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Integer Holdings Corp (ITGR) SEC Filing 10-Q Quarterly Report for the period ending Friday, July 1, 2022

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ITGR Quarterly Reports

Integer Holdings Corp

CIK: 1114483 Ticker: ITGR

EXHIBIT 99.1

Integer Holdings Corporation Reports Second Quarter 2022 Results

~ 2Q22 sales and profit consistent with expectations ~
~ Increasing 2022 sales and operating income outlook ~

PLANO, Texas, July 28, 2022 (GLOBE NEWSWIRE) -- Integer Holdings Corporation (NYSE:ITGR), a leading medical device outsource manufacturer, today announced results for the three months ended July 1, 2022.

Second Quarter 2022 Highlights (compared to Second Quarter 2021, except as noted)

  • Sales increased 12% to $350 million, inclusive of sales from recent Oscor and Aran acquisitions.
  • GAAP net income decreased $9 million to $21 million, a decrease of 29%. Non-GAAP adjusted net income decreased $1 million to $35 million, a decrease of 3%.
  • GAAP operating income decreased $7 million to $33 million, a decrease of 17%. Non-GAAP adjusted operating income decreased 1% to $50 million.
  • GAAP diluted EPS decreased $0.27 per share to $0.62 per share. Non-GAAP adjusted EPS decreased 3% per share to $1.04 per share.
  • Over the last four quarters our adjusted gross margins have been approximately 28%, or 300 bps below pre-pandemic levels, driven by incremental labor and supply chain costs related to overtime, training, and manufacturing inefficiencies from supply chain disruptions.
  • From the end of the fourth quarter 2021, total debt increased $119 million to $947 million and net total debt increased $121 million to $938 million, attributable to the $129 million in cash paid to acquire Aran Biomedical, resulting in a leverage ratio of 3.9 times adjusted EBITDA.

Executing Strategy to Drive Accelerated Revenue Growth

  • Expect revenue growth to accelerate in the second half 2022 through new product introductions in high growth electrophysiology, structural heart, and neuromodulation markets.
  • Oscor acquisition exceeding expectations and increased sales outlook by $5 million to $71 million.
  • Closed acquisition of Aran Biomedical on April 6, 2022. Integration is on track with strong engagement from strategic customers.

“Integer delivered second quarter 2022 financial results consistent with our expectations, as sales grew 13% versus the first quarter 2022 and 12% versus prior year. Integer’s associates around the globe remain focused on delivering products for our customers and the patients they serve, while managing the challenges of the ongoing labor and supply chain dynamics,” said Joseph Dziedzic, Integer’s president and CEO. “We have raised our full year 2022 sales outlook and expect to grow 12% to 14% versus 2021, driven by strong demand, accelerating new product introductions, and our recent Oscor and Aran acquisitions.”

Discussion of Product Line Second Quarter 2022 Sales

  • Cardio & Vascular sales increased 25% in the second quarter 2022 compared to the second quarter 2021 driven by strong demand in the neurovascular, electrophysiology, and structural heart markets, as well as the Oscor and Aran acquisitions.
  • Cardiac Rhythm Management & Neuromodulation sales increased 2% in the second quarter 2022 compared to the second quarter 2021 as the sales growth from the recently acquired Oscor was offset by labor and supply chain constraints.
  • Advanced Surgical, Orthopedics & Portable Medical includes sales under supply agreement to the acquirer of our divested AS&O product line. Sales were flat in the second quarter 2022 compared to the second quarter 2021, inclusive of a reduction in demand for COVID-related ventilator and patient monitoring components.
  • Electrochem sales decreased 1% in the second quarter 2022 compared to the second quarter 2021 as our ability to fulfill strong customer demand was constrained by supplier shortages.

2022 Outlook(a)

Organic sales growth now expected to be 6% to 8%.

(dollars in millions, except per share amounts) GAAP Non-GAAP(b)
  As Reported Change from
Prior Year
 Adjusted Change from
Prior Year
Sales $1,370 to $1,395 12% to 14% N/A N/A
Operating income $136 to $148 0% to 9% $206 to $218 10% to 16%
EBITDA N/A N/A $273 to $285 13% to 17%
Net income $83 to $93 (11)% to 0% $140 to $151 4% to 11%
Diluted earnings per share $2.49 to $2.79 (11)% to 0% $4.20 to $4.50 3% to 10%
Cash flow from operating activities $151 - $166 (4)% to 6% N/A N/A

(a)   Except as described below, further reconciliations by line item to the closest corresponding GAAP financial measure for Adjusted operating income, Adjusted EBITDA, Adjusted net income, organic sales growth, and Adjusted Earnings per Share (“EPS”), all from continuing operations, included in our “2022 Outlook” above, and Adjusted interest expense, Adjusted effective tax rate and leverage ratio below, 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 operating income for 2022 consists of GAAP operating income, excluding items such as amortization of intangible assets, restructuring and restructuring-related charges, and acquisition and integration costs, totaling approximately $70 million, pre-tax. Adjusted net income and Adjusted EPS for 2022 consist of GAAP net income and diluted EPS, excluding items such as amortization of intangible assets, restructuring and restructuring-related charges, acquisition and integration costs, and gain or loss on equity investments totaling approximately $73 million, pre-tax. The after-tax impact of these items is estimated to be approximately $57 million, or approximately $1.71 per diluted share.

Adjusted EBITDA is expected to consist of Adjusted net income, excluding items such as depreciation, interest, stock-based compensation and taxes totaling approximately $133 million to $135 million.

Supplemental Financial Information

(dollars in millions)2022
Outlook
 2021
Actual
Depreciation and amortization$95 - $100 $81
Adjusted total interest expense(a)$35 - $40 $28
Stock-based compensation$19 - $21 $16
Restructuring, acquisition and other charges(b)$13 - $17 $8
Adjusted effective tax rate(c)16.0% - 17.5% 15%
Leverage ratio3.0x - 3.2x 3.4x
Capital expenditures, net$65 - $75 $53
Cash tax payments$15 - $20 $20

(a)   Adjusted total interest expense refers to our expected full-year GAAP total interest expense, expected to range from $35 million to $40 million for 2022, adjusted to remove the full-year impact of charges associated with the accelerated write-off of deferred issuance costs and unamortized discounts (loss on extinguishment of debt) included in GAAP total interest expense.

(b)   Restructuring, acquisition and other charges consists of restructuring and restructuring-related charges, acquisition and integration costs and other general expenses.

(c)   Adjusted effective tax rate refers to our full-year GAAP effective tax rate, expected to range from 14.0% to 15.5% for 2022, adjusted to reflect the full-year impact of the items that are excluded in providing adjusted net income and certain other identified items.


Summary Financial Results
(dollars in thousands, except per share data)

 Three Months Ended
 July 1, 2022 July 2, 2021 QTD
Change
Operating income$32,707 $39,350 (16.9)%
Net income$20,836 $29,433 (29.2)%
Diluted EPS$0.62 $0.89 (30.3)%
      
EBITDA(a)$55,407 $58,435 (5.2)%
Adjusted EBITDA(a)$65,897 $63,743 3.4%
Adjusted operating income(a)$49,679 $50,064 (0.8)%
Adjusted net income(a)$34,651 $35,558 (2.6)%
Adjusted EPS(a)$1.04 $1.07 (2.8)%
      
 Six Months Ended
 July 1, 2022 July 2, 2021 YTD
Change
Operating income$55,204 $73,958 (25.4)%
Net income$32,203 $50,953 (36.8)%
Diluted EPS$0.97 $1.53 (36.6)%
      
EBITDA(a)$97,865 $112,239 (12.8)%
Adjusted EBITDA(a)$120,102 $124,855 (3.8)%
Adjusted operating income(a)$88,484 $96,391 (8.2)%
Adjusted net income(a)$60,730 $67,668 (10.3)%
Adjusted EPS(a)$1.82 $2.04 (10.8)%

(a)   EBITDA, Adjusted EBITDA, Adjusted operating income, Adjusted net income, and Adjusted EPS are Non-GAAP financial measures. Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of non-GAAP financial measures. Refer to Tables A, B and C at the end of this release for reconciliations of adjusted amounts to the closest corresponding GAAP financial measures.


Summary Product Line Results
(dollars in thousands)

 Three Months Ended
 July 1, 2022 July 2, 2021 QTD
Change
 Organic
Change
(a)
Medical Sales       
Cardio & Vascular$180,604 $144,683 24.8% 16.7%
Cardiac Rhythm Management & Neuromodulation 135,945  133,660 1.7% (5.4)%
Advanced Surgical, Orthopedics & Portable Medical 23,285  23,283 % 0.1%
Total Medical Sales 339,834  301,626 12.7% 5.6%
Non-Medical Sales 10,247  10,397 (1.4)% (1.4)%
Total Sales$350,081 $312,023 12.2% 5.3%
        
 Six Months Ended
 July 1, 2022 July 2, 2021 YTD
Change
 Organic
Change
(a)
Medical Sales       
Cardio & Vascular$339,641 $285,889 18.8% 12.5%
Cardiac Rhythm Management & Neuromodulation 259,269  255,363 1.5% (6.6)%
Advanced Surgical, Orthopedics & Portable Medical 42,951  43,339 (0.9)% (0.8)%
Total Medical Sales 641,861  584,591 9.8% 3.2%
Non-Medical Sales 19,132  17,899 6.9% 6.9%
Total Sales$660,993 $602,490 9.7% 3.3%

(a)   Organic sales change is a Non-GAAP financial measure. Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of non-GAAP financial measures and 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, July 28, 2022, at 8 a.m. CT / 9 a.m. ET 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 (888) 330-3567 (U.S.) or (646) 960-0842 (outside U.S.) and the conference ID is 9252310. 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.

From time to time, the Company posts information that may be of interest to investors on its website at investor.integer.net. To automatically receive Integer financial news by email, please visit investor.integer.net and subscribe to email alerts.

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, the Company 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
Senior Vice President, 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 in the United States of America (“GAAP”), we provide adjusted net income, adjusted EPS, earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted operating income, and organic sales change rates.

Adjusted net income and adjusted EPS consist of GAAP amounts adjusted for the following to the extent occurring during the period: (i) amortization of intangible assets, (ii) certain legal expenses, (iii) restructuring and restructuring- related charges; (iv) acquisition and integration related costs; (v) other general expenses; (vi) (gain) loss on equity investments; (vii) extinguishment of debt charges; (viii) European Union medical device regulation incremental charges, (ix) inventory step-up amortization; (x) unusual, or infrequently occurring items; (xi) the income tax provision (benefit) related to these adjustments and (xii) certain tax items that are outside the normal tax provision for the period. Adjusted EPS is calculated by dividing adjusted net income by diluted weighted average shares outstanding.

EBITDA is calculated by adding back interest expense, provision (benefit) for income taxes, depreciation expense, and amortization expense from intangible assets and financing leases, to net income, which is the most directly comparable GAAP financial measure. Adjusted EBITDA consists of EBITDA plus adding back stock-based compensation and the same adjustments as listed above except for items (i), (vii), (xi) and (xii). Adjusted operating income consists of operating income adjusted for the same items listed above except for items (vi), (vii), (xi) and (xii).

Organic sales change is reported sales growth adjusted for the impact of foreign currency and the contribution of acquisitions. To calculate the impact of foreign currency on sales growth rates, we convert any sale made in a foreign currency by converting current period sales into prior period sales using the exchange rate in effect at that time and then compare the two, negating any effect foreign currency had on our transactional revenue, and exclude the amount of sales acquired or divested during the period from the current/previous period amounts, respectively.

We believe that the presentation of adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA, adjusted operating income, and organic sales change 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. In addition to the performance measures identified above, we believe that net total debt and leverage ratio provide meaningful measures of liquidity and a useful basis for assessing our ability to fund our activities, including the financing of acquisitions and debt repayments. Net total debt is calculated as total principal amount of debt outstanding less cash and cash equivalents. We calculate leverage ratio as net total debt divided by adjusted EBITDA for the trailing 4 quarters. Free cash flow is defined as Net cash provided by operating activities (as stated in our Condensed Consolidated Statements of Cash Flows) reduced by capital expenditures (acquisition of property, plant, and equipment (PP&E), net of proceeds from the sale of PP&E).

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 recovery from the COVID-19 global pandemic; future sales, expenses, and profitability; future development and expected growth of our business and industry, including expansion of our manufacturing capacity; our ability to execute our business model and our business strategy, including completion and integration of current or future acquisition targets; having available sufficient cash and borrowing capacity to meet working capital, debt service and capital expenditure requirements for the next twelve months; projected capital spending; 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,” “projects,” 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.

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 and other risks and uncertainties that arise from time to time are described in Item 1A “Risk Factors” of our Annual Report on Form 10-K and in our other periodic filings with the SEC and include the following:

  • operational risks, such as the duration, scope and impact of the COVID-19 pandemic, including the evolving health, economic, social and governmental environments and the effect of the pandemic on our associates, suppliers and customers as well as the global economy; our dependence upon a limited number of customers; pricing pressures that we face from customers; our reliance on third party suppliers for raw materials, key products and subcomponents; our ability to attract, train and retain a sufficient number of qualified associates; the potential for harm to our reputation caused by quality problems related to our products; the dependence of our energy market-related revenues on the conditions in the oil and natural gas industry; interruptions in our manufacturing operations; our dependence upon our information technology systems and our ability to prevent cyber-attacks and other failures; and our dependence upon our senior management team and technical personnel;
  • strategic risks, such as the intense competition we face and our ability to successfully market our products; our ability to respond to changes in technology; our ability to develop new products and expand into new geographic and product markets; and our ability to successfully identify, make and integrate acquisitions to expand and develop our business in accordance with expectations;
  • financial risks, such as our significant amount of outstanding indebtedness and our ability to remain in compliance with financial and other covenants under our senior secured credit facilities; economic and credit market uncertainties that could interrupt our access to capital markets, borrowings or financial transactions; financial and market risks related to our international operations and sales; our complex international tax profile; and our ability to realize the full value of our intangible assets; and
  • legal and compliance risks, such as regulatory issues resulting from product complaints, recalls or regulatory audits; the potential of becoming subject to product liability or intellectual property claims; our ability to protect our intellectual property and proprietary rights; our ability and the cost to comply with environmental regulations; our ability to comply with customer-driven policies and third party standards or certification requirements; our ability to obtain necessary licenses for new technologies; legal and regulatory risks from our international operations; and the fact that the healthcare industry is highly regulated and subject to various regulatory changes;

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 Balance Sheets - Unaudited
(in thousands)
  
 July 1,
2022
 December 31,
2021
ASSETS   
Current assets:   
Cash and cash equivalents$15,593  $17,885
Accounts receivable, net 221,939   182,310
Inventories 194,458   155,699
Refundable income taxes 4,627   4,735
Contract assets 70,408   64,743
Prepaid expenses and other current assets 25,988   27,610
Total current assets 533,013   452,982
Property, plant and equipment, net 280,461   277,099
Goodwill 978,559   924,704
Other intangible assets, net 841,122   807,810
Deferred income taxes 6,149   5,711
Operating lease assets 75,777   70,053
Other long-term assets 43,006   43,856
Total assets$2,758,087  $2,582,215
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Current portion of long-term debt$15,250  $15,250
Accounts payable 103,111   76,859
Income taxes payable 259   725
Operating lease liabilities 10,762   9,862
Accrued expenses and other current liabilities 68,344   56,933
Total current liabilities 197,726   159,629
Long-term debt 931,889   812,876
Deferred income taxes 178,695   171,505
Operating lease liabilities 64,436   59,767
Other long-term liabilities 21,890   23,741
Total liabilities 1,394,636   1,227,518
Stockholders’ equity:   
Common stock 33   33
Additional paid-in capital 722,175   713,150
Retained earnings 646,527   614,324
Accumulated other comprehensive income (loss) (5,284)  27,190
Total stockholders’ equity 1,363,451   1,354,697
Total liabilities and stockholders’ equity$2,758,087  $2,582,215
       


Condensed Consolidated Statements of Operations - Unaudited    
(in thousands, except per share data)       
        
 Three Months Ended Six Months Ended
 July 1,
2022
 July 2,
2021
 July 1,
2022
 July 2,
2021
Sales$350,081 $312,023 $660,993 $602,490
Cost of sales (COS) 257,184  223,277  486,621  429,258
Gross profit 92,897  88,746  174,372  173,232
Operating expenses:       
Selling, general and administrative (SG&A) 41,786  35,379  81,346  70,881
Research, development and engineering (RD&E) 14,871  13,738  30,954  27,199
Restructuring and other charges 3,533  279  6,868  1,194
Total operating expenses 60,190  49,396  119,168  99,274
Operating income 32,707  39,350  55,204  73,958
Interest expense 7,773  7,532  13,741  16,064
Loss on equity investments 320  684  2,724  2,019
Other loss, net 191  356  368  119
Income before taxes 24,423  30,778  38,371  55,756
Provision for income taxes 3,587  1,345  6,168  4,803
Net income$20,836 $29,433 $32,203 $50,953
        
Earnings per share:       
Basic$0.63 $0.89 $0.97 $1.55
Diluted$0.62 $0.89 $0.97 $1.53
        
Weighted average shares outstanding:       
Basic 33,111  32,982  33,101  32,970
Diluted 33,350  33,254  33,326  33,221
            


Condensed Consolidated Statements of Cash Flows - Unaudited
(in thousands)
  
 Six Months Ended
 July 1,
2022
 July 2,
2021
Cash flows from operating activities:   
Net income$32,203  $50,953 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization 45,753   40,419 
Debt related charges included in interest expense 962   2,446 
Inventory step-up amortization 798    
Stock-based compensation 10,951   8,953 
Non-cash lease expense 5,344   3,947 
Non-cash loss on equity investments 2,724   2,019 
Other non-cash losses 7,510   29 
Deferred income taxes (969)  (242)
Changes in operating assets and liabilities, net of acquisition:   
Accounts receivable (37,642)  (19,141)
Inventories (41,471)  898 
Prepaid expenses and other assets (783)  (2,604)
Contract assets (6,189)  (16,792)
Accounts payable 25,554   16,937 
Accrued expenses and other liabilities (7,295)  (13,737)
Income taxes payable (439)  (5,298)
Net cash provided by operating activities 37,011   68,787 
Cash flows from investing activities:   
Acquisition of property, plant and equipment (22,610)  (18,416)
Proceeds from sale of property, plant and equipment 587   15 
Acquisitions, net (126,636)   
Net cash used in investing activities (148,659)  (18,401)
Cash flows from financing activities:   
Principal payments of term loans (7,625)  (64,750)
Proceeds from revolving credit facility 160,000    
Payments of revolving credit facility (34,000)   
Proceeds from the exercise of stock options    340 
Payment of debt issuance costs    (141)
Tax withholdings related to net share settlements of restricted stock unit awards (1,926)  (2,988)
Contingent consideration payments (493)  (1,621)
Principal payments on finance leases (353)  (24)
Net cash provided by (used in) financing activities 115,603   (69,184)
Effect of foreign currency exchange rates on cash and cash equivalents (6,247)  173 
Net decrease in cash and cash equivalents (2,292)  (18,625)
Cash and cash equivalents, beginning of period 17,885   49,206 
Cash and cash equivalents, end of period$15,593  $30,581 
        


Reconciliations of Non-GAAP Measures

Table A: Net Income and Diluted EPS Reconciliations
(in thousands, except per share amounts)

 Three Months Ended
 July 1, 2022 July 2, 2021
 Pre-Tax Net of
Tax
 Per
Diluted
Share
 Pre-Tax Net of
Tax
 Per
Diluted
Share
Net income (GAAP)$24,423  $20,836  $0.62 $30,778  $29,433  $0.89 
Adjustments(a):           
Amortization of intangible assets 12,285   9,710   0.29  10,339   8,177   0.25 
Certain legal expenses (SG&A)(b)         288   228   0.01 
Restructuring and restructuring-related charges(c) 884   728   0.02  191   149    
Acquisition and integration costs(d) 3,333   2,614   0.08  26   21    
Other general expenses(e) 205   167   0.01  62   39    
Loss on equity investments 320   253   0.01  684   540   0.02 
Loss on extinguishment of debt         82   65    
Medical device regulations(f) 182   143     169   134    
Customer bankruptcy(g) 83   66     (361)  (285)  (0.01)
Inventory step-up amortization (COS)(h)                
Tax adjustments(i)    134        (2,943)  (0.09)
Adjusted net income (Non-GAAP)$41,715  $34,651   1.04 $42,258  $35,558   1.07 
            
Weighted average shares for adjusted diluted EPS   33,350       33,254   
            
 Six Months Ended
 July 1, 2022 July 2, 2021
 Pre-Tax Net of
Tax
 Per
Diluted
Share
 Pre-Tax Net of
Tax
 Per
Diluted
Share
Net income (GAAP)$38,371  $32,203  $0.97 $55,756  $50,953  $1.53 
Adjustments(a):           
Amortization of intangible assets 23,889   18,882   0.57  20,789   16,442   0.49 
Certain legal expenses (SG&A)(b)         545   431   0.01 
Restructuring and restructuring-related charges(c) 2,637   2,075   0.06  845   666   0.02 
Acquisition and integration costs(d) 5,269   4,149   0.12  110   92    
Other general expenses(e) 501   396   0.01  239   169   0.01 
Loss on equity investments 2,724   2,152   0.06  2,019   1,595   0.05 
Loss on extinguishment of debt         428   338   0.01 
Medical device regulations(f) 292   230   0.01  290   229   0.01 
Customer bankruptcy(g) (106)  (83)    (385)  (304)  (0.01)
Inventory step-up amortization (COS)(h) 798   630   0.02         
Tax adjustments(i)    96        (2,943)  (0.09)
Adjusted net income (Non-GAAP)$74,375  $60,730  $1.82 $80,636  $67,668  $2.04 
            
Weighted average shares for adjusted diluted EPS   33,326       33,221   

(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 applicable in foreign tax jurisdictions, as adjusted for the existence of net operating losses (“NOLs”). Expenses that are not deductible for tax purposes (i.e. permanent tax differences) are added back at 100%.

(b)   Expenses associated with non-ordinary course legal matters.

(c)   We initiate discrete restructuring programs primarily to realign resources to better serve our customers and markets, improve operational efficiency and capabilities, and lower operating costs or improve profitability. Depending on the program, restructuring charges may include termination benefits, contract termination, facility closure and other exit and disposal costs. Restructuring-related expenses are directly related to the program and may include retention bonuses, accelerated depreciation, consulting expense and costs to transfer manufacturing operations among our facilities.

(d)   Acquisition and integration costs are incremental costs that are directly related to a business or asset acquisition. These costs may include, among other things, professional, consulting and other fees, system integration costs, and fair value adjustments relating to contingent consideration.

(e)   Other general expenses are discrete transactions occurring sporadically and affect period-over-period comparisons.

(f)   The charges represent incremental costs of complying with the new European Union medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses.

(g)   In November 2019, one of our customers, Nuvectra Corporation, filed a voluntary Chapter 11 bankruptcy petition (the “Customer Bankruptcy”). The 2022 and 2021 amounts are predominantly due to favorable settlements on supplier purchase order termination clauses and benefits recognized from the utilization or sale of previously reserved inventory.

(h)   The accounting associated with our acquisitions require us to record inventory at its fair value, which is sometimes greater than the previous book value of inventory. The increase in inventory value is amortized to cost of sales over the period that the related inventory is sold. We exclude inventory step-up amortization from our non-GAAP financial measures because it is a non-cash expense that we do not believe is indicative of our ongoing operating results.

(i)   For the 2022 periods, tax adjustments predominately related to acquisition costs that are not deductible for tax purposes and interest associated with uncertain tax benefits related to acquired foreign tax credits. For the 2021 periods, tax adjustments predominately related to discrete tax benefits associated with the reversal of previously unrecognized tax benefits resulting from the effective settlement of tax audits and the utilization of acquired foreign tax credits during the periods presented.

Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of non-GAAP financial measures.


Table B: Adjusted Operating Income Reconciliations
(in thousands)

 Three Months Ended Six Months Ended
 July 1,
2022
 July 2,
2021
 July 1,
2022
 July 2,
2021
Operating income (GAAP)$32,707 $39,350  $55,204  $73,958 
Adjustments:       
Amortization of intangible assets 12,285  10,339   23,889   20,789 
Certain legal expenses   288      545 
Restructuring and restructuring-related charges 884  191   2,637   845 
Acquisition and integration costs 3,333  26   5,269   110 
Other general expenses 205  62   501   239 
Medical device regulations 182  169   292   290 
Customer bankruptcy 83  (361)  (106)  (385)
Inventory step-up amortization$ $   798    
Adjusted operating income (Non-GAAP)$49,679 $50,064  $88,484  $96,391 


Table C: EBITDA Reconciliations
(in thousands)

 Three Months Ended Six Months Ended
 July 1,
2022
 July 2,
2021
 July 1,
2022
 July 2,
2021
Net income (GAAP)$20,836 $29,433  $32,203  $50,953 
        
Interest expense 7,773  7,532   13,741   16,064 
Provision for income taxes 3,587  1,345   6,168   4,803 
Depreciation 10,666  9,786   21,402   19,630 
Amortization of intangible assets and financing leases 12,545  10,339   24,351   20,789 
EBITDA (Non-GAAP) 55,407  58,435   97,865   112,239 
Stock-based compensation(a) 5,483  4,249   10,122   8,953 
Certain legal expenses   288      545 
Restructuring and restructuring-related charges 884  191   2,637   845 
Acquisition and integration costs 3,333  26   5,269   110 
Other general expenses 205  62   501   239 
Loss on equity investments 320  684   2,724   2,019 
Medical device regulations 182  169   292   290 
Customer bankruptcy 83  (361)  (106)  (385)
Inventory step-up amortization      798    
Adjusted EBITDA (Non-GAAP)$65,897 $63,743  $120,102  $124,855 

(a)   Total stock-based compensation expense less amounts included in acquisition and integration costs.


Table D: Organic Sales Change Reconciliation (% Change)

 GAAP
Reported
Growth
 Impact of
Acquisitions
and Foreign
Currency
(a)
 Non-GAAP
Organic
Change
QTD Change (2Q 2022 vs. 2Q 2021)     
Medical Sales     
Cardio & Vascular24.8% 8.1% 16.7%
Cardiac Rhythm Management & Neuromodulation1.7% 7.1% (5.4)%
Advanced Surgical, Orthopedics & Portable Medical—% (0.1)% 0.1%
Total Medical Sales12.7% 7.1% 5.6%
Non-Medical Sales(1.4)% —% (1.4)%
Total Sales12.2% 6.9% 5.3%
      
YTD Change (6M 2022 vs. 6M 2021)     
Medical Sales     
Cardio & Vascular18.8% 6.3% 12.5%
Cardiac Rhythm Management & Neuromodulation1.5% 8.1% (6.6)%
Advanced Surgical, Orthopedics & Portable Medical(0.9)% (0.1)% (0.8)%
Total Medical Sales9.8% 6.6% 3.2%
Non-Medical Sales6.9% —% 6.9%
Total Sales9.7% 6.4% 3.3%

(a)   Sales have been adjusted to exclude the impact of foreign currency exchange rate fluctuations and acquisitions.


Table E: Net Total Debt Reconciliation
(in thousands)

 July 1,
2022
 December 31,
2021
Total debt$947,139 $828,126
Add: Unamortized discount and deferred debt issuance costs included above 6,724  7,361
Total principal amount of debt outstanding 953,863  835,487
Less: Cash and cash equivalents 15,593  17,885
Net Total Debt (Non-GAAP)$938,270 $817,602


The following information was filed by Integer Holdings Corp (ITGR) on Thursday, July 28, 2022 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 Statements Of Cash Flows (Unaudited)
Condensed Consolidated Statements Of Operations And Comprehensive Income (Loss) (Unaudited)
Condensed Consolidated Statements Of Stockholders' Equity (Unaudited)
Basis Of Presentation
Basis Of Presentation (Policies)
Business Acquisitions
Business Acquisitions (Allocation Of The Provisional Purchase Price) (Details)
Business Acquisitions (Definite-Lived Intangible Assets Acquired) (Details)
Business Acquisitions (Narrative) (Details)
Business Acquisitions (Pro Forma Information) (Details)
Business Acquisitions (Tables)
Commitments And Contingencies
Commitments And Contingencies (Schedule Of Product Warranty Liability) (Details)
Commitments And Contingencies (Tables)
Debt
Debt (Long-Term Debt Maturity Schedule) (Details)
Debt (Narrative) (Details)
Debt (Schedule Of Long-Term Debt) (Details)
Debt (Tables)
Earnings Per Share (???Eps???)
Earnings Per Share (???Eps???) (Details)
Earnings Per Share (???Eps???) (Tables)
Financial Instruments And Fair Value Measurements
Financial Instruments And Fair Value Measurements (Assets And Liabilities Recorded At Fair Value On A Recurring Basis) (Details)
Financial Instruments And Fair Value Measurements (Contingent Consideration Measurement Inputs) (Details)
Financial Instruments And Fair Value Measurements (Equity Method Investments) (Details)
Financial Instruments And Fair Value Measurements (Estimated Fair Values For Contingent Consideration) (Details)
Financial Instruments And Fair Value Measurements (Impact Of Cash Flow Hedges On Other Comprehensive Income (Loss), Aoci And The Condensed Consolidated Statements Of Operations) (Details)
Financial Instruments And Fair Value Measurements (Narrative) (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 (Intangible Assets Narrative) (Details)
Goodwill And Other Intangible Assets, Net (Schedule Of Definite-Lived And Indefinite-Lived Intangible Assets, Major Class) (Details)
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 Goodwill) (Details)
Goodwill And Other Intangible Assets, Net (Tables)
Income Taxes
Income Taxes (Details)
Inventories
Inventories (Details)
Inventories (Tables)
Restructuring And Other Charges
Restructuring And Other Charges (Narrative) (Details)
Restructuring And Other Charges (Schedule Of Restructuring And Other Charges Components) (Details)
Restructuring And Other Charges (Schedule Of Restructuring Reserve By Type Of Cost) (Details)
Restructuring And Other Charges (Schedule Of Restructuring Restructuring-Related Costs) (Details)
Restructuring And Other Charges (Tables)
Revenue From Contracts With Customers
Revenue From Contracts With Customers (Disaggregated Revenue) (Details)
Revenue From Contracts With Customers (Narrative) (Details)
Revenue From Contracts With Customers (Schedule Of Revenue By Ship To Location) (Details)
Revenue From Contracts With Customers (Tables)
Revenue From Contracts With Customers Contract With Customer (Assets And Liability) (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 (Allocation Of Recognized Period Costs) (Details)
Stock-Based Compensation (Narrative) (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 (Accumulated Other Comprehensive Income (Loss)) (Details)
Stockholders' Equity (Shares Issued And Outstanding) (Details)
Stockholders' Equity (Tables)
Supplemental Cash Flow Information
Supplemental Cash Flow Information (Details)
Supplemental Cash Flow Information (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: 0001114483-22-000024
Submitted to the SEC: Thu Jul 28 2022 4:10:15 PM EST
Accepted by the SEC: Thu Jul 28 2022
Period: Friday, July 1, 2022
Industry: Miscellaneous Electrical Machinery Equipment And Supplies

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