [Member]
Minimum [Member]
Oct. 2, 2015
Investments in Capacity and Capabilities [Member]
Minimum [Member]
Severance And Retention [Member]
Oct. 2, 2015
Investments in Capacity and Capabilities [Member]
Minimum [Member]
Accelerated Depreciation And Asset Write Offs [Member]
Oct. 2, 2015
Investments in Capacity and Capabilities [Member]
Minimum [Member]
Other Restructuring [Member]
Oct. 2, 2015
Investments in Capacity and Capabilities [Member]
Maximum [Member]
Oct. 2, 2015
Investments in Capacity and Capabilities [Member]
Maximum [Member]
Severance And Retention [Member]
Oct. 2, 2015
Investments in Capacity and Capabilities [Member]
Maximum [Member]
Accelerated Depreciation And Asset Write Offs [Member]
Oct. 2, 2015
Investments in Capacity and Capabilities [Member]
Maximum [Member]
Other Restructuring [Member]
Jul. 3, 2015
Orthopaedic Facility Optimization [Member]
Jan. 2, 2015
Orthopaedic Facility Optimization [Member]
Jul. 4, 2014
Orthopaedic Facility Optimization [Member]
Oct. 2, 2015
Orthopaedic Facility Optimization [Member]
building
Jan. 2, 2015
Orthopaedic Facility Optimization [Member]
Oct. 2, 2015
Orthopaedic Facility Optimization [Member]
Severance And Retention [Member]
Oct. 2, 2015
Orthopaedic Facility Optimization [Member]
Accelerated Depreciation And Asset Write Offs [Member]
Oct. 2, 2015
Orthopaedic Facility Optimization [Member]
Minimum [Member]
Oct. 2, 2015
Orthopaedic Facility Optimization [Member]
Minimum [Member]
Other Restructuring [Member]
Oct. 2, 2015
Orthopaedic Facility Optimization [Member]
Maximum [Member]
Oct. 2, 2015
Orthopaedic Facility Optimization [Member]
Maximum [Member]
Other Restructuring [Member]
Oct. 2, 2015
Operating Unit Realignment [Member]
Oct. 2, 2015
Operating Unit Realignment [Member]
Severance And Retention [Member]
Oct. 2, 2015
Operating Unit Realignment [Member]
Other Restructuring [Member]
Oct. 2, 2015
Operating Unit Realignment [Member]
Greatbatch Medical [Member]
departmental_group
Oct. 2, 2015
Asset Dispositions Severance And Other [Member]
Nuvectra [Member]
Spinoff [Member]
Oct. 2, 2015
Asset Dispositions Severance And Other [Member]
Nuvectra [Member]
Minimum [Member]
Spinoff [Member]
Oct. 2, 2015
Asset Dispositions Severance And Other [Member]
Nuvectra [Member]
Maximum [Member]
Spinoff [Member]
Oct. 3, 2014
Business Reorganization [Member]
Oct. 2, 2015
Lake Region Medical [Member]
Acquisition And Integration Costs [Member]
Oct. 3, 2014
NeuroNexus Technologies [Domain]
Acquisition And Integration Costs [Member]
Oct. 3, 2014
Executive Vice President [Member]
Restructuring Cost and Reserve [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring And Related Activities Expected Capital Expenditures
 
 
 
$ 25,000,000 
 
 
 
$ 28,000,000 
 
 
 
 
 
 
 
 
 
 
$ 30,000,000 
 
$ 35,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring And Related Activities Capital Expenditures Incurred To Date
 
 
19,400,000 
 
 
 
 
 
 
 
 
 
 
 
25,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and Related Cost, Expected Cost
 
 
 
29,000,000 
5,000,000 
2,000,000 
22,000,000 
34,000,000 
7,000,000 
3,000,000 
24,000,000 
 
 
 
 
 
11,000,000 
13,000,000 
45,000,000 
21,000,000 
48,000,000 
24,000,000 
 
 
 
 
 
10,000,000 
12,000,000 
 
 
 
 
Restructuring and Related Cost, Cost Incurred to Date
 
 
26,800,000 
 
 
 
 
 
 
 
 
 
 
 
43,800,000 
 
 
 
 
 
 
 
6,600,000 
5,000,000 
1,600,000 
 
4,600,000 
 
 
 
 
 
 
Restructuring and Related Costs, Facility Consolidations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from sale of orthopaedic product lines
2,655,000 
 
 
 
 
 
 
 
 
 
 
 
2,655,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) on Disposition of Business
 
 
 
 
 
 
 
 
 
 
 
 
 
2,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets Transferred to Held for Sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impairment of Long-Lived Assets to be Disposed of
 
 
 
 
 
 
 
 
 
 
 
 
400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from Sale of Property Held for Sale
 
 
 
 
 
 
 
 
 
 
 
600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) on Disposition of Assets Held for Sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Initiatives, Expected Period of Completion
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Sales and Marketing Groups
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Operations Groups
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition related transaction costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,100,000 
 
 
Acquisition related transaction costs accrued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,700,000 
 
 
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800,000 
 
Other Cost and Expense, Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,000,000 
 
 
 
Severance Costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 800,000 
Income Taxes (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Income Tax Disclosure [Abstract]
 
 
Effective Income Tax Rate Reconciliation, Percent
20.40% 
30.10% 
Unrecognized Tax Benefits
$ 1.8 
 
Significant Change in Unrecognized Tax Benefits is Reasonably Possible, Amount of Unrecorded Benefit
0.2 
 
Unrecognized Tax Benefits that Would Impact Effective Tax Rate
$ 1.4 
 
Commitments and Contingencies (Schedule of Product Warranty Liability) (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Oct. 2, 2015
Movement in Standard Product Warranty Accrual [Roll Forward]
 
At January 2, 2015
$ 660 
Additions to warranty reserve
790 
Warranty claims paid
(216)
At October 2, 2015
$ 1,234 
Commitments and Contingencies (Schedule of Future Minimum Rental Payments for Operating Leases) (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
 
Remainder of 2015
$ 1,546 
2016
6,009 
2017
3,924 
2018
3,491 
2019
3,418 
Thereafter
13,938 
Total estimated operating lease expense
$ 32,326 
Commitments and Contingencies (Foreign Currency Contracts) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Foreign Currency Cash Flow Hedges [Abstract]
 
 
 
 
Addition (reduction) in cost of sales
$ 562 
$ (48)
$ 1,226 
$ (204)
Ineffective portion of change in fair value
FX Contract 1 [Member]
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
Instrument
 
 
FX Contract 
 
Aggregate Notional Amount
4,220 
 
4,220 
 
Start Date
 
 
Jan. 01, 2015 
 
End Date
 
 
Dec. 31, 2015 
 
$/Peso
0.0734 
 
0.0734 
 
FX Contract 2 [Member]
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
Instrument
 
 
FX Contract 
 
Aggregate Notional Amount
787 
 
787 
 
Start Date
 
 
Mar. 01, 2015 
 
End Date
 
 
Dec. 31, 2015 
 
$/Peso
0.0656 
 
0.0656 
 
FX Contract 3 [Member]
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
Instrument
 
 
FX Contract 
 
Aggregate Notional Amount
15,081 
 
15,081 
 
Start Date
 
 
Jan. 01, 2016 
 
End Date
 
 
Dec. 31, 2016 
 
$/Peso
0.0656 
 
0.0656 
 
Accrued Expenses [Member] |
FX Contract 1 [Member]
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
Fair Value
(808)
 
(808)
 
Accrued Expenses [Member] |
FX Contract 2 [Member]
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
Fair Value
(75)
 
(75)
 
Accrued Expenses [Member] |
FX Contract 3 [Member]
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
Fair Value
$ (1,675)
 
$ (1,675)
 
Commitments and Contingencies (Narrative) (Details) (USD $)
9 Months Ended 1 Months Ended
Oct. 2, 2015
Oct. 31, 2015
Subsequent Event [Member]
Commitments and Contingencies Disclosure [Abstract]
 
 
Product Warranty Description
The Company generally warrants that its products will meet customer specifications and will be free from defects in materials and workmanship. 
 
Purchase Commitments Description
Contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on the Company and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum, or variable price provisions, and the approximate timing of the transaction. The Company’s purchase orders are normally based on its current manufacturing needs and are fulfilled by its vendors within short time horizons. The Company also enters into blanket orders with vendors that have preferred pricing and terms; however, these orders are normally cancelable without penalty. The Company also enters into contracts for outsourced services; however, the obligations under these contracts generally contain clauses allowing for cancellation without significant penalty. 
 
Remaining Minimum Amount Committed
$ 35,200,000 
 
Foreign Currency Contracts Description
The Company entered into forward contracts to purchase Mexican pesos in order to hedge the risk of peso-denominated payments associated with operations at its Tijuana, Mexico facility. 
 
Maximum Aggregate Loss Under Medical Stop Loss Insurance Per Employee
250,000 
 
Self-Insurance Medical Liability
1,500,000 
 
Business Acquisition [Line Items]
 
 
Payments for termination of foreign currency contract
 
$ 2,400,000 
Earnings Per Share (EPS) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Net Income (Loss) Available to Common Stockholders, Diluted [Abstract]
 
 
 
 
Net income
$ 22 
$ 14,012 
$ 17,313 
$ 41,282 
Weighted Average Number of Shares Outstanding Reconciliation [Abstract]
 
 
 
 
Basic
25,536,000 
24,899,000 
25,424,000 
24,784,000 
Effect of dilutive securities stock options, restricted stock and restricted stock units
905,000 
1,024,000 
948,000 
1,066,000 
Denominator for diluted EPS
26,441,000 
25,923,000 
26,372,000 
25,850,000 
Basic EPS (in dollars per share)
$ 0.00 
$ 0.56 
$ 0.68 
$ 1.67 
Diluted EPS (in dollars per share)
$ 0.00 
$ 0.54 
$ 0.66 
$ 1.60 
Anitdilutive Securities Excluded From Earnings Per Share [Abstract]
 
 
 
 
Time-vested stock options, restricted stock and restricted stock units
260,000 
163,000 
268,000 
177,000 
Performance-vested stock options and restricted stock units
10,800 
4,400 
9,800 
3,600 
Accumulated Other Comprehensive Income (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Defined Benefit Plan Liability
 
 
 
 
Defined Benefit Plan Liability, Beginning
$ (1,181)
$ (672)
$ (1,181)
$ (672)
Defined Benefit Plan Liability, Ending
(1,181)
(672)
(1,181)
(672)
Cash Flow Hedges
 
 
 
 
Cash Flow Hedges, Beginning
(3,619)
(218)
(2,558)
(468)
Unrealized loss on cash flow hedges
(1,670)
(133)
(3,857)
35 
Realized gain loss on foreign currency hedges - before tax
562 
(48)
1,226 
(204)
Realized gain loss on interest rate swaps - before tax
2,169 
106 
2,631 
344 
Cash Flow Hedges, End
(2,558)
(293)
(2,558)
(293)
Foreign Currency Translation Adjustment
 
 
 
 
Foreign Currency Translation Adjustment, Beginning
9,839 
15,741 
11,450 
14,952 
Net foreign currency translation gain (loss)
144 
(3,211)
(1,467)
(2,422)
Foreign Currency Translation Adjustment, End
9,983 
12,530 
9,983 
12,530 
Total Pre-Tax Amount
 
 
 
 
Total Pre-Tax Amount, Beginning
5,039 
14,851 
7,711 
13,812 
Unrealized loss on cash flow hedges
(1,670)
(133)
(3,857)
35 
Realized gain loss on foreign currency hedges - before tax
562 
(48)
1,226 
(204)
Realized gain loss on interest rate swaps - before tax
2,169 
106 
2,631 
344 
Net foreign currency translation gain (loss)
144 
(3,211)
(1,467)
(2,422)
Total Pre-Tax Amount, End
6,244 
11,565 
6,244 
11,565 
Tax
 
 
 
 
Tax, Beginning
1,784 
459 
1,412 
546 
Unrealized gain (loss) on cash flow hedges
584 
46 
1,350 
(12)
Realized gain loss on foreign currency contracts - tax
(197)
17 
(429)
71 
Realized gain loss on interest rate swap hedges - tax
(759)
(37)
(921)
(120)
Net foreign currency translation gain (loss)
Tax, End
1,412 
485 
1,412 
485 
Net-of-Tax Amount
 
 
 
 
Total Net-of-Tax Amount, Beginning
6,823 
15,310 
9,123 
14,358 
Unrealized gain (loss) on cash flow hedges, net of tax
(1,086)
(87)
(2,507)
23 
Realized gain loss on foreign currency hedges, net of tax
365 
(31)
797 
(133)
Realized gain loss on interest rate swap hedges, net of tax
1,410 
69 
1,710 
224 
Foreign currency translation gain (loss)
144 
(3,211)
(1,467)
(2,422)
Total Net-of-Tax Amount, End
$ 7,656 
$ 12,050 
$ 7,656 
$ 12,050 
Fair Value Measurements Fair Value Measurements (Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis) (Details) (Fair Value, Measurements, Recurring [Member], USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Foreign currency contracts
$ 2,558 
Interest rate swap
2,788 
Fair Value, Inputs, Level 1 [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Foreign currency contracts
Interest rate swap
Fair Value, Inputs, Level 2 [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Foreign currency contracts
2,558 
Interest rate swap
2,788 
Fair Value, Inputs, Level 3 [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Foreign currency contracts
Interest rate swap
$ 0 
Fair Value Measurements Fair Value Measurements (Narrative) (Details) (USD $)
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
investment
Oct. 2, 2015
Oct. 3, 2014
Jan. 2, 2015
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
 
 
 
 
 
Foreign currency cash flow hedge gain (loss) to be reclassified
$ 2,100,000 
 
$ 2,100,000 
 
 
Long-lived asset impairment loss
 
 
 
Goodwill impairment loss
 
 
 
Indefinite-lived intangible assets (excluding goodwill) impairment loss
 
 
 
Cost-method investment impairment loss
 
 
 
Equity method investments, carrying value
22,600,000 
 
22,600,000 
 
14,500,000 
Equity method investment cash distribution
3,400,000 
 
 
 
 
Number of cost method investments sold
 
 
 
 
Pre-tax gain on sale of cost method investments
 
3,200,000 
 
 
 
Fair Value, Inputs, Level 2 [Member]
 
 
 
 
 
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
 
 
 
 
 
Gain on cost method and equity method investments
 
 
5,100,000 
3,900,000 
 
Net gain on equity method investments
$ 4,600,000 
 
 
 
 
Chinese Venture Capital Fund [Member]
 
 
 
 
 
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
 
 
 
 
 
Equity method investment ownership (percent)
6.60% 
 
6.60% 
 
 
Business Segment, Geographic And Concentration Risk Information (Reconciliation of Revenue from Segments to Consolidated) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
$ 146,637 
$ 171,699 
$ 482,847 
$ 518,061 
Greatbatch Medical [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
144,021 
169,225 
473,784 
514,036 
Greatbatch Medical [Member] |
Cardiac Neuromodulation [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
72,961 
85,618 
239,387 
252,403 
Greatbatch Medical [Member] |
Orthopaedic [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
27,752 
32,489 
102,204 
106,785 
Greatbatch Medical [Member] |
Portable Medical [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
17,224 
17,199 
48,591 
53,139 
Greatbatch Medical [Member] |
Vascular [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
14,107 
14,903 
37,370 
43,210 
Greatbatch Medical [Member] |
EME and Other [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
11,977 
19,016 
46,232 
58,499 
QiG [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
2,776 
2,474 
10,564 
4,025 
Intersegment Eliminations [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
$ (160)
$ 0 
$ (1,501)
$ 0 
Business Segment, Geographic And Concentration Risk Information (Reconciliation of Operating Profit (Loss) from Segments to Consolidated) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Segment Reporting Information [Line Items]
 
 
 
 
Operating income as reported
$ 1,195 
$ 16,183 
$ 23,618 
$ 58,246 
Unallocated other expense
(1,189)
2,717 
(1,857)
847 
Income before provision (benefit) for income taxes
18,900 
21,761 
59,093 
Greatbatch Medical [Member]
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Operating income as reported
21,512 
31,121 
72,179 
98,688 
QiG [Member]
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Operating income as reported
(7,680)
(6,796)
(20,132)
(18,882)
Operating Segments [Member]
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Operating income as reported
13,832 
24,325 
52,047 
79,806 
Segment Reconciling Items [Member]
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Operating income as reported
$ (12,637)
$ (8,142)
$ (28,429)
$ (21,560)
Business Segment, Geographic and Concentration Risk Information Business Segment, Geographic and Concentration Risk Information (Schedule of Revenue From External Customers Attributed to Foreign Countries By Geographic Area) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Revenue, Major Customer [Line Items]
 
 
 
 
Sales Revenue, Net
$ 146,637 
$ 171,699 
$ 482,847 
$ 518,061 
UNITED STATES
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Sales Revenue, Net
71,545 
76,330 
217,102 
235,203 
PUERTO RICO
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Sales Revenue, Net
26,816 
34,581 
98,247 
101,064 
BELGIUM
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Sales Revenue, Net
12,305 
13,722 
45,690 
47,351 
Rest Of World [Member]
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Sales Revenue, Net
$ 35,971 
$ 47,066 
$ 121,808 
$ 134,443 
Business Segment, Geographic and Concentration Risk Information Business Segment, Geographic and Concentration Risk Information (Schedule of Revenue By Major Customers By Reporting Segments) (Details)
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Revenue, Major Customer [Line Items]
 
 
 
 
Revenue Major Customer Percent
46.00% 
45.00% 
50.00% 
47.00% 
Customer A [Member]
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Revenue Major Customer Percent
17.00% 
19.00% 
20.00% 
19.00% 
Customer B [Member]
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Revenue Major Customer Percent
19.00% 
15.00% 
18.00% 
16.00% 
Customer C [Member]
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Revenue Major Customer Percent
10.00% 
11.00% 
12.00% 
12.00% 
Sales Revenue, Net [Member] |
Customer Concentration Risk [Member]
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Concentration risk, number of customers
 
 
 
Business Segment, Geographic And Concentration Risk Information (Schedule of Long-Lived Assets By Geographical Areas) (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Property, plant and equipment, net
$ 156,009 
$ 144,925 
UNITED STATES
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Property, plant and equipment, net
112,260 
113,851 
Rest Of World [Member]
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Property, plant and equipment, net
$ 43,749 
$ 31,074 
Business Segment, Geographic and Concentration Risk Information Business Segment, Geographic and Concentration Risk Information (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Oct. 2, 2015
Segment
Segment Reporting Information [Line Items]
 
Number of Reportable Segments
QiG [Member]
 
Segment Reporting Information [Line Items]
 
Number of Ownership Interests
Liability of Expenses Incurred (percent)
100.00% 
FDA Submission Date
Dec. 16, 2013 
CE Submission Date
Jan. 10, 2014 
CE Approval Date
Jun. 17, 2014 
Minimum [Member] |
QiG [Member]
 
Segment Reporting Information [Line Items]
 
Parent Ownership Percentage
89.00% 
Nuvectra [Member] |
Spinoff [Member] |
Minimum [Member]
 
Segment Reporting Information [Line Items]
 
Restructuring and Related Costs, Estimated Annual Future Operating Cost Savings
$ 12 
Nuvectra [Member] |
Spinoff [Member] |
Maximum [Member]
 
Segment Reporting Information [Line Items]
 
Restructuring and Related Costs, Estimated Annual Future Operating Cost Savings
$ 16 
Impact of Recently Issued Accounting Standards Impact of Recently Issued Accounting Standards (Narrative) (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
 
 
Deferred finance costs, net
$ 8,429 
$ 3,087 
Subsequent Events (Acquisition Narrative) (Details) (Lake Region Medical [Member], USD $)
9 Months Ended 0 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 3, 2014
Trade Names [Member]
Oct. 27, 2015
Subsequent Event [Member]
Oct. 27, 2015
Subsequent Event [Member]
Common Stock [Member]
Oct. 27, 2015
Subsequent Event [Member]
Equity Option [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
Total purchase price and debt assumed
 
 
 
$ 1,770,000,000 
 
 
Cash Paid
 
 
 
478,000,000 
 
 
Shares issued
 
 
 
 
5,000,000 
120,000 
Repayment of debt
 
 
 
1,000,000,000 
 
 
Weighted average consolidated basic and diluted shares outstanding
5,000,000 
 
 
 
 
 
Impairment of intangible assets included in pro forma results
 
 
26,800,000 
 
 
 
Loss on extinguishment of debt included in pro forma results
 
$ 53,400,000 
 
 
 
 
Subsequent Events (Summary of Assets Acquired and Liabilities Assumed) (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Assets acquired
 
 
Goodwill
$ 354,139 
$ 354,393 
Lake Region Medical [Member]
 
 
Assets acquired
 
 
Current assets
267,059 
 
Amortizing intangible assets
766,000 
 
Goodwill
793,888 
 
Other non-current assets
209,232 
 
Total assets acquired
2,036,179 
 
Liabilities assumed
 
 
Current liabilities
108,882 
 
Long-term debt
1,034,125 
 
Other long-term liabilities
164,806 
 
Total liabilities assumed
1,307,813 
 
Net assets acquired
$ 728,366 
 
Subsequent Events (Summary of Acquisition Pro Forma Results) (Details) (Lake Region Medical [Member], USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 3, 2014
Oct. 2, 2015
Oct. 3, 2014
Lake Region Medical [Member]
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
Sales
$ 349,999 
$ 372,194 
$ 1,086,350 
$ 1,070,597 
Net income (loss)
$ (7,883)
$ 3,265 
$ (5,360)
$ (44,889)
Earnings per share:
 
 
 
 
Basic (in dollars per share)
$ (0.26)
$ 0.11 
$ (0.18)
$ (1.51)
Diluted (in dollars per share)
$ (0.26)
$ 0.11 
$ (0.18)
$ (1.51)
Subsequent Events Subsequent Events (Senior Secured Credit Facility) (Details) (USD $)
9 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended
Oct. 2, 2015
Apr. 27, 2016
Secured Debt [Member]
Standby Letters of Credit [Member]
New Revolving Credit Facility 2015 [Member]
Scenario, Forecast [Member]
Oct. 27, 2015
Subsequent Event [Member]
Senior Notes [Member]
Senior Notes Due November 2023 [Member]
Oct. 27, 2015
Subsequent Event [Member]
Senior Notes [Member]
Senior Notes Due November 2023 [Member]
Prior to November 1, 2018 [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Senior Secured Credit Facilities [Member]
Maximum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Revolving Credit Facility [Member]
Prime Rate [Member]
Minimum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Revolving Credit Facility [Member]
Prime Rate [Member]
Maximum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Revolving Credit Facility [Member]
London Interbank Offered Rate (LIBOR) [Member]
Minimum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Revolving Credit Facility [Member]
London Interbank Offered Rate (LIBOR) [Member]
Maximum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Revolving Credit Facility [Member]
New Revolving Credit Facility 2015 [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Revolving Credit Facility [Member]
New Revolving Credit Facility 2015 [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Revolving Credit Facility [Member]
New Revolving Credit Facility 2015 [Member]
Minimum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Revolving Credit Facility [Member]
New Revolving Credit Facility 2015 [Member]
Maximum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Swingline Loans [Member]
New Revolving Credit Facility 2015 [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Standby Letters of Credit [Member]
New Revolving Credit Facility 2015 [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
Prime Rate [Member]
Minimum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
Prime Rate [Member]
Maximum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
London Interbank Offered Rate (LIBOR) [Member]
Minimum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
London Interbank Offered Rate (LIBOR) [Member]
Maximum [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Loans Payable [Member]
Term Loan B (TLB) Facility [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Loans Payable [Member]
Term Loan B (TLB) Facility [Member]
Prime Rate [Member]
Oct. 27, 2015
Subsequent Event [Member]
Secured Debt [Member]
Loans Payable [Member]
Term Loan B (TLB) Facility [Member]
London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility Maximum Borrowing Capacity
$ 300,000,000 
$ 25,000,000 
 
 
 
 
 
 
 
 
$ 200,000,000 
 
 
$ 15,000,000 
$ 30,000,000 
 
 
 
 
 
 
 
 
 
Debt face amount
 
 
$ 360,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 375,000,000 
 
 
 
 
$ 1,025,000,000 
 
 
Stated interest rate
 
 
9.125% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable interest rate
 
 
 
 
 
0.75% 
2.25% 
1.75% 
3.25% 
 
 
 
 
 
 
 
 
0.75% 
2.25% 
1.75% 
3.25% 
 
3.25% 
4.25% 
Interest rate floor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.00% 
First lien net leverage ratio
 
 
 
 
4.25 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unused capacity commitment fee (percent)
 
 
 
 
 
 
 
 
 
 
 
0.175% 
0.25% 
 
 
 
 
 
 
 
 
 
 
 
Line of Credit Facility, maximum leverage ratio
4.5 
 
 
 
 
 
 
 
 
6.50 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of Credit Facility, adjusted EBITDA to interest expense ratio
3.0 
 
 
 
 
 
 
 
 
3.00 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt maximum leverage ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.50 
 
 
 
 
 
 
 
 
Debt, adjusted EBITDA to interest expense ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.00 
 
 
 
 
 
 
 
 
Debt redemption price prior to make-whole premium (percent)
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt redemption percentage of principal amount redeemed if using proceeds from certain equity offerings
 
 
 
40.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt redemption price if using proceeds from certain equity offerings (percent)
 
 
 
109.125% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subsequent Events Subsequent Events (Debt Maturities) (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2015
Jan. 2, 2015
Oct. 27, 2015
Subsequent Event [Member]
Debt Instrument [Line Items]
 
 
 
2016
 
 
$ 29,000 
2017
 
 
31,344 
2018
 
 
40,719 
2019
 
 
47,750 
2020
 
 
47,750 
Thereafter
 
 
1,563,437 
Total debt
$ 180,000 
$ 187,500 
$ 1,760,000