EX-99.2

EX-99.2 4 d94221dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On August 27, 2015, Greatbatch, Inc. (the “Parent”), Provenance Merger Sub Inc. (the “Merger Sub”) and Lake Region Medical Holdings, Inc. (“Lake Region”) entered into an Agreement and Plan of Merger, dated August 27, 2015 (the “Merger Agreement”) providing for the merger of Lake Region into the Merger Sub, with Lake Region continuing as the surviving corporation and a wholly owned direct subsidiary of the Greatbatch Ltd. (the “Issuer”). The aggregate merger consideration to be paid by us to the equityholders of Lake Region will consist of approximately $479 million in cash and approximately 5.1 million newly issued shares of Greatbatch, Inc. common stock and options to purchase shares of Greatbatch, Inc. common stock. In connection with the acquisition of Lake Region (the “Lake Region Acquisition”), we will pay off all of Lake Region’s outstanding debt, estimated at approximately $1,045 million.

On August 27, 2015, in connection with the signing of the Merger Agreement, the Issuer entered into a commitment letter (as amended and restated or otherwise modified from time to time, the “Commitment Letter”) with Manufacturers and Traders Trust Company, Credit Suisse Securities (USA) LLC, Credit Suisse AG, KeyBank National Association and KeyBanc Capital Markets Inc. The Commitment Letter provides for commitments, subject to customary and other conditions set forth therein, for a $300 million Term Loan A Facility (“TLA Facility”), which was subsequently increased by $75 million to $375 million on a non-committed basis, a $1.0 billion Term Loan B Facility (“TLB Facility”), which was subsequently increased by $25 million to $1,025 million on a non-committed basis, a $200 million revolving credit facility (the “Revolving Credit Facility” and, together with the TLA Facility and TLB Facility, the “Senior Secured Credit Facilities”), and up to a $400 million senior unsecured bridge facility (the “Bridge Facility”). We are offering $360 million of notes hereby (the “Private Offering”) in lieu of a portion or all of the drawings under the Bridge Facility, subject to market and other conditions. For purposes of preparing the pro forma financial statements, it was determined that adequate financing will be obtained under the Private Offering.

On July 30, 2015, we announced a proposed spin-off (the “Spin-off”) of QiG Group, LLC (“QiG Group”). Immediately prior to completion of the Spin-off, QiG Group will be converted into a corporation organized under the laws of Delaware and change its name to Nuvectra Corporation. The Spin-off is expected to be comprised of QiG Group and its subsidiaries Algostim, LLC (“Algostim”) and PelviStim LLC (“Pelvistim”), and Parent’s NeuroNexus Technologies, Inc. (“NeuroNexus”) subsidiary, the shares of which will be transferred to Nuvectra in connection with the Spin-off.

The unaudited pro forma condensed combined financial statements of Parent present the pro forma consolidated balance sheet and statement of operations of the combined company based upon the financial statements of Parent and Accellent Inc. (“Accellent”) after giving effect to the Lake Region Acquisition, the financing transactions, and the Spin-off on Parent’s consolidated financial statements. The historical consolidated financial information has been adjusted to give effect to pro forma events that are: directly attributable to the aforementioned transactions; factually supportable; and, with respect to the unaudited pro forma condensed combined statement of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the unaudited pro forma condensed combined financial statements were based on and should be read in conjunction with the financial statements discussed below. Lake Region is the parent company of Accellent Holdings Corp. (“Accellent Holdings”), which in turn is the parent company of Accellent Acquisition Corp., which in turn is the parent company of Accellent. The consolidated financial statements of Accellent include the accounts of Lake Region, Accellent Holdings, and Accellent Acquisition Corp. and are collectively referred to in these pro forma statements as Lake Region.

For purposes of preparing the unaudited pro forma condensed combined balance sheet as of July 3, 2015, we have presented the following information:

•

The unaudited Greatbatch condensed consolidated balance sheet as of July 3, 2015

•

The unaudited Accellent condensed consolidated balance sheet as of July 4, 2015

For purposes of preparing the unaudited pro forma condensed combined statement of operations for the fiscal year ended January 2, 2015 we have presented the following information:

•

The Greatbatch consolidated statement of operations for the year ended January 2, 2015

•

The Accellent consolidated statement of operations for the year ended January 3, 2015

For purposes of preparing the unaudited pro forma condensed combined statement of operations for the six months ended July 3, 2015 we have presented the following information:

•

The unaudited Greatbatch condensed consolidated statement of operations for the six months ended July 3, 2015

•

The unaudited Accellent condensed consolidated statement of operations for the six months ended July 4, 2015

The unaudited pro forma condensed combined statements of operations for the twelve months ended July 3, 2015 were calculated as follows:

•

The Greatbatch consolidated statement of operations for the year ended January 2, 2015

•

The Accellent consolidated statement of operations for the year ended January 3, 2015

less

•

The unaudited Greatbatch condensed consolidated statement of operations for the six months ended July 4, 2014

•

The unaudited Accellent condensed consolidated statement of operations for the six months ended June 28, 2014

plus

•

The unaudited Greatbatch condensed consolidated statement of operations for the six months ended July 3, 2015

•

The unaudited Accellent condensed consolidated statement of operations for the six months ended July 4, 2015

The unaudited pro forma financial information is for informational purposes only. It does not purport to indicate the results that would have actually been attained had the Lake Region Acquisition or the Spin-off been completed on the assumed dates or for the periods presented, or which may be realized in the future. To produce the unaudited pro forma financial information, we allocated the estimated purchase price using its best estimates of fair value. These estimates are based on the most recently available public information. To the extent there are significant changes to the business of Lake Region the assumptions and estimates herein could change significantly. The allocation of the purchase price is dependent upon certain valuation and other studies that are not yet started. Accordingly, the pro forma purchase price adjustments are preliminary and subject to further adjustments as additional information becomes available, and as additional analysis is performed. There can be no assurances that the final valuation will not result in material changes to the purchase price allocation.

As a result of the Lake Region Acquisition, the combined company expects to achieve annual synergies at the operating profit level of $25 million in 2016 which is expected to increase to at least $60 million in 2018. Additionally, twelve Lake Region executives have existing employee agreements that entitle them to severance payments upon a change-in-control and termination of employment with good reason. We would be responsible for a maximum payout of $12.3 million if all twelve executives were to be severed following the Lake Region Acquisition. The unaudited pro forma financial information does not reflect these potential expenses and efficiencies.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

GREATBATCH, INC.

FOR THE TWELVE MONTHS ENDED

JULY 3, 2015


(in thousands, except per share data)	Greatbatch, Inc. Historical			Lake Region Adjusted Historical (Note 1)			Merger and Related Pro Forma Adjustments				Financing and Related Pro Forma Adjustments				Greatbatch, Inc. Pro Forma Combined			Nuvectra Pro Forma Adjustments				Greatbatch, Inc. Post Spin-off Pro Forma Combined
	A			B			C				D				E=A+B+C+D			F				E+F
Sales	$	677,635		$	805,687		$	(4,765	)	5a	$	—			$	1,478,557		$	(4,816	)	6c	$	1,473,741
Cost of sales		451,954			608,122			(4,765	)	5a		—				1,076,951			(2,941	)	6c		1,074,010
								18,333		5b
								3,307		5c

Gross profit (loss)		225,681			197,565			(21,640	)			—				401,606			(1,875	)			399,731
Operating expenses:
Selling, general and administrative expenses		93,683			84,895			28,438		5b		—				207,393			(7,963	)	6c		199,430
								377		5c
Research, development and engineering costs, net		49,129			10,324			19		5c		—				59,472			(15,539	)	6c		43,933
Other operating expenses (income), net		26,855			29,878			(24,544	)	5b		—				32,189			(1,091	)	6c		31,098

Total operating expenses		169,667			125,097			4,290				—				299,054			(24,593	)			274,461
Operating income (loss)		56,014			72,468			(25,930	)			—				102,552			22,718				125,270
Interest expense		4,421			60,413			—				(4,421	)	4b		98,115			—				98,115
												(60,413	)	4c
												5,391		4d
												1,501		4e
												90,752		4f
												471		4g
Gain on cost and equity method investments		(4,130	)		—			—				—				(4,130	)		—				(4,130	)
Loss on debt extinguishment		—			(1	)		—				—				(1	)		—				(1	)
Other (income) expense, net		(2,418	)		1,016			—				—				(1,402	)		—				(1,402	)

Income (loss) before provision (benefit) for income taxes		58,141			11,040			(25,930	)			(33,281	)			9,970			22,718				32,688
Provision (benefit) for income taxes		12,662			3,843			(8,402	)	5e		(12,148	)	4l		(4,045	)		8,292		6d		4,247

Net income (loss)	$	45,479		$	7,197		$	(17,528	)		$	(21,133	)		$	14,015		$	14,426			$	28,441

Earnings per share:
Basic	$	1.81													$	0.46						$	0.94
Diluted	$	1.74													$	0.45						$	0.91
Weighted average shares outstanding:
Basic		25,146						5,069		5f						30,215							30,215
Diluted		26,132						5,129		5f						31,261							31,261

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

GREATBATCH, INC.

FOR THE TWELVE MONTHS ENDED

JANUARY 2, 2015


(in thousands, except per share data)	Greatbatch, Inc. Historical			Lake Region Adjusted Historical (Note 1)			Merger and Related Pro Forma Adjustments				Financing and Related Pro Forma Adjustments				Greatbatch, Inc. Pro Forma Combined				Nuvectra Pro Forma Adjustments				Greatbatch, Inc. Post Spin-off Pro Forma Combined
	A			B			C				D				E=A+B+C+D				F				E+F
Sales	$	687,787		$	752,264		$	(6,839	)	5a	$	—			$	1,433,212			$	(3,696	)	6a	$	1,429,516
Cost of sales		456,389			573,616			(6,839	)	5a		—				1,058,689				(1,769	)	6a		1,056,920
								18,333		5b
								2,548		5c
								14,642		5d

Gross profit (loss)		231,398			178,648			(35,523	)			—				374,523				(1,927	)			372,596
Operating expenses:
Selling, general and administrative expenses		90,602			82,676			28,438		5b		—				202,006				(6,704	)	6a		195,302
								290		5c
Research, development and engineering costs, net		49,845			8,763			15		5c		—				58,623				(16,572	)	6a		42,051
Other operating expenses (income), net		15,297			55,017			(25,039	)	5b		—				45,275				(95	)	6a		45,180

Total operating expenses		155,744			146,456			3,704				—				305,904				(23,371	)			282,533
Operating income (loss)		75,654			32,192			(39,227	)			—				68,619				21,444				90,063
Interest expense		4,252			63,096			—				(4,252	)	4b		98,712				—				98,712
												(63,096	)	4c
												5,391		4d
												1,509		4e
												91,341		4f
												471		4g
Gain on cost and equity method investments		(4,370	)		—			—				—				(4,370	)			—				(4,370	)
Loss on debt extinguishment		—			53,421			—				—				53,421				—				53,421
Other (income) expense, net		(807	)		887			—				—				80				—				80

Income (loss) before provision (benefit) for income taxes		76,579			(85,212	)		(39,227	)			(31,364	)			(79,224	)			21,444				(57,780	)
Provision (benefit) for income taxes		21,121			(38,882	)		(12,710	)	5e		(11,448	)	4l		(41,919	)			7,827		6d		(34,092	)

Net income (loss)	$	55,458		$	(46,330	)	$	(26,517	)		$	(19,916	)		$	(37,305	)		$	13,617			$	(23,688	)

Earnings (loss) per share:
Basic	$	2.23													$	(1.25	)						$	(0.79	)
Diluted	$	2.14													$	(1.25	)						$	(0.79	)
Weighted average shares outstanding:
Basic		24,825						5,069		5f						29,894		5f						29,894
Diluted		25,975						5,069		5f						29,894		5f						29,894

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

GREATBATCH, INC.

FOR THE SIX MONTHS ENDED

JULY 3, 2015


(in thousands, except per share data)	Greatbatch, Inc. Adjusted Historical (Note 1)			Lake Region Adjusted Historical (Note 1)		Merger and Related Pro Forma Adjustments				Financing and Related Pro Forma Adjustments				Greatbatch, Inc. Pro Forma Combined			Nuvectra Pro Forma Adjustments				Greatbatch, Inc. Post Spin-off Pro Forma Combined
	A			B		C				D				E=A+B+C+D			F				E+F
Sales	$	336,210		$	402,570	$	(2,429	)	5a	$	—			$	736,351		$	(2,671	)	6a	$	733,680
Cost of sales		225,861			301,683		(2,429	)	5a		—				535,774			(1,937	)	6a		533,837
							9,167		5b
							1,492		5c

Gross profit (loss)		110,349			100,887		(10,659	)			—				200,577			(734	)			199,843
Operating expenses:
Selling, general and administrative expenses		46,713			42,437		14,219		5b		—				103,538			(4,276	)	6a		99,262
							169		5c
Research, development and engineering costs, net		25,608			5,283		9		5c		—				30,900			(7,691	)	6a		23,209
Other operating expenses (income), net		15,605			13,185		(11,072	)	5b		—				17,718			(458	)	6a		17,260

Total operating expenses		87,926			60,905		3,325				—				152,156			(12,425	)			139,731
Operating income (loss)		22,423			39,982		(13,984	)			—				48,421			11,691				60,112
Interest expense		2,326			29,664		—				(2,326	)	4b		48,909			—				48,909
											(29,664	)	4c
											2,696		4d
											749		4e
											45,228		4f
											236		4g
Gain on cost and equity method investments, net		(540	)		—		—				—				(540	)		—				(540	)
Other (income) expense, net		(1,118	)		310		—				—				(808	)		—				(808	)

Income (loss) before provision (benefit) for income taxes		21,755			10,008		(13,984	)			(16,919	)			860			11,691				12,551
Provision (benefit) for income taxes		4,464			1,543		(4,531	)	5e		(6,175	)	4l		(4,699	)		4,267		6d		(432	)

Net income (loss)	$	17,291		$	8,465	$	(9,453	)		$	(10,744	)		$	5,559		$	7,424			$	12,983

Earnings per share:
Basic	$	0.68												$	0.18						$	0.43
Diluted	$	0.66												$	0.18						$	0.41
Weighted average shares outstanding:
Basic		25,369					5,069		5f						30,438							30,438
Diluted		26,264					5,129		5f						31,393							31,393

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

GREATBATCH, INC.

AS OF JULY 3, 2015


(in thousands)	Greatbatch, Inc. Adjusted Historical (Note 1)			Lake Region Adjusted Historical (Note 1)			Merger and Related Pro Forma Adjustments				Financing and Related Pro Forma Adjustments				Greatbatch, Inc. Pro Forma Combined			Nuvectra Pro Forma Adjustments				Greatbatch, Inc. Post Spin-off Pro Forma Combined
	A			B			C				D				E = A+B+C+D			F				E+F
Assets
Current assets:
Cash and cash equivalents	$	72,338		$	45,708		$	(478,618	)	3a	$	532,938		4a	$	86,938		$	(1,674	)	6a	$	10,264
								(22,522	)	3b		(177	)	4b					(75,000	)	6b
												(3,442	)	4c
												(36,280	)	4d
												(10,250	)	4e
												(4,000	)	4h
												(6,557	)	4i
												(2,200	)	4j
Accounts receivable, net of allowance		122,101			82,731			—				—				204,832			(501	)	6a		204,331
Inventories		140,093			97,958			14,642		3d		—				252,693			—				252,693
Refundable income taxes		2,368			—			—				—				2,368			—				2,368
Deferred income taxes		6,227			4,407			—				—				10,634			—				10,634
Prepaid expenses and other current assets		12,279			8,552			—				—				20,831			(158	)	6a		20,673

Total current assets		355,406			239,356			(486,498	)			470,032				578,296			(77,333	)			500,963
Property and equipment, net		152,713			184,304			22,996		3e		—				360,013			(4,447	)	6a		355,566
Amortizing intangible assets, net		58,572			178,583			587,417		3f		—				824,572			(2,128	)	6a		822,444
Indefinite-lived intangible assets		20,288			—			—				—				20,288			—				20,288
Goodwill		354,107			710,646			109,178		3c		—				1,173,931			(38,182	)	6a		1,135,749
Deferred income taxes		2,654			—			—				—				2,654			—				2,654
Other assets		22,391			21,643			(19,680	)	3g		36,280		4d		57,934			—				57,934
												(2,700	)	4k

Total assets	$	966,131		$	1,334,532		$	213,413			$	503,612			$	3,017,688		$	(122,090	)		$	2,895,598

Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	13,750		$	8,350		$	—			$	6,900		4a	$	28,898		$	—			$	28,898
												(102	)	4e
Accounts payable		44,858			33,787			—				—				78,645			(565	)	6a		78,080
Income taxes payable		1,761			—			—				—				1,761			—				1,761
Deferred income taxes		588			—			4,744		3i		—				5,332			—				5,332
Accrued expenses		37,670			56,123			—				(6,557	)	4i		83,617			(980	)	6a		82,637
												(177	)	4b
												(3,442	)	4c

Total current liabilities		98,627			98,260			4,744				(3,378	)			198,253			(1,545	)			196,708
Long-term debt		168,750			1,036,212			—				526,038		4a		1,720,852			—				1,720,852
												(10,148	)	4e
Deferred income taxes		51,087			37,931			117,362		3i		—				206,380			—				206,380
Other long-term liabilities		6,065			9,431			(880	)	3h		—				14,616			—				14,616

Total liabilities	$	324,529		$	1,181,834		$	121,226			$	512,512			$	2,140,101		$	(1,545	)		$	2,138,556

Stockholders’ Equity:
Preferred stock		—			—			—				—				—			—				—
Common stock		26			—			5		3k		—				31			—				31
Additional paid-in capital		380,293			718,430			(718,430	)	3j		—				647,695			—				647,695
								267,402		3k
Treasury stock, at cost		(2,279	)		—			—				—				(2,279	)		—				(2,279	)
Retained earnings (loss)		256,739			(502,906	)		502,906		3j		(4,000	)	4h		225,317			(157,914	)	6a		104,772
								(22,522	)	3b		(2,200	)	4j					112,369		6a
												(2,700	)	4k					(75,000	)	6b
Accumulated other comprehensive income (loss)		6,823			(62,826	)		62,826		3j		—				6,823			—				6,823

Total stockholders’ equity		641,602			152,698			92,187				(8,900	)			877,587			(120,545	)			757,042

Total liabilities and stockholders’ equity	$	966,131		$	1,334,532		$	213,413			$	503,612			$	3,017,688		$	(122,090	)		$	2,895,598

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1. Basis of Presentation

Our accompanying unaudited pro forma condensed combined financial information presents the pro forma consolidated balance sheet and statement of operations of the combined company based upon the financial statements of Greatbatch, Nuvectra, and Accellent after giving effect to the Lake Region Acquisition, the financing transactions, and the Spin-off on our consolidated financial statements.

The unaudited pro forma condensed combined statements of operations for the six months ended July 3, 2015, for the fiscal year ended January 2, 2015, and for the last twelve months ended July 3, 2015 combine our historical consolidated statements of operations of Greatbatch and the historical consolidated statements of operations of Accellent. These statements of operations also eliminate the combined results of Nuvectra, giving effect to the Lake Region Acquisition, the financing transactions, and the Spin-off as if they had been consummated on January 4, 2014, the beginning of the earliest period presented. The unaudited pro forma condensed combined balance sheet combines our historical condensed consolidated balance sheet of Greatbatch and the historical condensed consolidated balance sheet of Accellent and it eliminates the condensed combined balance sheet of Nuvectra as of July 3, 2015, giving effect to the Lake Region Acquisition, the financing transactions, and the Spin-off as if they had been consummated on July 3, 2015.

The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting with our Company considered the acquirer of Lake Region. Under the acquisition method of accounting the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed with any excess allocated to goodwill. The pro forma purchase price allocation was based on an estimate of the fair market value of the tangible and intangible assets acquired and liabilities assumed of Lake Region. In arriving at the estimated fair market values, we considered the appraisals of independent consultants which were based on a preliminary and limited review of assets and liabilities related to Lake Region which will be transferred. We expect to complete the purchase price allocation after considering the appraisal of Lake Region at the level of detail necessary to finalize the required purchase price allocation. The final purchase price allocation may be different than that reflected in the preliminary pro forma purchase price allocation presented herein, and this difference may be material.

The unaudited pro forma condensed combined financial statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the Lake Region Acquisition.

Certain reclassifications were made to the historical financial statements of Accellent to conform to our presentation, which includes the following:

Adjustments made to Accellent’s historical consolidated financial statements for the year ended January 3, 2015

•

A reclassification of $26.8 million, $3.1 million, $25.0 million from impairment of intangible assets and goodwill, restructuring, and amortization of intangible assets respectively, to other operating expenses.

Adjustments made to Accellent’s historical condensed consolidated financial statements as of or for the six months ended July 4, 2015

•

A reclassification of $1.9 million, $11.1 million and $0.2 million from restructuring, amortization of intangible assets and loss on disposal of assets, respectively, to other operating expenses.

•

A reclassification of $20.1 million, $3.4 million and $32.6 million from accrued payroll and benefits, accrued interest, and accrued expenses and other current liabilities, respectively, to accrued expenses.

The following reclassification was made to our historical financial statements to remain consistent across all periods presented:

Adjustments made to our historical condensed consolidated financial statements for the six months ended July 3, 2015

•

A reclassification of $0.54 million from other (income) expense, net to gain on cost and equity method investments.

2. Lake Region Purchase Price and Preliminary Purchase Price Allocation

Purchase price

Upon consummation of the proposed Lake Region Acquisition, Lake Region’s shareholders will receive approximately $478.6 million in cash consideration and approximately $267.4 million in shares of Greatbatch, Inc. common stock and we will repay all of Lake Region’s outstanding debt, which we estimate to be approximately $1,045 million.


(in thousands except for share and per share data)
Cash payment	$	477,000
Cash consideration for exercise price of rollover stock options		1,618

Cash consideration to Lake Region shareholders	$	478,618

Number of Greatbatch shares to be issued		5,100,000
Less: shares of rollover options⁽¹⁾		(30,688	)

Total number of Greatbatch shares to be issued to Lake Region shareholders		5,069,332
Multiplied by Greatbatch closing share price on October 8, 2015	$	52.75

Stock consideration to Lake Region shareholders	$	267,407

Total consideration to Lake Region shareholders	$	746,025

(1)	As the exercise price of the options is included as part of cash consideration, the equivalent number of shares has been removed from stock consideration.

Preliminary purchase price allocation

The following is a summary of the preliminary purchase price allocation giving effect to the Lake Region Acquisition as if it had been consummated on July 3, 2015:


(in thousands)
Cash	$	45,708
Property and equipment		207,300
Accounts receivable		82,731
Inventory		112,600
Other assets		14,922
Amortizing intangible assets		766,000
Goodwill		819,824

Total assets acquired		2,049,085

Long-term debt		1,036,212
Accounts payable, accrued expenses and other current liabilities		98,260
Deferred tax liability, including current portion		160,037
Other long-term liabilities		8,551

Total liabilities assumed		1,303,060

Net assets acquired, net of cash	$	746,025

a.	The table below depicts a sensitivity analysis of the estimated purchase consideration and goodwill, assuming a 10% increase or decrease in the closing price of Greatbatch, Inc.’s shares of common stock used to determine the total estimated purchase consideration:


(in thousands, except share and per share data)

	Stock Consideration						Cash Consideration								Total
	Price of Greatbatch Ordinary Shares		Shares Exchanged		Total Stock Consideration		Replacement Option Shares		Cash Consideration Replacement Options		Other Cash Consideration		Total Cash Consideration		Total Purchase Price		Total Goodwill
As of 10/8/15	$	52.75		5,069,332	$	267,407		122,671	$	1,618	$	477,000	$	478,618	$	746,025	$	819,824
Decrease of 10%		47.48		4,963,699		235,676		136,301		1,618		477,000		478,618		714,294		788,093
Increase of 10%		58.03		5,072,120		294,335		111,519		1,618		477,000		478,618		772,953		846,752

3. Merger and Related Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

The following summarizes the pro forma adjustments in connection with the proposed Lake Region Acquisition to give effect to the transaction as if it had occurred on July 3, 2015 for purposes of the unaudited pro forma condensed combined balance sheet:

a.	Reflects the cash consideration for the proposed Lake Region Acquisition as shown within Note 2: Lake Region Purchase Price and Preliminary Purchase Price Allocation.

Reflects the recognition of $22.5 million of transaction costs to be incurred by us. The $22.5 million is expected to be incurred through the consummation of the transaction. These fees are recorded against retained earnings solely for the purposes of this presentation. There is no continuing impact of these transaction costs on the combined results of operations and, as such, these fees are not included in the pro forma condensed combined statement of operations.

Reflects the elimination of the historical goodwill amount and the recognition of goodwill related to the proposed acquisition. Goodwill is calculated as the difference between the fair value of the consideration expected to be transferred and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. The estimated goodwill calculation is preliminary and is subject to change based upon final determination of the fair value of assets acquired and liabilities assumed and finalization of the purchase price. Goodwill is not amortized, but is assessed at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable based on management’s assessment.

Represents the estimated adjustment to step-up inventory to fair value of $112.6 million. The estimated step-up in inventory is preliminary and is subject to change based upon final determination of the fair values of finished goods and work-in-process inventories. We will reflect the fair value of the inventory of Lake Region as the acquired inventory is sold, which for purposes of the unaudited pro forma condensed combined statement of operations is assumed to occur within the first two months after closing.

Represents the estimated adjustment to step-up property and equipment to fair value of $207.3 million. The fair value of property and equipment acquired was valued primarily using a combination of the trended reproduction cost method and net book value. The fair value approximates the current cost of replacing an asset with another asset of equivalent economic utility adjusted further for obsolescence and physical depreciation. Additionally, 36% of the fair value of acquired property and equipment consists of property and equipment acquired by Lake Region in a transaction that was consummated on March 12, 2014. As these assets were recently recorded at fair value, it was determined that their current book value approximates fair value.

The estimated useful lives of the property, plant and equipment range from 3 to 20 years. A ten percent change in the fair value of the property and equipment assets would result in a change in depreciation expense of $3.1 million for the 12 months ended July 3, 2015, $2.9 million for the 12 months ended January 2, 2015, and $1.5 million for the 6 months ended July 3, 2015.

Represents the estimated adjustment to record acquired identifiable intangible assets consisting of tradenames, technology, and customer relationships to fair value of $766.0 million. This adjustment is preliminary and is determined using the “income approach,” which is a valuation technique that calculates an estimate of the fair value

of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of the identifiable intangible asset valuations, from the perspective of a market participant, include the estimated net cash flows for each year (including net revenues, cost of sales, research and development costs, selling and marketing costs, and working capital), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, competitive trends impacting the asset and each cash flow stream, attrition rates, royalty rates, and other factors. This estimate is preliminary and subject to change and could vary materially from the actual adjustment on the consummation date.

The estimated useful lives of the intangibles range from 5 to 21 years. A one year decrease in the useful lives of the definite-lived intangible assets would result in additional annual amortization expense of $3.7 million for the 12 months ended July 3, 2015 and January 2, 2015, and $1.9 million for the 6 months ended July 3, 2015.

g.	Represents the elimination of Lake Region’s historical deferred financing costs as the debt was revalued under acquisition accounting. Refer to adjustment 4(k) for the write-off of our historical deferred financing costs.

h.	Reflects the elimination of the historical deferred compensation liability, as all deferred compensation will be paid out upon consummation of the transaction.

The adjustments to deferred taxes result in a net increase to long-term deferred tax liability of $117.4 million and an increase to short-term deferred tax liability of $4.7 million. These adjustments reflect the tax impact of opening balance sheet purchase accounting adjustments on the unaudited pro forma condensed combined balance sheet, and are computed by applying the statutory tax rates of the relevant jurisdictions to basis differences created by the pro forma adjustments. In addition, the historic Lake Region valuation allowance against certain federal deferred tax assets of $80.4 million was released and is reflected in the net long-term deferred tax liability amount above. This estimate of deferred income tax liabilities is preliminary and is subject to change based upon the final determination of blended statutory tax rate post-acquisition, valuation allowance assessments, and management’s final determination of the fair values of tangible and identifiable intangible assets acquired and liabilities assumed by jurisdiction.

j.	The adjustments relate to the elimination of Lake Region’s shareholders’ equity.

k.	This adjustment reflects the increase in Greatbatch, Inc. shares of common stock outstanding due to 5.072 million shares being issued to Lake Region shareholders as part of the transaction consideration.

4. Financing & Related Pro Forma Adjustments

The following summarizes the pro forma adjustments in connection with the financing for the proposed acquisition of Lake Region to give effect the transaction as if it had occurred on January 4, 2014 for purposes of the unaudited pro forma condensed combined statements of operations, and as if it had occurred on July 3, 2015 for purposes of the unaudited pro forma condensed combined balance sheet:

On August 27, 2015, the Issuer entered into the Commitment Letter with Manufacturers and Traders Trust Company, Credit Suisse Securities (USA) LLC, Credit Suisse AG, KeyBank National Association and KeyBanc Capital Markets Inc. The Commitment Letter provides for commitments, subject to customary and other conditions set forth therein, for a $300 million TLA Facility, which was subsequently increased by $75 million to $375 million on a non-committed basis, a $1.0 billion TLB Facility, which was subsequently increased by $25 million to $1,025 million on a non-committed basis, a $200 million Revolving Credit Facility, and up to a $400 million Bridge Facility. We are offering $360 million of notes in the Private Offering in lieu of a portion or all of the drawings under the Bridge Facility, subject to market and other conditions. For purposes of preparing the pro forma financial statements, it was determined that adequate financing will be obtained under the Private Offering.

The proceeds of the TLA Facility and the TLB Facility will be used to refinance our existing debt and Lake Region debt of $182.5 million and $1.0 billion respectively. The revolving credit facility will be

used for working capital requirements and it was determined that no amount would need to be drawn against the Revolving Credit Facility. The following is a reconciliation of the outstanding long-term debt amounts shown in the unaudited pro forma condensed combined balance sheet as of July 3, 2015:


(in millions)
TLA Facility	$	375.0
TLB Facility		1,025.0
Private Offering		360.0
Original issue discount (Note 4e)		(10.3	)

Total debt		1,749.7
Less: current portion		(28.9	)

Total long-term debt	$	1,720.8

b.	Reflects the elimination of our existing accrued interest and interest expense as outstanding debt will be refinanced in conjunction with this transaction.

c.	Reflects the elimination of existing Lake Region accrued interest and interest expense as outstanding debt will be refinanced in conjunction with this transaction.

We will incur approximately $36.3 million of debt issuance costs, of which $28.0 million relate to the Senior Secured Credit Facilities and $8.3 million relate to the Private Offering. The costs consist of various fees paid to the initial purchasers for their services in arranging and structuring the financing. The fees will be deferred, recorded within the other assets line item, and amortized over the lives of the respective debt, which range from 5-8 years. The amortization of these fees is $5.4 million per year and $2.7 million per each six month period.

The TLB Facility has an original issuance discount of $10.3. This discount will be amortized over the 7 year life of the debt based on the effective interest method. The amortization of the discount results in additional interest expense of $1.5 million per year and $0.75 million per the six month period.

The pro forma adjustment to interest expense is approximately $91.3 million for the twelve months ended January 2, 2015, $90.8 million for the twelve months ended July 3, 2015, and $45.2 million for the six month period ended July 3, 2015. The weighted average interest rate for TLA Facility, TLB Facility and the amounts outstanding under the Private Offering for all periods presented was approximately 5.20%.

g.	Reflects unused commitment fees applied to the Revolving Credit Facility at an annual rate of 0.25% for unused capacity. The pro forma adjustment is approximately $0.47 million per year and $0.24 million for the six month period.

h.	Reflects the commitment fee applied to the available amount under the Bridge Facility. It was determined that the Bridge Facility would not need to be utilized, as adequate financing will be secured under the Private Offering. The fee will be expensed in full as incurred.

i.	Reflects the cash settlement of interest rate swap derivatives used to hedge Lake Region debt. As all Lake Region debt will be refinanced in conjunction with this transaction, all related derivatives will be terminated.

j.	Reflects the prepayment penalty fees associated with refinancing Lake Region debt.

k.	Represents the elimination of our historical deferred financing costs as the debt will be refinanced in conjunction with the acquisition resulting in the write-off of the recorded deferred financing costs.

l.	Reflects tax expense computed by applying the statutory tax rates of the relevant jurisdictions to the respective pro forma adjustments presented in the unaudited pro forma condensed combined statements of

operations. These rates do not reflect our effective tax rate, which includes other items and may be significantly different than the rates assumed for purposes of preparing the unaudited pro forma condensed combined financial statements for a variety of factors.

The fees that we will pay and the level of net debt expected to be incurred could vary significantly from what is assumed in these unaudited condensed combined pro forma financial statements. Variances could arise from multiple factors including: other acquisitions we may pursue, the amount of cash on hand at the time of the closing of the Lake Region Acquisition and subsequent to the Spin-off, the actual mix of permanent debt/equity financing, the actual fixed/floating mix of permanent debt and our credit rating. Accordingly, the estimated debt and interest expense reflected in these unaudited pro forma condensed combined financial statements may change and the change could be significant. A 0.125 percent change in the interest rate could result in an increase or decrease in the pro forma interest expense of approximately $2.2 million for a full year period.

5. Merger and Related Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments

The following summarizes the pro forma adjustments in connection with the Lake Region Acquisition to give effect to the transaction as if it had occurred on January 4, 2014 for purposes of the unaudited pro forma condensed combined statements of operations:

a.	Reflects the elimination of our sales and related cost of sales to Lake Region.

Represents an increase in amortization expense associated with fair value adjustments to the carrying value of intangible assets. The increase in amortization expense related to the tradename and customer relationship intangible assets is recorded within the selling, general, and administrative expenses line item. The increase in amortization expense associated with the technology intangible asset was recorded within the cost of sales line item. For purposes of the unaudited pro forma condensed combined statements of operations, amortization expense was assumed to be on a straight-line basis, which may be different than what is actually recorded. Amortization expense is recorded as follows:


(in thousands)					Amortization Expense
	Fair Value		Useful Life		12 Months Ended 7/3/2015		12 Months Ended 1/2/2015		6 Months Ended 7/3/2015
Tradename	$	16,000		5	$	3,200	$	3,200	$	1,600
Customer Relationships		530,000		21		25,238		25,238		12,619
Technology		220,000		12		18,333		18,333		9,167

	$	766,000			$	46,771	$	46,771	$	23,386

Lake Region historical amortization expense					$	24,544	$	25,039	$	11,072

Represents an increase in depreciation expense associated with fair value adjustments to the carrying value of property and equipment. The increase in depreciation expense is split between the selling, general, and administrative expenses, the cost of sales, and research, development and engineering costs, net line items based upon historical Lake Region depreciation expense. The increase in depreciation expense is recorded as follows:


(in thousands)			Depreciation Expense
	Fair Value		12 Months Ended 7/3/2015		12 Months Ended 1/2/2015		6 Months Ended 7/3/2015
Property & Equipment	$	207,300	$	30,916	$	28,617	$	15,058

Lake Region historical depreciation expense			$	27,213	$	25,764	$	13,388

Increase in depreciation expense:
Cost of sales				3,307		2,548		1,492
Selling, general, and administrative expenses				377		290		169
Research, development and engineering costs, net				19		15		9

			$	3,703	$	2,853	$	1,670

Represents an adjustment to cost of goods sold for the amortization expense associated with fair value adjustments to the carrying value of inventory. We will amortize the fair value of the inventory of Lake Region as the acquired inventory is sold, which for purposes of the unaudited pro forma condensed combined statement of operations is assumed to occur within the first three months after closing.

Reflects tax expense computed by applying the statutory tax rates of the relevant jurisdictions to the respective pro forma adjustments presented in the unaudited pro forma condensed combined statements of operations. These rates do not reflect our effective tax rate, which includes other items and may be significantly different than the rates assumed for purposes of preparing the unaudited pro forma condensed combined financial statements for a variety of factors.

Represents the adjustment to weighted average shares outstanding to account for the Greatbatch, Inc. shares of common stock issued to Lake Region stockholders as part of the Merger consideration. Additionally, in order to reflect the dilutive effect of Greatbatch, Inc.’s replacement options issued to Lake Region stockholders, 60,000 shares were added to diluted weighted average shares outstanding for the twelve month period ended July 3, 2015 and the six month period ended July 3, 2015. For purposes of the unaudited pro forma condensed combined statement of operations for the twelve months ended January 2, 2015, the dilutive impacts of share based awards and equity warrants have been excluded from the calculation of the pro forma diluted loss per share, as the effect of including them would have been anti-dilutive.

6. Nuvectra Pro Forma Adjustments

The following summarizes the pro forma adjustments in connection with the announced Spin-Off of Nuvectra to give effect to the disposition as if it had occurred on January 4, 2014 for purposes of the unaudited pro forma condensed combined statements of operations and as of July 3, 2015 for purposes of the unaudited pro forma condensed combined balance sheet.

Reflects the elimination of historical financial information for Nuvectra. The historical financial information for Nuvectra have been “carved-out” of our consolidated financial statements and reflect assumptions and allocations made by us. These combined financial statements include the assets and liabilities that have historically been held at Greatbatch but which were specifically identifiable or attributable to Nuvectra or were transferred to Nuvectra in connection with the Spin-Off. All intercompany transactions and accounts within Nuvectra have been eliminated. All transactions between Nuvectra and Greatbatch are considered to be effectively settled in the combined financial statements at the time the

transaction is recorded. In addition, certain expenses reflected in Nuvectra’s historical financial information are an allocation of corporate expenses from us including executive oversight, finance, legal, human resources, tax, information technology, product development, corporate procurement, and facilities. The actual costs that may have been incurred if Nuvectra had been a stand-alone company would be dependent on a number of factors including the chosen organizational structure and strategic decisions. As such, the Nuvectra combined financial statements do not necessarily reflect what Nuvectra’s financial condition and results of operations would have been had Nuvectra operated as a stand-alone company during the periods or at the date presented. As this information is not readily determinable, nor factually supportable, no pro forma adjustments have been made to adjust Nuvectra’s historic financial information to reflect costs that may have been incurred if Nuvectra had been a stand-alone company.

b.	Represents the cash capital contribution of $75 million to Nuvectra to be made by us immediately prior to completion of the Spin-off. The amount of this capital contribution is a preliminary estimate and is subject to our board of directors’ approval of the Spin-off.

Reflects the elimination of historical financial information for Nuvectra. The historical financial information for the twelve month period ended July 3, 2015 was calculated by taking the Nuvectra combined statement of operations for the year ended January 2, 2015 less the unaudited Nuvectra condensed combined statement of operations for the six months ended July 4, 2014 plus the unaudited Nuvectra condensed combined statement of operations for the six months ended July 3, 2015.