Integer Holdings Corporation (NYSE:ITGR) today announced results
for the three months ended March 29, 2024.
First Quarter
2024 Highlights (compared to
First Quarter 2023, except as noted)
- Sales increased 10% to $415 million, with organic growth of
6%.
- GAAP net income increased $7 million to $21 million, an
increase of 57%. Non-GAAP adjusted net income increased $10 million
to $39 million, an increase of 33%.
- GAAP operating income increased $5 million to $39 million, an
increase of 15%. Non-GAAP adjusted operating income increased $13
million to $63 million, an increase of 26%.
- GAAP diluted EPS increased $0.20 per share to $0.59 per share.
Non-GAAP adjusted EPS increased $0.27 per share to $1.14 per
share.
- Adjusted EBITDA increased $15 million to $81 million, an
increase of 22%.
- From the end of 2023, total debt increased $181 million to
$1.141 billion and net total debt increased $162 million to $1.112
billion, primarily to finance the acquisition of Pulse
Technologies, resulting in a leverage ratio of 3.4 times adjusted
EBITDA as of March 29, 2024.
“Integer started the year strong with first quarter 2024 sales
growing 10% versus a year ago and adjusted operating income growing
26%, more than two and a half times the rate of sales growth.” said
Joseph Dziedzic, Integer’s president and CEO. “We
continue to expect 2024 sales growth of 9% to 11% and adjusted
operating income growth of 13% to 20% in 2024, as we execute our
strategy and expand margins throughout the year.”
Discussion of Product Line
First Quarter
2024 Sales
- Cardio & Vascular sales increased 16% in the first quarter
2024 compared to the first quarter 2023, driven by continued strong
demand across all markets, new product ramps in electrophysiology
and structural heart, and the InNeuroCo and Pulse
acquisitions.
- Cardiac Rhythm Management & Neuromodulation sales increased
8% in the first quarter 2024 compared to the first quarter 2023,
with strong growth in emerging Neuromodulation customers with PMA
(pre-market approval) products and strong demand in Cardiac Rhythm
Management.
- Advanced Surgical, Orthopedics & Portable Medical sales
increased 4% in the first quarter 2024 compared to the first
quarter 2023, driven by growth of Advanced Surgical and
Orthopedics, partially offset by decline in Portable Medical from
execution of the planned multi-year exit announced in 2022.
- Electrochem sales decreased in the first quarter 2024 compared
to the first quarter 2023, returning to a normalized run-rate after
previously higher sales from the supply chain recovery.
2024 Outlook(a)
(dollars in millions, except
per share amounts) |
|
GAAP |
|
Non-GAAP(b) |
|
|
As Reported |
|
Change from Prior Year |
|
Adjusted |
|
Change from Prior Year |
Sales |
|
$1,735 to $1,770 |
|
9% to 11% |
|
N/A |
|
N/A |
Operating income |
|
$202 to $220 |
|
20% to 31% |
|
$272 to $290 |
|
13% to 20% |
EBITDA |
|
N/A |
|
N/A |
|
$355 to $375 |
|
15% to 21% |
Net income |
|
$115 to $130 |
|
27% to 43% |
|
$171 to $185 |
|
8% to 18% |
Diluted earnings per
share |
|
$3.30 to $3.71 |
|
23% to 38% |
|
$5.01 to $5.43 |
|
7% to 16% |
Cash flow from operating
activities |
|
$185 to $205 |
|
3% to 14% |
|
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 and Adjusted Earnings per Share (“EPS”),
included in our “2024 Outlook” above, and Adjusted total interest
expense, Adjusted effective tax rate and Leverage ratio in
“Supplemental Financial Information” 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 2024 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 $71
million, pre-tax. Adjusted net income and Adjusted EPS for 2024
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 $71
million, pre-tax. The after-tax impact of these items is estimated
to be approximately $56 million, or approximately $1.63 per diluted
share. Adjusted EPS is calculated using Adjusted weighted average
shares. Adjusted EBITDA is expected to consist of Adjusted net
income, excluding items such as depreciation, interest, stock-based
compensation and taxes totaling approximately $184 million to $190
million.
Please see “Notes Regarding Non-GAAP Financial Information” for
additional information regarding our use of non-GAAP financial
measures.
Supplemental Financial Information
(dollars in millions) |
2024Outlook |
|
2023Actual |
Depreciation and
amortization |
$105 to $115 |
|
$97 |
Adjusted total interest
expense(a) |
$56 to $61 |
|
$49 |
Stock-based compensation |
$24 to $27 |
|
$23 |
Restructuring, acquisition and
other charges(b) |
$15 to $20 |
|
$22 |
Adjusted effective tax
rate(c) |
19.0% to 21.0% |
|
17.7% |
Leverage ratio(d) |
2.5x to 3.5x |
|
3.1x |
Capital expenditures(d) |
$90 to $110 |
|
$120 |
Cash income tax payments |
$43 to $47 |
|
$30 |
|
(a) Adjusted total interest expense refers to our
expected full-year GAAP interest expense, expected to range from
$56 million to $61 million for 2024, adjusted to remove the
full-year impact of charges associated with the accelerated
write-off of debt discounts and deferred issuance costs (loss on
extinguishment of debt) included in GAAP interest expense, if any.
Adjusted total interest expense of $48.9 million for 2023 consists
of GAAP interest expense of $53.4 million less $4.5 million of
losses from the extinguishment of debt.
(b) Restructuring, acquisition and other charges
consists of restructuring and restructuring-related charges,
acquisition and integration costs, other general expenses and
incremental costs of complying with the new European Union medical
device regulations.
(c) Adjusted effective tax rate refers to our
full-year GAAP effective tax rate, expected to range from 19.0% to
21.0% for 2024, adjusted to reflect the full-year impact of the
items that are excluded in providing adjusted net income and
certain other identified items. Adjusted effective tax rate of
17.7% for 2023 consists of GAAP effective tax rate of 15.5%
adjusted to reflect the impact on the income tax provision related
to Non-GAAP adjustments.
(d) Please see “Notes Regarding Non-GAAP Financial
Information” for additional information regarding leverage ratio.
Capital expenditures is calculated as cash used to acquire
property, plant, and equipment (PP&E) less cash proceeds from
the sale of PP&E.
Summary Financial Results(dollars in thousands,
except per share data)
|
Three Months Ended |
|
March 29,2024 |
|
March 31,2023 |
|
QTD Change |
Operating income |
$ |
39,277 |
|
$ |
34,166 |
|
15.0 |
% |
Net income |
$ |
20,508 |
|
$ |
13,065 |
|
57.0 |
% |
Diluted EPS |
$ |
0.59 |
|
$ |
0.39 |
|
51.3 |
% |
|
|
|
|
|
|
EBITDA(a) |
$ |
65,385 |
|
$ |
57,377 |
|
14.0 |
% |
Adjusted
EBITDA(a) |
$ |
81,238 |
|
$ |
66,345 |
|
22.4 |
% |
Adjusted operating
income(a) |
$ |
62,875 |
|
$ |
49,862 |
|
26.1 |
% |
Adjusted net
income(a) |
$ |
38,667 |
|
$ |
29,060 |
|
33.1 |
% |
Adjusted
EPS(a) |
$ |
1.14 |
|
$ |
0.87 |
|
31.0 |
% |
|
(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 |
|
March 29,2024 |
|
March 31,2023 |
|
QTD Change |
|
Organic Change(a) |
Medical Sales |
|
|
|
|
|
|
|
Cardio & Vascular |
$ |
221,836 |
|
$ |
191,203 |
|
16.0 |
% |
|
9.3 |
% |
Cardiac Rhythm Management & Neuromodulation |
|
156,257 |
|
|
145,139 |
|
7.7 |
% |
|
6.9 |
% |
Advanced Surgical, Orthopedics & Portable Medical |
|
29,121 |
|
|
27,924 |
|
4.3 |
% |
|
21.4 |
% |
Total Medical Sales |
|
407,214 |
|
|
364,266 |
|
11.8 |
% |
|
8.6 |
% |
Non-Medical Sales |
|
7,591 |
|
|
14,519 |
|
(47.7 |
)% |
|
(47.7 |
)% |
Total Sales |
$ |
414,805 |
|
$ |
378,785 |
|
9.5 |
% |
|
6.4 |
% |
|
(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 InformationThe
Company will host a conference call on Thursday, April 25,
2024, 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
contract development and manufacturing organizations (CDMO) in the
world, serving the cardiac rhythm management, neuromodulation, and
cardio and vascular markets. As a strategic partner of choice to
medical device companies and OEMs, the Company is committed to
enhancing the lives of patients worldwide by providing innovative,
high-quality products and solutions. The Company's brands include
Greatbatch Medical®, Lake Region
Medical® and Electrochem®.
Additional information is available at www.integer.net.
Investor Relations:Andrew
Senn763.951.8312andrew.senn@integer.net
Notes Regarding Non-GAAP Financial
InformationIn 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.
Adjusted net income and adjusted EPS consist of GAAP net income
and diluted EPS, respectively, adjusted for the following to the
extent occurring during the period: (i) amortization of intangible
assets, (ii) restructuring and restructuring-related charges; (iii)
acquisition and integration related costs; (iv) other general
expenses; (v) (gain) loss on equity investments; (vi)
extinguishment of debt charges; (vii) European Union medical device
regulation incremental charges; (viii) inventory step-up
amortization; (ix) unusual, or infrequently occurring items; (x)
the income tax provision (benefit) related to these adjustments and
(xi) certain tax items that are outside the normal tax provision
for the period. Adjusted EPS is calculated by dividing adjusted net
income by Adjusted weighted average shares.
The weighted average shares used to calculate diluted EPS in
accordance with GAAP includes dilution, when applicable, resulting
from the potential conversion of our 2.125% Convertible Senior
Notes due 2028 (the “2028 Convertible Notes”). In connection with
the issuance of the 2028 Convertible Notes, we entered into capped
call contracts which are expected to reduce the potential dilution
on our common stock in connection with any conversion of the 2028
Convertible Notes, subject to a cap. Adjusted weighted average
shares consists of GAAP weighted average shares used to calculate
diluted EPS, excluding, when applicable, dilution resulting from
the potential conversion of our 2028 Convertible Notes expected to
be offset by the capped call contracts.
EBITDA is calculated by adding back interest expense, provision
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),
(vi), (x) and (xi). Adjusted operating income consists of operating
income adjusted for the same items listed above except for items
(v), (vi), (x) and (xi).
Organic sales change is reported sales growth adjusted to remove
the impact of foreign currency, the contribution of acquisitions
and the strategic exit of the Portable Medical market. 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. For contribution of
acquisitions, we exclude the impact on the growth rate attributable
to the contribution of acquisitions in all periods where there were
no comparable sales. For the strategic exit of the Portable Medical
market, we exclude the impact on the growth rate attributable to
Portable Medical sales for all periods presented.
We believe that the presentation of adjusted net income,
adjusted EPS, EBITDA, adjusted EBITDA, adjusted operating income,
and organic sales change, 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.
Forward-Looking StatementsSome
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: our 2024 outlook including future sales, expenses, and
profitability; our ability to execute our business model and our
business strategy; 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 “outlook,” “projected,” “may,”
“will,” “should,” “could,” “expects,” “intends,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential,”
“project,” 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 our
dependence upon a limited number of customers; pricing pressures
and contractual pricing restraints we face from customers; our
reliance on third-party suppliers for raw materials, key products
and subcomponents; interruptions in our manufacturing operations;
our ability to attract, train and retain a sufficient number of
qualified associates to maintain and grow our business; the
potential for harm to our reputation and competitive advantage
caused by quality problems related to our products; our dependence
upon our information technology systems and our ability to prevent
cyber-attacks and other failures; global climate change and the
emphasis on Environmental, Social and Governance matters by various
stakeholders; our dependence upon our senior management team and
key technical personnel; our energy market revenues’ dependence on
conditions in the historically volatile oil and natural gas
industries; and consolidation in the healthcare industry resulting
in greater competition;
- 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 and indebtedness risks,
such as our ability to accurately forecast future performance based
on operating results that often fluctuate; our significant amount
of outstanding indebtedness and our ability to remain in compliance
with financial and other covenants under the credit agreement
governing our Senior Secured Credit Facilities; economic and credit
market uncertainties that could interrupt our access to capital
markets, borrowings or financial transactions; the conditional
conversion feature of the 2028 Convertible Notes adversely
impacting our liquidity, the conversion of our 2028 Convertible
Notes, if it were to occur, diluting ownership interests of
existing holders of our common stock; the counterparty risk
associated with our capped call transaction; the counter 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;
- 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 to
comply with customer-driven policies and third-party standards or
certification requirements; our ability to obtain and/or retain
necessary licenses from third parties for new technologies; our
ability and the cost to comply with environmental regulations;
legal and regulatory risks from our international operations; the
fact that the healthcare industry is highly regulated and subject
to various regulatory changes; and our business being indirectly
subject to healthcare industry cost containment measures that could
result in reduced sales of our products; and
- other risks and uncertainties that
arise from time to time.
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) |
|
|
|
March 29,2024 |
|
December 31, 2023 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
42,156 |
|
$ |
23,674 |
Accounts receivable, net |
|
237,154 |
|
|
238,277 |
Inventories |
|
262,869 |
|
|
239,716 |
Refundable income taxes |
|
2,848 |
|
|
1,998 |
Contract assets |
|
90,873 |
|
|
85,871 |
Prepaid expenses and other current assets |
|
32,673 |
|
|
28,132 |
Total current assets |
|
668,573 |
|
|
617,668 |
Property, plant and equipment,
net |
|
448,712 |
|
|
407,954 |
Goodwill |
|
1,043,876 |
|
|
1,011,007 |
Other intangible assets,
net |
|
828,854 |
|
|
783,146 |
Deferred income taxes |
|
7,026 |
|
|
7,001 |
Operating lease assets |
|
83,243 |
|
|
81,632 |
Financing lease assets |
|
12,630 |
|
|
11,828 |
Other long-term assets |
|
23,095 |
|
|
22,417 |
Total assets |
$ |
3,116,009 |
|
$ |
2,942,653 |
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current portion of long-term debt |
$ |
— |
|
$ |
— |
Accounts payable |
|
116,220 |
|
|
120,293 |
Income taxes payable |
|
5,963 |
|
|
3,896 |
Operating lease liabilities |
|
8,550 |
|
|
8,692 |
Accrued expenses and other current liabilities |
|
70,696 |
|
|
88,088 |
Total current liabilities |
|
201,429 |
|
|
220,969 |
Long-term debt |
|
1,140,724 |
|
|
959,925 |
Deferred income taxes |
|
145,199 |
|
|
145,625 |
Operating lease
liabilities |
|
74,294 |
|
|
72,339 |
Financing lease
liabilities |
|
10,928 |
|
|
10,388 |
Other long-term
liabilities |
|
18,424 |
|
|
14,365 |
Total liabilities |
|
1,590,998 |
|
|
1,423,611 |
Stockholders’ equity: |
|
|
|
Common stock |
|
34 |
|
|
33 |
Additional paid-in capital |
|
725,247 |
|
|
727,435 |
Retained earnings |
|
791,859 |
|
|
771,351 |
Accumulated other comprehensive income |
|
7,871 |
|
|
20,223 |
Total stockholders’ equity |
|
1,525,011 |
|
|
1,519,042 |
Total liabilities and stockholders’ equity |
$ |
3,116,009 |
|
$ |
2,942,653 |
Condensed
Consolidated Statements of Operations - Unaudited |
(in thousands, except per
share data) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 29,2024 |
|
March 31,2023 |
Sales |
$ |
414,805 |
|
|
$ |
378,785 |
Cost of sales (COS) |
|
304,965 |
|
|
|
282,112 |
Gross profit |
|
109,840 |
|
|
|
96,673 |
Operating expenses: |
|
|
|
Selling, general and administrative (SG&A) |
|
46,929 |
|
|
|
41,886 |
Research, development and engineering (RD&E) |
|
15,753 |
|
|
|
19,092 |
Restructuring and other charges (R&O) |
|
7,881 |
|
|
|
1,529 |
Total operating expenses |
|
70,563 |
|
|
|
62,507 |
Operating income |
|
39,277 |
|
|
|
34,166 |
Interest expense |
|
14,671 |
|
|
|
17,254 |
(Gain) loss on equity
investments |
|
(1,136 |
) |
|
|
155 |
Other loss, net |
|
1,007 |
|
|
|
760 |
Income before taxes |
|
24,735 |
|
|
|
15,997 |
Provision for income
taxes |
|
4,227 |
|
|
|
2,932 |
Net income |
$ |
20,508 |
|
|
$ |
13,065 |
|
|
|
|
Earnings per share: |
|
|
|
Basic |
$ |
0.61 |
|
|
$ |
0.39 |
Diluted |
$ |
0.59 |
|
|
$ |
0.39 |
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
Basic |
|
33,478 |
|
|
|
33,258 |
Diluted |
|
34,993 |
|
|
|
33,575 |
Condensed
Consolidated Statements of Cash Flows - Unaudited |
(in
thousands) |
|
|
|
Three Months Ended |
|
March 29,2024 |
|
March 31,2023 |
Cash flows from
operating activities: |
|
|
|
Net income |
$ |
20,508 |
|
|
$ |
13,065 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
|
26,185 |
|
|
|
24,126 |
|
Debt related charges included in interest expense |
|
931 |
|
|
|
5,149 |
|
Inventory step-up amortization |
|
1,056 |
|
|
|
— |
|
Stock-based compensation |
|
6,848 |
|
|
|
6,102 |
|
Non-cash lease expense |
|
2,295 |
|
|
|
2,741 |
|
Non-cash (gain) loss on equity investments |
|
(1,136 |
) |
|
|
155 |
|
Contingent consideration fair value adjustment |
|
— |
|
|
|
(265 |
) |
Other non-cash (gains) losses |
|
805 |
|
|
|
(1,417 |
) |
Deferred income taxes |
|
— |
|
|
|
(5 |
) |
Changes in operating assets
and liabilities, net of acquisition: |
|
|
|
Accounts receivable |
|
7,667 |
|
|
|
(24,206 |
) |
Inventories |
|
(17,271 |
) |
|
|
(17,016 |
) |
Prepaid expenses and other assets |
|
(4,208 |
) |
|
|
1,657 |
|
Contract assets |
|
(5,255 |
) |
|
|
(8,819 |
) |
Accounts payable |
|
2,669 |
|
|
|
12,877 |
|
Accrued expenses and other liabilities |
|
(19,026 |
) |
|
|
(7,773 |
) |
Income taxes payable |
|
1,171 |
|
|
|
(183 |
) |
Net cash provided by operating activities |
|
23,239 |
|
|
|
6,188 |
|
Cash flows from
investing activities: |
|
|
|
Acquisition of property, plant
and equipment |
|
(29,072 |
) |
|
|
(24,694 |
) |
Acquisitions, net |
|
(139,126 |
) |
|
|
— |
|
Net cash used in investing activities |
|
(168,198 |
) |
|
|
(24,694 |
) |
Cash flows from
financing activities: |
|
|
|
Principal payments of term
loans |
|
— |
|
|
|
(390,938 |
) |
Proceeds from issuance of
convertible notes, net of discount |
|
— |
|
|
|
486,250 |
|
Proceeds from revolving credit
facility |
|
192,000 |
|
|
|
208,689 |
|
Payments of revolving credit
facility |
|
(12,000 |
) |
|
|
(232,500 |
) |
Purchase of capped calls |
|
— |
|
|
|
(35,000 |
) |
Payment of debt issuance
costs |
|
— |
|
|
|
(1,055 |
) |
Proceeds from the exercise of
stock options |
|
313 |
|
|
|
555 |
|
Tax withholdings related to
net share settlements of restricted stock unit awards |
|
(9,348 |
) |
|
|
(2,610 |
) |
Principal payments on finance
leases |
|
(8,386 |
) |
|
|
(275 |
) |
Other financing
activities |
|
715 |
|
|
|
— |
|
Net cash provided by financing activities |
|
163,294 |
|
|
|
33,116 |
|
Effect of foreign currency
exchange rates on cash and cash equivalents |
|
147 |
|
|
|
1,722 |
|
Net increase in cash and cash
equivalents |
|
18,482 |
|
|
|
16,332 |
|
Cash and cash equivalents,
beginning of period |
|
23,674 |
|
|
|
24,272 |
|
Cash and cash equivalents, end
of period |
$ |
42,156 |
|
|
$ |
40,604 |
|
|
Table A: Net Income and Diluted EPS
Reconciliations(in thousands, except per share
amounts)
|
Three Months Ended |
|
March 29, 2024 |
|
March 31, 2023 |
|
Pre-Tax |
|
Net of Tax |
|
PerDilutedShare(a) |
|
Pre-Tax |
|
Net of Tax |
|
PerDilutedShare(a) |
Net income (GAAP) |
$ |
24,735 |
|
|
$ |
20,508 |
|
|
$ |
0.59 |
|
|
$ |
15,997 |
|
$ |
13,065 |
|
$ |
0.39 |
Adjustments(b): |
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
13,437 |
|
|
|
10,813 |
|
|
|
0.32 |
|
|
|
12,924 |
|
|
10,216 |
|
|
0.30 |
Restructuring and restructuring-related charges(c) |
|
1,905 |
|
|
|
1,601 |
|
|
|
0.05 |
|
|
|
1,805 |
|
|
1,396 |
|
|
0.04 |
Acquisition and integration costs(d) |
|
6,335 |
|
|
|
5,024 |
|
|
|
0.15 |
|
|
|
382 |
|
|
270 |
|
|
0.01 |
Other general expenses(e) |
|
118 |
|
|
|
88 |
|
|
|
— |
|
|
|
83 |
|
|
59 |
|
|
— |
(Gain) loss on equity investments(f) |
|
(1,136 |
) |
|
|
(897 |
) |
|
|
(0.03 |
) |
|
|
155 |
|
|
123 |
|
|
— |
Loss on extinguishment of debt(g) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,393 |
|
|
3,470 |
|
|
0.10 |
Medical device regulations(h) |
|
275 |
|
|
|
217 |
|
|
|
0.01 |
|
|
|
502 |
|
|
395 |
|
|
0.01 |
Other adjustments(i) |
|
472 |
|
|
|
373 |
|
|
|
0.01 |
|
|
|
— |
|
|
— |
|
|
— |
Inventory step-up amortization (COS)(j) |
|
1,056 |
|
|
|
834 |
|
|
|
0.02 |
|
|
|
— |
|
|
— |
|
|
— |
Tax adjustments(k) |
|
— |
|
|
|
106 |
|
|
|
— |
|
|
|
— |
|
|
66 |
|
|
— |
Adjusted net income
(non-GAAP) |
$ |
47,197 |
|
|
$ |
38,667 |
|
|
|
1.14 |
|
|
$ |
36,241 |
|
$ |
29,060 |
|
|
0.87 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares for
diluted EPS (GAAP) |
|
|
|
34,993 |
|
|
|
|
|
|
|
33,575 |
|
|
Less: 2028 Convertible Notes
capped call contract impact |
|
|
|
(1,028 |
) |
|
|
|
|
|
|
— |
|
|
Adjusted weighted average
shares (non-GAAP) |
|
|
|
33,965 |
|
|
|
|
|
|
|
33,575 |
|
|
|
(a) Net income (GAAP) per diluted share amounts are
calculated in accordance with GAAP using Weighted average shares
for diluted EPS. The per share amounts for the Adjustments and
Adjusted net income are calculated using Adjusted weighted average
shares.
(b) 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%.
(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.
The expenses for the 2024 and 2023 periods include gains and losses
in connection with the disposal of property, plant and
equipment.
(f) Amounts reflect our share of equity method
investee (gains) losses including unrealized
appreciation/depreciation of the underlying interests of the
investee.
(g) Loss on extinguishment of debt consists of
accelerated write-offs of unamortized deferred debt issuance costs
and discounts, which are included in interest expense. The 2023
amount represents a write-off of unamortized deferred debt issuance
costs and discounts in connection with the amendments to the credit
agreement governing our credit facilities, prepayments of portions
of the Term Loan A Facility, and repayment in full of our Term Loan
B Facility.
(h) 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.
(i) Amount primarily relates to costs associated
certain formal strategic projects. Strategic projects primarily
involve system reconfiguration to support our manufacturing
excellence operational strategic imperative and investments in
certain technology and platform development to align our
capabilities to meet customer needs.
(j) 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.
(k) Tax adjustments predominately relate to acquired
foreign tax credits, including utilization, changes to uncertain
tax benefits and associated interest.
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 |
|
March 29,2024 |
|
March 31,2023 |
Operating income (GAAP) |
$ |
39,277 |
|
$ |
34,166 |
Adjustments: |
|
|
|
Amortization of intangible assets |
|
13,437 |
|
|
12,924 |
Restructuring and restructuring-related charges |
|
1,905 |
|
|
1,805 |
Acquisition and integration costs |
|
6,335 |
|
|
382 |
Other general expenses |
|
118 |
|
|
83 |
Medical device regulations |
|
275 |
|
|
502 |
Other adjustments |
|
472 |
|
|
— |
Inventory step-up amortization |
|
1,056 |
|
|
— |
Adjusted operating income
(non-GAAP) |
$ |
62,875 |
|
$ |
49,862 |
|
Table C: EBITDA Reconciliations(in
thousands)
|
Three Months Ended |
|
March 29,2024 |
|
March 31,2023 |
Net income (GAAP) |
$ |
20,508 |
|
|
$ |
13,065 |
|
|
|
|
Interest expense |
|
14,671 |
|
|
|
17,254 |
Provision for income
taxes |
|
4,227 |
|
|
|
2,932 |
Depreciation(a) |
|
12,036 |
|
|
|
10,877 |
Amortization of intangible
assets and financing leases |
|
13,943 |
|
|
|
13,249 |
EBITDA (non-GAAP) |
|
65,385 |
|
|
|
57,377 |
Stock-based
compensation(a) |
|
6,828 |
|
|
|
6,041 |
Restructuring and
restructuring-related charges |
|
1,905 |
|
|
|
1,805 |
Acquisition and integration
costs |
|
6,335 |
|
|
|
382 |
Other general expenses |
|
118 |
|
|
|
83 |
(Gain) loss on equity
investments |
|
(1,136 |
) |
|
|
155 |
Medical device
regulations |
|
275 |
|
|
|
502 |
Other adjustments |
|
472 |
|
|
|
— |
Inventory step-up
amortization |
|
1,056 |
|
|
|
— |
Adjusted EBITDA
(non-GAAP) |
$ |
81,238 |
|
|
$ |
66,345 |
|
(a) Excludes amounts included in Restructuring and
restructuring-related charges.
Table D: Organic Sales Change Reconciliation (%
Change)
|
GAAP Reported Growth |
|
Impact of Foreign
Currency(a) |
|
Impact of Strategic Exits and
Acquisitions(a) |
|
Non-GAAP Organic Change |
QTD Change
(1Q 2024 vs. 1Q
2023) |
|
|
|
|
|
|
|
Medical Sales |
|
|
|
|
|
|
|
Cardio & Vascular |
16.0% |
|
0.1% |
|
6.6% |
|
9.3% |
Cardiac Rhythm Management & Neuromodulation |
7.7% |
|
—% |
|
0.8% |
|
6.9% |
Advanced Surgical, Orthopedics & Portable Medical |
4.3% |
|
—% |
|
(17.1)% |
|
21.4% |
Total Medical Sales |
11.8% |
|
—% |
|
3.2% |
|
8.6% |
Non-Medical Sales |
(47.7)% |
|
—% |
|
—% |
|
(47.7)% |
Total Sales |
9.5% |
|
—% |
|
3.1% |
|
6.4% |
|
(a) Sales growth has been adjusted to
exclude the impact of foreign currency exchange rate fluctuations
and acquisitions and strategic exits.
Table E: Net Total Debt Reconciliation(in
thousands)
|
March 29,2024 |
|
December 31,2023 |
Total debt |
$ |
1,140,724 |
|
$ |
959,925 |
Add: Debt discounts and
deferred issuance costs included in Total debt |
|
13,276 |
|
|
14,075 |
Total principal amount of debt
outstanding |
|
1,154,000 |
|
|
974,000 |
LESS: Cash and cash
equivalents |
|
42,156 |
|
|
23,674 |
Net Total Debt (Non-GAAP) |
$ |
1,111,844 |
|
$ |
950,326 |
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