0001114483-20-000007.txt : 20200508 0001114483-20-000007.hdr.sgml : 20200508 20200508163448 ACCESSION NUMBER: 0001114483-20-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 98 CONFORMED PERIOD OF REPORT: 20200403 FILED AS OF DATE: 20200508 DATE AS OF CHANGE: 20200508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Integer Holdings Corp CENTRAL INDEX KEY: 0001114483 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 161531026 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-16137 FILM NUMBER: 20861128 BUSINESS ADDRESS: STREET 1: 5830 GRANITE PARKWAY., SUITE 1150 CITY: PLANO STATE: TX ZIP: 75024 BUSINESS PHONE: (214) 618-5243 MAIL ADDRESS: STREET 1: 5830 GRANITE PARKWAY., SUITE 1150 CITY: PLANO STATE: TX ZIP: 75024 FORMER COMPANY: FORMER CONFORMED NAME: GREATBATCH, INC. DATE OF NAME CHANGE: 20050531 FORMER COMPANY: FORMER CONFORMED NAME: WILSON GREATBATCH TECHNOLOGIES INC DATE OF NAME CHANGE: 20000511 10-Q 1 a2020q1form10-q.htm 10-Q Document
false--12-31Q1202000011144830.0025240000022000000.0010.00110000000010000000032847017328470170.03250.02250.01750.007514654621012 0001114483 2020-01-01 2020-04-03 0001114483 2020-05-01 0001114483 2019-12-31 0001114483 2020-04-03 0001114483 2018-12-29 2019-03-29 0001114483 2019-03-29 0001114483 2018-12-28 0001114483 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001114483 us-gaap:AdditionalPaidInCapitalMember 2018-12-28 0001114483 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-28 0001114483 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-04-03 0001114483 us-gaap:TreasuryStockMember 2019-12-31 0001114483 us-gaap:TreasuryStockMember 2018-12-28 0001114483 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-29 2019-03-29 0001114483 us-gaap:TreasuryStockMember 2020-01-01 2020-04-03 0001114483 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001114483 us-gaap:AdditionalPaidInCapitalMember 2020-04-03 0001114483 us-gaap:RetainedEarningsMember 2019-12-31 0001114483 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-03 0001114483 us-gaap:TreasuryStockMember 2018-12-29 2019-03-29 0001114483 us-gaap:AdditionalPaidInCapitalMember 2019-03-29 0001114483 us-gaap:AdditionalPaidInCapitalMember 2018-12-29 2019-03-29 0001114483 us-gaap:TreasuryStockMember 2020-04-03 0001114483 us-gaap:RetainedEarningsMember 2018-12-29 2019-03-29 0001114483 us-gaap:TreasuryStockMember 2019-03-29 0001114483 us-gaap:RetainedEarningsMember 2019-03-29 0001114483 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-04-03 0001114483 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-29 0001114483 us-gaap:RetainedEarningsMember 2020-04-03 0001114483 us-gaap:RetainedEarningsMember 2020-01-01 2020-04-03 0001114483 us-gaap:RetainedEarningsMember 2018-12-28 0001114483 gb:USBioDesignLLCMember 2019-10-07 2019-10-07 0001114483 gb:InoMecLtdMember 2020-02-19 2020-02-19 0001114483 2019-10-07 2019-10-07 0001114483 gb:USBioDesignLLCMember gb:TechnologyMember 2019-10-07 0001114483 gb:USBioDesignLLCMember 2019-10-07 0001114483 gb:InoMecLtdAndUSBioDesignLLCMember 2020-01-01 2020-04-03 0001114483 gb:InoMecLtdMember 2020-02-19 0001114483 gb:USBioDesignLLCMember gb:TechnologyMember 2019-10-07 2019-10-07 0001114483 gb:USBioDesignLLCMember 2020-01-01 2020-04-03 0001114483 gb:MedicalSegmentMember 2019-12-31 0001114483 gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 gb:NonMedicalSegmentMember 2020-04-03 0001114483 gb:NonMedicalSegmentMember 2020-01-01 2020-04-03 0001114483 gb:NonMedicalSegmentMember 2019-12-31 0001114483 gb:MedicalSegmentMember 2020-04-03 0001114483 gb:PurchasedTechnologyAndPatentsMember gb:NonMedicalSegmentMember 2020-04-03 0001114483 gb:PurchasedTechnologyAndPatentsMember gb:NonMedicalSegmentMember 2020-01-01 2020-04-03 0001114483 us-gaap:CustomerListsMember 2020-04-03 0001114483 us-gaap:CustomerListsMember 2019-12-31 0001114483 us-gaap:OtherIntangibleAssetsMember 2020-04-03 0001114483 us-gaap:TrademarksAndTradeNamesMember 2019-12-31 0001114483 gb:PurchasedTechnologyAndPatentsMember 2020-04-03 0001114483 gb:PurchasedTechnologyAndPatentsMember 2019-12-31 0001114483 us-gaap:OtherIntangibleAssetsMember 2019-12-31 0001114483 us-gaap:TrademarksAndTradeNamesMember 2020-04-03 0001114483 us-gaap:CostOfSalesMember 2020-01-01 2020-04-03 0001114483 gb:SellingGeneralAndAdministrativeExpenseMember 2020-01-01 2020-04-03 0001114483 us-gaap:CostOfSalesMember 2018-12-29 2019-03-29 0001114483 gb:SellingGeneralAndAdministrativeExpenseMember 2018-12-29 2019-03-29 0001114483 us-gaap:SecuredDebtMember gb:TermLoanBTLBFacilityMember us-gaap:LoansPayableMember 2020-04-03 0001114483 us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember 2020-01-01 2020-04-03 0001114483 us-gaap:SecuredDebtMember gb:TermLoanATLAFacilityMember us-gaap:LoansPayableMember 2015-10-27 2015-10-27 0001114483 us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember 2015-10-27 0001114483 us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member gb:SwinglineLoansMember 2015-10-27 0001114483 us-gaap:SecuredDebtMember gb:TermLoanATLAFacilityMember us-gaap:LoansPayableMember 2020-04-03 0001114483 us-gaap:SecuredDebtMember gb:TermLoanATLAFacilityMember us-gaap:LoansPayableMember us-gaap:SubsequentEventMember 2020-04-04 2020-07-03 0001114483 srt:MaximumMember us-gaap:SecuredDebtMember gb:TermLoanATLAFacilityMember us-gaap:LoansPayableMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-01-01 2020-04-03 0001114483 srt:MinimumMember us-gaap:SecuredDebtMember gb:TermLoanATLAFacilityMember us-gaap:LoansPayableMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-01-01 2020-04-03 0001114483 us-gaap:SecuredDebtMember gb:TermLoanBTLBFacilityMember us-gaap:LoansPayableMember 2015-10-27 2015-10-27 0001114483 us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember 2020-04-03 0001114483 us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:StandbyLettersOfCreditMember 2015-10-27 0001114483 us-gaap:StandbyLettersOfCreditMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember 2020-04-03 0001114483 us-gaap:SecuredDebtMember gb:TermLoanBTLBFacilityMember us-gaap:LoansPayableMember us-gaap:LondonInterbankOfferedRateLIBORMember 2015-10-27 2015-10-27 0001114483 srt:MaximumMember us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember 2015-10-27 2015-10-27 0001114483 srt:MinimumMember us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember 2015-10-27 2015-10-27 0001114483 us-gaap:SecuredDebtMember gb:TermLoanBTLBFacilityMember us-gaap:LoansPayableMember us-gaap:PrimeRateMember 2015-10-27 2015-10-27 0001114483 srt:MaximumMember us-gaap:SecuredDebtMember gb:TermLoanATLAFacilityMember us-gaap:LoansPayableMember us-gaap:PrimeRateMember 2020-01-01 2020-04-03 0001114483 srt:MinimumMember us-gaap:SecuredDebtMember gb:TermLoanATLAFacilityMember us-gaap:LoansPayableMember us-gaap:PrimeRateMember 2020-01-01 2020-04-03 0001114483 us-gaap:SecuredDebtMember gb:TermLoanBTLBFacilityMember us-gaap:LoansPayableMember 2019-12-31 0001114483 us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember 2019-12-31 0001114483 us-gaap:SecuredDebtMember gb:TermLoanATLAFacilityMember us-gaap:LoansPayableMember 2019-12-31 0001114483 srt:MinimumMember us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2015-10-27 2015-10-27 0001114483 srt:MinimumMember us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember us-gaap:PrimeRateMember 2015-10-27 2015-10-27 0001114483 srt:MaximumMember us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember us-gaap:PrimeRateMember 2015-10-27 2015-10-27 0001114483 srt:MaximumMember us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2015-10-27 2015-10-27 0001114483 us-gaap:SecuredDebtMember gb:TermLoanBTLBFacilityMember us-gaap:LoansPayableMember 2020-01-01 2020-04-03 0001114483 gb:RestrictedStockAndRestrictedStockUnitsTimeBasedMember 2020-01-01 2020-04-03 0001114483 gb:RestrictedStockAndRestrictedStockUnitsTimeBasedMember 2020-04-03 0001114483 gb:RestrictedStockAndRestrictedStockUnitsTimeBasedMember 2019-12-31 0001114483 us-gaap:EmployeeStockOptionMember 2018-12-29 2019-03-29 0001114483 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-04-03 0001114483 gb:RestrictedStockAndRestrictedStockUnitsPerformanceBasedMember 2020-01-01 2020-04-03 0001114483 gb:RestrictedStockAndRestrictedStockUnitsPerformanceBasedMember 2019-12-31 0001114483 gb:RestrictedStockAndRestrictedStockUnitsPerformanceBasedMember 2020-04-03 0001114483 gb:SellingGeneralAndAdministrativeExpenseMember 2018-12-29 2019-03-29 0001114483 us-gaap:ResearchAndDevelopmentExpenseMember 2018-12-29 2019-03-29 0001114483 us-gaap:CostOfSalesMember 2018-12-29 2019-03-29 0001114483 gb:SellingGeneralAndAdministrativeExpenseMember 2020-01-01 2020-04-03 0001114483 gb:RestrictedStockAndUnitAwardsMember 2018-12-29 2019-03-29 0001114483 gb:RestrictedStockAndUnitAwardsMember 2020-01-01 2020-04-03 0001114483 us-gaap:ResearchAndDevelopmentExpenseMember 2020-01-01 2020-04-03 0001114483 us-gaap:CostOfSalesMember 2020-01-01 2020-04-03 0001114483 gb:StrategicReorganizationAndAlignmentMember 2020-01-01 2020-04-03 0001114483 gb:ManufacturingAlignmentToSupportGrowthMember 2018-12-29 2019-03-29 0001114483 gb:A2020restructuringplanMember 2018-12-29 2019-03-29 0001114483 gb:A2020restructuringplanMember 2020-01-01 2020-04-03 0001114483 gb:IntegrationCostsMember 2018-12-29 2019-03-29 0001114483 gb:AssetDispositionsSeveranceAndOtherMember 2018-12-29 2019-03-29 0001114483 gb:ManufacturingAlignmentToSupportGrowthMember 2020-01-01 2020-04-03 0001114483 gb:StrategicReorganizationAndAlignmentMember 2018-12-29 2019-03-29 0001114483 gb:IntegrationCostsMember 2020-01-01 2020-04-03 0001114483 gb:AssetDispositionsSeveranceAndOtherMember 2020-01-01 2020-04-03 0001114483 srt:MinimumMember gb:TwoThousandTwentyRestructuringPlanMember 2020-04-03 0001114483 gb:StrategicReorganizationAndAlignmentMember srt:MinimumMember 2020-04-03 0001114483 gb:StrategicReorganizationAndAlignmentMember srt:MaximumMember 2020-04-03 0001114483 gb:ManufacturingAlignmentToSupportGrowthMember 2020-04-03 0001114483 gb:ManufacturingAlignmentToSupportGrowthMember srt:MinimumMember 2020-04-03 0001114483 gb:StrategicReorganizationAndAlignmentMember 2020-04-03 0001114483 srt:MaximumMember gb:TwoThousandTwentyRestructuringPlanMember 2020-04-03 0001114483 gb:ManufacturingAlignmentToSupportGrowthMember srt:MaximumMember 2020-04-03 0001114483 gb:TwoThousandTwentyRestructuringPlanMember 2020-04-03 0001114483 gb:ConsolidationAndOptimizationInitiativesMember gb:SeveranceAndRetentionMember 2020-01-01 2020-04-03 0001114483 gb:ConsolidationAndOptimizationInitiativesMember 2019-12-31 0001114483 gb:ConsolidationAndOptimizationInitiativesMember us-gaap:OtherRestructuringMember 2020-04-03 0001114483 gb:ConsolidationAndOptimizationInitiativesMember us-gaap:OtherRestructuringMember 2019-12-31 0001114483 gb:ConsolidationAndOptimizationInitiativesMember 2020-04-03 0001114483 gb:ConsolidationAndOptimizationInitiativesMember us-gaap:OtherRestructuringMember 2020-01-01 2020-04-03 0001114483 gb:ConsolidationAndOptimizationInitiativesMember 2020-01-01 2020-04-03 0001114483 gb:ConsolidationAndOptimizationInitiativesMember gb:SeveranceAndRetentionMember 2019-12-31 0001114483 gb:ConsolidationAndOptimizationInitiativesMember gb:SeveranceAndRetentionMember 2020-04-03 0001114483 us-gaap:PositiveOutcomeOfLitigationMember 2016-01-26 2016-01-26 0001114483 2016-01-26 2016-01-26 0001114483 us-gaap:PositiveOutcomeOfLitigationMember 2019-01-14 2019-01-14 0001114483 us-gaap:TreasuryStockCommonMember 2019-12-31 0001114483 us-gaap:TreasuryStockCommonMember 2018-12-29 2019-03-29 0001114483 us-gaap:CommonStockMember 2020-01-01 2020-04-03 0001114483 us-gaap:RestrictedStockMember us-gaap:TreasuryStockCommonMember 2018-12-29 2019-03-29 0001114483 us-gaap:CommonStockMember 2019-12-31 0001114483 us-gaap:RestrictedStockMember us-gaap:CommonStockMember 2018-12-29 2019-03-29 0001114483 us-gaap:TreasuryStockCommonMember 2020-04-03 0001114483 us-gaap:CommonStockMember 2018-12-29 2019-03-29 0001114483 us-gaap:TreasuryStockCommonMember 2019-03-29 0001114483 us-gaap:TreasuryStockCommonMember 2020-01-01 2020-04-03 0001114483 us-gaap:RestrictedStockMember us-gaap:TreasuryStockCommonMember 2020-01-01 2020-04-03 0001114483 us-gaap:RestrictedStockMember 2018-12-29 2019-03-29 0001114483 us-gaap:RestrictedStockMember us-gaap:CommonStockMember 2020-01-01 2020-04-03 0001114483 us-gaap:CommonStockMember 2020-04-03 0001114483 us-gaap:TreasuryStockCommonMember 2018-12-28 0001114483 us-gaap:RestrictedStockMember 2020-01-01 2020-04-03 0001114483 us-gaap:CommonStockMember 2019-03-29 0001114483 us-gaap:CommonStockMember 2018-12-28 0001114483 gb:AccruedExpensesAndOtherCurrentLiabilitiesMember gb:ForeignExchangeContractMaturingSeptemberTwoThousandTwentyMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-04-03 0001114483 gb:AccruedExpensesAndOtherCurrentLiabilitiesMember gb:ForeignExchangeContractMaturingJuneTwoThousandTwentyMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-04-03 0001114483 gb:AccruedExpensesAndOtherCurrentLiabilitiesMember gb:ForeignExchangeContractMaturingDecemberTwoThousandTwentyContractOneMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-04-03 0001114483 gb:AccruedExpensesAndOtherCurrentLiabilitiesMember gb:ForeignExchangeContractMaturingDecemberTwoThousandTwentyContractTwoMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-04-03 0001114483 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember gb:ForeignExchangeContractMaturingJuneTwoThousandTwentyMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001114483 gb:AccruedExpensesAndOtherCurrentLiabilitiesMember gb:InterestRateSwapMaturingApril2020Member us-gaap:DesignatedAsHedgingInstrumentMember 2020-04-03 0001114483 gb:AccruedExpensesAndOtherCurrentLiabilitiesMember gb:InterestRateSwapMaturingJuly2020Member us-gaap:DesignatedAsHedgingInstrumentMember 2020-04-03 0001114483 us-gaap:OtherNoncurrentLiabilitiesMember gb:InterestRateSwapMaturingJune2023Member us-gaap:DesignatedAsHedgingInstrumentMember 2020-04-03 0001114483 gb:AccruedExpensesAndOtherCurrentLiabilitiesMember gb:InterestRateSwapMaturingJune2020Member us-gaap:DesignatedAsHedgingInstrumentMember 2020-04-03 0001114483 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001114483 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-04-03 0001114483 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-04-03 0001114483 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001114483 us-gaap:FairValueMeasurementsRecurringMember 2020-04-03 0001114483 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-04-03 0001114483 us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001114483 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001114483 2018-12-29 2019-12-31 0001114483 gb:AccruedExpensesAndOtherCurrentLiabilitiesMember gb:InterestRateSwapMaturingJune2020Member us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001114483 gb:AccruedExpensesAndOtherCurrentLiabilitiesMember gb:InterestRateSwapMaturingJuly2020Member us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001114483 us-gaap:OtherNoncurrentLiabilitiesMember gb:InterestRateSwapMaturingJune2023Member us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001114483 gb:AccruedExpensesAndOtherCurrentLiabilitiesMember gb:InterestRateSwapMaturingApril2020Member us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001114483 us-gaap:CostOfGoodsTotalMember 2018-12-29 2019-03-29 0001114483 us-gaap:InterestExpenseMember 2018-12-29 2019-03-29 0001114483 us-gaap:RevenueFromContractWithCustomerMember 2018-12-29 2019-03-29 0001114483 us-gaap:CostOfGoodsTotalMember 2020-01-01 2020-04-03 0001114483 us-gaap:RevenueFromContractWithCustomerMember 2020-01-01 2020-04-03 0001114483 us-gaap:InterestExpenseMember 2020-01-01 2020-04-03 0001114483 gb:ChineseVentureCapitalFundMember 2020-04-03 0001114483 us-gaap:ForeignExchangeForwardMember us-gaap:RevenueFromContractWithCustomerMember 2020-01-01 2020-04-03 0001114483 us-gaap:ForeignExchangeForwardMember us-gaap:CostOfGoodsTotalMember 2018-12-29 2019-03-29 0001114483 us-gaap:InterestRateSwapMember us-gaap:InterestExpenseMember 2018-12-29 2019-03-29 0001114483 us-gaap:ForeignExchangeForwardMember us-gaap:RevenueFromContractWithCustomerMember 2018-12-29 2019-03-29 0001114483 us-gaap:ForeignExchangeForwardMember us-gaap:CostOfGoodsTotalMember 2020-01-01 2020-04-03 0001114483 us-gaap:InterestRateSwapMember us-gaap:InterestExpenseMember 2020-01-01 2020-04-03 0001114483 us-gaap:OperatingSegmentsMember gb:CardiacNeuromodulationMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 us-gaap:OperatingSegmentsMember gb:CardioAndVascularMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 us-gaap:OperatingSegmentsMember gb:NonMedicalSegmentMember 2020-01-01 2020-04-03 0001114483 us-gaap:OperatingSegmentsMember gb:CardiacNeuromodulationMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 us-gaap:OperatingSegmentsMember gb:AdvancedSurgicalOrthopedicsandPortableMedicalMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 us-gaap:OperatingSegmentsMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 us-gaap:OperatingSegmentsMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 us-gaap:OperatingSegmentsMember gb:CardioAndVascularMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 us-gaap:OperatingSegmentsMember gb:NonMedicalSegmentMember 2018-12-29 2019-03-29 0001114483 us-gaap:OperatingSegmentsMember gb:AdvancedSurgicalOrthopedicsandPortableMedicalMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 us-gaap:OperatingSegmentsMember 2018-12-29 2019-03-29 0001114483 us-gaap:MaterialReconcilingItemsMember 2020-01-01 2020-04-03 0001114483 us-gaap:OperatingSegmentsMember 2020-01-01 2020-04-03 0001114483 us-gaap:MaterialReconcilingItemsMember 2018-12-29 2019-03-29 0001114483 gb:AllOtherCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 gb:CustomerAMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 gb:AllOtherCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:NonMedicalSegmentMember 2020-01-01 2020-04-03 0001114483 gb:AllOtherCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 gb:CustomerDMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:NonMedicalSegmentMember 2020-01-01 2020-04-03 0001114483 gb:CustomerDMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:NonMedicalSegmentMember 2018-12-29 2019-03-29 0001114483 gb:AllOtherCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:NonMedicalSegmentMember 2018-12-29 2019-03-29 0001114483 gb:CustomerCMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 gb:CustomerAMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 gb:CustomerBMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 gb:CustomerBMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 gb:CustomerCMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 country:PR us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 country:CA us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:NonMedicalSegmentMember 2020-01-01 2020-04-03 0001114483 country:CA us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:NonMedicalSegmentMember 2018-12-29 2019-03-29 0001114483 country:PR us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 gb:AllOtherCountriesMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:NonMedicalSegmentMember 2018-12-29 2019-03-29 0001114483 gb:AllOtherCountriesMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 gb:AllOtherCountriesMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 gb:AllOtherCountriesMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:NonMedicalSegmentMember 2020-01-01 2020-04-03 0001114483 country:US us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:MedicalSegmentMember 2018-12-29 2019-03-29 0001114483 country:US us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:NonMedicalSegmentMember 2018-12-29 2019-03-29 0001114483 country:GB us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:NonMedicalSegmentMember 2020-01-01 2020-04-03 0001114483 country:US us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:MedicalSegmentMember 2020-01-01 2020-04-03 0001114483 country:US us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:NonMedicalSegmentMember 2020-01-01 2020-04-03 0001114483 country:SG us-gaap:RevenueFromContractWithCustomerMember us-gaap:GeographicConcentrationRiskMember gb:NonMedicalSegmentMember 2020-01-01 2020-04-03 0001114483 us-gaap:DiscontinuedOperationsHeldforsaleMember gb:ASOBusinessMember 2018-12-29 2019-03-29 0001114483 us-gaap:DiscontinuedOperationsHeldforsaleMember gb:ASOBusinessMember 2020-01-01 2020-04-03 0001114483 us-gaap:SecuredDebtMember gb:NewRevolvingCreditFacility2015Member us-gaap:RevolvingCreditFacilityMember us-gaap:SubsequentEventMember 2020-04-10 xbrli:pure iso4217:USD xbrli:shares iso4217:USD iso4217:UYU iso4217:USD xbrli:shares gb:patent iso4217:USD iso4217:EUR iso4217:USD iso4217:MXN gb:Segment


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _____________________________________________________________ 
FORM 10-Q
 _____________________________________________________________ 
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 1-16137
 _____________________________________________________________ 
itgrlogo20190925a07.jpg
INTEGER HOLDINGS CORPORATION
(Exact name of Registrant as specified in its charter)
 _____________________________________________________________ 
Delaware
 
16-1531026
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
5830 Granite Parkway,
Suite 1150
Plano,
Texas
 
75024
(Address of principal executive offices)
 
(Zip Code)
(214) 618-5243
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.001 par value per share
 
ITGR
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
  
Accelerated filer
 
Non-accelerated filer
 
 
 
 
 
 
 
Smaller reporting company
  
Emerging growth company
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of shares outstanding of the Company’s common stock, $0.001 par value per share, as of May 1, 2020 was: 32,833,992 shares.




INTEGER HOLDINGS CORPORATION
Form 10-Q
For the Quarterly Period Ended April 3, 2020
TABLE OF CONTENTS
 
 
Page
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 6.
 
 
 


- 2 -



PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands except share and per share data)
April 3,
2020
 
December 31,
2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
37,259

 
$
13,535

Accounts receivable, net of provision for credit losses of $2.2 million and allowance for doubtful accounts of $2.4 million, respectively
199,785

 
191,985

Inventories
170,298

 
167,256

Contract assets
38,882

 
24,767

Prepaid expenses and other current assets
14,598

 
17,852

Total current assets
460,822

 
415,395

Property, plant and equipment, net
246,378

 
246,185

Goodwill
839,395

 
839,617

Other intangible assets, net
766,535

 
775,784

Deferred income taxes
5,045

 
4,438

Operating lease assets
49,039

 
42,379

Other long-term assets
30,813

 
29,295

Total assets
$
2,398,027

 
$
2,353,093

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
37,500

 
$
37,500

Accounts payable
79,138

 
64,975

Income taxes payable
7,564

 
3,023

Operating lease liabilities
7,951

 
7,507

Accrued expenses and other current liabilities
53,976

 
66,073

Total current liabilities
186,129

 
179,078

Long-term debt
793,829

 
777,272

Deferred income taxes
185,814

 
187,978

Operating lease liabilities
42,482

 
37,114

Other long-term liabilities
25,572

 
19,163

Total liabilities
1,233,826

 
1,200,605

Commitments and contingencies (Note 10)

 

Stockholders’ equity:
 
 
 
Common stock, $0.001 par value; 100,000,000 shares authorized; 32,847,017 shares issued; 32,826,005 and 32,700,471 shares outstanding, respectively
33

 
33

Additional paid-in capital
694,746

 
701,018

Treasury stock, at cost, 21,012 and 146,546 shares, respectively
(1,263
)
 
(8,809
)
Retained earnings
471,358

 
440,258

Accumulated other comprehensive income (loss)
(673
)
 
19,988

Total stockholders’ equity
1,164,201

 
1,152,488

Total liabilities and stockholders’ equity
$
2,398,027

 
$
2,353,093

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 3 -



INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
Three Months Ended
(in thousands except per share data)
April 3,
2020
 
March 29,
2019
Sales
$
328,426

 
$
314,676

Cost of sales
231,724

 
226,066

Gross profit
96,702

 
88,610

Operating expenses:
 
 
 
Selling, general and administrative expenses
36,457

 
34,956

Research, development and engineering costs
13,241

 
11,595

Other operating expenses
2,928

 
2,890

Total operating expenses
52,626

 
49,441

Operating income
44,076

 
39,169

Interest expense
10,361

 
13,830

(Gain) loss on equity investments, net
(1,925
)
 
41

Other (income) loss, net
(999
)
 
166

Income from continuing operations before taxes
36,639

 
25,132

Provision for income taxes
5,539

 
3,766

Income from continuing operations
$
31,100

 
$
21,366

 
 
 
 
Discontinued operations:
 
 
 
Income from discontinued operations before taxes

 
386

Provision for income taxes

 
83

Income from discontinued operations
$

 
$
303

 
 
 
 
Net income
$
31,100

 
$
21,669

 
 
 
 
Basic earnings per share:
 
 
 
Income from continuing operations
$
0.95

 
$
0.66

Income from discontinued operations

 
0.01

Basic earnings per share
0.95

 
0.67

 
 
 
 
Diluted earnings per share:
 
 
 
Income from continuing operations
$
0.94

 
$
0.65

Income from discontinued operations

 
0.01

Diluted earnings per share
0.94

 
0.66

 
 
 
 
Weighted average shares outstanding:
 
 
 
Basic
32,807

 
32,536

Diluted
33,117

 
32,980

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 4 -


INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
 
Three Months Ended
(in thousands)
April 3,
2020
 
March 29,
2019
Comprehensive Income
 
 
 
Net income
$
31,100

 
$
21,669

Other comprehensive loss:
 
 
 
Foreign currency translation loss
(12,032
)
 
(6,838
)
Change in fair value of cash flow hedges, net of tax
(8,629
)
 
(702
)
Other comprehensive loss, net of tax
(20,661
)
 
(7,540
)
Comprehensive income, net of tax
$
10,439

 
$
14,129

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 5 -



INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
Three Months Ended
(in thousands)
April 3,
2020
 
March 29,
2019
Cash flows from operating activities:
 
 
 
Net income
$
31,100

 
$
21,669

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
19,494

 
19,658

Debt related charges included in interest expense
1,023

 
1,774

Stock-based compensation
1,738

 
2,713

Non-cash charges related to customer bankruptcy
628

 

Non-cash lease expense
1,930

 
1,864

Non-cash (gain) loss on equity investments
(1,925
)
 
41

Other non-cash gains
(1,085
)
 
(1,075
)
Deferred income taxes
61

 
96

Changes in operating assets and liabilities, net of acquisition:
 
 
 
Accounts receivable
(8,165
)
 
(30,924
)
Inventories
(4,365
)
 
8,612

Prepaid expenses and other assets
(13,350
)
 
(14,266
)
Accounts payable
18,458

 
15,411

Accrued expenses and other liabilities
(18,108
)
 
(15,894
)
Income taxes payable
4,963

 
1,555

Net cash provided by operating activities
32,397

 
11,234

Cash flows from investing activities:
 
 
 
Acquisition of property, plant and equipment
(14,925
)
 
(7,447
)
Purchase of intangible asset
(3,500
)
 

Proceeds from sale of property, plant and equipment
52

 
2

Purchase of equity investments

 
(42
)
Acquisitions, net
(5,219
)
 

Net cash used in investing activities
(23,592
)
 
(7,487
)
Cash flows from financing activities:
 
 
 
Principal payments of long-term debt
(9,375
)
 
(30,375
)
Proceeds from senior secured revolving line of credit
25,000

 
15,000

Proceeds from the exercise of stock options
2,201

 
1,338

Tax withholdings related to net share settlements of restricted stock unit awards
(2,664
)
 
(2,123
)
Net cash provided by (used in) financing activities
15,162

 
(16,160
)
Effect of foreign currency exchange rates on cash and cash equivalents
(243
)
 
382

Net increase (decrease) in cash and cash equivalents
23,724

 
(12,031
)
Cash and cash equivalents, beginning of period
13,535

 
25,569

Cash and cash equivalents, end of period
$
37,259

 
$
13,538

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 6 -



INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
 
Three Months Ended
(in thousands)
April 3,
2020
 
March 29,
2019
Total stockholders’ equity, beginning balance
$
1,152,488

 
$
1,060,493

 
 
 
 
Common stock and additional paid-in capital
 
 
 
Balance, beginning of period
701,051

 
691,116

Stock awards exercised or vested
(8,010
)
 
1,114

Stock-based compensation
1,738

 
2,713

Balance, end of period
694,779

 
694,943

Treasury stock
 
 
 
Balance, beginning of period
(8,809
)
 
(8,125
)
Treasury shares purchased

 
(2,123
)
Treasury shares reissued
7,546

 
222

Balance, end of period
(1,263
)
 
(10,026
)
Retained earnings
 
 
 
Balance, beginning of period
440,258

 
344,498

Adoption of ASC 842, Leases

 
(576
)
Net income
31,100

 
21,669

Balance, end of period
471,358

 
365,591

Accumulated other comprehensive income (loss)
 
 
 
Balance, beginning of period
19,988

 
33,004

Other comprehensive loss
(20,661
)
 
(7,540
)
Balance, end of period
(673
)
 
25,464

Total stockholders’ equity, ending balance
$
1,164,201

 
$
1,075,972

The accompanying notes are an integral part of these condensed consolidated financial statements.


- 7 -



INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1.)    BASIS OF PRESENTATION
Integer Holdings Corporation (together with its consolidated subsidiaries, “Integer” or the “Company”) is a publicly-traded corporation listed on the New York Stock Exchange under the symbol “ITGR.” Integer is one of the largest medical device outsource manufacturers in the world serving the cardiac, neuromodulation, vascular, orthopedics, advanced surgical and portable medical markets. The Company provides innovative, high-quality medical technologies that enhance the lives of patients worldwide. In addition, it develops batteries for high-end niche applications in the energy, military, and environmental markets. The Company’s reportable segments are: (1) Medical and (2) Non-Medical. The Company’s customers include large multi-national original equipment manufacturers (“OEMs”) and their affiliated subsidiaries.
On July 2, 2018, the Company completed the sale of the Advanced Surgical and Orthopedic product lines (the “AS&O Product Line”). The results of operations of the AS&O Product Line are reported as discontinued operations in the Condensed Consolidated Statements of Operations for all periods presented. The cash flows related to discontinued operations have not been segregated, and are included in the Condensed Consolidated Statements of Cash Flows. Unless otherwise noted specifically as discontinued operations, discussion within these notes to the Company’s condensed consolidated financial statements relates to continuing operations. See Note 16 “Discontinued Operations” for additional information related to discontinued operations.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all of the information necessary for a full presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of the Company for the periods presented. Intercompany transactions and balances have been fully eliminated in consolidation.
Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, certain components of equity, sales, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ materially from these estimates. For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The first quarter of 2020 ended on April 3 and consisted of 94 days, and the first quarter of 2019 ended on March 29 and consisted of 91 days.
Certain prior year amounts have been reclassified to conform to current year’s presentation, which management does not consider to be material.
Supplier Financing Arrangements
In the first quarter of 2020, the Company began utilizing supplier financing arrangements with financial institutions to sell certain accounts receivable on a non-recourse basis. These transactions are treated as a sale of, and are accounted for as a reduction to, accounts receivable. The agreements transfer control and risk related to the receivables to the financial institutions. The Company has no continuing involvement in the transferred receivables subsequent to the sale. In the first quarter of 2020, the Company sold and de-recognized accounts receivable and collected cash of $15.5 million. The costs associated with the supplier financing arrangements were not material for the three months ended April 3, 2020.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standard Updates (“ASU”) issued by the Financial Accounting Standards Board ("FASB"). ASUs not yet adopted that are not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated results of operations, financial position and cash flows. With the exception of the accounting pronouncements adopted as discussed below, there have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, that are of significance, or potential significance, to the Company.

- 8 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(1.)    BASIS OF PRESENTATION (Continued)
Recently Adopted Accounting Guidance
Adoption of Accounting Standards Codification Topic 326
The Company adopted ASC 326, Financial Instruments-Credit Losses, effective January 1, 2020. Under the current expected credit losses (“CECL”) model, the Company immediately recognizes an estimate of credit losses expected to occur over the life of the financial asset at the time the financial asset is originated or acquired.  Estimated credit losses are determined by taking into consideration historical loss conditions, current conditions and reasonable and supportable forecasts.  Changes to the expected lifetime credit losses are recognized each period. The adoption of ASC 326 did not have a material impact to the Company’s Condensed Consolidated Financial Statements.
Recent Accounting Pronouncements Not Yet Effective
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, in response to concerns about structural risks of interbank offered rates (“IBORs”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions if certain criteria are met. The ASU applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is evaluating the impact of ASU 2020-04 on its Condensed Consolidated Financial Statements.
(2.)    BUSINESS ACQUISITIONS
On February 19, 2020, the Company acquired certain assets and liabilities of InoMec Ltd. (“InoMec”), a privately-held company based in Israel that specializes in the research, development and manufacturing of medical devices, including minimally invasive tools, delivery systems, tubing and catheters, surgery tools, drug-device combination, laser combined devices, and tooling and production. The acquisition enables the Company to create a research and development center in Israel, closer to the customer base in the region. The fair value of the consideration transferred was $7.0 million, which included an initial cash payment of $5.3 million and $1.7 million in estimated fair value of contingent consideration.
The contingent consideration represents the estimated fair value of the Company’s obligation, under the asset purchase agreement, to make additional payments of up to $3.5 million over the next four years based on specified conditions being met. Based on the preliminary purchase price allocation, the assets acquired principally comprise $2.0 million of intangible assets, $4.8 million of goodwill, $0.3 million of acquired property, plant and equipment, and a net liability for other working capital items of $0.1 million. Intangible assets included developed technology, customer relationships and non-compete provisions, which are being amortized over a weighted average period of 5.9 years.
On October 7, 2019, the Company acquired certain assets and liabilities of US BioDesign, LLC (“USB”), a privately-held developer and manufacturer of complex braided biomedical structures for disposable and implantable medical devices. The acquisition added a differentiated capability related to the complex development and manufacture of braided and formed biomedical structures to the Company’s broad portfolio. The fair value of the consideration transferred was $19.1 million, which included a cash payment of $14.9 million, which reflects a $0.1 million favorable working capital adjustment finalized in the first quarter of 2020, and $4.2 million in estimated fair value of contingent consideration.
The contingent consideration represents the estimated fair value of the Company’s obligation, under the asset purchase agreement, to make additional payments of up to $5.5 million if certain revenue goals are met through 2023. The assets acquired principally consist of $7.4 million of developed technology, $10.4 million of goodwill, $0.7 million of acquired property, plant and equipment, and $0.6 million of other working capital items. The developed technology intangible asset is being amortized over a useful life of 8 years. The $10.4 million of goodwill reflects a $0.1 million decrease resulting from the working capital adjustment.
The amount allocated to goodwill for these acquisitions is deductible for income tax purposes. The fair value of the contingent consideration was estimated using the Monte Carlo valuation approach. See Note 13 “Financial Instruments and Fair Value Measurements” for additional information related to the fair value measurement of the contingent consideration.

- 9 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(2.)    BUSINESS ACQUISITIONS (Continued)
For segment reporting purposes, the results of operations and assets from these acquisitions have been included in the Company’s Medical segment since the respective acquisition dates. For the three months ended April 3, 2020, sales related to InoMec and USB were $1.4 million. Earnings related to the operations consisting of the assets and liabilities acquired from InoMec and USB for the three months ended April 3, 2020 were not material. Direct costs of these acquisitions of $0.8 million were expensed as incurred and included in Other Operating Expenses in the Condensed Consolidated Statement of Operations during the three months ended April 3, 2020.
Pro forma financial information has not been presented for these acquisitions as the net effects were neither significant nor material to the Company’s results of operations or financial position.
(3.)    SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental information relating to the Condensed Consolidated Statements of Cash Flows (in thousands):
 
Three Months Ended
 
April 3,
2020
 
March 29,
2019
Noncash investing and financing activities:
 
 
 
Property, plant and equipment purchases included in accounts payable
$
4,481

 
$
2,146

Purchase of intangible asset included in accrued expenses
1,000

 

Supplemental lease disclosures:
 
 
 
Operating lease assets obtained in exchange for new or remeasured operating
   lease liabilities
7,427

 


Refer to Note 16 “Discontinued Operations” for additional supplemental cash flow information pertaining to discontinued operations.
(4.)    INVENTORIES
Inventories comprise the following (in thousands):
 
April 3,
2020
 
December 31,
2019
Raw materials
$
83,078

 
$
79,742

Work-in-process
60,761

 
60,042

Finished goods
26,459

 
27,472

Total
$
170,298

 
$
167,256


(5.)     GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
The changes in the carrying amount of goodwill by reportable segment for the three months ended April 3, 2020 were as follows (in thousands):
 
Medical
 
Non- Medical
 
Total
December 31, 2019
$
822,617

 
$
17,000

 
$
839,617

Foreign currency translation
(4,937
)
 

 
(4,937
)
Acquisitions and related adjustments (Note 2)
4,715

 

 
4,715

April 3, 2020
$
822,395

 
$
17,000

 
$
839,395



- 10 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(5.)    GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Continued)
Intangible Assets
Intangible assets at April 3, 2020 and December 31, 2019 were as follows (in thousands):
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
April 3, 2020
 
 
 
 

Definite-lived:
 
 
 
 
 
Purchased technology and patents
$
252,216

 
$
(141,279
)
 
$
110,937

Customer lists
702,422

 
(137,627
)
 
564,795

Other
4,067

 
(3,552
)
 
515

Total
$
958,705

 
$
(282,458
)
 
$
676,247

Indefinite-lived:
 
 
 
 
 
Trademarks and tradenames


 
 
 
$
90,288

 
 
 
 
 
 
December 31, 2019
 
 
 
 

Definite-lived:
 
 
 
 
 
Purchased technology and patents
$
248,264

 
$
(138,435
)
 
$
109,829

Customer lists
706,852

 
(131,185
)
 
575,667

Other
3,503

 
(3,503
)
 

Total
$
958,619

 
$
(273,123
)
 
$
685,496

Indefinite-lived:
 
 
 
 
 
Trademarks and tradenames


 
 
 
$
90,288


When acquiring certain assets, the Company assesses whether the acquired assets are a result of a business combination or a purchase of an asset. In the first quarter of 2020, the Company acquired a set of similar identifiable intangible assets relating to a license to use technology within its Non-Medical segment. The Company paid $3.5 million upon closing, and expects to pay $1.0 million in additional consideration subject to the completion of certain milestones. The $1.0 million of additional consideration is recorded within Accrued expenses and other current liabilities. The intangible asset is being amortized over 11 years, the remaining useful life of the patented technology. See Note 13 “Financial Instruments and Fair Value Measurements” for additional information related to the fair value measurement of the contingent consideration.
Aggregate intangible asset amortization expense is comprised of the following (in thousands):
 
Three Months Ended
 
April 3,
2020
 
March 29,
2019
Cost of sales
$
3,269

 
$
3,262

Selling, general and administrative expenses
7,175

 
6,592

Total intangible asset amortization expense
$
10,444

 
$
9,854


Estimated future intangible asset amortization expense based on the carrying value as of April 3, 2020 is as follows (in thousands):
 
Remainder of 2020
 
2021
 
2022
 
2023
 
2024
 
After 2024
Amortization Expense
$
30,296

 
40,399

 
39,383

 
37,984

 
37,051

 
491,134



- 11 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(6.)     DEBT
Long-term debt is comprised of the following (in thousands):
 
April 3,
2020
 
December 31,
2019
Senior secured term loan A
$
257,813

 
$
267,188

Senior secured term loan B
558,286

 
558,286

Revolving line of credit
25,000

 

Unamortized discount on term loan B and debt issuance costs
(9,770
)
 
(10,702
)
Total debt
831,329

 
814,772

Current portion of long-term debt
(37,500
)
 
(37,500
)
Total long-term debt
$
793,829

 
$
777,272


The Company has senior secured credit facilities (the “Senior Secured Credit Facilities”) as of April 3, 2020, consisting of (i) a $200 million revolving credit facility (the “Revolving Credit Facility”), (ii) a term loan A facility (the “TLA Facility”), and (iii) a term loan B facility (the “TLB Facility”). The TLA Facility and TLB Facility are collectively referred to as the “Term Loan Facilities.” The TLB Facility was issued at a 1% discount.
Revolving Credit Facility
The Revolving Credit Facility matures on October 27, 2022. The Revolving Credit Facility includes a $15 million sublimit for swingline loans and a $25 million sublimit for standby letters of credit. The Company is required to pay a commitment fee on the unused portion of the Revolving Credit Facility, which will range between 0.175% and 0.25%, depending on the Company’s Total Net Leverage Ratio (as defined in the Senior Secured Credit Facilities agreement). As of April 3, 2020, the commitment fee on the unused portion of the Revolving Credit Facility was 0.25%. Interest rates on the Revolving Credit Facility, as well as the TLA Facility, are at the Company’s option, either at: (i) the prime rate plus the applicable margin, which will range between 0.50% and 2.00%, based on the Company’s Total Net Leverage Ratio, or (ii) the applicable LIBOR rate plus the applicable margin, which will range between 1.50% and 3.00%, based on the Company’s Total Net Leverage Ratio.
As of April 3, 2020, the Company had available borrowing capacity on the Revolving Credit Facility of $168.3 million after giving effect to $25.0 million of outstanding borrowings and $6.7 million of outstanding standby letters of credit. As of April 3, 2020, the weighted average interest rate on outstanding borrowings under the Revolving Credit Facility was 2.87%.
Term Loan Facilities
The TLA Facility and TLB Facility mature on October 27, 2022. Interest rates on the TLB Facility are, at the Company’s option, either at: (i) the prime rate plus 1.50% or (ii) the applicable LIBOR rate plus 2.50%, with LIBOR subject to a 1.00% floor. As of April 3, 2020, the interest rates on the TLA Facility and TLB Facility were 2.96% and 3.51%, respectively.
Covenants
The Revolving Credit Facility and TLA Facility contain covenants requiring (A) a maximum Total Net Leverage Ratio of 4.25:1.00, subject to a step down of 25 basis points to 4.00:1:00 beginning in the second quarter of 2020 and (B) a minimum interest coverage ratio of adjusted EBITDA (as defined in the Senior Secured Credit Facilities) to interest expense of not less than 3.00:1.00. The TLB Facility does not contain any financial maintenance covenants. As of April 3, 2020, the Company was in compliance with these financial covenants.
Contractual maturities under the Senior Secured Credit Facilities for the remainder of 2020 and the next two years (through maturity), excluding any discounts or premiums, as of April 3, 2020 are as follows (in thousands):
 
 
2020
 
2021
 
2022
Future minimum principal payments
 
$
28,125

 
37,500

 
775,474


The Company prepaid portions of its TLB Facility during 2019. The Company recognized losses from extinguishment of debt during the three months ended March 29, 2019 of $0.4 million. The loss from extinguishment of debt represents the portion of the unamortized discount and debt issuance costs related to the portion of the TLB Facility that was prepaid and is included in Interest Expense in the accompanying Condensed Consolidated Statements of Operations.

- 12 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(7.)     STOCK-BASED COMPENSATION
The Company maintains certain stock-based compensation plans that were approved by the Company’s stockholders and are administered by the Board of Directors, or the Compensation and Organization Committee of the Board. The stock-based compensation plans provide for the granting of stock options, restricted stock awards, restricted stock units (“RSUs”), stock appreciation rights and stock bonuses to employees, non-employee directors, consultants, and service providers.
The components and classification of stock-based compensation expense were as follows (in thousands):
 
Three Months Ended
 
April 3,
2020
 
March 29,
2019
Stock options
$
13

 
$
101

RSUs
1,725

 
2,612

Total stock-based compensation expense
$
1,738

 
$
2,713

 
 
 
 
Cost of sales
$
454

 
$
317

Selling, general and administrative expenses
1,136

 
2,330

Research, development and engineering costs
148

 
66

Total stock-based compensation expense
$
1,738

 
$
2,713


 
 
 

The following table summarizes the Company’s stock option activity:
 
Number of
Stock
Options
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life
(In Years)
 
Aggregate
Intrinsic
Value
(In Millions)
Outstanding at December 31, 2019
384,013

 
$
34.96

 
 
 
 
Exercised
(58,658
)
 
37.60

 
 
 
 
Outstanding at April 3, 2020
325,355

 
$
34.48

 
5.0
 
$
5.7

Exercisable at April 3, 2020
322,805

 
$
34.40

 
5.0
 
$
5.6


During the three months ended April 3, 2020, the Company awarded grants to certain members of management, consisting of either time-based RSUs or a mix of time-based RSUs and performance-based RSUs (“PRSUs”). The time-based RSUs vest ratably, subject to the recipient’s continuous service to the Company over a period of generally three years from the grant date. For the Company’s PRSUs, in addition to service conditions, the ultimate number of shares to be earned depends on the achievement of financial performance or market-based conditions. The financial performance condition is based on the Company’s sales targets. The market-based conditions are based on the Company’s achievement of a relative total shareholder return (“TSR”) performance requirement, on a percentile basis, compared to a defined group of peer companies over three year performance periods.
The Company uses a Monte Carlo simulation model to determine the grant-date fair value of awards with TSR-based performance conditions. The grant-date fair value of all other RSUs is equal to the closing market price of Integer common stock on the date of grant.

- 13 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(7.)     STOCK-BASED COMPENSATION (Continued)
The weighted average fair value and assumptions used to value the TSR portion of the PRSUs granted are as follows:
 
Three Months Ended
 
April 3,
2020
 
March 29,
2019
Weighted average fair value
$
107.42

 
$
123.34

Risk-free interest rate
1.53
%
 
2.49
%
Expected volatility
30
%
 
40
%
Expected life (in years)
2.9

 
2.8

Expected dividend yield
%
 
%

The following table summarizes time-vested RSU activity:
 
Time-Vested
Activity
 
Weighted
Average
Grant Date Fair Value
Nonvested at December 31, 2019
205,223

 
$
64.75

Granted
107,030

 
85.58

Vested
(64,334
)
 
54.89

Forfeited
(7,524
)
 
70.37

Nonvested at April 3, 2020
240,395

 
$
76.49

The following table summarizes PRSU activity:
 
Performance-
Vested
Activity
 
Weighted
Average
Grant Date Fair Value
Nonvested at December 31, 2019
191,592

 
$
56.30

Granted
66,690

 
95.15

Vested
(35,363
)
 
31.17

Forfeited
(4,106
)
 
51.54

Nonvested at April 3, 2020
218,813

 
$
72.29


(8.)     OTHER OPERATING EXPENSES
Other Operating Expenses is comprised of the following (in thousands):
 
Three Months Ended
 
April 3,
2020
 
March 29,
2019
Strategic reorganization and alignment
$
548

 
$
1,734

Manufacturing alignment to support growth
128

 
585

2020 restructuring plan
974

 

Acquisition and integration expenses
356

 

Other general expenses
922

 
571

Total other operating expenses
$
2,928

 
$
2,890



- 14 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(8.)     OTHER OPERATING EXPENSES (Continued)
Strategic reorganization and alignment
As a result of the strategic review of its customers, competitors and markets, the Company began taking steps in 2017 to better align its resources in order to enhance the profitability of its portfolio of products. These initiatives include improving its business processes and redirecting investments away from projects where the market does not justify the investment, as well as aligning resources with market conditions and the Company’s future strategic direction. The Company estimates that it will incur aggregate pre-tax charges in connection with the strategic reorganization and alignment plan, including projects reported in discontinued operations, of between approximately $22 million to $23 million, the majority of which are expected to be cash expenditures. During the three months ended April 3, 2020, the Company incurred charges relating to this initiative, which primarily included severance recorded within the Medical segment. As of April 3, 2020, total expense incurred for this initiative since inception, including amounts reported in discontinued operations, was $22.9 million. These actions were substantially completed at the end of 2019.
Manufacturing alignment to support growth
In 2017, the Company initiated several initiatives designed to reduce costs, increase manufacturing capacity to accommodate growth and improve operating efficiencies.  The plan involves the relocation of certain manufacturing operations and expansion of certain of the Company’s facilities. The Company estimates that it will incur aggregate pre-tax restructuring related charges in connection with the realignment plan of between approximately $6 million to $7 million, the majority of which are expected to be cash expenditures. Costs related to the Company’s manufacturing alignment to support growth initiative were primarily recorded within the Medical segment. As of April 3, 2020, total expense incurred for this initiative since inception was $5.7 million. These actions were substantially completed at the end of 2019.
2020 restructuring plan
The Company’s 2020 restructuring plan mainly consists of costs associated with executing on its sales force excellence, manufacturing excellence and business process excellence imperatives. These projects focus on changing the Company’s organizational structure to match product line growth strategies and customer needs, transitioning its manufacturing process into a competitive advantage and standardizing and optimizing its business processes. The Company estimates that it will incur aggregate pre-tax restructuring related charges in connection with the 2020 restructuring plan of between approximately $2 million to $3 million, the majority of which are expected to be cash expenditures. Costs related to the Company’s 2020 restructuring plan are expected to be primarily recorded within the Medical segment. As of April 3, 2020, total expense incurred for this initiative since inception was $1.0 million, which was primarily severance. These actions are expected to be substantially complete by the end of 2020.
The following table summarizes the change in accrued liabilities, presented within Accrued Expense and Other Current Liabilities on the Condensed Consolidated Balance Sheets, related to the initiatives described above (in thousands):
 
Severance and Retention
 
Other
 
Total
December 31, 2019
$
1,389

 
$
596

 
$
1,985

Restructuring charges
1,309

 
341

 
1,650

Cash payments
(1,927
)
 
(935
)
 
(2,862
)
April 3, 2020
$
771

 
$
2

 
$
773


Acquisition and integration expenses
During the three months ended April 3, 2020, acquisition and integration expenses included $0.9 million of expenses related to the acquisition of certain assets and liabilities of InoMec and USB, and a $0.5 million adjustment to reduce the fair value of acquisition-related contingent consideration liabilities. Acquisition and integration costs primarily include direct acquisition costs incurred which consist of professional fees and other costs.
Other general expenses
During the three months ended April 3, 2020 and March 29, 2019, the Company recorded expenses related to other initiatives not described above, which relate primarily to integration and operational initiatives to reduce future operating costs and improve operational efficiencies. The 2020 and 2019 amounts primarily include systems conversion expenses and expenses related to the restructuring of certain legal entities of the Company.

- 15 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(9.)    INCOME TAXES
The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including discrete items, changes in the mix and amount of pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, business reorganizations, settlements with taxing authorities and foreign currency fluctuations. In addition, the Company continues to explore tax planning opportunities that may have a material impact on its effective tax rate.
The Company’s effective tax rate for continuing operations for the first quarter of 2020 was 15.1% on $36.6 million of income from continuing operations before taxes compared to 15.0% on $25.1 million of income from continuing operations before taxes for the same period in 2019. The difference between the Company’s effective tax rates and the U.S. federal statutory income tax rate of 21% for the first quarter of 2020 and 2019 is primarily attributable to the net impact of the Global Intangible Low-Taxed Income tax, the Company’s earnings outside the U.S., which are generally taxed at rates that differ from the U.S federal rate and discrete tax benefits of $1.0 million and $1.7 million, respectively. The discrete tax benefits for both periods are predominately related to excess tax benefits recognized upon vesting of RSUs or exercise of stock options.
As of April 3, 2020 and December 31, 2019, the Company had unrecognized tax benefits from continuing operations of approximately $4.6 million and $4.4 million, respectively. It is reasonably possible that a reduction of up to $0.6 million of the balance of unrecognized tax benefits may occur within the next twelve months as a result of potential audit settlements. As of April 3, 2020 and December 31, 2019, approximately $4.6 million and $4.4 million, respectively, of the unrecognized tax benefits would favorably impact the effective tax rate, net of federal benefit on state issues, if recognized.
In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. For the three months ended April 3, 2020, there were no material tax impacts to our Condensed Consolidated Financial Statements as it relates to COVID-19 measures. We continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others.

- 16 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(10.)    COMMITMENTS AND CONTINGENCIES
Litigation
The Company is subject to litigation arising from time to time in the ordinary course of its business. The Company does not expect that the ultimate resolution of any pending legal actions will have a material effect on its consolidated results of operations, financial position, or cash flows. However, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which the Company currently believes to be immaterial, will not become material in the future.
In April 2013, the Company commenced an action against AVX Corporation and AVX Filters Corporation (collectively “AVX”) alleging that AVX had infringed on the Company’s patents by manufacturing and selling filtered feedthrough assemblies used in implantable pacemakers and cardioverter defibrillators that incorporate the Company’s patented technology. Two juries in the U.S. District Court for the District of Delaware have returned verdicts finding that AVX infringed on three of the Company’s patents and awarded the Company $37.5 million in damages. In March 2018, the U.S. District Court for the District of Delaware vacated the original damage award and ordered a retrial on damages. In the January 2019 retrial on damages, the jury awarded the Company $22.2 million in damages. On July 31, 2019, the U.S. District Court for the District of Delaware entered an order denying AVX’s post-trial motion to overturn the jury verdict in favor of the Company. On August 23, 2019, AVX filed its notice of appeal with the United States Court of Appeals for the Federal Circuit and on September 5, 2019, the Company filed its notice of cross-appeal with the United States Court of Appeals for the Federal Circuit. Briefs by both parties have been filed, but the United States Court of Appeals for the Federal Circuit has not yet set a date for oral argument. To date, the Company has recorded no gains in connection with this litigation.
Product Warranties
The Company generally warrants that its products will meet customer specifications and will be free from defects in materials and workmanship. The product warranty liability is presented within Accrued Expense and Other Current Liabilities on the Condensed Consolidated Balance Sheets. The change in product warranty liability was comprised of the following (in thousands):
December 31, 2019
$
1,933

Additions to warranty reserve, net of reversals
14

Adjustments to pre-existing warranties
(66
)
Warranty claims settled
(997
)
April 3, 2020
$
884



- 17 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(11.)    EARNINGS PER SHARE (“EPS”)
The following table sets forth a reconciliation of the information used in computing basic and diluted EPS (in thousands, except per share amounts):
 
Three Months Ended
 
April 3,
2020
 
March 29,
2019
Numerator for basic and diluted EPS:
 
 
 
Income from continuing operations
$
31,100

 
$
21,366

Income from discontinued operations

 
303

Net income
$
31,100

 
$
21,669

 
 
 
 
Denominator for basic and diluted EPS:
 
 
 
Weighted average shares outstanding - Basic
32,807

 
32,536

Dilutive effect of share-based awards
310

 
444

Weighted average shares outstanding - Diluted
33,117

 
32,980

 
 
 
 
Basic earnings per share:
 
 
 
Income from continuing operations
$
0.95

 
$
0.66

Income from discontinued operations

 
0.01

Basic earnings per share
0.95

 
0.67

 
 
 
 
Diluted earnings per share:
 
 
 
Income from continuing operations
$
0.94

 
$
0.65

Income from discontinued operations

 
0.01

Diluted earnings per share
0.94

 
0.66


The diluted weighted average share calculations do not include the following securities, which are not dilutive to the EPS calculations or the performance criteria have not been met (in thousands):
 
Three Months Ended
 
April 3,
2020
 
March 29,
2019
Time-vested stock options, RSAs and RSUs
101

 
61

Performance-vested restricted stock and PRSUs
24

 
45



- 18 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(12.)     STOCKHOLDERS’ EQUITY
The following is a summary of the number of shares of common stock issued, treasury stock and common stock outstanding for the three month periods ended April 3, 2020 and March 29, 2019:
 
Three Months Ended April 3, 2020
 
Three Months Ended March 29, 2019
 
Issued
 
Treasury Stock
 
Outstanding
 
Issued
 
Treasury Stock
 
Outstanding
Balance, beginning of period
32,847,017

 
(146,546
)
 
32,700,471

 
32,624,494

 
(151,327
)
 
32,473,167

Stock options exercised

 
58,658

 
58,658

 
87,424

 

 
87,424

RSAs issued, net of forfeitures,
  and vesting of RSUs

 
66,876

 
66,876

 
76,144

 
(19,494
)
 
56,650

Balance, end of period
32,847,017

 
(21,012
)
 
32,826,005

 
32,788,062

 
(170,821
)
 
32,617,241


Accumulated Other Comprehensive Income (Loss) (“AOCI”) is comprised of the following (in thousands):
 
Defined
Benefit
Plan
Liability
 
Cash
Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Total
Pre-Tax
Amount
 
Tax
 
Net-of-Tax
Amount
December 31, 2019
$
(912
)
 
$
(2,358
)
 
$
22,639

 
$
19,369

 
$
619

 
$
19,988

Unrealized loss on cash flow hedges

 
(11,474
)
 

 
(11,474
)
 
2,410

 
(9,064
)
Realized gain on foreign currency hedges

 
(197
)
 

 
(197
)
 
41

 
(156
)
Realized loss on interest rate swap hedges

 
748

 

 
748

 
(157
)
 
591

Foreign currency translation loss

 

 
(12,032
)
 
(12,032
)
 

 
(12,032
)
April 3, 2020
$
(912
)
 
$
(13,281
)
 
$
10,607

 
$
(3,586
)
 
$
2,913

 
$
(673
)
December 28, 2018
$
(295
)
 
$
3,439

 
$
30,539

 
$
33,683

 
$
(679
)
 
$
33,004

Unrealized loss on cash flow hedges

 
(154
)
 

 
(154
)
 
32

 
(122
)
Realized gain on foreign currency hedges

 
(45
)
 

 
(45
)
 
9

 
(36
)
Realized gain on interest rate swap hedge

 
(689
)
 

 
(689
)
 
145

 
(544
)
Foreign currency translation loss

 

 
(6,838
)
 
(6,838
)
 

 
(6,838
)
March 29, 2019
$
(295
)
 
$
2,551

 
$
23,701

 
$
25,957

 
$
(493
)
 
$
25,464



- 19 -


INTEGER HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


(13.)     FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Fair value measurement standards apply to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period). For the Company, these financial assets and liabilities include its derivative instruments and contingent consideration. The Company does not have any nonfinancial assets or liabilities that are measured at fair value on a recurring basis.
The Company is exposed to global market risks, including the effect of changes in interest rates and foreign currency exchange rates, and uses derivatives to manage these exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes. All derivatives are recorded at fair value on the balance sheet.
The following tables provide information regarding assets and liabilities recorded at fair value on a recurring basis (in thousands):
 
Fair Value
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
April 3, 2020
 
 
 
 
 
 
 
Liabilities: Foreign currency contracts
$
4,574

 
$

 
$
4,574

 
$

Liabilities: Interest rate swaps
8,707

 

 
8,707

 

Liabilities: Contingent consideration (Note 2)
5,400

 

 

 
5,400

Liabilities: Contingent consideration (Note 5)
1,000

 

 

 
1,000

 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
Assets: Foreign currency contracts
$
710

 
$

 
$
710

 
$

Liabilities: Interest rate swaps
3,068

 

 
3,068

 

Liabilities: Contingent consideration (Note 2)
4,200

 

 

 
4,200


Interest Rate Swaps
The Company periodically enters into interest rate swap agreements in order to reduce the cash flow risk caused by interest rate changes on its outstanding floating rate borrowings. Under these swap agreements, the Company pays a fixed rate of interest and receives a floating rate equal to one-month LIBOR. The variable rate received from the swap agreements and the variable rate paid on the outstanding debt will have the same rate of interest, excluding the credit spread, and will reset and pay interest on the same date. The Company has designated these swap agreements as cash flow hedges based on concluding the hedged forecasted transaction is probable of occurring within the period the cash flow hedge is anticipated to affect earnings.
Information regarding the Company’s outstanding interest rate swaps designated as cash flow hedges as of April 3, 2020 is as follows (dollars in thousands):
Notional Amount
 
Start Date
 
End
Date
 
Pay Fixed Rate
 
Receive Current Floating Rate
 
Fair Value
 
Balance Sheet Location
$
200,000

 
Jun 2017
 
Jun 2020
 
1.1325
%
 
0.9591
%
 
$
(48
)
 
Accrued expenses and other current liabilities