SPNC The Spectranetics Corp. (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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SCHEDULE 14D-9

(Rule 14d-101)

(Amendment No. 2)

SOLICITATION/RECOMMENDATION STATEMENT

UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934

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THE SPECTRANETICS CORPORATION

(Name of Subject Company)

 

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THE SPECTRANETICS CORPORATION

(Name of Person Filing Statement)

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COMMON STOCK, PAR VALUE $0.001 PER SHARE

(Title of Class of Securities)

84760C107

(CUSIP Number of Class of Securities)

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Paul Gardon

Senior Vice President - General CounselThe Spectranetics Corporation
9965 Federal Drive
Colorado Springs, CO 80921
(719) 447-2000

(Name, address and telephone numbers of person authorized to

receive notices and communications on behalf of the persons filing statement)

With a copy to:

Minh Van Ngo, Esq.

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 8th Avenue

New York, New York 10019

(212) 474-1000

 

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☐	Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

 

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This Amendment No. 2 to Schedule 14D-9 (this   “ Amendment ” ) amends and supplements the Solicitation/Recommendation Statement on Schedule 14D-9 previously filed with the Securities and Exchange Commission (the “ SEC ” ) on July 12, 2017 (together with the Exhibits or Annexes thereto and as amended or supplemented from time to time, the “ Schedule 14D-9 ” ) by The Spectranetics Corporation, a Delaware corporation ( “ Spectranetics ” or the “ Company ” ).  The Schedule 14D-9 relates to the cash tender offer by HealthTech Merger Sub, Inc., a Delaware corporation ( “ Purchaser ” ), and a wholly owned subsidiary of Philips Holding USA Inc., a Delaware corporation ( “ Parent ” ), disclosed in the Tender Offer Statement on Schedule TO (together with the Exhibits or Annexes thereto and as amended or supplemented from time to time, the “ Schedule TO ” ), filed by Purchaser and Parent and Koninklijke Philips N.V., a corporation organized under the laws of the Netherlands, with the SEC on July 12, 2017, pursuant to which Purchaser has offered to purchase all of the outstanding shares of common stock, par value $0.001 per share, of Spectranetics (the “ Shares ” ) at a purchase price of $38.50 per Share, net to the seller in cash, without interest, less any applicable tax withholding, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 12, 2017, and in the related Letter of Transmittal, copies of which were incorporated by reference in the Schedule 14D-9 as Exhibits (a)(1)(A) and (a)(1)(B), respectively.

Capitalized terms used but not otherwise defined in this Amendment shall have the meanings ascribed to them in the Schedule 14D-9.  Except as set forth below, the information set forth in the Schedule 14D-9 remains unchanged and is incorporated herein by reference as relevant to the items in this Amendment.

Item 4. The Solicitation or Recommendation

The information set forth in Item 4 of the Schedule 14D-9 is hereby amended and supplemented by:

(a)

Replacing the eighth full paragraph on page 21 under the heading  “Background of the Merger Agreement; Reasons for Recommendation—Background of the Merger” with the following:

“On May 31, 2017, the Compensation Committee met telephonically, with members of Spectranetics’ management and representatives of Cravath, Deloitte LLP, tax advisor to Spectranetics, and Willis Towers Watson, compensation advisor to Spectranetics, participating, to discuss various compensation matters related to the potential transaction with Philips, including the change in control payments that would result from a transaction, employee benefit related provisions of the draft merger agreement, the acceleration of the waiting period applicable to the entry into severance agreements with certain key members of management and the potential tax liabilities that could be imposed under the parachute payment excise tax in various scenarios.  Prior to the Compensation Committee meeting, members of management had not had any discussions related to retention arrangements with Philips.  Based on advice from its advisors, the Compensation Committee directed management not to discuss retention arrangements with Philips and to defer negotiations of employee benefits matters with Philips until after Spectranetics had negotiated the best price for its stockholders.”

(b)

Inserting the following after the final full paragraph of page 34 under the heading “Financial Analyses and Opinion—Opinion of Spectranetics’ Financial Advisor—Public Trading Multiples”:

“Results of the analysis presented for the selected companies included the analysis indicated in the following table:

 

 

(c)

Deleting the table at the bottom of page 35 and top of page 36 under the heading “Financial Analyses and Opinion—Opinion of Spectranetics’ Financial Advisor—Selected Transaction Analysis” and replacing it with the following table:

 

 

(1) This transaction has not yet closed.”

(d)

Inserting the following immediately before the final sentence of the first paragraph of page 37 under the heading “Financial Analyses and Opinion—Opinion of Spectranetics’ Financial Advisor—Discounted Cash Flow Analysis”:

 

“The analysis of the weighted average cost of capital of Spectranetics included, among other considerations, an analysis of the cost of equity and cost of debt of Spectranetics using publicly available information and J.P. Morgan’s judgment.  In selecting the cost of equity, J.P. Morgan considered, among other things, a risk free rate of 2.2%, an equity risk premium range of 6.0% to 7.0% and a levered beta range of 0.90 to 1.40 (selected based upon the predicted and historical betas of the selected companies identified under “—Public Trading Multiples” above).  In calculating the cost of debt, J.P. Morgan considered, among other things, the interest rate on the existing term loan facility of Spectranetics and the approximate spread between 5-year and 10-year U.S. treasury notes.”

(e)

Replacing the section beginning on page 39 under the heading “Certain Spectranetics Forecasts—Management Case 1” with the following:

“The following table presents unaudited prospective financial information for the years 2017 through 2031 prepared by Spectranetics’ management ( “ Management Case 1 ” ), based solely on the best information available to Spectranetics’ management at the time Management Case 1 was developed.  Management Case 1 was developed by management as part of the development of management’s strategic plan and in connection with Spectranetics’ review of strategic and financial alternatives.  The projections contained in Management Case 1 for the years 2017 through 2021 were prepared by Spectranetics’ management based on management’s strategic plan, and the projections contained in Management Case 1 for the years 2022 through 2031 were developed by Spectranetics’ management based on an extrapolation of estimates in Management Case 1.  The principal assumptions reflected in Management Case 1 included the following:

●

Spectranetics receives no revenue from its calcium solution product in fiscal years 2020 and 2021;

●

No revenue is attributable to the below-the-knee application of Stellarex in fiscal years 2017 through 2031;

●

An implied compound annual growth rate of 6% for revenue attributable to the “Lead Management” revenue segment for fiscal years 2017 through 2021;

●

Revenue estimates for fiscal years 2022 through 2031 are based on linear extrapolations by segment targeting a growth rate in fiscal year 2031 of 3%, except the “Services” revenue segment, which targets a growth rate in fiscal year 2031 of 0%, and the “Stellarex” revenue segment, which has a step-down of its targeted growth rate to fiscal year 2023 to reflect its initial ramp up and potential competition;

●

Fixed tax expense is $0.7 million in fiscal year 2017, and $1.0 million annually thereafter in addition to calculated taxes and assumes a net operating loss balance of $245 million as of December 31, 2016; and

●

Approximately $10 million of amortization of intangibles related to the acquisition of AngioScore, Inc. expires in fiscal year 2024.

 

($ in millions)		FY 2017E				FY 2018E				FY 2019E				FY 2020E				FY 2021E				FY 2022E				FY 2023E				FY 2024E				FY 2025E				FY 2026E				FY 2027E				FY 2028E				FY 2029E				FY 2030E				FY 2031E
VI ex-Stellarex		$	200			$	216			$	236			$	260			$	279			$	298			$	318			$	337			$	356			$	374			$	392			$	409			$	424			$	439			$	452
% growth			12	%			8	%			9	%			10	%			7	%			7	%			6	%			6	%			6	%			5	%			5	%			4	%			4	%			3	%			3	%
Stellarex		$	14			$	56			$	84			$	131			$	178			$	228			$	274			$	323			$	373			$	424			$	473			$	518			$	555			$	583			$	601
% growth			402	%			311	%			50	%			55	%			36	%			28	%			20	%			18	%			16	%			14	%			12	%			9	%			7	%			5	%			3	%
Lead Management		$	77			$	81			$	86			$	92			$	97			$	103			$	108			$	114			$	120			$	125			$	130			$	135			$	140			$	145			$	149
% growth			5	%			5	%			6	%			7	%			6	%			6	%			5	%			5	%			5	%			5	%			4	%			4	%			4	%			3	%			3	%
Services		$	15			$	14			$	13			$	12			$	12			$	11			$	11			$	11			$	10			$	10			$	10			$	10			$	10			$	10			$	10
% growth			(8	%)			(6	%)			(6	%)			(7	%)			(4	%)			(4	%)			(3	%)			(3	%)			(2	%)			(2	%)			(2	%)			(1	%)			(1	%)			(0	%)			(0	%)
Total revenue		$	305			$	367			$	419			$	495			$	566			$	641			$	711			$	784			$	859			$	934			$	1,005			$	1,071			$	1,129			$	1,177			$	1,212
% growth			13	%			20	%			14	%			18	%			14	%			13	%			11	%			10	%			10	%			9	%			8	%			7	%			5	%			4	%			3	%
COGS		$	(75	)		$	(87	)		$	(97	)		$	(109	)		$	(123	)		$	(138	)		$	(152	)		$	(167	)		$	(181	)		$	(195	)		$	(208	)		$	(220	)		$	(230	)		$	(237	)		$	(242	)
% of revenue			25	%			24	%			23	%			22	%			22	%			22	%			21	%			21	%			21	%			21	%			21	%			21	%			20	%			20	%			20	%
Gross profit		$	230			$	280			$	323			$	386			$	443			$	502			$	559			$	618			$	678			$	739			$	797			$	851			$	900			$	940			$	970
% margin			75	%			76	%			77	%			78	%			78	%			78	%			79	%			79	%			79	%			79	%			79	%			79	%			80	%			80	%			80	%
Operating expenses		$	(270	)		$	(278	)		$	(286	)		$	(297	)		$	(306	)		$	(343	)		$	(378	)		$	(414	)		$	(450	)		$	(485	)		$	(519	)		$	(548	)		$	(574	)		$	(593	)		$	(606	)
% of revenue			88	%			76	%			68	%			60	%			54	%			54	%			53	%			53	%			52	%			52	%			52	%			51	%			51	%			50	%			50	%
Operating Income (Loss)		$	(40	)		$	2			$	37			$	88			$	137			$	159			$	180			$	204			$	228			$	253			$	278			$	303			$	326			$	346			$	364
% margin			(13	%)			1	%			9	%			18	%			24	%			25	%			25	%			26	%			27	%			27	%			28	%			28	%			29	%			29	%			30	%
D&A		$	26			$	31			$	35			$	38			$	41			$	45			$	47			$	38			$	39			$	40			$	40			$	40			$	39			$	37			$	35
% of revenue			9	%			8	%			8	%			8	%			7	%			7	%			7	%			5	%			5	%			4	%			4	%			4	%			3	%			3	%			3	%
% of capex			116	%			108	%			117	%			124	%			134	%			134	%			134	%			103	%			102	%			101	%			100	%			100	%			99	%			98	%			97	%
EBITDA (1)		$	(14	)		$	34			$	72			$	127			$	179			$	204			$	228			$	242			$	267			$	293			$	319			$	343			$	365			$	384			$	399
% margin			(5	%)			9	%			17	%			26	%			32	%			32	%			32	%			31	%			31	%			31	%			32	%			32	%			32	%			33	%			33	%
Key cash flow items
Capex		$	23			$	29			$	30			$	31			$	31			$	33			$	35			$	37			$	38			$	39			$	40			$	40			$	39			$	38			$	36
% of revenue			7	%			8	%			7	%			6	%			5	%			5	%			5	%			5	%			4	%			4	%			4	%			4	%			3	%			3	%			3	%
Change in NWC		$	(7	)		$	(5	)		$	(4	)		$	(9	)		$	(11	)		$	(11	)		$	(10	)		$	(10	)		$	(10	)		$	(10	)		$	(9	)		$	(8	)		$	(7	)		$	(6	)		$	(4	)
% of change in revenue			22	%			9	%			7	%			12	%			15	%			15	%			14	%			14	%			14	%			13	%			13	%			13	%			12	%			12	%			11	%
Unlevered free cash flow		$	(44	)		$	(2	)		$	37			$	86			$	136			$	110			$	118			$	122			$	138			$	154			$	171			$	187			$	203			$	218			$	230

($ in millions)			FY 2017E				FY 2018E				FY 2019E				FY 2020E				FY 2021E				FY 2022E				FY 2023E				FY 2024E				FY 2025E				FY 2026E				FY 2027E				FY 2028E				FY 2029E				FY 2030E				FY 2031E
VI ex-Stellarex			$	196			$	214			$	236			$	259			$	284			$	310			$	337			$	363			$	388			$	413			$	437			$	459			$	479			$	497			$	512
% growth				9	%			9	%			10	%			10	%			10	%			9	%			8	%			8	%			7	%			6	%			6	%			5	%			4	%			4	%			3	%
Stellarex			$	19			$	80			$	140			$	187			$	241			$	300			$	360			$	424			$	491			$	557			$	621			$	680			$	729			$	766			$	789
% growth				579	%			332	%			75	%			33	%			29	%			24	%			20	%			18	%			16	%			14	%			12	%			9	%			7	%			5	%			3	%
Lead Management			$	80			$	88			$	98			$	108			$	117			$	126			$	136			$	145			$	154			$	163			$	171			$	179			$	187			$	193			$	199
% growth				10	%			9	%			11	%			10	%			8	%			8	%			7	%			7	%			6	%			6	%			5	%			5	%			4	%			4	%			3	%
Services			$	15			$	14			$	13			$	12			$	11			$	10			$	9			$	8			$	8			$	7			$	7			$	7			$	7			$	7			$	7
% growth				(9	%)			(3	%)			(9	%)			(9	%)			(10	%)			(9	%)			(8	%)			(7	%)			(6	%)			(5	%)			(4	%)			(3	%)			(2	%)			(1	%)			0	%
Total revenue			$	309			$	396			$	487			$	565			$	653			$	746			$	840			$	940			$	1,041			$	1,141			$	1,237			$	1,325			$	1,401			$	1,463			$	1,507
% growth				14	%			28	%			23	%			16	%			15	%			14	%			13	%			12	%			11	%			10	%			8	%			7	%			6	%			4	%			3	%
COGS			$	(81	)		$	(97	)		$	(114	)		$	(129	)		$	(144	)		$	(163	)		$	(182	)		$	(201	)		$	(221	)		$	(240	)		$	(257	)		$	(273	)		$	(286	)		$	(296	)		$	(301	)
% of revenue				26	%			24	%			23	%			23	%			22	%			22	%			22	%			21	%			21	%			21	%			21	%			21	%			20	%			20	%			20	%
Gross profit			$	229			$	299			$	373			$	437			$	509			$	583			$	659			$	738			$	820			$	901			$	979			$	1,052			$	1,115			$	1,167			$	1,205
% margin				74	%			76	%			77	%			77	%			78	%			78	%			78	%			79	%			79	%			79	%			79	%			79	%			80	%			80	%			80	%
Operating expenses			$	(265	)		$	(294	)		$	(312	)		$	(336	)		$	(361	)		$	(409	)		$	(456	)		$	(505	)		$	(554	)		$	(601	)		$	(645	)		$	(684	)		$	(716	)		$	(739	)		$	(753	)
% of revenue				86	%			74	%			64	%			60	%			55	%			55	%			54	%			54	%			53	%			53	%			52	%			52	%			51	%			51	%			50	%
Operating Income (Loss)			$	(36	)		$	6			$	61			$	100			$	148			$	174			$	203			$	233			$	266			$	300			$	335			$	368			$	400			$	428			$	452
% margin				(12	%)			1	%			12	%			18	%			23	%			23	%			24	%			25	%			26	%			26	%			27	%			28	%			29	%			29	%			30	%
D&A			$	26			$	30			$	36			$	40			$	43			$	47			$	51			$	44			$	46			$	47			$	48			$	48			$	47			$	46			$	44
% of revenue				8	%			8	%			7	%			7	%			7	%			6	%			6	%			5	%			4	%			4	%			4	%			4	%			3	%			3	%			3	%
% of capex				121	%			105	%			102	%			110	%			139	%			139	%			139	%			111	%			109	%			107	%			105	%			103	%			101	%			99	%			97	%
EBITDA (1)			$	(10	)		$	36			$	96			$	140			$	191			$	222			$	254			$	278			$	312			$	348			$	383			$	416			$	447			$	474			$	496
% margin				(3	%)			9	%			20	%			25	%			29	%			30	%			30	%			30	%			30	%			30	%			31	%			31	%			32	%			32	%			33	%
Key cash flow items
Capex			$	21			$	29			$	35			$	36			$	31			$	34			$	37			$	40			$	42			$	44			$	46			$	47			$	47			$	46			$	45
% of revenue				7	%			7	%			7	%			6	%			5	%			5	%			4	%			4	%			4	%			4	%			4	%			4	%			3	%			3	%			3	%
Change in NWC			$	(9	)		$	(14	)		$	(6	)		$	(11	)		$	(13	)		$	(14	)		$	(14	)		$	(14	)		$	(14	)		$	(13	)		$	(12	)		$	(11	)		$	(9	)		$	(7	)		$	(5	)
% of change in revenue				23	%			16	%			6	%			14	%			15	%			15	%			14	%			14	%			14	%			13	%			13	%			13	%			12	%			12	%			12	%
Unlevered free cash flow			$	(41	)		$	(8	)		$	55			$	92			$	134			$	112			$	132			$	141			$	162			$	184			$	206			$	229			$	250			$	269			$	286

($ in millions)		FY 2017E				FY 2018E				FY 2019E				FY 2020E				FY 2021E				FY 2022E				FY 2023E				FY 2024E				FY 2025E				FY 2026E				FY 2027E				FY 2028E				FY 2029E				FY 2030E				FY 2031E
VI ex-Stellarex		$	196			$	215			$	237			$	264			$	307			$	354			$	403			$	453			$	503			$	552			$	599			$	641			$	678			$	707			$	728
% growth			10	%			9	%			10	%			11	%			17	%			15	%			14	%			12	%			11	%			10	%			8	%			7	%			6	%			4	%			3	%
Stellarex		$	18			$	80			$	140			$	207			$	271			$	340			$	408			$	480			$	556			$	632			$	705			$	771			$	827			$	869			$	895
% growth			563	%			340	%			75	%			48	%			31	%			25	%			20	%			18	%			16	%			14	%			12	%			9	%			7	%			5	%			3	%
Lead Management		$	81			$	89			$	101			$	112			$	123			$	134			$	146			$	158			$	169			$	180			$	191			$	201			$	209			$	217			$	224
% growth			10	%			11	%			12	%			11	%			10	%			9	%			9	%			8	%			7	%			7	%			6	%			5	%			4	%			4	%			3	%
Services		$	15			$	14			$	13			$	12			$	10			$	9			$	8			$	7			$	7			$	6			$	6			$	6			$	5			$	5			$	5
% growth			(4	%)			(7	%)			(9	%)			(11	%)			(13	%)			(12	%)			(11	%)			(9	%)			(8	%)			(7	%)			(5	%)			(4	%)			(3	%)			(1	%)			(0	%)
Total revenue		$	310			$	398			$	490			$	593			$	711			$	837			$	964			$	1,098			$	1,235			$	1,371			$	1,500			$	1,618			$	1,719			$	1,798			$	1,852
% growth			15	%			28	%			23	%			21	%			20	%			18	%			15	%			14	%			12	%			11	%			9	%			8	%			6	%			5	%			3	%
COGS		$	(80	)		$	(98	)		$	(115	)		$	(135	)		$	(156	)		$	(182	)		$	(208	)		$	(235	)		$	(262	)		$	(288	)		$	(312	)		$	(333	)		$	(351	)		$	(363	)		$	(370	)
% of revenue			26	%			24	%			23	%			23	%			22	%			22	%			22	%			21	%			21	%			21	%			21	%			21	%			20	%			20	%			20	%
Gross profit		$	230			$	301			$	375			$	459			$	554			$	654			$	756			$	863			$	973			$	1,083			$	1,188			$	1,285			$	1,368			$	1,435			$	1,482
% margin			74	%			76	%			77	%			77	%			78	%			78	%			78	%			79	%			79	%			79	%			79	%			79	%			80	%			80	%			80	%
Operating expenses		$	(264	)		$	(293	)		$	(312	)		$	(337	)		$	(364	)		$	(427	)		$	(491	)		$	(558	)		$	(627	)		$	(694	)		$	(757	)		$	(815	)		$	(864	)		$	(901	)		$	(926	)
% of revenue			85	%			74	%			64	%			57	%			51	%			51	%			51	%			51	%			51	%			51	%			50	%			50	%			50	%			50	%			50	%
Operating Income (Loss)		$	(34	)		$	8			$	63			$	122			$	190			$	227			$	264			$	305			$	347			$	389			$	431			$	470			$	505			$	534			$	556
% margin			(11	%)			2	%			13	%			21	%			27	%			27	%			27	%			28	%			28	%			28	%			29	%			29	%			29	%			30	%			30	%
D&A		$	26			$	30			$	35			$	39			$	42			$	48			$	54			$	48			$	51			$	54			$	56			$	57			$	57			$	56			$	54
% of revenue			8	%			7	%			7	%			7	%			6	%			6	%			6	%			4	%			4	%			4	%			4	%			4	%			3	%			3	%			3	%
% of capex			130	%			103	%			100	%			109	%			138	%			138	%			138	%			111	%			109	%			107	%			105	%			103	%			101	%			99	%			97	%
EBITDA (1)		$	(8	)		$	38			$	99			$	161			$	233			$	275			$	319			$	353			$	398			$	443			$	486			$	526			$	561			$	590			$	610
% margin			(3	%)			9	%			20	%			27	%			33	%			33	%			33	%			32	%			32	%			32	%			32	%			33	%			33	%			33	%			33	%
Key cash flow items
Capex		$	20			$	29			$	35			$	36			$	31			$	35			$	39			$	43			$	47			$	50			$	53			$	55			$	56			$	56			$	56
% of revenue			6	%			7	%			7	%			6	%			4	%			4	%			4	%			4	%			4	%			4	%			4	%			3	%			3	%			3	%			3	%
Change in NWC		$	(5	)		$	(14	)		$	(6	)		$	(15	)		$	(19	)		$	(20	)		$	(19	)		$	(20	)		$	(20	)		$	(19	)		$	(18	)		$	(16	)		$	(13	)		$	(10	)		$	(7	)
% of change in revenue			13	%			16	%			7	%			15	%			16	%			16	%			15	%			15	%			15	%			14	%			14	%			13	%			13	%			13	%			12	%
Unlevered free cash flow		$	(34	)		$	(7	)		$	57			$	109			$	146			$	140			$	166			$	182			$	209			$	236			$	264			$	290			$	314			$	335			$	352

($ in millions)		FY 2017E				FY 2018E				FY 2019E				FY 2020E				FY 2021E				FY 2022E				FY 2023E				FY 2024E				FY 2025E				FY 2026E				FY 2027E				FY 2028E				FY 2029E				FY 2030E				FY 2031E
Operating Income (Loss)		$	(40	)		$	2			$	37			$	88			$	137			$	159			$	180			$	204			$	228			$	253			$	278			$	303			$	326			$	346			$	364
Taxes		$	(1	)		$	(1	)		$	(1	)		$	(1	)		$	(1	)		$	(50	)		$	(64	)		$	(72	)		$	(81	)		$	(90	)		$	(98	)		$	(107	)		$	(115	)		$	(122	)		$	(128	)
After Tax Operating Income (Loss)		$	(41	)		$	1			$	36			$	87			$	136			$	109			$	116			$	131			$	147			$	164			$	180			$	196			$	211			$	224			$	235
Plus: D&A		$	26			$	31			$	35			$	38			$	41			$	45			$	47			$	38			$	39			$	40			$	40			$	40			$	39			$	37			$	35
Less: Capex		$	(23	)		$	(29	)		$	(30	)		$	(31	)		$	(31	)		$	(33	)		$	(35	)		$	(37	)		$	(38	)		$	(39	)		$	(40	)		$	(40	)		$	(39	)		$	(38	)		$	(36	)
Change in NWC		$	(7	)		$	(5	)		$	(4	)		$	(9	)		$	(11	)		$	(11	)		$	(10	)		$	(10	)		$	(10	)		$	(10	)		$	(9	)		$	(8	)		$	(7	)		$	(6	)		$	(4	)
Unlevered free cash flow		$	(44	)		$	(2	)		$	37			$	86			$	136			$	110			$	118			$	122			$	138			$	154			$	171			$	187			$	203			$	218			$	230

($ in millions)		FY 2017E				FY 2018E				FY 2019E				FY 2020E				FY 2021E				FY 2022E				FY 2023E				FY 2024E				FY 2025E				FY 2026E				FY 2027E				FY 2028E				FY 2029E				FY 2030E				FY 2031E
Operating Income (Loss)		$	(36	)		$	6			$	61			$	100			$	148			$	174			$	203			$	233			$	266			$	300			$	335			$	368			$	400			$	428			$	452
Taxes		$	(1	)		$	(1	)		$	(1	)		$	(1	)		$	(12	)		$	(62	)		$	(72	)		$	(83	)		$	(94	)		$	(106	)		$	(118	)		$	(130	)		$	(141	)		$	(151	)		$	(159	)
After Tax Operating Income (Loss)		$	(37	)		$	5			$	60			$	99			$	135			$	112			$	131			$	151			$	172			$	194			$	217			$	238			$	259			$	277			$	293
Plus: D&A		$	26			$	30			$	36			$	40			$	43			$	47			$	51			$	44			$	46			$	47			$	48			$	48			$	47			$	46			$	44
Less: Capex		$	(21	)		$	(29	)		$	(35	)		$	(36	)		$	(31	)		$	(34	)		$	(37	)		$	(40	)		$	(42	)		$	(44	)		$	(46	)		$	(47	)		$	(47	)		$	(46	)		$	(45	)
Change in NWC		$	(9	)		$	(14	)		$	(6	)		$	(11	)		$	(13	)		$	(14	)		$	(14	)		$	(14	)		$	(14	)		$	(13	)		$	(12	)		$	(11	)		$	(9	)		$	(7	)		$	(5	)
Unlevered free cash flow		$	(41	)		$	(8	)		$	55			$	92			$	134			$	112			$	132			$	141			$	162			$	184			$	206			$	229			$	250			$	269			$	286

($ in millions)		FY 2017E				FY 2018E				FY 2019E				FY 2020E				FY 2021E				FY 2022E				FY 2023E				FY 2024E				FY 2025E				FY 2026E				FY 2027E				FY 2028E				FY 2029E				FY 2030E				FY 2031E
Operating Income (Loss)		$	(34	)		$	8			$	63			$	122			$	190			$	227			$	264			$	305			$	347			$	389			$	431			$	470			$	505			$	534			$	556
Taxes		$	(1	)		$	(1	)		$	(1	)		$	(1	)		$	(37	)		$	(80	)		$	(94	)		$	(108	)		$	(122	)		$	(137	)		$	(152	)		$	(165	)		$	(178	)		$	(188	)		$	(195	)
After Tax Operating Income (Loss)		$	(35	)		$	7			$	62			$	121			$	153			$	146			$	171			$	197			$	224			$	252			$	279			$	304			$	327			$	346			$	360
Plus: D&A		$	26			$	30			$	35			$	39			$	42			$	48			$	54			$	48			$	51			$	54			$	56			$	57			$	57			$	56			$	54
Less: Capex		$	(20	)		$	(29	)		$	(35	)		$	(36	)		$	(31	)		$	(35	)		$	(39	)		$	(43	)		$	(47	)		$	(50	)		$	(53	)		$	(55	)		$	(56	)		$	(56	)		$	(56	)
Change in NWC		$	(5	)		$	(14	)		$	(6	)		$	(15	)		$	(19	)		$	(20	)		$	(19	)		$	(20	)		$	(20	)		$	(19	)		$	(18	)		$	(16	)		$	(13	)		$	(10	)		$	(7	)
Unlevered free cash flow		$	(34	)		$	(7	)		$	57			$	109			$	146			$	140			$	166			$	182			$	209			$	236			$	264			$	290			$	314			$	335			$	352

The Spectranetics Corporation
By:	/s/ Paul Gardon
	Name:	Paul Gardon
	Title:	Senior Vice President - General Counsel