INTEGER HOLDINGS CORP, 10-Q filed on 11/8/2016
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2016
Nov. 2, 2016
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
INTEGER HOLDINGS CORPORATION 
 
Entity Central Index Key
0001114483 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2016 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q3 
 
Current Fiscal Year End Date
--12-30 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
30,854,544 
Condensed Consolidated Balance Sheets - Unaudited (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Jan. 1, 2016
Current assets:
 
 
Cash and cash equivalents
$ 44,995 
$ 82,478 
Accounts receivable, net of allowance for doubtful accounts of $1.1 million and $1.0 million, respectively
191,409 
207,342 
Inventories
262,232 
252,166 
Refundable income taxes
3,257 
11,730 
Prepaid expenses and other current assets
23,246 
20,888 
Total current assets
525,139 
574,604 
Property, plant and equipment, net
381,671 
379,492 
Amortizing intangible assets, net
872,659 
893,977 
Indefinite-lived intangible assets
90,288 
90,288 
Goodwill
977,335 
1,013,570 
Deferred income taxes
3,081 
3,587 
Other assets
30,794 
26,618 
Total assets
2,880,967 
2,982,136 
Current liabilities:
 
 
Current portion of long-term debt
29,000 
29,000 
Accounts payable
86,290 
84,362 
Income taxes payable
2,641 
3,221 
Accrued expenses
81,960 
97,257 
Total current liabilities
199,891 
213,840 
Long-term debt
1,717,164 
1,685,053 
Deferred income taxes
207,183 
221,804 
Other long-term liabilities
15,704 
10,814 
Total liabilities
2,139,942 
2,131,511 
Stockholders’ equity:
 
 
Preferred stock, $0.001 par value, authorized 100,000,000 shares; no shares issued or outstanding
Common stock, $0.001 par value; 100,000,000 shares authorized; 30,939,907 and 30,664,119 shares issued, respectively; 30,805,320 and 30,601,167 shares outstanding, respectively
31 
31 
Additional paid-in capital
632,409 
620,470 
Treasury stock, at cost, 134,587 and 62,952 shares, respectively
(5,880)
(3,100)
Retained earnings
101,154 
231,854 
Accumulated other comprehensive income
13,311 
1,370 
Total stockholders’ equity
741,025 
850,625 
Total liabilities and stockholders’ equity
$ 2,880,967 
$ 2,982,136 
Condensed Consolidated Balance Sheets - Unaudited (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Sep. 30, 2016
Jan. 1, 2016
Current assets:
 
 
Allowance for doubtful accounts
$ 1.1 
$ 1.0 
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
30,939,907 
30,664,119 
Common stock, shares outstanding
30,805,320 
30,601,167 
Treasury stock, shares
134,587 
62,952 
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
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Income Statement [Abstract]
 
 
 
 
Sales
$ 346,567 
$ 146,637 
$ 1,027,187 
$ 482,847 
Cost of sales
248,658 
94,991 
741,779 
320,852 
Gross profit
97,909 
51,646 
285,408 
161,995 
Operating expenses:
 
 
 
 
Selling, general and administrative expenses
36,265 
22,308 
115,781 
69,021 
Research, development and engineering costs, net
11,412 
14,299 
42,358 
39,907 
Other operating expenses, net
13,370 
13,844 
50,004 
29,449 
Total operating expenses
61,047 
50,451 
208,143 
138,377 
Operating income
36,862 
1,195 
77,265 
23,618 
Interest expense, net
27,870 
5,825 
83,395 
8,151 
Other expense (income), net
275 
(4,636)
(2,772)
(6,294)
Income (loss) before provision (benefit) for income taxes
8,717 
(3,358)
21,761 
Provision (benefit) for income taxes
(2,741)
(16)
(1,386)
4,448 
Net income (loss)
11,458 
22 
(1,972)
17,313 
Earnings (loss) per share:
 
 
 
 
Basic
$ 0.37 
$ 0.00 
$ (0.06)
$ 0.68 
Diluted
$ 0.37 
$ 0.00 
$ (0.06)
$ 0.66 
Weighted average shares outstanding:
 
 
 
 
Basic
30,782 
25,536 
30,756 
25,424 
Diluted
31,153 
26,441 
30,756 
26,372 
Comprehensive Income
 
 
 
 
Net income (loss)
11,458 
22 
(1,972)
17,313 
Foreign currency translation gain (loss)
3,191 
144 
12,250 
(1,467)
Net change in cash flow hedges, net of tax
571 
689 
(309)
Other comprehensive income (loss)
3,762 
833 
11,941 
(1,467)
Comprehensive income
$ 15,220 
$ 855 
$ 9,969 
$ 15,846 
Condensed Consolidated Statements of Cash Flows - Unaudited (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Cash flows from operating activities:
 
 
Net income (loss)
$ (1,972)
$ 17,313 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
Depreciation and amortization
67,414 
26,941 
Debt related amortization included in interest expense
5,387 
5,368 
Stock-based compensation
7,179 
9,044 
Other non-cash losses (gains), net
1,938 
(1,549)
Deferred income taxes
(12,519)
(3,614)
Changes in operating assets and liabilities:
 
 
Accounts receivable
12,510 
17,395 
Inventories
(10,010)
(34,992)
Prepaid expenses and other current assets
(4,663)
(1,371)
Accounts payable
4,885 
3,347 
Accrued expenses
(5,650)
(5,823)
Income taxes
7,300 
(1,074)
Net cash provided by operating activities
71,799 
30,985 
Cash flows from investing activities:
 
 
Acquisition of property, plant and equipment
(46,968)
(31,307)
Purchase of cost and equity method investments, net
(2,917)
(6,300)
Other investing activities
(1,000)
732 
Net cash used in investing activities
(50,885)
(36,875)
Cash flows from financing activities:
 
 
Principal payments of long-term debt
(28,750)
(7,500)
Proceeds from issuance of long-term debt
57,000 
Issuance of common stock
723 
5,988 
Payment of debt issuance costs
(781)
Distribution of cash and cash equivalents to Nuvectra Corporation
(76,256)
Purchase of non-controlling interests
(6,818)
Other financing activities
(3,983)
(318)
Net cash used in financing activities
(58,865)
(1,830)
Effect of foreign currency exchange rates on cash and cash equivalents
468 
(510)
Net decrease in cash and cash equivalents
(37,483)
(8,230)
Cash and cash equivalents, beginning of period
82,478 
76,824 
Cash and cash equivalents, end of period
$ 44,995 
$ 68,594 
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. 01, 2016
$ 850,625 
$ 31 
$ 620,470 
$ (3,100)
$ 231,854 
$ 1,370 
Balance, shares at Jan. 01, 2016
 
30,664 
 
(63)
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Stock-based compensation
7,179 
 
7,179 
 
 
 
Net shares issued under stock incentive plans, shares
 
276 
 
(72)
 
 
Net shares issued (acquired) under stock incentive plans
(3,261)
(481)
(2,780)
 
 
Spin-off of Nuvectra Corporation
(123,487)
 
5,241 
 
(128,728)
 
Net income (loss)
(1,972)
 
 
 
(1,972)
 
Total other comprehensive income, net
11,941 
 
 
 
 
11,941 
Balance at Sep. 30, 2016
$ 741,025 
$ 31 
$ 632,409 
$ (5,880)
$ 101,154 
$ 13,311 
Balance, shares at Sep. 30, 2016
 
30,940 
 
(135)
 
 
Summary of Significant Accounting Policies
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, these financial statements 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 Integer Holdings Corporation and its subsidiaries (collectively “Integer” 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, certain components of equity, 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 1, 2016 condensed consolidated balance sheet data was derived from the Company’s 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 1, 2016. The Company utilizes a fifty-two, fifty-three week fiscal year ending on the Friday nearest December 31. The third quarter and first nine months of 2016 and 2015 each contained 13 weeks and 39 weeks, respectively, and ended on September 30, and October 2, respectively.
Effective June 30, 2016, the Company changed its name from Greatbatch, Inc. (“Greatbatch”) to Integer Holdings Corporation. The new name represents the union of the Greatbatch Medical, Lake Region Medical and Electrochem brands. Integer, as in whole or complete, signifies the Company’s more comprehensive products and service offerings, and a new dimension in its combined capabilities.
Nature of Operations On October 27, 2015, the Company acquired all of the outstanding common stock of Lake Region Medical Holdings, Inc. (“Lake Region Medical”). As a result, the Company has three reportable segments: Greatbatch Medical, QiG Group (“QiG”) and Lake Region Medical. On March 14, 2016, Integer completed the 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 Integer on a pro rata basis (the “Spin-off”). See Note 2 “Divestiture and Acquisition” for further description of these transactions. As a result of the Lake Region Medical acquisition and the Spin-off, the Company is in the process of re-evaluating its internal management and financial reporting structure, which may change its product line and segment reporting in the future. This process is expected to be finalized in 2016.
Greatbatch Medical designs and manufactures products where the Company either owns the intellectual property or has unique manufacturing and assembly expertise. These products include medical devices and components for the cardiac, neuromodulation, orthopedics, portable medical, vascular and energy markets among others.
The QiG segment focuses on the design and development of complete medical device systems and components for our customers. After completion of the Spin-off, the operations of QiG primarily consists of Centro de Construcción de Cardioestimuladores del Uruguay (“CCC”), which was acquired in 2014. QiG seeks to assist customers in accelerating the velocity of innovation while delivering an optimized supply chain and critical cost efficiencies. The medical devices QiG designs and develops are full product solutions that utilize the medical technology expertise and capabilities residing within Greatbatch Medical and Lake Region Medical. See Note 2 “Divestiture and Acquisition” for further description of the Spin-off and how it impacted the QiG segment.
Lake Region Medical has operated as a segment of Integer since it was acquired during the fourth quarter of 2015. This segment specializes in the design, development, and manufacturing of products across the medical component and device spectrum, primarily serving the cardio, vascular and advanced surgical markets. Lake Region Medical offers fully integrated outsourced manufacturing, regulatory and engineering services, contract manufacturing, finished device assembly services, original device development, and supply chain management to its customers.
The Company’s customers include large multi-national original equipment manufacturers (“OEMs”) and their affiliated subsidiaries.
Divestiture and Acquisition
DIVESTITURE AND ACQUISITION
DIVESTITURE AND ACQUISITION
Spin-off of Nuvectra Corporation
On March 14, 2016, Integer completed the 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 Integer on a pro rata basis. Immediately prior to completion of the Spin-off, QiG Group, LLC was converted into a corporation organized under the laws of Delaware and changed its name to Nuvectra Corporation (“Nuvectra”). On March 14, 2016, each of the Company’s stockholders of record as of the close of business on March 7, 2016 (the “Record Date”) received one share of Nuvectra common stock for every three shares of Integer common stock held as of the Record Date. Upon completion of the Spin-off, Nuvectra became an independent publicly traded company whose common stock is listed on the NASDAQ stock exchange under the symbol “NVTR.”
The portion of the QiG segment spun-off consisted of QiG Group, LLC and its subsidiaries: (i) Algostim, LLC (“Algostim”), (ii) PelviStim LLC (“PelviStim”), and (iii) the Company’s NeuroNexus Technologies (“NeuroNexus”) subsidiary. The operations of CCC and certain other existing QiG research and development capabilities were retained by the Company and not included as part of the Spin-off. As the Company continues to focus on the design and development of complete medical device systems and components, and more specifically on medical device systems and components in the neuromodulation market, the Spin-off was not considered a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the Spin-off is not presented as a discontinued operation in the Company’s Condensed Consolidated Financial Statements. The results of Nuvectra are included in the Condensed Consolidated Statements of Operations and Comprehensive Income through the date of the Spin-off.
In connection with the Spin-off, during the first quarter of 2016, the Company made a cash capital contribution of $75 million to Nuvectra and divested the following assets and liabilities (in thousands):
Assets divested
 
  Cash and cash equivalents
$
76,256

  Other current assets
977

  Property, plant and equipment, net
4,407

  Amortizing intangible assets, net
1,931

  Goodwill
40,830

  Deferred income taxes
6,446

Total assets divested
130,847

Liabilities transferred
 
     Current liabilities
2,119

Net assets divested
$
128,728


For the first quarter of 2016, Nuvectra contributed a pre-tax loss of $5.2 million to the Company’s results of operations. Nuvectra contributed a pre-tax loss of $7.0 million and $18.7 million, respectively, to the Company’s results of operations for the three and nine month periods ended October 2, 2015.
In connection with the Spin-off, on March 14, 2016, Integer entered into several agreements with Nuvectra that govern its post Spin-off relationship with Nuvectra, including a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement and Transition Services Agreement. The Transition Services Agreement contains customary mutual indemnification provisions. Amounts earned by Integer under the Transition Services Agreement were immaterial for the nine month period ended September 30, 2016. Accounts Receivable, Net within the Condensed Consolidated Balance Sheet at September 30, 2016 includes $7.0 million due from Nuvectra for payments made by the Company on Nuvectra’s behalf.
Acquisition of Lake Region Medical Holdings, Inc.
On October 27, 2015, the Company acquired all of the outstanding common stock of Lake Region Medical Holdings, Inc. for a total purchase price, including debt assumed, of approximately $1.77 billion. Lake Region Medical specializes in the design, development, and manufacturing of products across the medical component and device spectrum primarily serving the cardio, vascular and advanced surgical markets.
2.
DIVESTITURE AND ACQUISITION (Continued)
The aggregate consideration paid to the stockholders and equity award holders of Lake Region Medical consisted of the following (in thousands):
Cash
$
478,490

Fair value of Integer common stock
245,368

Replacement stock options attributable to pre-acquisition service
4,508

Total purchase consideration
$
728,366


The fair value of the Integer common stock issued as part of the consideration was determined based upon the closing stock price of Integer’s shares as of the acquisition date. The fair value of the Integer stock options issued as part of the consideration was determined utilizing a Black-Scholes option pricing model as of the acquisition date. Concurrent with the closing of the acquisition, the Company repaid all of the outstanding debt of Lake Region Medical of approximately $1.0 billion. The cash portion of the purchase price and the repayment of Lake Region Medical’s debt was primarily funded through new senior secured credit facilities and the issuance of senior notes. See Note 6 “Debt” for additional information regarding the Company’s debt. 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 OEM customers while building value for stockholders. 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, Integer’s customers will be able to accelerate patient access to life enhancing therapies. The transaction is consistent with Integer's strategy of achieving profitable growth and continuous improvement to drive margin expansion.
This transaction was accounted for under the acquisition method of accounting. Accordingly, the cost of the acquisition was 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 recorded as goodwill. Measurement-period adjustments made during the first nine months of 2016 were primarily to goodwill ($1.1 million) and deferred tax liabilities ($2.6 million), and did not impact the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income. The measurement-period for this acquisition is now closed and no further purchase price adjustments will be made.
The following table summarizes the allocation of the Lake Region Medical purchase price to the assets acquired and liabilities assumed (in thousands):
Assets acquired
 
Current assets
$
269,815

Property, plant and equipment
216,473

Amortizing intangible assets
849,000

Indefinite-lived intangible assets
70,000

Goodwill
660,670

Other non-current assets
1,629

Total assets acquired
2,067,587

Liabilities assumed
 
Current liabilities
103,986

Debt assumed
1,044,675

Other long-term liabilities
190,560

Total liabilities assumed
1,339,221

Net assets acquired
$
728,366


2.
DIVESTITURE AND ACQUISITION (Continued)
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 $23.0 million. This step-up in the fair value of inventory was amortized as the inventory to which the step-up relates was sold and was fully amortized as of January 1, 2016.
Property, Plant and Equipment – The fair value of property, plant & equipment acquired was estimated by applying the cost approach for personal property, buildings and building improvements and the market approach for land. The cost approach was applied by developing a replacement cost and adjusting for depreciation and obsolescence. The value of the land acquired was derived from market prices for comparable properties.
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)
 
Estimated Useful Life (Years)
 
Weighted Average Discount Rate
Technology
 
$
160,000

 
7
 
19
 
11.5%
Customer lists
 
689,000

 
14
 
29
 
11.5%
 
 
$
849,000

 
13
 
27
 
11.5%
Indefinite-lived Intangible Assets
 
 
 
 
 
 
 
 
Trademarks and tradenames
 
$
70,000

 
N/A
 
N/A
 
11.5%

The weighted average amortization period is less than the estimated useful life, as the Company is using an accelerated amortization method, which approximates the distribution of cash flows used to fair value those intangible assets.
Technology – Technology consists of technical processes, patented and unpatented technology, manufacturing know-how, trade secrets and the understanding with respect to products or processes that have been developed by Lake Region Medical 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 that ranged from 0.5% to 7%. The estimated useful life of the technology is based upon management’s estimate of the product life cycle associated with the technology before it will be replaced by new technologies.
2.
DIVESTITURE AND ACQUISITION (Continued)
Customer Lists – Customer lists represent the estimated fair value of non-contractual customer relationships Lake Region Medical had as of the acquisition date. The primary customers of Lake Region Medical are large OEMs 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 estimated useful life of the existing customer base was based upon the historical customer annual attrition rate of 5%, 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 Lake Region Medical’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 royalty rate that ranged from 0.25% to 1%. Trademarks and tradenames were assumed to have an indefinite useful life based upon the significant value the Lake Region Medical name has with OEMs in the medical component and device industries, their long history of being an industry leader and producing quality and innovative components, and given management’s current intention of using this tradename indefinitely, which was assumed to be consistent with what a reasonable market participant would also assume.
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 Lake Region Medical’s highly trained assembled work force and management team, the incremental value resulting from Lake Region Medical’s capabilities and services to OEMs, enhanced synergies, 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 acquisition was allocated to the Lake Region Medical segment and is not deductible for tax purposes.
Long-term Debt – The fair value of long-term debt was assumed to be equal to what was paid by Integer at the time of closing of the acquisition in order to retire the debt, including prepayment penalties and fees.
Statements of Operations and Comprehensive Income
The operating results of Lake Region Medical have been included in the Company’s Lake Region Medical segment from the date of acquisition. For the nine months ended September 30, 2016, Lake Region Medical added $607.1 million to the Company’s revenue and decreased the Company’s net loss by approximately $27.9 million.
Unaudited Pro Forma Financial Information
The following unaudited pro forma information presents the consolidated results of operations of the Company and Lake Region Medical as if that acquisition occurred as of the beginning of fiscal year 2014 (in thousands, except per share amounts):
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 2, 2015
 
October 2, 2015
Sales
 
$
349,561

 
$
1,085,912

Net loss
 
(9,215
)
 
(3,540
)
Loss per share:
 
 
 
 
     Basic
 
$
(0.30
)
 
$
(0.12
)
     Diluted
 
$
(0.30
)
 
$
(0.12
)




2.
DIVESTITURE AND ACQUISITION (Continued)
The unaudited pro forma financial information presents the combined operating results of Greatbatch and Lake Region Medical with the results prior to the acquisition date adjusted to include the pro forma impact of the amortization of acquired intangible assets, the adjustment to interest expense reflecting the amount borrowed in connection with the acquisition at Integer’s interest rates, and the impact of income taxes on the pro forma adjustments utilizing the applicable statutory tax rate. The unaudited pro forma consolidated basic and diluted loss per share calculations are based on the consolidated basic and diluted weighted average shares of Greatbatch outstanding for the respective period plus an adjustment for the additional shares and stock options issued in connection with the Lake Region Medical acquisition as discussed above. The unaudited pro forma financial information is presented for illustrative purposes only and does not reflect the realization of potential cost savings, and any related integration costs. Costs 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 by the combined company, or to be a projection of results that may be obtained in the future by the combined company.
Supplemental Cash Flow Information
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
 
Nine Months Ended
(in thousands)
September 30, 2016
 
October 2, 2015
Noncash investing and financing activities:
 
 
 
Property, plant and equipment purchases included in accounts payable
$
5,062

 
$
892

Purchase of technology included in accrued expenses
1,000

 

Common stock contributed to 401(k) Plan

 
3,920

Deferred financing costs included in accounts payable

 
7,922

Divestiture of noncash assets
54,591

 

Divestiture of liabilities
2,119

 

Inventories
INVENTORIES
INVENTORIES
Inventories are comprised of the following (in thousands):
 
As of
 
September 30, 2016
 
January 1, 2016
Raw materials
$
114,335

 
$
107,296

Work-in-process
99,892

 
93,729

Finished goods
48,005

 
51,141

Total
$
262,232

 
$
252,166

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 September 30, 2016
 
 
 
 
 
 

Purchased technology and patents
$
256,719

 
$
(96,381
)
 
$
2,750

 
$
163,088

Customer lists
759,987

 
(55,416
)
 
4,771

 
709,342

Other
4,534

 
(5,126
)
 
821

 
229

Total amortizing intangible assets
$
1,021,240

 
$
(156,923
)
 
$
8,342

 
$
872,659

At January 1, 2016
 
 
 
 
 
 
 
Purchased technology and patents
$
255,776

 
$
(83,708
)
 
$
1,444

 
$
173,512

Customer lists
761,857

 
(40,815
)
 
(986
)
 
720,056

Other
4,534

 
(4,946
)
 
821

 
409

Total amortizing intangible assets
$
1,022,167

 
$
(129,469
)
 
$
1,279

 
$
893,977


During the first quarter of 2016, the Company made an asset purchase of technology totaling $2.0 million, which is being amortized over a weighted average period of approximately 15 years.
Aggregate intangible asset amortization expense is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Cost of sales
$
4,228

 
$
1,324

 
$
12,708

 
$
4,240

Selling, general and administrative expenses
5,109

 
1,831

 
15,368

 
5,474

Research, development and engineering costs, net
136

 
88

 
375

 
294

Total intangible asset amortization expense
$
9,473

 
$
3,243

 
$
28,451

 
$
10,008


Estimated future intangible asset amortization expense based on the carrying value as of September 30, 2016 is as follows (in thousands):
 
Estimated
Amortization
Expense
Remainder of 2016
$
9,478

2017
44,129

2018
45,048

2019
45,135

2020
45,734

Thereafter
683,135

Total estimated amortization expense
$
872,659


Indefinite-lived intangible assets are comprised of the following (in thousands):
 
Trademarks
and
Tradenames
At January 1, 2016
$
90,288

At September 30, 2016
$
90,288


5.
INTANGIBLE ASSETS (Continued)
The change in goodwill is as follows (in thousands):
 
Greatbatch Medical
 
QiG
 
Lake Region Medical
 
Total
At January 1, 2016
$
303,929

 
$
50,096

 
$
659,545

 
$
1,013,570

Goodwill divested (Note 2)

 
(40,830
)
 

 
(40,830
)
Purchase accounting adjustments (Note 2)

 

 
(1,118
)
 
(1,118
)
Foreign currency translation
123

 

 
5,590

 
5,713

At September 30, 2016
$
304,052

 
$
9,266

 
$
664,017

 
$
977,335

Debt
DEBT
DEBT
Long-term debt is comprised of the following (in thousands):
 
As of
 
September 30, 2016
 
January 1, 2016
Senior secured term loan A
$
360,938

 
$
375,000

Senior secured term loan B
1,017,312

 
1,025,000

9.125% senior notes due 2023
360,000

 
360,000

Revolving line of credit
50,000

 

Less unamortized discount on term loan B and debt issuance costs
(42,086
)
 
(45,947
)
Total debt
1,746,164

 
1,714,053

Less current portion of long-term debt
29,000

 
29,000

Total long-term debt
$
1,717,164

 
$
1,685,053


Senior Secured Credit Facilities - In connection with the Lake Region Medical acquisition, on October 27, 2015, the Company replaced its existing credit facility with new senior secured credit facilities (the “Senior Secured Credit Facilities”) consisting of (i) a $200 million revolving credit facility (the “Revolving Credit Facility”), (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 TLA Facility and TLB Facility are collectively referred to as the “Term Loan Facilities.” The TLB facility was issued at a 1% discount.
Term Loan Facilities
The TLA Facility and TLB Facility mature on October 27, 2021 and October 27, 2022, respectively. Interest rates on the TLA Facility, as well as the 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 Net Leverage Ratio, as defined in the Senior Secured Credit Facilities agreement 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 Net 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.
Subject to certain conditions, one or more incremental term loan facilities may be added to the Term Loan Facilities so long as, on a pro forma basis, the Company’s first lien net leverage ratio does not exceed 4.25:1.00.
As of September 30, 2016, the estimated fair value of the TLB Facility was approximately $1,005 million, based on quoted market prices for the debt, recent sales prices for the debt and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as Level 2 measurements within the fair value hierarchy. The par amount of the TLA Facility approximated its fair value as of September 30, 2016 based upon the debt being variable rate in nature.
6.
DEBT (Continued)
Revolving Credit Facility
The Revolving Credit Facility matures on October 27, 2020. The Revolving Credit Facility also includes a $15 million sublimit for swingline loans and a $25 million sublimit for standby letters of credit. The Company is required to pay a commitment fee on the unused portion of the Revolving Credit Facility, which will range between 0.175% and 0.25%, depending on the Company’s Total Net Leverage Ratio. As of September 30, 2016, the Company had $50 million of outstanding borrowings on the Revolving Credit Facility and an available borrowing capacity of $141.1 million after giving effect to $8.9 million of outstanding standby letters of credit.
Subject to certain conditions, commitments under the Revolving Credit Facility may be increased through an incremental 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.
Covenants
The Revolving Credit Facility and TLA Facility contain covenants requiring (A) a maximum Total Net Leverage Ratio of 6.50:1.00, subject to step downs beginning in the fourth quarter of 2016 and (B) a minimum interest coverage ratio of adjusted EBITDA (as defined in the agreements governing the Senior Secured Credit Facilities) to interest expense of not less than 3.00:1.00. The TLB Facility does not contain any financial maintenance covenants. As of September 30, 2016, the Company was in compliance with these financial covenants. Based upon the Company’s current expectations for its 2016 adjusted EBITDA, there is a potential that it will not be able to meet its minimum interest coverage ratio at year-end 2016. The Company is working with the administrative agent under its Senior Secured Credit Facilities to obtain an amendment or waiver of the financial covenants before year-end.
The Senior Secured Credit Facilities also 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 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. As of September 30, 2016, the Company was in compliance with all negative covenants under the Senior Secured Credit Facilities.
The Senior Secured Credit Facilities provide for customary events of default. Upon the occurrence and during the continuance of an event of default, the outstanding advances and all other obligations under the Senior Secured Credit Facilities become immediately due and payable. The Senior Secured Credit Facilities are guaranteed by Integer Holdings Corporation, as a parent guarantor, and all of the Company’s present and future direct and indirect wholly-owned domestic subsidiaries (other than Greatbatch Ltd. (which is the borrower under the Senior Secured Credit Facilities), non-wholly owned joint ventures, and certain other excluded subsidiaries). The Senior Secured Credit Facilities are secured, subject to certain exceptions, by a first priority security interest in; i) the present and future shares of capital stock of (or other ownership or profit interests in) Greatbatch Ltd. and each guarantor (except Integer Holdings Corporation); ii) sixty-six percent (66%) of all present and future shares of voting capital stock of each specified first-tier foreign subsidiary; iii) substantially all of the Company’s, Greatbatch Ltd.’s and each other guarantor’s other personal property; and iv) all proceeds and products of the property and assets of the Company, Greatbatch Ltd. and the other guarantors.
9.125% Senior Notes due 2023 - On October 27, 2015, the Company completed a private offering of $360 million aggregate principal amount of 9.125% senior notes due on November 1, 2023 (the “Senior Notes”).
6.
DEBT (Continued)
Interest on the Senior Notes is payable on May 1 and November 1 of each year. 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. On or after November 1, 2018, the Company may redeem the Senior Notes, in whole or in part, pursuant to a customary schedule of declining redemption prices. As of September 30, 2016, the estimated fair value of the Senior Notes was approximately $351 million, based on quoted market prices of these Senior Notes, recent sales prices for the Senior Notes and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as Level 2 measurements within the fair value hierarchy.
The Senior Notes are senior unsecured obligations of the Company. The indenture for the Senior Notes contains 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 for the Senior Notes. The indenture for the Senior Notes provides for customary events of default, subject in certain cases to customary cure periods, in which the Senior Notes and any unpaid interest would become due and payable. As of September 30, 2016, the Company was in compliance with all restrictive covenants under the indenture governing the Senior Notes.
As of September 30, 2016, the weighted average interest rate on all outstanding borrowings is 5.69%.
Contractual maturities under the Senior Secured Credit Facilities and Senior Notes for the remainder of 2016 and the five years and thereafter, excluding any discounts or premiums, as of September 30, 2016 are as follows (in thousands):
Remaining in 2016
$
7,250

2017
31,344

2018
40,719

2019
47,750

2020
97,750

Thereafter
1,563,437

    Total
$
1,788,250


Interest Rate Swaps – From time to time, the Company enters into interest rate swap agreements in order to hedge against potential changes in cash flows on its outstanding variable rate debt. In July 2016, the Company entered into a one-year $250 million interest rate swap with an effective date of July 27, 2016. The Company entered into the swap to hedge against potential changes in cash flows on the outstanding variable rate debt, which is indexed to the one-month LIBOR rate. The variable rate received on the interest rate swap and the variable rate paid on the outstanding debt will have the same rate of interest, excluding the credit spread, and will reset and pay interest on the same day. The swap is being accounted for as a cash flow hedge.
In June 2016, the Company entered into a three-year $200 million interest rate swap with an effective date of June 27, 2017. The Company entered into the swap to hedge against potential changes in cash flows on the outstanding variable rate debt, which is indexed to the one-month LIBOR rate. The variable rate received on the interest rate swap and the variable rate paid on the outstanding debt will have the same rate of interest, excluding the credit spread, and will reset and pay interest on the same date. The swap is being accounted for as a cash flow hedge.
6.
DEBT (Continued)
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. These swaps were accounted for as cash flow hedges. 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. During the fourth quarter of 2015, the Company terminated these interest rate swap agreements.
Information regarding the Company’s outstanding interest rate swaps designated as cash flow hedges as of September 30, 2016 is as follows (dollars in thousands):
Notional Amount
 
Start Date
 
End Date
 
Pay Fixed Rate
 
Receive Current Floating Rate
 
Fair Value
 
Balance Sheet Location
$
200,000

 
Jun-17
 
Jun-20
 
1.1325
%
 
N/A

 
$
(974
)
 
Other Long-Term Liabilities
$
250,000

 
Jul-16
 
Jun-17
 
0.615
%
 
0.53
%
 
$
75

 
Prepaid Expenses and Other Current Assets

The estimated fair value of the interest rate swap agreements represents the amount the Company expects to receive (pay) to terminate the contract. No portion of the change in fair value of the Company’s interest rate swaps during the nine months ended September 30, 2016 and October 2, 2015 was considered ineffective. The amount recorded as Interest Expense during the nine months ended September 30, 2016 and October 2, 2015 related to the Company’s interest rate swaps was $0.05 million and $3.5 million, respectively.
Debt Issuance Costs and Discounts The change in deferred debt issuance costs related to the Revolving Credit Facility is as follows (in thousands):
At January 1, 2016
$
4,791

Amortization during the period
(745
)
At September 30, 2016
$
4,046


The change in unamortized discount and debt issuance costs related to the Term Loan Facilities and Senior Notes is as follows (in thousands):
 
Debt Issuance Costs
 
Unamortized Discount on TLB Facility
 
Total
At January 1, 2016
$
35,908

 
$
10,039

 
$
45,947

Financing costs incurred
781

 

 
781

Amortization during the period
(3,669
)
 
(973
)
 
(4,642
)
At September 30, 2016
$
33,020

 
$
9,066

 
$
42,086

Benefit Plans
BENEFIT PLANS
BENEFIT PLANS
The Company is required to provide its employees located in Switzerland, Mexico, France, and Germany certain statutorily mandated defined benefits. Under these plans, 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, France, and Germany 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 1, 2016
$
7,121

Net defined benefit cost
584

Benefit payments
(76
)
Foreign currency translation
125

At September 30, 2016
$
7,754


Net defined benefit cost is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Service cost
$
108

 
$
76

 
$
326

 
$
233

Interest cost
44

 
15

 
132

 
45

Amortization of net loss
47

 
13

 
140

 
39

Expected return on plan assets
(5
)
 
(2
)
 
(14
)
 
(8
)
Net defined benefit cost
$
194

 
$
102

 
$
584

 
$
309

Stock-Based Compensation
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
At the 2016 Annual Meeting of Stockholders held on May 24, 2016, the Company’s stockholders approved the Company’s 2016 Stock Incentive Plan (the “2016 Plan”). The 2016 Plan provides for the granting of stock options, shares of restricted stock, restricted stock units, stock appreciation rights and stock bonuses to employees, non-employee directors, consultants, and service providers. The 2016 Plan supplements the Company’s existing 2009 and 2011 Stock Incentive Plans, as amended.
In connection with the Spin-off, under the provisions of the Company’s existing 2009 and 2011 stock incentive plans, employee stock options, restricted stock awards, and restricted stock unit awards were adjusted to preserve the fair value of the awards immediately before and after the Spin-off. As such, the Company did not record any modification expense related to the conversion of the awards. Certain awards granted to employees who transferred to Nuvectra in connection with the Spin-off were canceled. As required, the Company accelerated the remaining expense related to these canceled awards of $0.5 million during the first quarter of 2016, which was classified as Other Operating Expenses, Net. The stock awards held as of March 14, 2016 were modified as follows:
Stock options: Holders of the Company’s stock option awards continued to hold stock options to purchase the same number of shares of Integer common stock at an adjusted exercise price and one new Nuvectra stock option for every three Integer stock options held as of the Record Date, which, in the aggregate, preserved the fair value of the overall awards granted. The adjusted exercise price for Integer stock options was equal to approximately 93% of the original exercise price. The stock option awards will continue to vest over their original vesting period.
Restricted stock and restricted stock units: Holders of the Company’s restricted stock and restricted stock unit awards received one new share of Nuvectra restricted stock and restricted stock unit awards for every three Integer restricted stock and restricted stock unit awards held as of the Record Date. Integer restricted stock and restricted stock unit awards will continue to vest in accordance with their original performance metrics and over their original vesting period.
The components and classification of stock-based compensation expense were as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Stock options
$
663

 
$
697

 
$
1,857

 
$
1,979

Restricted stock and restricted stock units
1,554

 
1,701

 
5,322

 
5,081

401(k) Plan stock contribution

 
674

 

 
1,984

Total stock-based compensation expense
$
2,217

 
$
3,072

 
$
7,179

 
$
9,044

 
 
 
 
 
 
 
 
Cost of sales
$
158

 
$
685

 
$
505

 
$
2,039

Selling, general and administrative expenses
1,677

 
1,981

 
4,860

 
5,890

Research, development and engineering costs, net
115

 
361

 
408

 
1,070

Other operating expenses, net
267

 
45

 
1,406

 
45

Total stock-based compensation expense
$
2,217

 
$
3,072

 
$
7,179

 
$
9,044


The weighted average fair value and assumptions used to value options granted are as follows:
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
Weighted average fair value
$
9.25

 
$
12.18

Risk-free interest rate
1.56
%
 
1.55
%
Expected volatility
26
%
 
26
%
Expected life (in years)
5

 
5

Expected dividend yield
%
 
%

8.
STOCK-BASED COMPENSATION (Continued)
The following table summarizes the Company’s 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 1, 2016
1,678,900

 
$
28.32

 
 
 
 
Granted
245,439

 
49.58

 
 
 
 
Exercised
(32,833
)
 
22.00

 
 
 
 
Forfeited or expired
(91,385
)
 
46.13

 
 
 
 
Adjustment due to Spin-off

 
(2.02
)
 
 
 
 
Outstanding at September 30, 2016
1,800,121

 
$
28.41

 
5.8
 
$
2.3

Exercisable at September 30, 2016
1,432,312

 
$
23.87

 
5.0
 
$
2.3


The following table summarizes time-vested restricted stock and restricted stock unit activity:
 
Time-Vested
Activity
 
Weighted Average Fair Value
Nonvested at January 1, 2016
39,235

 
$
47.40

Granted
48,702

 
50.15

Vested
(15,391
)
 
51.39

Forfeited
(10,835
)
 
48.67

Nonvested at September 30, 2016
61,711

 
$
48.35

The following table summarizes performance-vested restricted stock unit activity:
 
Performance-
Vested
Activity
 
Weighted
Average
Fair Value
Nonvested at January 1, 2016
577,825

 
$
25.11

Granted
163,651

 
31.20

Vested
(249,153
)
 
15.86

Forfeited
(119,005
)
 
32.15

Nonvested at September 30, 2016
373,318

 
$
31.70

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
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
2014 investments in capacity and capabilities
$
4,542

 
$
5,116

 
$
13,821

 
$
17,854

Orthopedic facilities optimization
329

 
357

 
628

 
1,348

Lake Region Medical consolidations
2,908

 

 
7,355

 

Acquisition and integration costs
5,319

 
5,202

 
23,143

 
5,366

Asset dispositions, severance and other
272

 
3,169

 
5,057

 
4,881

 
$
13,370

 
$
13,844

 
$
50,004

 
$
29,449


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 2017 and is dependent upon our customers’ validation and qualification of the transferred products as well as regulatory approvals worldwide.
Functions performed at the Company’s facilities in Beaverton, OR and Raynham, MA to manufacture products for the portable medical market were transferred to a new facility in Tijuana, Mexico. Products manufactured at the Beaverton facility, which do not serve the portable medical market, were transferred to the Company’s Raynham facility. This initiative was substantially completed during the first half of 2016. The final closure of the Beaverton, OR site will occur in the fourth quarter of 2016.
The design engineering responsibilities previously performed at the Company’s Cleveland, OH facility were transferred to the Company’s facilities in Minnesota in 2015.
The realignment of the Company’s commercial sales operations was completed in 2015.
The total capital investment expected for these initiatives is between $25.0 million and $28.0 million, of which $23.2 million has been expended through September 30, 2016. Total restructuring charges expected to be incurred in connection with this realignment are between $46.0 million and $52.0 million, of which $45.8 million has been incurred through September 30, 2016. Expenses related to this initiative are recorded within the applicable segment and corporate cost centers that the expenditures relate to and include the following:
Severance and retention: $5.0 million - $6.0 million;
Accelerated depreciation and asset write-offs: $2.0 million - $3.0 million; and
Other: $39.0 million - $43.0 million
Other expenses primarily consist of costs to relocate certain equipment and personnel, duplicate personnel costs, excess overhead, 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 1, 2016
$
1,429

 
$

 
$
1,595

 
$
3,024

Restructuring charges

 
1,787

 
12,034

 
13,821

Write-offs

 
(1,787
)
 

 
(1,787
)
Cash payments
(1,246
)
 

 
(13,629
)
 
(14,875
)
At September 30, 2016
$
183


$

 
$

 
$
183


9.
OTHER OPERATING EXPENSES, NET (Continued)
Orthopedic facilities optimization. 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 of an orthopedic 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.
In 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. This initiative was completed in 2013.
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 year.
The total capital investment expected to be incurred for these initiatives is between $31.0 million and $35.0 million, of which $30.0 million has been expended through September 30, 2016. Total expense expected to be incurred for these initiatives is between $45.0 million and $48.0 million, of which $44.5 million has been incurred through September 30, 2016. All expenses have been and will be recorded within the Greatbatch Medical segment and are expected to include the following:
Severance and retention: approximately $11.0 million;
Accelerated depreciation and asset write-offs: approximately $13.0 million; and
Other: $21.0 million$24.0 million
Other expenses include production inefficiencies, moving, revalidation, personnel, training, consulting, and travel costs associated with these consolidation projects. All expenses are cash expenditures except accelerated depreciation and asset write-offs.
The change in accrued liabilities related to the orthopedic facilities optimization is as follows (in thousands):
 
Severance and
Retention
 
Accelerated
Depreciation/Asset
Write-offs
 
Other
 
Total
At January 1, 2016
$

 
$

 
$

 
$

Restructuring charges

 
202

 
426

 
628

Write-offs

 
(202
)
 

 
(202
)
Cash payments

 


 
(426
)
 
(426
)
At September 30, 2016
$

 
$

 
$

 
$



Lake Region Medical consolidations. In 2014, Lake Region Medical initiated plans to close its Arvada, CO site, consolidate its two Galway, Ireland sites into one facility, and other restructuring actions that will result in a reduction in staff across manufacturing and administrative functions at certain locations. This initiative is expected to be substantially completed by the end of 2016.
During the third quarter of 2016, the Company announced the planned closure of its Clarence, NY facility. The machined component product lines manufactured in this facility will be transferred to other Integer locations in the U.S. The project is expected to be completed by the first quarter of 2018.
The total capital investment expected to be incurred for these initiatives is between $5.0 million and $6.0 million, of which $1.7 million has been expended through September 30, 2016. Total expense expected to be incurred for these initiatives are between $20.0 million and $25.0 million, of which $9.3 million has been incurred through September 30, 2016. All expenses related to these initiatives have been and will be recorded within the applicable segment and corporate cost centers that the expenditures relate to and are expected to include the following:
Employee costs: $8.0 million - $10.0 million;
Accelerated depreciation and asset write-offs: approximately $1.0 million - $2.0 million; and
Other: $11.0 million - $13.0 million.
9.
OTHER OPERATING EXPENSES, NET (Continued)
Other expenses primarily consist of production inefficiencies, moving, revalidation, personnel, training, consulting, and travel costs associated with these consolidation projects. All expenses are cash expenditures.
The change in accrued liabilities related to the Lake Region Medical consolidation initiatives is as follows (in thousands):
 
Employee Costs
 
Accelerated
Depreciation/Asset
Write-offs
 
Other
 
Total
At January 1, 2016
$
3,667

 
$

 
$
596

 
$
4,263

Restructuring charges
4,646

 
907

 
1,802

 
7,355

Write-offs

 
(907
)
 

 
(907
)
Cash payments
(7,392
)
 

 
(1,942
)
 
(9,334
)
At September 30, 2016
$
921


$

 
$
456

 
$
1,377


Acquisition and integration costs. During the third quarter and first nine months of 2016, the Company incurred $0.2 million and $4.2 million, respectively, in transaction costs related to the acquisition of Lake Region Medical. During the third quarter of 2015, the Company incurred $5.1 million of such costs. Transaction costs primarily relate to change-in-control payments to former Lake Region Medical executives, as well as professional and consulting fees. Additionally, during the third quarter and first nine months of 2016, the Company incurred $5.2 million and $18.9 million, respectively, in Lake Region Medical integration costs, which primarily included professional, consulting, severance, retention, relocation, and travel costs. As of September 30, 2016, $5.8 million of acquisition and integration costs related to the Lake Region Medical acquisition are accrued. Total expense expected to be incurred in connection with the integration of Lake Region Medical is between $40.0 million and $50.0 million, of which $31.7 million were incurred through September 30, 2016. Total capital expenditures for this initiative are expected to be between $20.0 million and $25.0 million, the incurrence of which have not been material to date. Expenses related to this initiative were recorded to corporate unallocated expenses, the Greatbatch Medical segment and the Lake Region Medical segment.
Asset dispositions, severance and other. During 2016 and 2015, the Company recorded losses in connection with various asset disposals and/or write-downs. In addition, during the first nine months of 2016 and 2015, the Company incurred legal and professional costs in connection with the Spin-off of $4.4 million ($0.02 million in the third quarter of 2016) and $4.6 million ($3.1 million in the third quarter of 2015), respectively. Total transaction related costs incurred for the Spin-off since inception were $10.4 million. Expenses related to the Spin-off were primarily recorded within the corporate unallocated and the QiG segment. Refer to Note 2 “Divestiture and Acquisition” for additional information on the Spin-off.
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 discrete items, changes in the mix of the pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, business reorganizations, settlements with taxing authorities and foreign currency fluctuations. The effective tax rate for the first nine months of 2016 and 2015 was 41.3% and 20.4%, respectively. The effective tax rate for the first nine months of 2016 includes the impact of a $1.6 million ($2.9 million for the third quarter of 2016) of net discrete tax benefits related to Lake Region Medical and Spin-off transaction costs. For fiscal year 2016, the effective tax rate is expected to be approximately (30%). The tax benefit for the third quarter and expected tax benefit for full year 2016 is due to these discrete tax items, as well as Company having projected losses in higher tax rate jurisdictions and income in lower tax rate jurisdictions.
As of September 30, 2016, the balance of unrecognized tax benefits is approximately $9.8 million. It is reasonably possible that a reduction of up to $0.1 million of the balance of unrecognized tax benefits may occur within the next twelve months as a result of potential audit settlements. Approximately $9.0 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 In April 2013, the Company commenced an action against AVX Corporation and AVX Filters Corporation (collectively “AVX”) alleging that AVX had infringed on the Company’s patents by manufacturing and selling filtered feedthrough assemblies used in implantable pacemakers and cardioverter defibrillators that incorporate the Company’s patented technology. On January 26, 2016, a jury in the U.S. District Court for the District of Delaware returned a verdict finding that AVX infringed on two Integer patents and awarded Integer $37.5 million in damages. The finding is subject to post-trial proceedings, including a possible appeal by AVX. The Company has recorded no gains in connection with this litigation as no cash has been received.
The Company is a party to various other legal actions arising in the normal course of business. The Company does not expect that the ultimate resolution of any other pending legal actions will have a material effect on its consolidated results of operations, financial position, or cash flows. However, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which the Company currently believes to be immaterial, will not become material in the future.
Environmental Matters The Company’s Collegeville, PA facility, which was acquired as part of the Lake Region Medical acquisition, is subject to two administrative consent orders entered into with the U.S. Environmental Protection Agency (the “EPA”), which require ongoing groundwater treatment and monitoring at the site as a result of historic leaks from underground storage tanks. Upon approval by the EPA of the Company’s proposed post remediation care plan, which requires a continuation of the groundwater treatment and monitoring process at the site, the Company expects that the consent orders will be terminated. The Company expects a decision from the EPA on whether the Company’s post remediation care plan has been approved during the fourth quarter of 2016 or early 2017. The groundwater treatment process at the Collegeville facility consists of a groundwater extraction and treatment system and the performance of annual sampling of a defined set of groundwater wells as a means to monitor containment within approved boundaries. The Company does not expect this environmental matter will have a material effect on its condensed consolidated results of operations, financial position or cash flows.
11.
COMMITMENTS AND CONTINGENCIES (Continued)
In January 2015, Lake Region Medical was notified by the New Jersey Department of Environmental Protection (“NJDEP”) of the NJDEP’s intent to revoke a no further action determination made by the NJDEP in favor of Lake Region Medical in 2002 pertaining to a property on which a subsidiary of Lake Region Medical operated a manufacturing facility in South Plainfield, New Jersey beginning in 1971. Lake Region Medical sold the property in 2004 and vacated the facility in 2007. In response to the NJDEP’s notice, the Company further investigated the matter and submitted a technical report to the NJDEP in August of 2015 that concluded that the NJDEP’s notice of intent to revoke was unwarranted. After reviewing the Company’s technical report, the NJDEP issued a draft response in May 2016, stating that the NJDEP would not revoke the no further action determination at that time, but would require some additional site investigation to support the Company’s conclusion. The Company is cooperating with the NJDEP and has met with NJDEP representatives to discuss the appropriate scope of the requested additional investigation. The Company does not expect this environmental matter will have a material effect on its condensed consolidated results of operations, financial position or cash flows.
As of September 30, 2016 and January 1, 2016, there was $1.1 million recorded in Other Long-Term Liabilities in the Condensed Consolidated Balance Sheets in connection with these environmental matters.
Product Warranties The Company generally warrants that its products will meet customer specifications and will be free from defects in materials and workmanship. The Company does not expect future product warranty claims will have a material effect on its condensed consolidated results of operations, financial position, or cash flows. However, there can be no assurance that any future customer complaints or negative regulatory actions regarding the Company’s products, which the Company currently believes to be immaterial, does not become material in the future. The change in product warranty liability was comprised of the following (in thousands):
At January 1, 2016
$
3,316

Additions to warranty reserve
1,568

Warranty claims settled
(2,351
)
At September 30, 2016
$
2,533


Foreign Currency ContractsFrom time to time, the Company enters into forward contracts to purchase Mexican pesos in order to hedge the risk of peso-denominated payments associated with operations at its facilities in Mexico. In connection with the Lake Region Medical acquisition, the Company terminated its outstanding forward contracts resulting in a $2.4 million payment to the foreign currency contract counter-party during the fourth quarter of 2015. As of September 30, 2016, the Company had a $0.3 million loss recorded in Accumulated Other Comprehensive Income related to these contracts, which will be amortized to Cost of Sales as the inventory, which the contracts were hedging the cash flows to produce, is sold.
The impact to the Company’s results of operations from its forward contract hedges is as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Addition in cost of sales
$
929

 
$
562

 
$
2,316

 
$
1,226

Ineffective portion of change in fair value

 

 

 


Information regarding outstanding foreign currency contracts designated as cash flow hedges as of September 30, 2016 is as follows (dollars in thousands):
Aggregate
Notional
Amount
 
Start
Date
 
End
Date
 
$/Peso
 
Fair
Value
 
Balance Sheet Location
$
4,120

 
Jan 2016
 
Dec 2016
 
0.0584

 
$
(506
)
 
Accrued Expenses
2,795

 
Apr 2016
 
Dec 2016
 
0.0565

 
(258
)
 
Accrued Expenses
18,490

 
Jan 2017
 
Sep 2017
 
0.0514

 
(415
)
 
Accrued Expenses
6,164

 
Oct 2017
 
Dec 2017
 
0.0514

 
(268
)
 
Other Long-Term Liabilities
11.
COMMITMENTS AND CONTINGENCIES (Continued)
Self-Insurance Liabilities As of September 30, 2016, and at various times in the past, the Company self-funded its workers' compensation and employee medical expenses. The Company has established reserves to cover these self-insured liabilities and also maintains stop-loss insurance to limit its exposures under these programs. Claims reserves represent accruals for the estimated uninsured portion of reported claims, including adverse development of reported claims, as well as estimates of incurred but not reported claims. Claims incurred but not reported are estimated based on the Company’s historical experience, which is continually monitored, and accruals are adjusted when warranted by changes in facts and circumstances. The Company’s actual experience may be different than its estimates, sometimes significantly. Changes in assumptions, as well as changes in actual experience could cause these estimates to change. Insurance and claims expense will vary from period to period based on the severity and frequency of claims incurred in a given period. The Company’s self-insurance reserves totaled $6.7 million and $7.9 million as of September 30, 2016 and January 1, 2016, respectively. These accruals are recorded in Accrued Expenses and Other Long-Term Liabilities in the Condensed Consolidated Balance Sheets.
Earnings (Loss) Per Share (EPS)
EARNINGS (LOSS) PER SHARE (EPS)
EARNINGS (LOSS) 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
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Numerator for basic and diluted EPS:
 
 
 
 
 
 
 
Net income (loss)
$
11,458

 
$
22

 
$
(1,972
)
 
$
17,313

Denominator for basic EPS:
 
 
 
 
 
 
 
Weighted average shares outstanding
30,782

 
25,536

 
30,756

 
25,424

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options, restricted stock and restricted stock units
371

 
905

 

 
948

Denominator for diluted EPS
31,153

 
26,441

 
30,756

 
26,372

Basic EPS
$
0.37

 
$


$
(0.06
)
 
$
0.68

Diluted EPS
$
0.37

 
$

 
$
(0.06
)
 
$
0.66


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 (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Time-vested stock options, restricted stock and restricted stock units
629

 
260

 
1,862

 
268

Performance-vested restricted stock units
373

 
11

 
417

 
10

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 1, 2016
$
(1,179
)
 
$
(3,746
)
 
$
12,668

 
$
7,743

 
$
1,806

 
$
9,549

Unrealized loss on cash flow hedges

 
(101
)
 

 
(101
)
 
35

 
(66
)
Realized loss on foreign currency hedges

 
929

 

 
929

 
(324
)
 
605

Realized loss on interest rate swap hedges

 
50

 

 
50

 
(18
)
 
32

Foreign currency translation gain

 

 
3,191

 
3,191

 

 
3,191

At September 30, 2016
$
(1,179
)
 
$
(2,868
)
 
$
15,859

 
$
11,812

 
$
1,499

 
$
13,311

 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
At January 1, 2016
$
(1,179
)
 
$
(2,392
)
 
$
3,609

 
$
38

 
$
1,332

 
$
1,370

Unrealized loss on cash flow hedges

 
(2,842
)
 

 
(2,842
)
 
995

 
(1,847
)
Realized loss on foreign currency hedges

 
2,316

 

 
2,316

 
(810
)
 
1,506

Realized loss on interest rate swap hedges

 
50

 

 
50

 
(18
)
 
32

Foreign currency translation gain

 

 
12,250

 
12,250

 

 
12,250

At September 30, 2016
$
(1,179
)
 
$
(2,868
)
 
$
15,859

 
$
11,812

 
$
1,499

 
$
13,311

 
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


The realized 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, Net, respectively, in the Condensed Consolidated Statements of Operations and Comprehensive Income.
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 counterparties 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 $1.7 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 September 30, 2016 were determined through the use of a cash flow model that utilizes observable market data inputs. These observable market data inputs include LIBOR, swap rates, and credit spread curves. In addition, the Company received a fair value estimate from the interest rate swaps 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 fair value of the Company’s interest rate swaps will be realized as Interest Expense as interest on the corresponding borrowings is accrued.
The following table provides information regarding assets and liabilities recorded at fair value on a recurring basis (in thousands):
 
 
Fair Value Measurements Using
 
 
At 
 September 30,
 
Quoted
Prices in
Active Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
Description
 
2016
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
 
 
 
 
 
 
 
Interest rate swap (Note 6)
 
$
75

 
$

 
$
75

 
$

Liabilities
 
 
 
 
 
 
 
 
Foreign currency contracts (Note 11)
 
$
1,447

 
$

 
$
1,447

 
$

Interest rate swap (Note 6)
 
$
974

 
$

 
$
974

 
$


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, and accrued expenses approximate fair value because of the short-term nature of these items. Refer to Note 6 “Debt” for further discussion regarding the fair value of the Company’s Senior Secured Credit Facilities and Senior Notes. 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.
14.
FAIR VALUE MEASUREMENTS (Continued)
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 recorded $1.0 million of impairment charges related to its long-lived assets, which is included in Other Operating Expenses, Net during the first nine months of 2016. The Company did not record any impairment charges related to its long-lived assets during the first nine months of 2015.
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 2016 or 2015, 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 on the Condensed Consolidated Balance Sheets. 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 Expense (Income), Net, unless separately stated. The aggregate recorded amount of cost and equity method investments at September 30, 2016 and January 1, 2016 was $24.4 million and $20.6 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 September 30, 2016, the Company owned 7.0% of this fund.
During the nine month periods ended September 30, 2016 and October 2, 2015, the Company did not recognize any impairment charges related to its cost method investments. The fair value of these investments is primarily determined by reference to recent sales data of similar shares to independent parties in an inactive market. This fair value calculation is categorized in Level 2 of the fair value hierarchy. During the nine month periods ended September 30, 2016 and October 2, 2015, the Company recognized a net gain on cost and equity method investments of $0.9 million and $5.1 million, respectively. 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.
Business Segment, Geographic and Concentration Risk Information
BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION
BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION
As a result of the acquisition of Lake Region Medical, the Company has three reportable segments: Greatbatch Medical, QiG and Lake Region Medical. During the first quarter of 2016, the Company completed the Spin-off of a portion of its QiG segment. See Note 2 “Divestiture and Acquisition” for further description of these transactions. As a result of the Lake Region Medical acquisition and the Spin-off, the Company is re-evaluating its internal management and financial reporting structure, which may change its product line and segment reporting in the future. This process is expected to be finalized in 2016.
Greatbatch Medical designs and manufactures medical devices and components where Integer either owns the intellectual property or has unique manufacturing and assembly expertise. Greatbatch Medical provides medical devices and components to the cardiac, neuromodulation, orthopedics, portable medical, vascular and energy markets among others. Greatbatch Medical also offers value-added assembly and design engineering services for medical devices that utilize its component products.
The QiG segment focuses on the design and development of complete medical device systems and components for our OEM customers. After completion of the Spin-off, the operations of QiG primarily consists of CCC. The medical devices QiG designs and develops are full product solutions that utilize the medical technology expertise and capabilities residing within Greatbatch Medical and Lake Region Medical. QiG revenue consists primarily of 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 QiG reach significant production levels, the responsibility for manufacturing these products may be transferred to Greatbatch Medical.
Lake Region Medical has operated as a segment for Integer since it was acquired during the fourth quarter of 2015. This segment specializes in the design, development, and manufacturing of products across the medical component and device spectrum, primarily serving the cardio, vascular and advanced surgical markets. Lake Region Medical offers fully integrated outsourced manufacturing, regulatory and engineering services, contract manufacturing, finished device assembly services, original device development, and supply chain management.
As a result of the Lake Region Medical acquisition and the Spin-off, the Company has recast its product line sales into the following four categories:
Cardio and Vascular: Includes the legacy Greatbatch Vascular product line sales plus the legacy Lake Region Medical Cardio and Vascular product line sales less the legacy Lake Region Medical Cardiac/Neuromodulation sales. Products include introducers, steerable sheaths, guidewires, catheters, and stimulation therapy components, subassemblies and finished devices 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.
Cardiac/Neuromodulation: Includes the legacy Greatbatch Cardiac/Neuromodulation and QiG sales plus the legacy Lake Region Medical Cardiac/Neuromodulation sales previously included in their Cardio and Vascular product line sales. Products include batteries, capacitors, filtered and unfiltered feed-throughs, engineered components, implantable stimulation leads, and enclosures used in implantable medical devices.
Advanced Surgical, Orthopedics, and Portable Medical: Includes legacy Greatbatch Orthopedics and Portable Medical product line sales plus the legacy Lake Region Medical Advanced Surgical product line sales. Products include components, sub-assemblies, finished devices, implants, instruments and delivery systems for a range of surgical technologies to the advanced surgical market, including laparoscopy, orthopedics and general surgery, biopsy and drug delivery, joint preservation and reconstruction, arthroscopy, and engineered tubing solutions. Products also include life-saving and life-enhancing applications comprising of automated external defibrillators, portable oxygen concentrators, ventilators, and powered surgical tools.
Electrochem: Includes the legacy Greatbatch Energy, Military and Environmental product line sales. Products include primary (lithium) cells, and primary and secondary battery packs for demanding applications such as down hole drilling tools.

15.
BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION (Continued)
An analysis and reconciliation of the Company’s business segments, product lines 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 (in thousands): 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Product line sales:
 
 
 
 
 
 
 
Cardio and Vascular
$
148,273

 
$
14,107

 
$
426,142

 
$
37,370

Cardiac/Neuromodulation
95,781

 
75,577

 
284,479

 
248,450

Advanced Surgical, Orthopedics, and Portable Medical
95,190

 
44,976

 
290,836

 
150,795

Electrochem
8,870

 
11,977

 
30,361

 
46,232

Elimination of interproduct line sales
(1,547
)
 

 
(4,631
)
 

Total sales
$
346,567

 
$
146,637

 
$
1,027,187

 
$
482,847


 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Business segment sales:
 
 
 
 
 
 
 
Greatbatch Medical
$
140,458

 
$
144,021

 
$
413,231

 
$
473,784

QiG
2,708

 
2,776

 
8,829

 
10,564

Lake Region Medical
203,913

 

 
607,122

 

Elimination of intersegment sales(a)
(512
)
 
(160
)
 
(1,995
)
 
(1,501
)
Total sales
$
346,567

 
$
146,637

 
$
1,027,187

 
$
482,847


(a) Greatbatch Medical sales include approximately $0.2 million and $0.5 million of intersegment sales for the three and nine months ended September 30, 2016, respectively. Lake Region Medical sales include approximately $0.3 million and $1.3 million of intersegment sales for the three and nine months ended September 30, 2016, respectively. Intersegment sales for the three and nine months periods of 2015 are included in the Greatbatch Medical segment.
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Segment income (loss) from operations:
 
 
 
 
 
 
 
Greatbatch Medical
$
15,986

 
$
21,512

 
$
41,565

 
$
72,179

QiG
562

 
(7,680
)
 
(5,347
)
 
(20,132
)
Lake Region Medical
29,906

 

 
78,461

 

Total segment income from operations
46,454

 
13,832

 
114,679

 
52,047

Unallocated operating expenses
(9,592
)
 
(12,637
)
 
(37,414
)
 
(28,429
)
Operating income
36,862

 
1,195

 
77,265

 
23,618

Unallocated expenses, net
(28,145
)
 
(1,189
)
 
(80,623
)
 
(1,857
)
Income (loss) before provision (benefit) for income taxes
$
8,717

 
$
6

 
$
(3,358
)
 
$
21,761


15.
BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION (Continued)
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Sales by geographic area:
 
 
 
 
 
 
 
United States
$
206,663

 
$
71,545

 
$
612,876

 
$
217,102

Non-Domestic locations:
 
 
 
 
 
 
 
Puerto Rico
41,745

 
26,816

 
120,217

 
98,247

Belgium
14,256

 
12,305

 
52,913

 
45,690

Rest of world
83,903

 
35,971

 
241,181

 
121,808

Total sales
$
346,567

 
$
146,637

 
$
1,027,187

 
$
482,847


Three customers accounted for a significant portion of the Company’s sales as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Customer A
18%
 
17%
 
18%
 
20%
Customer B
18%
 
19%
 
16%
 
18%
Customer C
11%
 
10%
 
12%
 
12%
Total
47%
 
46%
 
46%
 
50%

Long-lived tangible assets by geographic area are as follows (in thousands):
 
As of
 
September 30, 2016
 
January 1, 2016
United States
$
263,347

 
$
264,556

Rest of world
118,324

 
114,936

Total
$
381,671

 
$
379,492

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.
Recently Adopted
In September 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments,” which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. This update requires acquiring companies to recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The guidance in this ASU became effective for the Company on January 2, 2016. See Note 2 “Divestiture and Acquisition” for further description of the measurement-period adjustments made and the Company’s acquisition.
Not Yet Adopted
In August 2016, the FASB issued ASU No. 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments: A Consensus of the FASB Emerging Issues Task Force.” ASU 2016-15 makes targeted changes to how cash receipts and cash payments are presented in the statement of cash flows. The areas specifically addressed include debt prepayment and debt extinguishment costs, the settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, cash premiums paid for and proceeds from corporate-owned life insurance policies, distributions received from equity method investees and cash receipts from payments on transferor’s beneficial interest on securitized trade receivables. Additionally, the amendment states that, in the absence of other prevailing guidance, cash receipts and payments that have characteristics of more than one class of cash flows should have each separately identifiable source or use of cash presented within the most predominant class of cash flows based on the nature of the underlying cash flows. These amendments are effective for the Company in annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its Condensed Consolidated Statements of Cash Flows.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which amends the guidance on reporting credit losses for assets held at amortized cost and available-for-sale debt securities. For assets held at amortized cost, the ASU eliminates the probable initial recognition threshold and requires an entity to reflect a current estimate of all expected credit losses, such that the net amount expected to be collected is presented. For available-for-sale debt securities, the ASU requires credit losses to be presented as an allowance versus a write-down. These amendments are effective for the Company in annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted in annual and interim reporting periods beginning after December 15, 2018. The Company is currently evaluating the impact that the adoption of this ASU will have on its Condensed Consolidated Financial Statements.
In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.”  ASU 2016-09 changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for the Company in annual and interim reporting periods beginning after December 15, 2016, with early adoption permitted. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period and the entity must adopt all of the amendments from ASU 2016-09 in the same period. The Company is currently evaluating the impact that the adoption of this ASU will have on its Condensed Consolidated Financial Statements.

16.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS (Continued)
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires companies to recognize all leases as assets and liabilities on the consolidated balance sheet. This ASU retains a distinction between finance leases and operating leases, and the classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the current accounting literature. As a result, the effect of leases on the consolidated statement of comprehensive income and a consolidated statement of cash flows is largely unchanged from previous GAAP.  The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its Condensed Consolidated Financial Statements.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; requires entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset; and requires entities to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option. This ASU is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the own credit provision is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have 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 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. In August 2015, the FASB approved a one year deferral to the effective date to be adopted by all public companies for annual reporting periods beginning after December 15, 2017, with earlier application permitted as of annual reporting periods beginning after December 15, 2016. In March, April and May of 2016, respectively, the FASB issued ASU No. 2016-08, which clarifies the implementation guidance on principal versus agent considerations, ASU No. 2016-10, which clarifies the implementation guidance on identifying performance obligations and licensing and ASU No. 2016-12, which provides improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition, a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. These amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently assessing the financial impact of adopting these ASU’s 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.
Summary of Significant Accounting Policies (Policies)
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, these financial statements 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 Integer Holdings Corporation and its subsidiaries (collectively “Integer” or the “Company”) for the periods presented.
The January 1, 2016 condensed consolidated balance sheet data was derived from the Company’s 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 1, 2016.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, certain components of equity, 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 months of 2016 and 2015 each contained 13 weeks and 39 weeks, respectively, and ended on September 30, and October 2, 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 discrete items, changes in the mix of the pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, business reorganizations, settlements with taxing authorities and foreign currency fluctuations.
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.
14.
FAIR VALUE MEASUREMENTS (Continued)
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 recorded $1.0 million of impairment charges related to its long-lived assets, which is included in Other Operating Expenses, Net during the first nine months of 2016. The Company did not record any impairment charges related to its long-lived assets during the first nine months of 2015.
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 on the Condensed Consolidated Balance Sheets. 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 Expense (Income), Net, unless separately stated.
Divestiture and Acquisition (Tables)
In connection with the Spin-off, during the first quarter of 2016, the Company made a cash capital contribution of $75 million to Nuvectra and divested the following assets and liabilities (in thousands):
Assets divested
 
  Cash and cash equivalents
$
76,256

  Other current assets
977

  Property, plant and equipment, net
4,407

  Amortizing intangible assets, net
1,931

  Goodwill
40,830

  Deferred income taxes
6,446

Total assets divested
130,847

Liabilities transferred
 
     Current liabilities
2,119

Net assets divested
$
128,728

The aggregate consideration paid to the stockholders and equity award holders of Lake Region Medical consisted of the following (in thousands):
Cash
$
478,490

Fair value of Integer common stock
245,368

Replacement stock options attributable to pre-acquisition service
4,508

Total purchase consideration
$
728,366

The following table summarizes the allocation of the Lake Region Medical purchase price to the assets acquired and liabilities assumed (in thousands):
Assets acquired
 
Current assets
$
269,815

Property, plant and equipment
216,473

Amortizing intangible assets
849,000

Indefinite-lived intangible assets
70,000

Goodwill
660,670

Other non-current assets
1,629

Total assets acquired
2,067,587

Liabilities assumed
 
Current liabilities
103,986

Debt assumed
1,044,675

Other long-term liabilities
190,560

Total liabilities assumed
1,339,221

Net assets acquired
$
728,366

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)
 
Estimated Useful Life (Years)
 
Weighted Average Discount Rate
Technology
 
$
160,000

 
7
 
19
 
11.5%
Customer lists
 
689,000

 
14
 
29
 
11.5%
 
 
$
849,000

 
13
 
27
 
11.5%
Indefinite-lived Intangible Assets
 
 
 
 
 
 
 
 
Trademarks and tradenames
 
$
70,000

 
N/A
 
N/A
 
11.5%
The following unaudited pro forma information presents the consolidated results of operations of the Company and Lake Region Medical as if that acquisition occurred as of the beginning of fiscal year 2014 (in thousands, except per share amounts):
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 2, 2015
 
October 2, 2015
Sales
 
$
349,561

 
$
1,085,912

Net loss
 
(9,215
)
 
(3,540
)
Loss per share:
 
 
 
 
     Basic
 
$
(0.30
)
 
$
(0.12
)
     Diluted
 
$
(0.30
)
 
$
(0.12
)
Supplemental Cash Flow Information (Tables)
Schedule of Cash Flow, Supplemental Disclosures
 
Nine Months Ended
(in thousands)
September 30, 2016
 
October 2, 2015
Noncash investing and financing activities:
 
 
 
Property, plant and equipment purchases included in accounts payable
$
5,062

 
$
892

Purchase of technology included in accrued expenses
1,000

 

Common stock contributed to 401(k) Plan

 
3,920

Deferred financing costs included in accounts payable

 
7,922

Divestiture of noncash assets
54,591

 

Divestiture of liabilities
2,119

 

Inventories (Tables)
Schedule of Inventory, Current
Inventories are comprised of the following (in thousands):
 
As of
 
September 30, 2016
 
January 1, 2016
Raw materials
$
114,335

 
$
107,296

Work-in-process
99,892

 
93,729

Finished goods
48,005

 
51,141

Total
$
262,232

 
$
252,166

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 September 30, 2016
 
 
 
 
 
 

Purchased technology and patents
$
256,719

 
$
(96,381
)
 
$
2,750

 
$
163,088

Customer lists
759,987

 
(55,416
)
 
4,771

 
709,342

Other
4,534

 
(5,126
)
 
821

 
229

Total amortizing intangible assets
$
1,021,240

 
$
(156,923
)
 
$
8,342

 
$
872,659

At January 1, 2016
 
 
 
 
 
 
 
Purchased technology and patents
$
255,776

 
$
(83,708
)
 
$
1,444

 
$
173,512

Customer lists
761,857

 
(40,815
)
 
(986
)
 
720,056

Other
4,534

 
(4,946
)
 
821

 
409

Total amortizing intangible assets
$
1,022,167

 
$
(129,469
)
 
$
1,279

 
$
893,977

Aggregate intangible asset amortization expense is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Cost of sales
$
4,228

 
$
1,324

 
$
12,708

 
$
4,240

Selling, general and administrative expenses
5,109

 
1,831

 
15,368

 
5,474

Research, development and engineering costs, net
136

 
88

 
375

 
294

Total intangible asset amortization expense
$
9,473

 
$
3,243

 
$
28,451

 
$
10,008

Estimated future intangible asset amortization expense based on the carrying value as of September 30, 2016 is as follows (in thousands):
 
Estimated
Amortization
Expense
Remainder of 2016
$
9,478

2017
44,129

2018
45,048

2019
45,135

2020
45,734

Thereafter
683,135

Total estimated amortization expense
$
872,659

Indefinite-lived intangible assets are comprised of the following (in thousands):
 
Trademarks
and
Tradenames
At January 1, 2016
$
90,288

At September 30, 2016
$
90,288


5.
INTANGIBLE ASSETS (Continued)
The change in goodwill is as follows (in thousands):
 
Greatbatch Medical
 
QiG
 
Lake Region Medical
 
Total
At January 1, 2016
$
303,929

 
$
50,096

 
$
659,545

 
$
1,013,570

Goodwill divested (Note 2)

 
(40,830
)
 

 
(40,830
)
Purchase accounting adjustments (Note 2)

 

 
(1,118
)
 
(1,118
)
Foreign currency translation
123

 

 
5,590

 
5,713

At September 30, 2016
$
304,052

 
$
9,266

 
$
664,017

 
$
977,335

Debt (Tables)
Long-term debt is comprised of the following (in thousands):
 
As of
 
September 30, 2016
 
January 1, 2016
Senior secured term loan A
$
360,938

 
$
375,000

Senior secured term loan B
1,017,312

 
1,025,000

9.125% senior notes due 2023
360,000

 
360,000

Revolving line of credit
50,000

 

Less unamortized discount on term loan B and debt issuance costs
(42,086
)
 
(45,947
)
Total debt
1,746,164

 
1,714,053

Less current portion of long-term debt
29,000

 
29,000

Total long-term debt
$
1,717,164

 
$
1,685,053

Contractual maturities under the Senior Secured Credit Facilities and Senior Notes for the remainder of 2016 and the five years and thereafter, excluding any discounts or premiums, as of September 30, 2016 are as follows (in thousands):
Remaining in 2016
$
7,250

2017
31,344

2018
40,719

2019
47,750

2020
97,750

Thereafter
1,563,437

    Total
$
1,788,250

Information regarding the Company’s outstanding interest rate swaps designated as cash flow hedges as of September 30, 2016 is as follows (dollars in thousands):
Notional Amount
 
Start Date
 
End Date
 
Pay Fixed Rate
 
Receive Current Floating Rate
 
Fair Value
 
Balance Sheet Location
$
200,000

 
Jun-17
 
Jun-20
 
1.1325
%
 
N/A

 
$
(974
)
 
Other Long-Term Liabilities
$
250,000

 
Jul-16
 
Jun-17
 
0.615
%
 
0.53
%
 
$
75

 
Prepaid Expenses and Other Current Assets
The change in deferred debt issuance costs related to the Revolving Credit Facility is as follows (in thousands):
At January 1, 2016
$
4,791

Amortization during the period
(745
)
At September 30, 2016
$
4,046


The change in unamortized discount and debt issuance costs related to the Term Loan Facilities and Senior Notes is as follows (in thousands):
 
Debt Issuance Costs
 
Unamortized Discount on TLB Facility
 
Total
At January 1, 2016
$
35,908

 
$
10,039

 
$
45,947

Financing costs incurred
781

 

 
781

Amortization during the period
(3,669
)
 
(973
)
 
(4,642
)
At September 30, 2016
$
33,020

 
$
9,066

 
$
42,086

Benefit Plans (Tables)
The change in net defined benefit plan liability is as follows (in thousands):
At January 1, 2016
$
7,121

Net defined benefit cost
584

Benefit payments
(76
)
Foreign currency translation
125

At September 30, 2016
$
7,754

Net defined benefit cost is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Service cost
$
108

 
$
76

 
$
326

 
$
233

Interest cost
44

 
15

 
132

 
45

Amortization of net loss
47

 
13

 
140

 
39

Expected return on plan assets
(5
)
 
(2
)
 
(14
)
 
(8
)
Net defined benefit cost
$
194

 
$
102

 
$
584

 
$
309

Stock-Based Compensation (Tables)
The components and classification of stock-based compensation expense were as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Stock options
$
663

 
$
697

 
$
1,857

 
$
1,979

Restricted stock and restricted stock units
1,554

 
1,701

 
5,322

 
5,081

401(k) Plan stock contribution

 
674

 

 
1,984

Total stock-based compensation expense
$
2,217

 
$
3,072

 
$
7,179

 
$
9,044

 
 
 
 
 
 
 
 
Cost of sales
$
158

 
$
685

 
$
505

 
$
2,039

Selling, general and administrative expenses
1,677

 
1,981

 
4,860

 
5,890

Research, development and engineering costs, net
115

 
361

 
408

 
1,070

Other operating expenses, net
267

 
45

 
1,406

 
45

Total stock-based compensation expense
$
2,217

 
$
3,072

 
$
7,179

 
$
9,044

The weighted average fair value and assumptions used to value options granted are as follows:
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
Weighted average fair value
$
9.25

 
$
12.18

Risk-free interest rate
1.56
%
 
1.55
%
Expected volatility
26
%
 
26
%
Expected life (in years)
5

 
5

Expected dividend yield
%
 
%
The following table summarizes the Company’s 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 1, 2016
1,678,900

 
$
28.32

 
 
 
 
Granted
245,439

 
49.58

 
 
 
 
Exercised
(32,833
)
 
22.00

 
 
 
 
Forfeited or expired
(91,385
)
 
46.13

 
 
 
 
Adjustment due to Spin-off

 
(2.02
)
 
 
 
 
Outstanding at September 30, 2016
1,800,121

 
$
28.41

 
5.8
 
$
2.3

Exercisable at September 30, 2016
1,432,312

 
$
23.87

 
5.0
 
$
2.3

The following table summarizes time-vested restricted stock and restricted stock unit activity:
 
Time-Vested
Activity
 
Weighted Average Fair Value
Nonvested at January 1, 2016
39,235

 
$
47.40

Granted
48,702

 
50.15

Vested
(15,391
)
 
51.39

Forfeited
(10,835
)
 
48.67

Nonvested at September 30, 2016
61,711

 
$
48.35

The following table summarizes performance-vested restricted stock unit activity:
 
Performance-
Vested
Activity
 
Weighted
Average
Fair Value
Nonvested at January 1, 2016
577,825

 
$
25.11

Granted
163,651

 
31.20

Vested
(249,153
)
 
15.86

Forfeited
(119,005
)
 
32.15

Nonvested at September 30, 2016
373,318

 
$
31.70

Other Operating Expenses, Net (Tables)
Other Operating Expenses, Net is comprised of the following (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
2014 investments in capacity and capabilities
$
4,542

 
$
5,116

 
$
13,821

 
$
17,854

Orthopedic facilities optimization
329

 
357

 
628

 
1,348

Lake Region Medical consolidations
2,908

 

 
7,355

 

Acquisition and integration costs
5,319

 
5,202

 
23,143

 
5,366

Asset dispositions, severance and other
272

 
3,169

 
5,057

 
4,881

 
$
13,370

 
$
13,844

 
$
50,004

 
$
29,449

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 1, 2016
$
1,429

 
$

 
$
1,595

 
$
3,024

Restructuring charges

 
1,787

 
12,034

 
13,821

Write-offs

 
(1,787
)
 

 
(1,787
)
Cash payments
(1,246
)
 

 
(13,629
)
 
(14,875
)
At September 30, 2016
$
183


$

 
$

 
$
183

The change in accrued liabilities related to the orthopedic facilities optimization is as follows (in thousands):
 
Severance and
Retention
 
Accelerated
Depreciation/Asset
Write-offs
 
Other
 
Total
At January 1, 2016
$

 
$

 
$

 
$

Restructuring charges

 
202

 
426

 
628

Write-offs

 
(202
)
 

 
(202
)
Cash payments

 


 
(426
)
 
(426
)
At September 30, 2016
$

 
$

 
$

 
$

The change in accrued liabilities related to the Lake Region Medical consolidation initiatives is as follows (in thousands):
 
Employee Costs
 
Accelerated
Depreciation/Asset
Write-offs
 
Other
 
Total
At January 1, 2016
$
3,667

 
$

 
$
596

 
$
4,263

Restructuring charges
4,646

 
907

 
1,802

 
7,355

Write-offs

 
(907
)
 

 
(907
)
Cash payments
(7,392
)
 

 
(1,942
)
 
(9,334
)
At September 30, 2016
$
921


$

 
$
456

 
$
1,377

Commitments and Contingencies (Tables)
The change in product warranty liability was comprised of the following (in thousands):
The impact to the Company’s results of operations from its forward contract hedges is as follows (in thousands):

Information regarding outstanding foreign currency contracts designated as cash flow hedges as of September 30, 2016 is as follows (dollars in thousands):
Earnings (Loss) 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
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Numerator for basic and diluted EPS:
 
 
 
 
 
 
 
Net income (loss)
$
11,458

 
$
22

 
$
(1,972
)
 
$
17,313

Denominator for basic EPS:
 
 
 
 
 
 
 
Weighted average shares outstanding
30,782

 
25,536

 
30,756

 
25,424

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options, restricted stock and restricted stock units
371

 
905

 

 
948

Denominator for diluted EPS
31,153

 
26,441

 
30,756

 
26,372

Basic EPS
$
0.37

 
$


$
(0.06
)
 
$
0.68

Diluted EPS
$
0.37

 
$

 
$
(0.06
)
 
$
0.66

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 (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Time-vested stock options, restricted stock and restricted stock units
629

 
260

 
1,862

 
268

Performance-vested restricted stock units
373

 
11

 
417

 
10

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 1, 2016
$
(1,179
)
 
$
(3,746
)
 
$
12,668

 
$
7,743

 
$
1,806

 
$
9,549

Unrealized loss on cash flow hedges

 
(101
)
 

 
(101
)
 
35

 
(66
)
Realized loss on foreign currency hedges

 
929

 

 
929

 
(324
)
 
605

Realized loss on interest rate swap hedges

 
50

 

 
50

 
(18
)
 
32

Foreign currency translation gain

 

 
3,191

 
3,191

 

 
3,191

At September 30, 2016
$
(1,179
)
 
$
(2,868
)
 
$
15,859

 
$
11,812

 
$
1,499

 
$
13,311

 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
At January 1, 2016
$
(1,179
)
 
$
(2,392
)
 
$
3,609

 
$
38

 
$
1,332

 
$
1,370

Unrealized loss on cash flow hedges

 
(2,842
)
 

 
(2,842
)
 
995

 
(1,847
)
Realized loss on foreign currency hedges

 
2,316

 

 
2,316

 
(810
)
 
1,506

Realized loss on interest rate swap hedges

 
50

 

 
50

 
(18
)
 
32

Foreign currency translation gain

 

 
12,250

 
12,250

 

 
12,250

At September 30, 2016
$
(1,179
)
 
$
(2,868
)
 
$
15,859

 
$
11,812

 
$
1,499

 
$
13,311

 
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

Fair Value Measurements (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
The following table provides information regarding assets and liabilities recorded at fair value on a recurring basis (in thousands):
 
 
Fair Value Measurements Using
 
 
At 
 September 30,
 
Quoted
Prices in
Active Markets
for Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
Description
 
2016
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
 
 
 
 
 
 
 
Interest rate swap (Note 6)
 
$
75

 
$

 
$
75

 
$

Liabilities
 
 
 
 
 
 
 
 
Foreign currency contracts (Note 11)
 
$
1,447

 
$

 
$
1,447

 
$

Interest rate swap (Note 6)
 
$
974

 
$

 
$
974

 
$

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 (in thousands): 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Product line sales:
 
 
 
 
 
 
 
Cardio and Vascular
$
148,273

 
$
14,107

 
$
426,142

 
$
37,370

Cardiac/Neuromodulation
95,781

 
75,577

 
284,479

 
248,450

Advanced Surgical, Orthopedics, and Portable Medical
95,190

 
44,976

 
290,836

 
150,795

Electrochem
8,870

 
11,977

 
30,361

 
46,232

Elimination of interproduct line sales
(1,547
)
 

 
(4,631
)
 

Total sales
$
346,567

 
$
146,637

 
$
1,027,187

 
$
482,847


 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Business segment sales:
 
 
 
 
 
 
 
Greatbatch Medical
$
140,458

 
$
144,021

 
$
413,231

 
$
473,784

QiG
2,708

 
2,776

 
8,829

 
10,564

Lake Region Medical
203,913

 

 
607,122

 

Elimination of intersegment sales(a)
(512
)
 
(160
)
 
(1,995
)
 
(1,501
)
Total sales
$
346,567

 
$
146,637

 
$
1,027,187

 
$
482,847


(a) Greatbatch Medical sales include approximately $0.2 million and $0.5 million of intersegment sales for the three and nine months ended September 30, 2016, respectively. Lake Region Medical sales include approximately $0.3 million and $1.3 million of intersegment sales for the three and nine months ended September 30, 2016, respectively. Intersegment sales for the three and nine months periods of 2015 are included in the Greatbatch Medical segment.
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Segment income (loss) from operations:
 
 
 
 
 
 
 
Greatbatch Medical
$
15,986

 
$
21,512

 
$
41,565

 
$
72,179

QiG
562

 
(7,680
)
 
(5,347
)
 
(20,132
)
Lake Region Medical
29,906

 

 
78,461

 

Total segment income from operations
46,454

 
13,832

 
114,679

 
52,047

Unallocated operating expenses
(9,592
)
 
(12,637
)
 
(37,414
)
 
(28,429
)
Operating income
36,862

 
1,195

 
77,265

 
23,618

Unallocated expenses, net
(28,145
)
 
(1,189
)
 
(80,623
)
 
(1,857
)
Income (loss) before provision (benefit) for income taxes
$
8,717

 
$
6

 
$
(3,358
)
 
$
21,761

 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Sales by geographic area:
 
 
 
 
 
 
 
United States
$
206,663

 
$
71,545

 
$
612,876

 
$
217,102

Non-Domestic locations:
 
 
 
 
 
 
 
Puerto Rico
41,745

 
26,816

 
120,217

 
98,247

Belgium
14,256

 
12,305

 
52,913

 
45,690

Rest of world
83,903

 
35,971

 
241,181

 
121,808

Total sales
$
346,567

 
$
146,637

 
$
1,027,187

 
$
482,847

Three customers accounted for a significant portion of the Company’s sales as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
October 2, 2015
 
September 30, 2016
 
October 2, 2015
Customer A
18%
 
17%
 
18%
 
20%
Customer B
18%
 
19%
 
16%
 
18%
Customer C
11%
 
10%
 
12%
 
12%
Total
47%
 
46%
 
46%
 
50%
Long-lived tangible assets by geographic area are as follows (in thousands):
 
As of
 
September 30, 2016
 
January 1, 2016
United States
$
263,347

 
$
264,556

Rest of world
118,324

 
114,936

Total
$
381,671

 
$
379,492

Summary of Significant Accounting Policies (Basis of Presentation) (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Segment
Oct. 2, 2015
Accounting Policies [Abstract]
 
 
 
 
Fiscal Period Duration
91 days 
91 days 
273 days 
273 days 
Number of Reportable Segments
 
 
 
Divestiture and Acquisition (Spin-off of Nuvectra Corporation) (Details) (USD $)
0 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2016
Jan. 1, 2016
Sep. 30, 2016
Nuvectra [Member]
Mar. 14, 2016
Spin-off [Member]
Nuvectra [Member]
Apr. 1, 2016
Spin-off [Member]
Nuvectra [Member]
Oct. 2, 2015
Spin-off [Member]
Nuvectra [Member]
Oct. 2, 2015
Spin-off [Member]
Nuvectra [Member]
Mar. 14, 2016
Spin-off [Member]
Nuvectra [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
 
 
 
Stock conversion ratio
 
 
 
 
 
 
 
Cash capital contribution
 
 
 
 
$ 75,000,000 
 
 
 
Assets divested
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
 
 
 
76,256,000 
Other current assets
 
 
 
 
 
 
 
977,000 
Property, plant and equipment, net
 
 
 
 
 
 
 
4,407,000 
Amortizing intangible assets, net
 
 
 
 
 
 
 
1,931,000 
Goodwill
 
 
 
 
 
 
 
40,830,000 
Deferred income taxes
 
 
 
 
 
 
 
6,446,000 
Total assets
 
 
 
 
 
 
 
130,847,000 
Liabilities transferred
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
2,119,000 
Net assets divested
 
 
 
 
 
 
 
128,728,000 
Pre-tax loss
 
 
 
 
5,200,000 
7,000,000 
18,700,000 
 
Accounts receivable, net
$ 191,409,000 
$ 207,342,000 
$ 7,000,000 
 
 
 
 
 
Divestiture and Acquisition (Summary of Assets Acquired and Liabilities Assumed) (Details) (USD $)
In Thousands, unless otherwise specified
0 Months Ended 0 Months Ended
Sep. 30, 2016
Jan. 1, 2016
Oct. 27, 2015
Lake Region Medical [Member]
Oct. 27, 2015
Lake Region Medical [Member]
Oct. 27, 2015
Common Stock [Member]
Lake Region Medical [Member]
Oct. 27, 2015
Stock Option [Member]
Lake Region Medical [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
Cash
 
 
$ 478,490 
 
 
 
Equity interests
 
 
 
 
245,368 
4,508 
Total purchase consideration
 
 
728,366 
 
 
 
Assets acquired
 
 
 
 
 
 
Current assets
 
 
 
269,815 
 
 
Property, plant and equipment
 
 
 
216,473 
 
 
Amortizing intangible assets
 
 
 
849,000 
 
 
Indefinite-lived intangible assets
 
 
 
70,000 
 
 
Goodwill
977,335 
1,013,570 
 
660,670 
 
 
Other non-current assets
 
 
 
1,629 
 
 
Total assets acquired
 
 
 
2,067,587 
 
 
Liabilities assumed
 
 
 
 
 
 
Current liabilities
 
 
 
103,986 
 
 
Debt assumed
 
 
 
1,044,675 
 
 
Other long-term liabilities
 
 
 
190,560 
 
 
Total liabilities assumed
 
 
 
1,339,221 
 
 
Net assets acquired
 
 
 
$ 728,366 
 
 
Divestiture and Acquisition (Summary of Finite-Lived Intangible Assets Acquired) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 0 Months Ended
Apr. 1, 2016
Oct. 27, 2015
Lake Region Medical [Member]
Oct. 27, 2015
Lake Region Medical [Member]
Trademarks And Tradenames [Member]
Oct. 27, 2015
Lake Region Medical [Member]
Trademarks And Tradenames [Member]
Minimum [Member]
Oct. 27, 2015
Lake Region Medical [Member]
Trademarks And Tradenames [Member]
Maximum [Member]
Oct. 27, 2015
Lake Region Medical [Member]
Technology And Patents [Member]
Oct. 27, 2015
Lake Region Medical [Member]
Technology And Patents [Member]
Minimum [Member]
Oct. 27, 2015
Lake Region Medical [Member]
Technology And Patents [Member]
Maximum [Member]
Oct. 27, 2015
Lake Region Medical [Member]
Customer Lists [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
 
Fair Value Assigned
 
$ 849,000 
 
 
 
$ 160,000 
 
 
$ 689,000 
Weighted Average Amortization Period (Years)
15 years 
13 years 
 
 
 
7 years 
 
 
14 years 
Finite-Lived Intangible Asset, Useful Life
 
27 years 
 
 
 
19 years 
 
 
29 years 
Weighted Average Discount Rate
 
11.50% 
 
 
 
11.50% 
 
 
11.50% 
Indefinite-lived Intangible Assets Acquired
 
 
$ 70,000 
 
 
 
 
 
 
Acquired Indefinite Lived Intangible Asset Weighted Average Discount Rate
 
 
11.50% 
 
 
 
 
 
 
Royalty Rate (Percent)
 
 
 
0.25% 
1.00% 
 
0.50% 
7.00% 
 
Customer Annual Attrition Rate
 
 
 
 
 
 
 
 
5.00% 
Divestiture and Acquisition (Summary of Acquisition Pro Forma Results) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2015
Oct. 2, 2015
Business Acquisition [Line Items]
 
 
Sales
$ 349,561 
$ 1,085,912 
Net loss
$ (9,215)
$ (3,540)
Loss per share:
 
 
Basic (in dollars per share)
$ (0.30)
$ (0.12)
Diluted (in dollars per share)
$ (0.30)
$ (0.12)
Divestiture and Acquisition (Narrative) (Details) (USD $)
0 Months Ended 9 Months Ended
Oct. 27, 2015
Sep. 30, 2016
Oct. 27, 2015
Business Acquisition [Line Items]
 
 
 
Goodwill, measurement-period adjustment
 
$ (1,118,000)
 
Lake Region Medical [Member]
 
 
 
Business Acquisition [Line Items]
 
 
 
Total purchase price and debt assumed
1,770,000,000 
 
 
Repayments of Debt
1,000,000,000 
 
 
Reason for Acquisition
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 OEM customers while building value for stockholders. 
 
 
Goodwill, measurement-period adjustment
 
(1,100,000)
 
Deferred Tax Liability, measurement-period adjustment
 
(2,600,000)
 
Revenue since acquisition
 
607,100,000 
 
Net loss since acquisition
 
27,900,000 
 
Increase in Inventory
 
 
$ 23,000,000 
Supplemental Cash Flow Information (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Noncash investing and financing activities:
 
 
Property, plant and equipment purchases included in accounts payable
$ 5,062 
$ 892 
Purchase of technology included in accrued expenses
1,000 
Common stock contributed to 401(k) Plan
3,920 
Deferred financing costs included in accounts payable
7,922 
Divestiture of noncash assets
54,591 
Divestiture of liabilities
$ 2,119 
$ 0 
Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Jan. 1, 2016
Inventory Disclosure [Abstract]
 
 
Raw materials
$ 114,335 
$ 107,296 
Work-in-process
99,892 
93,729 
Finished goods
48,005 
51,141 
Total
$ 262,232 
$ 252,166 
Intangible Assets (Schedule of Finite-Lived Intangible Assets, Major Class) (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Jan. 1, 2016
Finite-Lived Intangible Assets [Line Items]
 
 
Finite-Lived Intangible Assets, Gross
$ 1,021,240 
$ 1,022,167 
Finite-Lived Intangible Assets, Accumulated Amortization
(156,923)
(129,469)
Foreign Currency Translation
8,342 
1,279 
Total estimated amortization expense
872,659 
893,977 
Purchased Technology And Patents [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Finite-Lived Intangible Assets, Gross
256,719 
255,776 
Finite-Lived Intangible Assets, Accumulated Amortization
(96,381)
(83,708)
Foreign Currency Translation
2,750 
1,444 
Total estimated amortization expense
163,088 
173,512 
Customer Lists [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Finite-Lived Intangible Assets, Gross
759,987 
761,857 
Finite-Lived Intangible Assets, Accumulated Amortization
(55,416)
(40,815)
Foreign Currency Translation
4,771 
(986)
Total estimated amortization expense
709,342 
720,056 
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
(5,126)
(4,946)
Foreign Currency Translation
821 
821 
Total estimated amortization expense
$ 229 
$ 409 
Intangible Assets (Schedule of Finite-Lived Intangible Assets, Amortization Expense) (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Apr. 1, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Acquired Finite-Lived Intangible Asset
 
$ 2,000,000 
 
 
 
Weighted Average Amortization Period (Years)
 
15 years 
 
 
 
Finite Lived Intangible Assets, Amortization Expense
9,473,000 
 
3,243,000 
28,451,000 
10,008,000 
Cost of Sales [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Finite Lived Intangible Assets, Amortization Expense
4,228,000 
 
1,324,000 
12,708,000 
4,240,000 
Selling General And Administrative Expense [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Finite Lived Intangible Assets, Amortization Expense
5,109,000 
 
1,831,000 
15,368,000 
5,474,000 
Research and Development Expense [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Finite Lived Intangible Assets, Amortization Expense
$ 136,000 
 
$ 88,000 
$ 375,000 
$ 294,000 
Intangible Assets (Schedule of Finite-Lived Intangible Assets, Future Amortization Expense) (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Jan. 1, 2016
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
 
 
Remainder of 2016
$ 9,478 
 
2017
44,129 
 
2018
45,048 
 
2019
45,135 
 
2020
45,734 
 
Thereafter
683,135 
 
Total estimated amortization expense
$ 872,659 
$ 893,977 
Intangible Assets (Schedule of Indefinite-Lived Intangible Assets and Goodwill) (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Sep. 30, 2016
Greatbatch Medical [Member]
Sep. 30, 2016
QiG [Member]
Sep. 30, 2016
Lake Region Medical [Member]
Sep. 30, 2016
Trademarks And Tradenames [Member]
Jan. 1, 2016
Trademarks And Tradenames [Member]
Indefinite-Lived Intangible Assets [Roll Forward]
 
 
 
 
 
 
Indefinite-Lived Intangible Assets (Excluding Goodwill), Beginning
$ 90,288 
 
 
 
$ 90,288 
$ 90,288 
Indefinite-Lived Intangible Assets (Excluding Goodwill), Ending
90,288 
 
 
 
90,288 
90,288 
Goodwill [Roll Forward]
 
 
 
 
 
 
Goodwill
1,013,570 
303,929 
50,096 
659,545 
 
 
Goodwill divested
40,830 
40,830 
 
 
Purchase accounting adjustment
(1,118)
(1,118)
 
 
Foreign currency translation
5,713 
123 
5,590 
 
 
Goodwill
$ 977,335 
$ 304,052 
$ 9,266 
$ 664,017 
 
 
Debt (Schedule of Long-Term Debt) (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Jan. 1, 2016
Debt Instrument [Line Items]
 
 
Long-term Debt, Gross
$ 1,788,250 
 
Less unamortized discount on term loan B and debt issuance costs
(42,086)
(45,947)
Total debt
1,746,164 
1,714,053 
Less current portion of long-term debt
29,000 
29,000 
Total long-term debt
1,717,164 
1,685,053 
Secured Debt [Member] |
Loans Payable [Member] |
Term Loan A (TLA) Facility [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term Debt, Gross
360,938 
375,000 
Secured Debt [Member] |
Loans Payable [Member] |
Term Loan B (TLB) Facility [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term Debt, Gross
1,017,312 
1,025,000 
Secured Debt [Member] |
Loans Payable [Member] |
9.125% Senior Notes due 2023 [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term Debt, Gross
360,000 
360,000 
Secured Debt [Member] |
Revolving Credit Facility [Member] |
New Revolving Credit Facility 2015 [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term Debt, Gross
$ 50,000 
$ 0 
Debt (Credit Facility) (Details) (USD $)
0 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended
Sep. 30, 2016
Oct. 27, 2015
Senior Notes [Member]
9.125% Senior Notes due 2023 [Member]
Sep. 30, 2016
Senior Notes [Member]
9.125% Senior Notes due 2023 [Member]
Oct. 27, 2015
Senior Notes [Member]
9.125% Senior Notes due 2023 [Member]
Oct. 27, 2015
Senior Notes [Member]
9.125% Senior Notes due 2023 [Member]
Debt Instrument, Redemption, Period One [Member]
Oct. 27, 2015
Secured Debt [Member]
Senior Secured Credit Facilities [Member]
Oct. 27, 2015
Secured Debt [Member]
Revolving Credit Facility [Member]
New Revolving Credit Facility 2015 [Member]
Sep. 30, 2016
Secured Debt [Member]
Revolving Credit Facility [Member]
New Revolving Credit Facility 2015 [Member]
Oct. 27, 2015
Secured Debt [Member]
Revolving Credit Facility [Member]
New Revolving Credit Facility 2015 [Member]
Oct. 27, 2015
Secured Debt [Member]
Loans Payable [Member]
loan_facility
Oct. 27, 2015
Secured Debt [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
Oct. 27, 2015
Secured Debt [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
Oct. 27, 2015
Secured Debt [Member]
Loans Payable [Member]
Term Loan B (TLB) Facility [Member]
Sep. 30, 2016
Secured Debt [Member]
Loans Payable [Member]
Term Loan B (TLB) Facility [Member]
Oct. 27, 2015
Secured Debt [Member]
Loans Payable [Member]
Term Loan B (TLB) Facility [Member]
Oct. 27, 2015
Secured Debt [Member]
Loans Payable [Member]
Term Loan B (TLB) Facility [Member]
Prime Rate [Member]
Oct. 27, 2015
Secured Debt [Member]
Loans Payable [Member]
Term Loan B (TLB) Facility [Member]
London Interbank Offered Rate (LIBOR) [Member]
Oct. 27, 2015
Secured Debt [Member]
Swingline Loans [Member]
New Revolving Credit Facility 2015 [Member]
Apr. 27, 2016
Secured Debt [Member]
Standby Letters of Credit [Member]
New Revolving Credit Facility 2015 [Member]
Oct. 27, 2015
Secured Debt [Member]
Minimum [Member]
Revolving Credit Facility [Member]
New Revolving Credit Facility 2015 [Member]
Oct. 27, 2015
Secured Debt [Member]
Minimum [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
Prime Rate [Member]
Oct. 27, 2015
Secured Debt [Member]
Minimum [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
London Interbank Offered Rate (LIBOR) [Member]
Oct. 27, 2015
Secured Debt [Member]
Maximum [Member]
Senior Secured Credit Facilities [Member]
Oct. 27, 2015
Secured Debt [Member]
Maximum [Member]
Revolving Credit Facility [Member]
New Revolving Credit Facility 2015 [Member]
Oct. 27, 2015
Secured Debt [Member]
Maximum [Member]
Loans Payable [Member]
Oct. 27, 2015
Secured Debt [Member]
Maximum [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
Prime Rate [Member]
Oct. 27, 2015
Secured Debt [Member]
Maximum [Member]
Loans Payable [Member]
Term Loan A (TLA) Facility [Member]
London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Facility Maximum Borrowing Capacity
 
 
 
 
 
 
 
 
$ 200,000,000 
 
 
 
 
 
 
 
 
$ 15,000,000 
$ 25,000,000 
 
 
 
 
 
 
 
 
Debt Instrument, Face Amount
 
 
 
360,000,000 
 
 
 
 
 
 
 
375,000,000 
 
 
1,025,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Discount, Percentage
 
 
 
 
 
 
 
 
 
 
 
 
1.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Maturity Date
 
Nov. 01, 2023 
 
 
 
 
Oct. 27, 2020 
 
 
 
Oct. 27, 2021 
 
Oct. 27, 2022 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Basis Spread on Variable Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.25% 
4.25% 
 
 
 
0.75% 
1.75% 
 
 
 
2.25% 
3.25% 
Debt Instrument, Interest Rate, Floor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.00% 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Covenant Compliance, Number Of Additional Term Loan Facilities That May Be Added
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Covenant Compliance, First Lien Net Leverage Ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.25 
 
4.25 
 
 
Long-term Debt, Fair Value
 
 
351,000,000 
 
 
 
 
 
 
 
 
 
 
1,005,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.175% 
 
 
 
0.25% 
 
 
 
Revolving line of credit
 
 
 
 
 
 
 
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of Credit Facility, Remaining Borrowing Capacity
 
 
 
 
 
 
 
141,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Letters of Credit Outstanding, Amount
 
 
 
 
 
 
 
$ 8,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Covenant Compliance, Maximum Leverage Ratio
 
 
 
 
 
 
 
 
 
 
6.50 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Covenant Compliance, Adjusted EBITDA To Interest Expense Ratio
 
 
 
 
 
 
 
 
 
 
3.00 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Covenant Compliance, Collateral, Percentage Of Present And Future Voting Capital Shares Of First Tier Foreign Subsidiaries
 
 
 
 
 
66.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Interest Rate, Stated Percentage
 
 
 
9.125% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Redemption Price, Percentage Excluding Make Whole Premium
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed, Using Proceeds From Equity Offerings
 
 
 
 
40.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Redemption Price, Percentage, Using Proceeds From Equity Offerings
 
 
 
 
109.125% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Weighted Average Interest Rate
5.69% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt (Long-term Debt Maturity Schedule) (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Debt Disclosure [Abstract]
 
Remaining in 2016
$ 7,250 
2017
31,344 
2018
40,719 
2019
47,750 
2020
97,750 
Thereafter
1,563,437 
Total
$ 1,788,250 
Debt (Schedule of Interest Rate Swaps and Details) (Details) (USD $)
3 Months Ended 9 Months Ended 1 Months Ended 1 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Jul. 31, 2016
Interest Rate Swap 4 [Member]
Sep. 30, 2016
Interest Rate Swap 4 [Member]
Jun. 30, 2016
Interest Rate Swap 3 [Member]
Sep. 30, 2016
Interest Rate Swap 3 [Member]
Dec. 28, 2012
Interest Rate Swap 1 [Member]
Sep. 30, 2016
Interest Rate Swap [Member]
Oct. 2, 2015
Interest Rate Swap [Member]
Jan. 1, 2016
Interest Rate Swap [Member]
Apr. 3, 2015
Interest Rate Swap 2a [Member]
Apr. 1, 2016
Interest Rate Swap 2b [Member]
Derivative [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative, Term of Contract
 
 
 
 
1 year 
 
3 years 
 
3 years 
 
 
 
 
 
Notional Amount, Asset
 
 
 
 
$ 250,000,000 
$ 250,000,000 
 
 
 
 
 
 
 
 
Notional Amount
 
 
 
 
 
 
200,000,000 
200,000,000 
150,000,000 
 
 
 
45,000,000 
45,000,000 
Annual Notional Amortizing Amount
 
 
 
 
 
 
 
 
50,000,000 
 
 
 
 
 
Description Of Interest Rate Cash Flow Hedge Accounting Method
 
 
 
 
 
 
 
 
 
 
 
These swaps were accounted for as cash flow hedges. 
 
 
Pay Fixed Rate
 
 
 
 
 
0.615% 
 
1.1325% 
 
 
 
 
 
 
Receive Current Floating Rate
 
 
 
 
 
0.53% 
 
 
 
 
 
 
 
 
Fair Value
 
 
 
 
 
 
 
(974,000)
 
 
 
 
 
 
Fair Value, Asset
 
 
 
 
 
75,000 
 
 
 
 
 
 
 
 
Gain (Loss) Recognized In Income Ineffective Portion
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense
$ 27,870,000 
$ 5,825,000 
$ 83,395,000 
$ 8,151,000 
 
 
 
 
 
$ 50,000 
$ 3,500,000 
 
 
 
Debt (Schedule of Deferred Financing Fees) (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Deferred Finance Costs [Roll Forward]
 
 
Total, Beginning Balance
$ (45,947)
 
Amortization during the period
(5,387)
(5,368)
Total, Beginning Balance
42,086 
 
Revolving Credit Facility [Member]
 
 
Deferred Finance Costs [Roll Forward]
 
 
Deferred Finance Costs, Net, Beginning Balance
4,791 
 
Amortization during the period
(745)
 
Deferred Finance Costs, Net, Ending Balance
4,046 
 
Term Loan And Senior Notes [Member]
 
 
Deferred Finance Costs [Roll Forward]
 
 
Deferred Finance Costs, Net, Beginning Balance
35,908 
 
Financing costs deferred
781 
 
Amortization during the period
(3,669)
 
Deferred Finance Costs, Net, Ending Balance
33,020 
 
Total, Beginning Balance
(45,947)
 
Financing costs incurred
781 
 
Amortization during the period
(4,642)
 
Total, Beginning Balance
42,086 
 
Term Loan B (TLB) Facility [Member]
 
 
Deferred Finance Costs [Roll Forward]
 
 
Unamortized Discount on TLB Facility, Beginning Balance
10,039 
 
Financing costs incurred
 
Amortization during the period
(973)
 
Unamortized Discount on TLB Facility, Ending Balance
$ 9,066 
 
Benefit Plans (Schedule of Defined Benefit Plan, Change in Benefit Obligation) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
 
 
 
 
At January 1, 2016
 
 
$ 7,121 
 
Net defined benefit cost
194 
102 
584 
309 
Benefit payments
 
 
(76)
 
Foreign currency translation
 
 
125 
 
At September 30, 2016
$ 7,754 
 
$ 7,754 
 
Benefit Plans (Schedule of Net Defined Benefit Cost) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]
 
 
 
 
Service cost
$ 108 
$ 76 
$ 326 
$ 233 
Interest cost
44 
15 
132 
45 
Amortization of net loss
47 
13 
140 
39 
Expected return on plan assets
(5)
(2)
(14)
(8)
Net defined benefit cost
$ 194 
$ 102 
$ 584 
$ 309 
Stock-Based Compensation (Allocation of Recognized Period Costs) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
$ 2,217 
$ 3,072 
$ 7,179 
$ 9,044 
Stock Option [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
663 
697 
1,857 
1,979 
Restricted Stock And Unit Awards [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
1,554 
1,701 
5,322 
5,081 
Retirement Plan [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
674 
1,984 
Cost of Sales [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
158 
685 
505 
2,039 
Selling General And Administrative Expense [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
1,677 
1,981 
4,860 
5,890 
Research and Development Expense [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
115 
361 
408 
1,070 
Other Operating Income (Expense) [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Allocated Share-based Compensation Expense
$ 267 
$ 45 
$ 1,406 
$ 45 
Stock-Based Compensation (Valuation Assumptions) (Details)
9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
 
Weighted average fair value
$ 9.25 
$ 12.18 
Risk-free interest rate
1.56% 
1.55% 
Expected volatility
26.00% 
26.00% 
Expected life (in years)
5 years 
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
Sep. 30, 2016
Stock Option Activity (in shares)
 
Options Outstanding, Beginning
1,678,900 
Granted
245,439 
Exercised
(32,833)
Forfeited or expired
(91,385)
Adjustment due to Spin-off, Number of Shares
Options Outstanding, Ending
1,800,121 
Options Exercisable
1,432,312 
Weighted Average Exercise Price (in dollars per share)
 
Options Outstanding, Beginning
$ 28.32 
Granted
$ 49.58 
Exercised
$ 22.00 
Forfeited or expired
$ 46.13 
Adjustment due to Spin-off, Weighted Average Exercise Price
$ (2.02)
Options Outstanding, Ending
$ 28.41 
Options Exercisable
$ 23.87 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
 
Options Outstanding, Weighted Average Remaining Contractual Term
5 years 9 months 18 days 
Options Exercisable, Weighted Average Remaining Contractual Term
5 years 
Options Outstanding, Intrinsic Value
$ 2.3 
Options Exercisable, Intrinsic Value
$ 2.3 
Stock-Based Compensation (Restricted Stock and Restricted Stock Units Activity) (Details) (USD $)
9 Months Ended
Sep. 30, 2016
Restricted Stock And Restricted Stock Units Time Based [Member]
 
Restricted Stock and Restricted Stock Unit Activity (in shares)
 
Nonvested, Beginning
39,235 
Granted
48,702 
Vested
(15,391)
Forfeited
(10,835)
Nonvested, Ending
61,711 
Restricted Stock and Restricted Stock Unit Weighted Average Fair Value (in dollars per share)
 
Nonvested, Beginning
$ 47.40 
Granted
$ 50.15 
Vested
$ 51.39 
Forfeited
$ 48.67 
Nonvested, Ending
$ 48.35 
Restricted Stock And Restricted Stock Units Performance Based [Member]
 
Restricted Stock and Restricted Stock Unit Activity (in shares)
 
Nonvested, Beginning
577,825 
Granted
163,651 
Vested
(249,153)
Forfeited
(119,005)
Nonvested, Ending
373,318 
Restricted Stock and Restricted Stock Unit Weighted Average Fair Value (in dollars per share)
 
Nonvested, Beginning
$ 25.11 
Granted
$ 31.20 
Vested
$ 15.86 
Forfeited
$ 32.15 
Nonvested, Ending
$ 31.70 
Stock-Based Compensation (Impact of Spin-off) (Details) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 0 Months Ended
Apr. 1, 2016
Mar. 14, 2016
Spin-off [Member]
Nuvectra [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
Acceleration of remaining compensation expense
$ 0.5 
 
Stockholders' Equity Note, Stock Split, Conversion Ratio
 
Adjusted Exercise Price due to Spin-off, percentage
93.00% 
 
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
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Cost and Expense, Operating
$ 13,370 
$ 13,844 
$ 50,004 
$ 29,449 
Investments in Capacity and Capabilities [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Cost and Expense, Operating
4,542 
5,116 
13,821 
17,854 
Orthopaedic Facility Optimization [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Cost and Expense, Operating
329 
357 
628 
1,348 
Legacy Lake Region Medical Consolidation [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Cost and Expense, Operating
2,908 
7,355 
Acquisition And Integration Costs [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Cost and Expense, Operating
5,319 
5,202 
23,143 
5,366 
Asset Dispositions Severance And Other [Member]
 
 
 
 
Other Operating Income Expense Detail [Line Items]
 
 
 
 
Other Cost and Expense, Operating
$ 272 
$ 3,169 
$ 5,057 
$ 4,881 
Other Operating Expenses, Net (Schedule of Restructuring Reserve By Type of Cost) (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Orthopaedic Facility Optimization [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
$ 0 
Restructuring charges
628 
Write-offs
(202)
Cash payments
(426)
Restructuring Reserve, Ending Balance
Legacy Lake Region Medical Consolidation [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
4,263 
Restructuring charges
7,355 
Write-offs
(907)
Cash payments
(9,334)
Restructuring Reserve, Ending Balance
1,377 
Investments in Capacity and Capabilities [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
3,024 
Restructuring charges
13,821 
Write-offs
(1,787)
Cash payments
(14,875)
Restructuring Reserve, Ending Balance
183 
Employee Severance [Member] |
Legacy Lake Region Medical Consolidation [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
3,667 
Restructuring charges
4,646 
Write-offs
Cash payments
(7,392)
Restructuring Reserve, Ending Balance
921 
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
Severance And Retention [Member] |
Investments in Capacity and Capabilities [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
1,429 
Restructuring charges
Write-offs
Cash payments
(1,246)
Restructuring Reserve, Ending Balance
183 
Accelerated Depreciation And Asset Write Offs [Member] |
Orthopaedic Facility Optimization [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
Restructuring charges
202 
Write-offs
(202)
Cash payments
   
Restructuring Reserve, Ending Balance
Accelerated Depreciation And Asset Write Offs [Member] |
Legacy Lake Region Medical Consolidation [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
Restructuring charges
907 
Write-offs
(907)
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
1,787 
Write-offs
(1,787)
Cash payments
Restructuring Reserve, Ending Balance
Other Restructuring [Member] |
Orthopaedic Facility Optimization [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
Restructuring charges
426 
Write-offs
Cash payments
(426)
Restructuring Reserve, Ending Balance
Other Restructuring [Member] |
Legacy Lake Region Medical Consolidation [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
596 
Restructuring charges
1,802 
Write-offs
Cash payments
(1,942)
Restructuring Reserve, Ending Balance
456 
Other Restructuring [Member] |
Investments in Capacity and Capabilities [Member]
 
Restructuring Reserve [Roll Forward]
 
Restructuring Reserve, Beginning Balance
1,595 
Restructuring charges
12,034 
Write-offs
Cash payments
(13,629)
Restructuring Reserve, Ending Balance
$ 0 
Other Operating Expenses, Net (Narrative) (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Other Cost and Expense, Operating
$ 13,370,000 
$ 13,844,000 
$ 50,004,000 
$ 29,449,000 
Spinoff [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Cost Incurred to Date
10,400,000 
 
10,400,000 
 
Professional Fees
20,000 
3,100,000 
4,400,000 
4,600,000 
Investments in Capacity and Capabilities [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring And Related Activities Capital Expenditures Incurred To Date
23,200,000 
 
23,200,000 
 
Restructuring and Related Cost, Cost Incurred to Date
45,800,000 
 
45,800,000 
 
Other Cost and Expense, Operating
4,542,000 
5,116,000 
13,821,000 
17,854,000 
Investments in Capacity and Capabilities [Member] |
Minimum [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring And Related Activities Expected Capital Expenditures
25,000,000 
 
25,000,000 
 
Restructuring and Related Cost, Expected Cost
46,000,000 
 
46,000,000 
 
Investments in Capacity and Capabilities [Member] |
Minimum [Member] |
Severance And Retention [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
5,000,000 
 
5,000,000 
 
Investments in Capacity and Capabilities [Member] |
Minimum [Member] |
Accelerated Depreciation And Asset Write Offs [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
2,000,000 
 
2,000,000 
 
Investments in Capacity and Capabilities [Member] |
Minimum [Member] |
Other Restructuring [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
39,000,000 
 
39,000,000 
 
Investments in Capacity and Capabilities [Member] |
Maximum [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring And Related Activities Expected Capital Expenditures
28,000,000 
 
28,000,000 
 
Restructuring and Related Cost, Expected Cost
52,000,000 
 
52,000,000 
 
Investments in Capacity and Capabilities [Member] |
Maximum [Member] |
Severance And Retention [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
6,000,000 
 
6,000,000 
 
Investments in Capacity and Capabilities [Member] |
Maximum [Member] |
Accelerated Depreciation And Asset Write Offs [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
3,000,000 
 
3,000,000 
 
Investments in Capacity and Capabilities [Member] |
Maximum [Member] |
Other Restructuring [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
43,000,000 
 
43,000,000 
 
Orthopaedic Facility Optimization [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring And Related Activities Capital Expenditures Incurred To Date
30,000,000 
 
30,000,000 
 
Restructuring and Related Costs, Facility Consolidations
 
 
 
Restructuring and Related Cost, Cost Incurred to Date
44,500,000 
 
44,500,000 
 
Other Cost and Expense, Operating
329,000 
357,000 
628,000 
1,348,000 
Orthopaedic Facility Optimization [Member] |
Severance And Retention [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
11,000,000 
 
11,000,000 
 
Orthopaedic Facility Optimization [Member] |
Accelerated Depreciation And Asset Write Offs [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
13,000,000 
 
13,000,000 
 
Orthopaedic Facility Optimization [Member] |
Minimum [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring And Related Activities Expected Capital Expenditures
31,000,000 
 
31,000,000 
 
Restructuring and Related Cost, Expected Cost
45,000,000 
 
45,000,000 
 
Orthopaedic Facility Optimization [Member] |
Minimum [Member] |
Other Restructuring [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
21,000,000 
 
21,000,000 
 
Orthopaedic Facility Optimization [Member] |
Maximum [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring And Related Activities Expected Capital Expenditures
35,000,000 
 
35,000,000 
 
Restructuring and Related Cost, Expected Cost
48,000,000 
 
48,000,000 
 
Orthopaedic Facility Optimization [Member] |
Maximum [Member] |
Other Restructuring [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
24,000,000 
 
24,000,000 
 
Legacy Lake Region Medical Consolidation [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring And Related Activities Capital Expenditures Incurred To Date
1,700,000 
 
1,700,000 
 
Restructuring and Related Costs, Facility Consolidations
 
 
 
Restructuring and Related Cost, Cost Incurred to Date
9,300,000 
 
9,300,000 
 
Restructuring and Related Costs, Number of Facilities After Consolidation
 
 
 
Other Cost and Expense, Operating
2,908,000 
7,355,000 
Legacy Lake Region Medical Consolidation [Member] |
Minimum [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring And Related Activities Expected Capital Expenditures
5,000,000 
 
5,000,000 
 
Restructuring and Related Cost, Expected Cost
20,000,000 
 
20,000,000 
 
Legacy Lake Region Medical Consolidation [Member] |
Minimum [Member] |
Accelerated Depreciation And Asset Write Offs [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
1,000,000 
 
1,000,000 
 
Legacy Lake Region Medical Consolidation [Member] |
Minimum [Member] |
Other Restructuring [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
11,000,000 
 
11,000,000 
 
Legacy Lake Region Medical Consolidation [Member] |
Minimum [Member] |
Employee Severance [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
8,000,000 
 
8,000,000 
 
Legacy Lake Region Medical Consolidation [Member] |
Maximum [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring And Related Activities Expected Capital Expenditures
6,000,000 
 
6,000,000 
 
Restructuring and Related Cost, Expected Cost
25,000,000 
 
25,000,000 
 
Legacy Lake Region Medical Consolidation [Member] |
Maximum [Member] |
Accelerated Depreciation And Asset Write Offs [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
2,000,000 
 
2,000,000 
 
Legacy Lake Region Medical Consolidation [Member] |
Maximum [Member] |
Other Restructuring [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
13,000,000 
 
13,000,000 
 
Legacy Lake Region Medical Consolidation [Member] |
Maximum [Member] |
Employee Severance [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
10,000,000 
 
10,000,000 
 
Acquisition And Integration Costs [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Other Cost and Expense, Operating
5,319,000 
5,202,000 
23,143,000 
5,366,000 
Asset Dispositions Severance And Other [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Other Cost and Expense, Operating
272,000 
3,169,000 
5,057,000 
4,881,000 
Lake Region Medical [Member] |
Acquisition And Integration Costs [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Cost Incurred to Date
31,700,000 
 
31,700,000 
 
Acquisition related transaction costs
200,000 
5,100,000 
4,200,000 
 
Business Combination, Integration Related Costs
5,200,000 
 
18,900,000 
 
Business Combination, Integration Related Costs Accrued
5,800,000 
 
5,800,000 
 
Lake Region Medical [Member] |
Acquisition And Integration Costs [Member] |
Minimum [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
40,000,000 
 
40,000,000 
 
Restructuring And Related Costs, Expected Capital Investment
20,000,000 
 
20,000,000 
 
Lake Region Medical [Member] |
Acquisition And Integration Costs [Member] |
Maximum [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and Related Cost, Expected Cost
50,000,000 
 
50,000,000 
 
Restructuring And Related Costs, Expected Capital Investment
$ 25,000,000 
 
$ 25,000,000 
 
Income Taxes (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2016
Sep. 30, 2016
Oct. 2, 2015
Dec. 30, 2016
Scenario, Forecast [Member]
Schedule Of Income Taxes [Line Items]
 
 
 
 
Effective income tax rate
 
41.30% 
20.40% 
(30.00%)
Discrete tax charges related to non-deductible Lake Region Medical and Spin-off
$ 2.9 
$ 1.6 
 
 
Unrecognized Tax Benefits
9.8 
9.8 
 
 
Significant Change in Unrecognized Tax Benefits is Reasonably Possible, Amount of Unrecorded Benefit
0.1 
0.1 
 
 
Unrecognized Tax Benefits that Would Impact Effective Tax Rate
$ 9.0 
$ 9.0 
 
 
Commitments and Contingencies (Schedule of Product Warranty Liability) (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Movement in Standard Product Warranty Accrual [Roll Forward]
 
At January 1, 2016
$ 3,316 
Additions to warranty reserve
1,568 
Warranty claims settled
(2,351)
At September 30, 2016
$ 2,533 
Commitments and Contingencies (Foreign Currency Contracts) (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Jan. 1, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Foreign Currency Cash Flow Hedges [Abstract]
 
 
 
 
 
Addition in cost of sales
$ 929,000 
 
$ 562,000 
$ 2,316,000 
$ 1,226,000 
Ineffective portion of change in fair value
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
 
Foreign Currency Contracts Description
From time to time, the Company enters into forward contracts to purchase Mexican pesos in order to hedge the risk of peso-denominated payments associated with operations at its facilities in Mexico 
 
 
 
 
Payments for termination of foreign currency contract
 
2,400,000 
 
 
 
Foreign currency cash flow hedge gain (loss) to be reclassified
1,700,000 
 
 
1,700,000 
 
Terminated FX Contract [Member]
 
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
 
Foreign currency cash flow hedge gain (loss) to be reclassified
(300,000)
 
 
(300,000)
 
FX Contract 1 [Member]
 
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
 
Aggregate Notional Amount
4,120,000 
 
 
4,120,000 
 
Start Date
 
 
 
Jan. 01, 2016 
 
End Date
 
 
 
Dec. 31, 2016 
 
$/Peso
0.0584 
 
 
0.0584 
 
FX Contract 2 [Member]
 
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
 
Aggregate Notional Amount
2,795,000 
 
 
2,795,000 
 
Start Date
 
 
 
Apr. 01, 2016 
 
End Date
 
 
 
Dec. 31, 2016 
 
$/Peso
0.0565 
 
 
0.0565 
 
FX Contract 3 [Member]
 
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
 
Aggregate Notional Amount
18,490,000 
 
 
18,490,000 
 
Start Date
 
 
 
Jan. 01, 2017 
 
End Date
 
 
 
Sep. 01, 2017 
 
$/Peso
0.0514 
 
 
0.0514 
 
FX Contract 4 [Member]
 
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
 
Aggregate Notional Amount
6,164,000 
 
 
6,164,000 
 
Start Date
 
 
 
Oct. 01, 2017 
 
End Date
 
 
 
Dec. 01, 2017 
 
$/Peso
0.0514 
 
 
0.0514 
 
Accrued Expenses [Member] |
FX Contract 1 [Member]
 
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
 
Fair Value
(506,000)
 
 
(506,000)
 
Accrued Expenses [Member] |
FX Contract 2 [Member]
 
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
 
Fair Value
(258,000)
 
 
(258,000)
 
Accrued Expenses [Member] |
FX Contract 3 [Member]
 
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
 
Fair Value
(415,000)
 
 
(415,000)
 
Other Long-Term Liabilities [Member] |
FX Contract 4 [Member]
 
 
 
 
 
Foreign Currency Cash Flow Hedge [Line Items]
 
 
 
 
 
Fair Value
$ (268,000)
 
 
$ (268,000)
 
Commitments and Contingencies (Narrative) (Details) (USD $)
3 Months Ended 9 Months Ended 0 Months Ended
Sep. 30, 2016
Jan. 1, 2016
Sep. 30, 2016
Jan. 26, 2016
Positive Outcome of Litigation [Member]
patent
Sep. 30, 2016
Other Noncurrent Liabilities [Member]
Jan. 1, 2016
Other Noncurrent Liabilities [Member]
Gain Contingencies [Line Items]
 
 
 
 
 
 
Gain Contingency, Patents Found Infringed upon, Number
 
 
 
 
 
Litigation Settlement, Amount
 
 
 
$ 37,500,000 
 
 
Gain (Loss) Related to Litigation Settlement
 
 
 
 
 
Accrual for Environmental Loss Contingencies
 
 
 
 
1,100,000 
1,100,000 
Product Warranty Description
 
 
The Company generally warrants that its products will meet customer specifications and will be free from defects in materials and workmanship. 
 
 
 
Foreign Currency Contracts Description
From time to time, the Company enters into forward contracts to purchase Mexican pesos in order to hedge the risk of peso-denominated payments associated with operations at its facilities in Mexico 
 
 
 
 
 
Payments for termination of foreign currency contract
 
2,400,000 
 
 
 
 
Self-insurance reserves
$ 6,700,000 
$ 7,900,000 
$ 6,700,000 
 
 
 
Earnings (Loss) Per Share (EPS) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Net Income (Loss) Available to Common Stockholders, Diluted [Abstract]
 
 
 
 
Net income (loss)
$ 11,458 
$ 22 
$ (1,972)
$ 17,313 
Weighted Average Number of Shares Outstanding Reconciliation [Abstract]
 
 
 
 
Basic
30,782,000 
25,536,000 
30,756,000 
25,424,000 
Effect of dilutive securities stock options, restricted stock and restricted stock units
371,000 
905,000 
948,000 
Denominator for diluted EPS
31,153,000 
26,441,000 
30,756,000 
26,372,000 
Basic EPS (in dollars per share)
$ 0.37 
$ 0.00 
$ (0.06)
$ 0.68 
Diluted EPS (in dollars per share)
$ 0.37 
$ 0.00 
$ (0.06)
$ 0.66 
Anitdilutive Securities Excluded From Earnings Per Share [Abstract]
 
 
 
 
Time-vested stock options, restricted stock and restricted stock units
629,000 
260,000 
1,862,000 
268,000 
Performance-vested stock options and restricted stock units
373,000 
11,000 
417,000 
10,000 
Accumulated Other Comprehensive Income (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Defined Benefit Plan Liability
 
 
 
 
Defined Benefit Plan Liability, Beginning
$ (1,179)
$ (1,181)
$ (1,179)
$ (1,181)
Defined Benefit Plan Liability, Ending
(1,179)
(1,181)
(1,179)
(1,181)
Cash Flow Hedges
 
 
 
 
Cash Flow Hedges, Beginning
(3,746)
(3,619)
(2,392)
(2,558)
Unrealized loss on cash flow hedges
(101)
(1,670)
(2,842)
(3,857)
Realized gain loss on foreign currency hedges - before tax
929 
562 
2,316 
1,226 
Realized gain loss on interest rate swaps - before tax
50 
2,169 
50 
2,631 
Cash Flow Hedges, End
(2,868)
(2,558)
(2,868)
(2,558)
Foreign Currency Translation Adjustment
 
 
 
 
Foreign Currency Translation Adjustment, Beginning
12,668 
9,839 
3,609 
11,450 
Net foreign currency translation gain (loss)
3,191 
144 
12,250 
(1,467)
Foreign Currency Translation Adjustment, End
15,859 
9,983 
15,859 
9,983 
Total Pre-Tax Amount
 
 
 
 
Total Pre-Tax Amount, Beginning
7,743 
5,039 
38 
7,711 
Unrealized loss on cash flow hedges
(101)
(1,670)
(2,842)
(3,857)
Realized gain loss on foreign currency hedges - before tax
929 
562 
2,316 
1,226 
Realized gain loss on interest rate swaps - before tax
50 
2,169 
50 
2,631 
Net foreign currency translation gain (loss)
3,191 
144 
12,250 
(1,467)
Total Pre-Tax Amount, End
11,812 
6,244 
11,812 
6,244 
Tax
 
 
 
 
Tax, Beginning
1,806 
1,784 
1,332 
1,412 
Unrealized gain (loss) on cash flow hedges
35 
584 
995 
1,350 
Realized gain loss on foreign currency contracts - tax
(324)
(197)
(810)
(429)
Realized gain loss on interest rate swap hedges - tax
(18)
(759)
(18)
(921)
Net foreign currency translation gain (loss)
Tax, End
1,499 
1,412 
1,499 
1,412 
Net-of-Tax Amount
 
 
 
 
Total Net-of-Tax Amount, Beginning
9,549 
6,823 
1,370 
9,123 
Unrealized gain (loss) on cash flow hedges, net of tax
(66)
(1,086)
(1,847)
(2,507)
Realized gain loss on foreign currency hedges, net of tax
605 
365 
1,506 
797 
Realized gain loss on interest rate swap hedges, net of tax
32 
1,410 
32 
1,710 
Foreign currency translation gain (loss)
3,191 
144 
12,250 
(1,467)
Total Net-of-Tax Amount, End
$ 13,311 
$ 7,656 
$ 13,311 
$ 7,656 
Fair Value Measurements (Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis) (Details) (Fair Value, Measurements, Recurring [Member], USD $)
Sep. 30, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Foreign currency contracts liabilities
$ 1,447,000 
Interest Rate Swap [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Interest rate swap assets
75,000 
Interest rate swap liabilities
974,000 
Fair Value, Inputs, Level 1 [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Foreign currency contracts liabilities
Fair Value, Inputs, Level 1 [Member] |
Interest Rate Swap [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Interest rate swap assets
Interest rate swap liabilities
Fair Value, Inputs, Level 2 [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Foreign currency contracts liabilities
1,447,000 
Fair Value, Inputs, Level 2 [Member] |
Interest Rate Swap [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Interest rate swap assets
75,000 
Interest rate swap liabilities
974,000 
Fair Value, Inputs, Level 3 [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Foreign currency contracts liabilities
Fair Value, Inputs, Level 3 [Member] |
Interest Rate Swap [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Interest rate swap assets
Interest rate swap liabilities
$ 0 
Fair Value Measurements (Narrative) (Details) (USD $)
3 Months Ended 9 Months Ended
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Jan. 1, 2016
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
 
 
 
 
Foreign currency cash flow hedge gain (loss) to be reclassified
 
$ 1,700,000 
 
 
Long-lived asset impairment loss
 
1,000,000 
 
Goodwill impairment loss
 
 
Indefinite-lived intangible assets (excluding goodwill) impairment loss
 
 
Cost-method investment impairment loss
 
 
Equity method investments, carrying value
 
24,400,000 
 
20,600,000 
Income from equity method investment
4,600,000 
 
 
 
Equity method investment cash distribution
3,400,000 
 
 
 
Fair Value, Inputs, Level 2 [Member]
 
 
 
 
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
 
 
 
 
Gain on cost method and equity method investments
 
$ 900,000 
$ 5,100,000 
 
Chinese Venture Capital Fund [Member]
 
 
 
 
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
 
 
 
 
Equity method investment ownership (percent)
 
7.00% 
 
 
Business Segment, Geographic And Concentration Risk Information (Reconciliation of Revenue from Segments to Consolidated) (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
$ 346,567,000 
$ 146,637,000 
$ 1,027,187,000 
$ 482,847,000 
Interproduct-Line Eliminations [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
(1,547,000)
(4,631,000)
Intersegment Eliminations [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
(512,000)
(160,000)
(1,995,000)
(1,501,000)
Greatbatch Medical [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Revenue From Intersegment Sales
200,000 
 
500,000 
 
Greatbatch Medical [Member] |
Operating Segments [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
140,458,000 
144,021,000 
413,231,000 
473,784,000 
QiG [Member] |
Operating Segments [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
2,708,000 
2,776,000 
8,829,000 
10,564,000 
Lake Region Medical [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Revenue From Intersegment Sales
300,000 
 
1,300,000 
 
Lake Region Medical [Member] |
Operating Segments [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
203,913,000 
607,122,000 
Cardio And Vascular [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
148,273,000 
14,107,000 
426,142,000 
37,370,000 
Cardiac Neuromodulation [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
95,781,000 
75,577,000 
284,479,000 
248,450,000 
Advanced Surgical, Orthopedics, and Portable Medical [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
95,190,000 
44,976,000 
290,836,000 
150,795,000 
Electrochem [Member]
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
Sales Revenue, Net
$ 8,870,000 
$ 11,977,000 
$ 30,361,000 
$ 46,232,000 
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
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Segment Reporting Information [Line Items]
 
 
 
 
Operating income
$ 36,862 
$ 1,195 
$ 77,265 
$ 23,618 
Unallocated expenses, net
(28,145)
(1,189)
(80,623)
(1,857)
Income (loss) before provision (benefit) for income taxes
8,717 
(3,358)
21,761 
Operating Segments [Member]
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Operating income
46,454 
13,832 
114,679 
52,047 
Operating Segments [Member] |
Greatbatch Medical [Member]
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Operating income
15,986 
21,512 
41,565 
72,179 
Operating Segments [Member] |
QiG [Member]
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Operating income
562 
(7,680)
(5,347)
(20,132)
Operating Segments [Member] |
Lake Region Medical [Member]
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Operating income
29,906 
78,461 
Segment Reconciling Items [Member]
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Operating income
$ (9,592)
$ (12,637)
$ (37,414)
$ (28,429)
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
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Revenue, Major Customer [Line Items]
 
 
 
 
Sales Revenue, Net
$ 346,567 
$ 146,637 
$ 1,027,187 
$ 482,847 
UNITED STATES
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Sales Revenue, Net
206,663 
71,545 
612,876 
217,102 
PUERTO RICO
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Sales Revenue, Net
41,745 
26,816 
120,217 
98,247 
BELGIUM
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Sales Revenue, Net
14,256 
12,305 
52,913 
45,690 
Rest Of World [Member]
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Sales Revenue, Net
$ 83,903 
$ 35,971 
$ 241,181 
$ 121,808 
Business Segment, Geographic and Concentration Risk Information (Schedule of Revenue By Major Customers By Reporting Segments) (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Oct. 2, 2015
Sep. 30, 2016
Oct. 2, 2015
Revenue, Major Customer [Line Items]
 
 
 
 
Revenue Major Customer Percent
47.00% 
46.00% 
46.00% 
50.00% 
Customer A [Member]
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Revenue Major Customer Percent
18.00% 
17.00% 
18.00% 
20.00% 
Customer B [Member]
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Revenue Major Customer Percent
18.00% 
19.00% 
16.00% 
18.00% 
Customer C [Member]
 
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
 
Revenue Major Customer Percent
11.00% 
10.00% 
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
Sep. 30, 2016
Jan. 1, 2016
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Property, plant and equipment, net
$ 381,671 
$ 379,492 
UNITED STATES
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Property, plant and equipment, net
263,347 
264,556 
Rest Of World [Member]
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Property, plant and equipment, net
$ 118,324 
$ 114,936 
Business Segment, Geographic and Concentration Risk Information (Narrative) (Details)
9 Months Ended
Sep. 30, 2016
Segment
Segment Reporting Information [Line Items]
 
Number of Reportable Segments