Integer Annual Report 2014

FY2014 Annual Report · Integer

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2014 Annual Report

To our shareholders:

Writing to you last year, I highlighted how Greatbatch was entering 2014 from a point of strength. Our plans called
for making progress on multiple fronts: organic growth by leveraging our long-term agreements with our blue chip
customer base, continued operational excellence to expand our margins, advancing our medical device strategy, and
pursuing targeted acquisitions.

Twelve months later, I am pleased to say that we made strides against each of these, resulting in meaningful returns
for you, for our customers and for the countless patients who benefit from our technologies worldwide.

Even with modest sales growth to $687.8 million (+3% organic constant currency), our continued focus on
increased operating efficiencies drove a 10% year over year improvement in adjusted operating income and 15%
improvement in adjusted diluted EPS.

Organic Growth

Greatbatch continued to establish our position as a leading developer and manufacturer in the $2.9 billion
neuromodulation market. This pathway spans across three segments of the market: enabling early stage innovation,
manufacturing discrete medical device technologies, and introducing innovative platforms for complete active
implantable medical device (AIMD) systems.

Our Algovita Spinal Cord Stimulation (SCS) system to treat chronic intractable pain in the trunk and/or limbs
achieved a significant regulatory milestone in June, receiving the CE Mark in Europe.

We significantly grew our intellectual property position. This past year saw another surge in our patent portfolio,
with 134 new patents issued, 105 new applications filed, and total patents held nearing 1,500.

To fund new organic growth initiatives, it’s crucial that we successfully execute opportunities in our core markets,
where we compete through advanced technology, speed to market, high quality standards and exceptional service.
Approximately 70 percent of our core product lines are secured by long-term customer agreements, and a strong
pipeline serves to deepen our customers’ commitments to working with us.

In 2014, we enjoyed double-digit organic constant currency growth in our orthopaedics and vascular product lines,
as we continue to realize the benefits of our operational investments, sales force productivity, marketing efforts, and
capitalize on market growth. These partially offset some weaknesses in our portable medical product line because of
strategic repositioning and lower cardiac/neuromodulation revenue due to customer inventory reduction initiatives,
and the end-of-life of two legacy products.

Margin Expansion

Considering the life-sustaining and life-enhancing aspects of our technologies and products, maintaining the utmost
quality is crucial to all of our 3,700 Associates. That’s why the past year saw us maintain and enhance a culture that
inspires continuous process improvements and competitive marketplace positioning, while at the same time meeting
superior quality metrics.

This effort was supported by ongoing investment in capabilities, capacity and technology – areas in which we
already excel, yet in which we believe there’s always room for additional progress. Our increased production
efficiencies and higher sales volumes led to gross profit gains in line with our plans. The company’s adjusted
operating income margin increased to 13.3% – an increase from 2013 (12.5%) and 2012 (11.4%).

Targeted Acquisitions

Greatbatch actively considered targeted acquisitions in 2014 in parallel to driving revenue, profitability and pipeline
growth. We identified opportunities that would drive our core market expansion, help us enter adjacent growth
markets, and also enhance our return on invested capital (ROIC) performance.

Our strategic acquisition of CCC Medical Devices in August was a prime example of this approach. This globally-
respected AIMD systems company designs and manufactures a range of technologies for some of the world’s
leading medical device companies. It immediately allowed us to more broadly partner with current & prospective
customers and enhanced our medical device innovation efforts, particularly in the Neuromodulation market.

We maintained a strong financial capacity to pursue additional deals, with $500 million of available credit that gives
us the enviable advantage of being able to move fast as we discover companies and technologies that meet our
acquisition criteria.

2015: Executing Our Strategy

Each new year provides a natural point to reflect upon how Greatbatch should evolve in the months ahead, staying
true to our strategic plan while making necessary adjustments and adaptations to serve our markets better.

Our multi-year strategy of growth through our core business, strategic acquisitions and commercializing medical
devices remains sound. It is based on our incredibly talented Associates, our deeply-rooted industry knowledge, and
a spirit of innovation that has persisted over four decades, and has created a solid foundation for the future.

The outlook for 2015 is bright with our Algovita platform, additional growth in our core business, continuous
improvement projects and focused R&D spending leading to margin expansion, and a healthy pipeline of accretive
acquisitions. Our financial accomplishments, combined with the difference our products make in the lives of so
many people each and every day, are steadily contributing to Greatbatch’s expanding industry reputation. With
continued execution against our plans – aided by the support of our shareholders, customers and Associates – we
believe 2015 will be a transformative year in the strategic evolution of Greatbatch.

Sincerely,

Thomas J. Hook
President & Chief Executive Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_____________________________________

FORM 10-K

_____________________________________

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year Ended January 2, 2015

Commission File Number 1-16137
_____________________________________

GREATBATCH, INC.

(Exact name of Registrant as specified in its charter)

_____________________________________

Delaware

(State of
Incorporation)

16-1531026

(I.R.S. Employer
Identification No.)

2595 Dallas Parkway
Suite 310
Frisco, Texas 75034
(Address of principal executive offices)

(716) 759-5600
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class:
Common Stock, Par Value $0.001 Per Share

Name of Each Exchange on Which Registered:
New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes (cid:95) No (cid:133)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes (cid:133) No (cid:95)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the

Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:95) No (cid:133)

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any,

every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes (cid:95) No (cid:133)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this

chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:133)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.

Large accelerated filer (cid:95)(cid:3)

Accelerated filer

(cid:133)(cid:3)

Non-accelerated filer (cid:133)(cid:3)

Smaller reporting company (cid:133)(cid:3)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:133) No (cid:95)

The aggregate market value of common stock held by non-affiliates as of July 3, 2014 (the last business day of the
registrant’s most recently completed second fiscal quarter), based on the last sale price of $49.58, as reported on the New York
Stock Exchange on that date: $1,212 million. Solely for the purpose of this calculation, shares held by directors and officers and
10 percent shareholders of the registrant have been excluded. This exclusion should not be deemed a determination by or an
admission that these individuals are, in fact, affiliates of the registrant.

Shares of common stock outstanding as of March 3, 2015: 25,354,051

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following document are specifically incorporated by reference into the indicated parts of this report:

Document
Proxy Statement for the 2015 Annual Meeting of
Stockholders

Part III, Item 10
“Directors, Executive Officers and Corporate Governance”

Part

Part III, Item 11
“Executive Compensation”

Part III, Item 12
“Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters”

Part III, Item 13
“Certain Relationships and Related Transactions, and
Director Independence”

Part III, Item 14
“Principal Accountant Fees and Services”

ITEM
NUMBER

1 Business

1A Risk Factors

1B Unresolved Staff Comments

2 Properties

3 Legal Proceedings

4 Mine Safety Disclosures

TABLE OF CONTENTS

PART I

PART II

5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

6 Selected Financial Data

7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

7A Quantitative and Qualitative Disclosures About Market Risk

8 Financial Statements and Supplementary Data

9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

9A Controls and Procedures

9B Other Information

10 Directors, Executive Officers and Corporate Governance

11 Executive Compensation

PART III

12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

13 Certain Relationships and Related Transactions, and Director Independence

14 Principal Accounting Fees and Services

PART IV

15 Exhibits, Financial Statement Schedules

Signatures

PAGE
NUMBER

100

101

102

103

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PART I

ITEM 1. BUSINESS

OVERVIEW

Greatbatch, Inc. was founded in 1970 and is a Delaware corporation formed in 1997. When used in this report, the terms
“Greatbatch,” “we,” “us,” “our” and the “Company” mean Greatbatch, Inc. and its subsidiaries. The Company conducted its
initial public offering in 2000.

We operate our Company in two reportable segments: Greatbatch Medical and QiG Group (“QiG”). Greatbatch Medical
designs and manufactures products where Greatbatch either owns the intellectual property or has unique manufacturing and
assembly expertise. These products include medical devices and components for the cardiac, neuromodulation, orthopaedics,
portable medical, vascular and energy markets among others. The Greatbatch Medical segment also offers value-added
assembly and design engineering services for medical devices that utilize its component products.

The Company’s customers include large multi-national original equipment manufacturers (“OEMs”).

Since formation, Greatbatch has completed the following acquisitions either directly or indirectly through one of its
subsidiaries:

Acquisition Date
July 1997

Acquired Company

Business at Time of Acquisition

Wilson Greatbatch Ltd.

Founded in 1970, designed and manufactured
batteries for implantable medical and commercial
applications.

August 1998

Hittman Materials and Medical Components, Inc. Founded in 1962, designed and manufactured

August 2000

Battery Engineering, Inc.

June 2001

Sierra-KD Components division of Maxwell
Technologies, Inc.

July 2002

Globe Tool and Manufacturing Company, Inc.

March 2004

NanoGram Devices Corporation

April 2007

BIOMEC, Inc.

ceramic and glass feedthroughs and specialized
porous coatings for electrodes used in implantable
medical devices (“IMDs”).

Founded in 1983, designed and manufactured
high-energy density batteries for industrial,
commercial, military and medical applications.

Founded in 1986, designed and manufactured
ceramic electromagnetic filtering capacitors and
integrated them with wire feedthroughs for use in
IMDs as well as military, aerospace and
commercial applications.

Founded in 1954, designed and manufactured
precision enclosures used in IMDs and
commercial products used in the aerospace,
electronics and automotive sectors.

Founded in 1996, developed nanoscale materials
for battery and medical device applications.

Established in 1998, provided medical device
design and component integration to early-stage
and established customers.

- 3 -

Acquisition Date

June 2007

Enpath Medical, Inc.

Acquired Company

Business at Time of Acquisition

October 2007

IntelliSensing LLC

November 2007

Quan Emerteq LLC

November 2007

Engineered Assemblies Corporation

January 2008

P Medical Holding SA

Founded in 1981, designed, developed, and
manufactured venous introducers and dilators,
implantable leadwires, steerable sheaths and
steerable catheters.

Founded in 2005, designed and manufactured
battery-powered wireless sensing solutions for
commercial applications.

Founded in 1998, designed, developed, and
manufactured catheters, stimulation leadwires,
microcomponents and assemblies.

Founded in 1984, designed and integrated custom
battery solutions and electronics focused on
rechargeable systems for industrial, commercial,
military and portable medical applications.

Founded in 1994, designed, manufactured and
supplied delivery systems, instruments and
implants for the orthopaedics industry.

February 2008

DePuy Orthopaedics’ Chaumont, France
manufacturing facility

Manufactured hip and shoulder implants for
DePuy Orthopaedics.

December 2011

Micro Power Electronics, Inc. (“Micro Power”)

February 2012

NeuroNexus Technologies, Inc.
(“NeuroNexus”)

August 2014

Centro de Construcción de Cardioestimuladores
del Uruguay (“CCC”)

Founded in 1990, designed custom battery packs,
smart chargers and power supplies for industrial,
military and portable medical applications.

Founded in 2004, medical device design firm
specializing in developing neural interface
technology, components and systems.
Founded in 1969, an active implantable
neuromodulation medical device systems
developer and manufacturer that produces a range
of medical devices including implantable pulse
generators, programmer systems, battery chargers,
patient wands and leads.

FINANCIAL STATEMENT YEAR END

We utilize a fifty-two, fifty-three week fiscal year ending on the Friday nearest December 31. Fiscal years 2014, 2013 and 2012
ended on January 2, 2015, January 3, 2014, and December 28, 2012, respectively. Fiscal year 2014 and 2012 contained fifty-
two weeks and fiscal year 2013 contained fifty-three weeks.

SEGMENT INFORMATION

We operate our company in two reportable segments: Greatbatch Medical and QiG. Segment information including sales from
external customers, profit or loss, and assets by segment as well as sales from external customers and long-lived assets by
geographic area are set forth in Note 19 “Business Segment, Geographic and Concentration Risk Information” of the Notes to
Consolidated Financial Statements contained in Item 8 of this report.

Greatbatch Medical

Greatbatch Medical’s products include medical devices and components for the cardiac, neuromodulation, orthopaedics,
portable medical, vascular and energy markets among others. A brief description of these products and markets follows:

Cardiac and neuromodulation – Products include batteries, capacitors, filtered and unfiltered feedthroughs, engineered
components, implantable stimulation leads and enclosures used in IMDs. Additionally, we offer value-added assembly for these
IMDs. An IMD is an instrument that is surgically inserted into the body to provide diagnosis and/or therapy. One sector of the
IMD market is cardiac, which is comprised of devices such as implantable pacemakers, implantable cardioverter defibrillators
(“ICD”), cardiac resynchronization therapy (“CRT”) devices, and cardiac resynchronization therapy with backup defibrillation
devices (“CRT-D”). Another sector of the IMD market is neuromodulation, which is comprised of pacemaker-type devices that
stimulate nerves for the treatment of various conditions. Beyond established therapies for pain control, incontinence, movement
disorders (Parkinson’s disease, essential tremor and dystonia) and epilepsy, nerve stimulation for the treatment of other
disabilities such as sleep apnea, migraines, obesity and depression has shown promising results.

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The following table sets forth the main categories of battery-powered IMDs and the principal illness or symptoms treated by
each device:

Device
Pacemakers
ICDs
CRT/CRT-Ds
Neurostimulators

Cochlear hearing devices

Market Size (in billions)

Principal Illness or Symptom

$4.0
$3.7
$3.0
$2.6

$0.8

Abnormally slow heartbeat (Bradycardia)
Rapid and irregular heartbeat (Tachycardia)
Congestive heart failure
Chronic pain, movement disorders, epilepsy, obesity or
depression
Hearing loss

IMD systems generally include an implantable pulse generator (“IPG”) and one or more stimulation leads. An IPG is a battery
powered device that produces electrical pulses. The lead then carries this electrical pulse from the IPG to the heart, spinal cord
or other location in the body. Our portfolio of proprietary technologies, products, and capabilities has been built to provide our
cardiac and neuromodulation customers with a single source for the vast majority of the components and subassemblies
required to manufacture an IPG or lead, to include complete lead systems. Our investments in research and development has
®
generated proprietary products such as the QHR
, and QCAPSTM primary battery and capacitor lines, which have enabled
our OEM partners to make improvements in their system offerings in terms of device reliability, size, longevity and power. Our
XcellionTM line of Lithium-Ion rechargeable batteries leverages decades of implantable battery research, development and
manufacturing expertise. This line of cells now includes the optional CoreGuardTM feature, which enables batteries to discharge
to zero volts without performance degradation.

®, QMR

We believe that the cardiac and neuromodulation markets continue to exhibit fundamentals for growth. Factors that are
impacting these markets are as follows:

• Growing patient population – Implantable pacemakers and ICDs remain primary therapies for a number of critical clinical
conditions, most of which are non-elective in nature. As the prevalence of many of these clinical conditions increase with
age, underlying population demographics in developed countries will provide an engine for procedure growth.

• Focus on emerging markets – OEMs have increased their focus and investment to expand physicians’ awareness of these life
changing therapies, which we believe will result in increased utilization to improve quality of life for more patients globally.
These growth initiatives will drive increased utilization of existing cardiac technologies and provide an avenue for new
device and technology development as device manufacturers look to develop unique products for these markets.

• Trends in device features – IMD evolution continues to favor the development of smaller, longer lasting devices with

increased functionality and more physiologic shapes. Innovative battery, capacitor, enclosure, and filtering solutions such as
those provided by Greatbatch Medical are critical to the realization of these market needs.

• Growth within neuromodulation – Neuromodulation applications continue to grow at a faster pace than traditional markets,
and are expected to continue to expand as new therapeutic applications are identified. There continues to be growth in
clinical data supporting new applications and a growing focus and excitement from clinicians looking for treatment
alternatives for challenging patient conditions that have not been traditionally served by implantable stimulation devices. As
many cardiac OEM companies are also OEMs in the neuromodulation market, Greatbatch is well positioned to capitalize on
these drivers of market growth based on the strength of existing relationships. Additionally, early stage neuromodulation
OEMs have begun to receive CE and FDA approvals for their novel device systems and therapies, further fueling
incremental growth in the market and providing new potential partners for Greatbatch technology.

• Innovative and disruptive technologies – Three innovative and disruptive device technologies (sub-cutaneous ICDs, leadless
pacemakers and injectable loop recorders) continued to receive significant attention from OEMs in 2014. These new device
technologies will play an important role in increasing utilization of critical therapy and diagnostic tools globally. Our
portfolio of technologies and next generation development efforts are vital to the advancement of these new therapy and
diagnostic platforms.

Orthopaedics – Products include hip and shoulder joint reconstruction implants, bone plates and spinal devices, and instruments
and delivery systems used in hip and knee replacement, trauma fixation, extremity and spine surgeries. Orthopaedic implants
are used in reconstructive surgeries to replace or repair hips, knees and other joints, such as shoulders, ankles and elbows that
have deteriorated as a result of disease or injury. Trauma implant systems are used primarily to reattach or stabilize damaged
bone or tissue while the body heals. Spinal implant systems are used by orthopaedic surgeons and neurosurgeons in the
treatment of degenerative diseases, deformities and injuries in various regions of the spine.

- 5 -

Each implant system typically has an associated instrument set that is used in the surgical procedure to insert that specific
implant system. Instruments included in a set vary by implant system. Usually, instrument sets are sterilized after each use and
then reused, however, recent trends are moving towards single use instrumentation. Cases are used to store, transport and
arrange implant systems and other medical devices and related surgical instruments. Orthopaedic trays are generally designed
to allow for sterilization and re-use after an implant or other surgical procedure is performed. The majority of cases are tailored
for specific implant procedures so that the instruments, implants and other devices are arranged to match the order of use in the
procedure and are securely held in clearly labeled, custom-formed pockets or brackets.

Many of the factors affecting the orthopaedics market segment are similar to the cardiac and neuromodulation markets and
include:

• Aging population in developed markets – Conditions like osteoarthritis and spine degeneration are underlying drivers of a
diverse spectrum of reconstructive therapies, and increase significantly with age. Continued growth in the 65+ population,
along with an increased desire to remain active, will provide a driver for procedural growth.

• Rates of obesity – Rates of obesity globally have continued to rise, and are expected to do so for the foreseeable future.

Excess weight exacerbates wear on joints and will drive the need for replacement and revision procedures.

• New implant and surgical technology – The orthopaedic market continues to see a growing focus on minimally invasive
procedures across a number of sectors including joint reconstruction and spinal fusion, potentially expanding the use of
these therapeutic approaches.

• Growth in emerging markets – Growing affluence in emerging markets has provided an opportunity for global growth of a
number of orthopaedic procedures. Patient populations outside of developed markets continue to be underpenetrated, and
investment from large device manufacturers in these markets will provide for procedural growth of established therapies.

We estimate that the orthopaedics market represents a $3 billion market opportunity for Greatbatch Medical.

Vascular – Products include off-the-shelf introducers, steerable sheaths, and components for high performance specialty
catheters that deliver minimally invasive therapies to treat disease states such as coronary, neurovascular and peripheral
vascular disease. Our customers include market leading OEMs within the interventional radiology, interventional cardiology,
electrophysiology and vascular access market. We believe that over the coming years these markets will experience strong
global procedural growth driven by:

• Growing global prevalence of vascular disease reflecting both the aging of the population in many developed markets and

the continuing growth in the number of people with conditions such as diabetes, hypertension, and obesity.

• Continued adoption of minimally invasive therapies in emerging markets.

• Emergence of new minimally invasive therapies expanding patient pools to patients who previously would have remained

either untreated or have undergone surgery.

Our products and capabilities seek to capitalize on the growth of the minimally invasive therapy markets by offering
complementary off-the-shelf access devices such as introducers and steerable sheaths as well as design and manufacturing
services for specialty catheter components that enable the delivery and administration of predominantly cardiovascular,
neurovascular and endovascular therapies. Our broad portfolio of peelable, valved and non-valved introducers have gained
strong adoption with OEMs in both the cardiac rhythm management (“CRM”) market, for the placement of leads, as well as the
vascular access space where our introducers are used to place dialysis catheters, PICCs, CVCs and ports. We service these
markets by providing OEMs with customizable sterile kits or non-sterile product for inclusion in OEMs device kits. Our
steerable sheaths have gained significant traction in the electrophysiology market where market-leading OEMs utilize our
steerable devices for the delivery of diagnostic and ablation devices. Our specialty catheter shaft components provide OEMs
custom design, prototyping, and manufacturing of the high performance catheter assemblies required to support the most
demanding minimally invasive catheter based surgical procedures.

Portable Medical, Energy, Military and Environmental – Greatbatch Medical also provides customized battery power and
management systems, charging and docking stations, and power supplies. We design customized primary (non-rechargeable)
and secondary (rechargeable) battery solutions which are used in the portable medical, energy, military and environmental
markets. Our primary and secondary power solutions are used where failure is not an option.

Greatbatch Medical’s primary lithium power solutions, which include high, moderate and low rate non-rechargeable cell
solutions, are utilized in extreme conditions and can withstand exceptionally high and low temperatures, sterilization, and high
shock and vibration. Our product designs incorporate protective circuitry, glass-to-metal hermetic seals, fuses and diodes to
help ensure safe, durable and reliable power as devices are subjected to these harsh conditions. Our primary batteries are often
used in remote and demanding environments, including down hole drilling tools, military communication devices,
oceanographic buoys and more.

- 6 -

In addition to primary power solutions, Greatbatch Medical offers customized secondary or rechargeable battery packs, in a
diverse range of chemistries for critical applications requiring rechargeable solutions. Rechargeable chemistries include lithium
ion, lithium ion polymer, nickel metal hydride, nickel cadmium, lithium iron phosphate and sealed lead acid. Greatbatch
Medical’s rechargeable battery packs include advanced electronics, smart charging and battery management systems and are
used in critical and life-saving applications, including automated external defibrillators, ventilators, powered surgical
instruments and portable oxygen concentrators, among others.

The portable medical market trends continue to be favorable with an aging population and the shift from clinical to home
settings for portable equipment to monitor and provide therapy. This market represents a strong opportunity despite cost
pressure from healthcare reform. New product development in this market is vibrant as our customers continue to invest in the
future to position for growth. We estimate that the portable medical market represents a $1.0 billion market opportunity for
Greatbatch Medical.

The following table summarizes information about our Greatbatch Medical products:

Product
Batteries

Capacitors

EMI filters

Description
Lithium iodine (“Li Iodine”)
Lithium silver vanadium oxide (“Li SVO”)
Lithium carbon monoflouride (“Li CFx”)
Lithium ion rechargeable (“Li Ion”)
Lithium SVO/CFx (“QHR” & “QMR”)

Principal Product Attributes

High reliability and predictability;
Long service life;
Customized configuration;
Light weight;
High energy density, small size

Storage for energy generated by a battery
before delivery to the heart. Used in ICDs
and CRT-Ds.

Stores more energy per unit volume (energy
density) than other existing technologies;
Customized configuration

Filters electromagnetic interference to limit
undesirable response, malfunctioning or
degradation in the performance of electronic
equipment

High reliability attenuation of EMI RF over
wide frequency ranges;
Customized design

Feedthroughs

Allow electrical signals to be brought from
inside hermetically sealed IMD to an
electrode

Ceramic to metal seal is substantially more
durable than traditional seals;
Multifunctional

Coated electrodes

Deliver electric signal from the feedthrough
to a body part undergoing stimulation

High quality coated surface;
Flexible in utilizing any combination of
biocompatible coating surfaces;
Customized offering of surfaces and tips

Precision components

Machined
Molded and over molded products

High level of manufacturing precision;
Broad manufacturing flexibility

Enclosures and related
components

Titanium
Stainless steel

Precision manufacturing, flexibility in
configurations and materials

Value-added assemblies

Combination of multiple components in a
single package/unit

Leveraging products and capabilities to provide
subassemblies and assemblies;
Provides synergies in component technology
and procurement systems

- 7 -

Product
Stimulation leads

Description

Cardiac, neuromodulation and hearing
restoration stimulation leads

Introducers

Conduit to deliver CRM leads or placement
of dialysis catheters, CVCs, PICCs, and ports

Principal Product Attributes
Custom and unique configurations that increase
therapy effectiveness, provide finished device
design and manufacturing

Variety of sizes and configurations that
facilitate reliable access in vascular access and
CRM applications

Steerable sheaths

Steerable guide sheath for the delivery of
diagnostic and ablation catheters

Configurations to enable effective delivery of
diagnostic and therapeutic devices in
electrophysiology procedures.

Specialty catheter shaft
components

High performance catheter shafts designed to
meet intended clinical performance
characteristics

Deep catheter design expertise and state-of-the-
art manufacturing services

Cases and trays

Delivery systems for cleaning and sterilizing
orthopaedic instruments and implants

High degree of customization;
Short, predictable development and production
timelines

Implants

Orthopaedic implants for large joint, spine,
extremity and trauma procedures

Precision manufacturing, leveraging
capabilities and product processes including
sterile packaging and coatings

Reusable and single use orthopaedic
instruments for large joint, spine, extremity
and trauma procedures

Designed to improve surgical techniques,
reduce surgery time, and increase surgical
precision

Instruments

Primary cells

Low-rate
Moderate-rate
High rate (spiral)
Wide Range

Primary and secondary
battery packs

Highly-customized pack solutions

Optimized rate capability, shock and vibration
resistant, high and low temperature tolerant,
high energy density;
Ability to operate in low and high temp
applications

Diverse portfolio of cells in various sizes,
temperature ranges and rate capabilities,
custom-engineered and designed, value-add
charging and battery management systems for
secondary packs

A majority of the components and devices Greatbatch Medical sells incorporate proprietary technologies. These proprietary
technologies provide an entry barrier for new competitors, and further limit existing competitors from duplicating our products.
In addition to these proprietary technologies, our proprietary “know-how” in the manufacture of these products provides further
barriers to competition.

QiG GROUP

QiG utilizes a disciplined and diversified portfolio approach with three investment modes: new medical device systems
commercialization, collaborative programs with OEM customers, and strategic equity positions in emerging healthcare
companies. The development of certain new medical device systems are facilitated through the establishment of limited liability
companies (“LLCs”). These LLCs do not own, but have the exclusive right to use the technology of Greatbatch in certain,
specific fields of use and have an exclusive manufacturing agreement with Greatbatch Medical. QiG currently owns 89% -
100% of three LLCs. The minority interests in these LLCs are held by key opinion leaders, clinicians and strategic partners.

- 8 -

Under the LLC agreement, QiG is responsible to fund 100% of the expenses incurred by the LLC. However, no distributions
are made to the minority holders until QiG is reimbursed for all expenses paid. Once QiG has been fully reimbursed, all future
distributions are made based upon the respective LLCs ownership percentages. One of the LLCs established by QiG is for our
spinal cord stimulation system to treat chronic intractable pain of the trunk and/or limbs. This product was submitted for
premarket approval (“PMA”) to the United States Food & Drug Administration (“FDA”) in December 2013 and in January
2014 documentation for European CE Mark was submitted to the notified body, TÜV SÜD America. CE Mark approval was
obtained on June 17, 2014. QiG is in the early stages of development of two additional medical device systems, which are
targeting approved and emerging indications. Additionally, based upon the technology acquired from NeuroNexus, QiG is
developing a platform of thin-film electrodes for neuromodulation leads, sub-systems and components.

QiG revenue includes sales of neural interface technology, components, and systems to the neuroscience and clinical markets.
On August 12, 2014, the Company acquired CCC, a neuromodulation medical device developer and manufacturer. As a result
of this transaction, QiG revenue also includes sales of various medical device products such as implantable pulse generators,
programmer systems, battery chargers, patient wands and leads to medical device companies. In the future, QiG revenue is
expected to come from various sources including investment gains from the sales of LLC ownership interests, technology
licensing fees, royalty revenue, and/or the sales of medical device systems.

RESEARCH AND DEVELOPMENT

Our position as a leading developer and manufacturer of medical devices and components is largely the result of our long
history of technological innovation. We invest substantial resources in research, development and engineering. Our scientists,
engineers and technicians focus on improving existing products, expanding the use of our products and developing new
products. In addition to our internal technology and product development efforts, we also engage outside research institutions
for unique technology projects. In order to facilitate the development of new and improved medical devices, in 2008, we
significantly increased our investments in research and development. Net investments in medical device systems (including
SG&A), which are being facilitated through QiG, totaled $23.9 million, $29.4 million and $32.7 million for 2014, 2013 and
2012, respectively. Further information regarding our research and development activities can be found in the “Product
Development” section of Item 7 of this report.

PATENTS AND PROPRIETARY TECHNOLOGY

We rely on a combination of patents, licenses, trade secrets and know-how to establish and protect our proprietary rights to our
technologies and products. Often, several patents covering various aspects of the design protect a single product. We believe
this provides broad protection of the inventions employed.

As of January 2, 2015, we have 1,023 active patents filed. We also have 462 pending patent applications at various stages of
approval. During 2014, there were 105 patent applications filed and 134 patents issued. As a result of QiG’s development of
complete medical device systems, the amount of intellectual property being generated by the Company has accelerated. Of the
1,485 patents filed and pending, approximately 542 of these relate to our complete medical device systems.

We are a party to several license agreements with third parties under which we have obtained, on varying terms, exclusive or
non-exclusive rights to patents held by them. An example of these agreements is the license of basic technology used in our wet
tantalum capacitors, filtered feedthroughs, biomimetic coatings, safety needles and MRI compatible lead systems. We have also
granted rights to our patents to others under license agreements.

It is our policy to require our management and technical employees, consultants and other parties having access to our
confidential information to execute confidentiality agreements. These agreements prohibit disclosure of confidential
information to third parties except in specified circumstances. In the case of employees and consultants, the agreements
generally provide that all confidential information relating to our business is the exclusive property of Greatbatch.

MANUFACTURING AND QUALITY CONTROL

We leverage our strength as an innovative designer and manufacturer of finished devices and components to the medical device
industry. Our manufacturing and engineering services include: design, testing, component production, and device assembly. We
have integrated our proprietary technologies in our own products and those of our customers throughout the medical device
industry. Our flexible, high productivity manufacturing capabilities span sites in Tijuana, Mexico, Beaverton, OR, Plymouth,
MN, Minneapolis, MN, Ft. Wayne, IN, Indianapolis, IN, Alden, NY, Clarence, NY, Raynham, MA, Chaumont, France, and with
the acquisition of CCC in August 2014, Montevideo, Uruguay.

Due to the highly regulated nature of the products we produce, we have implemented strong quality systems which are
harmonized across the Company. The quality systems at our sites are compliant with and certified to various recognized
international standards, requirements, and directives. Each site’s quality system is certified under an applicable International
Organization for Standardization (“ISO”) quality system standard, such as ISO 13485 or ISO 9001. This certification requires,

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among other things, an implemented quality system that applies (where applicable) to the design and manufacture of
components, assemblies and finished medical devices, including component quality and supplier control. Maintenance of these
certifications for each facility requires periodic re-examination from an independent notified body.

Along with ISO 13485, the facilities producing finished medical devices are subject to extensive and rigorous regulation by
numerous government bodies, including the FDA and comparable international regulatory agencies in order to ship product
worldwide. For these facilities, we maintain FDA registration and compliance to all applicable domestic and international
regulations. Compliance with applicable regulatory requirements is subject to continual review and is monitored through
periodic inspections by the FDA and other international regulatory bodies.

SALES AND MARKETING

We sell our products directly to our customers. In 2014, approximately 45% of our products were sold in the U.S. Sales outside
the U.S. are primarily to customers whose corporate offices are located and headquartered in the U.S. Information regarding our
sales by geographic area is set forth in Note 19 “Business Segment, Geographic and Concentration Risk Information” of the
Notes to Consolidated Financial Statements contained in Item 8 of this report.

Although the majority of our customers contract with us to develop custom components and assemblies to fit their product
specifications, we also provide system and device solutions ready for market distribution by OEMs. As a result, we have
established close working relationships between our internal program managers and our customers. We market our products and
technologies at industry meetings and trade shows domestically and internationally.

Internal account executives support all activity and involve engineers and technology professionals in the sales process to
address customer requests appropriately. For system and device solutions, we partner with our customers’ research, marketing,
and clinical groups to jointly develop technology platforms in alignment with their product roadmaps and therapy needs.

We leverage our account executives with support from engineering to design and sell product solutions into our targeted
markets. Our account executives are trained to assist our customers in selecting appropriate chemistries and configurations. We
market our products and services through well-defined selling strategies and marketing campaigns that are customized for each
of the industries we target.

Over the last several years we have significantly enhanced our sales and marketing capabilities. This has included moving
account executives closer to our major customers, upgrading our sales force with new sales talent, enhancing our sales
commission programs, and intensifying our market research. Additionally, we have placed additional emphasis on reaching
long-term agreements with our OEM customers in order to secure our revenue base. At times, we have provided our customers
with price concessions in exchange for entering into long-term agreements and certain volume commitments. We estimate that
approximately 70 percent of our revenue is generated from long-term (three- to seven-year) agreements.

Firm backlog orders at January 2, 2015 and January 3, 2014 were approximately $174 million and $170 million, respectively.
The majority of the orders outstanding at January 2, 2015 are expected to be shipped within one year.

CUSTOMERS

Our Greatbatch Medical customers include large multi-national OEMs and their subsidiaries such as, in alphabetical order here
and throughout this report, Biotronik, Biomet, Boston Scientific, Cyberonics, Halliburton Company, Johnson & Johnson,
Medtronic, Philips Healthcare, Smith & Nephew, Sorin Group, St. Jude Medical, Stryker, Zimmer, and Zoll. During 2014,
2013, and 2012, Biotronik, Johnson & Johnson, Medtronic, and St. Jude Medical, collectively accounted for 54%, 56% and
52% of our total sales, respectively. We have been successful in leveraging our diversified product line to further penetrate
these customers and selling into more of their operating divisions, which cover the cardiac, neuromodulation, orthopaedic and
vascular markets. QiG customers include numerous scientists, hospitals and universities throughout the world who perform
research for the neuroscience and clinical markets. With the acquisition of CCC in August 2014, QiG customers also include
various research companies and institutes and early stage medical device companies, with Nevro Corp. as the largest customer.

The nature and extent of our selling relationship with each OEM customer is different in terms of breadth of products
purchased, selling prices, product volumes, ordering patterns and inventory management. For customers with long-term
contracts, we have negotiated fixed pricing arrangements for pre-determined volume levels with pricing fixed at each level. In
general, the higher the volume level, the lower the pricing. We have pricing arrangements with our customers that at times do
not specify minimum order quantities. During new contract negotiations, price level decreases (concessions) for future sales
may be offered to customers in exchange for volume and/or long-term commitments. Once the new contracts are signed, these
prices are fixed and determinable for all future sales. We recognize revenue when it is realized or realizable and earned. This
occurs when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, the buyer
is obligated to pay us (i.e. payment is not contingent on a future event), the risk of loss is transferred, there is no obligation of
future performance, collectability is reasonably assured and the amount of future returns can reasonably be estimated. Those
criteria are met at the time of shipment when title passes.

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Our visibility to customer ordering patterns is over a relatively short period of time. Our customers may have inventory
management programs, vertical integration plans and/or alternate supply arrangements which we are unaware of. Additionally,
the relative market share among the OEM manufacturers changes periodically. Consequently, these and other factors can
significantly impact our sales in any given period. Our customers may initiate field actions with respect to market-released
products. These actions may include product recalls or communications with a significant number of physicians about a product
or labeling issue. The scope of such actions can range from very minor issues affecting a small number of units to more
significant actions. There are a number of factors, both short-term and long-term, related to these field actions that may impact
our results. In the short-term, if a product has to be replaced, or customer inventory levels have to be restored, demand will
increase. Also, changing customer order patterns due to market share shifts or accelerated device replacements may also have a
positive or negative impact on our sales results in the near-term. These same factors may have longer-term implications as well.
Customer inventory levels may ultimately have to be rebalanced to match new demand.

SUPPLIERS AND RAW MATERIALS

We purchase certain critical raw materials from a limited number of suppliers due to the technically challenging requirements
of the supplied product and/or the lengthy process required to qualify these materials both internally and with our customers.
We cannot quickly establish additional or replacement suppliers for these materials because of these rigid requirements. For
these critical raw materials, we maintain minimum safety stock levels and contractually partner with suppliers to help ensure
the continuity of supply. Historically, we have not experienced any significant interruptions or delays in obtaining critical raw
materials.

For non-critical raw material purchases, we utilize competitive pricing methods such as bulk purchases, precious metal pool
buys, blanket orders, and long-term contracts to secure supply. We believe that there are alternative suppliers or substitute
products available at competitive prices for all of these non-critical raw materials.

As discussed more fully in Item 1A “Risk Factors,” our business depends on a continuous supply of raw materials from a
limited number of suppliers. If an unforeseen interruption of supply were to occur, we may be unable to obtain substitute
sources for these raw materials on a timely basis or on terms acceptable to us, which could harm our ability to manufacture our
products profitably or on time. Additionally, we may be unable to quickly establish additional or replacement suppliers for
these materials as there are a limited number of worldwide suppliers.

COMPETITION

Our existing and potential competitors include our OEM customers that currently have vertically integrated operations and may
expand their vertical integration capability in the future. Competitors also include independent suppliers who typically
specialize in one type of component. Our known non-vertically integrated competitors include the following:

Product Line
Medical batteries

Capacitors

Feedthroughs

EMI filtering

Enclosures

Machined and molded components

Value added assembly

Catheters

Competitors
Eagle-Picher
Quallion

AVX (subsidiary of Kyocera)
Critical Medical Components

Alberox (subsidiary of The Morgan Crucible Co. PLC)

AVX (subsidiary of Kyocera)
Eurofarad

Heraeus
Hudson
National

Numerous

Creganna
Teleflex
Vention medical

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Product Line
Introducers

Stimulation leads

Orthopaedic trays, instruments and implants

Primary Power Solutions

Secondary Power Solutions

Competitors
Pressure Products
Theragenics (Galt)
Merit Medical

Oscor

Accelent
Avalign Technologies
IMDS
Micropulse, Inc.
Juno
Orchid
Sandvik
Symmetry
Paragon
Tecomet

Tracer Technologies
Engineered Power
Saft
Ultralife

Totex
Palladium
ICC/Nexergy
BMZ
Ultralife
Saft

With the acquisition of CCC in August 2014, our competitors also include contract manufacturers such as Cirtec Medical
Systems, Stellar Technologies, Flextronics, and Vention Medical.

GOVERNMENT REGULATION

As described below, our business is subject to direct governmental regulation including the laws and regulations generally
applicable to all businesses in the jurisdictions in which we operate. We are subject to federal, state and local environmental
laws and regulations governing the emission, discharge, use, storage and disposal of hazardous materials and the remediation of
contamination associated with the release of these materials at our facilities and at off-site disposal locations. Our
manufacturing and research, development and engineering activities may involve the controlled use of small amounts of
hazardous materials. Liabilities associated with hazardous material releases arise principally under the Federal Comprehensive
Environmental Response, Compensation and Liability Act and analogous state laws that impose strict, joint and several
liabilities on owners and operators of contaminated facilities and parties that arrange for the off-site disposal of hazardous
materials. We are not aware of any material noncompliance with the environmental laws currently applicable to our business
and we are not subject to any material claim for liability with respect to contamination at any of our facilities or any off-site
location. We may, however, become subject to these environmental liabilities in the future as a result of our historic or current
operations.

Our products are subject to regulation by numerous government agencies, including the FDA and comparable foreign agencies.
For some of our component technology, we have “master files” on record with the FDA. Master files may be used to provide
proprietary and confidential detailed information about technology, facilities, processes, or articles used in the manufacturing,
processing, packaging and storing of one or more medical device components. These master files may be used by device
manufacturers to support their PMA, investigational device exemption application (“IDE”) or premarket notification
(“510(k)”).

In the U.S., our introducer and delivery catheter products are considered Class II devices. The 510(k) process requires us to
demonstrate that our new medical devices are substantially equivalent to a legally marketed medical device. In order to support
a substantial equivalence claim, we must submit supporting data. In Europe, these devices are considered Class IIa and Class
III, respectively, under European Medical Device Directives. These Directives require companies that wish to manufacture and
distribute medical devices in European Union member countries to obtain a CE Marking for those products, which indicate that
the products meet minimum standards of performance, essential requirements, safety conformity assessment and quality.

The PMA process is a more rigorous process that is required to demonstrate that a new medical device is safe and effective.
This is demonstrated by generating data regarding design, manufacturing processes, materials, bench testing, and animal
testing, and typically human clinical data. Some of our products that we are developing are Class III medical devices that
require a PMA or, in the European Union, premarket approval through submission of a Design Dossier.

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As a manufacturer of medical devices and components that go into medical devices, we are also subject to periodic inspection
by the FDA for compliance with the FDA’s Quality System Requirements and the applicable notified body in the European
Union to ensure conformity to the Medical Device Directives and Active Implantable Medical Device Directives. We believe
that our quality controls, development, testing, manufacturing, labeling, marketing and distribution of our medical devices
conform to the requirements of all pertinent regulations.

Our sales and marketing practices are subject to regulation by the U.S. Department of Health and Human Services pursuant to
federal anti-kickback laws, and are also subject to similar state laws.

We are also subject to various other environmental, transportation and labor laws as well as various other directives and
regulations both in the U.S. and abroad. We believe that compliance with these laws will not have a material impact on our
capital expenditures, earnings or competitive position. Given the scope and nature of these laws, however, they may have a
material impact on our operational results in the future.

The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act
(collectively “Health Care Reform”) legislated broad-based changes to the U.S. healthcare system that could significantly
impact our business operations and financial results, including higher or lower revenue, as well as higher employee medical
costs and taxes. Health Care Reform imposes significant new taxes on medical device OEMs, which will result in a significant
increase in the tax burden on our industry and which could have a material negative impact on our financial condition, results
of operations and our cash flows. Other elements of Health Care Reform such as comparative effectiveness research, an
independent payment advisory board, payment system reforms including shared savings pilots and other provisions could
meaningfully change the way healthcare is developed and delivered, and may materially impact numerous aspects of our
business, results of operations and financial condition. Many significant parts of Health Care Reform will be phased in over the
next several years and require further guidance and clarification in the form of regulations. The new medical device tax, which
was effective in 2013, increased our cost of sales by $0.7 million and $0.5 million in 2014 and 2013, respectively.

RECRUITING AND TRAINING

We invest substantial resources in our recruiting efforts to focus on a quality workforce that will support our business
objectives. Our goal is to provide our associates with growth opportunities by attempting to fill many of our open employment
positions internally. We further meet our hiring needs through outside sources, as required. We have an active talent review
process including development opportunities for management in order to ensure we are able to implement our strategic plan.

We provide training for our associates designed to educate them on safety, quality, business strategy, and our culture. Our safety
training programs educate associates on basic industrial safety practices while emphasizing the importance of knowing
emergency response procedures. Our training programs focus on the methodologies and technical competencies required to
support current and future business needs with a strong focus on quality and continuous improvement.

Supporting our commitment to learning, we offer our associates tuition reimbursement and encourage them to continue their
education at accredited colleges and universities. We have established a number of programs designed to challenge and
motivate our associates specifically encouraging continuous improvement, supervisory and leadership skills. We believe
ongoing development is necessary to ensure our associates utilize best practices, and share a common understanding of work
practices and performance expectations.

EMPLOYEES

The following table provides a breakdown of our employees:

Manufacturing – U.S.
General and administrative – U.S.
Sales and marketing – U.S.
Research, development and engineering – U.S.
Chaumont, France facility
Switzerland facility
Tijuana, Mexico facility
Montevideo, Uruguay facility

Total

1,810
134
88
241
270
8
969
170
3,690

We also employ a number of temporary employees to assist us with various projects and service functions and address peaks in
staff requirements. Our employees at our Chaumont, France and Tijuana, Mexico facilities are represented by a union. Nearly

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all of the positions at our Chaumont, France, Tijuana, Mexico, and Montevideo, Uruguay facilities are manufacturing related.
We believe that we have a good relationship with our employees.

EXECUTIVE OFFICERS OF THE COMPANY

Information concerning our executive officers is presented below as of March 3, 2015. The officers’ terms of office run from
year to year until the first meeting of the Board of Directors occurring immediately following our Annual Meeting of
Stockholders, and until their successors are elected and qualified, except in the case of earlier death, retirement, resignation or
removal.

Mauricio Arellano, age 48, is Executive Vice President for Global Operations and has served in that office since June 2013.
From December 2010 to June 2013, he was President of Greatbatch Medical. Mr. Arellano served as Senior Vice President and
Business Leader of our Cardiac and Neurology Group from October 2008 until December 2010, Senior Vice President and
Business Leader of our CRM and Neuromodulation Group from January 2008 to October 2008, Senior Vice President and
Business Leader of our Medical Solutions Group from November 2006 to January 2008, and as Vice President of Greatbatch
Mexico from January 2005 to November 2006. Mr. Arellano joined our Company in October 2003 as the Plant Manager of our
former Carson City, NV facility. Prior to joining our Company, he served in a variety of human resources and operational roles
with Tyco Healthcare - Especialidades Medicas Kenmex and with Sony de Tijuana Este.

George M. Cintra, age 53, is Executive Vice President & Chief Technology Officer, and has served in that role since June
2013. Mr. Cintra had previously served as Vice President of Research, Development & Engineering of our Electrochem
Solutions business since joining Greatbatch in August 2010. Prior to joining Greatbatch, he was Section Head & Technical
Manager, Research & Development with Procter & Gamble from January 2007 to July 2010. Mr. Cintra previously held
positions with Gillette Co, Duracell, W.R. Grace and Alcoa.

Michael Dinkins, age 60, is Executive Vice President & Chief Financial Officer, and has served in that office since joining our
Company in May 2012. From 2008 until May 2012, he was Executive Vice President and Chief Financial Officer of USI
Insurance Services, an insurance intermediary company. From 2005 until 2008, he was Executive Vice President and Chief
Financial Officer of Hilb Rogal & Hobbs Co., an insurance and risk management services company. Prior to that, Mr. Dinkins
held senior positions at Guidant Corporation, Access Worldwide Communications, Cadmus Communications Group and
General Electric Company.

Thomas K. Hickman, age 49, is Executive Vice President, Global Sales & Marketing - QiG Group, and has served in that
office since August 2014. He joined our Company in July 2013 as Vice President for Strategy of our QiG Group. From 1998 to
2005 Mr. Hickman held leadership positions with Advanced Neuromodulation Systems, Inc. (“ANS”), marketing its
neurostimulation therapies. Upon St. Jude Medical’s acquisition of ANS in 2005 until 2012, he served as its Vice President of
New Products and Emerging Therapies, and Vice President of Marketing, Chronic Pain Therapies. From 2012 until joining
Greatbatch, Mr. Hickman was a private consultant.

Andrew P. Holman, age 47, is Executive Vice President, Global Sales & Marketing - Greatbatch Medical, and has served in
that role since June 2013. He joined Greatbatch in April 2012 as Vice President of Sales and Marketing for Greatbatch Medical.
From October 2011 until joining Greatbatch, Mr. Holman was a consultant with HarQuinn, LLC. From September 2009 to
October 2011, he served as Executive Vice President, Sales & Marketing for DJO Global, Inc., and from October 2005 to June
2009, he served as President of the Americas for the Orthopaedics business unit of Smith & Nephew, Inc. Mr. Holman
previously held various sales and marketing leadership positions at Johnson & Johnson, Inc., Boston Scientific Corporation and
Xerox Corporation.

Thomas J. Hook, age 52, has served as our President & Chief Executive Officer since August 2006. Prior to August 2006, he
was our Chief Operating Officer, a position he assumed upon joining our Company in September 2004. From August 2002 until
September 2004, Mr. Hook was employed by CTI Molecular Imaging where he had served as President, CTI Solutions Group.

Timothy G. McEvoy, age 57, is Senior Vice President, General Counsel & Secretary, and has served in that office since joining
our Company in February 2007. From 1992 until January 2007, he was employed in a variety of legal roles by Manufacturers
and Traders Trust Company.

AVAILABLE INFORMATION

We make available free of charge through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-
Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file those reports with, or furnish
them to, the SEC. Our Internet address is www.greatbatch.com. The information contained on our website is not incorporated
by reference in this annual report on Form 10-K and should not be considered a part of this report. These items may also be
obtained free of charge by written request made to Christopher J. Thome, Assistant Corporate Controller – Reporting and
Shared Services, Greatbatch, Inc., 10000 Wehrle Drive, Clarence, New York 14031.

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CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

Some of the statements contained in this annual report on Form 10-K and other written and oral statements made from time to
time by us and our representatives are not statements of historical or current fact. As such, they are “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations, and these
statements are subject to known and unknown risks, uncertainties and assumptions. Forward-looking statements include
statements relating to:

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.

You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or “variations” or the negative of these
terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially
from those stated or implied by these forward-looking statements. In evaluating these statements and our prospects, you should
carefully consider the factors set forth below. All forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by these cautionary factors and to others contained throughout this report. We are under
no duty to update any of the forward-looking statements after the date of this report or to conform these statements to actual
results.

Although it is not possible to create a comprehensive list of all factors that may cause actual results to differ from the results
expressed or implied by our forward-looking statements or that may affect our future results, some of these factors include the
following: our dependence upon a limited number of customers; customer ordering patterns; product obsolescence; our inability
to market current or future products; pricing pressure from customers; our ability to timely and successfully implement cost
reduction and plant consolidation initiatives; our reliance on third party suppliers for raw materials, products and
subcomponents; fluctuating operating results; our inability to maintain high quality standards for our products; challenges to
our intellectual property rights; product liability claims; product field actions or recalls; our inability to successfully
consummate and integrate acquisitions and to realize synergies and to operate these acquired businesses in accordance with
expectations; our unsuccessful expansion into new markets; our failure to develop new products including system and device
products; the timing, progress and ultimate success of pending regulatory actions and approvals, including with respect to our
Algovita spinal cord stimulation system; our inability to obtain licenses to key technology; regulatory changes, including
Health Care Reform, or consolidation in the healthcare industry; global economic factors including currency exchange rates and
interest rates; the resolution of various legal actions brought against the Company; and other risks and uncertainties that arise
from time to time and are described in Item 1A “Risk Factors” of this report.

ITEM 1A. RISK FACTORS

Our business faces many risks. Any of the risks discussed below, or elsewhere in this report or in our other SEC filings, could
have a material impact on our business, financial condition or results of operations.

Risks Related To Our Business

We depend heavily on a limited number of customers, and if we lose any of them or they reduce their business with us,
we would lose a substantial portion of our revenues.

In 2014, Biotronik, Johnson & Johnson, Medtronic, and St. Jude Medical collectively accounted for approximately 54% of our
revenues. Our supply agreements with these customers may not be renewed. Furthermore, many of our supply agreements do
not contain minimum purchase level requirements and therefore there is no guaranteed source of revenue that we can depend
upon under these agreements. The loss of any large customer, a reduction of business with that customer, or a delay or failure
by that customer to make payments due to us would harm our business, financial condition and results of operations.

If we do not respond to changes in technology, our products may become obsolete and we may experience a loss of
customers and lower revenues.

We sell our products to customers in several industries that experience rapid technological changes, new product introductions
and evolving industry standards. Without the timely introduction of new products and enhancements, our products and services

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will likely become technologically obsolete over time and we may lose a significant number of our customers. We dedicate a
significant amount of resources to the development of our products and technologies. Our product development efforts may be
affected by a number of factors, including our ability to anticipate customer needs, develop new products, secure intellectual
property protection for our product, and manufacture products in a cost effective manner. We would be harmed if we did not
meet customer requirements and expectations. Our inability, for technological or other reasons, to successfully develop and
introduce new and innovative products could result in a loss of customers and lower revenues.

If we are unable to successfully market our current or future products, our business will be harmed and our revenues
and operating results will be adversely affected.

The markets for our products have been growing in recent years. If the markets for our products do not grow as forecasted by
industry experts, our revenues could be less than expected. In addition, it is difficult to predict the rate at which the markets for
our products will grow or at which new and increased competition will result in market saturation. Slower growth in the cardiac
and neuromodulation, orthopaedic, portable medical, vascular or energy markets in particular would negatively impact our
revenues. In addition, we face the risk that our products will lose widespread market acceptance. Our customers may not
continue to utilize the products we offer and a market may not develop for our future products.

We may at times determine that it is not technically or economically feasible for us to continue to manufacture certain products
and we may not be successful in developing or marketing them. Additionally, new technologies that we develop may not be
rapidly accepted because of industry-specific factors, including the need for regulatory clearance, entrenched patterns of clinical
practice and uncertainty over third party reimbursement. If this occurs, our business will be harmed and our operating results
will be negatively affected.

We may face competition that could harm our business and we may be unable to compete successfully against new
entrants and established companies with greater resources.

Competition in connection with the manufacturing of our medical products may intensify in the future. One or more of our
medical customers may undertake additional vertical integration and/or supplier diversification initiatives and begin to
manufacture or dual-source some or all of their components that we currently supply them which could cause our operating
results to suffer. The market for commercial power sources is competitive, fragmented and subject to rapid technological
change. Many other commercial power source suppliers are larger and have greater financial, operational, economies of scale,
personnel, sales, technical and marketing resources than us. These and other companies may develop products that are superior
or more cost effective to ours, which could result in lower revenues and operating results.

We intend to develop new products and expand into new markets, which may not be successful and could harm our
operating results.

We intend to expand into new markets and develop new and modified products based on our existing technologies and
engineering capabilities, including the development of complete medical device systems. These efforts have required and will
continue to require us to make substantial investments, including significant research, development and engineering
expenditures and capital expenditures for new, expanded or improved manufacturing facilities. Additionally, many of the new
products we are working on take longer and more resources to develop and commercialize, including obtaining regulatory
approval.

Specific risks in connection with expanding into new products and markets include: longer product development cycles, the
inability to transfer our quality standards and technology into new products, the failure to receive or delay in receipt of
regulatory approval for new products or modifications to existing products, and the failure of our customers to accept the new
or modified products.

We are subject to pricing pressures from customers, which could harm our operating results.

We have made price concessions to some of our larger customers in recent years and we expect customer pressure for price
concessions will continue. Price concessions or reductions may cause our operating results to suffer.

We rely on third party suppliers for raw materials, key products and subcomponents and if we are unable to obtain
these materials, products and/or subcomponents on a timely basis or on terms acceptable to us, our ability to
manufacture products will suffer.

Our business depends on a continuous supply of raw materials. The principal raw materials used in our business include
lithium, iodine, gold, CFx, palladium, stainless steel, aluminum, cobalt chrome, tantalum, platinum, ruthenium, gallium
trichloride, vanadium oxide, iridium, titanium, and plastics. The supply and price of these raw materials are susceptible to
fluctuations due to transportation, government regulations, price controls, foreign civil unrest, economic climate or other

- 16 -

unforeseen circumstances. Increasing global demand for these raw materials has caused prices of these materials to increase
significantly. In addition, there are a limited number of worldwide suppliers of several raw materials needed to manufacture our
products. In addition, for reasons of quality, cost effectiveness or availability, we obtain some raw materials from a sole
supplier. Although we work closely with our suppliers to ensure continuity of supply, we may not be able to continue to procure
raw materials critical to our business or to procure them at acceptable price levels.

In addition, we rely on third party manufacturers to supply many of our products and subcomponents. Manufacturing problems
may occur with these and other outside sources, as a supplier may fail to develop and supply products and subcomponents to us
on a timely basis, or may supply us with products and subcomponents that do not meet our quality, quantity and cost
requirements. If any of these problems occur, we may be unable to obtain substitute sources for these products and
subcomponents on a timely basis or on terms acceptable to us, which could harm our ability to manufacture our own products
and components profitably or on time. In addition, to the extent the processes our suppliers use to manufacture products and
subcomponents are proprietary, we may be unable to obtain comparable subcomponents from alternative suppliers.

We may never realize the full value of our intangible assets, which represent a significant portion of our total assets.

At January 2, 2015, we had $440.0 million of intangible assets, representing 46% of our total assets. These intangible assets
consist primarily of goodwill, trademarks, tradenames, customer lists and patented technology arising from our acquisitions.
Goodwill and other intangible assets with indefinite lives are not amortized, but are tested annually or upon the occurrence of
certain events which indicate that the assets may be impaired. Definite lived intangible assets are amortized over their estimated
useful lives and are tested for impairment upon the occurrence of certain events which indicate that the assets may be impaired.
We may not receive the recorded value for our intangible assets if we sell or liquidate our business or assets. In addition, the
significant amount of intangible assets increases the risk of a large charge to earnings in the event that the recoverability of
these intangible assets is impaired. In the event of such a charge to earnings, the market price of our common stock could be
affected. In addition, intangible assets with definite lives, which represent $65.3 million of our net intangible assets at January
2, 2015, will continue to be amortized. We incurred total amortization expenses relating to these intangible assets of $13.9
million in 2014. These expenses will reduce our future earnings or increase our future losses.

Quality problems with our products could harm our reputation and erode our competitive advantage.

Quality is important to us and our customers, and our products are held to high quality and performance standards. In the event
our products fail to meet these standards, our reputation could be harmed, which could damage our competitive advantage,
causing us to lose customers and resulting in lower revenues.

Quality problems with our products could result in warranty claims and additional costs.

We generally allow customers to return defective or damaged products for credit, replacement, or exchange. We generally
warrant that our products will meet customer specifications and will be free from defects in materials and workmanship.
Additionally, we carry a safety stock of inventory for our customers which may be impacted by warranty claims. We reserve for
our exposure to warranty claims based upon recent historical experience and other specific information as it becomes available.
However, these reserves may not be adequate to cover future warranty claims and additional warranty costs or inventory write-
offs may be incurred which could harm our operating results.

Regulatory issues resulting from product complaints, or recalls, or regulatory audits could harm our ability to produce
and supply products or bring new products to market.

Our products are designed, manufactured and distributed globally in compliance with applicable regulations and standards.
However, a product complaint, recall or negative regulatory audit may cause products to be removed from the market and harm
our operating results or financial condition. In addition, during the period in which corrective action is being taken by us to
remedy a complaint, recall or negative audit, regulators may not allow new products to be cleared for marketing and sale.

If we become subject to product liability claims, our operating results and financial condition could suffer.

Our business exposes us to potential product liability claims that are inherent in the design, manufacture and sales of our
products. Product failures, including those that arise from failure to meet product specifications, misuse or malfunction, or
design flaws, or the use of our products with components or systems not manufactured or sold by us could result in product
liability claims or a recall. Many of our products are components and function in interaction with our customers’ medical
devices. For example, our batteries are produced to meet electrical performance, longevity and other specifications, but the
actual performance of those products is dependent on how they are utilized as part of our customers’ devices over the lifetime
of the products. Product performance and device interaction from time to time have been, and may in the future be different
than expected for a number of reasons. Consequently, it is possible that customers may experience problems with their medical
devices that could require device recall or other corrective action, where our batteries met the specification at delivery, and for
reasons that are not related primarily or at all to any failure by our product to perform in accordance with specifications. It is

- 17 -

possible that our customers (or end-users) may in the future assert that our products caused or contributed to device failure.
Even if these assertions do not lead to product liability or contract claims, they could harm our reputation and our customer
relationships.

Provisions contained in our agreements with key customers attempting to limit our damages, including provisions to limit
damages to liability for negligence, may not be enforceable in all instances or may otherwise fail to protect us from liability for
damages. Product liability claims or product recalls, regardless of their ultimate outcome, could require us to spend significant
time and money in litigation and require us to pay significant damages. The occurrence of product liability claims or product
recalls could affect our operating results and financial condition.

We carry product liability insurance with coverage that is limited in scope and amount. We may not be able to maintain this
insurance at a reasonable cost or on reasonable terms, or at all. This insurance may not be adequate to protect us against a
product liability claim that arises in the future.

Our operating results may fluctuate, which may make it difficult to forecast our future performance and may result in
volatility in our stock price.

Our operating results have fluctuated in the past and are likely to fluctuate significantly from quarter to quarter due to a variety
of factors, including the following:

•

a substantial percentage of our costs are fixed in nature, which results in our operations being particularly sensitive to
fluctuations in production volumes;

changes in the mix of our revenue represented by our various products and customers could result in reductions in our
profits if the mix of our revenue represented by lower margin products increases;

timing of orders placed by our principal customers who account for a significant portion of our revenues; and

increased costs of raw materials or supplies.

If we are unable to protect our intellectual property and proprietary rights, our business could be harmed.

We rely on a combination of patents, licenses, trade secrets and know-how to establish and protect our rights to our
technologies and products. As of January 2, 2015, we have 1,023 active patents filed. However, the steps we have taken and
will take in the future to protect our rights may not be adequate to deter misappropriation of our intellectual property. In
addition to seeking formal patent protection whenever possible, we attempt to protect our proprietary rights and trade secrets by
entering into confidentiality and non-compete agreements with employees, consultants and third parties with which we do
business. However, these agreements may be breached and, if breached, there may be no adequate remedy available to us and
we may be unable to prevent the unauthorized disclosure or use of our technical knowledge, practices and/or procedures. If our
trade secrets become known, we may lose our competitive advantages. Additionally, as patents and other intellectual property
protection expire we may lose our competitive advantage.

If third parties infringe or misappropriate our patents or other proprietary rights, our business could be seriously harmed. We
may be required to spend significant resources to monitor our intellectual property rights, or we may not be able to detect
infringement of these rights and may lose our competitive advantages associated with our intellectual property rights before we
do so. In addition, competitors may design around our technology or develop competing technologies that do not infringe our
proprietary rights.

We may be subject to intellectual property claims, which could be costly and time consuming and could divert our
management from our business operations.

In producing our products, third parties may claim that we are infringing on their intellectual property rights, and we may be
found to have infringed those intellectual property rights. We may be unaware of intellectual property rights of others that may
be used in our technology and products. In addition, third parties may claim that our patents have been improperly granted and
may seek to invalidate our existing or future patents. If any claim for invalidation prevailed, third parties may manufacture and
sell products that compete with our products and our revenues from any related license agreements would decrease accordingly.
We also typically do not receive significant indemnification from parties that license technology to us against third party claims
of intellectual property infringement.

Any litigation or other challenges regarding our patents or other intellectual property could be costly and time consuming and
could divert our management and key personnel from our business operations. The complexity of the technology involved in
producing our products, and the uncertainty of intellectual property litigation increases these risks. Claims of intellectual
property infringement may also require us to enter into costly royalty or license agreements. However, we may not be able to

- 18 -

obtain royalty or license agreements on terms acceptable to us, or at all. We also may be made subject to significant damages or
injunctions against development and sale of our products.

Our failure to obtain licenses from third parties for new technologies or the loss of these licenses could impair our ability
to design and manufacture new products and reduce our revenues.

We occasionally license technologies from third parties rather than depending exclusively on our own proprietary technology
and developments. Our ability to license new technologies from third parties is and will continue to be critical to our ability to
offer new and improved products. We may not be able to continue to identify new technologies developed by others and even if
we are able to identify new technologies, we may not be able to negotiate licenses on favorable terms, or at all. Additionally, we
could lose rights granted under licenses for reasons beyond our control.

We may not be able to attract, train and retain a sufficient number of qualified employees to maintain and grow our
business.

We monitor the markets in which we compete and assess opportunities to better align expenses with revenues, while preserving
our ability to make needed investments in research and development projects, capital and our people that we believe are critical
to our long-term success. Our success will depend in large part upon our ability to attract, train, retain and motivate highly
skilled employees. There is currently aggressive competition for employees who have experience in technology and
engineering. We compete intensely with other companies to recruit and hire from this limited pool. The industries in which we
compete for employees are characterized by high levels of employee attrition. Although we believe we offer competitive
salaries and benefits, we may have to increase spending in order to attract, train and retain personnel.

We are dependent upon our senior management team and key personnel and the loss of any of them could significantly
harm us.

Our future performance depends to a significant degree upon the continued contributions of our senior management team and
key technical personnel. Our products are highly technical in nature. In general, only highly qualified and trained scientists have
the necessary skills to develop our products. The loss or unavailability to us of any member of our senior management team or a
key technical employee could significantly harm us. We face intense competition for these professionals from our competitors,
customers and companies operating in our industry. To the extent that the services of members of our senior management team
and key technical personnel would be unavailable to us for any reason, we would be required to hire other personnel to manage
and operate our Company and to develop our products and technology. We may not be able to locate or employ these qualified
personnel on acceptable terms.

We may not realize the expected benefits from our cost savings and consolidation initiatives or those initiatives may have
unintended consequences, which may harm our business.

We have incurred significant charges related to various cost savings and consolidation initiatives. These initiatives were
undertaken to improve our operational effectiveness, efficiencies and profitability. Information regarding some of these
initiatives is discussed in Note 13 “Other Operating Expenses, Net” of the Notes to Consolidated Financial Statements
contained in Item 8 of this report. Cost reduction efforts under these initiatives include various cost and efficiency improvement
measures, such as headcount reductions, the relocation of resources and administrative and functional activities, the closure of
facilities, the transfer of production lines, the sale of non-strategic assets and other efforts to streamline our business, among
other actions. These measures could yield unintended consequences, such as distraction of our management and employees,
business disruption, disputes with customers, attrition beyond our planned reduction in workforce and reduced employee
productivity. If any of these unintended consequences were to occur, they could negatively affect our business, financial
condition and results of operations. In addition, headcount reductions and customer disputes may subject us to the risk of
litigation, which could result in substantial cost. Moreover, our cost reduction efforts result in charges and expenses that impact
our operating results. Our cost savings and consolidation initiatives, or other expense reduction measures we take in the future,
may not result in the expected cost savings.

We may make acquisitions that could subject us to a number of operational risks and we may not be successful in
integrating companies we acquire into our existing operations.

We have made and expect to make in the future acquisitions that complement our core competencies in technology and
manufacturing to enable us to manufacture and sell additional products to our existing customers and to expand our business
into related markets. Implementation of our acquisition strategy entails a number of risks, including:

inaccurate assessments of potential liabilities associated with the acquired businesses;
the existence of unknown or undisclosed liabilities associated with the acquired businesses;

•
•
• diversion of our management’s attention from our core businesses;

- 19 -

• potential loss of key employees or customers of the acquired businesses;
• difficulties in integrating the operations and products of an acquired business or in realizing projected revenue growth,

efficiencies and cost savings; and
increases in indebtedness and limitation in our ability to access capital if needed.

•

Our acquisitions have increased the size and scope of our operations, and may place a strain on our managerial, operational and
financial resources and systems. Any failure by us to manage this growth and successfully integrate these acquisitions could
harm our business and our financial condition and results.

If we are not successful in making acquisitions to expand and develop our business, our operating results may suffer.

One facet of our growth strategy is to make acquisitions that complement our core competencies in technology and
manufacturing to enable us to manufacture and sell additional products to our existing customers and to expand our business
into related markets. Our continued growth may depend on our ability to identify and acquire companies that complement or
enhance our business on acceptable terms. We may not be able to identify or complete future acquisitions. Some of the risks
that we may encounter include expenses associated with and difficulties in identifying potential targets, the costs associated
with unsuccessful acquisitions, and higher prices for acquired companies because of competition for attractive acquisition
targets.

Interruptions of our manufacturing operations could delay production and affect our operations.

Our products are designed and manufactured in facilities located around the world. In most cases, the manufacturing of specific
product lines is concentrated in one or a few locations. Our business involves complex manufacturing processes and hazardous
materials that can be dangerous to our employees. Although we employ safety procedures in the design and operation of our
facilities, there is a risk that an accident or death could occur. Any accident, such as a chemical spill or fire, could result in
significant manufacturing delays or claims for damages resulting from injuries, which would harm our operations and financial
condition. The potential liability resulting from any such accident or death, to the extent not covered by insurance, could harm
our financial condition or operating results. Any disruption of operations at any of our facilities, and in particular our larger
facilities, could harm our business.

Our international sales and operations are subject to a variety of market and financial risks and costs that could affect
our profitability and operating results.

Our sales outside the U.S., which accounted for 55% of sales for 2014, and our operations in Mexico, Switzerland, France, and
Uruguay are and will continue to be subject to a number of risks and potential costs, including:

changes in foreign economic conditions and/or regulatory requirements;
local product preferences and product requirements;
longer-term receivables than are typical in the U.S.;

•
•
•
• difficulties in enforcing agreements through foreign legal systems;
•
•
• work force instability;
• political and economic instability; and
•

less protection of intellectual property in some countries outside of the U.S.;
trade protection measures and import and export licensing requirements;

complex tax and cash management issues.

We earn revenue and incur expenses related to our foreign sales and operations that are denominated in a foreign currency.
Historically, foreign currency fluctuations have not had a material effect on our financial results. However, fluctuations in
foreign currency exchange rates could have a significant negative impact on our financial results in the future.

Economic and credit market uncertainty could interrupt our access to capital markets, borrowings, or financial
transactions to hedge certain risks, which could adversely affect our financial condition.

To date, we have been able to access debt and equity financing that has allowed us to make investments in growth opportunities
and fund working capital requirements. In addition, we enter into financial transactions to hedge certain risks, including foreign
exchange and interest rate risk. Our continued access to capital markets, the stability of our lenders and their willingness to
support our needs, and the stability of the parties to our financial transactions that hedge risks are essential for us to meet our
current and long-term obligations, fund operations, and fund our strategic initiatives. An interruption in our access to external
financing or financial transactions to hedge risk could affect our business prospects and financial condition.

- 20 -

The failure of our information technology systems to perform as anticipated could disrupt our business and affect our
financial condition.

The efficient operation of our business is dependent on our information technology (“IT”) systems. Accordingly, we rely upon
the capacity, reliability and security of our IT hardware and software infrastructure and our ability to expand and update this
infrastructure in response to our changing needs. Despite our implementation of security measures, our systems are vulnerable
to damages from computer viruses, natural disasters, incursions by intruders or hackers, failures in hardware or software, power
fluctuations, cyber terrorists and other similar disruptions. The failure of our IT systems to perform as anticipated for any
reason or any significant breach of security could disrupt our business and result in numerous consequences, including reduced
effectiveness and efficiency of operations, inappropriate disclosure of confidential information, increased overhead costs and
loss of important information, which could have a material effect on our business and results of operations. In addition, we may
be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

Risks Related To Our Industries

The healthcare industry is highly regulated and subject to various political, economic and regulatory changes that could
increase our compliance costs and force us to modify how we develop and price our products.

The healthcare industry is highly regulated and is influenced by changing political, economic and regulatory factors. Several of
our product lines are subject to international, federal, state and local health and safety, packaging and product content
regulations. In addition, medical devices are subject to regulation by the FDA and similar governmental agencies. These
regulations cover a wide variety of product activities from design and development to labeling, manufacturing, promotion, sales
and distribution. Compliance with these regulations may be time consuming, burdensome and expensive and could negatively
affect our ability to sell products. This may result in higher than anticipated costs or lower than anticipated revenues.

Furthermore, healthcare industry regulations are complex, change frequently and have tended to become more stringent over
time. Federal and state legislatures have periodically considered programs to reform or amend the U.S. healthcare system at
both the federal and state levels. In addition, these regulations may contain proposals to increase governmental involvement in
healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate.
We may be required to incur significant expenses to comply with these regulations or remedy past violations of these
regulations. Our failure to comply with applicable government regulations could also result in cessation of portions or all of our
operations, impositions of fines and restrictions on our ability to carry on or expand our operations. In addition, because many
of our products are sold into regulated industries, we must comply with additional regulations in marketing our products.

In response to perceived increases in healthcare costs in recent years, there have been and continue to be proposals by the
Obama administration, members of Congress, state governments, regulators and third-party payors to control these costs and,
more generally, to reform the U.S. healthcare system. Health Care Reform imposes significant new taxes on medical device
manufacturers, which will result in a significant increase in the tax burden on our industry and which could have a material
negative impact on our financial condition, results of operations and our cash flows. Other elements of Health Care Reform
such as comparative effectiveness research, an independent payment advisory board, payment system reforms including shared
savings pilots and other provisions could meaningfully change the way healthcare is developed and delivered, and may
materially adversely impact numerous aspects of our business, results of operations and financial condition. In 2014, the
medical device tax increased our cost of sales by $0.7 million.

Many significant parts of Health Care Reform will be phased in over time and require further guidance and clarification in the
form of regulations. As a result, many of the impacts of Health Care Reform will not be known until those regulations are
enacted, which we expect to occur over the next several years.

Our business is subject to environmental regulations that could be costly to comply with.

Federal, state and local regulations impose various environmental controls on the manufacturing, transportation, storage, use
and disposal of batteries and hazardous chemicals and other materials used in, and hazardous waste produced by the
manufacturing of our products. Conditions relating to our historical operations may require expenditures for clean-up in the
future and changes in environmental laws and regulations may impose costly compliance requirements on us or otherwise
subject us to future liabilities. Additional or modified regulations relating to the manufacture, transportation, storage, use and
disposal of materials used to manufacture our products or restricting disposal or transportation of batteries may be imposed that
may result in higher costs or lower operating results. In addition, we cannot predict the effect that additional or modified
environmental regulations may have on us or our customers.

- 21 -

Our international operations expose us to legal and regulatory risks, which could have a material effect on our business.

Our profitability and international operations are, and will continue to be, subject to risks relating to changes in foreign legal and
regulatory requirements. In addition, our international operations are governed by various U.S. laws and regulations, including
Foreign Corrupt Practices Act (“FCPA”) and other similar laws that prohibit us and our business partners from making improper
payments or offers of payment to foreign governments and their officials and political parties for the purpose of obtaining or
retaining business. Any alleged or actual violations of these regulations may subject us to government scrutiny, severe criminal or
civil sanctions and other liabilities and could negatively affect our business, reputation, operating results, and financial condition.

Consolidation in the healthcare industry could result in greater competition and reduce our revenues and harm our
business.

Many healthcare industry companies are consolidating to create new companies with greater market power. As the healthcare
industry consolidates, competition to provide products and services to industry participants will become more intense. These
industry participants may try to use their market power to negotiate price concessions or reductions for our products. If we are
forced to reduce our prices, our revenues would decrease and our operating results would suffer.

Our business is indirectly subject to healthcare industry cost containment measures that could result in reduced sales of
our products.

Several of our customers rely on third party payors, such as government programs and private health insurance plans, to
reimburse some or all of the cost of the procedures in which our products are used. The continuing efforts of government,
insurance companies and other payors of healthcare costs to contain or reduce those costs could lead to patients being unable to
obtain approval for payment from these third party payors. If that occurred, sales of medical devices may decline significantly
and our customers may reduce or eliminate purchases of our products. The cost containment measures that healthcare payors
are instituting, both in the U.S. and internationally, could reduce our revenues and harm our operating results.

Our energy market revenues are dependent on conditions in the oil and natural gas industry, which historically have
been volatile.

Sales of our products into the energy market depends upon the condition of the oil and gas industry. In the past, oil and natural
gas prices have been volatile and the oil and gas exploration and production industry has been cyclical, and it is likely that oil
and natural gas prices will continue to fluctuate in the future. The current and anticipated prices of oil and natural gas influence
the oil and gas exploration and production business and are affected by a variety of political and economic factors, including
worldwide demand for oil and natural gas, worldwide and domestic supplies of oil and natural gas, the ability of the
Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing, the level of
production of non-OPEC countries, the price and availability of alternative fuels, political stability in oil producing regions and
the policies of the various governments regarding exploration and development of their oil and natural gas reserves. A change in
the oil and gas exploration and production industry or a reduction in the exploration and production expenditures of oil and gas
companies could cause our energy market revenues to decline.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

- 22 -

ITEM 2.

PROPERTIES

The following table sets forth information about our principal facilities as of January 2, 2015:

Own/Lease

Location
Alden, NY
Ann Arbor, MI
Beaverton, OR
Biel, Switzerland
Blaine, MN
Chaumont, France
Clarence, NY
Clarence, NY
Clarence, NY
Cleveland, OH
Fort Wayne, IN
Frisco, TX
Indianapolis, IN
Minneapolis, MN
Montevideo, Uruguay
Plymouth, MN
Raynham, MA
Tijuana, Mexico

Sq. Ft.
125,000
9,970
62,200
1,000
32,400
59,200
117,800
20,800
18,600
16,900
81,000
9,200
82,600
72,000
21,900
122,800
81,000
190,800

Tijuana, Mexico
Warsaw, IN

144,000
3,000

Own
Lease
Lease
Lease
Own
Own
Own
Own
Lease
Lease
Own
Lease
Own
Own
Lease
Lease
Own
Lease

Lease
Lease

Principal Use

Medical battery and capacitor manufacturing
Office and lab space for design engineering team
Commercial battery manufacturing
European corporate offices
Medical device engineering
Manufacturing of orthopaedic implants
Corporate offices and RD&E
Machining and assembly of components
Machining and assembly of components
Office and lab space for design engineering team
Manufacturing of orthopaedic instruments
Global headquarters – principal executive office
Manufacturing of orthopaedic cases and trays
Enclosure manufacturing and engineering
Active implantable medical device systems assembly
Introducers, catheters and leads manufacturing
Commercial battery manufacturing and RD&E
Feedthrough, catheters and orthopaedic instrument manufacturing and
value-added assembly

Portable medical and electronics assembly
Orthopaedic rapid prototyping design center

In 2012, we completed construction of an orthopaedic manufacturing facility in Fort Wayne, IN and transferred manufacturing
operations being performed at our Columbia City, IN location into this new facility. During 2012, we also transferred most
major functions performed at our facilities in Orvin and Corgemont, Switzerland into our Fort Wayne, IN and Tijuana, Mexico
facilities. Additionally, during 2012, we relocated our global headquarters to Frisco, TX. During 2013, our Corgemont,
Switzerland facility lease was assumed by a third party in connection with our sale of certain non-core orthopaedic product
lines. During 2013, we began a project to expand our Chaumont, France facility in order to enhance our capabilities and fulfill
larger volume customer supply agreements. This initiative is expected to be completed over the next two years.

In 2014, we announced several initiatives to invest in capacity and capabilities and to better align our resources to meet
customers' needs and drive organic growth and profitability. These included the following:

• Functions currently performed at our facility in Plymouth, MN to manufacture catheters and introducers will transfer into our

existing facility in Tijuana, Mexico by the first half of 2016.

• Functions currently performed at our facilities in Beaverton, OR and Raynham, MA to manufacture products for the portable

medical market will transfer to a new facility in Tijuana, Mexico by the end of 2015.

• Functions currently performed at our Cleveland, OH facility were transferred to our facilities in Minnesota.

• Establishing a commercial operations hub at our global headquarters in Frisco, Texas. This initiative will build upon the

investment we have made in our global sales and marketing function and is expected to be completed during the first half of
2015.

The total capital investment expected for these initiatives is between $25.0 million and $27.0 million, of which $4.0 million has
been expended to date.

- 23 -

ITEM 3.

LEGAL PROCEEDINGS

On December 21, 2012, the Company and several other unaffiliated parties were named as defendants in a personal injury and
wrongful death action filed in the 113th Judicial District Court of Harris County, Texas. The complaint seeks damages alleging
marketing and product defects and failure to warn, negligence and gross negligence relating to a product the Company
manufactured and sold to a customer, one of the other named defendants. The Company’s customer, in turn, incorporated the
Greatbatch product into its own product which it sold to a third party, another named defendant. On December 3, 2014, the
District Court granted Greatbatch’s motion for summary judgment and dismissed all claims against the Company. The ruling is
subject to appeal by the plaintiff.

We are indemnified by our customer against any loss in this matter, including costs of defense, which obligation is supported by
its customer’s product liability insurance coverage. We also have our own product liability insurance coverage. During January
2015, Greatbatch’s customer reached a tentative, confidential settlement with the plaintiffs which, if approved by the Court, is
expected to result in a release of all claims, including appeal rights, against us and our customer.

We are party to various legal actions arising in the normal course of business. A description of pending legal actions against the
Company is set forth in Note 15 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements
contained in Item 8 of this report. We do not believe that the ultimate resolution of any pending legal actions will have a
material effect on our consolidated results of operations, financial position or cash flows. However, litigation is subject to
inherent uncertainties and there can be no assurance that any pending legal action, which we currently believe to be immaterial,
does not become material in the future.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “GB.” The following
table sets forth information on the prices of our common stock as reported by the NYSE:

2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

High

Low

30.64 $
34.41
38.36
45.02

47.78 $
50.65
51.64
50.69

22.70 $
27.03
32.70
33.24

40.02 $
43.65
42.23
43.42

29.87
32.79
33.69
43.80

44.85
49.58
43.56
48.66

As of March 3, 2015, there were approximately 113 record holders of the Company’s common stock. The Company stock
account within our 401(k) plan is considered one record holder for the purposes of this calculation. We have not paid cash
dividends and currently intend to retain any earnings to further develop and grow our business.

- 24 -

PERFORMANCE GRAPH

The following graph compares, for the five year period ended January 2, 2015, the cumulative total stockholder return for
Greatbatch, Inc., the S&P SmallCap 600 Index, and the Hemscott Peer Group Index. The Hemscott Peer Group Index includes
approximately 110 comparable companies included in the Hemscott Industry Group 520 Medical Instruments & Supplies and
521 Medical Appliances & Equipment. The graph assumes that $100 was invested on January 1, 2010 and assumes
reinvestment of dividends. The stock price performance shown on the following graph is not necessarily indicative of future
price performance.

$300

$250

$200

$150

$100

$50

1/1/10

12/31/10

12/30/11

12/28/12

1/3/14

1/2/15

Greatbatch, Inc.

S&P Smallcap 600

Hemscott Peer Group Index

Company/Index

1/1/10

12/31/10

12/30/11

12/28/12

1/3/14

1/2/15

Greatbatch, Inc.
S&P Smallcap 600
Hemscott Peer Group
Index

$ 100.00 $ 125.59 $ 114.92 $ 119.03 $ 227.77 $ 253.04
100.00 126.31 127.59 148.42 209.74 221.81

100.00 101.25 101.46 117.35 153.09 188.97

- 25 -

ITEM 6.

SELECTED FINANCIAL DATA

The following table provides selected financial data for the periods indicated. You should read this data along with Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8, “Financial Statements
and Supplementary Data” appearing elsewhere in this report. The consolidated statement of operations data and the
consolidated balance sheet data for the fiscal years indicated have been derived from our consolidated financial statements and
related notes (in thousands, except per share amounts):

Statement of Operations Data:
Sales
Net income (loss)
Earnings (loss) per share

Basic
Diluted

Balance Sheet Data:
Working capital
Total assets
Long-term obligations

Years Ended

Jan. 2
2015 (1)(2)

Jan. 3
2014 (1)

Dec. 28,
2012 (1)(2)

Dec. 30,
2011 (1)(2)

Dec. 31,
2010 (1)(3)

687,787 $
55,458

663,945 $
36,267

646,177 $
(4,799)

568,822 $
33,122

533,425
33,138

2.23 $
2.14

1.51 $
1.43

(0.20) $
(0.20)

1.42 $
1.40

1.44
1.40

242,022 $
956,009
233,986

190,731 $
890,703
256,846

176,376 $
889,875
317,258

170,907 $
881,347
320,015

150,922
776,976
289,560

(1) From 2010 to 2014, we recorded material charges in Other Operating Expenses, Net, primarily related to our cost savings
and consolidation initiatives. Additional information is set forth in Note 13 “Other Operating Expenses, Net” of the Notes
to Consolidated Financial Statements contained in Item 8 of this report.

(2) On August 12, 2014, February 16, 2012, and December 15, 2011, we acquired Centro de Construcción de

Cardioestimuladores del Uruguay, NeuroNexus Technologies, Inc., and Micro Power Electronics, Inc., respectively. This
data includes the results of operations of these companies subsequent to their acquisition. Additional information is set
forth in Note 2 “Acquisitions” of the Notes to Consolidated Financial Statements contained in Item 8 of this report. During
2014 and 2011, we sold cost method investments, which resulted in pre-tax gains of $3.2 million and $4.5 million,
respectively.

(3) In 2010, we recognized a $9.5 million pre-tax gain in connection with the settlement of an outstanding lawsuit.

- 26 -

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND RELATED NOTES
INCLUDED IN PART II ITEM 8 “FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” OF THIS REPORT.

Our Business

• Our business
• Our acquisitions
• Our customers
• Use of non-GAAP financial information
• Strategic and financial overview
• 2015 financial guidance
• Cost savings and consolidation efforts
• Product development
• Government regulation

Our Critical Accounting Estimates

• Valuation of goodwill and other identifiable intangible assets
• Stock-based compensation
•
• Tangible long-lived assets
• Provision for income taxes

Inventories

Our Financial Results

• Fiscal 2014 compared with fiscal 2013
• Fiscal 2013 compared with fiscal 2012
• Liquidity and capital resources
• Off-balance sheet arrangements
• Litigation
• Contractual obligations
•
•

Inflation
Impact of recently issued accounting standards

Our Business

We have two reportable segments: Greatbatch Medical and QiG Group (“QiG”). Greatbatch Medical designs and manufactures
products where Greatbatch either owns the intellectual property or has unique manufacturing and assembly expertise. These
products include medical devices and components for the cardiac, neuromodulation, orthopaedics, portable medical, vascular
and energy markets among others. Our Greatbatch Medical segment also offers value-added assembly and design engineering
services for medical devices that utilize its component products.

Our customers include large multi-national OEMs.

- 27 -

Our Acquisitions

On August 12, 2014 we purchased all of the outstanding common stock of Centro de Construcción de Cardioestimuladores del
Uruguay (“CCC”), headquartered in Montevideo, Uruguay. CCC is an active implantable neuromodulation medical device
systems developer and manufacturer that produces a range of medical devices including implantable pulse generators,
programmer systems, battery chargers, patient wands and leads. This acquisition allows us to more broadly partner with
medical device companies, complements our core discrete technology offerings and enhances our medical device innovation
efforts. The operating results of CCC were included in our QiG segment from the date of acquisition. The aggregate purchase
price of CCC was $19.8 million, which we funded with cash on hand. Total assets acquired from CCC were $26.2 million.
Total liabilities assumed from CCC were $6.4 million. For 2014, CCC added approximately $5.8 million to our revenue and
increased our net income by $1.2 million.

On February 16, 2012, we purchased all of the outstanding common stock of NeuroNexus Technologies, Inc. (“NeuroNexus”)
headquartered in Ann Arbor, MI. NeuroNexus is an active implantable medical device design firm specializing in developing
and commercializing neural interface technology, components and systems for neuroscience and clinical markets. NeuroNexus
has an extensive intellectual property portfolio, core technologies and capabilities to support the development and
manufacturing of innovative neural interface devices across a wide range of applications including neuromodulation, sensing,
optical stimulation and targeted drug delivery applications. The operating results of NeuroNexus were included in our QiG
segment from the date of acquisition. The aggregate purchase price of NeuroNexus was $13.2 million, which we funded with
cash on hand and $10.0 million borrowed under our revolving credit facility. Total assets acquired from NeuroNexus were
$14.6 million. Total liabilities assumed from NeuroNexus were $1.4 million. For 2012, NeuroNexus added approximately $2.5
million to our revenue and decreased our net loss by $0.2 million.

Going forward, we will continue to pursue acquisitions to enhance our top and bottom line growth trajectory, and expand our
pipeline technologies. Our strategic criteria for these acquisitions is that they should drive expansion in our core markets, allow
us to enter adjacent growth markets, are focused on proprietary technology, can be tightly integrated into our operating base,
and will enhance our return on invested capital.

Our Customers

Our products are designed to provide reliable, long-lasting solutions that meet the evolving requirements and needs of our
customers. The nature and extent of our selling relationships with each customer are different in terms of breadth of products
purchased, purchased product volumes, length of contractual commitment, ordering patterns, inventory management and selling
prices.

Our Greatbatch Medical customers include large multi-national OEMs, such as Biotronik, Biomet, Boston Scientific,
Cyberonics, Halliburton Company, Johnson & Johnson, Medtronic, Philips Healthcare, Smith & Nephew, Sorin Group, St. Jude
Medical, Stryker, Zimmer, and Zoll. During 2014, Biotronik, Johnson & Johnson, Medtronic, and St. Jude Medical collectively
accounted for 54% of our total sales.

QiG customers include numerous scientists, hospitals and universities throughout the world who perform research for the
neuroscience and clinical markets. Additionally, with the acquisition of CCC, QiG customers also include various research
companies and institutes and early stage medical device companies. QiG’s largest customer is Nevro Corp., who is a customer
of CCC.

Use of Non-GAAP Financial Information

We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United
States of America (“GAAP”). Additionally, we consistently report and discuss in our earnings releases and investor
presentations adjusted operating income and margin, adjusted net income, adjusted earnings per diluted share, and organic
constant currency growth rates. These adjusted amounts, other than organic constant currency growth rates, consist of GAAP
amounts excluding the following adjustments to the extent occurring during the period: (i) acquisition-related charges, (ii)
facility consolidation, optimization, manufacturing transfer and system integration charges, (iii) asset write-down and
disposition charges, (iv) severance charges in connection with corporate realignments or a reduction in force (v) litigation
charges and gains, (vi) the impact of certain non-cash charges to interest expense, (vii) unusual or infrequently occurring items,
(viii) for 2013 and 2012, DVT expenses in connection with developing our neuromodulation platform, (ix) gain/loss on the sale
of investments, (x) the income tax (benefit) related to these adjustments, and (xi) certain tax charges related to the Federal R&D
Tax Credit, which are outside the normal benefit received, and the consolidation of our Swiss Orthopaedic facilities in 2012.
Adjusted earnings per diluted share were calculated by dividing adjusted net income by adjusted diluted weighted average
shares outstanding. To calculate organic constant currency growth rates, which excludes the impact of changes in foreign
currency exchange rates, as well as the impact of any acquisitions or divestitures of product lines on sales growth rates, we
convert current period sales from local currency to U.S. dollars using the previous periods foreign currency exchange rates and

- 28 -

exclude the amount of sales acquired/divested during the period from the current/previous period amounts, respectively. We
believe that the presentation of adjusted operating income and margin, adjusted net income, adjusted diluted earnings per share,
and organic constant currency growth rates provides important supplemental information to management and investors seeking
to understand the financial and business trends relating to our financial condition and results of operations. These measures are
used by management to forecast and evaluate the operational performance of the Company. Additionally, incentive
compensation targets for all associates of the Company is based upon adjusted operating income.

Strategic and Financial Overview

The overriding long-term strategic objectives that we have set for our Company are to average annual revenue growth of five
percent and to return twice that amount to our bottom line. Our current strategy to achieve these objectives is centered around
four strategic imperatives: 1) Organic Growth; 2) Margin Expansion; 3) Medical Device Systems; and 4) Targeted Acquisitions.
During 2014, we made strides against each of these, resulting in meaningful returns for our investors, our customers and for the
patients who benefit from our technologies worldwide.

The Company utilizes a fifty-two, fifty-three week fiscal year, which ends on the Friday nearest December 31. As a result, the
results for 2013 include an additional week of operations in comparison to the same periods of 2014 and 2012. Although this
additional week of operations may have impacted certain financial statement line items, management believes that when
combined with the additional holiday and weather related shutdowns in 2013, this additional week did not materially impact our
2013 net operating results.

Organic Growth – Over the last several years we have significantly enhanced our sales and marketing capabilities. This has
included moving account executives closer to our major customers, upgrading our sales force with new sales talent, enhancing
our sales commission programs, and intensifying our market research. These initiatives contributed to our record sales for 2014
of $687.8 million, which represented a 4% increase over 2013 sales. After adjusting for the $5.8 million of revenue added from
our acquisition of CCC in August 2014, as well as the $1 million positive impact of foreign currency exchange rates, sales
increased 3% in 2014 due to double digit organic constant currency growth from our orthopaedic (12%) and vascular (22%)
product lines due to increased sales force productivity, marketing efforts, and market growth. Partially offsetting these increases
were declines in our portable medical and cardiac/neuromodulation product lines due to our strategic shift in 2013 to refocus
our portable medical product line offerings to products that have higher profitability, and the impact of several customer
inventory reduction initiatives and the end of life impact of two legacy products in our cardiac product line.

Sales for 2013 increased 3% over 2012 sales despite the divestiture of $15 million of certain non-core orthopaedic product lines
during the first quarter of 2013. After adjusting for the impact of these divestitures, as well as the $2 million positive impact of
foreign currency exchange rates, sales increased 5% in 2013 due to strong organic constant currency growth from our
cardiac/neuromodulation (6%) and orthopaedic (20%) product lines due to market share gains, customer product launches, the
additional week of sales and the release of backlog stemming from our Swiss consolidation in 2012. Partially offsetting these
increases were declines in our vascular and portable medical product lines due to the voluntary recall of two vascular medical
devices in 2012 and our increased pricing discipline, which resulted in the loss of some low-margin portable medical business.

For 2015, we expect revenue growth of 4 - 6%, which is in line with our long-term growth goal objectives of 5% growth. Going
forward, growth in our cardiac/neuromodulation product line will continue to be negatively impacted by the end of life on two
legacy products, as well as continued pressure from our customer’s diversification and cost reduction initiatives. We expect we
will be able to mitigate these headwinds through growth from new products, as well as current and projected product
development opportunities with our cardiac/neuromodulation customers. We also expect our portable medical product line will
continue to be negatively impacted by our strategic shift, discussed above, through the first half of 2015.

Margin Expansion – We have a longstanding history of operational excellence, which is one of our core competencies. This,
when combined with our medical device systems and our organic sales growth strategies, is expected to continue to drive both
gross and operating margin expansion. This strategic imperative was evident in our 2014 and 2013 results as gross profit as a
percentage of sales (“Gross Margin”) increased 60 basis points and 180 basis points, respectively. These increases primarily
resulted from our operational leverage, due to higher sales volumes, and our various productivity initiatives, which more than
offset the impact of contractual price concessions granted to our customers in exchange for long-term agreements and a higher
mix of lower margin sales in 2014 compared to 2013.

Partially offsetting these increases in Gross Margin were increases in our selling, general and administrative expenses
(“SG&A”), which increased 3% and 9% for 2014 and 2013, respectively. These increases were primarily due to our strategic
decision near the end of 2012 to invest additional resources in sales and marketing resources in order to drive organic growth.
Partially offsetting these increases were the cost savings generated as a result of our various cost savings and consolidation
initiatives. See “Cost Savings and Consolidation Efforts” contained in this item for further details on these initiatives.

- 29 -

Research, development and engineering costs, net (“RD&E”) decreased 8% for 2014. This decrease was primarily a result of a
lower level of design verification testing (“DVT”) costs in connection with the development of Algovita, our spinal cord
stimulation (“SCS”) system. See further discussion of our medical device systems strategy below. For 2013, RD&E costs
increased 3% primarily due to lower customer cost reimbursements due to the timing of achievement of milestones on various
projects.

We invest substantial resources in integrating our acquisitions and streamlining our operations in order to drive organic growth
and profitability. This strategy was evident during 2014 and 2013 as we announced several initiatives to invest in capacity and
capabilities, realign our operating structure, consolidate our orthopaedic footprint, and upgrade our global ERP system. As a
result, other operating expenses, net totaled $15.3 million, $15.8 million and $42.3 million for 2014, 2013 and 2012,
respectively. The significant other operating expenses, net for 2012 related to the consolidation of our Swiss orthopaedic
facilities, which was completed in the first quarter of 2013. As we move forward, investing in our operations will continue to be
critical to the success of our strategic imperative to drive margin expansion. For 2015, other operating expenses, net are
expected to be higher than 2014 levels, as we continue to invest in capacity and capabilities. See “Cost Savings and
Consolidation Efforts” contained in this item for further details on these initiatives.

The net result of the above is that GAAP operating income for 2014 was $75.7 million compared to $61.3 million for 2013 and
$25.8 million for 2012. The lower level of operating income in 2012 was primarily due to the costs incurred in connection with
our consolidation and productivity initiatives discussed above. Adjusted operating income, which excludes these items, was
$91.2 million for 2014, compared to $82.9 million for 2013 and $73.9 million for 2012. Adjusted operating income as a
percentage of sales (“Adjusted Operating Margin”) for 2014 was 13.3% compared to 12.5% for 2013 and 11.4% for 2012 and
reflects the success the Company has had in leveraging its operating infrastructure and driving margin expansion. We expect
these improvements to continue in 2015 as Adjusted Operating Margin is expected to be 13.7% - 14.0% of sales.

A reconciliation of GAAP operating income (loss) to adjusted amounts is as follows (dollars in thousands):

Total sales

Greatbatch Medical

QiG

Unallocated

Total

Jan 2,
2015

Jan 3,
2014

Jan 2,
2015

Jan 3,
2014

Jan 2,
2015

$ 678,285

$ 660,902

9,502

3,043

— $

Jan 3,
2014

Jan 2,
2015
— $ 687,787

Jan 3,
2014

$ 663,945

Operating income (loss) as reported

$ 126,312

$ 111,805

$ (23,256) $ (30,484) $ (27,402) $ (19,982) $ 75,654

$ 61,339

Adjustments:

Inventory step-up amortization (COS)
Medical device DVT expenses (RD&E)(a)
Consolidation and optimization costs
Acquisition and integration expenses

(income)

Asset dispositions, severance and other

Adjusted operating income (loss)
Adjusted operating margin

—

10,051

13,388

196

2,493

187

1,187

$ 139,052

$ 126,567

260

—

882

—

5,793

(713)

(690)

—
—
255

—
—
1,284

520
979

1
(193)

260

—

11,188

—

5,793

14,758

(502)

1,534

$ 82,922

634

4,106
$ (22,193) $ (24,755) $ (25,648) $ (18,890) $ 91,211

540

20.5%

19.2%

N/A

13.3%

12.5%

Total sales

Greatbatch Medical

QiG

Unallocated

Total

Jan 3,
2014

Dec 28,
2012

Jan 3,
2014

Dec 28,
2012

Jan 3,
2014

$ 660,902

$ 643,722

3,043 $

2,455 $

— $

Dec 28,
2012

Jan 3,
2014
— $ 663,945

Dec 28,
2012

$ 646,177

Operating income (loss) as reported

$ 111,805

$ 79,093

$ (30,484) $ (32,554) $ (19,982) $ (20,718) $ 61,339

$ 25,821

Adjustments:

Inventory step-up amortization (COS)

Medical device DVT expenses (RD&E)

Consolidation and optimization costs
Acquisition and integration (income)

expenses

Asset dispositions, severance and other

Adjusted operating income (loss)
Adjusted operating margin

—

532

—

13,388

34,372

187

1,187

1,287

1,073

$ 126,567

$ 116,357

—

5,793

—

5,190

(690)

167

—
—
1,284

—
—
4,670

—

5,793

14,758

540

1,534
$ (24,755) $ (27,134) $ (18,890) $ (15,334) $ 82,922

1
(193)

6
708

(502)

532

5,190

39,048

1,460

1,838

$ 73,889

19.2%

18.1%

N/A

12.5%

11.4%

- 30 -

(a) As a result of our premarket approval (“PMA”) submission to the Food and Drug Administration (“FDA”) for Algovita in

December 2013, we no longer exclude DVT costs associated with this system from adjusted operating income and adjusted
diluted EPS. DVT costs incurred in connection with the development of Algovita were $1.6 million for 2014.

Medical Device Systems – In 2008, we began evolving our product offerings to include the development of complete medical
device systems in order to raise the growth and profitability profile of our Company. This medical device systems strategy is
being facilitated through QiG and leverages the component technology of Greatbatch Medical. More specifically, this strategy
includes the development of a neuromodulation platform that can be used to support multiple devices. Our first device
developed under this platform is Algovita, our SCS system to treat chronic intractable pain of the trunk and/or limbs. We made
our PMA submission in December 2013 for Algovita and are on track for approval in the first half of 2015. In 2014, we
submitted and received CE Mark approval from the European Notified Body TÜV SÜD America for Algovita.

Medical device costs incurred by QiG were $23.9 million for 2014 compared to $29.4 million for 2013 and $32.7 million for
2012. Medical device costs for 2014 include $1.6 million of DVT costs incurred in connection with the development of
Algovita compared to $5.8 million for 2013 and $5.2 million for 2012.

A reconciliation of GAAP net income (loss) and diluted earnings (loss) per share (“EPS”) to adjusted amounts is as follows (in
thousands, except per share amounts):

Net income (loss) as reported

Adjustments:

Inventory step-up amortization (COS)(a)
Medical device DVT expenses (RD&E)(a)
Consolidation and optimization costs(a)
Acquisition and integration expenses (income)(a)
Asset dispositions, severance and other(a)
(Gain) loss on cost and equity method investments,

net(a)(b)

CSN conversion option discount and deferred fee

acceleration amortization(a)(c)

R&D Tax Credit(d)
Swiss tax impact(e)

January 2,
2015

Impact
Per
Diluted
Share

Net
Income

Year Ended

January 3,
2014

December 28,
2012

Net
Income

Impact
Per
Diluted
Share

Net
Income
(Loss)

Impact
Per
Diluted
Share

55,458 $

2.14 $

36,267 $

1.43 $

(4,799 ) $

(0.20)

195

—

6,567

3,463

0.01

—

0.25

—

0.13

—

3,765

10,602

(326)

997

—
0.15
0.42
(0.01)
0.04

346
3,374
28,934
949
1,186

(2,841)

(0.11)

451

0.02

—

3,007

(1,600)

—

0.12
(0.06)
—
2.10 $

6,234
—
6,190
42,483 $
23,947

0.01

0.14

1.21

0.04

0.05

—

0.26

—

0.26

1.77

Adjusted net income and diluted EPS(f)
Adjusted diluted weighted average shares(g)

62,903 $

2.42 $

53,163 $

25,975

25,323

(a) Net of tax amounts computed using a 35% U.S. and France statutory tax rates for the 2014, 2013, and 2012 periods and a
0%, 0%, and 22.5% Switzerland tax rate for the 2014, 2013, and 2012 periods, respectively. For 2014, net of tax amounts
computed also include a 25% Uruguay statutory tax rate.

(b) Pre-tax amount is a gain of $4.4 million, loss of $0.7 million, and loss of $0.1 million for 2014, 2013, and 2012,

respectively.

(c) Pre-tax amount is $4.6 million and $9.6 million for 2013 and 2012, respectively.
(d) The Federal R&D tax credit was enacted for 2014 during the fourth quarter of 2014. The 2013 amount relates to the 2012
portion of the R&D tax credit which was reinstated in the first quarter of 2013 retroactive to the beginning of 2012. As
required, the impact of the R&D tax credit relating to 2012 was recognized in the first quarter of 2013.

(e) Relates to the loss of our Swiss tax holiday due to our decision to transfer manufacturing out of Switzerland, as well as the
establishment of a valuation allowance on our Swiss deferred tax assets as it is more likely than not that they will not be
fully realized.

(f) The per share data in this table has been rounded to the nearest $0.01 and therefore may not sum to the total.
(g) Adjusted diluted weighted average shares for 2012 includes 363,000 shares of dilution related to outstanding stock

incentive awards that were not dilutive for GAAP EPS purposes.

- 31 -

Adjusted diluted EPS increased 15% in 2014 and 19% in 2013 and reflects the benefit of our strategic imperatives. Going
forward, our strategic objective of returning two times our revenue growth rate to adjusted diluted EPS remains unchanged as
we are providing guidance of 5-12% adjusted diluted EPS growth for 2015.

Targeted Acquisitions – The results for 2014, 2013 and 2012 include the impact of our acquisition of CCC in August 2014 and
NeuroNexus in February 2012. Going forward, we will continue to pursue acquisitions to enhance our top and bottom line
growth trajectory, and expand our pipeline technologies. Our strategic criteria for these acquisitions is that they should drive
expansion in our core markets, allow us to enter adjacent growth markets, are focused on proprietary technology, can be tightly
integrated into our operating base, and will enhance our return on invested capital.

We expect 2015 to be a transformative year for Greatbatch. FDA PMA approval of Algovita is on track for the first half of the
year and we are leveraging our broad intellectual property portfolio to be a leading manufacturer for the neuromodulation
market with complete systems and component projects. Furthermore, we expect to enhance our competitive position as we
bring on-line a new facility for our Portable Medical category and transfer other production lines to an existing facility in
Mexico. We are focused on delivering our 2015 commitments but recognize that most of the benefit of these initiatives will
impact 2016 and beyond.

2015 Financial Guidance

We are estimating the following for 2015:
Sales

GAAP Operating Income as a % of Sales
Adjusted Operating Income as a % of Sales

Capital Expenditures

GAAP Effective Tax Rate
Adjusted Effective Tax Rate

GAAP Diluted EPS
Adjusted Diluted EPS
Diluted Weighted Average Shares

$715 - $730 million

10.7% - 11.0%
13.7% - 14.0%

$35 - $45 million

~25%
~26%

$2.02 - $2.12
$2.61 - $2.71
26,500,000

Adjusted operating income for 2015 is expected to consist of GAAP operating income excluding items such as acquisition,
consolidation, integration, and asset disposition/write-down charges totaling approximately $22 million. The after tax impact of
these items is estimated to be $14 million or approximately $0.54 per diluted share. Adjusted diluted EPS also includes the
benefit of the Federal R&D tax credit of approximately $0.06 per diluted share which has not yet been enacted for 2015.

We continue to evaluate commercialization options and therefore our guidance does not reflect the commercialization of
Algovita. Our guidance also does not include the impact of additional acquisitions.

For the first quarter 2015, we expect our customers to continue to aggressively manage inventory and we will continue to be
impacted by end of life of products. These actions coupled with continued currency pressures and our strong first quarter 2014
sales performance lead us to believe year over year sales for the first quarter 2015 will be below the first quarter 2014, in the
high single digit percent range. We expect considerable momentum will be built throughout 2015 based on new product
launches that offset the effect of the end of life products. We expect foreign currency translation to have a negative impact on
sales of approximately 1% to 1.5%. As a result, we expect to be closer to the lower end of the above full year guidance for
revenue.

- 32 -

Cost Savings and Consolidation Efforts

In 2014, 2013, and 2012, we recorded charges in Other Operating Expenses, Net related to various cost savings and
consolidation initiatives. These initiatives were undertaken to improve our operational efficiencies and profitability the most
significant of which are as follows (in millions):

Initiative

2014 investments in capacity and capabilities
2013 operating unit realignment
Orthopaedic/medical device facilities optimization

Expected
Expense
$29 - $34
$6.6
$45 - $50

Expected
Capital
$25 - $27
—
$43 - $48

Expected
Annual
Cost
Savings
> $20
> $7
$10 - $15

Expected
Completion
Date
2016
Q4 2014
2016

See Note 13 “Other Operating Expenses, Net” of the Notes to Consolidated Financial Statements contained in Item 8 of this
report for additional information about the timing, cash flow impact and amount of future expenditures for these initiatives. We
continually evaluate our operating structure in order to maximize efficiencies and drive margin expansion. In 2015, other
operating expenses, net are expected to be higher than the 2014 levels primarily due to the 2014 investments in capacity and
capabilities initiatives.

Product Development

Greatbatch Medical

Our core business is well positioned because our OEM customers leverage our portfolio of intellectual property, and we
continue to build a healthy pipeline of diverse medical technology opportunities. These product development opportunities,
when combined with the investments we have made in our sales and marketing resources, are expected to allow us to meet our
five percent revenue growth objectives. Some of the more significant product development opportunities Greatbatch Medical is
pursuing are as follows:

Product Line
Cardiac/
Neuromodulation

Orthopaedic

Portable Medical

Vascular

Developing next generation technology programs including Gen 2 QHR battery, next generation
filtered feedthroughs, and high voltage capacitors.

Product Development Opportunities

Developing next generation reamers, hip and bone preparation instruments, as well as disposable kits,
and power solutions for surgical tools.

Developing power solutions for various surgical, diagnostic and other market categories where device
mobility is critical, including sterilized surgical products, wireless power and battery management
technologies.

Developing introducer technologies to expand into new clinical markets, as well as expanding current
introducer and catheter platforms to better serve existing clinical markets and customers.

Energy, Military,
Environmental

Developing power solutions to advance performance and reliability of battery packs in critical
environments.

QiG

Through QiG, we provide our Greatbatch Medical customers with complete medical device systems. This medical device
strategy includes strategic equity investments in medical device technology and products developed independently, as well as in
conjunction with our OEM partners. While we do not intend to discuss each of these projects individually, we will discuss
significant milestones as they occur.

Algovita, our SCS to treat chronic intractable pain of the trunk and/or limbs, was designed to target unmet clinical needs with a
focus on safety and product differentiation for all user groups. This product was submitted for PMA approval to the FDA in
December 2013, and in January 2014 documentation for European CE Mark was submitted to the notified body, TÜV SÜD
America. CE Mark approval was received in June 2014. Our Algovita project remains on track for regulatory approval in the
first half of 2015 and for early commercialization planning in Europe.

QiG is in the early stages of development of two additional medical device systems, which are targeting approved and emerging
indications. Based upon the technology acquired from NeuroNexus, QiG is developing a platform of thin-film electrodes for
neuromodulation leads, sub-systems and components. Additionally, as a result of our acquisition of CCC, QiG is now able to
more broadly partner with medical device companies, leveraging Greatbatch Medical’s core components discrete technology,
which will enhance our medical device innovation efforts.

- 33 -

Government Regulation

The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act
(collectively “Health Care Reform”) legislated broad-based changes to the U.S. healthcare system that could significantly
impact our business operations and financial results, including higher or lower revenue, as well as higher employee medical
costs and taxes. Health Care Reform imposes significant new taxes on medical device OEMs, which will result in a significant
increase in the tax burden on our industry and which could have a material negative impact on our financial condition, results of
operations and our cash flows. Other elements of Health Care Reform such as comparative effectiveness research, an
independent payment advisory board, payment system reforms including shared savings pilots and other provisions could
meaningfully change the way healthcare is developed and delivered, and may materially impact numerous aspects of our
business, results of operations and financial condition. Many significant parts of Health Care Reform will be phased in over the
next several years and require further guidance and clarification in the form of regulations. The medical device tax, which was
effective in 2013, increased our cost of sales by $0.7 million for 2014 and $0.5 million in 2013.

In the first quarter of 2014, we initiated a voluntary field corrective action for all Standard Offset Cup Impactors after an
internal review determined that the sterilization recommendation in the Instructions For Use for the product did not meet
requirements for sterility assurance, which has the potential to result in surgical infection. We have validated two sterilization
parameters that meet acceptable sterility assurance levels and provided them to affected customers. We have informed the FDA
and other government agencies of this action, which impacts all Standard Offset Cup Impactors manufactured and distributed
from 2004 to 2013. Greatbatch has received three complaints possibly related to this issue, however no adverse events have
been reported. Future customer complaints or negative regulatory actions regarding this product or any of our products could
harm our operating results or financial condition.

Our Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and
assumptions that affect reported amounts and related disclosures. The methods, estimates, and judgments we use in applying
our accounting policies have a significant impact on the results we report in our consolidated financial statements. Management
considers an accounting estimate to be critical if (1) it requires assumptions to be made that were uncertain at the time the
estimate was made; and (2) changes in the estimate or different estimates that could have been selected could have a material
impact on our consolidated results of operations, financial position or cash flows. Our most critical accounting estimates are
described below. We also have other policies that we consider key accounting policies, such as our policies for revenue
recognition; however, these policies do not meet the definition of critical accounting estimates, because they do not generally
require us to make estimates or judgments that are difficult or subjective.

Valuation of goodwill and other identifiable intangible assets

When we acquire a company, we allocate the purchase price to the tangible and intangible assets we acquire and liabilities we
assume based on their fair value at the date of acquisition. Goodwill is recorded when the purchase price paid for an acquisition
exceeds the estimated fair value of the net identified tangible and intangible assets acquired. In addition to goodwill, some of
our intangible assets are considered non-amortizing intangible assets as they are expected to generate cash flows indefinitely.
Goodwill and indefinite-lived intangibles are not amortized but are required to be assessed for impairment on an annual basis or
more frequently if certain indicators are present. Definite-lived intangible assets are amortized over their estimated useful lives
and are assessed for impairment if certain indicators are present.

Assumptions/Approach Used

We base the fair value of identifiable tangible and intangible assets on detailed valuations that use information and assumptions
provided by management. The fair values of intangible assets are determined using one of three valuation approaches: market,
income or cost. The selection of a particular method depends on the reliability of available data and the nature of the asset. The
market approach values the asset based on available market pricing for comparable assets. The income approach values the
asset based on the present value of risk adjusted cash flows projected to be generated by that asset. The projected cash flows for
each asset considers multiple factors from the perspective of a marketplace participant, including current revenue from existing
customers, attrition trends, reasonable contract renewal assumptions, royalty rates and expected profit margins giving
consideration to historical and expected margins. The cost approach values the asset by determining the current cost of
replacing that asset with another of equivalent economic utility. The cost to replace the asset reflects the estimated reproduction
or replacement cost, less an allowance for loss in value due to depreciation or obsolescence, with specific consideration given to
economic obsolescence if indicated.

We perform an annual review on the last day of each fiscal year, or more frequently if indicators of potential impairment exist,
to determine if the recorded goodwill and other indefinite-lived intangible assets are impaired. We assess goodwill for
impairment by comparing the fair value of our reporting units to their carrying value to determine if there is potential
impairment. When evaluating goodwill for impairment, we may first perform an assessment of qualitative factors, referred to as

- 34 -

the “step-zero” approach, to determine if the fair value of the reporting unit is more-likely-than-not greater than its carrying
amount. If, based on the review of the qualitative factors, we determine it is more-likely-than-not that the fair value of the
reporting unit is greater than its carrying value, the required two-step quantitative impairment test can be bypassed. If we do not
perform a qualitative assessment or if the fair value of the reporting unit is more-likely-than-not less than its carrying value, we
must perform the two-step quantitative impairment test, and calculate the estimated fair value of the reporting unit. If, based
upon the two-step impairment test, it is determined that the fair value of a reporting unit is less than its carrying value, an
impairment loss is recorded to the extent that the implied fair value of the goodwill within the reporting unit is less than its
carrying value. Fair values for reporting units are determined based on the income and market approaches. Indefinite-lived
intangible assets are evaluated for impairment by using the income approach. Definite-lived intangible assets are reviewed at
least quarterly to determine if any conditions exist or a change in circumstances has occurred that would indicate impairment or
a change in their remaining useful life.

We do not believe that the indefinite-lived intangible assets or goodwill allocated to our Greatbatch Medical or QiG segments
are at risk of failing step one of future annual impairment tests unless operating conditions significantly deteriorate, given the
results of our 2014 step zero qualitative analysis as well as the significant amount that our estimated fair value for these assets
was in excess of their respective book values as of January 3, 2014, the date of our last step one impairment test. Examples of a
significant deterioration in operating conditions for Greatbatch Medical and QiG could include the following: for Greatbatch
Medical, the loss of one or more significant customers, technology obsolescence, product liability claims or significant
manufacturing disruption, among others. For QiG, regulatory non-approval of new medical device systems, lack of market
acceptance, discontinuation of significant development projects, technology obsolescence or failure of technology, among
others.

Effect of Variation of Key Assumptions Used

The use of alternative valuation assumptions, including estimated cash flows and discount rates, and alternative estimated
useful life assumptions could result in significant changes to our intangible asset fair value estimates. These changes in fair
value estimates could impact the amount and timing of future intangible asset amortization expense and/or result in impairment
losses.

As part of our 2014 step zero qualitative analysis, we make certain assumptions by evaluating factors including, but not limited
to, macro-economic conditions, market and industry conditions, cost factors, competitive environment, share price fluctuations,
results of the last impairment test, and the operational stability and the overall financial performance of the reporting units. We
also make assumptions involving the projections of future revenues and expenses that impact the results of our step-zero
impairment analysis. Significant changes in these estimates and assumptions could create future impairment losses to our
goodwill. The assumptions used in our 2014 impairment analysis incorporate the information disclosed in “2015 Financial
Guidance” of this section as well as other forward-looking statements made in this Management’s Discussion and Analysis of
Financial Condition and Results of Operations section.

For the last step one impairment test for QiG, which was performed as of January 3, 2014, the fair value for our QiG reporting
unit was determined primarily through the use of the income approach. The projected cash flows used to determine the fair
value of the QiG reporting unit were based upon internal revenue and expense projections, discount rates and probability of
success factors based upon the stage of completion of the medical device projects within QiG. Revenue projections are expected
to increase for QiG as market share is garnered by each medical device. As QiG products are currently in the clinical and
development stage, projected market share penetration rates were assumed to grow from low single digits in the early years up
to maximum market share penetration rates that ranged between 6% and 15%. The discounted cash flow analysis for QiG
included a discount rate of 20% and probability of success factors ranging between 75% to 90%. The fair value calculation for
QiG was corroborated with market data such as recent acquisitions for comparable companies, analyst reports and discussions
with potential commercial partners of QiG.

For our indefinite-lived intangible assets, we make estimates of royalty rates, future revenues (consistent with those disclosed in
“2015 Financial Guidance” of this section), and discount rates. Significant changes in these estimates could create future
impairments of these assets.

Estimation of the useful lives of indefinite- and definite-lived intangible assets is based upon the estimated cash flows of the
respective intangible asset and requires significant management judgment. Events could occur that would materially affect our
estimates of the useful lives. Significant changes in these estimates and assumptions could change the amount of future
amortization expense or could create future impairments of these intangible assets.

The way we allocate resources and evaluate our businesses determines the reporting unit level which goodwill is tested for
impairment. Significant changes to these reporting units could create future impairments of goodwill.

- 35 -

As of January 2, 2015, we have $440.0 million of intangible assets recorded on our consolidated balance sheet representing
46% of total assets. This includes $65.3 million of amortizing intangible assets, $20.3 million of indefinite-lived intangible
assets and $354.4 million of goodwill. A 1% change in the amortization of our intangible assets would change 2014 net income
by approximately $0.09 million, or approximately $0.003 per diluted share.

Stock-based compensation

We record compensation costs related to our stock-based awards which include stock options, restricted stock and restricted
stock units. We measure stock-based compensation cost at the grant date based on the fair value of the award.

Compensation cost for service-based awards is recognized ratably over the applicable vesting period. Compensation cost for
performance awards based on Company financial metrics is reassessed each period and recognized based upon the probability
that the performance targets will be achieved. Compensation cost for performance awards based on market metrics (such as
total shareholder return) is expensed each period whether the performance metrics are achieved or not. The amount of stock-
based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to
vest, as well as market and nonmarket performance award considerations. The total expense recognized over the vesting period
will only be for those awards that ultimately vest, as well as market and nonmarket performance award considerations.

Assumptions/Approach Used

We utilize the Black-Scholes Option Pricing Model to determine the fair value of stock options. We are required to make certain
assumptions with respect to selected Black-Scholes model inputs, including expected volatility, expected life, expected
dividend yield and the risk-free interest rate. Expected volatility is based on the historical volatility of our stock over the most
recent period commensurate with the estimated expected life of the stock options. The expected life of stock options granted,
which represents the period of time that the stock options are expected to be outstanding, is based, primarily, on historical data.
The expected dividend yield is based on our history and expectation of dividend payouts. The risk-free interest rate is based on
the U.S. Treasury yield curve in effect at the time of grant for a period commensurate with the estimated expected life.

The fair value of time-based as well as nonmarket-based performance restricted stock and restricted stock unit awards is equal
to the fair value of the Company’s stock on the date of grant. The fair value of market-based performance restricted stock unit
awards is determined by utilizing a Monte Carlo simulation model, which projects the value of Greatbatch stock versus our peer
group under numerous scenarios and determines the value of the award based upon the present value of these projected
outcomes.

Compensation cost for nonmarket-based performance awards is reassessed each period and recognized based upon the
probability that the performance targets will be achieved. That assessment is based upon actual and expected future
performance.

Stock-based compensation expense is recorded for those awards that are expected to vest, as well as market and nonmarket
performance award considerations. Forfeiture estimates for determining appropriate stock-based compensation expense are
estimated at the time of grant based on historical experience and demographic characteristics. Revisions are made to those
estimates in subsequent periods if actual forfeitures differ from estimated forfeitures.

Effect of Variation of Key Assumptions Used

Option pricing models were developed for use in estimating the value of traded options that have no vesting restrictions and are
fully transferable. Because our share-based payments have characteristics significantly different from those of freely traded
options, and because changes in the subjective input assumptions can materially affect our estimates of fair values, existing
valuation models may not provide reliable measures of the fair values of our share-based compensation. Consequently, there is
a risk that our estimates of the fair values of our share-based compensation awards may bear little resemblance to the actual
values realized upon the exercise, expiration or forfeiture of those share-based payments in the future. Stock options may expire
worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and
reported in our consolidated financial statements. Alternatively, value may be realized from these instruments that are
significantly in excess of the fair values originally estimated on the grant date and reported in our consolidated financial
statements. There are significant differences among valuation models. This may result in a lack of comparability with other
companies that use different models, methods and assumptions.

There is a high degree of subjectivity involved in selecting assumptions to be utilized to determine fair value and forfeiture
assumptions. If factors change and result in different assumptions in future periods, the expense that we record for future grants
may differ significantly from what we have recorded in the current period. Additionally, changes in performance of the
Company and its stock price will affect the likelihood that performance-based targets are achieved and could materially impact
the amount of stock-based compensation expense recognized.

A 1% change in our stock-based compensation expense would change 2014 net income by approximately $0.09 million, or
approximately $0.003 per diluted share.

- 36 -

Inventories

Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market.

Assumptions/Approach Used

Inventory costing requires complex calculations that include assumptions for overhead absorption, scrap, sample calculations,
manufacturing yield estimates and the determination of which costs may be capitalized. The valuation of inventory requires us
to estimate obsolete or excess inventory, as well as inventory that is not of saleable quality.

Effect of Variation of Key Assumptions Used

Variations in methods or assumptions could have a material impact on our results. If our demand forecast for specific products
is greater than actual demand and we fail to reduce manufacturing output accordingly, we could be required to record additional
inventory write-downs or expense a greater amount of overhead costs, which would have a negative impact on our net income.
As of January 2, 2015, we have $129.2 million of inventory recorded on our consolidated balance sheet representing 14% of
total assets. A 1% write-down of our inventory would change 2014 net income by approximately $0.8 million, or
approximately $0.03 per diluted share.

Tangible long-lived assets

Property, plant and equipment and other tangible long-lived assets are carried at cost. The cost of property, plant and equipment
is charged to depreciation expense over the estimated life of the operating assets primarily using straight-line rates. Tangible
long-lived assets are subject to impairment assessment if certain indicators are present.

Assumptions/Approach Used

We assess the impairment of tangible long-lived assets when events or changes in circumstances indicate that the carrying value
of the asset (asset group) may not be recoverable. Factors that we consider in deciding when to perform an impairment review
include, but are not limited to: a significant decrease in the market price of the asset (asset group); a significant change in the
extent or manner in which a long-lived asset (asset group) is being used or in its physical condition; a significant change in
legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an action or
assessment by a regulator; an accumulation of costs significantly in excess of the amount originally expected for the
construction; a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a
projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); or a
current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly
before the end of its previously estimated useful life. Recoverability potential is measured by comparing the carrying amount of
the asset (asset group) to the related total future undiscounted cash flows. The projected cash flows for each asset (asset group)
considers multiple factors, including current revenue from existing customers, proceeds from the sale of the asset (asset group),
reasonable contract renewal assumptions, and expected profit margins giving consideration to historical and expected margins.
If an asset’s (assets group’s) carrying value is not recoverable through related undiscounted cash flows, the asset (asset group) is
considered to be impaired. Impairment is measured by comparing the asset’s (asset group’s) carrying amount to its fair value.
When it is determined that useful lives of assets are shorter than originally estimated, and there are sufficient cash flows to
support the carrying value of the assets, we accelerate the rate of depreciation in order to fully depreciate the assets over their
shorter useful lives.

Effect of Variation of Key Assumptions Used

Estimation of the cash flows and useful lives of tangible assets that are long-lived requires significant management judgment.
Events could occur that would materially affect our estimates and assumptions. Unforeseen changes in operations or technology
could substantially alter the assumptions regarding the ability to realize the return of our investment in long-lived assets or the
useful lives. Also, as we make manufacturing process conversions and other facility consolidation decisions, we must make
subjective judgments regarding the remaining cash flows and useful lives of our assets, primarily manufacturing equipment and
buildings. Significant changes in these estimates and assumptions could change the amount of future depreciation expense or
could create future impairments of these long-lived assets (asset groups).

As of January 2, 2015 we have $144.9 million of tangible long-lived assets recorded on our consolidated balance sheet
representing 15% of total assets. A 1% write-down in our tangible long-lived assets would change 2014 net income by
approximately $0.9 million, or approximately $0.04 per diluted share.

- 37 -

Provision for income taxes

Our consolidated financial statements have been prepared using the asset and liability approach in accounting for income taxes,
which requires the recognition of deferred income taxes for the expected future tax consequences of net operating losses,
credits, and temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. A
valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the asset will not be
realized.

Assumptions/Approach Used

In recording the provision for income taxes, management must estimate the future tax rates applicable to the reversal of
temporary differences based upon the timing of expected reversal. Also, estimates are made as to whether taxable operating
income in future periods will be sufficient to fully recognize any gross deferred tax assets. If recovery is not likely, we must
increase our provision for income taxes by recording a valuation allowance against the deferred tax assets that we estimate will
not ultimately be recoverable. Alternatively, we may make estimates about the potential usage of deferred tax assets that
decrease our valuation allowances.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations.
Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the
ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.
We establish reserves for uncertain tax positions when we believe that certain tax positions do not meet the more likely than not
threshold. We adjust these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or the lapse
of statutes of limitations. The provision for income taxes includes the impact of reserve provisions and changes to the reserves
that are considered appropriate.

Effect of Variation of Key Assumptions Used

Changes could occur that would materially affect our estimates and assumptions regarding deferred taxes. Changes in current
tax laws and tax rates could affect the valuation of deferred tax assets and liabilities, thereby changing the income tax provision.
Also, significant declines in taxable income could materially impact the realizable value of deferred tax assets. At January 2,
2015, we had $31.2 million of gross deferred tax assets on our consolidated balance sheet and a valuation allowance of $10.7
million has been established for certain deferred tax assets as it is more likely than not that they will not be realized. A 1%
change in the effective tax rate would impact the current year provision for income taxes by $0.8 million, and 2014 diluted
earnings per share by $0.03 per diluted share.

- 38 -

Our Financial Results

We utilize a fifty-two, fifty-three week fiscal year ending on the Friday nearest December 31. Fiscal years 2014, 2013 and 2012
ended on January 2, 2015, January 3, 2014 and December 28, 2012, respectively. Fiscal year 2013 contained fifty-three weeks.
Fiscal years 2014 and 2012 each contained fifty-two weeks.

Year Ended

2014 vs. 2013

2013 vs. 2012

January 2,
2015

January 3,
2014

December 28,
2012

$
Change

%
Change

$
Change

%
Change

Dollars in thousands, except per share data
Greatbatch Medical Sales

Cardiac/Neuromodulation
Orthopaedics
Portable Medical
Vascular
Energy, Military, Environmental
Total Greatbatch Medical

QiG

Total sales

Cost of sales

Gross profit
Gross profit as a % of sales

Selling, general and administrative
expenses (SG&A)
SG&A as a % of sales
Research, development and
engineering costs, net (RD&E)
RD&E as a % of sales
Other operating expenses, net

Operating income
Operating margin

Interest expense
(Gain) loss on cost and equity
method investments, net
Other (income) expense, net
Provision for income taxes
Effective tax rate

$ 321,419
147,296
69,043
58,770
81,757
678,285
9,502
687,787
456,389
231,398

$ 325,412
130,247
78,743
48,357
78,143
660,902
3,043
663,945
444,632
219,313

$ 306,669
122,061
81,659
51,980
81,353
643,722
2,455
646,177
444,528
201,649

33.6%

33.0%

31.2 %

(1)% $
(3,993)
13 %
17,049
(12)%
(9,700)
22 %
10,413
5 %
3,614
17,383
3 %
6,459 212 %
4 %
23,842
3 %
11,757
6 %
12,085

18,743
8,186
(2,916)
(3,623)
(3,210)
17,180
588
17,768

6 %
7 %
(4)%
(7)%
(4)%
3 %
24 %
3 %
104 — %
9 %

17,664

90,602

88,107

80,992

2,495

3 %

7,115

9 %

13.2%

13.3%

12.5 %

49,845

7.2%
15,297
75,654

11.0%
4,252

(4,370)
(807)
21,121
27.6%

54,077

52,490

(4,232)

(8)%

1,587

3 %

8.1%

8.1 %

15,790
61,339

42,346
25,821

(493)
14,315

(3)%
23 %

(26,556)
35,518

(63)%
138 %

9.2%

4.0 %

11,261

18,054

(7,009)

(62)%

(6,793)

(38)%

694
546
12,571

25.7%

106
931
11,529
171.3 %
$
(4,799)
(0.7)%

(5,064)
(1,353) NA
8,550

68 %

588
(385)
1,042

NA
(41)%
9 %

19,191

53 % $

41,066

Net income (loss)
Net margin

55,458

36,267

8.1%

5.5%

Diluted earnings (loss) per share

2.14

1.43

(0.20)

0.71

50 % $

1.63

- 39 -

Fiscal 2014 Compared with Fiscal 2013

Sales

Changes to sales by major product lines were as follows (dollars in thousands):

Sales:
Greatbatch Medical

Cardiac/Neuromodulation
Orthopaedics
Portable Medical
Vascular
Energy, Military, Environmental
Total Greatbatch Medical

QiG

Total sales

Year Ended

2014 vs. 2013

January 2,
2015

January 3,
2014

$
Change

%
Change

321,419 $
147,296
69,043
58,770
81,757
678,285
9,502
687,787 $

325,412 $
130,247
78,743
48,357
78,143
660,902
3,043
663,945 $

(3,993)
17,049
(9,700)
10,413
3,614
17,383
6,459
23,842

(1)%
13 %
(12)%
22 %
5 %
3 %
212 %
4 %

Greatbatch Medical – Total 2014 sales for Greatbatch Medical increased 3% to $678.3 million. The most significant drivers of
this increase were as follows:

For 2014, our cardiac/neuromodulation sales decreased 1%. Beginning in the second quarter of 2014, our
cardiac/neuromodulation revenue began to be negatively impacted by the end of life for two legacy products and pricing
pressure from our larger OEM customers. Additionally, fourth quarter 2014 cardiac/neuromodulation sales were impacted by
inventory adjustments by several of our larger OEM customers. Going forward, growth in our cardiac/neuromodulation product
line will continue to be negatively impacted by the end of life on these two legacy products, as well as continued pressure from
our customer’s diversification, vertical integration and price reduction initiatives. These two end of life products contributed
approximately $22 million to sales in 2014 and are expected to be phased out over the next few years. We expect we will be
able to mitigate these headwinds through growth from new products, as well as current and projected product development
opportunities with our cardiac/neuromodulation customers.

Orthopaedic product line sales for 2014 increased 13% compared to the same period of 2013. Foreign currency exchange rate
fluctuations increased our 2014 orthopaedic sales by approximately $1 million in comparison to the prior year. Excluding the
impact of foreign currency fluctuations, orthopaedic product line sales increased 12% in comparison to the prior year. Going
forward, foreign currency exchange rate fluctuations are expected to be a headwind for the first half of 2015 due to the
strengthening dollar versus the euro. The 2014 organic constant currency growth was primarily in orthopaedic implants and
instruments and was driven by our increased sales and marketing efforts and market growth. Additionally, our bone cutting and
preparation instruments have a strong position in the market place. For 2015, we are looking for another double digit growth
year and continue to innovate in the space with silicone handles, new instrumentation and higher level assemblies.

During 2014, portable medical sales decreased 12% in comparison to 2013. During the second half of 2013, we began
refocusing our product line offerings in the portable medical space to products that have higher profitability. Correspondingly,
we have discontinued or reduced volumes in certain of our lower margin products, which is expected to continue to negatively
impact our sales through the first half of 2015. As part of our investment in capacity and capabilities and to better align our
resources, during the second quarter of 2014, we announced plans to transfer our portable medical operations into a new facility
located in Tijuana, Mexico. We remain optimistic about this product line and continue to see our pipeline of customer
opportunities grow as we invest in new technologies to meet our customers’ needs and to expand our overall market
opportunity.

For 2014, our vascular product line sales increased 22% in comparison to the prior year and reflects the continued adoption of
our products and the relaunch of a vascular medical device near the end of 2013, which, as previously communicated, was
voluntarily recalled in the fourth quarter of 2012.

Energy, Military and Environmental product line sales for 2014 increased 5% compared to the same period of 2013. This
increase was mainly driven by new product introductions, our deepening relationship with our OEM customers, as well as the
timing of customer orders.

- 40 -

QiG – QiG sales for 2014 increased 212% to $9.5 million and includes $5.8 million of sales from CCC, which we acquired on
August 12, 2014. CCC is an active implantable medical device systems developer and manufacturer that designs and produces a
range of devices for some of the world’s top medical device companies, including implantable pulse generators, programmer
systems, battery chargers, patient wands and leads. Excluding the revenue acquired from CCC, QiG revenue increased 21% in
comparison to the prior year, due to increased adoption of our thin film electrode technology and new product launches.

Gross Profit

Changes to gross profit as a percentage of sales were primarily due to the following:

Performance-based compensation(a)
Production efficiencies, volume and mix(b)
Impact of acquisition(c)
Price(d)
Other

Total percentage point change to gross profit as a percentage of sales

2014-2013
% Point Change
0.1 %
1.9 %
0.1 %
(1.2)%
(0.3)%
0.6 %

(a) Amount represents the change in performance-based compensation versus the prior year period and is recorded based upon

the actual results achieved.

(b) Our gross profit percentage benefited from production efficiencies gained at our manufacturing facilities as a result of our
various lean and supply chain initiatives, as well as higher production volumes due to increased sales. Partially offsetting
these production efficiencies was an increase in mix of lower margin sales in comparison to the prior year (i.e. higher mix
of orthopaedic sales and lower mix of cardiac/neuromodulation sales).

(d) Our gross profit percentage was negatively impacted by contractual price concessions to our larger OEM customers, which

were given in exchange for long-term contracts and volume commitments.

Over the long-term, we expect to see gross margin improvements as we leverage our organic growth across our manufacturing
footprint and realize the benefit of the various productivity improvement initiatives that are being implemented (see “Cost
Savings and Consolidation Efforts” section of this Item). Additionally, we expect our gross margin to improve as more system
and device level products are introduced, which typically earn a higher margin.

SG&A Expenses

Changes to SG&A expenses were primarily due to the following (in thousands):

Selling and marketing(a)
Performance-based compensation(b)
Legal fees(c)
G&A personnel costs(d)
Impact of acquisition(e)
Other

Net increase in SG&A

2014-2013
$ Change

3,408
(991)
2,555
(3,096)
911
(292)
2,495

(a) Amount represents the incremental costs related to our strategic initiative to increase selling and marketing resources to

drive 5% core business growth and sustain a pipeline of revenue generating opportunities.

(b) Amount represents the change in performance-based compensation versus the prior year and is recorded based upon the

actual results achieved.

(c) Amount represents the increase in legal costs compared to the prior year and includes higher intellectual property related

costs, as well as other corporate initiatives.

(d) Amount represents lower G&A personnel costs in comparison to the prior year and is primarily the result of our various

consolidation initiatives including our operating unit realignment that occurred during the second half of 2013.

(e) Amount represents the incremental SG&A expenses related to the acquisition of CCC in August 2014.

- 41 -

RD&E Expenses, Net

Net RD&E costs were as follows (in thousands):

Research, development and engineering costs
Less: cost reimbursements
Total RD&E, net

Year Ended

January 2,
2015

January 3,
2014

Change

58,974 $
(9,129)
49,845 $

62,652 $
(8,575)
54,077 $

(3,678)
(554)
(4,232)

Net RD&E for 2014 decreased $4.2 million to $49.8 million. Medical device costs incurred by QiG were $23.9 million for
2014 compared to $29.4 million for 2013. Medical device costs for 2014 include $4.2 million less DVT costs in comparison to
2013 as most of the testing was completed by the end of 2013. The decrease in DVT costs was partially offset by higher costs
incurred in connection with the development of our next generation cardiac products (i.e. batteries, capacitors, filtered
feedthroughs), higher performance-based compensation, which was accrued based upon the achievement of certain Algovita
milestones, and a higher rate of spend on other QiG medical device projects.

The increase in customer cost reimbursements in 2014 primarily relates to the timing of the achievement of milestones on
various customer cost reimbursement projects, partially offset by the expiration of certain government grants acquired from our
acquisition of NeuroNexus in 2012.

QiG’s medical device technology investment is primarily focused on successfully commercializing Algovita, which continues
to progress as planned, with PMA approval on track for the first half of 2015.

Other Operating Expenses, Net

Other operating expenses, net were comprised of the following (in thousands):

2014 investments in capacity and capabilities(a)
2013 operating unit realignment(a)
Orthopaedic facilities optimization(a)
Medical device facility optimization(a)
ERP system upgrade (income) costs(a)
Acquisition and integration (income) costs(b)
Asset dispositions, severance and other(c)
Total other operating expenses, net

Year Ended

January 2,
2015

January 3,
2014

Change

8,925 $
1,017
1,317
11
(82)
3
4,106
15,297 $

— $

5,625
8,038
312
783
(502)
1,534
15,790 $

8,925
(4,608)
(6,721)
(301)
(865)
505
2,572
(493)

(a) Refer to “Cost Savings and Consolidation Efforts” section of this Item and Note 13 “Other Operating Expenses, Net” of

the Notes to Consolidated Financial Statements contained in Item 8 of this report for disclosures related to the timing and
level of remaining expenditures for these initiatives.

(b) During 2014 and 2013, we recognized costs (income) related to the integration of Micro Power Electronics, Inc.,

NeuroNexus, and CCC. These expenses (income) 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. Refer to Note 18 “Fair Value Measurements” of the Notes to Consolidated Financial
Statements contained in Item 8 of this report for disclosures related to the change in fair value of the contingent
consideration.

(c) During 2014 and 2013, we recorded losses in connection with various asset disposals and write-downs. During 2014, we
incurred $0.9 million of expense related to the separation of our Senior Vice President, Human Resources. Additionally,
during 2014, Greatbatch Medical recorded charges in connection with its business reorganization to align its contract
manufacturing operations. Costs incurred primarily related to consulting and IT development. 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 NeuroNexus’s in-process research and development “IPR&D”.

- 42 -

We continually evaluate our operating structure in order to maximize efficiencies and drive margin expansion. For 2015, other
operating expenses, net are expected to be approximately $22 million, as we continue to invest in our capacity and capabilities.
See “Cost Savings and Consolidation Efforts” contained in this Item for further details on these initiatives.

Interest Expense

Interest expense for 2014 decreased $7.0 million over 2013 primarily due to the repayment of $198 million of convertible
subordinated notes during the first quarter of 2013, which had an effective interest rate of 8.5%. The current weighted average
interest rate on our long-term debt is 1.79%. Additionally, interest expense was lower in 2014 due to lower outstanding Credit
Facility balances. During 2014 and 2013, we made net repayments of $10 million and $33.3 million on long-term debt,
respectively. See Note 9 “Debt” of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

(Gain) Loss on Cost and Equity Method Investments

During 2014, we sold one of our cost method investments, which resulted in a pre-tax gain of $3.2 million and contributed to
the overall gain on cost and equity method investments for the year. During 2013, we incurred losses on our cost and equity
method investments. These investments are in start-up research and development companies whose fair value is highly
subjective in nature and subject to future fluctuations, which could be significant. Our recorded investment in cost and equity
method investments was $14.5 million at January 2, 2015. During 2014, we recognized a $1.2 million gain and loss of $0.2
million in 2013 related to our equity method investments.

Other (Income) Expense, Net

Other (income) expense, net primarily includes the impact of foreign currency exchange rate fluctuations on transactions
denominated in foreign currencies. In 2014, we recognized $1.3 million of foreign currency exchange gains, compared to a loss
of $0.1 million for 2013, primarily due to the strengthening of the U.S. dollar relative to the Euro. We generally do not expect
foreign currency exchange rate fluctuations to have a material impact on our results of operations.

Provision for Income Taxes

The effective tax rate for 2014 was 27.6% versus 25.7% for 2013. The stand-alone U.S. component of the effective tax rate for
2014 was 32.6% versus 30.0% for 2013. The year over year increase is primarily attributable to a decrease in federal tax credits
recorded in 2014. $3.7 million of federal tax credits were recorded in 2013 as a result of the retroactive reinstatement of the
U.S. R&D tax credit versus $1.6 million in 2014. On January 2, 2013, the President signed into law the American Taxpayer
Relief Act of 2012 (the “Act”), which included a retroactive extension of the R&D tax credit that had expired on December 31,
2011. Under the Act, the R&D credit was extended for two years retroactively from January 1, 2012 through December 31,
2013. As the Act was signed into law on January 2, 2013, the effects of the change in the tax law were recognized in 2013. As
such, a benefit for the R&D credits earned both in 2012 and 2013 were recorded through the fiscal 2013 effective tax rate. The
2014 effective tax rate appropriately reflects only the 2014 tax credits.

The increase in rate from the reduction in recognized tax credits was partially offset by the impact of an increase in foreign
source income recognized in 2014. The foreign source income carries a lower overall effective tax rate than U.S. income.

The provision for income taxes for 2014 differs from the U.S. statutory rate due to the following (dollars in thousands):

Income before provision for income
taxes

Provision at statutory rate
Federal tax credits
Foreign rate differential(a)
Uncertain tax positions
State taxes, net of federal benefit
Change in foreign tax rates(b)
Valuation allowance
Other
Provision for income taxes/effective
tax rate

U.S.

International

Combined

56,801

19,778

76,579

19,881
(1,600)
—
412
507
—
135
(842)

35.0% $
(2.8)
—
0.7
0.9
—
0.2
(1.5)

6,922
—
(3,276)
—
—
(446)
(434)
(138)

35.0% $

—
(16.6)
—
—
(2.3)
(2.2)
(0.7)

26,803
(1,600)
(3,276)
412
507
(446)
(299)
(980)

35.0%
(2.1)
(4.3)
0.6
0.7
(0.6)
(0.4)
(1.3)

18,493

32.6% $

2,628

13.3% $

21,121

27.6%

- 43 -

(a) The tax rate reflects the impact of an increase in foreign source income, which carries a lower overall effective tax rate than

U.S. income.

(b) Amounts relate to the tax benefit resulting from a favorable Swiss tax ruling received in 2014. During 2014, our Swiss
subsidiary filed for a tax ruling requesting a reduced income tax rate in Switzerland. We received an approved ruling in
December 2014 effectively reducing the Swiss tax rate from 9.3% to approximately 6.5% depending on the jurisdictional
mix of revenues and expenditures. As such, the carrying value of the deferred taxes, which reflected a net deferred tax
liability position as of the date of enactment, have been adjusted to reflect the rate reduction. The adjusted carrying value
resulted in a reduction to the deferred tax liability and a corresponding deferred tax benefit.

There is a prospective potential for volatility of the effective tax rate due to several factors, including changes in the mix of pre-
tax income and the jurisdictions to which it relates, business acquisitions, settlements with taxing authorities and foreign
currency exchange rate fluctuations. In addition, we continue to explore tax planning opportunities that may have a material
impact on our effective tax rate. For 2015, we expect our GAAP and adjusted effective tax rate to be approximately 25% and
26%, respectively.

We believe it is reasonably possible that a reduction of up to $1.0 million of the balance of our unrecognized tax benefits may
occur within the next twelve months as a result of the expiration of applicable statutes of limitation and/or potential audit
settlements, which would positively impact the effective tax rate in the period of reduction.

- 44 -

Fiscal 2013 Compared with Fiscal 2012

Sales

Changes to sales by major product lines were as follows (dollars in thousands):

Sales:
Greatbatch Medical

Cardiac/Neuromodulation
Orthopaedics
Portable Medical
Vascular
Energy, Military, Environmental

Total Greatbatch Medical
QiG

Total sales

Year Ended

2013 vs. 2012

January 3,
2014

December 28,
2012

$
Change

%
Change

325,412 $
130,247
78,743
48,357
78,143
660,902
3,043
663,945 $

306,669 $
122,061
81,659
51,980
81,353
643,722
2,455
646,177 $

18,743
8,186
(2,916)
(3,623)
(3,210)
17,180
588
17,768

6 %
7 %
(4)%
(7)%
(4)%
3 %
24 %
3 %

Greatbatch Medical – Total 2013 sales for Greatbatch Medical increased 3% to $660.9 million. The most significant drivers of
this increase were as follows:

For 2013, our cardiac/neuromodulation sales increased 6% to $325.4 million, which exceeded our expectations. During 2013,
cardiac and neuromodulation sales benefited from stronger market performance and continued deepening relationships with our
OEM partners. More specifically, we experienced strong growth in batteries, capacitors, leads, and assembly revenue.

Orthopaedic product line sales for 2013 increased 7% compared to the same period of 2012. During the first quarter of 2013,
the Company divested certain non-core orthopaedic product lines, which reduced 2013 orthopaedic revenue by approximately
$15 million in comparison to the prior year. Additionally, foreign currency exchange rate fluctuations benefited orthopaedic
revenue by approximately $2 million in comparison to the prior year. On an organic constant currency basis, orthopaedic
product line sales increased 20% in comparison to 2012. This organic constant currency improvement was across all
orthopaedic products and was above market growth rates primarily due to our increased sales and marketing efforts, customer
market share gains, customer product launches, as well as the release of backlog built up as a result of our Swiss orthopaedic
facilities consolidation near the end of 2012.

During 2013 portable medical sales decreased $2.9 million or 4% compared to 2012. During the second half of 2013 we began
refocusing our product line offerings in the portable medical space to products that have higher profitability. Correspondingly,
we have discontinued or reduced volumes in certain of our lower margin products, which resulted in the loss of two lower
margin portable medical programs accounting for approximately $9 million of revenues in 2013.

For 2013, our vascular product line sales decreased $3.6 million or 7% as a result of the previously communicated voluntary
recall of two vascular medical devices in the fourth quarter of 2012. We began reshipping one of these products in the fourth
quarter of 2013.

QiG – QiG revenue includes sales of neural interface technology, components and systems to the neuroscience and clinical
markets. The 24% revenue growth for 2013 in comparison to 2012 was primarily due to having a full year of sales from
NeuroNexus, which was acquired in February 2012, as well as the higher growth characteristics of the neuroscience and clinical
markets.

- 45 -

Gross Profit

Changes to gross profit as a percentage of sales were primarily due to the following:

Impact of Swiss consolidation(a)
Performance-based compensation(b)
Cost savings and production efficiencies(c)
Other

Total percentage point change to gross profit as a percentage of sales

2013-2012
% Point Change
0.4 %
(0.5)%
2.0 %
(0.1)%
1.8 %

(a) Our Gross Margin benefited approximately $2.8 million from the consolidation of our Swiss orthopaedic facilities into

other existing Greatbatch facilities in the first quarter of 2013. The 2012 gross profit percentage includes the negative
impact of production inefficiencies at those facilities.

(b) Amount represents higher performance-based compensation versus the prior year of approximately $3.4 million and is

recorded based upon actual results achieved.

(c) Our Gross Margin percentage benefited from production efficiencies gained at our manufacturing facilities as a result of
our various lean and supply chain initiatives, as well as higher production volumes due to increased sales and inventory
levels.

SG&A Expenses

Changes to SG&A expenses were primarily due to the following (in thousands):

Selling and marketing(a)
Performance-based compensation(b)
Swiss consolidation(c)
Other(d)

Net increase in SG&A

2013-2012
$ Change

3,848
2,680
(1,359)
1,946
7,115

(a) Amount represents the incremental costs related to our decision near the end of 2012 to increase selling and marketing

resources to drive 5% core business growth and sustain a pipeline of revenue generating opportunities.

(b) Amount represents the change in performance-based compensation versus the prior year period and is recorded based upon

the actual results achieved.

(c) Amount represents the estimated impact to SG&A costs as a result of the consolidation of our Swiss orthopaedic facilities

into other existing Greatbatch facilities, which was completed in the first quarter of 2013.

(d) Amount represents various cost increases in SG&A expenses that occurred during 2013 including an additional week of
operations in comparison to 2012 as the Company utilizes a fifty-two, fifty-three week fiscal year, which ends on the
Friday nearest December 31.

RD&E Expenses, Net

Net RD&E costs were as follows (in thousands):

Research, development, and engineering costs
Less cost reimbursements
Total RD&E, net

Year Ended

January 3,
2014

December 28,
2012

Change

62,652 $
(8,575)
54,077 $

62,848 $
(10,358)
52,490 $

(196)
1,783
1,587

Net RD&E for 2013 increased $1.6 million to $54.1 million. This increase was attributable to a decrease of $1.8 million in
customer cost reimbursements compared to the prior year due to the timing of achievement of milestones on various projects.
During the second half of 2012, we began to implement an initiative to optimize our RD&E investment. This included the
reallocation of RD&E resources to higher priority projects, the postponement of some RD&E projects, as well as the decision to

- 46 -

pursue various alternatives to monetize some of our existing intellectual property that are outside our core business.
Additionally, our Swiss orthopaedic facilities consolidation contributed to a reduction in RD&E expenses of $3.1 million. The
benefit that was realized in 2013 from these initiatives was offset by an increase in performance-based compensation ($1.4
million), a higher level of DVT costs ($0.6 million), as well as the additional week of payroll expense incurred during 2013.

Medical device costs incurred by QiG were $29.4 million for 2013 and $32.7 million for 2012. 2013 QiG results include $5.8
million of DVT costs incurred in connection with our development of a neuromodulation platform compared to $5.2 million for
2012.

Other Operating Expenses, Net

Other operating expenses, net were comprised of the following (in thousands):

2013 operating unit realignment(a)
Orthopaedic facilities optimization(a)
Medical device facility optimization(a)
ERP system upgrade (income) costs(a)
Acquisition and integration (income) costs(b)
Asset dispositions, severance and other(c)
Total other operating expenses, net

Year Ended

January 3,
2014

December 28,
2012

Change

5,625 $
8,038
312
783
(502)
1,534
15,790 $

— $

32,482
1,525
5,041
1,460
1,838
42,346 $

5,625
(24,444)
(1,213)
(4,258)
(1,962)
(304)
(26,556)

(a) Refer to “Cost Savings and Consolidation Efforts” section of this Item and Note 13 “Other Operating Expenses, Net” of the
Notes to Consolidated Financial Statements contained in Item 8 of this report for disclosures related to the timing and level
of remaining expenditures for these initiatives.

(b) During 2013 and 2012, we incurred costs (income) related to the integration of Micro Power and 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 these acquisitions. Refer to Note 18
“Fair Value Measurements” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for
disclosures related to the change in fair value of the contingent consideration.

(c) During 2013 and 2012, we recorded losses in connection with various asset disposals and/or write-downs. Additionally,
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 NeuroNexus IPR&D. During 2012, we incurred $1.2 million of costs related to the
relocation of our global headquarters to Frisco, Texas.

- 47 -

Interest Expense

Interest expense for 2013 decreased $6.8 million over 2012 primarily due to the repayment of $198 million of convertible
subordinated notes during the first quarter of 2013, which had an effective interest rate of 8.5%. Additionally, interest expense
decreased due to lower outstanding debt balances, and lower interest rates paid on outstanding debt. During 2013, we made net
repayments of $33.3 million on long-term debt. See Note 9 “Debt” of the Notes to Consolidated Financial Statements contained
in Item 8 of this report.

(Gain) Loss on Cost and Equity Method Investments

During 2013 and 2012, we incurred losses on our cost and equity method investments. These investments are in start-up
research and development companies whose fair value is highly subjective in nature and subject to future fluctuations, which
could be significant.

Other Expense, Net

Other expense, net primarily includes the impact of foreign currency exchange rate fluctuations on transactions denominated in
foreign currencies. We generally do not expect foreign currency exchange rate fluctuations to have a material impact on our
results of operations.

Provision for Income Taxes

The effective tax rate for 2013 was 25.7%, versus 171.3% for 2012. The stand-alone U.S. component of the effective tax rate
for 2013 was 30.0% versus 33.1% for 2012. This decrease was primarily attributable to $6.2 million of tax charges recorded in
2012 relating to our Swiss Orthopaedic consolidation. These charges related to the loss of our Swiss tax holiday, due to our
decision in 2012 to discontinue manufacturing in Switzerland and the valuation allowance established on our Swiss deferred tax
assets, as it was more likely than not that they will not be fully realized. The reinstatement of the R&D tax credit in 2013, as
well as higher income in lower tax rate jurisdictions also contributed to the more favorable tax rate in 2013. The provision for
income taxes for 2013 differs from the U.S. statutory rate due to the following (dollars in thousands):

Income before provision for income
taxes

Provision at statutory rate
Federal tax credits(a)
Foreign rate differential
Uncertain tax positions
State taxes, net of federal benefit
Change in foreign tax rates(b)
Valuation allowance
Other
Provision for income taxes/effective
tax rate

U.S.

International

Combined

42,392

6,446

48,838

14,837
(3,651)
—
831
1,147
—
176
(634)

35.0% $
(8.6)
—
2.0
2.7
—
0.4
(1.5)

2,256
—
(348)
—
—
(1,807)
10
(246)

35.0 % $

—
(5.4)
—
—
(28.0)
0.2
(3.8)

17,093
(3,651)
(348)
831
1,147
(1,807)
186
(880)

35.0%
(7.5)
(0.7)
1.7
2.3
(3.7)
0.4
(1.8)

12,706

30.0% $

(135)

(2.0)% $

12,571

25.7%

(a) Amounts relate to the retroactive reinstatement of the U.S. R&D tax credit. On January 2, 2013, the President signed into

law the Act, which included a retroactive extension of the R&D tax credit that had expired on December 31, 2011. Under the
Act, the R&D credit is extended for two years retroactively from January 1, 2012 through December 31, 2013. As the Act
was signed into law on January 2, 2013, the effects of the change in the tax law were recognized as a financial statement
event in the financial statement period that includes the date of enactment. As such, we recorded a benefit for the R&D
credits earned in 2012 and 2013 through the fiscal 2013 effective tax rate.

(b) Amounts relate to the tax benefit recorded in 2013 relating to Mexican Tax Reform Package and a favorable Swiss tax

ruling. On December 12, 2013, the 2014 Mexican Tax Reform Package took effect. This tax reform repealed the previous
Mexican income tax law, including the flat tax regime and tax consolidation. The Mexican corporate income tax rate of 30%
will be maintained. As such, for U.S. GAAP purposes, the deferred tax items, historically carried at the 17% flat tax rate,
were adjusted to reflect a carrying value of 30%. Since our Mexican subsidiary was in an overall deferred tax asset position
as of the enactment date, the adjustment to 30% resulted in an overall deferred tax benefit which was recorded in 2013. In
addition, during 2013, our Swiss subsidiary filed for a tax ruling requesting a reduced income tax rate in Switzerland. We

- 48 -

received an approved ruling in December 2013 effectively reducing the Swiss tax rate from 22.6% to approximately 9.3%
depending on jurisdictional mix of revenues and expenditures. As such, the carrying value of the deferred taxes, which
reflected a net deferred tax liability position as of the date of enactment, have been adjusted to reflect the rate reduction. The
adjusted carrying value resulted in a reduction to the deferred tax liability and a corresponding deferred tax benefit.

Liquidity and Capital Resources

(Dollars in thousands)

Cash and cash equivalents
Working capital
Current ratio

January 2,
2015
$
76,824 $
$ 242,022 $

3.23

January 3,
2014
35,465
190,731
3.08

The increase in cash and cash equivalents and working capital from January 3, 2014 is due primarily to our operating income,
which generated $81.3 million in net cash provided by operating activities partially offset by the $16.0 million net cash paid for
the CCC acquisition and $24.8 million of capital expenditures. Additionally, working capital balances increased from the end of
2013, primarily cash, accounts receivable and inventory, due to our growth in sales and expected sales as well as our acquisition
of CCC, which added $4.6 million of working capital. Of the $76.8 million of cash on hand as of January 2, 2015, $12.6 million
is being held at our foreign subsidiaries and is considered permanently reinvested.

Revolving Line of Credit – We have a credit facility (the “Credit Facility”), which consists of a $300 million revolving line of
credit (the “Revolving Credit Facility”), a $200 million term loan (the “Term Loan”), a $15 million letter of credit subfacility,
and a $15 million swingline subfacility. The Credit Facility can be increased by $200 million upon our request and approval by
the lenders. The Revolving Credit Facility has a maturity date of September 20, 2018, which may be extended to September 20,
2019 upon notice by us and subject to certain conditions. The principal of the Term Loan is payable in quarterly installments as
specified in the Credit Facility until its maturity date of September 20, 2019, when the unpaid balance is due in full.

The Credit Facility is supported by a consortium of fifteen banks with no bank controlling more than 18% of the facility. As of
January 2, 2015, the banks supporting 98% of the Credit Facility each had an S&P credit rating of at least BBB or better, which
is considered investment grade. The bank which supports the remaining 2% of the Credit Facility is not currently being rated.

The Credit Facility requires us to maintain a rolling four quarter ratio of adjusted EBITDA to interest expense of at least 3.0 to
1.0. For the twelve month period ended January 2, 2015, our ratio of adjusted EBITDA to interest expense, calculated in
accordance with our credit agreement, was 34.7 to 1.00, well above the required limit. The Credit Facility also requires us to
maintain a total leverage ratio of not greater than 4.5 to 1.0 decreasing to not greater than 4.25 to 1.0 after January 2, 2016. As
of January 2, 2015, our total leverage ratio, calculated in accordance with our credit agreement, was 1.29 to 1.00, well below
the required limit.

See Note 9 “Debt” of the Notes to Consolidated Financial Statements contained in Item 8 of this report for a more detailed
description of the Credit Facility.

As of January 2, 2015, we had $300 million of borrowing capacity available under the Credit Facility. This amount may vary
from period to period based upon our debt and EBITDA levels, which impacts the covenant calculations discussed above. We
believe that our cash flow from operations and available borrowing capacity under the Credit Facility provide adequate liquidity
to meet our short- and long-term funding needs.

Operating Activities – Cash flows from operating activities for 2014 of $81.3 million were $24.5 million above 2013. During
2013, the Company made estimated tax payments of $28.8 million in connection with the retirement of our convertible
subordinated notes. Excluding these payments, cash flows from operating activities for 2014 were slightly below 2013 as the
increased level of cash operating income was more than offset by an increase in working capital levels primarily due to the
timing of receivable collections.

Cash flows from operating activities for 2013 were $56.8 million compared to $64.8 million for 2012. Excluding the $28.8
million of tax payments related to our convertible debt, cash flows from operations were $85.5 million for 2013. This increase
in 2013 cash flows from operations over 2012, after adjusting for the 2013 tax payments, is a result of a higher level of cash
operating income partially offset by higher working capital levels in anticipation of higher sales and critical raw material
purchases. During 2013, we reduced our receivable balances by $7.2 million due to the timing of receivable collections.

- 49 -

Investing Activities – Net cash used in investing activities for 2014 of $35.9 million were $17.6 million above 2013. 2014
investing activities include $16.0 million of net cash used for the acquisition of CCC as well as $24.8 million of cash used for
the purchase of property, plant and equipment. These transactions were partially offset by a $2.7 million contingent payment
received in 2014 in connection with the sale of certain non-core Swiss orthopaedic product lines, which closed during the first
quarter of 2013, as well as $2.2 million of net proceeds received from the sale of a cost method investment.

Net cash used in investing activities for 2013 was $18.3 million compared to $59.8 million for 2012 and was net of $4.7 million
of proceeds received from the sale of our non-core Swiss orthopaedic product lines. The decrease in cash used in investing
activities from 2012 primarily relates to a decline in capital expenditures of $22.5 million from 2012 due to the completion of
various consolidation and optimization initiatives discussed in the “Cost Savings and Consolidation Efforts” section of this Item
(primarily the construction of our Fort Wayne facility, which was completed in 2012). Additionally, we made $17.2 million of
cash payments in 2012 related to our acquisitions.

Our current expectation is that capital spending for 2015 will be in the range of $35 million to $45 million, of which
approximately half is discretionary in nature. We anticipate that cash on hand, cash flows from operations and available
borrowing capacity under our Credit Facility will be sufficient to fund these capital expenditures. As part of our growth
strategy, we have and will continue to consider targeted and opportunistic acquisitions.

Financing Activities – Net cash used in financing activities for 2014 of $2.4 million was $21.0 million below 2013. This cash
outflow is the result of $10.0 million of principal payments on long-term debt partially offset by $8.3 million of cash received
from the exercise of stock options during 2014.

Net cash used in financing activities for 2013 was $23.4 million compared to $21.5 million for the prior year period. During
2013, we made $33.3 million of net long-term debt repayments as compared to $22.0 million in 2012 as cash flows from
operations was significantly higher than our cash used in investing activities. These net repayments were partially offset by
$12.8 million of cash received from the exercise of stock options versus $1.3 million in 2012 due to our higher stock price in
2013.

Capital Structure – As of January 2, 2015, our capital structure consisted of $187.5 million of debt outstanding on our Term
Loan and 25.1 million shares of common stock outstanding. Additionally, we had $76.8 million in cash and cash equivalents,
which we believe is sufficient to meet our short-term operating cash needs. If necessary, we currently have access to $300
million under our Revolving Credit Facility and are authorized to issue 100 million shares of common stock and 100 million
shares of preferred stock. We believe that, if needed, we can access public markets to raise additional capital. We believe that
our capital structure provides adequate funding to meet our growth objectives. We continuously evaluate our capital structure,
including our Credit Facility, as it relates to our anticipated long-term funding needs. Changes to our capital structure may
occur as a result of this analysis or changes in market conditions.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements within the meaning of Item 303(a)(4) of Regulation S-K.

Litigation

We are party to various legal actions arising in the normal course of business. A description of pending legal actions against the
Company is set forth in Note 15 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements
contained at Item 8 of this report. We do not believe that the ultimate resolution of any individual pending legal action will have
a material effect on our consolidated results of operations, financial position or cash flows. However, litigation is subject to
inherent uncertainties and there can be no assurance that any pending legal action, which we currently believe to be immaterial,
does not become material in the future.

- 50 -

Contractual Obligations

The following table summarizes our contractual obligations at January 2, 2015:

CONTRACTUAL OBLIGATIONS
Debt obligations(a)
Operating lease obligations(b)
Purchase obligations(b)
Foreign currency contracts(b)
Defined benefit plan obligations(c)
Total contractual obligations

Total

Less than 1
year

1-3 years

3-5 years

More than 5
years

Payments due by period

205,998 $
36,502
36,412
16,880
1,394
297,186 $

15,898 $
5,797
35,117
16,880
47
73,739 $

44,745 $
9,860
1,175
—
191
55,971 $

145,355 $
6,907
100
—
290
152,652 $

—
13,938
20
—
866
14,824

(a) Includes the annual interest expense on the $187.5 million outstanding on our Term Loan based upon the period end

weighted average interest rate of 1.79%, which includes the impact of our interest rate swap agreement. Also includes $5.0
million of deferred federal and state taxes on our convertible subordinated notes that will be due between 2015 and 2018.
See Note 9 “Debt” of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

(b) See Note 15 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements contained in Item 8 of
this report for additional information about our operating leases, purchase obligations and foreign currency contracts.

additional information about our defined benefit plan obligations.

This table does not reflect $2.4 million of unrecognized tax benefits, as we are uncertain if or when such amounts may be
settled. Refer to Note 14 “Income Taxes” of the Notes to Consolidated Financial Statements in Item 8 of this report for
additional information about these unrecognized tax benefits.

We self-fund the medical insurance coverage provided to our U.S. based employees. We limit our risk through the use of stop
loss insurance. As of January 2, 2015, we had $1.8 million accrued related to our self-insurance obligations under our medical
plan. This accrual is recorded in Accrued Expenses in the Consolidated Balance Sheet and is primarily based upon claim
history. For 2015, we have specific stop loss coverage per associate for claims in the year exceeding $250 thousand per
associate with no annual maximum aggregate stop loss coverage. This table does not reflect any potential future payments for
self-insured medical claims.

We were a member of a group self-insurance trust that provided workers’ compensation benefits to our employees in Western
New York (the “Trust”). During 2011, we were notified by the Trust of its intentions to cease operations and were assessed a
pro-rata share of future costs related to the Trust. Based on actual experience, we could receive a refund or be assessed
additional contributions for workers’ compensation claims insured by the Trust, which are not reflected in the table above.
Since 2011, we have utilized a traditional insurance provider for workers’ compensation coverage.

Inflation

We utilize certain critical raw materials (including precious metals) in our products that we obtain from a limited number of
suppliers due to the technically challenging requirements of the supplied product and/or the lengthy process required to qualify
these materials with our customers. We cannot quickly establish additional or replacement suppliers for these materials because
of these requirements. Our results may be negatively impacted by an increase in the price of these critical raw materials. This
risk is partially mitigated as many of the supply agreements with our customers allow us to partially adjust prices for the impact
of any raw material price increases and the supply agreements with our vendors have final one-time buy clauses to meet a long-
term need. Historically, raw material price increases have not materially impacted our results of operations.

Impact of Recently Issued Accounting Standards

In the normal course of business, we evaluate all new accounting pronouncements issued by the Financial Accounting
Standards Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”) or other
authoritative accounting bodies to determine the potential impact they may have on our Consolidated Financial Statements. See
Note 1 “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements contained in Item 8 of
this report for additional information about these recently issued accounting standards and their potential impact on our
financial condition or results of operations.

- 51 -

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency – We have foreign operations in France, Mexico, Switzerland and Uruguay, which expose the Company to
foreign currency exchange rate fluctuations due to transactions denominated in Euros, Mexican pesos, Swiss francs, and
Uruguayan pesos, respectively. We continuously evaluate our foreign currency risk and will take action from time to time in
order to best mitigate these risks, which includes the use of various derivative instruments such as forward currency exchange
rate contracts. A hypothetical 10% change in the value of the U.S. dollar in relation to our most significant foreign currency
exposures would have had an impact of approximately $7 million on our annual sales. This amount is not indicative of the
hypothetical net earnings impact due to partially offsetting impacts on cost of sales and operating expenses in those currencies.
We estimate that foreign currency exchange rate fluctuations during 2014 increased sales in comparison to 2013 by
approximately $1 million.

In 2013, we entered into two forward contracts to purchase 8.4 million and 7.0 million Mexican pesos per month beginning in
January 2014 through December 2014 at an exchange rate of $0.0767 and $0.0752 per peso, respectively. These contracts were
entered into in order to hedge the risk of peso-denominated payments associated with a portion of the operations at our Tijuana,
Mexico facility for 2014 and are being accounted for as cash flow hedges. The amount recorded as a reduction of Cost of Sales
during 2014 related to these forward contracts was $0.2 million. No portion of the change in fair value of our foreign currency
exchange rate contracts during 2014 was considered ineffective.

In 2014, we entered into a forward contract to purchase 19.2 million Mexican pesos per month beginning in January 2015
through December 2015 at an exchange rate of $0.0734 per peso. This contract was entered into in order to hedge the risk of
peso-denominated payments associated with a portion of the operations at our Tijuana, Mexico facility for 2015 and is being
accounted for as a cash flow hedge. As of January 2, 2015, this contract has a negative fair value of $1.6 million.

We translate all assets and liabilities of our foreign operations, where the U.S. dollar is not the functional currency, at the
period-end exchange rate and translate sales and expenses at the average exchange rates in effect during the period. The net
effect of these translation adjustments is recorded in the Consolidated Financial Statements as Comprehensive Income (Loss).
The translation adjustment for 2014 was a $3.5 million loss. Translation adjustments are not adjusted for income taxes as they
relate to permanent investments in our foreign subsidiaries. Net foreign currency transaction gains and losses included in Other
(Income) Expense, Net amounted to a gain of $1.3 million for 2014. A hypothetical 10% change in the value of the U.S. dollar
in relation to our most significant foreign currency net assets would have had an impact of approximately $2 million on our
foreign net assets as of January 2, 2015.

Interest Rates – Interest rates on our Credit Facility reset, at our option, based upon the prime rate or LIBOR rate, thus
subjecting us to interest rate risk. To help offset this risk, from time to time, we enter into receive floating-pay fixed interest rate
swaps indexed to the same applicable index rate as the debt it is hedging.

In 2012, we entered into a three-year $150 million interest rate swap, which amortizes $50 million per year beginning in 2014
and became effective during the first quarter of 2013. Under terms of the contract, we receive a floating interest rate indexed to
the one-month LIBOR rate and pay a fixed interest rate of 0.573%. In 2014, we entered into an additional interest rate swap in
order to hedge against potential changes in cash flows on the outstanding borrowings on our Credit Facility. The first $45
million of notional amount of the swap is effective February 20, 2015 and the second $45 million of notional amount is
effective February 22, 2016. The notional amount of the swap amortizes $10 million per year beginning on February 21, 2017
with the remaining settled on the termination date of the swap agreement on September 20, 2019. Under the terms of the swap
agreement, we will pay a fixed interest rate of 1.921% and receive a floating interest rate equal to the one-month LIBOR rate.

These swaps were entered into in order to hedge against potential changes in cash flows on our outstanding variable-rate debt,
which is also indexed to the one-month LIBOR rate. The receive variable leg of the interest rate swaps and the variable rate
paid on the debt is expected to have the same rate of interest, excluding the credit spread, and reset and pay interest on the same
dates. These swaps are accounted for as cash flow hedges. As of January 2, 2015, these swaps had a negative fair value of $1.0
million.

As of January 2, 2015, we had $187.5 million outstanding under the Term Loan, of which $100 million is currently being
hedged. See Note 9 “Debt” of the Notes to the Consolidated Financial Statements in Item 8 of this report for additional
information about our outstanding debt. A hypothetical one percentage point (100 basis points) change in the LIBOR rate on the
$187.5 million of unhedged floating rate debt outstanding at January 2, 2015 would have an impact of approximately $0.9
million on our interest expense.

- 52 -

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following are set forth below:

Management’s Report on Internal Control Over Financial Reporting

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of January 2, 2015 and January 3, 2014

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended January 2,
2015, January 3, 2014, and December 28, 2012

Consolidated Statements of Cash Flows for the years ended January 2, 2015, January 3, 2014, and December
28, 2012

Consolidated Statements of Stockholders’ Equity for the years ended January 2, 2015, January 3, 2014, and
December 28, 2012

Notes to Consolidated Financial Statements

- 53 -

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company’s certifying officers are responsible for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control over financial reporting is designed and maintained under the supervision of its
certifying officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the
Company’s consolidated financial statements for external reporting purposes in accordance with accounting principles generally
accepted in the United States of America.

As of January 2, 2015, management conducted an assessment of the effectiveness of the Company’s internal control over
financial reporting based on the framework established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined
that the Company’s internal control over financial reporting as of January 2, 2015 is effective.

In conducting the evaluation of the effectiveness of internal control over financial reporting as of January 2, 2015, as permitted
by the guidance issued by the Office of the Chief Accountant of the Securities and Exchange Commission, management
excluded the following subsidiary acquired in 2014:

• Centro de Construcción de Cardioestimuladores del Uruguay

This subsidiary represented approximately 3% and 2% of net and total assets, respectively, 1% of revenues, and 2% of net
income of the consolidated financial statement amounts as of and for the year ended January 2, 2015. See Note 2 –
“Acquisitions” for a discussion of this acquisition and its impact on the Company’s Consolidated Financial Statements.

The effectiveness of internal control over financial reporting as of January 2, 2015 has been audited by Deloitte & Touche LLP,
the Company’s independent registered public accounting firm.

Dated: March 3, 2015

Thomas J. Hook
President & Chief Executive Officer

Michael Dinkins
Executive Vice President & Chief Financial Officer

- 54 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Greatbatch, Inc.
Frisco, Texas

We have audited the internal control over financial reporting of Greatbatch, Inc. and subsidiary (the “Company”) as of January
2, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Control Over
Financial Reporting, management excluded from its assessment the internal control over financial reporting, Centro de
Construcción de Cardioestimuladores del Uruguay (“CCC”), which was acquired on August 12, 2014 and whose financial
statements constitute 3% and 2% of net and total assets, respectively, 1% of revenues, and 2% of net income of the consolidated
financial statement amounts as of and for the year ended January 2, 2015. Accordingly, our audit did not include the internal
control over financial reporting at CCC. The Company’s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s
principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s
board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely
basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
January 2, 2015, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated financial statements and consolidated financial statement schedule as of and for the year ended January 2, 2015 of
the Company and our report dated March 3, 2015 expressed an unqualified opinion on those consolidated financial statements
and consolidated financial statement schedule.

Williamsville, New York
March 3, 2015

- 55 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Greatbatch, Inc.
Frisco, Texas

We have audited the accompanying consolidated balance sheets of Greatbatch, Inc. and subsidiary (the “Company”) as of January 2,
2015 and January 3, 2014, and the related consolidated statements of operations and comprehensive income (loss), cash flows, and
stockholders’ equity for each of the three years in the period ended January 2, 2015. Our audits also included the financial statement
schedule listed in the Index at Item 15. These consolidated financial statements and consolidated financial statement schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements
and consolidated financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of January 2, 2015 and January 3, 2014, and the results of its operations and its cash flows for each of the three years in the period
ended January 2, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our
opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Company’s internal control over financial reporting as of January 2, 2015, based on the criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 3, 2015 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Williamsville, New York
March 3, 2015

- 56 -

GREATBATCH, INC.
CONSOLIDATED BALANCE SHEETS

January 2,
2015

January 3,
2014

(in thousands except share and per share data)
ASSETS
Current assets:

Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $1.4 million in 2014 and

76,824 $

35,465

$2.0 million in 2013

Inventories
Refundable income taxes
Deferred income taxes
Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net
Amortizing intangible assets, net
Indefinite-lived intangible assets
Goodwill
Deferred income taxes
Other assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Current portion of long-term debt
Accounts payable
Income taxes payable
Deferred income taxes
Accrued expenses

Total current liabilities

Long-term debt
Deferred income taxes
Other long-term liabilities

Total liabilities

Commitments and contingencies (Note 15)
Stockholders’ equity:

Preferred stock, $0.001 par value, authorized 100,000,000 shares; no shares issued or

outstanding in 2014 or 2013

Common stock, $0.001 par value, authorized 100,000,000 shares; 25,099,293 shares
issued and 25,070,931 shares outstanding in 2014; 24,459,153 shares issued and
24,422,555 shares outstanding in 2013

Additional paid-in capital
Treasury stock, at cost, 28,362 shares in 2014 and 36,598 shares in 2013
Retained earnings
Accumulated other comprehensive income

Total stockholders’ equity
Total liabilities and stockholders’ equity

124,953
129,242
1,716
6,168
11,780
350,683
144,925
65,337
20,288
354,393
2,626
17,757
956,009 $

11,250 $
46,436
2,003
588
48,384
108,661
176,250
53,195
4,541
342,647

113,679
118,358
2,306
6,008
6,717
282,533
145,773
76,122
20,288
346,656
2,933
16,398
890,703

—
46,508
—
613
44,681
91,802
197,500
52,012
7,334
348,648

—

25
366,073
(1,307)
239,448
9,123
613,362
956,009 $

24
344,915
(1,232)
183,990
14,358
542,055
890,703

The accompanying notes are an integral part of these consolidated financial statements.

- 57 -

GREATBATCH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)

(in thousands except per share data)
Sales
Cost of sales

Gross profit
Operating expenses:

Selling, general and administrative expenses
Research, development and engineering costs, net
Other operating expenses, net
Total operating expenses
Operating income

Interest expense
(Gain) loss on cost and equity method investments, net
Other (income) expense, net

Income before provision for income taxes

Provision for income taxes
Net income (loss)

Earnings (loss) per share:

Basic
Diluted

Weighted average shares outstanding:

Basic
Diluted

Comprehensive Income (Loss)
Net income (loss)
Other comprehensive income (loss):

$
$

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

687,787 $
456,389
231,398

90,602
49,845
15,297
155,744
75,654
4,252
(4,370)
(807)
76,579
21,121
55,458 $

663,945 $
444,632
219,313

88,107
54,077
15,790
157,974
61,339
11,261
694
546
48,838
12,571
36,267 $

2.23 $
2.14 $

1.51 $
1.43 $

24,825
25,975

23,991
25,323

646,177
444,528
201,649

80,992
52,490
42,346
175,828
25,821
18,054
106
931
6,730
11,529
(4,799)

(0.20)
(0.20)

23,584
23,584

55,458 $

36,267 $

(4,799)

Foreign currency translation gain (loss)
Net change in cash flow hedges, net of tax
Defined benefit plan liability adjustment, net of tax

Other comprehensive income (loss)

Comprehensive income (loss)

(3,502)
(1,359)
(374)
(5,235)
50,223 $

1,521
(382)
272
1,411
37,678 $

1,905
428
1,685
4,018
(781)

The accompanying notes are an integral part of these consolidated financial statements.

- 58 -

GREATBATCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:

Depreciation and amortization
Debt related amortization included in interest expense
Stock-based compensation
(Gain) loss on cost and equity method investments, net
Other non-cash (gains) losses, net
Deferred income taxes

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued expenses
Income taxes payable

Net cash provided by operating activities

Cash flows from investing activities:
Proceeds from sale of orthopaedic product lines
Acquisition of property, plant and equipment
Proceeds from sale (purchase) of cost and equity method investments, net
Acquisitions, net of cash acquired
Other investing activities, net

Net cash used in investing activities

Cash flows from financing activities:
Principal payments of long-term debt
Proceeds from issuance of long-term debt
Issuance of common stock
Payment of debt issuance costs
Other financing activities, net

Net cash used in financing activities

Effect of foreign currency exchange rates on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year

Year Ended

January 2,
2015

January 3,
2014

December 28,
2012

55,458 $

36,267 $

(4,799)

37,457
773
13,186
(4,370)
(3,214)
531

(11,731)
(6,726)
(3,281)
(970)
1,214
2,949
81,276

2,655
(24,823)
2,248
(16,002)
—
(35,922)

35,966
6,366
14,101
694
255
(29,856)

7,379
(11,508)
(353)
1,307
(1,176)
(2,687)
56,755

4,746
(18,558)
(3,732)
—
(740)
(18,284)

(10,000)
—
8,278
—
(655)
(2,377)
(1,618)
41,359
35,465
76,824 $

(458,282)
425,000
12,807
(2,802)
(81)
(23,358)
68
15,181
20,284
35,465 $

46,368
12,557
10,904
106
10,788
5,733

(18,834)
(7,481)
1,253
5,757
1,459
1,020
64,831

—
(41,069)
(1,887)
(17,224)
393
(59,787)

(32,000)
10,000
1,263
—
(717)
(21,454)
186
(16,224)
36,508
20,284

The accompanying notes are an integral part of these consolidated financial statements.

- 59 -

GREATBATCH, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Treasury
Stock

Shares Amount

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total
Stockholders’
Equity

(60) $ (1,387) $ 152,522 $

8,929 $

467,283

(in thousands)

At December 30, 2011

Stock-based compensation

Net shares issued under
stock incentive plans
Income tax liability from

stock options, restricted
stock and restricted stock
units

Shares contributed to 401(k)

Plan

Net loss

Total other comprehensive

income, net

At December 28, 2012

Stock-based compensation
Net shares issued (acquired)
under stock incentive
plans

Income tax benefit from

stock options, restricted
stock and restricted stock
units

Shares contributed to 401(k)

Plan

Net income
Total other comprehensive

income, net

At January 3, 2014

Stock-based compensation
Net shares issued (acquired)
under stock incentive
plans

Income tax benefit from

stock options, restricted
stock and restricted stock
units

Shares contributed to 401(k)

Plan

Net income

Common Stock

Shares
23,466 $
—

Amount
23 $
—

Additional
Paid-In
Capital

307,196

9,019

103

—

663

—

911

—

(4,799)

—

(452)

147,723

—

163
—

—
23,732
—

—

1
—

—
24
—

(141)

3,881

—

320,618

9,333

(20)

—

636

—

12,245

(17)

(780)

—

36,267

—

55,458

(1,232)

183,990

—

91
—

—
24,459
—

—

—
—

—
24
—

242

2,477

—

344,915

8,921

—

(37)

—

640

7,754

(86)

(4,290)

—

—
—

—

4,357

—
—

—
25 $

126

—

4,215

—

4,018

12,947

—

1,411

14,358

—

9,019

687

(141)

4,793

(4,799)

4,018

480,860

9,333

11,465

242

2,477

36,267

1,411

542,055

8,921

3,465

4,357

4,341

55,458

Total other comprehensive

loss, net

At January 2, 2015

—
25,099 $

366,073

(28) $ (1,307) $ 239,448 $

9,123 $

613,362

—

(5,235)

The accompanying notes are an integral part of these consolidated financial statements.

- 60 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The consolidated financial statements include the accounts of Greatbatch, Inc. and its
wholly owned subsidiary Greatbatch Ltd. (collectively, the “Company” or “Greatbatch”). All intercompany balances and
transactions have been eliminated in consolidation.

Nature of Operations – The Company has two reportable segments: Greatbatch Medical and QiG Group (“QiG”).
Greatbatch Medical designs and manufactures products where Greatbatch either owns the intellectual property or has
unique manufacturing and assembly expertise. These products include medical devices and components for the cardiac,
neuromodulation, orthopaedics, portable medical, vascular and energy markets among others. The Greatbatch Medical
segment also offers value-added assembly and design engineering services for medical devices that utilize its component
products.

The Company’s customers include large multi-national OEMs and their affiliated subsidiaries.

Fiscal Year End – The Company utilizes a fifty-two, fifty-three week fiscal year ending on the Friday nearest
December 31. Fiscal years 2014, 2013 and 2012 ended on January 2, 2015, January 3, 2014 and December 28, 2012.
Fiscal years 2014 and 2012 each contained fifty-two weeks, while fiscal year 2013 contained fifty-three weeks.

Fair Value Measurements – Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date. Accounting
Standards Codification (“ASC”) establishes a hierarchy for inputs used in measuring fair value that maximizes the use of
observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used
when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed
based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the
Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed
based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the
reliability of inputs as follows:

Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities that the Company has the
ability to access. Level 1 valuations do not entail a significant degree of judgment.

Level 2 – Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for
identical instruments in markets that are not active or by model-based techniques in which all significant inputs are
observable in the market.

Level 3 – Valuation is based on unobservable inputs that are significant to the overall fair value measurement. The degree
of judgment in determining fair value is greatest for Level 3 valuations.

The availability of observable inputs can vary and is affected by a wide variety of factors, including, the type of
asset/liability, whether the asset/liability is established in the marketplace, and other characteristics particular to the
valuation. To the extent that a valuation is based on models or inputs that are less observable or unobservable in the
market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may
fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value
hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is
significant to the fair value measurement in its entirety.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific
measure. Therefore, even when market assumptions are not readily available, assumptions are required to reflect those
that market participants would use in pricing the asset or liability at the measurement date. Note 18 “Fair Value
Measurements” contains additional information on assets and liabilities recorded at fair value in the consolidated financial
statements.

Cash and Cash Equivalents – Cash and cash equivalents consist of cash and highly liquid, short-term investments with
maturities at the time of purchase of three months or less. The carrying amount of cash and cash equivalents approximated
their fair value as of January 2, 2015 and January 3, 2014 based upon the short-term nature of these instruments.

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk
consist principally of accounts receivable. A significant portion of the Company’s sales and/or accounts receivable are to
four customers, all in the medical device industry, and, as such, the Company is directly affected by the condition of those
customers and that industry. However, the credit risk associated with trade receivables is partially mitigated due to the
stability of those customers. The Company performs on-going credit evaluations of its customers. Note 19 “Business
Segment, Geographic and Concentration Risk Information” contains information on sales and accounts receivable for
these customers. The Company maintains cash deposits with major banks, which from time to time may exceed insured
limits. The Company performs on-going credit evaluations of its banks.

Allowance for Doubtful Accounts – The Company provides credit, in the normal course of business, to its customers in
the form of trade receivables. Credit is extended based on evaluation of a customer’s financial condition and collateral is
not required. The Company maintains an allowance for those customer receivables that it does not expect to collect. The
Company accrues its estimated losses from uncollectable accounts receivable to the allowance based upon recent
historical experience, the length of time the receivable has been outstanding and other specific information as it becomes
available. Provisions to the allowance for doubtful accounts are charged to current operating expenses. Actual losses are
charged against this allowance when incurred. The carrying amount of trade receivables approximated their fair value as
of January 2, 2015 based upon the short-term nature of these assets.

Inventories – Inventories are stated at the lower of cost, determined using the first-in first-out method, or market. Write-
downs for excess, obsolete or expired inventory are based primarily on how long the inventory has been held as well as
estimates of forecasted net sales of that product. A significant change in the timing or level of demand for products may
result in recording additional write-downs for excess, obsolete or expired inventory in the future. Note 4 “Inventories”
contains additional information on the Company’s inventory.

Property, Plant and Equipment (“PP&E”) – PP&E is carried at cost less accumulated depreciation. Depreciation is
computed by the straight-line method over the estimated useful lives of the assets, as follows: buildings and building
improvements 7-40 years; machinery and equipment 3-8 years; office equipment 3-10 years; and leasehold improvements
over the remaining lives of the improvements or the lease term, if less. The cost of repairs and maintenance are expensed
as incurred; renewals and betterments are capitalized. Upon retirement or sale of an asset, its cost and related accumulated
depreciation or amortization is removed from the accounts and any gain or loss is recorded in operating income or
expense. Note 6 “Property, Plant and Equipment, Net” contains additional information on the Company’s PP&E.

Business Combinations – The Company records its business combinations under the acquisition method of accounting.
Under the acquisition method of accounting, the Company allocates the purchase price of each acquisition to the tangible
and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of
acquisition. The fair value of identifiable intangible assets is based upon detailed valuations that use various assumptions
made by management. Any excess of the purchase price over the fair value of net tangible and identifiable intangible
assets acquired is allocated to goodwill. All direct acquisition-related costs are expensed as incurred.

In circumstances where an acquisition involves a contingent consideration arrangement, the Company recognizes a
liability equal to the fair value of the contingent payments it expects to make as of the acquisition date. The Company re-
measures this liability each reporting period and records changes in the fair value through Other Operating Expenses, Net.
Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount
periods and rates, as well as changes in the timing, amount of, or the likelihood of achieving the applicable contingent
consideration. See Note 18 “Fair Value Measurements” and Note 2 “Acquisitions” for additional information on the
Company’s contingent consideration and acquisitions, respectively.

Amortizing Intangible Assets – Amortizing intangible assets consists primarily of purchased technology, patents and
customer lists. The Company amortizes its definite-lived intangible assets over their estimated useful lives utilizing an
accelerated or straight-line method of amortization, which approximates the projected cash flows used to fair value those
intangible assets at the time of acquisition. When the straight-line method of amortization is utilized, the estimated useful
life of the intangible asset is shortened to assure that recognition of amortization expense corresponds with the expected
cash flows. The amortization period for the Company’s amortizing intangible assets are as follows: purchased technology
and patents 5-15 years; customer lists 7-20 years and other intangible assets 1-10 years. See Note 7 “Intangible Assets” for
additional information on the Company’s amortizing intangible assets.

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Long-Lived Assets – The Company assesses the impairment of definite-lived long-lived assets or asset
groups when events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that are
considered in deciding when to perform an impairment review include: a significant decrease in the market price of the
asset or asset group; a significant change in the extent or manner in which a long-lived asset or asset group is being used
or in its physical condition; a significant change in legal factors or in the business climate that could affect the value of a
long-lived asset or asset group, including an action or assessment by a regulator; an accumulation of costs significantly in
excess of the amount originally expected for the acquisition or construction; a current-period operating or cash flow loss
combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset or asset group; or a current expectation that, more likely than not, a long-lived
asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful
life. The term more likely than not refers to a level of likelihood that is more than 50 percent.

Potential recoverability is measured by comparing the carrying amount of the asset or asset group to its related total future
undiscounted cash flows. If the carrying value is not recoverable, the asset or asset group is considered to be impaired.
Impairment is measured by comparing the asset or asset group’s carrying amount to its fair value. When it is determined
that useful lives of assets are shorter than originally estimated, and no impairment is present, the rate of depreciation is
accelerated in order to fully depreciate the assets over their new shorter useful lives.

Goodwill and other indefinite lived intangible assets recorded are not amortized but are periodically tested for
impairment. The Company assesses goodwill for impairment on the last day of each fiscal year, or more frequently if
certain events occur as described above. Goodwill is evaluated for impairment through the comparison of the fair value of
the reporting units to their carrying values. When evaluating goodwill for impairment, the Company may first perform an
assessment of qualitative factors to determine if the fair value of the reporting unit is more-likely-than-not greater than its
carrying amount. This qualitative assessment is referred to as a “step zero” approach. If, based on the review of the
qualitative factors, the Company determines it is more-likely-than-not that the fair value of the reporting unit is greater
than its carrying value, the required two-step impairment test can be bypassed. If the Company does not perform a step
zero assessment or if the fair value of the reporting unit is more-likely-than-not less than its carrying value, the Company
must perform a two-step impairment test, and calculate the estimated fair value of the reporting unit. If, based upon the
two-step impairment test, it is determined that the fair value of a reporting unit is less than its carrying value, an
impairment loss is recorded to the extent that the implied fair value of the goodwill within the reporting unit is less than its
carrying value. Under the two-step approach, fair values for reporting units are determined based on discounted cash
flows and market multiples.

The Company completed its annual goodwill impairment assessment for 2014 by performing a step zero qualitative
analysis. As part of this analysis, the Company evaluated factors including, but not limited to, macro-economic
conditions, market and industry conditions, cost factors, competitive environment, share price fluctuations, results of the
last impairment test, and the operational stability and the overall financial performance of the reporting units. After
completing the analysis, the Company determined that it was more likely than not that its reporting units fair values are
greater than the reporting units carrying values and the two-step impairment test is not necessary.

Other indefinite lived intangible assets are assessed for impairment on the last day of each fiscal year, or more frequently
if certain events occur as described above, by comparing the fair value of the intangible asset to its carrying value. The
fair value is determined by using the income approach. Note 7 “Intangible Assets” contains additional information on the
Company’s long-lived intangible assets.

Other Long-Term Assets – Other long-term assets includes deferred financing fees incurred in connection with the
Company’s issuance of its long-term debt. The fees relating to the Company’s Term Loan are amortized to Interest
Expense using the effective interest method over the period from the date of issuance to the put option date (if applicable)
or the maturity date, whichever is earlier. Fees relating to the Company’s Revolving Credit Facility are amortized to
Interest Expense on a straight-line basis over the contractual term of the credit facility. The amortization of deferred fees
is included in Debt Related Amortization Included in Interest Expense in the Consolidated Statements of Cash Flows.
Note 9 “Debt” contains additional information on the Company’s deferred financing fees.

Other long-term assets also include investments in equity securities of entities that are not publicly traded and which do
not have readily determinable fair values. The Company accounts for investments in these entities under the cost or equity
method depending on the type of ownership interest, as well as the Company’s ability to exercise influence over these
entities. Equity method investments are initially recorded at cost, and are subsequently adjusted to reflect the Company’s
share of earnings or losses of the investee. Cost method investments are recorded at cost. Each reporting period,
management evaluates these cost and equity method investments to determine if there are any events or circumstances
that are likely to have a significant effect on the fair value of the investment. Examples of such impairment indicators

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

include, but are not limited to: a recent sale or offering of similar shares of the investment at a price below the Company’s
cost basis; a significant deterioration in earnings performance; a significant change in the regulatory, economic or
technological environment of the investee; or a significant doubt about an investee’s ability to continue as a going
concern. If an impairment indicator is identified, management will estimate the fair value of the investment and compare
it to its carrying value. The estimation of fair value considers all available financial information related to the investee,
including, but not limited to, valuations based on recent third-party equity investments in the investee. If the fair value of
the investment is less than its carrying value, the investment is impaired and a determination as to whether the impairment
is other-than-temporary is made. Impairment is deemed to be other-than-temporary unless the Company has the ability
and intent to hold the investment for a period sufficient for a market recovery up to the carrying value of the investment.
Further, evidence must indicate that the carrying value of the investment is recoverable within a reasonable period. For
other-than-temporary impairments, an impairment loss is recognized equal to the difference between the investment’s
carrying value and its fair value. The Company has determined that these investments are not considered variable interest
entities. The Company’s exposure related to these entities is limited to its recorded investment. These investments are in
start-up research and development companies whose fair value is highly subjective in nature and subject to future
fluctuations, which could be significant.

Income Taxes – The consolidated financial statements of the Company have been prepared using the asset and liability
approach in accounting for income taxes, which requires the recognition of deferred income taxes for the expected future
tax consequences of net operating losses, credits, and temporary differences between the financial statement carrying
amounts and the tax bases of assets and liabilities. A valuation allowance is provided on deferred tax assets if it is
determined that it is more likely than not that the asset will not be realized.

The Company accounts for uncertain tax positions using a more likely than not recognition threshold. The evaluation of
uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax
positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit
activity and changes in facts or circumstances related to a tax position. These tax positions are evaluated on a quarterly
basis. The Company recognizes interest expense related to uncertain tax positions as Provision for Income Taxes.
Penalties, if incurred, are recognized as a component of Selling, General and Administrative Expenses (“SG&A”).

The Company and its subsidiary file a consolidated U.S. federal income tax return. State tax returns are filed on a
combined or separate basis depending on the applicable laws in the jurisdictions where tax returns are filed. The Company
also files foreign tax returns on a separate company basis in the countries in which it operates. See Note 14 “Income
Taxes” for additional information.

Convertible Subordinated Notes (“CSN”) – For convertible debt instruments that may be settled in cash upon conversion,
the Company accounts for the liability and equity components of those instruments in a manner that will reflect the
entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods.

Upon issuance, the Company determined the carrying amount of the liability component of CSN by measuring the fair
value of a similar liability that does not have the associated conversion option. The carrying amount of the conversion
option was then determined by deducting the fair value of the liability component from the initial proceeds received from
the issuance of CSN. The carrying amount of the conversion option was recorded in Additional Paid-In Capital with an
offset to Long-Term Debt and was amortized using the effective interest method over the period from the date of issuance
to the maturity date. The amortization of discount related to the Company’s convertible debt instruments is included in
Debt Related Amortization Included in Interest Expense in the Consolidated Statements of Cash Flows. See Note 9
“Debt” for additional information.

Derivative Financial Instruments – The Company recognizes all derivative financial instruments in its consolidated
financial statements at fair value. Changes in the fair value of derivative instruments are recorded in earnings unless hedge
accounting criteria are met. The Company designates its interest rate swaps (See Note 9 “Debt”) and foreign currency
contracts (See Note 15 “Commitments and Contingencies”) entered into as cash flow hedges. The effective portion of the
changes in fair value of these cash flow hedges is recorded each period, net of tax, in Accumulated Other Comprehensive
Income until the related hedged transaction occurs. Any ineffective portion of the changes in fair value of these cash flow
hedges is recorded in earnings. In the event the hedged cash flow for forecasted transactions does not occur, or it becomes
probable that they will not occur, the Company would reclassify the amount of any gain or loss on the related cash flow
hedge to income (expense) at that time. Cash flows related to these derivative financial instruments are included in cash
flows from operating activities.

Revenue Recognition – The Company recognizes revenue when it is realized or realizable and earned. This occurs when
persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable (including any
price concessions under long-term agreements), the buyer is obligated to pay us (i.e., not contingent on a future event), the

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

risk of loss is transferred, there is no obligation of future performance, collectability is reasonably assured and the amount
of future returns can reasonably be estimated. With regards to the Company’s customers (including distributors), those
criteria are met at the time of shipment when title passes. Currently, the revenue recognition policy is the same for both
Greatbatch Medical and QiG. In general, for customers with long-term contracts, we have negotiated fixed pricing
arrangements. During new contract negotiations, price level decreases (concessions) for future sales may be offered to
customers in exchange for volume and/or long-term commitments. Once the new contracts are signed, these prices are
fixed and determinable for all future sales. The Company includes shipping and handling fees billed to customers in Sales.
Shipping and handling costs associated with inbound and outbound freight are recorded in Cost of Sales. In certain
instances the Company obtains component parts for sub-assemblies from its customers that are included in the final
product sold back to the same customer. These amounts are excluded from Sales and Cost of Sales recognized by the
Company. The cost of these customer supplied component parts amounted to $48.1 million, $45.3 million and $32.6
million in 2014, 2013 and 2012, respectively.

Product Warranties – The Company allows customers to return defective or damaged products for credit, replacement, or
exchange. The Company warrants that its products will meet customer specifications and will be free from defects in
materials and workmanship. The Company accrues its estimated exposure to warranty claims, through Cost of Sales,
based upon recent historical experience and other specific information as it becomes available. Note 15 “Commitments
and Contingencies” contains additional information on the Company’s product warranties.

Research, Development and Engineering Costs, Net (“RD&E”) – RD&E costs are expensed as incurred. The primary
costs are salary and benefits for personnel, material costs used in development projects and subcontracting costs. Cost
reimbursements for engineering services from customers for whom the Company designs products are recorded as an
offset to engineering costs upon achieving development milestones specified in the contracts. These reimbursements do
not cover the complete cost of the development projects. Additionally, the technology developed under these cost
reimbursement projects is owned by the Company and is utilized for future products developed for other customers.

In-process research and development (“IPR&D”) represents research projects acquired in a business combination which
are expected to generate cash flows but have not yet reached technological feasibility. The primary basis for determining
the technological feasibility of these projects is whether or not regulatory approval has been obtained. The Company
classifies IPR&D acquired in a business combination as an indefinite-lived intangible asset until the completion or
abandonment of the associated projects. Upon completion, the Company would determine the useful life of the IPR&D
and begin amortizing the assets to reflect their use over their remaining lives. Upon permanent abandonment, the
remaining carrying amount of the associated IPR&D would be written-off. The Company tests the IPR&D acquired for
impairment at least annually, and more frequently if events or changes in circumstances indicate that the assets may be
impaired. The impairment test consists of a comparison of the fair value of the intangible assets with their carrying
amount. If the carrying amount exceeds its fair value, the Company would record an impairment loss in an amount equal
to the excess.

Note 12 “Research, Development and Engineering Costs, Net” contains additional information on the Company’s RD&E
activities.

Stock-Based Compensation – The Company records compensation costs related to stock-based awards granted to
employees based upon their estimated fair value on the grant date. Compensation cost for service-based awards is
recognized ratably over the applicable vesting period. Compensation cost for nonmarket-based performance awards is
reassessed each period and recognized based upon the probability that the performance targets will be achieved.
Compensation cost for market-based performance awards is expensed ratably over the applicable vesting period and is
recognized each period whether the performance metrics are achieved or not.

The Company utilizes the Black-Scholes option pricing model to estimate the fair value of stock options granted. For
service-based and nonmarket-based performance restricted stock and restricted stock unit awards, the fair market value of
the award is determined based upon the closing value of the Company’s stock price on the grant date. For market-based
performance restricted stock unit awards, the fair market value of the award is determined utilizing a Monte Carlo
simulation model, which projects the value of the Company’s stock under numerous scenarios and determines the value of
the award based upon the present value of those projected outcomes.

The amount of stock-based compensation expense recognized is based on the portion of the awards that are ultimately
expected to vest. The Company estimates pre-vesting forfeitures at the time of grant by analyzing historical data and
revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The total expense
recognized over the vesting period will only be for those awards that ultimately vest, excluding market and nonmarket
performance award considerations. Note 11 “Stock-Based Compensation” contains additional information on the
Company’s stock-based compensation.

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency Translation – The Company translates all assets and liabilities of its foreign subsidiaries, where the
U.S. dollar is not the functional currency, at the period-end exchange rate and translates income and expenses at the
average exchange rates in effect during the period. The net effect of this translation is recorded in the consolidated
financial statements as Accumulated Other Comprehensive Income. Translation adjustments are not adjusted for income
taxes as they relate to permanent investments in the Company’s foreign subsidiaries.

Net foreign currency transaction gains and losses are included in Other (Income) Expense, Net and amounted to a gain of
$1.3 million for 2014, a loss of $0.1 million for 2013 and a loss of $0.3 million for 2012.

Defined Benefit Plans – The Company recognizes in its balance sheet as an asset or liability the overfunded or
underfunded status of its defined benefit plans provided to its employees located in Mexico, Switzerland and France. This
asset or liability is measured as the difference between the fair value of plan assets and the benefit obligation of those
plans. For these plans, the benefit obligation is the projected benefit obligation, which is calculated based on actuarial
computations of current and future benefits for employees. Actuarial gains or losses and prior service costs or credits that
arise during the period, but are not included as components of net periodic benefit expense, are recognized as a
component of Accumulated Other Comprehensive Income. Defined benefit expenses are charged to Cost of Sales, SG&A
and RD&E expenses as applicable. Note 10 “Benefit Plans” contains additional information on these costs.

Earnings (Loss) Per Share (“EPS”) – Basic EPS is calculated by dividing Net Income (Loss) by the weighted average
number of shares outstanding during the period. Diluted EPS is calculated by adjusting the weighted average number of
shares outstanding for potential common shares, which consist of stock options, unvested restricted stock and restricted
stock units and, if applicable, contingently convertible instruments such as convertible debt. Note 16 “Earnings (Loss) Per
Share” contains additional information on the computation of the Company’s EPS.

Comprehensive Income (Loss) – The Company’s comprehensive income (loss) as reported in the Consolidated
Statements of Operations and Comprehensive Income (Loss) includes net income (loss), foreign currency translation
adjustments, the net change in cash flow hedges, and defined benefit plan liability adjustments. The Consolidated
Statements of Operations and Comprehensive Income (Loss) and Note 17 “Accumulated Other Comprehensive Income”
contains additional information on the computation of the Company’s comprehensive income (loss).

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported
amounts of sales and expenses during the reporting period. Actual results could differ materially from those estimates.

Recently Issued Accounting Pronouncements – In the normal course of business, management evaluates all new
accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), Securities and Exchange
Commission (“SEC”), Emerging Issues Task Force (“EITF”), or other authoritative accounting bodies to determine the
potential impact they may have on the Company’s Consolidated Financial Statements. Based upon this review, except as
noted below, management does not expect any of the recently issued accounting pronouncements, which have not already
been adopted, to have a material impact on the Company’s Consolidated Financial Statements.

In November 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-17, “Business Combinations
(Topic 805): Pushdown Accounting (a Consensus of the FASB Emerging Issues Task Force).” The amendments in this
ASU provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon
occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option
to apply pushdown accounting in the reporting period in which the change-in-control event occurs. The amendments in
this ASU are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply
the guidance to future change-in-control events or to its most recent change-in-control event. This ASU did not impact the
Company’s Consolidated Financial Statements.

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The core principle behind
ASU 2014-09 is that an entity should recognize revenue in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for delivering goods and services. This model involves a five-step process that includes
identifying the contract with the customer, identifying the performance obligations in the contract, determining the
transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue
when the entity satisfies the performance obligations. This ASU supersedes existing revenue recognition guidance and is
effective for annual reporting periods beginning after December 15, 2016 with early application not permitted. This ASU
allows two methods of adoption; a full retrospective approach where three years of financial information are presented in
accordance with the new standard, and a modified retrospective approach where this ASU is applied to the most current
period presented in the financial statements. The Company is currently assessing the financial impact of adopting the new
standard and the methods of adoption; however, given the scope of the new standard, the Company is currently unable to
provide a reasonable estimate regarding the financial impact or which method of adoption will be elected.

In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity,” which amends the definition of a discontinued operation and requires entities to provide
additional disclosures about disposal transactions that do not meet the discontinued operations criteria. The revised
guidance changes how entities identify and disclose information about disposal transactions under U.S. GAAP. This ASU
is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or
components initially classified as held for sale in periods beginning on or after December 15, 2014, with early adoption
permitted. This ASU will be applicable for disposal transactions, if any, that the Company enters into after the adoption
date.

In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax
Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” This ASU
requires that entities present an unrecognized tax benefit, or portion of an unrecognized tax benefit, as a reduction to a
deferred tax asset in the financial statements for a net operating loss carryforward, a similar tax loss, or a tax credit
carryforward, with certain exceptions. This ASU was adopted during the first quarter of 2014 and did not impact the
Company’s Consolidated Financial Statements as the Company does not have any net operating loss carryforward
deferred tax assets that are eligible to be reduced by an unrecognized tax benefit as required by the ASU.

2. ACQUISITIONS

Centro de Construcción de Cardioestimuladores del Uruguay

On August 12, 2014 the Company purchased all of the outstanding common stock of Centro de Construcción de
Cardioestimuladores del Uruguay (“CCC”), headquartered in Montevideo, Uruguay. CCC is an active implantable
neuromodulation medical device systems developer and manufacturer that produces a range of medical devices including
implantable pulse generators, programmer systems, battery chargers, patient wands and leads. This acquisition allows the
Company to more broadly partner with medical device companies, complements the Company’s core discrete technology
offerings and enhances the Company’s medical device innovation efforts.

This transaction was accounted for under the acquisition method of accounting. Accordingly, the operating results of CCC
have been included in the Company’s QiG segment from the date of acquisition. For 2014, CCC added approximately
$5.8 million to the Company’s revenue and increased the Company’s net income by $1.2 million. The aggregate purchase
price of $19.8 million was funded with cash on hand.

The cost of the acquisition was preliminarily allocated to the assets acquired and liabilities assumed from CCC based on
their fair values as of the closing date of the acquisition, with the amount exceeding the fair value of the net assets
acquired being recorded as goodwill. The value assigned to certain assets and liabilities are preliminary and are subject to
adjustment as additional information is obtained, including, but not limited to, the finalization of pre-acquisition tax
positions. The valuation is expected to be finalized in 2015. When the valuation is finalized, any changes to the
preliminary valuation of assets acquired or liabilities assumed may result in material adjustments to the fair value of the
intangible assets acquired, as well as goodwill.

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the preliminary allocation of the CCC purchase price to the assets acquired and liabilities
assumed as of the acquisition date (in thousands):

Assets acquired

Current assets
Property, plant and equipment
Amortizing intangible assets
Goodwill
Total assets acquired
Liabilities assumed

Current liabilities
Deferred income taxes

Total liabilities assumed
Net assets acquired

10,670
1,131
6,100
8,296
26,197

4,842
1,590
6,432
19,765

The preliminary fair values of the assets acquired were determined using one of three valuation approaches: market,
income or cost. The selection of a particular method for a given asset depended on the reliability of available data and the
nature of the asset, among other considerations.

The market approach estimates the value for a subject asset based on available market pricing for comparable assets. The
income approach estimates the value for a subject asset based on the present value of cash flows projected to be generated
by the asset. The projected cash flows were discounted at a required rate of return that reflects the relative risk of the asset
and the time value of money. The projected cash flows for each asset considered multiple factors from the perspective of a
marketplace participant including revenue projections from existing customers, attrition trends, technology life-cycle
assumptions, marginal tax rates and expected profit margins giving consideration to historical and expected margins. The
cost approach estimates the value for a subject asset based on the cost to replace the asset and reflects the estimated
reproduction or replacement cost for the asset, less an allowance for loss in value due to depreciation or obsolescence,
with specific consideration given to economic obsolescence if indicated. These fair value measurement approaches are
based on significant unobservable inputs, including management estimates and assumptions.

Current assets and liabilities – The fair value of current assets and liabilities, excluding inventory, was assumed to
approximate their carrying value as of the acquisition date due to the short-term nature of these assets and liabilities.

The fair value of in-process and finished goods inventory acquired was estimated by applying a version of the market
approach called the comparable sales method. This approach estimates the fair value of the assets by calculating the
potential revenue generated from selling the inventory and subtracting from it the costs related to the completion and sale
of that inventory and a reasonable profit allowance. Based upon this methodology, the Company recorded the inventory
acquired at fair value resulting in an increase in inventory of $0.3 million.

Intangible assets – The purchase price was allocated to intangible assets as follows (dollars in thousands):

Amortizing Intangible Assets

Technology
Customer lists
Trademarks and tradenames

Fair
Value
Assigned

1,400
4,600
100
6,100

Weighted
Average
Amortization
Period
(Years)

Weighted
Average
Discount
Rate

10
10
2
10

18%
18%
18%
18%

- 68 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Technology – Technology consists of technical processes, unpatented technology, manufacturing know-how, trade secrets
and the understanding with respect to products or processes that have been developed by CCC and that will be leveraged
in current and future products. The fair value of technology acquired was determined utilizing the relief from royalty
method, a form of the income approach, with a royalty rate of 3%. The weighted average amortization period of the
technology is based upon management’s estimate of the product life cycle associated with technology before they will be
replaced by new technologies.

Customer lists – Customer lists represent the estimated fair value of non-contractual customer relationships CCC has as of
the acquisition date. The primary customers of CCC include medical device companies in various geographic locations
around the world. These relationships were valued separately from goodwill at the amount that an independent third party
would be willing to pay for these relationships. The fair value of customer lists was determined using the multi-period
excess-earnings method, a form of the income approach. The weighted average amortization period of the existing
customer base was based upon the historical customer annual attrition rate of 15%, as well as management’s
understanding of the industry and product life cycles.

Trademarks and tradenames – Trademarks and tradenames represent the estimated fair value of corporate and product
names acquired from CCC. These tradenames were valued separately from goodwill at the amount that an independent
third party would be willing to pay for use of these names. The fair value of the trademarks and tradenames was
determined by utilizing the relief from royalty method, a form of the income approach, with a 0.5% royalty rate.

Goodwill – The excess of the purchase price over the fair value of net tangible and intangible assets acquired and
liabilities assumed was allocated to goodwill. Various factors contributed to the establishment of goodwill, including: the
value of CCC’s highly trained assembled work force and management team; the incremental value that CCC’s technology
will bring to QiG’s medical devices; and the expected revenue growth over time that is attributable to increased market
penetration from future products and customers. The goodwill acquired in connection with the CCC acquisition was
allocated to the QiG business segment and is not deductible for tax purposes.

NeuroNexus Technologies, Inc.

On February 16, 2012, the Company purchased all of the outstanding common stock of NeuroNexus Technologies, Inc.
(“NeuroNexus”) headquartered in Ann Arbor, MI. NeuroNexus is an active implantable medical device design firm
specializing in developing and commercializing neural interface technology, components and systems for neuroscience
and clinical markets. NeuroNexus has an extensive intellectual property portfolio, core technologies and capabilities to
support the development and manufacturing of neural interface devices across a wide range of applications including
neuromodulation, sensing, optical stimulation and targeted drug delivery.

This transaction was accounted for under the acquisition method of accounting. Accordingly, the operating results of
NeuroNexus have been included in the Company’s QiG segment from the date of acquisition. For 2012, NeuroNexus
added approximately $2.5 million to the Company’s revenue and decreased the Company’s net loss by $0.2 million. The
purchase price of NeuroNexus consisted of cash payments of $11.7 million and potential future payments of up to an
additional $2 million. These future payments were contingent upon the achievement of certain financial and development-
based milestones and had an estimated fair value of $1.5 million as of the acquisition date.

The cost of the acquisition was allocated to the assets acquired and liabilities assumed from NeuroNexus based on their
fair values as of the close of the acquisition, with the amount exceeding the fair value of the net assets acquired being
recorded as goodwill. The valuation of the assets acquired and liabilities assumed from NeuroNexus was finalized during
2013 and did not result in a material adjustment to the original valuation of net assets acquired, including goodwill and
therefore was not reflected as a retrospective adjustment of the historical financial statements.

- 69 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the allocation of the NeuroNexus purchase price to the assets acquired and liabilities
assumed as of the acquisition date (in thousands):

Assets acquired

Current assets
Property, plant and equipment
Amortizing intangible assets
Indefinite-lived intangible assets
Goodwill
Other assets
Total assets acquired
Liabilities assumed

Current liabilities
Deferred income taxes

Total liabilities assumed
Net assets acquired

618
35
2,927
540
8,924
1,576
14,620

420
989
1,409
13,211

The fair values of the assets acquired were determined using one of three valuation approaches: market, income and cost.
The selection of a particular method for a given asset depended on the reliability of available data and the nature of the
asset, among other considerations.

Current assets and liabilities – The fair value of current assets and liabilities was assumed to approximate their carrying
value as of the acquisition date due to the short-term nature of these assets and liabilities.

Intangible assets – The purchase price was allocated to identifiable intangible assets as follows (dollars in thousands):

Amortizing Intangible Assets
Technology and patents
Customer lists

Indefinite-lived Intangible Assets
In-process research and development

Fair
Value
Assigned

Weighted
Average
Amortization
Period (Years)

Estimated
Useful
Life (Years)

Weighted
Average
Discount
Rate

1,058
1,869
2,927

540

6
7
7

N/A

10
15
13

14%
13%
13%

26%

The weighted average amortization period is less than the estimated useful life due to the Company using an accelerated
amortization method, which approximates the projected cash flows used to determine the fair value of those intangible
assets.

Technology and patents – Technology and patents consists of technical processes, patented and unpatented technology,
manufacturing know-how, trade secrets and the understanding with respect to products or processes that have been
developed by NeuroNexus and that will be leveraged in current and future products. The fair value of technology and
patents acquired was determined utilizing the relief from royalty method, a form of the income approach, with royalty
rates that ranged from 2% to 6%. The estimated useful life of the technology and patents is based upon management’s
estimate of the product life cycle associated with technology and patents before they will be replaced by new
technologies.

Customer lists – Customer lists represent the estimated fair value of non-contractual customer relationships NeuroNexus
has as of the acquisition date. The primary customers of NeuroNexus include numerous scientists and researchers from
various geographic locations around the world. These relationships were valued separately from goodwill at the amount
which an independent third party would be willing to pay for these relationships. The fair value of customer lists was
determined using the multi-period excess-earnings method, a form of the income approach. The estimated useful life of
the existing customer list was based upon historical customer attrition as well as management’s understanding of the
industry and product life cycles.

- 70 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

IPR&D – IPR&D represents research projects which are expected to generate cash flows but have not yet reached
technological feasibility. The Company used the income approach to determine the fair value of the IPR&D acquired. In
arriving at the value of the IPR&D, management considered, among other factors: the projects’ stage of completion; the
complexity of the work to be completed as of the acquisition date; the projected costs to complete the projects; the
contribution of other acquired assets; and the estimated useful life of the technology. The Company applied a market-
participant risk-adjusted discount rate to arrive at a present value as of the date of acquisition. The value assigned to
IPR&D related to the development of micro-electrodes for deep brain mapping and electrocorticography. For purposes of
valuing the IPR&D, the Company estimated total costs to complete the projects to be approximately $1.5 million.

Goodwill – The excess of the purchase price over the fair value of net tangible and intangible assets acquired and
liabilities assumed was allocated to goodwill. Various factors contributed to the establishment of goodwill, including: the
value of NeuroNexus’s highly trained assembled work force and management team; the incremental value that
NeuroNexus’s technology will bring to the Company’s neuromodulation platform currently in development; and the
expected revenue growth over time that is attributable to increased market penetration from future products and
customers. The goodwill acquired in connection with the NeuroNexus acquisition was allocated to the QiG business
segment and is not deductible for tax purposes.

Pro Forma Results (Unaudited) – The following unaudited pro forma information presents the consolidated results of
operations of the Company, CCC, and NeuroNexus as if those acquisitions occurred as of the beginning of fiscal years
2013 (CCC) and 2011 (NeuroNexus) (in thousands, except per share amounts):

Sales
Net income (loss)
Earnings (loss) per share:

Basic
Diluted

Year Ended

January 3,
2014
677,657 $
37,612

December 28,
2012
646,617
(4,973 )

1.57 $
1.49 $

(0.21)
(0.21)

January 2,
2015
696,357
56,453

2.27
2.17

$
$

The unaudited pro forma information presents the combined operating results of Greatbatch, CCC, and NeuroNexus, with
the results prior to the acquisition date adjusted to include the pro forma impact of the amortization of acquired intangible
assets, the adjustment to interest expense reflecting the amount borrowed in connection with the acquisitions at
Greatbatch’s interest rate, and the impact of income taxes on the pro forma adjustments utilizing the applicable statutory
tax rate. The unaudited pro forma consolidated basic and diluted earnings (loss) per share calculations are based on the
consolidated basic and diluted weighted average shares of Greatbatch. The unaudited pro forma results are presented for
illustrative purposes only and do not reflect the realization of potential cost savings, and any related integration costs.
Certain costs savings may result from the acquisition; however, there can be no assurance that these cost savings will be
achieved. These pro forma results do not purport to be indicative of the results that would have been obtained, or to be a
projection of results that may be obtained in the future.

- 71 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SUPPLEMENTAL CASH FLOW INFORMATION

(in thousands)
Noncash investing and financing activities:

Common stock contributed to 401(k) Plan
Property, plant and equipment purchases included in
accounts payable

Cash paid during the year for:

Interest
Income taxes

Acquisition of noncash assets
Liabilities assumed

4. INVENTORIES

Inventories are comprised of the following (in thousands):

Raw materials
Work-in-process
Finished goods

Total

5. ASSETS HELD FOR SALE

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

4,341 $

2,477 $

2,926

2,103

3,521
13,565
22,434
6,432

4,989
44,165
—
—

4,793

2,522

6,230
4,909
14,396
1,244

January 2,
2015

January 3,
2014

73,354 $
38,930
16,958
129,242 $

67,939
36,670
13,749
118,358

Assets held for sale included in Prepaid Expenses and Other Current Assets, is comprised of the following (in thousands):

Asset

Business
Segment

Building and building improvements

Greatbatch Medical

January 2,
2015

January 3,
2014

1,635 $

—

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 that was recorded in Other Operating Expenses, Net. See
Note 13 “Other Operating Expenses, Net,” for additional information regarding this transaction and Note 18 “Fair Value
Measurements,” for information regarding the fair value of the assets.

- 72 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment are comprised of the following (in thousands):

Manufacturing machinery and equipment
Buildings and building improvements
Information technology hardware and software
Leasehold improvements
Furniture and fixtures
Land and land improvements
Construction work in process
Other

Accumulated depreciation

Total

January 2,
2015

January 3,
2014

167,173 $
89,258
31,725
31,170
14,045
10,816
14,129
629
358,945
(214,020)
144,925 $

159,542
87,359
28,010
31,522
13,889
13,016
7,886
633
341,857
(196,084)
145,773

Depreciation expense for property, plant and equipment was as follows (in thousands):

Depreciation expense

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

23,320 $

22,799 $

31,575

Construction work in process at January 2, 2015 primarily relates to the Company’s 2014 investment in capacity and
capabilities initiative. See Note 13 “Other Operating Expenses, Net” for a description of the Company’s significant capital
investment projects. Construction work in process at January 3, 2014 primarily relates to routine purchases of machinery,
equipment, and information technology assets to support normal recurring operations.

- 73 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. INTANGIBLE ASSETS

Amortizing intangible assets, net are comprised of the following (in thousands):

At January 2, 2015
Purchased technology and patents
Customer lists
Other

Total amortizing intangible assets

At January 3, 2014
Purchased technology and patents
Customer lists
Other

Total amortizing intangible assets

Gross
Carrying
Amount

Accumulated
Amortization

Foreign
Currency
Translation

Net
Carrying
Amount

95,776 $
72,857
4,534
173,167 $

97,376 $
68,257
4,434
170,067 $

(75,894) $
(31,460)
(4,619)
(111,973) $

(69,026) $
(24,671)
(4,399)
(98,096) $

1,966 $
1,374
803
4,143 $

1,980 $
1,367
804
4,151 $

21,848
42,771
718
65,337

30,330
44,953
839
76,122

Aggregate intangible asset amortization expense is comprised of the following (in thousands):

Cost of sales
SG&A
RD&E

Total intangible asset amortization expense

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

6,201 $
7,009
667
13,877 $

6,822 $
5,800
545
13,167 $

7,489
6,227
545
14,261

Estimated future intangible asset amortization expense based upon the current carrying value is as follows (in thousands):

2015
2016
2017
2018
2019
Thereafter

Total estimated amortization expense

Estimated
Amortization
Expense

12,988
10,676
9,520
7,232
5,431
19,490
65,337

As of January 3, 2014, the Company had recorded in Other Long-Term Liabilities $4.0 million of contingent liabilities
incurred in connection with technology purchases made in previous years. During 2014, the Company reversed $3.0
million of these contingent liabilities as a result of certain performance targets not being achieved, which reduced the
technology asset recorded at the time of the asset purchase.

- 74 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The change in indefinite-lived assets during 2014 is as follows (in thousands)

At January 3, 2014
At January 2, 2015

The change in goodwill during 2014 is as follows (in thousands):

Trademarks
and
Tradenames

$
$

20,288
20,288

At January 3, 2014
Goodwill acquired (Note 2)
Foreign currency translation
At January 2, 2015

Greatbatch
Medical

304,856 $
—
(559)
304,297 $

QiG

Total

41,800 $
8,296
—
50,096 $

346,656
8,296
(559)
354,393

As of January 2, 2015, no accumulated impairment loss has been recognized for the goodwill allocated to the Company’s
Greatbatch Medical or QiG segments.

8. ACCRUED EXPENSES

Accrued expenses are comprised of the following (in thousands):

Salaries and benefits
Profit sharing and bonuses
Warranty
Other

Total

9. DEBT

Long-term debt is comprised of the following (in thousands):

Variable rate term loan
Revolving line of credit

Total debt

Less current portion of long-term debt

Total long-term debt

January 2,
2015

January 3,
2014

20,770 $
18,524
660
8,430
48,384 $

16,311
19,808
1,819
6,743
44,681

January 2,
2015
187,500 $

—
187,500
11,250
176,250 $

January 3,
2014
197,500
—
197,500
—
197,500

Credit Facility – In September 2013, the Company amended and extended its credit facility (the “Credit Facility”). The
Credit Facility provides a $300 million revolving credit facility (the “Revolving Credit Facility”), a $200 million term
loan (the “Term Loan”), a $15 million letter of credit subfacility, and a $15 million swingline subfacility. The Revolving
Credit Facility can be increased by $200 million upon the Company’s request and approval by the lenders. The Revolving
Credit Facility has a maturity date of September 20, 2018, which may be extended to September 20, 2019 upon notice by
the Company and subject to certain conditions. The principal of the Term Loan is payable in quarterly installments as
specified in the Credit Facility until its maturity date of September 20, 2019 when the unpaid balance is due in full.

The Credit Facility is secured by the Company’s non-realty assets including cash, accounts receivable and inventories.
Interest rates on the Revolving Credit Facility and Term Loan are, at the Company’s option either at: (i) the prime rate
plus the applicable margin, which ranges between 0.0% and 0.75%, based on the Company’s total leverage ratio or (ii) the
applicable LIBOR rate plus the applicable margin, which ranges between 1.375% and 2.75%, based on the Company’s
total leverage ratio. Loans under the swingline subfacility will bear interest at the prime rate plus the applicable margin,

- 75 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

which ranges between 0.0% and 0.75%, based on the Company’s total leverage ratio. The Company is also required to
pay a commitment fee, which varies between 0.175% and 0.25% depending on the Company’s total leverage ratio.

The Credit Facility contains limitations on the incurrence of indebtedness, liens and licensing of intellectual property,
investments and certain payments. The Credit Facility permits the Company to engage in the following activities up to an
aggregate amount of $300 million: 1) permitted acquisitions in the aggregate not to exceed $250 million; 2) other
investments in the aggregate not to exceed $100 million; 3) stock repurchases and dividends not to exceed $150 million in
the aggregate; and 4) investments in foreign subsidiaries not to exceed $20 million in the aggregate. At any time that the
total leverage ratio of the Company for the two most recently ended fiscal quarters is less than 2.75 to 1.0, the Company
may make an election to reset each of the amounts specified above. Additionally, these limitations can be waived upon the
Company’s request and approval of a majority of the lenders. As of January 2, 2015, the Company had available to it
100% of the above limits except for the aggregate limit, acquisitions limit, and other investments limit which are now
$277 million, $230 million, and $97 million, respectively.

The Credit Facility requires the Company to maintain a rolling four quarter ratio of adjusted EBITDA to interest expense
of at least 3.0 to 1.0, and a total leverage ratio of not greater than 4.5 to 1.0 decreasing to not greater than 4.25 to 1.0 after
January 2, 2016. The calculation of adjusted EBITDA and total leverage ratio excludes non-cash charges, extraordinary,
unusual, or non-recurring expenses or losses, non-cash stock-based compensation, and non-recurring expenses or charges
incurred in connection with permitted acquisitions. As of January 2, 2015, the Company was in compliance with all
covenants under the Credit Facility.

The Credit Facility contains customary events of default. Upon the occurrence and during the continuance of an event of
default, a majority of the lenders may declare the outstanding advances and all other obligations under the Credit Facility
immediately due and payable.

As of January 2, 2015, the weighted average interest rate on borrowings under the Credit Facility, which does not take
into account the impact of the Company’s interest rate swap, was 1.57%. As of January 2, 2015, the Company had $300
million of borrowing capacity available under the Credit Facility. This borrowing capacity may vary from period to period
based upon the debt and EBITDA levels of the Company, which impacts the covenant calculations described above.

Interest Rate Swaps – From time to time, the Company enters into interest rate swap agreements in order to hedge against
potential changes in cash flows on the outstanding borrowings on the Credit Facility. The variable rate received on the
interest rate swaps and the variable rate paid on the debt have the same rate of interest, excluding the credit spread,
indexed to the one-month LIBOR rate and reset and pay interest on the same date. During 2012, the Company entered into
a three-year $150 million interest rate swap, which amortizes $50 million per year. During 2014, the Company entered
into an additional interest rate swap. The first $45 million of notional amount of the swap is effective February 20, 2015
and the second $45 million of notional amount is effective February 22, 2016. The notional amount of the swap amortizes
$10 million per year beginning on February 21, 2017 with the remaining settled on the termination date of the swap
agreement on September 20, 2019. These swaps are being accounted for as cash flow hedges.

Information regarding the Company’s outstanding interest rate swaps as of January 2, 2015 is as follows (dollars in
thousands):

Instrument

Type of
Hedge

Notional
Amount

Start
Date

End
Date

Pay
Fixed
Rate

Current
Receive
Floating
Rate

Fair
Value
January 2,
2015

Interest rate swap Cash flow $ 100,000

Feb-13

Feb-16

0.573% 0.155% $

(125)

Interest rate swap Cash flow $

90,000

Feb-15

Sept-19

1.921% N/A

(865)

Balance
Sheet Location

Other Long-
Term Liabilities

The estimated fair value of the interest rate swap agreements represents the amount the Company expects to receive (pay)
to terminate the contract. No portion of the change in fair value of the Company’s interest rate swaps during 2014, 2013,
or 2012 was considered ineffective. The amount recorded as Interest Expense during 2014, 2013, and 2012 related to the
Company’s interest rate swaps was $0.5 million, $0.5 million and $0.0 million, respectively.

- 76 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The expected future minimum principal payments under the Credit Facility as of January 2, 2015 are as follows (in
thousands):

2015
2016
2017
2018
2019

Total

11,250
16,250
20,000
20,000
120,000
187,500

Convertible Subordinated Notes – In March 2007, the Company issued $197.8 million of CSN at a 5% discount. CSN
accrued interest at 2.25% per annum. The effective interest rate of CSN, which took into consideration the amortization of
the discount and deferred fees related to the issuance of these notes, was 8.5%. On February 20, 2013, the Company
redeemed all outstanding CSN. The contractual interest and discount amortization for CSN were as follows (in
thousands):

Contractual interest
Discount amortization

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

— $
—

634 $

5,368

4,450
11,464

Deferred Financing Fees - The change in deferred financing fees is as follows (in thousands):

At December 28, 2012

Financing costs deferred
Write-off during the period
Amortization during the period

At January 3, 2014

Amortization during the period

At January 2, 2015

10. BENEFIT PLANS

2,056
2,802
(156)
(842)
3,860
(773)
3,087

Savings Plan – The Company sponsors a defined contribution 401(k) plan, for its U.S. based employees. The plan
provides for the deferral of employee compensation under Section 401(k) and a discretionary Company match. In 2014,
2013, and 2012, this match was 35% per dollar of participant deferral, up to 6% of the total compensation for each
participant. Net costs related to this defined contribution plan were $2.2 million in 2014 and $2.0 million in 2013 and
2012.

In addition to the above, under the terms of the 401(k) plan document there is an annual discretionary defined
contribution of up to 4% of each employee’s eligible compensation based upon the achievement of certain performance
targets. This amount is contributed to the 401(k) plan in the form of Company stock. Compensation cost recognized
related to the defined contribution plan was $4.2 million, $4.8 million, $1.9 million in 2014, 2013, and 2012,
respectively. As of January 2, 2015, the 401(k) Plan held 602,604 shares of Company stock.

Education Assistance Program – The Company reimburses tuition, textbooks and laboratory fees for college or other
job related programs for all of its U.S. based employees. The Company also reimburses college tuition for the dependent
children of certain full-time U.S. based employees hired prior to 2012, which vests on a straight-line basis over ten years,
up to the applicable local state university tuition rate. For certain employees and executives, the dependent children
benefit is not limited. Minimum academic achievement is required in order to receive reimbursement under both
programs. Aggregate expenses under the programs were $1.9 million, $2.0 million, and $2.2 million in 2014, 2013 and
2012, respectively.

- 77 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Defined Benefit Plans – The Company is required to provide its employees located in Switzerland, Mexico, and France
certain statutorily mandated defined benefits. Under these plans, benefits accrue to employees based upon years of
service, position, age and compensation. The defined benefit pension plan provided to the Company’s employees located
in Switzerland is a funded contributory plan, while the plans that provide benefits to the Company’s employees located
in Mexico and France are unfunded and noncontributory. The liability and corresponding expense related to these benefit
plans is based on actuarial computations of current and future benefits for employees.

During 2012, the Company transferred most major functions performed at its facilities in Switzerland into other existing
facilities. As a result, the Company curtailed its defined benefit plan provided to employees at those Swiss facilities
during 2012. In accordance with ASC 715, this gain was recognized in Other Operating Expenses, Net as the related
employees were terminated. Since Swiss plan assets were sufficient to cover all plan liabilities, during 2012 the plan
assets were transferred into cash. During 2013, the plan assets that remained after settlement payments were made were
transferred to an AA- rated insurance carrier who bears the pension risk and longevity risk, and will be used to cover the
pension liability for the remaining retirees of the Swiss plan, as well as the remaining employees at that location.

Information relating to the funding position of the Company’s defined benefit plans as of the plans measurement date of
January 2, 2015 and January 3, 2014 were as follows (in thousands):

Change in projected benefit obligation:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Prior service cost and plan amendments
Plan participants’ contribution
Actuarial (gain) loss
Benefits transferred in, net
Settlement/curtailment gain
Foreign currency translation

Projected benefit obligation at end of year

Change in fair value of plan assets:
Fair value of plan assets at beginning of year
Employer contributions (refund)
Plan participants’ contributions
Actual loss on plan assets
Benefits transferred in, net
Settlements
Foreign currency translation

Fair value of plan assets at end of year
Projected benefit obligation in excess of plan assets at end of year

Defined benefit liability classified as other current liabilities
Defined benefit liability classified as long-term liabilities
Accumulated benefit obligation at end of year

Year Ended

January 2,
2015

January 3,
2014

2,422 $
203
75
—
36
630
155
(337)
(341)
2,843

731
(39)
36
(101)
198
(337)
(51)
437
2,406 $
25 $
2,381 $
1,938 $

16,215
236
138
(45)
134
(2)
434
(14,539)
(149)
2,422

12,269
150
134
(26)
138
(11,780)
(154)
731
1,691
25
1,666
1,684

$
$
$
$

- 78 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts recognized in Accumulated Other Comprehensive Income are as follows (in thousands):

Net loss occurring during the year
Amortization of losses
Prior service cost
Amortization of prior service cost
Foreign currency translation

Pre-tax adjustment

Taxes

Net (gain) loss

Year Ended

January 2,
2015

January 3,
2014

736 $
(138)
(2)
(11)
(76)
509
(135)
374 $

25
(722)
150
33
224
(290)
18
(272)

The amortization of amounts in Accumulated Other Comprehensive Income expected to be recognized as components of
net periodic benefit expense during 2015 are as follows (in thousands):

Amortization of net prior service cost
Amortization of net loss

Net pension cost (income) is comprised of the following (in thousands):

Service cost
Interest cost
Settlements loss
Expected return on assets
Recognized net actuarial loss (gain)

Net pension cost (income)

11
45

Year Ended

January 2,
2015

January 3,
2014

203 $
75
105
(3)
45
425 $

236
138
—
—
(1,929)
(1,555)

The weighted-average rates used in the actuarial valuations were as follows:

Discount rate
Salary growth
Expected rate of return on assets

Projected Benefit Obligation

Net Pension Cost

January 2,
2015

January 3,
2014

2014

2013

2012

2.3%
3.0%
2.3%

3.4%
3.1%
2.5%

2.1%
2.4%
—%

2.5%
2.3%
3.5%

The discount rate used is based on the yields of AA bonds with a duration matching the duration of the liabilities plus
approximately 50 basis points to reflect the risk of investing in corporate bonds. The expected rate of return on plan
assets reflects earnings expectations on existing plan assets.
Plan assets were comprised of the following (in thousands):

Insurance contract

Total

Fair Value Measurements Using

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

— $
— $

437 $
437 $

—
—

January 2,
2015

$
$

437 $
437 $

- 79 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements Using

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

— $
— $

731 $
731 $

—
—

January 3,
2014

$
$

731 $
731 $

Insurance contract

Total

The fair value of Level 2 plan assets are obtained from quoted market prices in inactive markets or valuation models with
observable market data inputs to estimate fair value. These observable market data inputs include benchmark yields,
reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data.

Estimated benefit payments over the next ten years are as follows (in thousands):

2015
2016
2017
2018
2019
2020-2024

47
67
124
113
177
866

- 80 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. STOCK-BASED COMPENSATION

The components and classification of stock-based compensation expense were as follows (in thousands):

Stock options
Restricted stock and units
401(k) stock contribution

Total stock-based compensation expense

Cost of sales
Selling, general and administrative expenses
Research, development and engineering costs, net
Other operating expenses, net (Note 13)

Total stock-based compensation expense

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

2,523 $
6,417
4,246
13,186 $

3,530 $
7,923
1,440
293
13,186 $

3,490 $
5,843
4,768
14,101 $

3,864 $
7,907
1,194
1,136
14,101 $

2,786
6,233
1,885
10,904

2,620
7,684
600
—
10,904

During 2014 and 2013, the Company recorded within Other Operating Expenses, Net stock modification expense related
to employee separation costs incurred during 2014 and 2013 in connection with realignment initiatives, which are
discussed in Note 13 “Other Operating Expenses, Net.”

Summary of Plans

The Company’s 1998 Stock Option Plan and Non-Employee Directors Stock Plan have been frozen to any new award
issuances. Stock options remain outstanding under these plans.

The Company’s 2005 Stock Incentive Plan (“2005 Plan”), as amended, authorizes the issuance of up to 2,450,000 shares
of equity incentive awards including nonqualified and incentive stock options, restricted stock, restricted stock units,
stock bonuses and stock appreciation rights subject to the terms of the 2005 Plan. The 2005 Plan limits the amount of
restricted stock, restricted stock units and stock bonuses that may be awarded in the aggregate to 850,000 shares of the
2,450,000 shares authorized by the 2005 Plan.

The Company’s 2009 Stock Incentive Plan (“2009 Plan”) authorizes the issuance of up to 1,350,000 shares of equity
incentive awards including nonqualified and incentive stock options, restricted stock, restricted stock units, stock
bonuses and stock appreciation rights subject to the terms of the 2009 Plan. The 2009 Plan limits the amount of restricted
stock, restricted stock units and stock bonuses that may be awarded in the aggregate to 200,000 shares of the 1,350,000
shares authorized.

The Company’s 2011 Stock Incentive Plan (“2011 Plan”), as amended, authorizes the issuance of up to 1,350,000 shares
of equity incentive awards including nonqualified and incentive stock options, restricted stock, restricted stock units,
stock bonuses and stock appreciation rights, subject to the terms of the 2011 Plan. The 2011 Plan does not limit the
amount of restricted stock, restricted stock units or stock bonuses that may be awarded.

As of January 2, 2015, there were 575,451, 316,695, and 16,799 shares available for future grants under the 2011 Plan,
2009 Plan and 2005 Plan, respectively. Due to plan sub-limits, of the shares available for grant, only 26,594 shares and
3,625 shares may be awarded under the 2009 Plan and the 2005 Plan, respectively, in the form of restricted stock,
restricted stock units or stock bonuses.

Stock Options

Stock options granted generally vest over a three year period, expire 10 years from the date of grant, and are granted at
exercise prices equal to or greater than the fair value of the Company’s common stock on the date of grant. Performance-
based stock options have not been granted since 2010.

The Company utilizes the Black-Scholes option pricing model to determine the fair value of stock options. Management
is required to make certain assumptions with respect to selected model inputs. Expected volatility is based on the
historical volatility of the Company’s stock over the most recent period commensurate with the estimated expected life
of the stock options. The expected life of stock options, which represents the period of time that the stock options are
expected to be outstanding, is based on historical data. The expected dividend yield is based on the Company’s history
and expectation of future dividend payouts. The risk-free interest rate is based on the U.S. Treasury yield curve in effect

- 81 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

at the time of grant for a period commensurate with the estimated expected life. If factors change and result in different
assumptions, the stock option expense that the Company records for future grants may differ significantly from what the
Company recorded in the current period. Stock-based compensation expense is only recorded for those awards that are
expected to vest. Pre-vesting forfeiture estimates for determining appropriate stock-based compensation expense are
estimated at the time of grant based on historical experience. Revisions are made to those estimates in subsequent
periods if actual forfeitures differ from estimated forfeitures.

The weighted-average fair value and assumptions used are as follows:

Weighted average grant date fair value
Risk-free interest rate
Expected volatility
Expected life (in years)
Expected dividend yield
Annual prevesting forfeiture rate

January 2,
2015

16.43

1.73%
39%
5.3
0%
9%

Year Ended

January 3,
2014

December 28,
2012

8.38
0.73%
39%
5.3
0%
9%

8.20
0.83%
40%
5.3
0%
9%

The following table summarizes time-vested stock option activity:

Outstanding at December 30, 2011

Granted
Exercised
Forfeited or expired

Outstanding at December 28, 2012

Granted
Exercised
Forfeited or expired
Outstanding at January 3, 2014

Granted
Exercised
Forfeited or expired
Outstanding at January 2, 2015
Expected to vest at January 2, 2015
Exercisable at January 2, 2015

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life
(In Years)

Aggregate
Intrinsic
Value
(In Millions)

23.42
22.19
20.77
24.21
23.17
23.33
23.24
28.05
22.92
43.84
23.42
27.82
25.32
25.10
23.88

6.1 $
6.1 $
5.8 $

34.3
34.1
31.7

Number of
Time-Vested
Stock
Options
1,558,771 $
395,978
(52,683)
(126,219)
1,775,847
372,676
(443,428)
(88,686)
1,616,409
183,571
(295,203)
(33,279)
1,471,498 $
1,447,519 $
1,278,765 $

- 82 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes performance-vested stock option activity:

Number of
Performance-
Vested Stock
Options

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life
(In Years)

Aggregate
Intrinsic
Value
(In Millions)

Outstanding at December 30, 2011

Exercised
Forfeited or expired

Outstanding at December 28, 2012

Exercised
Forfeited or expired
Outstanding at January 3, 2014

Exercised
Forfeited or expired
Outstanding at January 2, 2015
Expected to vest at January 2, 2015
Exercisable at January 2, 2015

478,364 $
(7,657)
(185,782)
284,925
(107,664)
—
177,261
(58,422)
—
118,839 $
118,839 $
118,839 $

24.44
22.04
26.35
23.26
23.23

—

23.27
23.35

—

23.24
23.24
23.24

3.0 $
3.0 $
3.0 $

3.0
3.0
3.0

Intrinsic value is calculated for in-the-money options (exercise price less than market price) as the difference between the
market price of the Company’s common shares as of January 2, 2015 ($48.66) and the weighted average exercise price
of the underlying stock options, multiplied by the number of options outstanding and/or exercisable. As of January 2,
2015, $2.1 million of unrecognized compensation cost related to non-vested stock options is expected to be recognized
over a weighted-average period of approximately 2 years. Shares are distributed from the Company’s authorized but
unissued reserve upon the exercise of stock options or treasury stock if available. The Company does not intend to
purchase treasury shares to fund the future exercises of stock options.

Proceeds from the exercise of stock options are credited to common stock at par value and the excess is credited to
additional paid-in capital. A portion of the options outstanding qualify as incentive stock options (“ISO”) for income tax
purposes. As such, a tax benefit is not recorded at the time the compensation cost related to the stock options is recorded
for book purposes due to the fact that an ISO does not ordinarily result in a tax benefit unless there is a disqualifying
disposition. Stock option grants of non-qualified stock options result in the creation of a deferred tax asset, which is a
temporary difference, until the time that the option is exercised.

The following table provides certain information relating to the exercise of stock options (in thousands):

Intrinsic value
Cash received
Tax benefit (expense) realized

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

7,997 $
8,278
1,704

6,807 $
12,807
727

148
1,263
(132)

- 83 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock and Restricted Stock Units

Time-vested restricted stock and restricted stock unit awards granted typically vest in equal annual installments over a
three or four year period. The fair value of time-based as well as nonmarket-based performance restricted stock and
restricted stock unit awards is equal to the fair value of the Company’s stock on the date of grant. The following table
summarizes time-vested restricted stock and unit activity:

Nonvested at December 30, 2011

Granted
Vested
Forfeited

Nonvested at December 28, 2012

Granted
Vested
Forfeited

Nonvested at January 3, 2014

Granted
Vested
Forfeited

Nonvested at January 2, 2015

Time-Vested
Activity

Weighted
Average
Fair Value

69,942 $
92,265
(74,901)
(7,037)
80,269
67,230
(74,062)
(5,862)
67,575
63,817
(53,568)
(9,992)
67,832 $

22.69
23.49
22.83
22.56
23.48
26.76
23.93
22.26
26.37
44.78
34.16
35.30
36.22

Performance-based restricted stock units granted only vest if certain market-based performance metrics are achieved.
The amount of shares that ultimately vest range from 0 shares to 716,163 shares based upon the total shareholder return
of the Company relative to the Company’s compensation peer group over a three year performance period beginning in
the year of grant. The fair value of the restricted stock units was determined by utilizing a Monte Carlo simulation
model, which projects the value of Greatbatch stock versus the peer group under numerous scenarios and determines the
value of the award based upon the present value of these projected outcomes. The following table summarizes
performance-vested restricted stock and stock unit activity related to the Company’s plans:

Nonvested at December 30, 2011

Granted
Vested
Forfeited

Nonvested at December 28, 2012

Granted
Vested
Forfeited

Nonvested at January 3, 2014

Granted
Vested
Forfeited

Nonvested at January 2, 2015

Performance-
Vested
Activity

Weighted
Average
Fair Value

529,743 $
332,918
(15,500)
(64,715)
782,446
318,169
(49,139)
(271,798)
779,678
186,825
(221,470)
(28,870)
716,163 $

16.68
15.30
24.64
15.72
16.02
15.86
14.68
14.94
16.41
31.33
18.51
18.42
19.57

The realized tax benefit (expense) from the vesting of restricted stock and restricted stock units was $2.3 million, $(0.4)
million and $(0.02) million for 2014, 2013, 2012, respectively. As of January 2, 2015, there was $7.7 million of total
unrecognized compensation cost related to the restricted stock and restricted stock unit awards. That cost is expected to
be recognized over a weighted-average period of approximately 2 years. The fair value of shares vested in 2014, 2013,
2012 was $12.5 million, $4.0 million and $1.5 million, respectively.

- 84 -

12. RESEARCH, DEVELOPMENT AND ENGINEERING COSTS, NET

Research, Development and Engineering Costs, Net are comprised of the following (in thousands):

Research, development and engineering costs
Less: cost reimbursements

Total research, development and engineering costs, net

January 2,
2015

58,974 $
(9,129)
49,845 $

Year Ended

January 3,
2014

December 28,
2012

62,652 $
(8,575)
54,077 $

62,848
(10,358)
52,490

13. OTHER OPERATING EXPENSES, NET

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

2014 investments in capacity and capabilities
2013 operating unit realignment
Orthopaedic facilities optimization
Medical device facility optimization
ERP system upgrade (income) costs
Acquisition and integration (income) costs
Asset dispositions, severance and other
Total other operating expenses, net

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

8,925 $
1,017
1,317
11
(82)
3
4,106
15,297 $

— $

5,625
8,038
312
783
(502)
1,534
15,790 $

—
—
32,482
1,525
5,041
1,460
1,838
42,346

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 currently 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 by the first half of 2016.

• Functions currently 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 by the end of 2015.
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.

• Establishing a R&D hub in the Minneapolis/St. Paul, MN area for the Company’s Global R&D QiG - Medical

Device Systems team, which will serve as the technical center of expertise for active implantable medical device
development, implantable leads design, system level design verification testing, and continuation engineering. As
part of this initiative, the design engineering responsibilities previously performed at the Company’s Cleveland, OH
facility was transferred to the new R&D hub in 2014.

• Establishing a commercial operations hub at the Company’s global headquarters in Frisco, Texas. This initiative will
build upon the investment the Company has made in its global sales and marketing function and is expected to be
completed during the first half of 2015.

The total capital investment expected for these initiatives is between $25.0 million and $27.0 million, of which $4.0
million has been expended to date. Total restructuring charges expected to be incurred in connection with this
realignment are between $29.0 million and $34.0 million, of which $8.9 million has been incurred to date. 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: $7.0 million - $9.0 million;
• Accelerated depreciation and asset write-offs: $2.0 million - $3.0 million; and
• Other: $20.0 million - $22.0 million

- 85 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other costs primarily consist of costs to relocate certain equipment and other 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):

At January 3, 2014
Restructuring charges
Write-offs
Cash payments
At January 2, 2015

Severance and
Retention

Accelerated
Depreciation/
Asset Write-offs

Other

Total

— $

2,209
—
(1,046)
1,163 $

— $
33
(33)
—
— $

— $
6,683
—
(5,617)
1,066 $

—
8,925
(33)
(6,663)
2,229

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 reportable segments were combined into one sales and
marketing and one operations group serving the entire Company. 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 costs primarily consist of relocation, recruitment and travel expenditures. The change in accrued liabilities related
to the 2013 operating unit realignment is as follows (in thousands):

At January 3, 2014
Restructuring charges
Cash payments
At January 2, 2015

Severance and
Retention

Other

Total

465 $
849
(1,314)

— $

746 $
168
(914)

— $

1,211
1,017
(2,228)
—

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, the Company curtailed its defined benefit plan provided to its Swiss employees and recognized a $1.9
million pension gain in 2013. See Note 10 “Benefit Plans” for additional information. Also in connection with this
consolidation, in 2012, the Company entered into an agreement to sell assets related to certain non-core Swiss
orthopaedic product lines to an independent third party. In connection with the transfer of these orthopaedic product lines
to held for sale, the Company recognized a $3.6 million impairment charge in 2012 based upon the contractual sales
price to the third party. This transaction closed during 2013 upon which the Company received payments totaling $4.7
million and the third party assumed $2.4 million of severance liabilities. 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. See Note 5 “Assets Held For Sale” for
additional information.

- 86 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 two
years.

The total capital investment expected to be incurred for these initiatives is between $30 million and $35 million, of
which $24.8 million has been expended to date. Total expense expected to be incurred for these initiatives is between $43
million and $48 million, of which $42.5 million has been incurred to date. All expenses have been and will be recorded
within the Greatbatch Medical segment and are expected to include the following:

• Severance and retention: $11 million;
• Accelerated depreciation and asset write-offs: $13 million;
• Other: $19 million - $24 million.

Other costs include production inefficiencies, moving, revalidation, personnel, training 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):

At January 3, 2014
Restructuring charges (income), net
Write-offs
Cash receipts (payments)
At January 2, 2015

Severance
and
Retention

Accelerated
Depreciation/
Asset Write-offs

Other

Total

— $
—
—
—
— $

— $

(2,255)
(400)
2,655

— $

857 $
3,572
—
(4,142)

287 $

857
1,317
(400)
(1,487)
287

Medical device facility optimization. Near the end of 2011, the Company initiated plans to upgrade and expand its
manufacturing infrastructure in order to support its medical device strategy. This includes the transfer of certain product
lines to create additional capacity for the manufacture of medical devices, expansion of two existing facilities, as well as
the purchase of equipment to enable the production of medical devices. These initiatives were completed in 2014. Total
capital investment under these initiatives was $12.5 million. Total expenses incurred on these projects was $1.8 million.
All expenses were recorded within the Greatbatch Medical segment and included the following:

• Production inefficiencies, moving and revalidation: $0.7 million;
• Personnel: $0.6 million; and
• Other: approximately $0.5 million.

The change in accrued liabilities related to the medical device facility optimization is as follows (in thousands):

At January 3, 2014
Restructuring charges
Cash payments
At January 2, 2015

Production
Inefficiencies,
Moving and
Revalidation

— $
—
—
— $

Personnel

Other

Total

— $

1
(1)
— $

— $
10
(10)
— $

—
11
(11)
—

ERP system upgrade (income) costs. In 2011, the Company initiated plans to upgrade its existing global ERP system.
This initiative was completed in 2014. Total capital investment expended under this initiative was $4.0 million. Total
expenses incurred on this initiative were $5.7 million. Expenses related to this initiative were recorded within the
applicable segment and corporate cost centers that the expenditures related to and included the following:

• Training and consulting costs: $3.2 million; and
• Accelerated depreciation and asset write-offs: $2.5 million.

- 87 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The change in accrued liabilities related to the ERP system upgrade is as follows (in thousands):

At January 3, 2014
Restructuring income
Cash receipts
At January 2, 2015

Training &
Consulting
Costs

Accelerated
Depreciation/
Asset Write-offs

Total

— $
(82)
82
— $

— $
—
—
— $

—
(82)
82
—

Acquisition and integration (income) costs. During 2014, 2013, and 2012, the Company incurred costs (income)
related to the integration of CCC, NeuroNexus, and Micro Power Electronics, Inc. These expenses were primarily for
retention bonuses, travel cost in connection with integration efforts, training, severance, and the change in fair value of
the contingent consideration recorded in connection with these acquisitions. See Note 18 “Fair Value Measurements” for
additional information on the Company’s contingent consideration, which resulted in a gain of $0.8 million and $0.7
million in 2014, and 2013, respectively.

Asset dispositions, severance and other. During 2014, 2013, and 2012, the Company recorded losses in connection
with various asset disposals and/or write-downs. 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. See Note 18, “Fair Value Measurements” for additional information.

During 2012, the Company incurred $1.2 million of costs related to the relocation of its global headquarters to Frisco,
Texas.

- 88 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. INCOME TAXES

The U.S. and international components of income before provision for income taxes were as follows (in thousands):

U.S.
International

Total income before provision for income taxes

January 2,
2015

56,801 $
19,778
76,579 $

Year Ended

January 3,
2014

December 28,
2012

42,392 $
6,446
48,838 $

36,057
(29,327)
6,730

The provision for income taxes was comprised of the following (in thousands):

Current:

Federal
State
International

Deferred:

Federal
State
International

Total provision for income taxes

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

16,293 $
1,299
2,998
20,590

1,211
(310)
(370)
531
21,121 $

39,353 $
1,604
1,470
42,427

(28,678)
427
(1,605)
(29,856)
12,571 $

4,747
381
668
5,796

6,615
175
(1,057)
5,733
11,529

The provision for income taxes differs from the U.S. statutory rate due to the following:

Statutory rate
Federal tax credits
Foreign rate differential
Uncertain tax positions
State taxes, net of federal benefit
Change in tax rate - loss of Swiss tax holiday
Change in foreign tax rates
Valuation allowance
Other

Effective tax rate

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

35.0%
(2.1)
(4.3)
0.6
0.7
—
(0.6)
(0.4)
(1.3)
27.6%

35.0%
(7.5)
(0.7)
1.7
2.3
—
(3.7)
0.4
(1.8)
25.7%

35.0%
—
50.7
(10.1)
4.9
25.6
—
67.6
(2.4)
171.3%

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets (liabilities) consist of the following (in thousands):

Tax credits
Net operating loss carryforwards
Inventories
Accrued expenses
Stock-based compensation
Other

Gross deferred tax assets

Less valuation allowance
Net deferred tax assets
Property, plant and equipment
Intangible assets
Convertible subordinated notes
Gross deferred tax liabilities
Net deferred tax liability

Presented as follows:
Current deferred tax asset
Current deferred tax liability
Noncurrent deferred tax asset
Noncurrent deferred tax liability
Net deferred tax liability

January 2,
2015

January 3,
2014

5,828 $
6,721
3,335
4,338
9,341
1,659
31,222
(10,709)
20,513
(2,646)
(57,850)
(5,006)
(65,502)
(44,989) $

6,168 $
(588)
2,626
(53,195)
(44,989) $

6,624
9,161
4,202
4,303
9,194
573
34,057
(11,661)
22,396
(2,254)
(57,648)
(6,178)
(66,080)
(43,684)

6,008
(613)
2,933
(52,012)
(43,684)

As of January 2, 2015, the Company has the following carryforwards available:

Jurisdiction
International
State
U.S. and State
State

Tax
Attribute
Net Operating Loss
Net Operating Loss
R&D Tax Credit
Investment Tax Credit

Amount
(in millions)

Begin to
Expire

48.0 (1)
37.6 (1)
0.7 (1)
5.3

2015
Various
Various
Various

(1) The utilization of certain net operating losses and credits is subject to an annual limitation under Internal Revenue

Code Section 382.

Certain federal tax credits reported on filed income tax returns included uncertain tax positions taken in prior years. Due
to the application of the accounting for uncertain tax positions, the actual tax attributes are larger than the tax credits for
which a deferred tax asset is recognized for financial statement purposes.

In assessing the realizability of deferred tax assets, management considers, within each taxing jurisdiction, whether it is
more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this
assessment. Based on the consideration of the weight of both positive and negative evidence, management has
determined that a portion of the deferred tax assets as of January 2, 2015 and January 3, 2014 related to certain state
investment tax credits and net operating losses will not be realized.

The Company files annual income tax returns in the U.S., various state and local jurisdictions, and in various foreign
jurisdictions. A number of years may elapse before an uncertain tax position, for which the Company has unrecognized
tax benefits, is examined and finally settled. While it is often difficult to predict the final outcome or the timing of
resolution of any particular uncertain tax position, the Company believes that its unrecognized tax benefits reflect the
most probable outcome. The Company adjusts these unrecognized tax benefits, as well as the related interest, in light of

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

changing facts and circumstances. The resolution of a matter could be recognized as an adjustment to the Provision for
Income Taxes and the effective tax rate in the period of resolution.

Below is a summary of changes to the unrecognized tax benefit (in thousands):

Balance, beginning of year
Additions based upon tax positions related to the current year
Additions related to prior period tax positions
Reductions relating to settlements with tax authorities
Reductions as a result of a lapse of applicable statute of limitations
Balance, end of year

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

1,858 $
268
510
(225)
—
2,411 $

970 $
325
651
(88)
—
1,858 $

1,580
—
210
(522)
(298)
970

The tax years that remain open and subject to tax audits varies depending on the tax jurisdiction. An audit of the
consolidated federal 2012 and 2013 tax returns were completed in the first quarter of 2015. It is reasonably possible that
a reduction of approximately $1.0 million of the balance of unrecognized tax benefits may occur within the next twelve
months as a result of the lapse of the statute of limitations and/or audit settlements. As of January 2, 2015, approximately
$2.1 million of unrecognized tax benefits would favorably impact the effective tax rate (net of federal impact on state
issues), if recognized.

15. COMMITMENTS AND CONTINGENCIES

Litigation – On December 21, 2012, the Company and several other unaffiliated parties were named as defendants in a
personal injury and wrongful death action filed in the 113th Judicial District Court of Harris County, Texas. The
complaint seeks damages alleging marketing and product defects and failure to warn, negligence and gross negligence
relating to a product the Company manufactured and sold to a customer, one of the other named defendants. The
Company’s customer, in turn, incorporated the Greatbatch product into its own product which it sold to a third party,
another named defendant. On December 3, 2014, the District Court granted the Company’s motion for summary
judgment and dismissed all claims against the Company. The ruling is subject to appeal by the plaintiffs.

The Company is indemnified by its customer against any loss in this matter, including costs of defense, which obligation
is supported by its customer’s product liability insurance coverage in the amount of $5 million. The Company also has its
own product liability insurance coverage, subject to a $10 million retention. In January 2015, Greatbatch’s customer
reached a tentative, confidential settlement with the plaintiffs which, if approved by the Court, is expected to result in a
release of all claims, including appeal rights, against the Company and its customer. The Company has not recorded a
reserve in connection with this matter since any potential loss is not probable.

The Company is a party to various other legal actions arising in the normal course of business. While the Company does
not expect that the ultimate resolution of any of these pending actions will have a material effect on its consolidated
results of operations, financial position, or cash flows, litigation is subject to inherent uncertainties. As such, there can be
no assurance that any pending legal action, which the Company currently believes to be immaterial, does not become
material in the future.

License agreements – The Company is a party to various license agreements for technology that is utilized in certain of
its products. The most significant of these agreements are the licenses for basic technology used in the production of wet
tantalum capacitors, filtered feedthroughs and MRI compatible lead systems. Expenses related to license agreements
were $3.3 million, $3.5 million and $3.1 million, for 2014, 2013 and 2012, respectively, and are included in Cost of
Sales.

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Product Warranties – The Company generally warrants that its products will meet customer specifications and will be
free from defects in materials and workmanship. The change in product warranty liability was comprised of the
following (in thousands):

Beginning balance
Additions to warranty reserve
Warranty claims paid
Ending balance

Year Ended

January 2,
2015

January 3,
2014

1,819 $
953
(2,112)

660 $

2,626
1,624
(2,431)
1,819

Operating Leases – The Company is a party to various operating lease agreements for buildings, machinery, equipment
and software. The Company primarily leases buildings, which accounts for the majority of the future lease payments.
Lease expense includes the effect of escalation clauses and leasehold improvement incentives which are accounted for
ratably over the lease term. Operating lease expense was as follows (in thousands):

Operating lease expense

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

4,281 $

4,379 $

4,024

Minimum future estimated annual operating lease expenses are as follows (in thousands):

2015
2016
2017
2018
2019
Thereafter

Total estimated operating lease expense

5,797
5,952
3,908
3,489
3,418
13,938
36,502

Self-Insured Medical Plan – The Company self-funds the medical insurance coverage provided to its U.S. based
employees. The Company had specific stop loss coverage per associate for claims incurred during 2014 exceeding $225
thousand per associate with no annual maximum aggregate stop loss coverage. As of January 2, 2015 and January 3,
2014, the Company had $1.8 million and $1.6 million accrued related to the self-insurance of its medical plan,
respectively. This accrual is recorded in Accrued Expenses in the Consolidated Balance Sheet, and is primarily based
upon claim history.

Purchase Commitments – Contractual obligations for purchase of goods or services are defined as agreements that are
enforceable and legally binding on the Company and that specify all significant terms, including: fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
The Company’s purchase orders are normally based on its current manufacturing needs and are fulfilled by its vendors
within short time horizons. The Company enters into blanket orders with vendors that have preferred pricing and terms,
however these orders are normally cancelable by us without penalty. As of January 2, 2015, the total contractual
obligation related to such expenditures is approximately $36.4 million and will primarily be financed by existing cash
and cash equivalents, cash generated from operations, or the Credit Facility. The Company also enters into contracts for
outsourced services; however, the obligations under these contracts were not significant and the contracts generally
contain clauses allowing for cancellation without significant penalty.

Foreign Currency Contracts – The Company has entered into forward contracts to purchase Mexican pesos in order to
hedge the risk of peso-denominated payments associated with the operations at its Tijuana, Mexico facility. The impact
to the Company’s results of operations from these forward contracts was as follows (in thousands):

- 92 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reduction in Cost of Sales
Ineffective portion of change in fair value

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

(168) $
—

(1,154 ) $
—

(79)
—

Information regarding outstanding foreign currency contracts as of January 2, 2015 is as follows (dollars in thousands):

Instrument

Type of
Hedge

Aggregate
Notional
Amount

Start
Date

End
Date

$/Peso

Fair
Value

Balance Sheet
Location

FX Contract

Cash flow $ 16,880

Jan-15

Dec-15

0.0734 $

(1,568) Accrued Expenses

Workers’ Compensation Trust – The Company was a member of a group self-insurance trust that provided workers’
compensation benefits to employees of the Company in Western New York (the “Trust”). Under the Trust agreement,
each participating organization has joint and several liability for Trust obligations if the assets of the Trust are not
sufficient to cover those obligations. During 2011, the Company was notified by the Trust of its intentions to cease
operations at the end of 2011 and was assessed a pro-rata share of future costs related to the Trust. Based on actual
experience, the Company could receive a refund or be assessed additional contributions for workers’ compensation
claims insured by the Trust. Since 2011, the Company has utilized a traditional insurance provider for workers’
compensation coverage.

16. EARNINGS (LOSS) PER SHARE

The following table illustrates the calculation of Basic and Diluted EPS (in thousands, except per share amounts):

Numerator for basic EPS:
Net income (loss)
Denominator for basic EPS:

Weighted average shares outstanding

Effect of dilutive securities:

Stock options, restricted stock and restricted stock units

Denominator for diluted EPS
Basic EPS
Diluted EPS

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

55,458 $

36,267 $

(4,799)

24,825

1,150
25,975

$
$

2.23 $
2.14 $

23,991

23,584

1,332
25,323

1.51 $
1.43 $

—
23,584
(0.20)
(0.20)

The diluted weighted average share calculations do not include the following securities, which are not dilutive to the EPS
calculations or the performance criteria have not been met:

Time-vested stock options, restricted stock and restricted stock units
Performance-vested stock options and restricted stock units

January 2,
2015

175,549
—

Year Ended

January 3,
2014

18,480
—

December 28,
2012
2,142,000
781,000

For the 2013 and 2012 periods, no shares related to CSN were included in the diluted EPS calculations as the average
share price of the Company’s common stock for those periods did not exceed CSN’s conversion price per share.

- 93 -

17. ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated Other Comprehensive Income is comprised of the following (in thousands):

At January 3, 2014
Unrealized loss on cash flow

hedges

Realized gain on foreign currency

hedges

Realized loss on interest rate swap

hedges

Net defined benefit plan liability

adjustments

Foreign currency translation loss
At January 2, 2015

Defined
Benefit
Plan
Liability

Cash
Flow
Hedges

Foreign
Currency
Translation
Adjustment

Total
Pre-Tax
Amount

Tax

Net-of-Tax
Amount

(672) $

(468) $

14,952 $

13,812 $

546 $

14,358

—

(2,372)

(168)

450

—

(2,372)

(168)

829

(1,543)

(109)

450

(157)

293

(509)
—
(1,181) $

—
—
(2,558) $

—
(3,502)
11,450 $

(509)
(3,502)
7,711 $

135
—
1,412 $

(374)
(3,502)
9,123

At December 28, 2012
Unrealized gain on cash flow

hedges

Realized gain on foreign currency

hedges

Realized loss on interest rate swap

hedges

Net defined benefit plan liability

adjustments

Foreign currency translation gain
At January 3, 2014

Defined
Benefit
Plan
Liability

Cash
Flow
Hedges

Foreign
Currency
Translation
Adjustment

Total
Pre-Tax
Amount

Tax

Net-of-Tax
Amount

(962) $

120 $

13,431 $

12,589 $

358 $

12,947

—

(1,154)

508

—

(1,154)

(20)

404

(750)

508

(178)

330

290
—
(672) $

—
—
(468) $

—
1,521
14,952 $

290
1,521
13,812 $

(18)
—
546 $

272
1,521
14,358

The realized (gain) loss relating to the Company’s foreign currency and interest rate swap hedges were reclassified from
Accumulated Other Comprehensive Income and included in Cost of Sales and Interest Expense, respectively, in the
Consolidated Statements of Operations. See Note 10 “Benefit Plans” for details on the change in defined benefit plan
liability adjustments.

18. FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Fair value measurement standards apply to certain financial assets and liabilities that are measured at fair value on a
recurring basis (each reporting period). For the Company, these financial assets and liabilities include its derivative
instruments and accrued contingent consideration. The Company does not have any nonfinancial assets or liabilities that
are measured at fair value on a recurring basis.

Foreign currency contracts – The fair value of foreign currency contracts are determined through the use of cash flow
models that utilize observable market data inputs to estimate fair value. These observable market data inputs include
foreign exchange rate and credit spread curves. In addition to the above, the Company received fair value estimates from
the foreign currency contract counterparty to verify the reasonableness of the Company’s estimates. The Company’s
foreign currency contracts are categorized in Level 2 of the fair value hierarchy. The fair value of the Company’s foreign
currency contracts will be realized as Cost of Sales as the inventory, which the contracts are hedging the cash flows to
produce, is sold, of which approximately $1.6 million is expected to be realized within the next twelve months.

Interest rate swaps – The fair value of the Company’s interest rate swaps outstanding at January 2, 2015 was determined
through the use of a cash flow model that utilizes observable market data inputs. These observable market data inputs
include LIBOR, swap rates, and credit spread curves. In addition to the above, the Company received a fair value

- 94 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

estimate from the interest rate swap counterparty to verify the reasonableness of the Company’s estimate. This fair value
calculation was categorized in Level 2 of the fair value hierarchy.

Accrued contingent consideration – The fair value of accrued contingent consideration recorded by the Company
represents the estimated fair value of the contingent consideration the Company expects to pay to the former
shareholders of NeuroNexus based upon the achievement of certain financial and development-based milestones. The
fair value of the contingent consideration liability was estimated by discounting to present value, the probability
weighted contingent payments expected to be made utilizing a risk adjusted discount rate. During the first quarter of
2014, the financial milestone expired unachieved and as a result, was determined to have a fair value of zero. During the
fourth quarter of 2014, the Company determined that the development milestone will expire unachieved, and as a result,
was determined to have a fair value of zero. Changes in the fair value of accrued contingent consideration were recorded
in Other Operating Expenses, Net. The Company’s accrued contingent consideration is categorized in Level 3 of the fair
value hierarchy. Changes in accrued contingent consideration were as follows (in thousands):

At December 28, 2012
Fair value adjustments
At January 3, 2014
Fair value adjustments
At January 2, 2015

1,530
(690)
840
(840)
—

The following tables provide information regarding assets and liabilities recorded at fair value on a recurring basis (in
thousands):

Description
Liabilities
Foreign currency contracts (Note 15)
Interest rate swaps (Note 9)

Description
Liabilities
Foreign currency contracts
Accrued contingent consideration
Interest rate swap

Fair Value Measurements Using

Quoted
Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

— $
—

1,568 $
990

—
—

At January 2,
2015

1,568 $
990

Fair Value Measurements Using

Quoted
Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

At January 3,
2014

140 $
840
328

— $
—
—

140 $
—
328

—
840
—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Fair value standards also apply to certain assets and liabilities that are measured at fair value on a nonrecurring basis.
The carrying amounts of cash, accounts receivable, accounts payable, accrued expenses and current portion of long-term
debt approximate fair value because of the short-term nature of these items. As of January 2, 2015, the fair value of the
Company’s variable rate long-term debt approximates its carrying value and is categorized in Level 2 of the fair value
hierarchy.

A summary of the valuation methodologies for assets and liabilities measured on a nonrecurring basis is as follows:

Cost and equity method investments – The Company holds investments in equity and other securities that are accounted
for as either cost or equity method investments, which are classified as Other Assets. The total carrying value of these
investments is reviewed quarterly for changes in circumstance or the occurrence of events that suggest the Company’s

- 95 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

investment may not be recoverable. The fair value of cost or equity method investments is not adjusted if there are no
identified events or changes in circumstances that may have a material effect on the fair value of the investments. Gains
and losses realized on cost and equity method investments are recorded in Other (Income) Expense, Net, unless
separately stated. The aggregate recorded amount of cost and equity method investments at January 2, 2015 and
January 3, 2014 was $14.5 million and $12.3 million, respectively. The Company’s equity method investment is in a
Chinese venture capital fund focused on investing in life sciences companies. This fund accounts for its investments at
fair value with the unrealized change in fair value of these investments recorded as income or loss to the fund in the
period of change. As of January 2, 2015, the Company owned 7.4% of this fund.

During 2014, 2013 and 2012, the Company recognized impairment charges related to its cost method investments of $0.0
million, $0.5 million and $0.1 million, respectively. The fair value of these investments was determined by reference to
recent sales data of similar shares to independent parties in an inactive market. This fair value calculation was
categorized in Level 2 of the fair value hierarchy. During 2014, the Company sold one of its cost method investments,
which resulted in a pre-tax gain of $3.2 million. During 2014, 2013, and 2012, the Company recognized a net gain (loss)
on equity method investments of $1.2 million, $(0.2) million, and $(0.3) million, respectively.

Long-lived assets – The Company reviews the carrying amount of its long-lived assets to be held and used for potential
impairment whenever certain indicators are present as described in Note 1 “Summary of Significant Accounting
Policies.” During 2014, the Company recorded a $0.4 million impairment charge related to its Orvin, Switzerland
property held for sale. The fair value of these assets were determined based upon recent sales data of similar assets and
discussions with potential buyers, and was categorized in Level 2 of the fair value hierarchy. During 2013, the Company
wrote off $0.5 million of IPR&D allocated to its QiG segment as these projects were discontinued prior to reaching
technological feasibility. Additionally, during 2013, the Company wrote off $0.9 million of inventory and technology
related to Greatbatch Medical’s wireless sensing product line held for sale, as an agreement could not be reached with
potential buyers. During 2012, the Company recognized a $3.6 million impairment charge in connection with the sale of
certain non-core Swiss orthopaedic product lines to an independent third party. The above impairment charges were
recorded in Other Operating Expenses, Net. See Note 13 “Other Operating Expenses, Net” for further discussion.

The following table provides information regarding assets and liabilities recorded at fair value on a nonrecurring basis as
of January 2, 2015. There were no such assets or liabilities as of January 3, 2014 (in thousands):

Fair Value Measurements Using

Quoted
Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

At January 2,
2015

1,635 $

— $

1,635 $

—

Description
Assets
Assets Held for Sale (Note 5)

Fair Value of Other Financial Instruments

Pension plan assets – The fair value of the Company’s pension plan assets disclosed in Note 10 “Benefit Plans” are
determined based upon quoted market prices in inactive markets or valuation models with observable market data inputs
to estimate fair value. These observable market data inputs include benchmark yields, reported trades, broker/dealer
quotes, issuer spreads, benchmark securities, bids, offers and reference data. The Company’s pension plan assets are
categorized Level 2 of the fair value hierarchy.

19. BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION

The Company has two reportable segments: Greatbatch Medical and QiG. Greatbatch Medical designs and manufactures
medical devices and components where Greatbatch either owns the intellectual property or has unique manufacturing
and assembly expertise. Greatbatch Medical provides medical devices and components to the following markets:

• Cardiac/Neuromodulation: Products include batteries, capacitors, filtered and unfiltered feed-throughs, engineered

components, implantable stimulation leads, and enclosures used in implantable medical devices.

• Orthopaedics: Products include implants, instruments and delivery systems for large joint, spine, extremity and

trauma procedures.

• Portable Medical: Products include life-saving and life-enhancing applications comprising automated external

defibrillators, portable oxygen concentrators, ventilators, and powered surgical tools.

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GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Vascular: Products include introducers, steerable sheaths, and catheters that deliver therapies for various markets such
as coronary and neurovascular disease, peripheral vascular disease, interventional radiology, vascular access, atrial
fibrillation, and interventional cardiology, plus products for medical imaging and pharmaceutical delivery.

• Energy, Military, Environmental: Products include primary and rechargeable batteries and battery packs for

demanding applications such as down hole drilling tools.

Greatbatch Medical also offers value-added assembly and design engineering services for medical devices that utilize its
component products.

QiG focuses on developing medical device systems for some of healthcare’s most pressing challenges and reflects
Greatbatch’s strategic evolution of its product offerings in order to raise the growth and profitability profile of the
Company. QiG utilizes a disciplined and diversified portfolio approach with three investment modes: new medical
device systems commercialization, collaborative programs with OEM customers, and strategic equity positions in
emerging healthcare companies. The development of certain new medical device systems are facilitated through the
establishment of limited liability companies (“LLCs”). These LLCs do not own, but have the exclusive right to use the
technology of Greatbatch in certain, specific fields of use and have an exclusive manufacturing agreement with
Greatbatch Medical. QiG currently owns 89% - 100% of three LLCs. Minority interest in these LLCs are held by key
opinion leaders, clinicians and strategic partners. Under the agreements governing these LLCs, QiG is responsible to
fund 100% of the expenses incurred by the LLC. However, no distributions are made to the minority holders until QiG is
reimbursed for all expenses paid. Once QiG has been fully reimbursed, all future distributions are made based upon the
respective LLCs ownership percentages. One of the LLCs established by QiG is for the Company’s Algovita spinal cord
stimulator to treat chronic intractable pain of the trunk and/or limbs. This product was submitted for premarket approval
(“PMA”) to the United States Food & Drug Administration (“FDA”) in December 2013 and in January 2014
documentation for European CE Mark was submitted to the notified body, TÜV SÜD America. CE Mark approval was
obtained on June 17, 2014.

QiG revenue includes sales of neural interface technology, components and systems to the neuroscience and clinical
markets. As further discussed in Note 2 “Acquisitions,” during 2014, the Company acquired CCC, a neuromodulation
medical device developer and manufacturer. As a result of this transaction, QiG revenue also includes sales of various
medical device products such as implantable pulse generators, programmer systems, battery chargers, patient wands and
leads to medical device companies. Future income of QiG is expected to come from various sources including
investment gains from the sales of its LLC ownership interests, technology licensing fees, royalty revenue, and/or the
sales of medical device systems.

An analysis and reconciliation of the Company’s business segment, product line and geographic information to the
respective information in the Consolidated Financial Statements follows. Intersegment sales between Greatbatch Medical
and QiG were not material for 2014, 2013 or 2012. Sales by geographic area are presented by allocating sales from
external customers based on where the products are shipped to (in thousands):

Sales:
Greatbatch Medical

Cardiac/Neuromodulation
Orthopaedics
Portable Medical
Vascular
Energy, Military, Environmental
Total Greatbatch Medical

QiG

Total sales

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

321,419 $
147,296
69,043
58,770
81,757
678,285
9,502
687,787 $

325,412 $
130,247
78,743
48,357
78,143
660,902
3,043
663,945 $

306,669
122,061
81,659
51,980
81,353
643,722
2,455
646,177

- 97 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Segment income (loss) from operations:

Greatbatch Medical
QiG

Total segment income from operations
Unallocated operating expenses
Operating income as reported

Unallocated other income (expense), net

Income before provision for income taxes as reported

Depreciation and Amortization:

Greatbatch Medical
QiG

Total depreciation and amortization included in segment income

from operations

Unallocated depreciation and amortization
Total depreciation and amortization

Expenditures for tangible long-lived assets, excluding acquisitions:

Greatbatch Medical
QiG

Total reportable segments
Unallocated long-lived tangible assets

Total expenditures

Identifiable assets:

Greatbatch Medical
QiG

Total reportable segments
Unallocated assets
Total assets

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

126,312 $
(23,256)
103,056
(27,402)
75,654
925
76,579 $

111,805 $
(30,484)
81,321
(19,982)
61,339
(12,501)
48,838 $

79,093
(32,554)
46,539
(20,718)
25,821
(19,091)
6,730

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

31,906 $

2,101

34,007
4,223

38,230 $

31,112 $
1,539

32,651
9,681
42,332 $

39,820
630

40,450
18,475
58,925

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

19,006 $

1,453
20,459
5,187

25,646 $

13,242 $
2,134
15,376
2,798
18,174 $

33,249
3,208
36,457
4,709
41,166

January 2,
2015

January 3,
2014

December 28,
2012

761,225 $

76,529
837,754
118,255
956,009 $

758,369 $
56,245
814,614
76,089
890,703 $

779,890
57,750
837,640
52,235
889,875

- 98 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Sales by geographic area:

United States

Non-Domestic locations:

Puerto Rico
Belgium
Rest of world

Total sales

Long-lived tangible assets:
United States
Rest of world
Total

January 2,
2015

Year Ended

January 3,
2014

December 28,
2012

312,539 $

325,090 $

330,537

127,702
65,308
182,238
687,787 $

117,961
67,155
153,739
663,945 $

105,731
58,043
151,866
646,177

January 2,
2015

January 3,
2014

December 28,
2012

113,851 $
31,074

144,925 $

116,484 $
29,289
145,773 $

123,104
27,789
150,893

A significant portion of the Company’s sales and accounts receivable were to four customers as follows:

Customer A
Customer B
Customer C
Customer D

Sales

Year Ended

Accounts Receivable

January 2,
2015

January 3,
2014

December 28,
2012

January 2,
2015

January 3,
2014

18%
18%
12%
6%
54%

20%
16%
13%
7%
56%

19%
16%
11%
6%
52%

4%
23%
8%
12%
47%

8%
19%
8%
11%
46%

20. QUARTERLY SALES AND EARNINGS DATA—UNAUDITED

2014
Sales
Gross profit
Net income
EPS—basic
EPS—diluted

2013
Sales
Gross profit
Net income
EPS—basic
EPS—diluted

4th Qtr.

3rd Qtr.

2nd Qtr.

1st Qtr.

(in thousands, except per share data)

171,699 $

58,118
14,012
0.56
0.54

167,730 $
55,877
11,071
0.46
0.44

172,081 $
58,470
12,348
0.50
0.48

171,331 $
57,302
9,752
0.41
0.39

174,281
57,596
14,922
0.61
0.58

148,265
48,749
5,663
0.24
0.23

169,726 $
57,214
14,176
0.57
0.54

176,619 $
57,385
9,781
0.40
0.38

- 99 -

GREATBATCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fourth quarter results for 2013 includes an additional week of operations in comparison to the same period of 2014 as
the Company utilizes a fifty-two, fifty-three week fiscal year, which ends on the Friday nearest December 31st.
Although this additional week of operations may have impacted certain financial statement line items, management
believes that, when combined with the additional holiday and weather related shutdowns, this additional week did not
materially impact the Company’s net operating results.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Management’s Report on Internal Control Over Financial Reporting appears in Part II, Item 8, “Financial Statements and
Supplementary Data” of this report and is incorporated into this Item 9A by reference.

a. Evaluation of Disclosure Controls and Procedures.

Our management, including the principal executive officer and principal financial officer, evaluated our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) related to the recording,
processing, summarization and reporting of information in our reports that we file with the Securities and Exchange
Commission as of January 2, 2015. These disclosure controls and procedures have been designed to provide reasonable
assurance that material information relating to us, including our subsidiaries, is made known to our management, including
these officers, by our employees, and that this information is recorded, processed, summarized, evaluated and reported, as
applicable, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based on their
evaluation, as of January 2, 2015, our principal executive officer and principal financial officer have concluded that our
disclosure controls and procedures are effective.

b. Changes in Internal Control Over Financial Reporting.

We acquired the following subsidiary during 2014:

Centro de Construcción de Cardioestimuladores del Uruguay

We believe that the internal controls and procedures of the above mentioned subsidiary are reasonably likely to materially affect
our internal control over financial reporting. We are currently in the process of incorporating the internal controls and
procedures of this subsidiary into our internal controls over financial reporting.

The Company has begun to extend its Section 404 compliance program under the Sarbanes-Oxley Act of 2002 (the “Act”) and
the applicable rules and regulations under such Act to include this subsidiary. However, the Company has excluded this
subsidiary from management’s assessment of the effectiveness of internal control over financial reporting as of January 2, 2015,
as permitted by the guidance issued by the Office of the Chief Accountant of the Securities and Exchange Commission. This
subsidiary represented approximately 3% and 2% of net and total assets, respectively, 1% of revenues, and 2% of net income of
the consolidated financial statement amounts as of and for the year ended January 2, 2015. The Company will report on its
assessment of the internal controls of its combined operations within the time period provided by the Act and the applicable
Securities and Exchange Commission rules and regulations concerning business combinations.

Other than as described above, there were no changes in the registrant’s internal control over financial reporting during our last
fiscal quarter to which this Annual Report on Form 10-K relates that have materially affected, or are reasonably likely to
materially affect, internal control over financial reporting.

- 100 -

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding the Company’s directors appearing under the caption “Election of Directors” in the Company’s
Proxy Statement for its 2015 Annual Meeting of Stockholders is incorporated herein by reference.

Information regarding the Company’s executive officers is presented under the caption “Executive Officers of the
Company” in Part I of this Annual Report on Form 10-K.

The other information required by Item 10 is incorporated herein by reference from the Company’s Proxy Statement for
its 2015 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding executive compensation in the Company’s Proxy Statement for the 2015 Annual Meeting of
Stockholders is incorporated herein by reference.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Information regarding security ownership of certain beneficial owners and management and related stockholder matters,
including the table titled “Equity Compensation Plan Information,” in the Company’s Proxy Statement for the 2015
Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information regarding certain relationships and related transactions, and director independence in the Company’s Proxy
Statement for the 2015 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information regarding the fees paid to and services provided by Deloitte & Touche LLP, the Company’s independent
registered public accounting firm, in the Company’s Proxy Statement for the 2015 Annual Meeting of Stockholders is
incorporated herein by reference.

- 101 -

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT

PART IV

1. Financial statements and financial statement schedules filed as part of this Annual Report on Form 10-K. See Part II,

Item 8. “Financial Statements and Supplementary Data.”

2. The following financial statement schedule is included in this Annual Report on Form 10-K (in thousands):

Schedule II—Valuation and Qualifying Accounts

Col. C—Additions

Col. A
Description
January 2, 2015
Allowance for doubtful accounts
Valuation allowance for deferred income tax
assets
January 3, 2014
Allowance for doubtful accounts
Valuation allowance for deferred income tax
assets
December 28, 2012
Allowance for doubtful accounts
Valuation allowance for deferred income tax
assets

Col. B
Balance at
Beginning
of Period

Charged to
Costs &
Expenses

Charged to
Other
Accounts-
Describe

Col. D
Deductions
- Describe

Col. E
Balance at
End of
Period

2,001 $

(3)(4) $

(702) (2)

1,411

$ 11,661 $

(729) (1) $

— (4)

(223) (1)(5) $ 10,709

2,372 $

(93)

(15)

(4)

(263) (2)

2,001

$ 12,768 $

(1,263) (1) $

(4)

124

(1)

$ 11,661

1,930 $

484

(3)(4) $

(113) (2)

2,372

7,775 $

5,145 (1) $

124

(4)

(276) (5)

$ 12,768

(1) Valuation allowance recorded in the provision for income taxes for certain net operating losses and tax credits. The net

decrease in allowance in 2014 and 2013 primarily relates to the use of net operating loss carryforwards.

(2) Accounts written off.
(3) Balance recorded as a part of our 2014 acquisition of Centro de Construcción de Cardioestimuladores del Uruguay and our

2012 acquisition of NeuroNexus Technologies, Inc.
Includes foreign currency translation effect.

(4)
(5) Primarily relates to return to provision adjustments for prior years.

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is
shown in the financial statements or notes thereto.

3. Exhibits required by Item 601 of Regulation S-K. The exhibits listed on the Exhibit Index of this Annual Report on
Form 10-K have been previously filed, are filed herewith or are incorporated herein by reference to other filings.

- 102 -

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Dated: March 3, 2015

By /s/ Thomas J. Hook

Thomas J. Hook (Principal Executive Officer)
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the date indicated.

Date

March 3, 2015

Signature

Title

/s/ Thomas J. Hook
Thomas J. Hook

/s/ Michael Dinkins
Michael Dinkins

/s/ Thomas J. Mazza
Thomas J. Mazza

/s/ Bill R. Sanford
Bill R. Sanford

/s/ Pamela G. Bailey
Pamela G. Bailey

/s/ Anthony P. Bihl III
Anthony P. Bihl III

/s/ Joseph W. Dziedzic
Joseph W. Dziedzic

/s/ Dr. Joseph A. Miller, Jr.
Dr. Joseph A. Miller, Jr.

/s/ Peter H. Soderberg
Peter H. Soderberg

/s/ William B. Summers, Jr.
William B. Summers, Jr.

President, Chief Executive
Officer and Director
(Principal Executive Officer)

Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

Vice President and Corporate Controller (Principal
Accounting Officer)

Chairman

Director

- 103 -

EXHIBIT
NUMBER

3.1

3.2

10.1#

10.2#

10.3#

10.4#

10.5

10.6+

10.7#

10.8#

10.9

10.10#

10.11#

10.12#

10.13#

10.14#

EXHIBIT INDEX

DESCRIPTION

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).

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K
for the year ended January 1, 2010).

1998 Stock Option Plan (including form of “standard” option agreement, form of “special” option agreement
and form of “non-standard” option agreement) (incorporated by reference to Exhibit 10.2 to our Registration
Statement on Form S-1 filed on May 22, 2000 (File No. 333-37554)).

Amendment to Greatbatch, Inc. 1998 Stock Option Plan (incorporated by reference to Exhibit 10.2 to our
Annual Report on Form 10-K for the period ended January 3, 2014).

Non-Employee Director Stock Incentive Plan (incorporated by reference to Exhibit A to our Definitive Proxy
Statement on Schedule 14-A filed on April 22, 2002).

Greatbatch, Inc. Executive Short Term Incentive Compensation Plan (incorporated by reference to Exhibit A
to our Definitive Proxy Statement on Schedule 14-A filed on April 20, 2012).

License Agreement dated August 8, 1996, between Greatbatch Ltd. and Evans Capacitor Company
(incorporated by reference to Exhibit 10.23 to our Registration Statement on Form S-1 filed on May 22, 2000
(File No. 333-37554)).

Amendment No. 2 dated December 6, 2002, between Greatbatch Technologies, Ltd. and Evans Capacitor
Company (incorporated by reference to Exhibit 10.18 to our Annual Report on Form 10-K for the year ended
January 3, 2003).

Form of Change of Control Agreement between Greatbatch, Inc. and its executive officers (Thomas J. Hook,
Mauricio Arellano, and Timothy G. McEvoy) (incorporated by reference to Exhibit 10.1 to our Quarterly
Report on Form 10-Q for the period ended July 1, 2011).

Form of Change of Control Agreement between Greatbatch, Inc. and its executive officers (Michael Dinkins,
Andrew P. Holman, George M. Cintra, and Thomas K. Hickman) (incorporated by reference to Exhibit 10.8
to our Annual Report on Form 10-K for the year ended December 28, 2012).

Second Amended and Restated Credit Agreement dated September 20, 2013 by and among Greatbatch Ltd.,
the lenders party thereto and Manufacturers and Traders Trust Company, as administrative agent, Bank of
America, N.A., as syndication agent and RBS Citizens, N.A. and Wells Fargo Bank, National Association, as
co-documentation agents (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed
on September 23, 2013).

Employment Agreement dated August 5, 2013 between Greatbatch, Inc. and Thomas J. Hook (incorporated
by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on August 9, 2013).

2005 Stock Incentive Plan (incorporated by reference to Exhibit B to our Definitive Proxy Statement on
Schedule 14A filed on April 20, 2007).

2009 Stock Incentive Plan (incorporated by reference to Exhibit A to our Definitive Proxy Statement on
Schedule 14A filed on April 13, 2009).

2011 Stock Incentive Plan (incorporated by reference to Exhibit A to our Definitive Proxy Statement on
Schedule 14A filed on April 14, 2014).

Amendment to Greatbatch, Inc. 2011 Stock Incentive Plan, Greatbatch, Inc. 2009 Stock Incentive Plan,
Greatbatch, Inc. 2005 Stock Incentive Plan (incorporated by reference to Exhibit 10.14 to our Annual Report
on Form 10-K for the year ended January 3, 2014).

- 104 -

EXHIBIT
NUMBER

10.15#

10.16#

10.17#

10.18#

10.19#

12.1*

21.1*

23.1*

31.1*

31.2*

32.1**

101.INS*

101.SCH*

101.CAL*

101.LAB*

101.PRE*

101.DEF*

DESCRIPTION

Form of Restricted Stock Award Letter (incorporated by reference to Exhibit 10.15 to our Annual Report on
Form 10-K for the year ended January 3, 2014).

Form of Performance-Based Restricted Stock Units Award Letter (incorporated by reference to Exhibit 10.16
to our Annual Report on Form 10-K for the year ended January 3, 2014).

Form of Nonqualified Option Award Letter (incorporated by reference to Exhibit 10.17 to our Annual Report
on Form 10-K for the year ended January 3, 2014).

Form of Time-Based Restricted Stock Units Award Letter (incorporated by reference to Exhibit 10.18 to our
Annual Report on Form 10-K for the year ended January 3, 2014).

Separation Agreement and Acknowledgment effective January 3, 2015 between Greatbatch, Inc. and
Michelle Graham (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the
period ended October 3, 2014).

Ratio of Earnings to Fixed Charges (Unaudited)
Subsidiaries of Greatbatch, Inc.

Consent of Independent Registered Public Accounting Firm

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
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.

XBRL Instance Document
XRBL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Labels Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

Portions of those exhibits marked “+” have been omitted and filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment.

* -

Filed herewith.

** -

Furnished herewith.

# -

Indicates exhibits that are management contracts or compensation plans or arrangements required to be filed pursuant
to Item 15(b) of Form 10-K.

- 105 -

[This page intentionally left blank.]

RATIO OF EARNINGS TO FIXED CHARGES (Unaudited)

EXHIBIT 12.1

Earnings:
Income before income taxes
Fixed Charges:

Interest expense
Discounts & deferred financing fees
Interest portion of rental expense

Total earnings and fixed charges

Fixed Charges:

Interest expense
Discounts & deferred financing fees
Interest portion of rental expense

Total fixed charges

Ratio of earnings to fixed charges

Jan. 2,
2015

Jan. 3,
2014

Year Ended

Dec. 28,
2012

Dec. 30,
2011

Dec. 31,
2010

76,579 $

48,838 $

6,730 $

48,392 $

49,325

3,479
773
1,413
82,244 $

3,479 $
773
1,413
5,665 $
14.5

4,895
6,366
1,460
61,559 $

4,895 $
6,366
1,460
12,721 $
4.8

5,497
12,557
1,056
25,840 $

5,497 $
12,557
1,056
19,110 $
1.4

5,539
11,389
766
66,086 $

5,539 $
11,389
766
17,694 $
3.7

7,839
10,680
848
68,692

7,839
10,680
848
19,367
3.5

SUBSIDIARIES OF GREATBATCH, INC.

EXHIBIT 21.1

Subsidiary

Greatbatch Ltd.
(direct subsidiary of Greatbatch, Inc.)

Electrochem Solutions, Inc.
(direct subsidiary of Greatbatch Ltd.)

Micro Power Electronics, Inc.
(direct subsidiary of Electrochem Solutions, Inc.)

Greatbatch-Globe Tool, Inc.
(direct subsidiary of Greatbatch Ltd.)

Precimed, Inc.
(direct subsidiary of Greatbatch Ltd.)

QiG Group, LLC
(direct subsidiary of Greatbatch Ltd.)

P Medical Holding SA
(direct subsidiary of Greatbatch Ltd.)

QiG Singapore Pte. Ltd.
(direct subsidiary of P Medical Holding SA)

Greatbatch Medical SA
(direct subsidiary of P Medical Holding SA)

Greatbatch LLC
(direct subsidiary of Greatbatch Medical SA)

Greatbatch Medical, S. de R.L. de C.V.
(owned 99% by Greatbatch LLC & 1% by Greatbatch Medical SA)

Greatbatch Medical SAS
(direct subsidiary of Greatbatch Medical SA)

Greatbatch Medical Limited
(direct subsidiary of Greatbatch Medical SA)

NeuroNexus Technologies, Inc.
(direct subsidiary of Greatbatch Ltd.)

AlgoStim LLC
(owned 88% by QiG Group, LLC)

PelviStim LLC
(owned 88.25% by QiG Group, LLC)

Greatbatch UHC SA
(direct subsidiary of Greatbatch Medical SA)

Centro de Construcción de Cardioestimuladores del Uruguay SA
(direct subsidiary of Greatbatch UHC SA)

Incorporated

New York

Massachusetts

Delaware

Minnesota

Pennsylvania

Delaware

Switzerland

Singapore

Switzerland

Delaware

Mexico

France

United Kingdom

Michigan

Delaware

Switzerland

Uruguay

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

EXHIBIT 23.1

We consent to the incorporation by reference in Registration Statement Nos. 333-61476, 333-97209, 333-129002, 333-143519,
333-161159, 333-174559, 333-184604 and 333-196320 on Form S-8 of our reports dated March 3, 2015, relating to the
consolidated financial statements and consolidated financial statement schedule of Greatbatch, Inc. and subsidiary (the
“Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report
on Form 10-K of Greatbatch, Inc. for the year ended January 2, 2015.

Williamsville, New York
March 3, 2015

EXHIBIT 31.1

I, Thomas J. Hook, certify that:

CERTIFICATION

I have reviewed this annual report on Form 10-K for the fiscal year ended January 2, 2015 of Greatbatch, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered
by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditor and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in

the registrant’s internal control over financial reporting.

Dated: March 3, 2015

Thomas J. Hook
President and Chief Executive Officer
(Principal Executive Officer)

EXHIBIT 31.2

I, Michael Dinkins, certify that:

CERTIFICATION

I have reviewed this annual report on Form 10-K for the fiscal year ended January 2, 2015 of Greatbatch, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by the report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in

the registrant’s internal control over financial reporting.

Dated: March 3, 2015

Michael Dinkins
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the
undersigned officers of Greatbatch, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Annual Report on Form 10-K for the fiscal year ended January 2, 2015 (the “Form 10-K”) of the Company fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the
Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 3, 2015

Thomas J. Hook
President and Chief Executive Officer
(Principal Executive Officer)

Michael Dinkins
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

Corporate Leadership

Thomas J. Hook
President & Chief Executive Officer

Michael Dinkins
Executive Vice President &
Chief Financial Officer

Mauricio Arellano
Executive Vice President,
Global Operations

Andrew P. Holman
Executive Vice President,
Global Sales & Marketing – Greatbatch Medical

Thomas K. Hickman
Executive Vice President, Global Sales &
Marketing - QiG Group

George M. Cintra
Executive Vice President & Chief Technology
Officer

Timothy G. McEvoy
Senior Vice President,
General Counsel & Secretary

Board of Directors

Pamela G. Bailey
President and Chief Executive
Officer, The Grocery
Manufacturers Association

Anthony P. Bihl III
Chief Executive Officer,
Bioventus, LLC

Joseph W. Dziedzic
Executive Vice President and
Chief Financial Officer, The
Brink’s Company

Thomas J. Hook
President & Chief Executive
Officer, Greatbatch, Inc.

Dr. Joseph A. Miller, Jr.
Retired Executive Vice President
and Chief Technology Officer,
Corning, Inc.

Bill R. Sanford, Chairman
Founder and Chairman,
Symark LLC

Peter H. Soderberg
Managing Partner,
Worthy Ventures Resources, LLC

William B. Summers, Jr.
Retired Chairman and Chief
Executive Officer,
McDonald Investments, Inc.

Global Headquarters
Greatbatch, Inc.
2595 Dallas Parkway, Suite 310
Frisco, Texas 75034

Internet Address
www.greatbatch.com

Common Stock Listing
New York Stock Exchange
Trading Symbol: GB

Investor Information
Shareholders, securities analysts and investors seeking more information about the company can access
information via the Internet or from the Investor Relations Department:

Greatbatch, Inc.
2595 Dallas Parkway, Suite 310
Frisco, Texas 75034

Transfer Agent and Registrar
Computershare Shareholder Services
P.O. Box 30170
College Station, Texas 77842-3170

For Overnight Mail:
Computershare Shareholder Services
211 Quality Circle, Suite 210
College Station, Texas 77845
www.computershare.com/investor

Dedicated Toll Free Number: 1-877-832-7265
TDD Hearing Impaired: 1-800-231-5469
TDD Foreign Stockholders: 1-201-680-6610
Foreign Stockholders: 1-201-680-6578

Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
Williamsville, NY

Greatbatch, Inc.
2595 Dallas Parkway
Suite 310
Frisco, Texas 75034
(716) 759-5600
www.greatbatch.com