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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Integer Holdings Corporation | NYSE:ITGR | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 113.14 | 0 | 09:09:56 |
|
Delaware
|
|
16-1531026
|
(State of
Incorporation)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
Large accelerated filer
|
ý
|
|
Accelerated filer
|
¨
|
|
|
|
|
|
Non-accelerated filer
|
¨
|
|
Smaller reporting company
|
¨
|
|
|
Page No.
|
|
||
|
|
|
ITEM 1.
|
||
|
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ITEM 2.
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ITEM 3.
|
||
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ITEM 4.
|
||
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ITEM 1.
|
||
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ITEM 1A.
|
||
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ITEM 2.
|
||
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ITEM 3.
|
||
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ITEM 4.
|
||
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ITEM 5.
|
||
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ITEM 6.
|
||
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|
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As of
|
||||||
|
April 1, 2016
|
|
January 1, 2016
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
54,123
|
|
|
$
|
82,478
|
|
Accounts receivable, net of allowance for doubtful accounts of $1.0 million in 2016 and 2015
|
183,563
|
|
|
207,342
|
|
||
Inventories
|
267,380
|
|
|
252,166
|
|
||
Refundable income taxes
|
11,099
|
|
|
11,730
|
|
||
Prepaid expenses and other current assets
|
18,241
|
|
|
20,888
|
|
||
Total current assets
|
534,406
|
|
|
574,604
|
|
||
Property, plant and equipment, net
|
381,460
|
|
|
379,492
|
|
||
Amortizing intangible assets, net
|
894,553
|
|
|
893,977
|
|
||
Indefinite-lived intangible assets
|
90,288
|
|
|
90,288
|
|
||
Goodwill
|
979,501
|
|
|
1,013,570
|
|
||
Deferred income taxes
|
3,537
|
|
|
3,587
|
|
||
Other assets
|
29,238
|
|
|
26,618
|
|
||
Total assets
|
$
|
2,912,983
|
|
|
$
|
2,982,136
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current portion of long-term debt
|
$
|
29,000
|
|
|
$
|
29,000
|
|
Accounts payable
|
83,306
|
|
|
84,362
|
|
||
Income taxes payable
|
3,447
|
|
|
3,221
|
|
||
Accrued expenses
|
100,756
|
|
|
97,257
|
|
||
Total current liabilities
|
216,509
|
|
|
213,840
|
|
||
Long-term debt
|
1,733,547
|
|
|
1,685,053
|
|
||
Deferred income taxes
|
218,969
|
|
|
221,804
|
|
||
Other long-term liabilities
|
11,501
|
|
|
10,814
|
|
||
Total liabilities
|
2,180,526
|
|
|
2,131,511
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.001 par value, authorized 100,000,000 shares; no shares issued or outstanding in 2016 or 2015
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value, authorized 100,000,000 shares; 30,909,429 shares issued and 30,774,842 shares outstanding in 2016; 30,664,119 shares issued and 30,601,167 shares outstanding in 2015.
|
31
|
|
|
31
|
|
||
Additional paid-in capital
|
627,343
|
|
|
620,470
|
|
||
Treasury stock, at cost, 134,587 shares in 2016 and 62,952 shares in 2015
|
(5,880
|
)
|
|
(3,100
|
)
|
||
Retained earnings
|
90,466
|
|
|
231,854
|
|
||
Accumulated other comprehensive income
|
20,497
|
|
|
1,370
|
|
||
Total stockholders’ equity
|
732,457
|
|
|
850,625
|
|
||
Total liabilities and stockholders’ equity
|
$
|
2,912,983
|
|
|
$
|
2,982,136
|
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Sales
|
$
|
332,238
|
|
|
$
|
161,320
|
|
Cost of sales
|
240,770
|
|
|
108,922
|
|
||
Gross profit
|
91,468
|
|
|
52,398
|
|
||
Operating expenses:
|
|
|
|
||||
Selling, general and administrative expenses
|
41,888
|
|
|
22,609
|
|
||
Research, development and engineering costs, net
|
17,306
|
|
|
12,545
|
|
||
Other operating expenses, net
|
21,140
|
|
|
7,855
|
|
||
Total operating expenses
|
80,334
|
|
|
43,009
|
|
||
Operating income
|
11,134
|
|
|
9,389
|
|
||
Interest expense, net
|
27,617
|
|
|
1,120
|
|
||
Other income, net
|
(3,721
|
)
|
|
(1,551
|
)
|
||
Income (loss) before provision (benefit) for income taxes
|
(12,762
|
)
|
|
9,820
|
|
||
Provision (benefit) for income taxes
|
(102
|
)
|
|
1,812
|
|
||
Net income (loss)
|
$
|
(12,660
|
)
|
|
$
|
8,008
|
|
Earnings (loss) per share:
|
|
|
|
||||
Basic
|
$
|
(0.41
|
)
|
|
$
|
0.32
|
|
Diluted
|
$
|
(0.41
|
)
|
|
$
|
0.31
|
|
Weighted average shares outstanding:
|
|
|
|
||||
Basic
|
30,718
|
|
|
25,264
|
|
||
Diluted
|
30,718
|
|
|
26,219
|
|
||
Comprehensive Income
|
|
|
|
||||
Net income (loss)
|
$
|
(12,660
|
)
|
|
$
|
8,008
|
|
Other comprehensive income (loss):
|
|
|
|
||||
Foreign currency translation gain (loss)
|
18,760
|
|
|
(1,825
|
)
|
||
Net change in cash flow hedges, net of tax
|
367
|
|
|
(600
|
)
|
||
Other comprehensive income (loss)
|
19,127
|
|
|
(2,425
|
)
|
||
Comprehensive income
|
$
|
6,467
|
|
|
$
|
5,583
|
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(12,660
|
)
|
|
$
|
8,008
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
22,413
|
|
|
9,178
|
|
||
Debt related amortization included in interest expense
|
1,773
|
|
|
193
|
|
||
Stock-based compensation
|
2,835
|
|
|
2,253
|
|
||
Other non-cash gains, net
|
(3,522
|
)
|
|
(1,089
|
)
|
||
Deferred income taxes
|
(2,445
|
)
|
|
(568
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
23,856
|
|
|
14,311
|
|
||
Inventories
|
(14,444
|
)
|
|
(8,746
|
)
|
||
Prepaid expenses and other current assets
|
1,410
|
|
|
1,060
|
|
||
Accounts payable
|
1,913
|
|
|
(738
|
)
|
||
Accrued expenses
|
7,844
|
|
|
(12,614
|
)
|
||
Income taxes
|
885
|
|
|
(3,917
|
)
|
||
Net cash provided by operating activities
|
29,858
|
|
|
7,331
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Acquisition of property, plant and equipment
|
(18,768
|
)
|
|
(15,380
|
)
|
||
Purchase of cost and equity method investments, net
|
(648
|
)
|
|
(2,000
|
)
|
||
Other investing activities
|
285
|
|
|
—
|
|
||
Net cash used in investing activities
|
(19,131
|
)
|
|
(17,380
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Principal payments of long-term debt
|
(7,250
|
)
|
|
(2,500
|
)
|
||
Proceeds from issuance of long-term debt
|
55,000
|
|
|
—
|
|
||
Issuance of common stock
|
—
|
|
|
4,207
|
|
||
Payment of debt issuance costs
|
(781
|
)
|
|
—
|
|
||
Spin-off of cash and cash equivalents to Nuvectra Corporation
|
(76,256
|
)
|
|
—
|
|
||
Purchase of non-controlling interests
|
(6,818
|
)
|
|
—
|
|
||
Other financing activities
|
(3,983
|
)
|
|
(855
|
)
|
||
Net cash provided by (used in) financing activities
|
(40,088
|
)
|
|
852
|
|
||
Effect of foreign currency exchange rates on cash and cash equivalents
|
1,006
|
|
|
(608
|
)
|
||
Net decrease in cash and cash equivalents
|
(28,355
|
)
|
|
(9,805
|
)
|
||
Cash and cash equivalents, beginning of period
|
82,478
|
|
|
76,824
|
|
||
Cash and cash equivalents, end of period
|
$
|
54,123
|
|
|
$
|
67,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
||||||||||||||
|
|
|
|
|
Additional
|
|
Treasury
|
|
|
|
Other
|
|
Total
|
||||||||||||||||
|
Common Stock
|
|
Paid-In
|
|
Stock
|
|
Retained
|
|
Comprehensive
|
|
Stockholders’
|
||||||||||||||||||
|
Shares
|
|
Amount
|
|
Capital
|
|
Shares
|
|
Amount
|
|
Earnings
|
|
Income
|
|
Equity
|
||||||||||||||
At January 1, 2016
|
30,664
|
|
|
$
|
31
|
|
|
$
|
620,470
|
|
|
(63
|
)
|
|
$
|
(3,100
|
)
|
|
$
|
231,854
|
|
|
$
|
1,370
|
|
|
$
|
850,625
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
2,835
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,835
|
|
||||||
Net shares issued (acquired) under stock incentive plans
|
245
|
|
|
—
|
|
|
(1,203
|
)
|
|
(72
|
)
|
|
(2,780
|
)
|
|
—
|
|
|
—
|
|
|
(3,983
|
)
|
||||||
Spin-off of Nuvectra Corporation
|
—
|
|
|
—
|
|
|
5,241
|
|
|
—
|
|
|
—
|
|
|
(128,728
|
)
|
|
—
|
|
|
(123,487
|
)
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,660
|
)
|
|
—
|
|
|
(12,660
|
)
|
||||||
Total other comprehensive income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,127
|
|
|
19,127
|
|
||||||
At April 1, 2016
|
30,909
|
|
|
$
|
31
|
|
|
$
|
627,343
|
|
|
(135
|
)
|
|
$
|
(5,880
|
)
|
|
$
|
90,466
|
|
|
$
|
20,497
|
|
|
$
|
732,457
|
|
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
DIVESTITURE AND ACQUISITION
|
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
|
|
Cash
|
$
|
478,490
|
|
Fair value of Greatbatch common stock
|
245,368
|
|
|
Replacement stock options attributable to pre-acquisition service
|
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
|
660,487
|
|
|
Other non-current assets
|
1,629
|
|
|
Total assets acquired
|
2,067,404
|
|
|
Liabilities assumed
|
|
||
Current liabilities
|
103,149
|
|
|
Debt assumed
|
1,044,675
|
|
|
Other long-term liabilities
|
191,214
|
|
|
Total liabilities assumed
|
1,339,038
|
|
|
Net assets acquired
|
$
|
728,366
|
|
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%
|
|
|
Three Months Ended
|
||||||
|
|
April 1, 2016
|
|
April 3, 2015
|
||||
Sales
|
|
$
|
332,238
|
|
|
$
|
358,417
|
|
Net income (loss)
|
|
(12,660
|
)
|
|
966
|
|
||
Earnings (loss) per share:
|
|
|
|
|
||||
Basic
|
|
$
|
(0.41
|
)
|
|
$
|
0.03
|
|
Diluted
|
|
$
|
(0.41
|
)
|
|
$
|
0.03
|
|
|
Three Months Ended
|
||||||
(in thousands)
|
April 1, 2016
|
|
April 3, 2015
|
||||
Noncash investing and financing activities:
|
|
|
|
||||
Common stock contributed to 401(k) Plan
|
$
|
—
|
|
|
$
|
3,920
|
|
Property, plant and equipment purchases included in accounts payable
|
4,304
|
|
|
943
|
|
||
Purchase of technology included in accrued expenses
|
2,000
|
|
|
—
|
|
||
Divestiture of noncash assets
|
54,591
|
|
|
—
|
|
||
Divestiture of liabilities
|
2,119
|
|
|
—
|
|
4.
|
INVENTORIES
|
|
As of
|
||||||
|
April 1, 2016
|
|
January 1, 2016
|
||||
Raw materials
|
$
|
110,095
|
|
|
$
|
107,296
|
|
Work-in-process
|
104,698
|
|
|
93,729
|
|
||
Finished goods
|
52,587
|
|
|
51,141
|
|
||
Total
|
$
|
267,380
|
|
|
$
|
252,166
|
|
5.
|
INTANGIBLE ASSETS
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Foreign
Currency
Translation
|
|
Net
Carrying
Amount
|
||||||||
At April 1, 2016
|
|
|
|
|
|
|
|
||||||||
Purchased technology and patents
|
$
|
256,719
|
|
|
$
|
(87,626
|
)
|
|
$
|
3,270
|
|
|
$
|
172,363
|
|
Customer lists
|
759,987
|
|
|
(45,315
|
)
|
|
7,176
|
|
|
721,848
|
|
||||
Other
|
4,534
|
|
|
(4,995
|
)
|
|
803
|
|
|
342
|
|
||||
Total amortizing intangible assets
|
$
|
1,021,240
|
|
|
$
|
(137,936
|
)
|
|
$
|
11,249
|
|
|
$
|
894,553
|
|
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
|
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Cost of sales
|
$
|
4,240
|
|
|
$
|
1,471
|
|
Selling, general and administrative expenses
|
5,136
|
|
|
1,813
|
|
||
Research, development and engineering costs, net
|
88
|
|
|
103
|
|
||
Total intangible asset amortization expense
|
$
|
9,464
|
|
|
$
|
3,387
|
|
|
Estimated
Amortization
Expense
|
||
Remainder of 2016
|
$
|
28,538
|
|
2017
|
44,249
|
|
|
2018
|
45,179
|
|
|
2019
|
45,272
|
|
|
2020
|
45,876
|
|
|
Thereafter
|
685,439
|
|
|
Total estimated amortization expense
|
$
|
894,553
|
|
|
Trademarks
and
Tradenames
|
||
At January 1, 2016
|
$
|
90,288
|
|
At April 1, 2016
|
$
|
90,288
|
|
|
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 adjustment (Note 2)
|
—
|
|
|
—
|
|
|
(1,301
|
)
|
|
(1,301
|
)
|
||||
Foreign currency translation
|
172
|
|
|
—
|
|
|
7,890
|
|
|
8,062
|
|
||||
At April 1, 2016
|
$
|
304,101
|
|
|
$
|
9,266
|
|
|
$
|
666,134
|
|
|
$
|
979,501
|
|
6.
|
DEBT
|
|
As of
|
||||||
|
April 1, 2016
|
|
January 1, 2016
|
||||
Senior secured term loan A
|
$
|
370,313
|
|
|
$
|
375,000
|
|
Senior secured term loan B
|
1,022,437
|
|
|
1,025,000
|
|
||
9.125% senior notes due 2023
|
360,000
|
|
|
360,000
|
|
||
Revolving line of credit
|
55,000
|
|
|
—
|
|
||
Less unamortized discount on term loan B and debt issuance costs
|
(45,203
|
)
|
|
(45,947
|
)
|
||
Total debt
|
1,762,547
|
|
|
1,714,053
|
|
||
Less current portion of long-term debt
|
29,000
|
|
|
29,000
|
|
||
Total long-term debt
|
$
|
1,733,547
|
|
|
$
|
1,685,053
|
|
Remaining in 2016
|
$
|
21,750
|
|
2017
|
31,344
|
|
|
2018
|
40,719
|
|
|
2019
|
47,750
|
|
|
2020
|
102,750
|
|
|
Thereafter
|
1,563,437
|
|
|
Total
|
$
|
1,807,750
|
|
At January 1, 2016
|
$
|
4,791
|
|
Amortization during the period
|
(248
|
)
|
|
At April 1, 2016
|
$
|
4,543
|
|
|
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
|
(1,201
|
)
|
|
(324
|
)
|
|
(1,525
|
)
|
|||
At April 1, 2016
|
$
|
35,488
|
|
|
$
|
9,715
|
|
|
$
|
45,203
|
|
7.
|
BENEFIT PLANS
|
At January 1, 2016
|
$
|
7,121
|
|
Net defined benefit cost
|
192
|
|
|
Foreign currency translation
|
288
|
|
|
At April 1, 2016
|
$
|
7,601
|
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Service cost
|
$
|
108
|
|
|
$
|
79
|
|
Interest cost
|
43
|
|
|
15
|
|
||
Amortization of net loss
|
46
|
|
|
14
|
|
||
Expected return on plan assets
|
(5
|
)
|
|
(3
|
)
|
||
Net defined benefit cost
|
$
|
192
|
|
|
$
|
105
|
|
8.
|
STOCK-BASED COMPENSATION
|
•
|
Stock options
: Holders of Greatbatch stock option awards continued to hold stock options to purchase the same number of shares of Greatbatch common stock at an adjusted exercise price and one new Nuvectra stock option for every
three
Greatbatch 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 Greatbatch 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 Greatbatch restricted stock and restricted stock unit awards received one new share of Nuvectra restricted stock and restricted stock unit awards for every three Greatbatch restricted stock and restricted stock unit awards held as of the Record Date. Greatbatch restricted stock and restricted stock unit awards will continue to vest in accordance with their original performance metrics and over their original vesting period.
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Stock options
|
$
|
609
|
|
|
$
|
619
|
|
Restricted stock and restricted stock units
|
2,226
|
|
|
1,634
|
|
||
Total stock-based compensation expense
|
$
|
2,835
|
|
|
$
|
2,253
|
|
|
|
|
|
||||
Cost of sales
|
$
|
197
|
|
|
$
|
260
|
|
Selling, general and administrative expenses
|
1,655
|
|
|
1,761
|
|
||
Research, development and engineering costs, net
|
177
|
|
|
232
|
|
||
Other operating expenses, net
|
806
|
|
|
—
|
|
||
Total stock-based compensation expense
|
$
|
2,835
|
|
|
$
|
2,253
|
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Weighted average fair value
|
$
|
12.81
|
|
|
$
|
12.07
|
|
Risk-free interest rate
|
1.69
|
%
|
|
1.55
|
%
|
||
Expected volatility
|
26
|
%
|
|
26
|
%
|
||
Expected life (in years)
|
5
|
|
|
5
|
|
||
Expected dividend yield
|
—
|
%
|
|
—
|
%
|
|
Number of
Stock
Options
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life
(In Years)
|
|
Aggregate
Intrinsic
Value
(In Millions)
|
|||||
Outstanding at January 1, 2016
|
1,678,900
|
|
|
$
|
28.32
|
|
|
|
|
|
||
Granted
|
152,546
|
|
|
51.92
|
|
|
|
|
|
|||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|||
Forfeited or expired
|
(16,318
|
)
|
|
(46.53
|
)
|
|
|
|
|
|||
Adjustment due to Spin-off
|
—
|
|
|
(2.02
|
)
|
|
|
|
|
|||
Outstanding at April 1, 2016
|
1,815,128
|
|
|
$
|
28.09
|
|
|
6.2
|
|
$
|
18.2
|
|
Exercisable at April 1, 2016
|
1,472,299
|
|
|
$
|
23.87
|
|
|
5.5
|
|
$
|
18.2
|
|
|
Time-Vested
Activity
|
|
Weighted
Average
Fair Value
|
|||
Nonvested at January 1, 2016
|
39,235
|
|
|
$
|
47.40
|
|
Granted
|
46,474
|
|
|
51.48
|
|
|
Vested
|
(5,057
|
)
|
|
51.00
|
|
|
Forfeited
|
(6,317
|
)
|
|
49.53
|
|
|
Nonvested at April 1, 2016
|
74,335
|
|
|
$
|
49.52
|
|
|
Performance-
Vested
Activity
|
|
Weighted
Average
Fair Value
|
|||
Nonvested at January 1, 2016
|
577,825
|
|
|
$
|
25.11
|
|
Granted
|
156,730
|
|
|
31.59
|
|
|
Vested
|
(249,153
|
)
|
|
15.86
|
|
|
Forfeited
|
(44,587
|
)
|
|
32.42
|
|
|
Nonvested at April 1, 2016
|
440,815
|
|
|
$
|
31.89
|
|
9.
|
OTHER OPERATING EXPENSES, NET
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
2014 investments in capacity and capabilities
|
$
|
4,153
|
|
|
$
|
6,455
|
|
Orthopedic facilities optimization
|
137
|
|
|
473
|
|
||
Legacy Lake Region Medical consolidations
|
2,359
|
|
|
—
|
|
||
Acquisition and integration costs
|
9,965
|
|
|
66
|
|
||
Asset dispositions, severance and other
|
4,526
|
|
|
861
|
|
||
|
$
|
21,140
|
|
|
$
|
7,855
|
|
•
|
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 by the first half of 2016 and is dependent upon our customers’ validation and qualification of the transferred products.
|
•
|
Functions performed at the Company’s facilities in Beaverton, OR and Raynham, MA to manufacture products for the portable medical market 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 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.
|
|
Severance and
Retention
|
|
Accelerated
Depreciation/Asset
Write-offs
|
|
Other
|
|
Total
|
||||||||
At January 1, 2016
|
$
|
1,429
|
|
|
$
|
—
|
|
|
$
|
1,595
|
|
|
$
|
3,024
|
|
Restructuring charges
|
118
|
|
|
—
|
|
|
4,035
|
|
|
4,153
|
|
||||
Cash payments
|
(455
|
)
|
|
—
|
|
|
(3,648
|
)
|
|
(4,103
|
)
|
||||
At April 1, 2016
|
$
|
1,092
|
|
|
$
|
—
|
|
|
$
|
1,982
|
|
|
$
|
3,074
|
|
•
|
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
|
|
Severance
and
Retention
|
|
Accelerated
Depreciation/Asset
Write-offs
|
|
Other
|
|
Total
|
||||||||
At January 1, 2016
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restructuring charges
|
—
|
|
|
—
|
|
|
137
|
|
|
137
|
|
||||
Cash payments
|
—
|
|
|
—
|
|
|
(137
|
)
|
|
(137
|
)
|
||||
At April 1, 2016
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
•
|
Employee costs:
$5.0 million
-
$6.0 million
; and
|
•
|
Other:
$8.0 million
-
$9.0 million
.
|
|
Employee Costs
|
|
Other
|
|
Total
|
||||||
At January 1, 2016
|
$
|
3,667
|
|
|
$
|
596
|
|
|
$
|
4,263
|
|
Restructuring charges
|
1,840
|
|
|
519
|
|
|
2,359
|
|
|||
Cash payments
|
(1,382
|
)
|
|
(515
|
)
|
|
(1,897
|
)
|
|||
At April 1, 2016
|
$
|
4,125
|
|
|
$
|
600
|
|
|
$
|
4,725
|
|
10.
|
INCOME TAXES
|
11.
|
COMMITMENTS AND CONTINGENCIES
|
At January 1, 2016
|
$
|
3,316
|
|
Additions to warranty reserve
|
294
|
|
|
Warranty claims paid
|
(24
|
)
|
|
At April 1, 2016
|
$
|
3,586
|
|
Remainder of 2016
|
$
|
11,076
|
|
2017
|
13,114
|
|
|
2018
|
12,147
|
|
|
2019
|
11,052
|
|
|
2020
|
9,018
|
|
|
Thereafter
|
31,272
|
|
|
Total estimated operating lease expense
|
$
|
87,679
|
|
|
|
Three Months Ended
|
||||||
|
|
April 1, 2016
|
|
April 3, 2015
|
||||
Addition in cost of sales
|
|
$
|
619
|
|
|
$
|
244
|
|
Ineffective portion of change in fair value
|
|
—
|
|
|
—
|
|
Instrument
|
|
Type of
Hedge
|
|
Aggregate
Notional
Amount
|
|
Start
Date
|
|
End
Date
|
|
$/Peso
|
|
Fair
Value
|
|
Balance Sheet Location
|
|||||
FX Contract
|
|
Cash flow
|
|
$
|
12,360
|
|
|
Jan 2016
|
|
Dec 2016
|
|
0.0584
|
|
|
$
|
(325
|
)
|
|
Accrued Expenses
|
FX Contract
|
|
Cash flow
|
|
$
|
8,386
|
|
|
Apr 2016
|
|
Dec 2016
|
|
0.0565
|
|
|
$
|
62
|
|
|
Other Current Assets
|
12.
|
EARNINGS (LOSS) PER SHARE (“EPS”)
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Numerator for basic and diluted EPS:
|
|
|
|
||||
Net income (loss)
|
$
|
(12,660
|
)
|
|
$
|
8,008
|
|
Denominator for basic EPS:
|
|
|
|
||||
Weighted average shares outstanding
|
30,718
|
|
|
25,264
|
|
||
Effect of dilutive securities:
|
|
|
|
||||
Stock options, restricted stock and restricted stock units
|
—
|
|
|
955
|
|
||
Denominator for diluted EPS
|
30,718
|
|
|
26,219
|
|
||
Basic EPS
|
$
|
(0.41
|
)
|
|
$
|
0.32
|
|
Diluted EPS
|
$
|
(0.41
|
)
|
|
$
|
0.31
|
|
|
Three Months Ended
|
||||
|
April 1, 2016
|
|
April 3, 2015
|
||
Time-vested stock options, restricted stock and restricted stock units
|
1,889,500
|
|
|
266,000
|
|
Performance-vested restricted stock units
|
440,800
|
|
|
11,900
|
|
13.
|
ACCUMULATED OTHER COMPREHENSIVE INCOME
|
|
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
|
—
|
|
|
(54
|
)
|
|
—
|
|
|
(54
|
)
|
|
19
|
|
|
(35
|
)
|
||||||
Realized loss on foreign currency hedges
|
—
|
|
|
619
|
|
|
—
|
|
|
619
|
|
|
(217
|
)
|
|
402
|
|
||||||
Foreign currency translation gain
|
—
|
|
|
—
|
|
|
18,760
|
|
|
18,760
|
|
|
—
|
|
|
18,760
|
|
||||||
At April 1, 2016
|
$
|
(1,179
|
)
|
|
$
|
(1,827
|
)
|
|
$
|
22,369
|
|
|
$
|
19,363
|
|
|
$
|
1,134
|
|
|
$
|
20,497
|
|
|
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
|
—
|
|
|
(1,347
|
)
|
|
—
|
|
|
(1,347
|
)
|
|
470
|
|
|
(877
|
)
|
||||||
Realized loss on foreign currency hedges
|
—
|
|
|
244
|
|
|
—
|
|
|
244
|
|
|
(85
|
)
|
|
159
|
|
||||||
Realized loss on interest rate swap hedges
|
—
|
|
|
181
|
|
|
—
|
|
|
181
|
|
|
(63
|
)
|
|
118
|
|
||||||
Foreign currency translation loss
|
—
|
|
|
—
|
|
|
(1,825
|
)
|
|
(1,825
|
)
|
|
—
|
|
|
(1,825
|
)
|
||||||
At April 3, 2015
|
$
|
(1,181
|
)
|
|
$
|
(3,480
|
)
|
|
$
|
9,625
|
|
|
$
|
4,964
|
|
|
$
|
1,734
|
|
|
$
|
6,698
|
|
14.
|
FAIR VALUE MEASUREMENTS
|
|
|
Fair Value Measurements Using
|
||||||||||||||
|
|
At
April 1, |
|
Quoted
Prices in
Active Markets
for Identical
Assets
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
||||||||
Description
|
|
2016
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts (Note 11)
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts (Note 11)
|
|
$
|
325
|
|
|
$
|
—
|
|
|
$
|
325
|
|
|
$
|
—
|
|
15.
|
BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION
|
•
|
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.
|
•
|
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.
|
•
|
Electrochem:
Includes the legacy Greatbatch Energy, Military and Environmental product line sales. Products include primary and rechargeable batteries and battery packs for demanding applications such as down hole drilling tools.
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Product line sales:
|
|
|
|
||||
Advanced Surgical, Orthopedics, and Portable Medical
|
$
|
91,329
|
|
|
$
|
52,638
|
|
Cardio and Vascular
|
133,650
|
|
|
10,356
|
|
||
Cardiac/Neuromodulation
|
97,075
|
|
|
80,616
|
|
||
Electrochem
|
11,672
|
|
|
17,710
|
|
||
Elimination of interproduct line sales
|
(1,488
|
)
|
|
—
|
|
||
Total sales
|
$
|
332,238
|
|
|
$
|
161,320
|
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Business segment sales:
|
|
|
|
||||
Greatbatch Medical
|
$
|
131,606
|
|
|
$
|
156,977
|
|
QiG
|
3,374
|
|
|
5,047
|
|
||
Lake Region Medical
|
198,275
|
|
|
—
|
|
||
Elimination of intersegment sales
(a)
|
(1,017
|
)
|
|
(704
|
)
|
||
Total sales
|
$
|
332,238
|
|
|
$
|
161,320
|
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Segment income (loss) from operations:
|
|
|
|
||||
Greatbatch Medical
|
$
|
11,015
|
|
|
$
|
21,753
|
|
QiG
|
(5,209
|
)
|
|
(5,450
|
)
|
||
Lake Region Medical
|
21,199
|
|
|
—
|
|
||
Total segment income from operations
|
27,005
|
|
|
16,303
|
|
||
Unallocated operating expenses
|
(15,871
|
)
|
|
(6,914
|
)
|
||
Operating income
|
11,134
|
|
|
9,389
|
|
||
Unallocated other income (expense), net
|
(23,896
|
)
|
|
431
|
|
||
Income (loss) before provision (benefit) for income taxes
|
$
|
(12,762
|
)
|
|
$
|
9,820
|
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Sales by geographic area:
|
|
|
|
||||
United States
|
$
|
202,123
|
|
|
$
|
70,516
|
|
Non-Domestic locations:
|
|
|
|
||||
Puerto Rico
|
39,128
|
|
|
34,016
|
|
||
Belgium
|
18,166
|
|
|
17,367
|
|
||
Rest of world
|
72,821
|
|
|
39,421
|
|
||
Total sales
|
$
|
332,238
|
|
|
$
|
161,320
|
|
|
As of
|
||||||
|
April 1, 2016
|
|
January 1, 2016
|
||||
United States
|
$
|
262,109
|
|
|
$
|
264,556
|
|
Rest of world
|
119,351
|
|
|
114,936
|
|
||
Total
|
$
|
381,460
|
|
|
$
|
379,492
|
|
16.
|
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
|
|
Three Months Ended
|
||||||||||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||||||||||
|
Net
Income
|
|
Per
Diluted
Share
|
|
Net
Income
|
|
Per
Diluted
Share
|
||||||||
Net income (loss) as reported
|
$
|
(12,660
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
8,008
|
|
|
$
|
0.31
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Amortization of intangibles
(a)(c)
|
6,691
|
|
|
0.21
|
|
|
2,366
|
|
|
0.09
|
|
||||
IP related litigation (SG&A)
(b)(c)
|
1,240
|
|
|
0.04
|
|
|
455
|
|
|
0.02
|
|
||||
Consolidation and optimization expenses (OOE)
(c)(d)
|
5,314
|
|
|
0.17
|
|
|
5,538
|
|
|
0.21
|
|
||||
Acquisition and integration expenses (OOE)
(c)(e)
|
6,511
|
|
|
0.21
|
|
|
46
|
|
|
—
|
|
||||
Asset dispositions, severance and other (OOE)
(c)(f)
|
4,226
|
|
|
0.14
|
|
|
434
|
|
|
0.02
|
|
||||
Gain on cost and equity method investments, net (other income, net)
(c)(g)
|
(846
|
)
|
|
(0.03
|
)
|
|
(324
|
)
|
|
(0.01
|
)
|
||||
R&D Tax Credit
(h)
|
—
|
|
|
—
|
|
|
400
|
|
|
0.02
|
|
||||
Adjusted net income and diluted EPS
(i)
|
$
|
10,476
|
|
|
$
|
0.34
|
|
|
$
|
16,923
|
|
|
$
|
0.65
|
|
Adjusted diluted weighted average shares
(j)
|
31,253
|
|
|
|
|
26,219
|
|
|
|
(a)
|
As a result of our acquisition of Lake Region Medical in the fourth quarter of 2015 and in order to present our financial results in a form more comparable to other medical device companies and less acquisitive companies, during the third quarter of 2015 we began excluding intangible asset amortization for purposes of calculating adjusted net income and adjusted diluted EPS. Prior period adjusted amounts have been recalculated to exclude intangible amortization.
|
(b)
|
In 2013, we filed suit against AVX Corporation alleging they were infringing our intellectual property. Given the complexity and significant costs incurred pursuing this litigation, during the second quarter of 2015, we began excluding these litigation expenses from adjusted amounts. This matter proceeded to trial during the first quarter of 2016 and a federal jury awarded Greatbatch $37.5 million in damages. To date, no gains have been recognized in connection with this litigation. Prior period adjusted amounts have been recalculated to exclude IP related litigation costs.
|
(c)
|
Net of tax amounts computed using a 35% U.S., Mexico, Germany and France statutory tax rate, a 0% Swiss tax rate, a 25% Uruguay statutory tax rate, and a 12.5% Ireland statutory tax rate. Expenses that are not deductible for tax purposes (i.e. permanent tax differences) are added back at 100%.
|
(d)
|
During 2016 and 2015, we incurred costs primarily related to the transfer of our Beaverton, OR portable medical and Plymouth, MN vascular manufacturing operations to Tijuana, Mexico. Additionally, with the acquisition of Lake Region Medical, 2016 costs also include expenses incurred in connection with the closure of Lake Region Medical’s Arvada, CO site and the consolidation of its two Galway, Ireland sites, which was initiated by Lake Region Medical in 2014.
|
(e)
|
During 2016, we incurred acquisition and integration costs related to the acquisition of Lake Region Medical, which was acquired in October 2015. During 2015, we incurred costs related to the integration of CCC Medical Devices, which was acquired in August 2014.
|
(f)
|
Costs primarily include legal and professional fees incurred in connection with the Spin-off, which was completed in March 2016.
|
(g)
|
Pre-tax amount is a gain of $1.3 million and $0.5 million for the 2016 and 2015 periods, respectively.
|
(h)
|
The 2015 Federal R&D tax credit was enacted during the fourth quarter of 2015 and has been permanently reinstated. Amounts assume that the tax credit was effective at the beginning of the year for 2015.
|
(i)
|
The per share data in this table has been rounded to the nearest $0.01 and therefore may not sum to the total.
|
(j)
|
First quarter 2016 adjusted diluted weighted average shares includes 535,000 shares related to outstanding equity awards that were not dilutive for GAAP diluted EPS purposes.
|
•
|
The 16% organic constant currency decline in sales as discussed above;
|
•
|
A $26.5 million increase in interest expense and an additional 5 million of shares outstanding due to the debt incurred and shares issued in connection with the Lake Region Medical acquisition in October 2015;
|
•
|
The decrease in GAAP diluted EPS was also attributable to $23.0 million of consolidation, IP related litigation, acquisition, integration and spin-off related expenses incurred during the first quarter of 2016 compared to $8.6 million in the 2015 first quarter. These costs are included in GAAP results, but are excluded from adjusted amounts; and
|
•
|
The decrease in GAAP and adjusted diluted EPS was partially offset by $21.2 million of operating income added from Lake Region Medical and approximately $5 million of synergies realized in connection with the Lake Region Medical acquisition during the first quarter of 2016.
|
|
Three Months Ended
|
||||||
|
April 1,
|
|
April 3,
|
||||
(dollars in thousands)
|
2016
|
|
2015
|
||||
Net income (loss) as reported
|
$
|
(12,660
|
)
|
|
$
|
8,008
|
|
|
|
|
|
||||
Interest expense
|
27,617
|
|
|
1,120
|
|
||
Provision (benefit) for income taxes
|
(102
|
)
|
|
1,812
|
|
||
Depreciation
|
12,949
|
|
|
5,791
|
|
||
Amortization
|
9,464
|
|
|
3,387
|
|
||
EBITDA
|
37,268
|
|
|
20,118
|
|
||
|
|
|
|
||||
IP related litigation
|
1,907
|
|
|
700
|
|
||
Stock-based compensation expense
|
2,029
|
|
|
2,253
|
|
||
Consolidation and optimization expenses
|
6,649
|
|
|
7,160
|
|
||
Acquisition and integration expenses
|
9,965
|
|
|
66
|
|
||
Asset dispositions, severance and other
|
4,526
|
|
|
629
|
|
||
Noncash gain on cost and equity method investments
|
(639
|
)
|
|
(498
|
)
|
||
Adjusted EBITDA
|
$
|
61,705
|
|
|
$
|
30,428
|
|
Adjusted EBITDA as a % of sales
|
18.6
|
%
|
|
18.9
|
%
|
Product Line
|
|
Product Development Opportunities
|
Advanced Surgical, Orthopedics, and Portable Medical
|
|
Developing a portfolio of single use products and instruments for the orthopedics market.
|
|
|
Developing a portfolio of wireless products for the portable medical and orthopedic markets.
|
|
|
|
Cardio and Vascular
|
|
Developing a portfolio of catheter, wire-based, sensor and coating products for the cardio and vascular markets.
|
|
|
|
Cardiac/Neuromodulation
|
|
Developing next generation technology programs including Gen 2 Q
HR
battery, next generation filtered feedthroughs, high voltage capacitors and vertically integrated lead solutions.
|
|
|
|
Electrochem
|
|
Developing power solutions to advance performance and reliability of battery packs in critical environments.
|
Initiative
|
|
Expected Expense
|
|
Expected Capital
|
|
Expected Benefit to Operating Income
(a)
|
|
Expected Completion Date
|
2014 investments in capacity and capabilities
|
|
$34 - $39
|
|
$25 - $28
|
|
> $20
|
|
2016
|
Orthopedic facilities optimization
|
|
$45 - $48
|
|
$30 - $35
|
|
$15 - $20
|
|
2016
|
Legacy Lake Region Medical consolidations
|
|
$13 - $15
|
|
$3 - $4
|
|
$8 - $9
|
|
2016
|
•
|
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.
|
•
|
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.
|
•
|
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.
|
•
|
Electrochem
- Includes the legacy Greatbatch Energy, Military and Environmental product line sales.
|
|
Three Months Ended
|
|
|
|
|
|||||||||
|
April 1,
|
|
April 3,
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
Sales:
|
|
|
|
|
|
|
|
|||||||
Advanced Surgical, Orthopedics, and Portable Medical
|
$
|
91,329
|
|
|
$
|
52,638
|
|
|
$
|
38,691
|
|
|
74
|
%
|
Cardio and Vascular
|
133,650
|
|
|
10,356
|
|
|
123,294
|
|
|
N/A
|
|
|||
Cardiac/Neuromodulation
|
97,075
|
|
|
80,616
|
|
|
16,459
|
|
|
20
|
%
|
|||
Electrochem
|
11,672
|
|
|
17,710
|
|
|
(6,038
|
)
|
|
(34
|
)%
|
|||
Elimination of interproduct line sales
|
(1,488
|
)
|
|
—
|
|
|
(1,488
|
)
|
|
N/A
|
|
|||
Total Sales
|
332,238
|
|
|
161,320
|
|
|
170,918
|
|
|
106
|
%
|
|||
Cost of sales
|
240,770
|
|
|
108,922
|
|
|
131,848
|
|
|
121
|
%
|
|||
Gross profit
|
91,468
|
|
|
52,398
|
|
|
39,070
|
|
|
75
|
%
|
|||
Gross profit as a % of sales
|
27.5
|
%
|
|
32.5
|
%
|
|
|
|
|
|||||
Selling, general and administrative expenses (“SG&A”)
|
41,888
|
|
|
22,609
|
|
|
19,279
|
|
|
85
|
%
|
|||
SG&A as a % of sales
|
12.6
|
%
|
|
14.0
|
%
|
|
|
|
|
|||||
Research, development and engineering costs, net (“RD&E”)
|
17,306
|
|
|
12,545
|
|
|
4,761
|
|
|
38
|
%
|
|||
RD&E as a % of sales
|
5.2
|
%
|
|
7.8
|
%
|
|
|
|
|
|||||
Other operating expenses, net
|
21,140
|
|
|
7,855
|
|
|
13,285
|
|
|
169
|
%
|
|||
Operating income
|
11,134
|
|
|
9,389
|
|
|
1,745
|
|
|
19
|
%
|
|||
Operating margin
|
3.4
|
%
|
|
5.8
|
%
|
|
|
|
|
|||||
Interest expense, net
|
27,617
|
|
|
1,120
|
|
|
26,497
|
|
|
N/A
|
|
|||
Other income, net
|
(3,721
|
)
|
|
(1,551
|
)
|
|
(2,170
|
)
|
|
140
|
%
|
|||
Provision (benefit) for income taxes
|
(102
|
)
|
|
1,812
|
|
|
(1,914
|
)
|
|
(106
|
)%
|
|||
Effective tax rate
|
0.8
|
%
|
|
18.5
|
%
|
|
|
|
|
|||||
Net income (loss)
|
$
|
(12,660
|
)
|
|
$
|
8,008
|
|
|
$
|
(20,668
|
)
|
|
(258
|
)%
|
Net margin
|
(3.8
|
)%
|
|
5.0
|
%
|
|
|
|
|
|||||
Diluted earnings (loss) per share
|
$
|
(0.41
|
)
|
|
$
|
0.31
|
|
|
$
|
(0.72
|
)
|
|
(232
|
)%
|
|
Change From Prior Year
|
||
|
|
Three Months
|
|
Impact of Lake Region Medical
(a)
|
|
(4.4
|
)%
|
Production efficiencies, volume and mix
(b)
|
|
(0.2
|
)%
|
Price
(c)
|
|
(0.4
|
)%
|
Total percentage point change to gross profit as a percentage of sales
|
|
(5.0
|
)%
|
(a)
|
Amount represents the impact to our Gross Margin related to the acquisition of Lake Region Medical in October 2015, which historically had lower Gross Margins than legacy Greatbatch.
|
(b)
|
Our Gross Margin for the first quarter of 2016 was negatively impacted by lower production volumes partially offset by production efficiencies gained as a result of our investments in capacity and capabilities.
|
(c)
|
Our Gross Margin for the first quarter of 2016 was negatively impacted by price concessions given to our larger OEM customers in return for long-term volume commitments.
|
|
Change From Prior Year
|
|||
|
|
Three Months
|
||
Performance-based compensation
(a)
|
|
$
|
644
|
|
Legal fees
(b)
|
|
963
|
|
|
Impact of Lake Region Medical acquisition
(c)
|
|
18,700
|
|
|
Other
(d)
|
|
(1,028
|
)
|
|
Net increase in SG&A
|
|
$
|
19,279
|
|
(a)
|
Amount represents the change in performance-based compensation versus the prior year period and is recorded based upon actual results achieved.
|
(b)
|
Amount represents the increase in legal costs compared to the prior year period and includes higher IP related defense costs, as well as other corporate initiatives. In 2013, we filed suit against one of our cardiac/neuromodulation competitors alleging they were infringing on our IP. Costs associated with this litigation accounted for $1.2 million of the quarter over quarter increase in SG&A expenses from 2015 to 2016.
|
(c)
|
Amount represents the incremental SG&A expenses related to the acquisition of Lake Region Medical in October 2015.
|
(d)
|
Amount represents various increases and decreases to SG&A expenses and includes the initial impact of synergies realized in connection with the Lake Region Medical acquisition, as well as the Spin-off of Nuvectra. The SG&A expenses related to the operations that were spun-off to Nuvectra were $1.9 million during the first quarter of 2016.
|
|
Three Months Ended
|
||||||
|
April 1, 2016
|
|
April 3, 2015
|
||||
Research, development and engineering costs
|
$
|
18,198
|
|
|
$
|
13,830
|
|
Less: cost reimbursements
|
(892
|
)
|
|
(1,285
|
)
|
||
Total RD&E, net
|
$
|
17,306
|
|
|
$
|
12,545
|
|
|
|
Three Months Ended
|
||||||
|
|
April 1, 2016
|
|
April 3, 2015
|
||||
2014 investments in capacity and capabilities
(a)
|
|
$
|
4,153
|
|
|
$
|
6,455
|
|
Orthopedic facilities optimization
(a)
|
|
137
|
|
|
473
|
|
||
Legacy Lake Region Medical consolidations
(a)
|
|
2,359
|
|
|
—
|
|
||
Acquisition and integration costs
(b)
|
|
9,965
|
|
|
66
|
|
||
Asset dispositions, severance and other
(c)
|
|
4,526
|
|
|
861
|
|
||
Total other operating expenses, net
|
|
$
|
21,140
|
|
|
$
|
7,855
|
|
(a)
|
Refer to “Cost Savings and Consolidation Efforts” section of this Item and Note 9 “Other Operating Expenses, Net” of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for disclosures related to the timing and level of remaining expenditures for these initiatives.
|
(b)
|
During the first quarter of 2016, we incurred $1.4 million in transaction costs related to the acquisition of Lake Region Medical, which primarily included professional and consulting fees. Additionally, during the first quarter of 2016, we incurred $7.3 million in Lake Region Medical integration costs, which primarily included change-in-control payments to former Lake Region Medical executives, professional, consulting, severance, relocation, and travel costs. Refer to Note 9 “Other Operating Expenses, Net” of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for disclosures related to the timing and level of remaining expenditures for acquisition and integration costs.
|
(c)
|
During 2016 and 2015, we incurred legal and professional costs in connection with the Spin-off of Nuvectra of $4.3 million and $0.5 million, respectively. Refer to Note 2 “Divestiture and Acquisition” of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for additional discussion on the Spin-off.
|
|
As of
|
||||||
(Dollars in thousands)
|
April 1, 2016
|
|
January 1, 2016
|
||||
Cash and cash equivalents
|
$
|
54,123
|
|
|
$
|
82,478
|
|
Working capital
|
$
|
317,897
|
|
|
$
|
360,764
|
|
Current ratio
|
2.47
|
|
|
2.69
|
|
•
|
future sales, expenses and profitability;
|
•
|
future development and expected growth of our business and industry;
|
•
|
our ability to execute our business model and our business strategy;
|
•
|
our ability to identify trends within our industries and to offer products and services that meet the changing needs of those markets; and
|
•
|
projected capital expenditures.
|
a.
|
Evaluation of Disclosure Controls and Procedures
|
b.
|
Changes in Internal Control Over Financial Reporting
|
•
|
Lake Region Medical Holdings, Inc.
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
Dated:
|
May 10, 2016
|
|
GREATBATCH, INC.
|
||
|
|
|
|
||
|
|
|
By:
|
|
/s/ Thomas J. Hook
|
|
|
|
|
|
Thomas J. Hook
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Michael Dinkins
|
|
|
|
|
|
Michael Dinkins
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Thomas J. Mazza
|
|
|
|
|
|
Thomas J. Mazza
|
|
|
|
|
|
Vice President, Corporate Controller and Treasurer
|
|
|
|
|
|
(Principal Accounting Officer)
|
Exhibit No.
|
|
Description
|
|
|
|
2.1
|
|
Separation and Distribution Agreement, dated March 14, 2016, between Greatbatch, Inc. and QiG Group, LLC (incorporated by reference to Exhibit 2.1 to our current report on Form 8-K filed on March 18, 2016).
|
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to our quarterly report on Form 10-Q for the period ended June 27, 2008).
|
|
|
|
3.2
|
|
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our annual report on Form 10-K for the period ended January 1, 2010).
|
|
|
|
10.1*
|
|
Release Agreement and Acknowledgement effective April 8, 2016 between Greatbatch, Ltd. and Andrew P. Holman.
|
|
|
|
10.2
|
|
Transition Services Agreement, dated March 14, 2016, between Greatbatch, Inc. and QiG Group, LLC (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on March 18, 2016).
|
|
|
|
10.3
|
|
Tax Matters Agreement, dated March 14, 2016, between Greatbatch, Inc. and QiG Group, LLC (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K filed on March 18, 2016).
|
|
|
|
10.4
|
|
Employee Matters Agreement, dated March 14, 2016, between Greatbatch, Inc. and QiG Group, LLC (incorporated by reference to Exhibit 10.3 to our current report on Form 8-K filed on March 18, 2016).
|
|
|
|
31.1*
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
|
|
|
|
31.2*
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
|
|
|
|
32.1**
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Extension Calculation Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Extension Presentation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Extension Definition Linkbase Document
|
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