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Integer Holdings Corp (ITGR) SEC Filing 10-Q Quarterly report for the period ending Friday, September 27, 2019

Integer Holdings Corp

CIK: 1114483 Ticker: ITGR

EXHIBIT 99.1

Integer Holdings Corporation Reports Third Quarter 2019 Results

~ Strong net income growth: +$39 million GAAP(a), +14% adjusted ~
~ 2019 profit guidance increased, sales outlook unchanged ~

PLANO, Texas, Oct. 31, 2019 (GLOBE NEWSWIRE) -- Integer Holdings Corporation (NYSE:ITGR), a leading medical device outsource manufacturer, today announced results for the three and nine months ended September 27, 2019.

Third Quarter 2019 Highlights (compared to Third Quarter 2018)

  • Sales from continuing operations were $304 million, approximately flat to prior year.
  • GAAP income from continuing operations increased $39 million to $31 million(a).  Non-GAAP adjusted income from continuing operations increased $5 million to $40 million, an increase of 14%.
  • Adjusted EBITDA from continuing operations increased $3 million to $69 million, an increase of 4%.
  • GAAP diluted EPS from continuing operations increased $1.18 per share to $0.92 per share(a).  Non-GAAP adjusted diluted EPS from continuing operations increased $0.14 per share to $1.20 per share, an increase of 13%.
  • Paid down $36 million of debt, reducing total outstanding debt to $828 million, achieving a leverage ratio of 3.0 times adjusted EBITDA.

Revised 2019 Full Year Financial Guidance

  • Sales guidance unchanged at low-end of $1,265 million to $1,280 million, inclusive of fiscal year-end change.
  • Increased GAAP diluted EPS guidance to a range of $3.22 to $3.32.  Increased non-GAAP adjusted diluted EPS guidance to a range of $4.55 to $4.65.
  • Increased adjusted EBITDA guidance to a range of $282 million to $286 million.

“Integer delivered strong adjusted income growth in the third quarter, on flat sales, as our manufacturing excellence strategic imperative continues to deliver results,” said Joseph Dziedzic, Integer’s president and chief executive officer. “We expect a strong fourth quarter and have increased our full year profit outlook.  Strong cash flow generation continued, which enabled debt leverage reduction to 3.0 times adjusted EBITDA.  We continue to execute our strategy, including completing, in October, a bolt-on acquisition to add complex braiding capabilities for high-growth C&V markets.”

(a)  Percent change is not considered meaningful due to a GAAP loss from continuing operations in 3Q18 versus a profit in 3Q19.

Discussion of Product Line Third Quarter 2019 Sales (compared to Third Quarter 2018)

  • Cardio & Vascular sales decreased 1% as the growth in peripheral vascular and structural heart was offset by an end of life electrophysiology program, which experienced the largest quarter decline to date.
  • Cardiac & Neuromodulation sales decreased 3% due to neuromodulation customer demand shift to the fourth quarter and flat cardiac rhythm management sales.  Full year neuromodulation device commitments remain in place, per supply agreements.
  • Advanced Surgical, Orthopedics & Portable Medical includes sales to the acquirer of our AS&O product line, Viant, under long-term supply agreements entered into as part of the divestiture. Sales increased 5% driven by an increase in the advanced surgical base products and new product launches in portable medical.
  • Electrochem sales increased 14% driven by energy market demand and favorable military order timing.

2019 Outlook(a)
(dollars in millions, except per share amounts)

  GAAP Non-GAAP(b)
Continuing Operations: As Reported Growth Adjusted Growth
Sales $1,265 to $1,280 4% to 5% $1,265 to $1,280 4% to 6%
Income $106 to $110 125% to 134% $150 to $154 21% to 23%
EBITDA N/A N/A $282 to $286 9% to 10%
Earnings per Diluted Share $3.22 to $3.32 123% to 130% $4.55 to $4.65 20% to 22%

(a) Except as described below, further reconciliations by line item to the closest corresponding GAAP financial measure for Adjusted Sales, Adjusted Income, Adjusted EBITDA, and Adjusted Earnings per Diluted Share (“EPS”), all from continuing operations, included in our “2019 Outlook” above, are not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and visibility of the charges excluded from these non-GAAP financial measures.

(b) Adjusted Income and diluted EPS, both from continuing operations, for 2019 are expected to consist of GAAP income from continuing operations and diluted EPS from continuing operations, excluding items such as intangible amortization, certain legal expenses, reorganization and realignment costs, asset dispositions, severance, gains and losses on equity investments and loss on extinguishment of debt totaling approximately $56 million, pre-tax. The after-tax impact of these items is estimated to be approximately $44 million, or approximately $1.33 per diluted share.

Adjusted EBITDA from continuing operations is expected to consist of Adjusted income from continuing operations, excluding items such as depreciation, interest, stock-based compensation and taxes, which are expected to be approximately $132 million.

Summary of Financial and Product Line Results from Continuing Operations

(dollars in thousands, except per share data)Three Months Ended
GAAPSeptember 27,
2019
 September 28,
2018
 Change Organic
Growth(a)
Medical Sales       
Cardio & Vascular$148,581  $150,230  (1.1)% (0.7)%
Cardiac & Neuromodulation106,533  109,620  (2.8)% (2.8)%
Advanced Surgical, Orthopedics & Portable Medical34,310  32,789  4.6% 4.7%
Total Medical Sales289,424  292,639  (1.1)% (0.9)%
Non-Medical Sales14,163  12,449  13.8% 13.8%
Total Sales$303,587  $305,088  (0.5)% (0.3)%
        
Income (loss) from continuing operations$30,586  $(8,303) NM   
Diluted EPS from continuing operations$0.92  $(0.26) NM   
        
 Nine Months Ended
GAAPSeptember 27,
2019
 September 28,
2018
  Change Organic
Growth(a)
Medical Sales       
Cardio & Vascular$451,552  $435,859  3.6% 4.1%
Cardiac & Neuromodulation337,932  334,471  1.0% 1.0%
Advanced Surgical, Orthopedics & Portable Medical98,544  101,481  (2.9)% (0.9)%
Total Medical Sales888,028  871,811  1.9% 2.3%
Non-Medical Sales44,429  40,167  10.6% 10.6%
Total Sales$932,457  $911,978  2.2% 2.7%
        
Income from continuing operations$80,174  $27,837  188.0%  
Diluted EPS from continuing operations$2.43  $0.86  182.6%  

(a) Organic Growth for sales is a Non-GAAP financial measure, which excludes foreign currency exchange impact reported in other (income) loss, net and is primarily non-cash and includes the impact of the long-term supply agreements (“LSAs”) entered into between the Company and Viant as of the closing of the divestiture of the AS&O product line. These LSAs govern the sale of products supplied by Viant to the Company for further resale to customers and by the Company to Viant for further resale to customers. Refer to Table C at the end of this release for a reconciliation of these amounts.

NM Calculated amount not meaningful.

 Three Months Ended
Non-GAAP(a)September 27,
2019
 September 28,
2018
 Change Organic
Growth(b)
Adjusted EBITDA from continuing operations$69,444  $66,606  4.3% 1.2%
Adjusted income from continuing operations$39,575  $34,850  13.6% 8.5%
Adjusted diluted EPS from continuing operations$1.20  $1.06  13.2% 8.2%
        
 Nine Months Ended
Non-GAAP(a)September 27,
2019
 September 28,
2018
 YTD Change Organic
Growth(b)
Adjusted EBITDA from continuing operations$210,497  $191,907  9.7% 9.0%
Adjusted income from continuing operations$113,047  $90,013  25.6% 24.2%
Adjusted diluted EPS from continuing operations$3.42  $2.75  24.4% 22.7%

(a) Refer to Tables A and B at the end of this release for reconciliations of adjusted amounts to the closest corresponding GAAP financial measures.

(b) Organic Growth for Adjusted EBITDA from continuing operations, Adjusted income from continuing operations, and Adjusted diluted EPS from continuing operations are Non-GAAP financial measures, which exclude the foreign currency exchange impact reported in other (income) loss, net and is primarily non-cash.  Refer to Table D at the end of this release for a reconciliation of these amounts.

Conference Call Information

The Company will host a conference call on Thursday, October 31, 2019, at 9:00 a.m. ET / 8:00 a.m. CT to discuss these results.  The scheduled conference call will be webcast live and is accessible through our website at investor.integer.net or by dialing (833) 236-5762 (U.S.) or (647) 689-4190 (outside U.S.) and the conference ID is 2991322. The call will be archived on the Company’s website.  An earnings call slide presentation containing supplemental information about the Company’s results will be posted to our website at investor.integer.net prior to the conference call and will be referenced during the conference call.

About Integer™

Integer Holdings Corporation (NYSE: ITGR) is one of the largest medical device outsource (MDO) manufacturers in the world serving the cardiac, neuromodulation, vascular, portable medical and orthopedics markets. The Company provides innovative, high-quality medical technologies that enhance the lives of patients worldwide. In addition, it develops batteries for high-end niche applications in energy, military, and environmental markets. The Company's brands include Greatbatch™ Medical, Lake Region Medical™ and Electrochem™. Additional information is available at www.integer.net.

Contact Information

Tony Borowicz
SVP, Strategy, Corporate Development & Investor Relations
716.759.5809
tony.borowicz@integer.net

Notes Regarding Non-GAAP Financial Information

In addition to our results reported in accordance with generally accepted accounting principles (“GAAP”), we provide adjusted sales, adjusted income, adjusted diluted EPS, earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted EBITDA margin, and organic growth rates, all from continuing operations.  Adjusted income and adjusted diluted EPS from continuing operations consist of GAAP amounts adjusted for the following to the extent occurring during the period: (i) acquisition and integration related charges and expenses, (ii) amortization of intangible assets, (iii) facility consolidation, optimization, manufacturing transfer and system integration charges, (iv) asset write-down and disposition charges, (v) charges in connection with corporate realignments or a reduction in force, (vi) certain legal expenses, charges and gains, (vii) unusual or infrequently occurring items, (viii) gain (loss) on equity  investments, (ix) extinguishment of debt charges, (x) the net impact of the LSAs entered into as of the closing of the divestiture of the AS&O product line, (xi) the income tax (benefit) related to these adjustments and (xii) certain tax items that are outside the normal provision for the period.  Adjusted diluted EPS from continuing operations are calculated by dividing adjusted income from continuing operations by diluted weighted average shares outstanding.  EBITDA from continuing operations is calculated by adding back interest expense, GAAP provision (benefit) for income taxes, depreciation and amortization expense, to income from continuing operations, which is the most directly comparable GAAP measure.  Adjusted EBITDA from continuing operations consists of EBITDA from continuing operations plus GAAP stock-based compensation and the same adjustments as listed above except for items (ii), (ix), (xi) and (xii).

Adjusted EBITDA margin is adjusted EBITDA as a percentage of adjusted sales, all from continuing operations.  To calculate organic sales growth rates, we convert current period sales from local currency to U.S. dollars using the previous period’s foreign currency exchange rates and exclude the amount of sales acquired/divested during the period from the current/previous period amounts, respectively.  Adjusted sales from continuing operations consist of GAAP sales adjusted for item (x) above.  Organic growth rates for adjusted EBITDA from continuing operations, adjusted income from continuing operations and adjusted diluted EPS from continuing operations exclude the impact of foreign currency exchange gains and losses included in other (income) loss, net. We believe that the presentation of adjusted sales, adjusted income, adjusted diluted EPS, EBITDA, adjusted EBITDA, adjusted EBITDA margin, and organic growth rates, all from continuing operations, 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.

In addition to the performance measures identified above, we believe that leverage ratio provides a meaningful measure of liquidity and a useful basis for assessing our ability to fund our activities, including the financing of acquisitions and debt repayments.  We calculate leverage ratio as total principal amount of debt outstanding less cash and cash equivalents divided by trailing 4 quarters adjusted EBITDA.

Forward-Looking Statements

Some of the statements contained in this press release 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, including statements relating to future sales, expenses, and profitability; our ability to execute our business strategy; projected capital expenditures; and other events, conditions or developments that will or may occur in the future. 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 and actual events or results may differ materially from those stated or implied by these statements. In evaluating these statements and our prospects, you should carefully consider a number of factors, including, but not limited to, the following factors: our indebtedness, our inability to pay principal and interest on this outstanding indebtedness or to remain in compliance with financial and other covenants under our senior secured credit facilities, and the risk that this indebtedness limits our ability to invest in our business and overall financial flexibility; 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 benefits from these acquisitions 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; our inability to obtain licenses to key technology; regulatory changes, including health care reform, or consolidation in the healthcare industry; global economic factors including foreign currency exchange rates and interest rates; the resolution of various legal actions brought against the Company; enactment related and ongoing impacts related to the Tax Reform Act, including the GILTI tax; and other risks and uncertainties that arise from time to time and are described in Item 1A “Risk Factors” of our Annual Report on Form 10-K and in our other periodic filings with the SEC.  Except as may be required by law, we assume no obligation to update forward-looking statements in this press release whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.

Condensed Consolidated Statements of Operations - Unaudited    
(in thousands except per share data)       
        
 Three Months Ended Nine Months Ended
 September 27,
2019
 September 28,
2018
 September 27,
2019
 September 28,
2018
Sales$303,587  $305,088  $932,457  $911,978 
Cost of sales210,201  213,165  653,477  637,758 
Gross profit93,386  91,923  278,980  274,220 
Operating expenses:       
Selling, general and administrative expenses (SG&A)32,935  34,091  101,034  107,300 
Research, development and engineering costs (RD&E)11,729  12,234  34,720  38,445 
Other operating expenses (OOE)2,241  4,139  8,239  12,615 
Total operating expenses46,905  50,464  143,993  158,360 
Operating income46,481  41,459  134,987  115,860 
Interest expense12,337  54,526  39,779  85,355 
(Gain) loss on equity investments, net(986) (291) 666  (5,545)
Other (income) loss, net(369) 1,684  (921) 257 
Income (loss) from continuing operations before taxes35,499  (14,460) 95,463  35,793 
Provision for (benefit from) income taxes4,913  (6,157) 15,289  7,956 
Income (loss) from continuing operations$30,586  $(8,303) $80,174  $27,837 
        
Discontinued operations:       
Income from discontinued operations before taxes  195,874  5,316  188,251 
Provision for income taxes  73,492  178  73,869 
Income from discontinued operations$  $122,382  $5,138  $114,382 
        
Net income$30,586  $114,079  $85,312  $142,219 
        
Basic earnings (loss) per share:       
Income (loss) from continuing operations$0.94  $(0.26) $2.46  $0.87 
Income from discontinued operations$  $3.80  $0.16  $3.57 
Basic earnings per share$0.94  $3.54  $2.62  $4.44 
        
Diluted earnings (loss) per share:       
Income (loss) from continuing operations$0.92  $(0.26) $2.43  $0.86 
Income from discontinued operations$  $3.80  $0.16  $3.52 
Diluted earnings per share$0.92  $3.54  $2.58  $4.38 
        
Weighted average shares outstanding:       
Basic32,660  32,211  32,606  32,050 
Diluted33,068  32,211  33,019  32,451 


Condensed Consolidated Balance Sheets - Unaudited
(in thousands)
  
 September 27,
2019
 December 28,
2018
ASSETS   
Current assets:   
Cash and cash equivalents$14,719  $25,569 
Accounts receivable, net216,671  185,501 
Inventories197,977  190,076 
Prepaid expenses and other current assets23,704  15,104 
Total current assets453,071  416,250 
Property, plant and equipment, net230,683  231,269 
Goodwill825,318  832,338 
Other intangible assets, net774,744  812,338 
Deferred income taxes4,070  3,937 
Operating lease assets43,670   
Other long-term assets27,263  30,549 
Total assets$2,358,819  $2,326,681 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Current portion of long-term debt$37,500  $37,500 
Accounts payable77,383  57,187 
Income taxes payable12,228  9,393 
Accrued expenses and other current liabilities61,827  60,490 
Total current liabilities188,938  164,570 
Long-term debt790,420  888,007 
Deferred income taxes199,966  203,910 
Operating lease liabilities38,724   
Other long-term liabilities12,193  9,701 
Total liabilities1,230,241  1,266,188 
Stockholders’ equity:   
Common stock33  33 
Additional paid-in capital699,915  691,083 
Treasury stock(10,373) (8,125)
Retained earnings429,234  344,498 
Accumulated other comprehensive income9,769  33,004 
Total stockholders’ equity1,128,578  1,060,493 
Total liabilities and stockholders’ equity$2,358,819  $2,326,681 
        


Condensed Consolidated Statements of Cash Flows - Unaudited(a)
(in thousands)
  
 Nine Months Ended
 September 27,
2019
 September 28,
2018
Cash flows from operating activities:   
Net income$85,312  $142,219 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization57,397  68,447 
Debt related charges included in interest expense5,280  47,173 
Stock-based compensation6,894  7,684 
Non-cash (gain) loss on equity investments666  (1,043)
Other non-cash gains(1,088) (771)
Deferred income taxes(1,086) 66,953 
Gain on sale of discontinued operations(4,974) (194,734)
Changes in operating assets and liabilities:   
Accounts receivable(29,962) (4,805)
Inventories(8,567) (19,688)
Prepaid expenses and other assets(10,829) 5,155 
Accounts payable17,760  10,488 
Accrued expenses and other liabilities(8,988) (14,904)
Income taxes payable4,162  8,562 
Net cash provided by operating activities111,977  120,736 
Cash flows from investing activities:   
Acquisition of property, plant and equipment(24,704) (33,340)
Proceeds from sale of property, plant and equipment5  1,366 
Purchase of equity investments(417) (1,230)
Proceeds from sale of discontinued operations4,734  582,359 
Net cash (used in) provided by investing activities(20,382) 549,155 
Cash flows from financing activities:   
Principal payments of long-term debt(97,125) (670,094)
Proceeds from senior secured revolving line of credit20,000   
Payments of senior secured revolving line of credit(25,000)  
Proceeds from the exercise of stock options2,654  11,757 
Payment of debt issuance and redemption costs  (31,991)
Tax withholdings related to net share settlements of restricted stock unit awards(2,961) (2,568)
Net cash used in financing activities(102,432) (692,896)
Effect of foreign currency exchange rates on cash and cash equivalents(13) 1,790 
Net decrease in cash and cash equivalents(10,850) (21,215)
Cash and cash equivalents, beginning of period25,569  44,096 
Cash and cash equivalents, end of period$14,719  $22,881 
        

(a) Condensed Consolidated Statements of Cash Flows - Unaudited includes cash flows related to discontinued operations.

Reconciliations of Non-GAAP Measures from Continuing Operations

Table A: Income (Loss) from Continuing Operations and Diluted EPS Reconciliations
(in thousands except per share amounts)

 Three Months Ended
 September 27, 2019 September 28, 2018
 Pre-Tax Net of
Tax
 Per
Diluted
Share
 Pre-Tax Net of
Tax
 Per
Diluted
Share
Income (loss) from continuing operations (GAAP)$35,499  $30,586  $0.92  $(14,460) $(8,303) $(0.26)
Adjustments:           
Amortization of intangibles(a)9,782  7,750  0.23  9,896  7,830  0.24 
Certain legal expenses (SG&A)(a)(b)99  78    749  591  0.02 
Strategic reorganization and alignment (OOE)(a)(c)962  740  0.02  2,643  2,085  0.06 
Manufacturing alignment to support growth (OOE)(a)(d)515  366  0.01  877  657  0.02 
Consolidation and optimization expenses (OOE)(a)(e)      137  108   
Asset dispositions, severance and other (OOE)(a)(f)764  604  0.02  482  412  0.01 
Gain on equity investments, net(a)(986) (779) (0.02) (291) (230) (0.01)
Loss on extinguishment of debt(a)(g)291  230  0.01  40,654  32,117  0.98 
Tax adjustments(h)        (417) (0.01)
Adjusted income from continuing operations (Non-GAAP)$46,926  $39,575  $1.20  $40,687  $34,850  $1.06 
            
Diluted weighted average shares for adjusted EPS(j)  33,068      32,899   
            
 Nine Months Ended
 September 27, 2019 September 28, 2018
 Pre-Tax Net of
Tax
 Per
Diluted
Share
 Pre-Tax Net of
Tax
 Per
Diluted
Share
Income from continuing operations (GAAP)$95,463  $80,174  $2.43  $35,793  $27,837  $0.86 
Adjustments:           
Amortization of intangibles(a)29,467  23,324  0.71  31,068  24,523  0.75 
Certain legal expenses (SG&A)(a)(b)2,175  1,718  0.05  1,546  1,221  0.04 
Strategic reorganization and alignment (OOE)(a)(c)4,352  3,377  0.10  8,424  6,662  0.20 
Manufacturing alignment to support growth (OOE)(a)(d)1,661  1,173  0.04  2,493  1,841  0.06 
Consolidation and optimization expenses (OOE)(a)(e)      698  553  0.02 
Asset dispositions, severance and other (OOE)(a)(f)2,226  1,756  0.05  1,000  776  0.02 
(Gain) loss on equity investments, net(a)666  526  0.02  (5,545) (4,381) (0.13)
Loss on extinguishment of debt(a)(g)1,265  999  0.03  42,128  33,281  1.02 
LSA adjustments(a)(i)      (6,119) (4,834) (0.15)
Tax adjustments(h)        2,534  0.08 
Adjusted income from continuing operations (Non-GAAP)$137,275  $113,047  $3.42  $111,486  $90,013  $2.75 
            
Diluted weighted average shares for adjusted EPS(j)  33,019      32,681   

(a) The difference between pre-tax and net of tax amounts is the estimated tax impact related to the respective adjustment.  Net of tax amounts are computed using a 21% U.S. tax rate, and the statutory tax rates in Mexico, Netherlands, Uruguay, Ireland and Switzerland, as adjusted for the existence of net operating losses (“NOLs”).  Amortization of intangibles and other operating expense for 2018 were adjusted to reflect the estimated impact relating to our disallowed deduction of the GILTI tax, as described in footnote (h) below.  Expenses that are not deductible for tax purposes (i.e. permanent tax differences) are added back at 100%.

(b) In 2013, we filed suit against AVX Corporation alleging they were infringing our intellectual property.  Given the complexity and significant costs incurred pursuing this litigation, we are excluding these litigation expenses from adjusted amounts. This matter proceeded to trial during the first quarter of 2016 and again in the third quarter of 2017 that resulted in a jury awarding damages in the amount of $37.5 million.  In March 2018, the court vacated that damage award and ordered a new trial on damages.  In the January 2019 retrial on damages, the jury awarded damages in the amount of $22.2 million.  To date, no gains have been recognized in connection with this litigation.  The second and third quarters of 2019 also include costs associated with a legal matter to which we are a non-party witness.

(c) Amounts include expenses related to implementing our strategy that is designed to better align our resources in order to invest to grow, protect, preserve and to enhance the profitability of our portfolio of products, including focusing our investment in RD&E and manufacturing, improving our business processes and redirecting investments away from projects where the market does not justify the investment.  During 2019 and 2018, we incurred charges related to this strategy, which primarily consisted of severance costs and fees for professional services.

(d) Includes expenses related to several initiatives designed to reduce costs, improve operating efficiencies and increase manufacturing capacity to accommodate growth.  The plan involves the relocation of certain manufacturing operations and expansion of certain of our facilities.

(e) During 2018, we incurred costs primarily related to the closure of our Clarence, NY facility.

(f) Amounts include expenses related to other initiatives not described above, which relate primarily to integration and operational initiatives to reduce costs and improve operational efficiencies.

(g) Represents debt extinguishment charges in connection with pre-payments made on our Term Loan B Facility, which are included in interest expense.

(h) The tax adjustment for 2018 represents the estimated impact relating to our disallowed deduction of the GILTI tax, as mandated by the Tax Reform Act.  This disallowed deduction of the GILTI tax (approximately 50% of the total GILTI tax) is due to the Company making use of its U.S. NOLs during 2018.  This adjustment makes our adjusted diluted EPS from continuing operations more comparable with other global companies that are not subject to this disallowed GILTI tax deduction and more comparable to the Company’s results following the full utilization of its U.S. NOLs.

(i) Reflects the net impact of the LSAs entered into as of the closing of the divestiture of the AS&O product line.  These LSAs govern the sale of products supplied by Viant to the Company for further resale to customers and by the Company to Viant for further resale to customers.

(j) The diluted weighted average shares for adjusted EPS for the three and nine months ended September 28, 2018 includes potentially dilutive shares not included in the computation of diluted weighted average common shares for GAAP diluted EPS purposes because their effect would have been anti-dilutive.

Table B: EBITDA and Sales Reconciliations
(in thousands)

 Three Months Ended Nine Months Ended
 September 27,
2019
 September 28,
2018
 September 27,
2019
 September 28,
2018
Income (loss) from continuing operations (GAAP)$30,586  $(8,303) $80,174  $27,837 
        
Interest expense12,337  54,526  39,779  85,355 
Provision for (benefit from) income taxes4,913  (6,157) 15,289  7,956 
Depreciation9,080  9,960  27,930  29,929 
Amortization of intangibles (excluding OOE)9,782  9,896  29,467  31,068 
EBITDA from continuing operations (Non-GAAP)66,698  59,922  192,639  182,145 
Certain legal expenses99  749  2,175  1,546 
Stock-based compensation (excluding OOE)1,392  2,087  6,778  7,265 
Strategic reorganization and alignment962  2,643  4,352  8,424 
Manufacturing alignment to support growth515  877  1,661  2,493 
Consolidation and optimization expenses  137    698 
Asset dispositions, severance and other764  482  2,226  1,000 
(Gain) loss on equity investments, net(986) (291) 666  (5,545)
LSA adjustments      (6,119)
Adjusted EBITDA from continuing operations
  (Non-GAAP)
$69,444  $66,606  $210,497  $191,907 
        
Total Sales (GAAP)$303,587  $305,088  $932,457  $911,978 
LSA adjustments      (2,003)
Adjusted sales from continuing operations (Non-GAAP)$303,587  $305,088  $932,457  $909,975 
        
Adjusted EBITDA margin22.9% 21.8% 22.6% 21.1%


Table C: Organic Sales from Continuing Operations Growth Rate Reconciliation (% Change)

 GAAP
Reported
Growth
 Impact of
LSAs(a)
 Impact of
Foreign
Currency(b)
 Non-GAAP
Organic
Growth
QTD Change (3Q 2019 vs. 3Q 2018)       
Medical Sales       
Cardio & Vascular(1.1)% % 0.4% (0.7)%
Cardiac & Neuromodulation(2.8)%     (2.8)%
Advanced Surgical, Orthopedics & Portable Medical4.6% % 0.1% 4.7%
Total Medical Sales(1.1)% % 0.2% (0.9)%
Non-Medical Sales13.8%     13.8%
Total Sales(0.5)% % 0.2% (0.3)%
        
YTD Change (9M 2019 vs. 9M 2018)       
Medical Sales       
Cardio & Vascular3.6% % 0.5% 4.1%
Cardiac & Neuromodulation1.0%     1.0%
Advanced Surgical, Orthopedics & Portable Medical(2.9)% 2.0% % (0.9)%
Total Medical Sales1.9% 0.2% 0.2% 2.3%
Non-Medical Sales10.6%     10.6%
Total Sales2.2% 0.3% 0.2% 2.7%

(a) Reflects the net impact of the LSAs entered into as of the closing of the divestiture of the AS&O product line.

(b) Third quarter and year-to-date 2019 GAAP sales were negatively impacted by $0.6 million and $2.2 million, respectively,  due to foreign currency exchange rate fluctuations, primarily in our Cardio & Vascular product line.

Table D: Non-GAAP Organic Growth Rate Reconciliation (% Change)

 GAAP
Reported
Growth(a)
 Impact of
Non-GAAP
Adjustment(b)
 Impact of
Foreign
Currency(c)
 Non-GAAP
Organic
Growth
QTD Change (3Q 2019 vs. 3Q 2018)       
EBITDA from continuing operations11.3% (7.0)% (3.1)% 1.2%
Income from continuing operationsNM  13.6% (5.1)% 8.5%
Diluted EPS from continuing operationsNM  13.2% (5.0)% 8.2%
        
YTD Change (9M 2019 vs. 9M 2018)       
EBITDA from continuing operations5.8% 3.9% (0.7)% 9.0%
Income from continuing operationsNM  25.6% (1.4)% 24.2%
Diluted EPS from continuing operationsNM  24.4% (1.7)% 22.7%

(a) EBITDA from continuing operations is a non-GAAP financial measure.  See Table B for a reconciliation to the most comparable GAAP measure.

(b) Represents the impact to our growth rate from our Non-GAAP adjustments. See Tables A and B for further detail on these items.

(c) Represents the impact to our growth rate due to changes in foreign currency exchange rates realized in income and reported in other (income) loss, net in the consolidated statements of operations.

NM Calculated amount not meaningful.

Table E: Supplemental Financial Items Affecting Cash Flow
(dollars in millions)

 2019
Outlook
 2018
Actual
Capital Expenditures$50 - $55 $44
Depreciation and Amortization$75 - $85 $82
Stock-Based Compensation$10 - $12 $10
Other Operating Expense$10 - $13 $16
Adjusted Effective Tax Rate17.0% - 18.5%  18.5%
Cash Tax Payments$25 - $30 $23


Integer Contact
Investor Relations
Tony Borowicz
tony.borowicz@integer.net
716.759.5809


The following information was filed by Integer Holdings Corp (ITGR) on Thursday, October 31, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Inside Integer Holdings Corp's 10-Q Quarterly Report:

Financial Statements, Disclosures and Schedules

Inside this 10-Q Quarterly Report

Cover
Condensed Consolidated Balance Sheets - Unaudited
Condensed Consolidated Balance Sheets - Unaudited (Parenthetical)
Condensed Consolidated Statement Of Stockholders' Equity - Unaudited
Condensed Consolidated Statements Of Cash Flows - Unaudited
Condensed Consolidated Statements Of Comprehensive Income
Condensed Consolidated Statements Of Operations
Basis Of Presentation
Basis Of Presentation (Narrative) (Details)
Basis Of Presentation (Policies)
Commitments And Contingencies
Commitments And Contingencies (Narrative) (Details)
Commitments And Contingencies (Schedule Of Product Warranty Liability) (Details)
Commitments And Contingencies (Tables)
Debt
Debt (Credit Facility) (Details)
Debt (Long-Term Debt Maturity Schedule) (Details)
Debt (Schedule Of Deferred Financing Fees) (Details)
Debt (Schedule Of Interest Rate Swaps And Details) (Details)
Debt (Schedule Of Long-Term Debt) (Details)
Debt (Tables)
Debt Debt (9.125% Senior Notes Due 2023) (Details)
Discontinued Operations
Discontinued Operations (Assets And Liabilities Of As&Amp;O Business) (Details)
Discontinued Operations (Loss From Discontinued Operations) (Details)
Discontinued Operations (Tables)
Discontinued Operations - Acquisition Of Assets From Us Biodesign Llc (Details)
Discontinued Operations Discontinued Operations (Cash Flow Information From Discontinued Operations) (Details)
Earnings (Loss) Per Share (Eps)
Earnings (Loss) Per Share (Eps) (Details)
Earnings (Loss) Per Share (Eps) (Tables)
Financial Instruments And Fair Value Measurements
Financial Instruments And Fair Value Measurements (Impact Of Cash Flow Hedges On The Condensed Consolidated Statements Of Operations) (Details)
Financial Instruments And Fair Value Measurements (Narrative) (Details)
Financial Instruments And Fair Value Measurements (Schedule Of Fair Value, Assets And Liabilities Measured On Recurring Basis) (Details)
Financial Instruments And Fair Value Measurements (Schedule Of Foreign Currency Contracts) (Details)
Financial Instruments And Fair Value Measurements (Schedule Of Interest Rate Swaps) (Details)
Financial Instruments And Fair Value Measurements (Tables)
Goodwill And Other Intangible Assets, Net
Goodwill And Other Intangible Assets, Net (Schedule Of Finite-Lived Intangible Assets, Amortization Expense) (Details)
Goodwill And Other Intangible Assets, Net (Schedule Of Finite-Lived Intangible Assets, Future Amortization Expense) (Details)
Goodwill And Other Intangible Assets, Net (Schedule Of Finite-Lived Intangible Assets, Major Class) (Details)
Goodwill And Other Intangible Assets, Net (Schedule Of Indefinite-Lived Intangible Assets And Goodwill) (Details)
Goodwill And Other Intangible Assets, Net (Tables)
Impact Of Recently Issued Accounting Standards
Impact Of Recently Issued Accounting Standards (Tables)
Income Taxes
Income Taxes (Narrative) (Details)
Inventories
Inventories (Details)
Inventories (Tables)
Leases
Leases (Tables)
Leases - Lease Costs (Details)
Leases - Narrative (Details)
Leases - Operating Lease Liability Maturity Schedule (Topic 842) (Details)
Leases - Operating Lease Weighted Average Lease Term And Discount Rate (Details)
Leases - Supplemental Cash Flow Information (Details)
Other Operating Expenses, Net
Other Operating Expenses, Net (Narrative) (Details)
Other Operating Expenses, Net (Schedule Of Other Operating Cost And Expense By Component) (Details)
Other Operating Expenses, Net (Schedule Of Restructuring Reserve By Type Of Cost) (Details)
Other Operating Expenses, Net (Tables)
Revenue From Contracts With Customers
Revenue From Contracts With Customers (Disaggregated Revenue) (Details)
Revenue From Contracts With Customers (Tables)
Revenue From Contracts With Customers Revenue From Contracts With Customers (Narrative) (Details)
Segment Information
Segment Information (Narrative) (Details)
Segment Information (Reconciliation Of Operating Profit (Loss) From Segments To Consolidated) (Details)
Segment Information (Reconciliation Of Revenue From Segments To Consolidated) (Details)
Segment Information (Tables)
Stock-Based Compensation
Stock-Based Compensation (Additional Information) (Details)
Stock-Based Compensation (Allocation Of Recognized Period Costs) (Details)
Stock-Based Compensation (Restricted Stock And Restricted Stock Units Activity) (Details)
Stock-Based Compensation (Stock Options Activity) (Details)
Stock-Based Compensation (Tables)
Stock-Based Compensation (Valuation Assumptions) (Details)
Stockholders' Equity
Stockholders' Equity (Details)
Stockholders' Equity (Tables)

Material Contracts, Statements, Certifications & more

Integer Holdings Corp provided additional information to their SEC Filing as exhibits

Ticker: ITGR
CIK: 1114483
Form Type: 10-Q Quarterly Report
Accession Number: 0001114483-19-000025
Submitted to the SEC: Thu Oct 31 2019 12:00:52 PM EST
Accepted by the SEC: Thu Oct 31 2019
Period: Friday, September 27, 2019
Industry: Miscellaneous Electrical Machinery Equipment And Supplies

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