9.) DEBT

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



	December 30, 2016			January 1, 2016
Senior secured term loan A	$	356,250		$	375,000
Senior secured term loan B	1,014,750			1,025,000
9.125% senior notes due 2023	360,000			360,000
Revolving line of credit	40,000			—
Less unamortized discount on term loan B and debt issuance costs	(40,837		)	(45,947		)
Total debt	1,730,163			1,714,053
Less current portion of long-term debt	31,344			29,000
Total long-term debt	$	1,698,819		$	1,685,053

Senior Secured Credit Facilities

In connection with the Lake Region Medical acquisition, on October 27, 2015, the Company replaced its existing credit facility with new senior secured credit facilities (the “Senior Secured Credit Facilities”) consisting of (i) a $200 million revolving credit facility (the “Revolving Credit Facility”), (ii) a $375 million term loan A facility (the “TLA Facility”), and (iii) a $1,025 million term loan B facility (the “TLB Facility”). The TLA Facility and TLB Facility are collectively referred to as the “Term Loan Facilities.” The TLB facility was issued at a 1% discount.

(9.) DEBT (Continued)

Revolving Credit Facility

The Revolving Credit Facility matures on October 27, 2020 and includes a $15 million sublimit for swingline loans and a $25 million sublimit for standby letters of credit. The Company is required to pay a commitment fee on the unused portion of the Revolving Credit Facility, which will range between 0.175% and 0.25%, depending on the Company’s total net leverage ratio, as defined in the Senior Secured Credit Facilities agreement. As of December 30, 2016, the Company had $40 million of outstanding borrowings on the Revolving Credit Facility and an available borrowing capacity of $151.1 million after giving effect to$8.9 million of outstanding standby letters of credit. As of December 30, 2016, the weighted average interest rate on outstanding borrowings under the Revolving Credit Facility was 3.95%.

Subject to certain conditions, commitments under the Revolving Credit Facility may be increased through an incremental revolving facility so long as, on a pro forma basis, the Company’s first lien net leverage ratio does not exceed 4.25:1.00. The outstanding amount of the Revolving Credit Facility approximated its fair value as of December 30, 2016 based upon the debt being variable rate and short-term in nature.

Term Loan Facilities

The TLA Facility and TLB Facility mature on October 27, 2021 and October 27, 2022, respectively. Interest rates on the TLA Facility, as well as the Revolving Credit Facility, are at the Company’s option, either at: (i) the prime rate plus the applicable margin, which will range between 0.75% and 2.25%, based on the Company’s total net leverage ratio, as defined in the Senior Secured Credit Facilities agreement or (ii) the applicable LIBOR rate plus the applicable margin, which will range between 1.75% and 3.25%, based on the Company’s total net leverage ratio. Interest rates on the TLB Facility are, at the Company’s option, either at: (i) the prime rate plus 3.25% or (ii) the applicable LIBOR rate plus 4.25%, with LIBOR subject to a 1.00% floor. As of December 30, 2016, the interest rate on the TLA Facility and TLB Facility were 4.01% and 5.25%, respectively.

Subject to certain conditions, one or more incremental term loan facilities may be added to the Term Loan Facilities so long as, on a pro forma basis, the Company’s first lien net leverage ratio does not exceed 4.25:1.00.

As of December 30, 2016, the estimated fair value of TLA and TLB were approximately $349 million and $1,022 million, respectively, based on quoted market prices for the debt, recent sales prices for the debt and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as Level 2 measurements within the fair value hierarchy.

Covenants

The Revolving Credit Facility and the TLA Facility contain covenants requiring (A) a maximum total net leverage ratio of 6.25:1.0, subject to step downs and (B) a minimum interest coverage ratio of adjusted EBITDA (as defined in the Senior Secured Credit Facilities) to interest expense of not less than 2.50:1.0, subject to step ups. The TLB Facility does not contain any financial maintenance covenants. During the fourth quarter of 2016, the Company amended the Senior Secured Credit Facilities. The amendment modified certain covenants covering the Revolving Credit Facility and the TLA Facility. Pursuant to the amendment, the maximum total net leverage ratio stepped down to 6.25:1.0 beginning in the fourth fiscal quarter of 2016 until and including the fourth fiscal quarter for 2017, and will gradually decline to 4.0:1.0 by the second fiscal quarter of 2020. Additionally, pursuant to the amendment, the minimum interest coverage ratio dropped to 2.50:1.0 beginning in the fourth fiscal quarter of 2016 until and including the fourth fiscal quarter of 2017. For fiscal quarters in 2018 and 2019, the interest coverage ratio will rise to 2.75:1.0 and 3.0:1.0, respectively.

The Senior Secured Credit Facilities also contain negative covenants that restrict the Company’s ability to (i) incur additional indebtedness; (ii) create certain liens; (iii) consolidate or merge; (iv) sell assets, including capital stock of the Company’s subsidiaries; (v) engage in transactions with the Company’s affiliates; (vi) create restrictions on the payment of dividends or other amounts from the Company’s restricted subsidiaries; (vii) pay dividends on capital stock or redeem, repurchase or retire capital stock; (viii) pay, prepay, repurchase or retire certain subordinated indebtedness; (ix) make investments, loans, advances and acquisitions; (x) make certain amendments or modifications to the organizational documents of the Company or its subsidiaries or the documentation governing other senior indebtedness of the Company; and (xi) change the Company’s type of business. These negative covenants are subject to a number of limitations and exceptions that are described in the Senior Secured Credit Facilities agreement. As of December 30, 2016, the Company was in compliance with all financial and negative covenants under the Senior Secured Credit Facilities.

(9.) DEBT (Continued)

The Senior Secured Credit Facilities provide for customary events of default. Upon the occurrence and during the continuance of an event of default, the outstanding advances and all other obligations under the Senior Secured Credit Facilities become immediately due and payable. The Senior Secured Credit Facilities are guaranteed by Integer Holdings Corporation, as a parent guarantor, and all of the Company’s present and future direct and indirect wholly-owned domestic subsidiaries (other than Greatbatch Ltd. (which is the borrower under the Senior Secured Credit Facilities), non-wholly owned joint ventures, and certain other excluded subsidiaries). The Senior Secured Credit Facilities are secured, subject to certain exceptions, by a first priority security interest in; i) the present and future shares of capital stock of (or other ownership or profit interests in) Greatbatch Ltd. and each guarantor (except Integer Holdings Corporation); ii) sixty-six percent (66%) of all present and future shares of voting capital stock of each specified first-tier foreign subsidiary; iii) substantially all of the Company’s, Greatbatch Ltd.’s and each other guarantor’s other personal property; and iv) all proceeds and products of the property and assets of the Company, Greatbatch Ltd. and the other guarantors.

9.125% Senior Notes due 2023

On October 27, 2015, the Company completed a private offering of $360 million aggregate principal amount of 9.125% senior notes due on November 1, 2023 (the “Senior Notes”). All the Senior Notes are outstanding as of December 30, 2016.

Interest on the Senior Notes is payable on May 1 and November 1 of each year. The Company may redeem the Senior Notes, in whole or in part, prior to November 1, 2018 at a price equal to 100% of the principal amount thereof plus a “make-whole” premium. Prior to November 1, 2018, the Company may redeem up to 40% of the aggregate principal amount of the Senior Notes using the proceeds from certain equity offerings at a redemption price equal to 109.125% of the aggregate principal amount of the Senior Notes. On or after November 1, 2018, the Company may redeem the Senior Notes, in whole or in part, pursuant to a customary schedule of declining redemption prices. As of December 30, 2016, the estimated fair value of the Senior Notes was approximately $359 million, based on quoted market prices of these notes, recent sales prices for the notes and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as Level 2 measurements within the fair value hierarchy.

The Senior Notes are senior unsecured obligations of the Company. The Senior Notes contain restrictive covenants that, among other things, limit the ability of the Company to: (i) incur or guarantee additional indebtedness or issue certain disqualified stock or preferred stock; (ii) create certain liens; (iii) pay dividends or make distributions in respect of capital stock; (iv) make certain other restricted payments; (v) enter into agreements that restrict certain dividends or other payments; (vi) enter into sale-leaseback agreements; (vii) engage in certain transactions with affiliates; and (viii) consolidate or merge with, or sell substantially all of their assets to, another person. These covenants are subject to a number of limitations and exceptions that are described in the indenture for the Senior Notes. The Senior Notes provide for customary events of default, subject in certain cases to customary cure periods, in which the Senior Notes and any unpaid interest would become due and payable. As of December 30, 2016, the Company was in compliance with all restrictive covenants under the indenture governing the Senior Notes.

As of December 30, 2016, the weighted average interest rate on all outstanding borrowings is 5.76%.

Contractual maturities of the Company’s debt facilities for the next five years and thereafter, excluding any discounts or premiums, as of December 30, 2016 are as follows (in thousands):



	2017		2018	2019	2020	2021	After 2021
Future minimum principal payments	$	31,344	40,719	47,750	87,750	239,937	1,323,500

(9.) DEBT (Continued)

Debt Issuance Costs and Discounts

The Company incurred debt issuance costs in conjunction with the issuance of the Senior Secured Credit Facilities and the Senior Notes. The change in deferred debt issuance costs related to the Company’s Revolving Credit Facility is as follows (in thousands):



January 2, 2015	$	2,200
Financing costs deferred	4,152
Write-off during the period	(907		)
Amortization during the period	(654		)
January 1, 2016	4,791
Amortization during the period	(991		)
December 30, 2016	$	3,800

The change in unamortized discount and debt issuance costs related to the Term Loan Facilities and Senior Notes is as follows (in thousands):



	Debt Issuance Costs			Unamortized Discount on TLB Facility			Total
January 2, 2015	$	887		$	—		$	887
Financing costs incurred	41,781			10,250			52,031
Write-off during the period	(732		)	—			(732		)
Amortization during the period	(6,028		)	(211		)	(6,239		)
January 1, 2016	35,908			10,039			45,947
Financing costs incurred	1,177			—			1,177
Amortization during the period	(4,989		)	(1,298		)	(6,287		)
December 30, 2016	$	32,096		$	8,741		$	40,837

During fiscal year 2015, the Company wrote off $1.6 million of debt issuance costs in connection with the extinguishment and modification of its term loan and revolving line of credit, respectively, which is included in Interest Expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).

(9.) DEBT (Continued)

Interest Rate Swaps

From time to time, the Company enters into interest rate swap agreements in order to hedge against potential changes in cash flows on its outstanding variable rate debt. During 2016, the Company entered into a one year $250 million interest rate swap and a three year $200 million interest rate swap to hedge against potential changes in cash flows on its outstanding variable rate debt, which are indexed to the one-month LIBOR rate. The variable rate received on the interest rate swaps and the variable rate paid on the variable rate debt will have the same rate of interest, excluding the credit spread, and will reset and pay interest on the same day. The swaps are being accounted for as cash flow hedges.

In connection with the Lake Region Medical acquisition, the Company terminated its then outstanding interest rate swap agreements as the forecasted cash flows that the interest rate swaps were hedging were no longer expected to occur. As a result, during the fourth quarter of 2015, the Company made a $2.8 million payment to the interest rate swap counterparty and recognized a $2.8 million charge to Interest Expense.

Information regarding the Company’s outstanding interest rate swaps designated as cash flow hedges as of December 30, 2016 is as follows (dollars in thousands):



Notional Amount		Start Date	End Date	Pay Fixed Rate		Receive Current Floating Rate		Fair Value		Balance Sheet Location
$	250,000	Jul-16	Jun-17	0.615	%	0.7561	%	$	267	Prepaid Expenses and Other Current Assets
$	200,000	Jun-17	Jun-20	1.1325	%	N/A		$	3,215	Other Assets

The estimated fair value of the interest rate swap agreements represents the amount the Company expects to receive (pay) to terminate the contract. No portion of the change in fair value of the Company’s interest rate swaps during 2016, 2015, or 2014 were considered ineffective. The amount recorded as Interest Expense during 2016, 2015, and 2014 related to the Company’s interest rate swaps was $0.1 million, $3.5 million $0.5 million, respectively.