| Debt
|
|
|
|
|
|
|
|
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 |
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% |
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 |
|
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 |
|
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 |
|
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 |
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 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 |
Trademarks and Tradenames | |||
At January 2, 2015 | $ | 20,288 | |
At October 2, 2015 | $ | 20,288 |
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 |
|
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 |
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 |
At January 2, 2015 | $ | 3,087 | |
Financing costs deferred | 7,922 | ||
Amortization during the period | (2,580 | ) | |
At October 2, 2015 | $ | 8,429 |
|
At January 2, 2015 | $ | 2,406 | |
Net defined benefit cost | 309 | ||
Foreign currency translation | (157 | ) | |
At October 2, 2015 | $ | 2,558 |
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 |
|
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 |
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 | — | % | — | % |
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 |
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 |
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 |
|
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 |
• | 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. |
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 |
• | Severance and retention: approximately $11 million; |
• | Accelerated depreciation and asset write-offs: approximately $13 million; and |
• | Other: $21 million – $24 million |
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 | $ | — | $ | — | $ | — | $ | — |
|
|
At January 2, 2015 | $ | 660 | |
Additions to warranty reserve | 790 | ||
Warranty claims paid | (216 | ) | |
At October 2, 2015 | $ | 1,234 |
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 |
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 | — | — | — | — |
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 |
|
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 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 | — |
|
• | 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. |
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 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 | % |
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 |
|
|
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 |
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 | ) |
2016 | $ | 29,000 | ||
2017 | 31,344 | |||
2018 | 40,719 | |||
2019 | 47,750 | |||
2020 | 47,750 | |||
Thereafter | 1,563,437 | |||
Total | $ | 1,760,000 |
|
|
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 |
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% |
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 |
|
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 |
|
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 |
|
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 |
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 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 |
Trademarks and Tradenames | |||
At January 2, 2015 | $ | 20,288 | |
At October 2, 2015 | $ | 20,288 |
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 |
|
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 |
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 |
At January 2, 2015 | $ | 3,087 | |
Financing costs deferred | 7,922 | ||
Amortization during the period | (2,580 | ) | |
At October 2, 2015 | $ | 8,429 |
|
At January 2, 2015 | $ | 2,406 | |
Net defined benefit cost | 309 | ||
Foreign currency translation | (157 | ) | |
At October 2, 2015 | $ | 2,558 |
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 |
|
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 |
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 | — | % | — | % |
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 |
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 |
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 |
|
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 |
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 |
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 | $ | — | $ | — | $ | — | $ | — |
|
At January 2, 2015 | $ | 660 | |
Additions to warranty reserve | 790 | ||
Warranty claims paid | (216 | ) | |
At October 2, 2015 | $ | 1,234 |
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 |
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 | — | — | — | — |
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 |
|
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 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 | — |
|
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 | ||||||||
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 |
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 |
|
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 |
2016 | $ | 29,000 | ||
2017 | 31,344 | |||
2018 | 40,719 | |||
2019 | 47,750 | |||
2020 | 47,750 | |||
Thereafter | 1,563,437 | |||
Total | $ | 1,760,000 |
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 |
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 | ) |
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