Integer Holdings Corporation Reports Second Quarter 2021 Results

Integer Holdings Corporation
25 min read
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In this article:

~ Strong sales and profit growth vs. last year ~
~ Increased 2021 outlook ~

PLANO, Texas, July 29, 2021 (GLOBE NEWSWIRE) -- Integer Holdings Corporation (NYSE:ITGR), a leading medical device outsource manufacturer, today announced results for the three months ended July 2, 2021.

Second Quarter 2021 Highlights (compared to Second Quarter 2020, except as noted)

  • Sales increased 30% to $312 million.

  • GAAP net income increased $29 million to $29 million. Non-GAAP adjusted net income increased $25 million to $36 million, an increase of 239%.

  • GAAP operating income increased $30 million to $39 million, an increase of 328%. Non-GAAP adjusted operating income increased $28 million to $50 million, an increase of 130%.

  • Adjusted EBITDA increased $31 million to $64 million, an increase of 92%.

  • GAAP diluted EPS increased $0.88 per share to $0.89 per share. Non-GAAP adjusted EPS increased $0.75 per share to $1.07 per share, an increase of 234%.

  • From the end of the fourth quarter 2020, total debt decreased $63 million to $669 million and net total debt decreased $46 million to $643 million, achieving a leverage ratio of 3.1 times adjusted EBITDA.

“Integer delivered strong growth versus last year on continued recovery from the pandemic,” said Joseph Dziedzic, Integer’s president and CEO. “These results demonstrate the resiliency of Integer’s associates to deliver for customers and patients despite the U.S. labor constraints and global supply chain disruptions. The strength of our second quarter results supports another increase in our 2021 financial guidance as we continue to execute our strategy to generate a premium valuation for shareholders.”

Discussion of Product Line Second Quarter 2021 Sales (compared to Second Quarter 2020, except as noted)

  • Cardio & Vascular sales increased 18% as the industry continues to recover from the negative impact of COVID, with strong increases across all cardio & vascular markets, particularly interventional cardiology, electrophysiology, and peripheral vascular markets. Second quarter sales sequentially increased 2% compared to the first quarter of 2021.

  • Cardiac & Neuromodulation sales increased 67% as the industry continues to recover from the negative impact of COVID, with very strong increases across all markets. Sales in the cardiac rhythm management market increased high double-digits, and sales in the neuromodulation market doubled. Second quarter sales sequentially increased 10% compared to the first quarter of 2021.

  • Advanced Surgical, Orthopedics & Portable Medical includes sales to the acquirer of our former AS&O product line, under supply agreements entered into as part of the divestiture. Sales declined 4% as ventilator and patient monitoring components sales declined from pandemic-driven peak demand in 2020. Second quarter sales sequentially increased 15% compared to the first quarter of 2021.

  • Electrochem sales increased 19%, driven by the emerging recovery of the energy market. Second quarter sales sequentially increased 39% compared to the first quarter of 2021, driven by high double-digit energy market recovery growth.

2021 Outlook(a)
We are increasing our full year 2021 financial outlook with year-over-year sales growth now projected to be 12% to 14%. We expect strong year-over-year growth in the second half of 2021.

We are also increasing our adjusted operating income outlook and now expect to grow between 25% and 36%. We increased our cash flow outlook and now project to generate $95 million to $115 million of free cash flow for the year.

(dollars in millions, except per share amounts)

GAAP

Non-GAAP(b)

As Reported

Change

Adjusted

Change

Sales

$1,200 to $1,220

12% to 14%

$1,200 to $1,220

12% to 14%

Operating income

$129 to $144

7% to 19%

$180 to $195

25% to 36%

EBITDA

N/A

N/A

$240 to $255

26% to 34%

Net income

$81 to $94

5% to 21%

$122 to $134

32% to 46%

Diluted earnings per share

$2.45 to $2.82

5% to 21%

$3.66 to $4.03

32% to 46%

(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 “2021 Outlook” above, and Adjusted effective tax rate 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 2021 is expected to consist of GAAP operating income, excluding items such as intangible amortization, certain legal expenses, reorganization and realignment costs, asset dispositions and severance, totaling approximately $51 million, pre-tax. Adjusted net income and Adjusted EPS for 2021 are expected to consist of GAAP net income and diluted EPS, 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 $54 million, pre-tax. The after-tax impact of these items is estimated to be approximately $40 million or approximately $1.21 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 $118 million to $121 million.

Supplemental Financial Information

(dollars in millions)

2021
Outlook

2020
Actual

Capital expenditures, net

$50 - $60

$47

Depreciation and amortization

$80 - $85

$79

Stock-based compensation

$17 - $19

$9

Other operating expense

$6 - $9

$8

Adjusted effective tax rate(a)

15.5% - 17.5%

12.2%

Cash tax payments

$20 - $25

$18

(a) Adjusted effective tax rate refers to our full-year GAAP effective tax rate, expected to range from 11% to 13% for 2021, adjusted to reflect the full-year impact of the items that are excluded in providing adjusted net income and certain other identified items.

Summary of Financial and Product Line Results

(dollars in thousands, except per share data)

Three Months Ended

GAAP

July 2, 2021

July 3, 2020

QTD
Change

Organic
Change(a)

Medical Sales

Cardio & Vascular

$

152,609

$

129,084

18.2

%

17.4

%

Cardiac & Neuromodulation

119,749

71,675

67.1

%

67.1

%

Advanced Surgical, Orthopedics & Portable Medical

29,268

30,625

(4.4

)

%

(4.5

)

%

Total Medical Sales

301,626

231,384

30.4

%

29.9

%

Non-Medical Sales

10,397

8,731

19.1

%

19.1

%

Total Sales

$

312,023

$

240,115

29.9

%

29.5

%

Net income

$

29,433

$

389

NM

NM

Diluted EPS

$

0.89

$

0.01

NM

NM

Six Months Ended

GAAP

July 2, 2021

July 3, 2020

YTD
Change

Organic
Change(a)

Medical Sales

Cardio & Vascular

$

301,774

$

308,289

(2.1

)

%

(2.8

)

%

Cardiac & Neuromodulation

228,157

179,495

27.1

%

27.1

%

Advanced Surgical, Orthopedics & Portable Medical

54,660

61,862

(11.6

)

%

(11.7

)

%

Total Medical Sales

584,591

549,646

6.4

%

6.0

%

Non-Medical Sales

17,899

18,895

(5.3

)

%

(5.3

)

%

Total Sales

$

602,490

$

568,541

6.0

%

5.6

%

Net income

$

50,953

$

31,489

61.8

%

33.8

%

Diluted EPS

$

1.53

$

0.95

61.1

%

33.3

%

(a) Organic Change is a Non-GAAP 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 and E at the end of this release for a reconciliation of these amounts.

NM Calculated amount not meaningful

Three Months Ended

Non-GAAP(a)

July 2, 2021

July 3, 2020

QTD
Change

Organic
Change(b)

Adjusted EBITDA

$

63,743

$

33,181

92.1

%

97.6

%

Adjusted operating income

$

50,064

$

21,790

129.8

%

132.7

%

Adjusted net income

$

35,558

$

10,485

239.1

%

NM

Adjusted EPS

$

1.07

$

0.32

234.4

%

NM

Six Months Ended

Non-GAAP(a)

July 2, 2021

July 3, 2020

YTD
Change

Organic
Change(b)

Adjusted EBITDA

$

124,855

$

103,872

20.2

%

22.5

%

Adjusted operating income

$

96,391

$

80,694

19.5

%

20.2

%

Adjusted net income

$

67,668

$

51,769

30.7

%

33.8

%

Adjusted EPS

$

2.04

$

1.56

30.8

%

33.3

%

(a) 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.

(b) Organic change rates for Adjusted EBITDA, Adjusted operating income, Adjusted net income, and Adjusted EPS are Non-GAAP measures. Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of non-GAAP financial measures and refer to Table E at the end of this release for a reconciliation of these amounts.

NM Calculated amount not meaningful

Conference Call Information
The Company will host a conference call on Thursday, July 29, 2021, 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 (833) 714-0898 (U.S.) or (778) 560-2691 (outside U.S.) and the conference ID is 1337644. 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
SVP, Strategy, Business 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 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 EBITDA margin, adjusted operating income, and organic change rates. Adjusted net income and adjusted EPS consist of GAAP amounts adjusted for the following to the extent occurring during the period: (i) acquisition and integration related expenses, including fair value adjustments to contingent consideration resulting from acquisitions, (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 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 diluted weighted average shares outstanding. EBITDA is calculated by adding back interest expense, provision (benefit) for income taxes, depreciation and amortization expense, to net income, which is the most directly comparable GAAP measure. Adjusted EBITDA consists of EBITDA plus stock-based compensation and the same adjustments as listed above except for items (ii), (ix), (x) and (xi). Adjusted operating income consists of operating income adjusted for the same items listed above except for items (viii), (ix), (x) and (xi).

Adjusted EBITDA margin is adjusted EBITDA as a percentage of sales. 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.

Organic change rates for adjusted EBITDA, adjusted net income and adjusted EPS exclude the impact of foreign currency exchange gains and losses included in other (income) loss, net, and acquisitions.

We believe that the presentation of adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating income, adjusted operating income margin, and organic 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, leverage ratio and free cash flow 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 the impact of the COVID-19 global pandemic; future sales, expenses, and profitability; future development and expected growth of our business and industry; 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 “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; 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 2,
2021

December 31,
2020

ASSETS

Current assets:

Cash and cash equivalents

$

30,581

$

49,206

Accounts receivable, net

175,533

156,207

Inventories

147,836

149,323

Refundable income taxes

5,449

2,087

Contract assets

56,824

40,218

Prepaid expenses and other current assets

18,020

15,896

Total current assets

434,243

412,937

Property, plant and equipment, net

251,070

253,964

Goodwill

853,309

859,442

Other intangible assets, net

730,079

757,224

Deferred income taxes

4,396

4,398

Operating lease assets

48,528

45,153

Other long-term assets

37,514

38,739

Total assets

$

2,359,139

$

2,371,857

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current portion of long-term debt

$

37,500

$

37,500

Accounts payable

69,303

51,570

Income taxes payable

34

1,847

Operating lease liabilities

7,946

8,431

Accrued expenses and other current liabilities

49,344

56,843

Total current liabilities

164,127

156,191

Long-term debt

631,204

693,758

Deferred income taxes

181,154

182,304

Operating lease liabilities

43,121

37,861

Other long-term liabilities

24,961

30,688

Total liabilities

1,044,567

1,100,802

Stockholders’ equity:

Common stock

33

33

Additional paid-in capital

707,119

700,814

Retained earnings

568,469

517,516

Accumulated other comprehensive income

38,951

52,692

Total stockholders’ equity

1,314,572

1,271,055

Total liabilities and stockholders’ equity

$

2,359,139

$

2,371,857


Condensed Consolidated Statements of Operations - Unaudited

(in thousands, except per share data)

Three Months Ended

Six Months Ended

July 2,
2021

July 3,
2020

July 2,
2021

July 3,
2020

Sales

$

312,023

$

240,115

$

602,490

$

568,541

Cost of sales (COS)

223,277

182,252

429,258

413,976

Gross profit

88,746

57,863

173,232

154,565

Operating expenses:

Selling, general and administrative (SG&A)

35,379

33,903

70,881

70,360

Research, development and engineering (RD&E)

13,738

12,746

27,199

25,987

Other operating expenses (OOE)

279

2,029

1,194

4,957

Total operating expenses

49,396

48,678

99,274

101,304

Operating income

39,350

9,185

73,958

53,261

Interest expense, net

7,532

9,273

16,064

19,634

(Gain) loss on equity investments

684

205

2,019

(1,720

)

Other (income) loss, net

356

(458

)

119

(1,457

)

Income before taxes

30,778

165

55,756

36,804

Provision (benefit) for income taxes

1,345

(224

)

4,803

5,315

Net income

$

29,433

$

389

$

50,953

$

31,489

Earnings per share:

Basic

$

0.89

$

0.01

$

1.55

$

0.96

Diluted

$

0.89

$

0.01

$

1.53

$

0.95

Weighted average shares outstanding:

Basic

32,982

32,834

32,970

32,820

Diluted

33,254

33,129

33,221

33,123


Condensed Consolidated Statements of Cash Flows - Unaudited

(in thousands)

Six Months Ended

July 2,
2021

July 3,
2020

Cash flows from operating activities:

Net income

$

50,953

$

31,489

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

40,419

39,074

Debt related charges included in interest expense

2,446

2,045

Stock-based compensation

8,953

3,242

Non-cash (gains) charges related to customer bankruptcy

(15

)

567

Non-cash lease expense

3,947

3,875

Non-cash (gain) loss on equity investments

2,019

(1,720

)

Contingent consideration fair value adjustment

—

(500

)

Other non-cash losses

44

539

Deferred income taxes

(242

)

39

Changes in operating assets and liabilities, net of acquisition:

Accounts receivable

(19,141

)

44,115

Inventories

898

(5,933

)

Prepaid expenses and other assets

(2,604

)

(3,943

)

Contract assets

(16,792

)

(12,621

)

Accounts payable

16,937

(5,854

)

Accrued expenses and other liabilities

(13,737

)

(18,195

)

Income taxes payable

(5,298

)

1,735

Net cash provided by operating activities

68,787

77,954

Cash flows from investing activities:

Acquisition of property, plant and equipment

(18,416

)

(26,680

)

Purchase of intangible asset

—

(4,107

)

Proceeds from sale of property, plant and equipment

15

52

Acquisitions, net

—

(5,219

)

Net cash used in investing activities

(18,401

)

(35,954

)

Cash flows from financing activities:

Principal payments of long-term debt

(64,750

)

(18,750

)

Proceeds from senior secured revolving line of credit

—

185,000

Payments of senior secured revolving line of credit

—

(15,000

)

Proceeds from the exercise of stock options

340

2,474

Payment of debt issuance costs

(141

)

—

Tax withholdings related to net share settlements of restricted stock unit awards

(2,988

)

(2,779

)

Contingent consideration payments

(1,621

)

—

Principal payments on finance leases

(24

)

—

Net cash (used in) provided by financing activities

(69,184

)

150,945

Effect of foreign currency exchange rates on cash and cash equivalents

173

(236

)

Net increase (decrease) in cash and cash equivalents

(18,625

)

192,709

Cash and cash equivalents, beginning of period

49,206

13,535

Cash and cash equivalents, end of period

$

30,581

$

206,244


Reconciliations of Non-GAAP Measures

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

Three Months Ended

July 2, 2021

July 3, 2020

Pre-Tax

Net of
Tax

Per
Diluted
Share

Pre-Tax

Net of
Tax

Per
Diluted
Share

Net income (GAAP)

$

30,778

$

29,433

$

0.89

$

165

$

389

$

0.01

Adjustments(a):

Amortization of intangibles

10,339

8,177

0.25

10,151

8,026

0.24

Certain legal expenses (SG&A)(b)

288

228

0.01

407

323

0.01

Other operating expenses (OOE)(c)

279

209

0.01

2,029

1,571

0.05

(Gain) loss on equity investments

684

540

0.02

205

162

—

Loss on extinguishment of debt

82

65

—

—

—

—

Medical device regulations (COS)(d)

169

134

—

—

—

—

Customer bankruptcy(e)

(361

)

(285

)

(0.01

)

18

14

—

Tax adjustments(f)

—

(2,943

)

(0.09

)

—

—

—

Adjusted net income (Non-GAAP)

$

42,258

$

35,558

$

1.07

$

12,975

$

10,485

$

0.32

Diluted weighted average shares for adjusted EPS

33,254

33,129

Six Months Ended

July 2, 2021

July 3, 2020

Pre-Tax

Net of
Tax

Per
Diluted
Share

Pre-Tax

Net of
Tax

Per
Diluted
Share

Net income (GAAP)

$

55,756

$

50,953

$

1.53

$

36,804

$

31,489

$

0.95

Adjustments(a):

Amortization of intangibles

20,789

16,442

0.49

20,595

16,280

0.49

Certain legal expenses (gains) (SG&A)(b)

545

431

0.01

1,009

798

0.02

Other operating expenses (OOE)(c)

1,194

927

0.03

4,957

3,872

0.12

(Gain) loss on equity investments

2,019

1,595

0.05

(1,720

)

(1,359

)

(0.04

)

Loss on extinguishment of debt

428

338

0.01

—

—

—

Medical device regulations (COS)(d)

290

229

0.01

—

—

—

Customer bankruptcy(e)

(385

)

(304

)

(0.01

)

872

689

0.02

Tax adjustments(f)

—

(2,943

)

(0.09

)

—

—

—

Adjusted net income (Non-GAAP)

$

80,636

$

67,668

$

2.04

$

62,517

$

51,769

$

1.56

Weighted average shares for adjusted diluted EPS

33,221

33,123

(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) Other operating expenses includes acquisition and integration related expenses, facility consolidation, optimization, manufacturing transfer and system integration charges, asset write-down and disposition charges, charges in connection with corporate realignments or a reduction in force, unusual or infrequently occurring items.

(d) 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.

(e) In November 2019, one of our customers, Nuvectra Corporation, filed a voluntary Chapter 11 bankruptcy petition (the “Customer Bankruptcy”). The 2021 amounts are predominantly due to favorable settlements on supplier purchase order termination clauses and the 2020 amounts primarily consist of charges related to inventory recorded in cost of sales in our condensed consolidated statement of operations.

(f) Discrete tax benefits predominately related to the reversal of previously unrecognized tax benefits resulting from the effective settlement of tax audits during the second quarter of 2021.

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 2,
2021

July 3,
2020

July 2,
2021

July 3,
2020

Operating income (GAAP)

$

39,350

$

9,185

$

73,958

$

53,261

Adjustments:

Amortization of intangibles

10,339

10,151

20,789

20,595

Certain legal expenses

288

407

545

1,009

Other operating expenses

279

2,029

1,194

4,957

Medical device regulations

169

—

290

—

Customer bankruptcy

(361

)

18

(385

)

872

Adjusted operating income (Non-GAAP)

$

50,064

$

21,790

$

96,391

$

80,694


Table C: EBITDA Reconciliations
(in thousands)

Three Months Ended

Six Months Ended

July 2,
2021

July 3,
2020

July 2,
2021

July 3,
2020

Net income (GAAP)

$

29,433

$

389

$

50,953

$

31,489

Interest expense

7,532

9,273

16,064

19,634

Provision (benefit) for income taxes

1,345

(224

)

4,803

5,315

Depreciation

9,786

9,429

19,630

18,479

Amortization of intangibles

10,339

10,151

20,789

20,595

EBITDA (Non-GAAP)

58,435

29,018

112,239

95,512

Stock-based compensation

4,249

1,504

8,953

3,242

Certain legal expenses

288

407

545

1,009

Other operating expenses (OOE)

279

2,029

1,194

4,957

(Gain) loss on equity investments

684

205

2,019

(1,720

)

Medical device regulations

169

—

290

—

Customer bankruptcy

(361

)

18

(385

)

872

Adjusted EBITDA (Non-GAAP)

$

63,743

$

33,181

$

124,855

$

103,872

Total Sales

$

312,023

$

240,115

$

602,490

$

568,541

Adjusted EBITDA margin

20.4

%

13.8

%

20.7

%

18.3

%


Table D: Organic Sales Change Reconciliation (% Change)

GAAP
Reported
Growth

Impact of
Acquisitions
and Foreign
Currency(a)

Non-GAAP
Organic
Change

QTD Change (2Q 2021 vs. 2Q 2020)

Medical Sales

Cardio & Vascular

18.2

%

(0.8

)%

17.4

%

Cardiac & Neuromodulation

67.1

%

—

67.1

%

Advanced Surgical, Orthopedics & Portable Medical

(4.4

)%

(0.1

)%

(4.5

)%

Total Medical Sales

30.4

%

(0.5

)%

29.9

%

Non-Medical Sales

19.1

%

—

19.1

%

Total Sales

29.9

%

(0.4

)%

29.5

%

YTD Change (6M 2021 vs. 6M 2020)

Medical Sales

Cardio & Vascular

(2.1

)%

(0.7

)%

(2.8

)%

Cardiac & Neuromodulation

27.1

%

—

27.1

%

Advanced Surgical, Orthopedics & Portable Medical

(11.6

)%

(0.1

)%

(11.7

)%

Total Medical Sales

6.4

%

(0.4

)%

6.0

%

Non-Medical Sales

(5.3

)%

—

(5.3

)%

Total Sales

6.0

%

(0.4

)%

5.6

%

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


Table E: Non-GAAP Organic Change Reconciliation (% Change)

GAAP
Reported
Growth(a)

Impact of
Non-GAAP
Adjustments(b)

Impact of
Acquisitions
and Foreign
Currency(c)

Non-GAAP
Organic
Change

QTD Change (2Q 2021 vs. 2Q 2020)

EBITDA

101.4

%

(9.3

)%

5.5

%

97.6

%

Operating income

328.4

%

(198.6

)%

2.9

%

132.7

%

Net income

NM

NM

22.4

%

261.5

%

Diluted EPS

NM

NM

25.6

%

260.0

%

YTD Change (6M 2021 vs. 6M 2020)

EBITDA

17.5

%

2.7

%

2.3

%

22.5

%

Operating income

38.9

%

(19.4

)%

0.7

%

20.2

%

Net income

61.8

%

(31.1

)%

3.1

%

33.8

%

Diluted EPS

61.1

%

(30.3

)%

2.5

%

33.3

%

(a) EBITDA is a non-GAAP financial measure. See Table C 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 C 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 condensed consolidated statements of operations, and the adjustment to exclude the impact of acquisitions.

NM Calculated amount not meaningful


Table F: Net Total Debt Reconciliation
(in thousands)

July 2,
2021

December 31,
2020

Current portion of long-term debt

$

37,500

$

37,500

Long-term debt

631,204

693,758

Total debt

668,704

731,258

Add: Unamortized discount and debt issuance costs included above

4,519

6,715

Total principal amount of debt outstanding

673,223

737,973

Less: Cash and cash equivalents

30,581

49,206

Net Total Debt (Non-GAAP)

$

642,642

$

688,767


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