Bay Street News

Integer Holdings Corporation Reports Second Quarter 2024 Results

~ Continued strong performance with 2Q24 financial results ~
~ Raising full year 2024 profit outlook ~

PLANO, Texas, July 25, 2024 (GLOBE NEWSWIRE) — Integer Holdings Corporation (NYSE:ITGR) today announced results for the three months ended June 28, 2024.

Second Quarter 2024 Highlights (compared to Second Quarter 2023, except as noted)

“Integer delivered another strong quarter with 9% sales growth and a 20% increase in adjusted operating income versus a year ago.” said Joseph Dziedzic, Integer’s president and CEO. “We continue to expect 2024 above-market sales growth of 9% to 11% and we are raising our full year adjusted operating income growth outlook to 14% to 21%. Our strong 2023 results and 2024 outlook demonstrate successful execution of our strategy.”

Discussion of Product Line Second Quarter 2024 Sales

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   21% to 31%   $275 to $293   14% to 21%
EBITDA N/A   N/A   $357 to $377   15% to 22%
Net income $116 to $130   28% to 44%   $174 to $189   11% to 20%
Diluted earnings per share $3.26 to $3.67   21% to 37%   $5.07 to $5.49   9% to 18%
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 $73 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 $72 million, pre-tax. The after-tax impact of these items is estimated to be approximately $59 million, or approximately $1.71 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 $182 million to $188 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) 2024
Outlook
  2023
Actual
Depreciation and amortization $106 to $114   $97
Adjusted total interest expense(a) $58 to $61   $49
Stock-based compensation $24 to $27   $23
Restructuring, acquisition and other charges(b) $17 to $22   $22
Adjusted effective tax rate(c) 18.0% to 20.0%   17.7%
Leverage ratio(d) 2.5x to 3.5x   3.1x
Capital expenditures(d) $90 to $110   $120
Cash income tax payments $38 to $42   $30

(a)  Adjusted total interest expense refers to our expected full-year GAAP interest expense, expected to range from $58 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 18.0% to 20.0% 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   Six Months Ended
  June 28,
2024
  June 30,
2023
  QTD
Change
  June 28,
2024
  June 30,
2023
  YTD
Change
Operating income $ 55,186     $ 41,576       32.7 %   $ 94,463     $ 75,742       24.7 %
Net income $ 31,246     $ 23,971       30.3 %   $ 51,754     $ 37,036       39.7 %
Diluted EPS $ 0.88     $ 0.71       23.9 %   $ 1.47     $ 1.10       33.6 %
                       
EBITDA(a) $ 82,398     $ 65,794       25.2 %   $ 147,783     $ 123,171       20.0 %
Adjusted EBITDA(a) $ 91,120     $ 76,300       19.4 %   $ 172,358     $ 142,645       20.8 %
Adjusted operating income(a) $ 71,848     $ 59,824       20.1 %   $ 134,723     $ 109,686       22.8 %
Adjusted net income(a) $ 44,984     $ 38,372       17.2 %   $ 83,651     $ 67,432       24.1 %
Adjusted EPS(a) $ 1.30     $ 1.14       14.0 %   $ 2.44     $ 2.01       21.4 %

(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
  June 28,
2024
  June 30,
2023
  QTD Change   Organic Change(a)
Medical Sales              
Cardio & Vascular $ 231,335     $ 208,494       11.0 %     4.2 %
Cardiac Rhythm Management & Neuromodulation   167,635       153,411       9.3 %     8.3 %
Advanced Surgical, Orthopedics & Portable Medical   28,408       27,206       4.4 %     5.5 %
Total Medical Sales   427,378       389,111       9.8 %     5.9 %
Non-Medical Sales   8,824       10,933       (19.3 )%     (19.3 )%
Total Sales $ 436,202     $ 400,044       9.0 %     5.2 %
               
  Six Months Ended
  June 28,
2024
  June 30,
2023
  YTD Change   Organic Change(a)
Medical Sales              
Cardio & Vascular $ 453,171     $ 399,697       13.4 %     6.7 %
Cardiac Rhythm Management & Neuromodulation   323,892       298,550       8.5 %     7.6 %
Advanced Surgical, Orthopedics & Portable Medical   57,529       55,130       4.4 %     13.1 %
Total Medical Sales   834,592       753,377       10.8 %     7.2 %
Non-Medical Sales   16,415       25,452       (35.5 )%     (35.5 )%
Total Sales $ 851,007     $ 778,829       9.3 %     5.8 %

(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 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 (800) 715-9871 (U.S.) or (646) 307-1963 (outside U.S.) and the conference ID is 4525826. 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 Senn
763.951.8312
andrew.senn@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.

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 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: our 2024 outlook including future sales, expenses, and profitability; our ability to execute our business model and our business strategy; 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:

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)
   
  June 28,
2024
  December 31, 2023
ASSETS      
Current assets:      
Cash and cash equivalents $ 34,137     $ 23,674  
Accounts receivable, net   240,504       238,277  
Inventories   272,335       239,716  
Refundable income taxes   9,072       1,998  
Contract assets   97,212       85,871  
Prepaid expenses and other current assets   23,720       28,132  
Total current assets   676,980       617,668  
Property, plant and equipment, net   466,296       407,954  
Goodwill   1,042,183       1,011,007  
Other intangible assets, net   813,727       783,146  
Deferred income taxes   6,858       7,001  
Operating lease assets   81,345       81,632  
Financing lease assets   16,549       11,828  
Other long-term assets   22,474       22,417  
Total assets $ 3,126,412     $ 2,942,653  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Current portion of long-term debt $     $  
Accounts payable   119,446       120,293  
Income taxes payable   461       3,896  
Operating lease liabilities   8,729       8,692  
Accrued expenses and other current liabilities   77,355       88,088  
Total current liabilities   205,991       220,969  
Long-term debt   1,118,529       959,925  
Deferred income taxes   144,101       145,625  
Operating lease liabilities   71,935       72,339  
Financing lease liabilities   13,491       10,388  
Other long-term liabilities   18,455       14,365  
Total liabilities   1,572,502       1,423,611  
Stockholders’ equity:      
Common stock   34       33  
Additional paid-in capital   730,157       727,435  
Retained earnings   823,105       771,351  
Accumulated other comprehensive income   614       20,223  
Total stockholders’ equity   1,553,910       1,519,042  
Total liabilities and stockholders’ equity $ 3,126,412     $ 2,942,653  
Condensed Consolidated Statements of Operations – Unaudited        
(in thousands, except per share data)              
               
  Three Months Ended   Six Months Ended
  June 28,
2024
  June 30,
2023
  June 28,
2024
  June 30,
2023
Sales $ 436,202     $ 400,044     $ 851,007     $ 778,829  
Cost of sales (COS)   316,809       294,240       621,774       576,352  
Gross profit   119,393       105,804       229,233       202,477  
Operating expenses:              
Selling, general and administrative (SG&A)   47,117       45,827       94,046       87,713  
Research, development and engineering (RD&E)   16,104       16,883       31,857       35,975  
Restructuring and other charges (R&O)   986       1,518       8,867       3,047  
Total operating expenses   64,207       64,228       134,770       126,735  
Operating income   55,186       41,576       94,463       75,742  
Interest expense   15,278       11,459       29,949       28,713  
(Gain) loss on equity investments   7       (134 )     (1,129 )     21  
Other (gain) loss, net   (127 )     359       880       1,119  
Income before taxes   40,028       29,892       64,763       45,889  
Provision for income taxes   8,782       5,921       13,009       8,853  
Net income $ 31,246     $ 23,971     $ 51,754     $ 37,036  
               
Earnings per share:              
Basic $ 0.93     $ 0.72     $ 1.54     $ 1.11  
Diluted $ 0.88     $ 0.71     $ 1.47     $ 1.10  
               
Weighted average shares outstanding:              
Basic   33,600       33,312       33,540       33,285  
Diluted   35,529       33,686       35,264       33,631  
Condensed Consolidated Statements of Cash Flows – Unaudited
(in thousands)
   
  Six Months Ended
  June 28,
2024
  June 30,
2023
Cash flows from operating activities:      
Net income $ 51,754     $ 37,036  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization   53,410       48,569  
Debt related charges included in interest expense   1,869       6,118  
Inventory step-up amortization   1,056        
Stock-based compensation   12,614       11,603  
Non-cash lease expense   4,622       5,473  
Non-cash (gain) loss on equity investments   (1,129 )     21  
Contingent consideration fair value adjustment         (265 )
Other non-cash (gains) losses   1,408       (1,437 )
Deferred income taxes         (4 )
Changes in operating assets and liabilities, net of acquisition:      
Accounts receivable   3,465       (9,742 )
Inventories   (27,235 )     (21,646 )
Prepaid expenses and other assets   (744 )     1,308  
Contract assets   (11,666 )     (7,983 )
Accounts payable   7,069       797  
Accrued expenses and other liabilities   (16,155 )     1,781  
Income taxes payable   (9,864 )     (9,296 )
Net cash provided by operating activities   70,474       62,333  
Cash flows from investing activities:      
Acquisition of property, plant and equipment   (60,252 )     (57,416 )
Proceeds from sale of property, plant and equipment         50  
Acquisitions, net   (138,544 )      
Net cash used in investing activities   (198,796 )     (57,366 )
Cash flows from financing activities:      
Principal payments of term loans         (398,438 )
Proceeds from issuance of convertible notes, net of discount         486,250  
Proceeds from revolving credit facility   208,500       229,604  
Payments of revolving credit facility   (51,500 )     (263,443 )
Purchase of capped calls         (35,000 )
Payment of debt issuance costs         (2,181 )
Proceeds from the exercise of stock options   742       1,948  
Tax withholdings related to net share settlements of restricted stock unit awards   (10,625 )     (2,930 )
Contingent consideration payments         (7,660 )
Principal payments on finance leases   (8,956 )     (557 )
Other financing activities   607        
Net cash provided by financing activities   138,768       7,593  
Effect of foreign currency exchange rates on cash and cash equivalents   17       1,783  
Net increase in cash and cash equivalents   10,463       14,343  
Cash and cash equivalents, beginning of period   23,674       24,272  
Cash and cash equivalents, end of period $ 34,137     $ 38,615  

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

  Three Months Ended
  June 28, 2024   June 30, 2023
  Pre-Tax   Net of Tax   Per
Diluted
Share(a)
  Pre-Tax   Net of Tax   Per
Diluted
Share(a)
Net income (GAAP) $ 40,028     $ 31,246     $ 0.88     $ 29,892     $ 23,971     $ 0.71  
Adjustments(b):                      
Amortization of intangible assets   13,698       11,021       0.32       13,107       10,360       0.31  
Certain legal expenses (SG&A)(c)   354       279       0.01                    
Restructuring and restructuring-related charges(d)   2,177       1,707       0.05       3,116       2,461       0.07  
Acquisition and integration costs(e)   1,056       834       0.02       556       432       0.01  
Other general expenses(f)   (1,173 )     (817 )     (0.02 )     26       20        
(Gain) loss on equity investments(g)   7       5             (134 )     (106 )      
Loss on extinguishment of debt(h)                     38       31        
Medical device regulations(i)   278       220       0.01       534       422       0.01  
Other adjustments(j)   272       215       0.01       909       718       0.02  
Tax adjustments(k)         274       0.01             63        
Adjusted net income (non-GAAP) $ 56,697     $ 44,984       1.30     $ 48,044     $ 38,372       1.14  
                       
Weighted average shares for diluted EPS (GAAP)       35,529               33,686      
Less: 2028 Convertible Notes capped call contract impact       (1,050 )                  
Adjusted weighted average shares (non-GAAP)       34,479               33,686      
                       
  Six Months Ended
  June 28, 2024   June 30, 2023
  Pre-Tax   Net of Tax   Per
Diluted
Share(a)
  Pre-Tax   Net of Tax   Per
Diluted
Share(a)
Net income (GAAP) $ 64,763     $ 51,754     $ 1.47     $ 45,889     $ 37,036     $ 1.10  
Adjustments(b):                      
Amortization of intangible assets   27,135       21,834       0.64       26,031       20,576       0.61  
Certain legal expenses (SG&A)(c)   354       279       0.01                    
Restructuring and restructuring-related charges(d)   4,082       3,308       0.10       4,921       3,857       0.11  
Acquisition and integration costs(e)   7,391       5,858       0.17       938       702       0.02  
Other general expenses(f)   (1,055 )     (729 )     (0.02 )     109       79        
(Gain) loss on equity investments(g)   (1,129 )     (892 )     (0.03 )     21       17        
Loss on extinguishment of debt(h)                     4,431       3,501       0.10  
Medical device regulations(i)   553       437       0.01       1,036       817       0.02  
Other adjustments(j)   744       588       0.02       909       718       0.02  
Inventory step-up amortization (COS)(l)   1,056       834       0.02                    
Tax adjustments(k)         380       0.01             129        
Adjusted net income (Non-GAAP) $ 103,894     $ 83,651       2.44     $ 84,285     $ 67,432       2.01  
                       
Weighted average shares for diluted EPS (GAAP)       35,264               33,631      
Less: 2028 Convertible Notes capped call contract impact       (1,039 )                  
Adjusted weighted average shares (non-GAAP)       34,225               33,631      

(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 in the table above 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)  Certain legal expenses associated with non-ordinary course legal matters.

(d)  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.

(e)  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.

(f)  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. In addition, during the second quarter of 2024, we recorded $1.2 million of loss recoveries relating to property damage which occurred in the fourth quarter of 2023 at one of our manufacturing facilities.

(g)  Amounts reflect our share of equity method investee (gains) losses including unrealized appreciation/depreciation of the underlying interests of the investee.

(h)  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 the Term Loan B Facility.

(i)  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.

(j)  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.

(k)  Tax adjustments predominately relate to acquired foreign tax credits, including utilization, changes to uncertain tax benefits and associated interest.

(l)   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.

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
  June 28,
2024
  June 30,
2023
  June 28,
2024
  June 30,
2023
Operating income (GAAP) $ 55,186     $ 41,576     $ 94,463     $ 75,742  
Adjustments:              
Amortization of intangible assets   13,698       13,107       27,135       26,031  
Certain legal expenses   354             354        
Restructuring and restructuring-related charges   2,177       3,116       4,082       4,921  
Acquisition and integration costs   1,056       556       7,391       938  
Other general expenses   (1,173 )     26       (1,055 )     109  
Medical device regulations   278       534       553       1,036  
Other adjustments   272       909       744       909  
Inventory step-up amortization               1,056        
Adjusted operating income (non-GAAP) $ 71,848     $ 59,824     $ 134,723     $ 109,686  

Table C: EBITDA Reconciliations
(in thousands)

  Three Months Ended   Six Months Ended
  June 28,
2024
  June 30,
2023
  June 28,
2024
  June 30,
2023
Net income (GAAP) $ 31,246     $ 23,971     $ 51,754     $ 37,036  
               
Interest expense   15,278       11,459       29,949       28,713  
Provision for income taxes   8,782       5,921       13,009       8,853  
Depreciation(a)   12,814       11,005       24,850       21,882  
Amortization of intangible assets and financing leases   14,278       13,438       28,221       26,687  
EBITDA (non-GAAP)   82,398       65,794       147,783       123,171  
Stock-based compensation(a)   5,751       5,499       12,579       11,540  
Certain legal expenses   354             354        
Restructuring and restructuring-related charges   2,177       3,116       4,082       4,921  
Acquisition and integration costs   1,056       556       7,391       938  
Other general expenses   (1,173 )     26       (1,055 )     109  
(Gain) loss on equity investments   7       (134 )     (1,129 )     21  
Medical device regulations   278       534       553       1,036  
Other adjustments   272       909       744       909  
Inventory step-up amortization               1,056        
Adjusted EBITDA (non-GAAP) $ 91,120     $ 76,300     $ 172,358     $ 142,645  

(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 (2Q 2024vs.2Q 2023)              
Medical Sales              
Cardio & Vascular   11.0%       0.1%       6.7%       4.2%  
Cardiac Rhythm Management & Neuromodulation   9.3%       —%       1.0%       8.3%  
Advanced Surgical, Orthopedics & Portable Medical   4.4%       —%       (1.1)%       5.5%  
Total Medical Sales   9.8%       —%       3.9%       5.9%  
Non-Medical Sales   (19.3)%       —%       —%       (19.3)%  
Total Sales   9.0%       —%       3.8%       5.2%  
               
YTD Change (6M 2024vs.6M 2023)              
Medical Sales              
Cardio & Vascular   13.4%       —%       6.7%       6.7%  
Cardiac Rhythm Management & Neuromodulation   8.5%       —%       0.9%       7.6%  
Advanced Surgical, Orthopedics & Portable Medical   4.4%       —%       (8.7)%       13.1%  
Total Medical Sales   10.8%       —%       3.6%       7.2%  
Non-Medical Sales   (35.5)%       —%       —%       (35.5)%  
Total Sales   9.3%       —%       3.5%       5.8%  

(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)

  June 28,
2024
  December 31,
2023
Total debt $ 1,118,529     $ 959,925  
Add: Debt discounts and deferred issuance costs included in Total debt   12,471       14,075  
Total principal amount of debt outstanding   1,131,000       974,000  
LESS: Cash and cash equivalents   34,137       23,674  
Net Total Debt (Non-GAAP) $ 1,096,863     $ 950,326  


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