

13.		OTHER OPERATING EXPENSES, NET

Other Operating Expenses, Net is comprised of the following (in thousands):



	Year Ended
	January 1, 2016		January 2, 2015			January 3, 2014
2014 investments in capacity and capabilities	$	23,037	$	8,925		$	—
Orthopaedic facilities optimization	1,395		1,317			8,038
2013 operating unit realignment	—		1,017			5,625
Legacy Lake Region Medical consolidations	1,961		—			—
Other consolidation and optimization costs (income)	—		(71		)	1,095
Acquisition and integration costs (income)	33,449		3			(502		)
Asset dispositions, severance and other	6,622		4,106			1,534
Total other operating expenses, net	$	66,464	$	15,297		$	15,790

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 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 will transfer to a new facility in Tijuana, Mexico. This initiative is expected to be substantially completed by the end of the first quarter of 2016 and is dependent upon our customers’ validation and qualification of the transferred products. Products currently manufactured at the Beaverton facility, which do not serve the portable medical market, are planned to transfer to the Company’s Raynham facility.


•	The design engineering responsibilities previously performed at the Company’s Cleveland, OH facility were transferred to the Company’s facilities in Minnesota in 2015.


•	The realignment of the Company’s commercial sales operations was completed during the fourth quarter of 2015.

The total capital investment expected for these initiatives is between $25.0 million and $28.0 million, of which $21.3 million has been expended through January 1, 2016. Total restructuring charges expected to be incurred in connection with this realignment are between $34.0 million and $39.0 million, of which $32.0 million has been incurred through January 1, 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 - $7.0 million;


•	Accelerated depreciation and asset write-offs: $2.0 million - $3.0 million; and


•	Other: $27.0 million - $29.0 million

Other expenses primarily consist of costs to relocate certain equipment and personnel, duplicate personnel costs, disposal, and travel expenditures. All expenses are cash expenditures except accelerated depreciation and asset write-offs.

The change in accrued liabilities related to the 2014 investments in capacity and capabilities is as follows (in thousands):



	Severance and Retention			Accelerated Depreciation/ Asset Write-offs			Other			Total
At January 2, 2015	$	1,163		$	—		$	1,066		$	2,229
Restructuring charges	2,729			235			20,073			23,037
Write-offs	—			(235		)	—			(235		)
Cash payments	(2,463		)	—			(19,544		)	(22,007		)
At January 1, 2016	$	1,429		$	—		$	1,595		$	3,024

Orthopaedic 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 orthopaedic manufacturing facility in Fort Wayne, IN and transferred manufacturing operations being performed at its Columbia City, IN location into this new facility. This initiative was completed in 2012.

During 2012, the Company transferred manufacturing and development operations performed at its facilities in Orvin and Corgemont, Switzerland into existing facilities in Fort Wayne, IN and Tijuana, Mexico. In connection with this consolidation, in 2013, the Company sold assets related to certain non-core Swiss orthopaedic product lines to an independent third party. The purchase agreement provided the Company with an earn out payment based upon the amount of inventory consumed by the purchaser within one year after the close of the transaction. As a result of this earn out, a gain of $2.7 million was recorded in Other Operating Expenses, Net during 2014. During 2014, the Company transferred $2.1 million of assets relating to the Company’s Orvin, Switzerland property to held for sale and recognized a $0.4 million impairment charge. During 2015, the Company sold $0.6 million of these assets held for sale with no additional gain or loss recognized. Refer to Note 5 “Assets Held For Sale” for additional information.

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 $30.0 million and $35.0 million, of which $28.4 million has been expended through January 1, 2016. Total expense expected to be incurred for these initiatives is between $45.0 million and $48.0 million, of which $43.9 million has been incurred through January 1, 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 orthopaedic facilities optimizations is as follows (in thousands):



	Severance and Retention		Accelerated Depreciation/ Asset Write-offs			Other			Total
At January 2, 2015	$	—	$	—		$	287		$	287
Restructuring charges	—		88			1,307			1,395
Write-offs	—		(88		)	—			(88		)
Cash payments	—		—			(1,594		)	(1,594		)
At January 1, 2016	$	—	$	—		$	—		$	—

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


•	Severance and retention: $5.0 million; and


•	Other: $1.6 million.

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

Legacy Lake Region Medical consolidations. In 2014, Lake Region Medical initiated plans to close its Arvada, Colorado site, consolidate its two Galway, Ireland sites into one facility, and take 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. The total capital investment expected for this initiative since the acquisition date is between $4.0 million and $5.0 million, of which $0.9 million has been expended through January 1, 2016. Total expense expected to be incurred for this initiative since the acquisition date is between $13.0 million and $15.0 million, of which $2.0 million has been incurred through January 1, 2016. All expenses have been and will be recorded with the Lake Region Medical segment and are expected to include the following:


•	Employee costs: $5.0 million - $6.0 million; and


•	Other: $8.0 million - $9.0 million

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 and are being recorded in the Lake Region Medical segment.

The change in accrued liabilities related to these legacy Lake Region Medical consolidation initiatives is as follows (in thousands):



	Employee Costs			Other Exit Costs			Total
At October 27, 2015	$	3,392		$	653		$	4,045
Restructuring charges	557			1,404			1,961
Write-offs	—			—			—
Cash payments	(282		)	(1,461		)	(1,743		)
At January 1, 2016	$	3,667		$	596		$	4,263

Acquisition and integration costs (income). During 2015, the Company incurred $23.7 million in transaction costs related to the acquisition of Lake Region Medical. These costs primarily relate to professional and consulting fees incurred in connection with due diligence efforts of this acquisition, of which $0.7 million are accrued as of January 1, 2016. Expenses related to this initiative were recorded to corporate unallocated expenses. Additionally, during 2015, the Company incurred $8.6 million in Lake Region Medical integration costs, which consisted primarily of change-in-control payments to former Lake Region Medical executives, professional and consulting fees, and travel costs, of which $6.2 million are accrued as of January 1, 2016 in the Lake Region Medical segment. Total expense expected to be incurred on the integration of Lake Region Medical is between $40.0 million and $50.0 million and total capital expenditures are expected to be between $20.0 million to $25.0 million.

During 2015, 2014, and 2013, the Company also incurred costs (income) related to the integration of CCC and NeuroNexus Technologies, Inc. (“NeuroNexus”). These expenses were primarily for retention bonuses, travel costs in connection with integration efforts, training, severance, and the change in fair value of the contingent consideration recorded in connection with the NeuroNexus acquisition, which resulted in a gain of $0.8 million and $0.7 million in 2014 and 2013, respectively, and was categorized in Level 3 of the fair value hierarchy.

Asset dispositions, severance and other. During 2015, 2014, and 2013, the Company recorded losses in connection with various asset disposals and/or write-downs. In addition, during 2015, the Company incurred legal and professional costs in connection with the expected Spin-off of Nuvectra of $6.0 million, of which $0.5 million are accrued as of January 1, 2016. Expenses related to the expected Spin-off were recorded within the applicable segment and corporate cost centers to which the expenditures relate. The transaction is expected to be completed in March 2016. Deal related costs for the Spin-off are estimated to be between $10.0 million and $12.0 million. Refer to Note 19 “Business Segment, Geographic and Concentration Risk Information” for additional information on the expected Spin-off.

During 2014, the Company incurred $0.9 million of expense related to the separation of the Company’s Senior Vice President, Human Resources. Additionally, during 2014, the Company recorded charges in connection with its business reorganization to align its contract manufacturing operations. Costs incurred primarily related to consulting and IT development and were completed in 2014.

During 2013, Greatbatch Medical recorded a $0.9 million write-off related to its wireless sensing product line and QiG recorded a $0.5 million write-off of IPR&D. Refer to Note 18 “Fair Value Measurements” for additional information.