PLANO, Texas, July 30, 2020 (GLOBE NEWSWIRE) — Integer Holdings Corporation (NYSE:ITGR), a leading medical device outsource manufacturer, today announced results for the three months ended July 3, 2020. Unless otherwise stated, all results and comparisons are from continuing operations.
Leading through the “new normal” of COVID-19COVID-19 safety measures are in place for Integer associates, who continue to deliver critical products that customers and patients rely on every day.Integer is treating the current environment as the “new normal” by increasing its agility to respond to changing customer demand and adjusting costs related to the expected temporary volume decline.Integer continues to execute its operational strategic imperatives to create long-term value.Integer is positioned to continue making strategic investments in capabilities and potential bolt-on acquisitions with ample liquidity and the recent bank covenant amendment.Second Quarter 2020 Highlights (compared to Second Quarter 2019)Sales declined $74 million to $240 million, a decrease of 24%.The COVID-19 driven sales decline of 24% was better than the estimated industry decline, as expected.GAAP income declined $28 million to $0.4 million, a decrease of 99%. Non-GAAP adjusted income declined $30 million to $10 million, a decrease of 74%.Income declined as variable costs were managed to match lower volumes and infrastructure maintained to support the return of sales post-COVID-19 and continue executing our strategy.Adjusted EBITDA declined $42 million to $33 million, a decrease of 56%.GAAP diluted EPS declined $0.84 per share to $0.01 per share, a decrease of 99%. Non-GAAP adjusted diluted EPS decreased $0.91 per share to $0.32 per share, a decrease of 74%.Net total debt decreased $33 million from the end of the first quarter 2020 to $770 million.Early in the third quarter, the United States Court of Appeals affirmed the $27 million judgment in Integer’s favor in the patent infringement dispute with its competitor.“I want to recognize the sacrifice our associates have made during the pandemic to continue delivering the products our customers and patients need,” said Joseph Dziedzic, Integer’s president and chief executive officer. “We have implemented the necessary measures to manage in the new normal while continuing to execute our strategy. Our financial strength, ample liquidity and improved bank covenant cushion, positions us to continue making strategic investments to earn the valuation premium we expect in the long term.”Discussion of Product Line Second Quarter 2020 Sales (compared to Second Quarter 2019)Cardio & Vascular sales decreased 14%. Sales were negatively impacted by the COVID-19 pandemic and a blend of our customers’ responses across nearly all C&V markets, though structural heart continued to grow due to development programs.Cardiac & Neuromodulation sales decreased 37%. CRM and Neuromodulation declined commensurate with the market impact and a blend of our customers’ responses. Additionally, the Nuvectra bankruptcy created a $7 million headwind.Advanced Surgical, Orthopedics & Portable Medical includes sales to the acquirer of our AS&O product line, Viant, under supply agreements entered into as part of the divestiture. Sales declined 6% driven by COVID-19 impact and a blend of our customers’ responses, partially offset by increased demand for ventilator and patient monitoring components.Electrochem sales declined 48% driven by a severe decline in the energy market and demand fall-out from the COVID-19 pandemic.Summary of Financial and Product Line Results from Continuing Operations(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 C and Table D at the end of this release for a reconciliation of these amounts.(a) Refer to Tables A and B at the end of this release for reconciliations of adjusted amounts to the closest corresponding GAAP financial measures.(b) Organic Change for Adjusted EBITDA from continuing operations, Adjusted income from continuing operations, and Adjusted diluted EPS from continuing operations 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 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 30, 2020, at 9:00 a.m. EDT / 8:00 a.m. CDT 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 1449653. The call will be archived on the Company’s website. An earnings call slide presentation containing supplemental information about the Company’s results will be posted to our website at investor.integer.net prior to the conference call and will be referenced during the conference call.About Integer®
Integer Holdings Corporation (NYSE: ITGR) is one of the largest medical device outsource (MDO) manufacturers in the world serving the cardiac, neuromodulation, vascular, portable medical and orthopedics markets. The Company provides innovative, high-quality medical technologies that enhance the lives of patients worldwide. In addition, the Company develops batteries for high-end niche applications in energy, military, and environmental markets. The Company’s brands include Greatbatch Medical®, Lake Region MedicalTM and Electrochem®. Additional information is available at www.integer.net.Contact Information
Tony Borowicz
SVP, Strategy, Business Development & Investor Relations
716.759.5809
[email protected]Notes Regarding Non-GAAP Financial Information
In addition to our results reported in accordance with generally accepted accounting principles (“GAAP”), we provide adjusted income, adjusted diluted EPS, earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted EBITDA margin, and organic change rates, all from continuing operations. Adjusted income and adjusted diluted EPS from continuing operations consist of GAAP amounts adjusted for the following to the extent occurring during the period: (i) acquisition and integration related 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 provision for the period. Adjusted diluted EPS from continuing operations is calculated by dividing adjusted income from continuing operations by diluted weighted average shares outstanding. EBITDA from continuing operations is calculated by adding back interest expense, GAAP provision (benefit) for income taxes, depreciation and amortization expense, to income from continuing operations, which is the most directly comparable GAAP measure. Adjusted EBITDA from continuing operations consists of EBITDA from continuing operations plus GAAP stock-based compensation and the same adjustments as listed above except for items (ii), (ix), (x) and (xi).Adjusted EBITDA margin is adjusted EBITDA as a percentage of sales, all from continuing operations. 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/divested during the period from the current/previous period amounts, respectively. Organic change rates for adjusted EBITDA from continuing operations, adjusted income from continuing operations and adjusted diluted EPS from continuing operations exclude the impact of foreign currency exchange gains and losses included in other (income) loss, net, and the contribution of acquisitions. Contribution of acquisitions represents results, based on the growth rate being presented, attributable to acquired entities for the first four full quarters plus any partial period since the entities’ acquisition date. After the completion of four full fiscal quarters, results of the acquired entity are treated as organic for current and comparable historical periods.We believe that the presentation of adjusted income, adjusted diluted EPS, EBITDA, adjusted EBITDA, adjusted EBITDA margin, and organic change rates, all from continuing operations, provides important supplemental information to management and investors seeking to understand the financial and business trends relating to our financial condition and results of operations. In addition to the performance measures identified above, we believe that leverage ratio provides a meaningful measure of liquidity and a useful basis for assessing our ability to fund our activities, including the financing of acquisitions and debt repayments. We calculate leverage ratio as total principal amount of debt outstanding less cash and cash equivalents divided by trailing 4 quarters adjusted EBITDA.Forward-Looking Statements
Some of the statements contained in this press release are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to 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; and projected capital spending. You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or “variations” or the negative of these terms or other comparable terminology. These statements are only predictions. 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 include the following: the duration, scope and impact of the COVID-19 pandemic, including government, social, business and other actions taken in response to the pandemic 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 ability to respond to changes in technology; the intense competition we face and our ability to successfully market our products; our ability to develop new products and expand into new geographic and product markets; 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; regulatory issues resulting from products complaints, recalls or regulatory audits; the potential of becoming subject to product liability claims; our ability to protect our intellectual property and proprietary rights; our significant amount of outstanding indebtedness and our ability to remain in compliance with financial and other covenants under our senior secured credit facilities; our ability to integrate acquisitions and operate acquired businesses in accordance with expectations; our dependence upon our senior management team and technical personnel; our ability to realize the benefits from cost savings and consolidation initiatives; interruptions in our manufacturing operations; our ability to comply with environmental regulations; our complex international tax profile; our dependence upon our information technology systems and our ability to prevent cyber-attacks and other failures; market, financial and other risks related to our international operations and sales; global economic factors, including currency exchange rates and interest rates; the fact that the healthcare industry is highly regulated and subject to various regulatory changes; the dependence of our energy market-related revenues on the conditions in the oil and natural gas industry; and other risks and uncertainties that arise from time to time and are described in Item 1A “Risk Factors” of our Annual Report on Form 10-K and in our other periodic filings with the SEC. Except as may be required by law, we assume no obligation to update forward-looking statements in this press release whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.
(a) Condensed Consolidated Statements of Cash Flows – Unaudited includes cash flows related to discontinued operations.Reconciliations of Non-GAAP Measures from Continuing OperationsTable A: Income from Continuing Operations and Diluted EPS Reconciliations
(in thousands except per share amounts)(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) In November 2019, one of our customers, Nuvectra Corporation, filed a voluntary Chapter 11 bankruptcy petition (the “Customer Bankruptcy”). During the first six months of 2020, we incurred costs and recorded charges associated with the Customer Bankruptcy, primarily consisting of an $0.8 million charge in the first quarter related to inventory recorded in cost of sales in our condensed consolidated statement of operations.Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of non-GAAP financial measures.Table B: EBITDA Reconciliations
(in thousands)
Table C: Organic Sales from Continuing Operations Growth Rate Reconciliation (% Change)(a) 2020 sales have been adjusted to exclude the contribution of business acquisitions and foreign currency exchange rate fluctuations. 2019 sales have been adjusted to exclude the impact of foreign currency exchange rate fluctuations. There was no impact from business acquisitions on the 2019 periods.Table D: Non-GAAP Organic Growth Rate Reconciliation (% Change)(a) EBITDA from continuing operations is a non-GAAP financial measure. See Table B for a reconciliation to the most comparable GAAP measure.(b) Represents the impact to our growth rate from our Non-GAAP adjustments. See Tables A and B for further detail on these items.(c) Represents the impact to our growth rate due to changes in foreign currency exchange rates realized in income and reported in other (income) loss, net in the consolidated statements of operations, and the adjustment to exclude the contribution of acquisitions when applicable.
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