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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 2, 2021
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
 _____________________________________________________________ 
itgr-20210402_g1.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 1150Plano,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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareITGRNew 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 filerNon-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 April 23, 2021 was: 32,975,085 shares.



INTEGER HOLDINGS CORPORATION
Form 10-Q
For the Quarterly Period Ended April 2, 2021
TABLE OF CONTENTS

- 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 2,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$28,402 $49,206 
Accounts receivable, net of provision for credit losses of $0.2 million, respectively
165,826 156,207 
Inventories153,815 149,323 
Refundable income taxes2,461 2,087 
Contract assets44,686 40,218 
Prepaid expenses and other current assets14,047 15,896 
Total current assets409,237 412,937 
Property, plant and equipment, net248,993 253,964 
Goodwill852,243 859,442 
Other intangible assets, net739,334 757,224 
Deferred income taxes4,381 4,398 
Operating lease assets50,433 45,153 
Other long-term assets38,731 38,739 
Total assets$2,343,352 $2,371,857 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt$37,500 $37,500 
Accounts payable62,395 51,570 
Income taxes payable3,610 1,847 
Operating lease liabilities7,904 8,431 
Accrued expenses and other current liabilities50,142 56,843 
Total current liabilities161,551 156,191 
Long-term debt649,630 693,758 
Deferred income taxes180,779 182,304 
Operating lease liabilities45,150 37,861 
Other long-term liabilities28,518 30,688 
Total liabilities1,065,628 1,100,802 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 32,974,702 and 32,908,178 shares issued and outstanding, respectively
33 33 
Additional paid-in capital703,033 700,814 
Retained earnings539,036 517,516 
Accumulated other comprehensive income35,622 52,692 
Total stockholders’ equity1,277,724 1,271,055 
Total liabilities and stockholders’ equity$2,343,352 $2,371,857 
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 3 -


INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (Unaudited)
 Three Months Ended
(in thousands except per share data)April 2,
2021
April 3,
2020
Sales$290,467 $328,426 
Cost of sales205,981 231,724 
Gross profit84,486 96,702 
Operating expenses:
Selling, general and administrative35,502 36,457 
Research, development and engineering13,461 13,241 
Other operating expenses915 2,928 
Total operating expenses49,878 52,626 
Operating income34,608 44,076 
Interest expense8,532 10,361 
(Gain) loss on equity investments1,335 (1,925)
Other income, net(237)(999)
Income before taxes 24,978 36,639 
Provision for income taxes3,458 5,539 
Net income$21,520 $31,100 
Earnings per share:
Basic$0.65 $0.95 
Diluted$0.65 $0.94 
Weighted average shares outstanding:
Basic32,957 32,807 
Diluted33,188 33,117 
Comprehensive Income
Net income$21,520 $31,100 
Other comprehensive loss:
Foreign currency translation loss(16,364)(12,032)
Change in fair value of cash flow hedges, net of tax(706)(8,629)
Other comprehensive loss, net of tax(17,070)(20,661)
Comprehensive income, net of tax$4,450 $10,439 
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 4 -


INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Three Months Ended
(in thousands)April 2,
2021
April 3,
2020
Cash flows from operating activities:
Net income$21,520 $31,100 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization20,294 19,494 
Debt related charges included in interest expense1,372 1,023 
Stock-based compensation4,704 1,738 
Non-cash (gains) charges related to customer bankruptcy(24)628 
Non-cash lease expense2,004 1,930 
Non-cash (gain) loss on equity investments1,335 (1,925)
Contingent consideration fair value adjustment (500)
Other non-cash (gains) losses69 (585)
Deferred income taxes(242)61 
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable(9,373)(8,165)
Inventories(5,157)(4,365)
Prepaid expenses and other assets(189)929 
Contract assets(4,677)(14,279)
Accounts payable11,434 18,458 
Accrued expenses and other liabilities(7,887)(18,108)
Income taxes1,246 4,963 
Net cash provided by operating activities36,429 32,397 
Cash flows from investing activities:
Acquisition of property, plant and equipment(7,660)(14,925)
Purchase of intangible asset (3,500)
Proceeds from sale of property, plant and equipment15 52 
Acquisitions, net (5,219)
Net cash used in investing activities(7,645)(23,592)
Cash flows from financing activities:
Principal payments of long-term debt(45,375)(9,375)
Proceeds from senior secured revolving line of credit 25,000 
Proceeds from the exercise of stock options116 2,201 
Payment of debt issuance costs(72) 
Tax withholdings related to net share settlements of restricted stock unit awards(2,601)(2,664)
Contingent consideration payments(1,621) 
Principal payments on finance leases(9) 
Net cash provided by (used in) financing activities(49,562)15,162 
Effect of foreign currency exchange rates on cash and cash equivalents(26)(243)
Net increase (decrease) in cash and cash equivalents(20,804)23,724 
Cash and cash equivalents, beginning of period49,206 13,535 
Cash and cash equivalents, end of period$28,402 $37,259 
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 5 -


INTEGER HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
 Three Months Ended
(in thousands)April 2,
2021
April 3,
2020
Total stockholders’ equity, beginning balance$1,271,055 $1,152,488 
Common stock and additional paid-in capital
Balance, beginning of period700,847 701,051 
Stock awards exercised or vested(2,485)(8,010)
Stock-based compensation4,704 1,738 
Balance, end of period703,066 694,779 
Treasury stock
Balance, beginning of period (8,809)
Treasury shares reissued 7,546 
Balance, end of period (1,263)
Retained earnings
Balance, beginning of period517,516 440,258 
Net income21,520 31,100 
Balance, end of period539,036 471,358 
Accumulated other comprehensive income (loss)
Balance, beginning of period52,692 19,988 
Other comprehensive loss(17,070)(20,661)
Balance, end of period35,622 (673)
Total stockholders’ equity, ending balance$1,277,724 $1,164,201 
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 6 -


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.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) 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 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, 2020.
The first quarter of 2021 ended on April 2 and consisted of 92 days, and the first quarter of 2020 ended on April 3 and consisted of 94 days.
Risks and Uncertainties
Beginning in early March 2020, the global spread of the novel coronavirus (“COVID-19”) created significant uncertainty and worldwide economic disruption. Specific impacts to the Company’s business include delayed or reduced customer orders and sales, restrictions on its associates’ ability to travel or work, delays in shipments to and from certain countries, and disruptions in its supply chain. The extent to which COVID-19 impacts the Company’s operations will depend on future developments, which are highly uncertain and difficult to predict, including, among others, the duration of the outbreak, the effectiveness and utilization of vaccines for COVID-19 and its variants, new information that may emerge concerning the severity of COVID-19 and the actions, especially those taken by governmental authorities to contain the pandemic or treat its impact. As pandemic-related events continue to evolve, additional impacts may arise that the Company is not aware of currently. Any prolonged material disruption of the Company’s associates, suppliers, manufacturing, or customers could materially impact its consolidated financial position, results of operations or cash flows.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standard Updates (“ASU”) issued by the Financial Accounting Standards Board ("FASB"). The Company evaluated all recent accounting pronouncements issued, including those that are currently effective, and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations or cash flows of the Company. 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, 2020, that are of significance, or potential significance, to the Company.
- 7 -

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


(2.)    BUSINESS ACQUISITION
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 four years following the acquisition based on specified conditions being met. Based on the final 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 from the date of acquisition.
The amount allocated to goodwill for this acquisition 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.
For segment reporting purposes, the results of operations and assets from this acquisition have been included in the Company’s Medical segment since the acquisition date. Sales related to InoMec were $0.8 million and $0.4 million, respectively, for the three months ended April 2, 2021 and April 3, 2020. Earnings related to the operations consisting of the assets and liabilities acquired from InoMec for the three months ended April 2, 2021 and April 3, 2020 were not material. During the three months ended on April 3, 2020, direct costs of this acquisition of $0.7 million were expensed as incurred and included in Other operating expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income.
Pro forma financial information has not been presented for this acquisition as the net effects were not significant or 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 2,
2021
April 3,
2020
Noncash investing and financing activities:
Property, plant and equipment purchases included in accounts payable$2,981 $4,481 
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
7,414 7,427 
(4.)    INVENTORIES
Inventories comprise the following (in thousands):
April 2,
2021
December 31,
2020
Raw materials$70,552 $72,477 
Work-in-process64,320 58,806 
Finished goods18,943 18,040 
Total$153,815 $149,323 
- 8 -

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


(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 2, 2021 were as follows (in thousands):
MedicalNon- MedicalTotal
December 31, 2020$842,442 $17,000 $859,442 
Foreign currency translation(7,199) (7,199)
April 2, 2021$835,243 $17,000 $852,243 
Intangible Assets
Intangible assets comprise the following (in thousands):
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
April 2, 2021
Definite-lived:
Purchased technology and patents$255,606 $(155,278)$100,328 
Customer lists716,081 (167,620)548,461 
Other4,120 (3,863)257 
Total amortizing intangible assets$975,807 $(326,761)$649,046 
Indefinite-lived:
Trademarks and tradenames$90,288 
December 31, 2020
Definite-lived:
Purchased technology and patents$257,453 $(152,798)$104,655 
Customer lists723,791 (161,856)561,935 
Other4,142 (3,796)346 
Total amortizing intangible assets$985,386 $(318,450)$666,936 
Indefinite-lived:
Trademarks and tradenames$90,288 
Aggregate intangible asset amortization expense comprises the following (in thousands):
 Three Months Ended
 April 2,
2021
April 3,
2020
Cost of sales$3,268 $3,269 
Selling, general and administrative expenses7,182 7,175 
Total intangible asset amortization expense$10,450 $10,444 
Estimated future intangible asset amortization expense based on the carrying value as of April 2, 2021 is as follows (in thousands):
Remainder of 2021202220232024 2025After 2025
Amortization Expense$30,835 40,170 38,751 37,798 36,483 465,009 
- 9 -

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


(6.)     DEBT
Long-term debt comprises the following (in thousands):
 April 2,
2021
December 31,
2020
Senior secured term loan A$220,312 $229,687 
Senior secured term loan B472,286 508,286 
Unamortized discount on term loan B and debt issuance costs(5,468)(6,715)
Total debt687,130 731,258 
Current portion of long-term debt(37,500)(37,500)
Total long-term debt$649,630 $693,758 
The Company has senior secured credit facilities (the “Senior Secured Credit Facilities”) as of April 2, 2021, 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 2, 2021, 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 London Interbank Offered Rate (“LIBOR”) plus the applicable margin, which will range between 1.50% and 3.00%, based on the Company’s Total Net Leverage Ratio. The Company also pays certain of its lenders a deferred amendment fee, payable in installments of 0.03125% of the outstanding Revolving Credit Facility and TLA Facility each quarter through maturity when the Company’s total net leverage ratio equals or exceeds 3.00 to 1.00.
As of April 2, 2021, the Company had no outstanding borrowings on the Revolving Credit Facility and an available borrowing capacity of $193.3 million after giving effect to $6.7 million of outstanding standby letters of credit.
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 2, 2021, the interest rates on the TLA Facility and TLB Facility were 2.36% and 3.50%, respectively.
Covenants
The Revolving Credit Facility and TLA Facility contain covenants requiring (A) a maximum Total Net Leverage Ratio of 4.75:1.00, subject to a step down to 4.50 to 1.00 for the third fiscal quarter of 2021, and reverting to and remaining at 4.00 to 1.00 beginning with the fourth quarter of 2021 through maturity, 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 2, 2021, the Company was in compliance with these financial covenants.
Contractual maturities under the Senior Secured Credit Facilities for the remainder of 2021 and through maturity, excluding any discounts or premiums, as of April 2, 2021 are as follows (in thousands):
20212022
Future minimum principal payments$28,125 664,473 
During the three months ended April 2, 2021, the Company prepaid $36.0 million of its TLB Facility and recognized a loss from extinguishment of debt of $0.3 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 and Comprehensive Income.
- 10 -

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 2,
2021
April 3,
2020
Stock options$ $13 
RSUs4,704 1,725 
Total stock-based compensation expense$4,704 $1,738 
Cost of sales$1,114 $454 
Selling, general and administrative3,355 1,136 
Research, development and engineering235 148 
Total stock-based compensation expense$4,704 $1,738 
Stock Options
The following table summarizes the Company’s stock option activity for the three month period ended April 2, 2021:
Number of
Stock
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
(In Years)
Aggregate
Intrinsic
Value
(In Millions)
Outstanding at December 31, 2020281,873 $36.05 
Exercised(4,229)27.32 
Outstanding and exercisable at April 2, 2021277,644 $36.18 4.5$15.4 
Restricted Stock Units
During the three months ended April 2, 2021, the Company awarded grants of either time-based RSUs or a mix of time-based RSUs and performance-based RSUs (“PRSUs”) to certain members of its Board of Directors and management. Newly appointed members to the Board of Directors received a pro-rated portion of the their annual equity retainer in the form of time-based RSUs that vest in accordance with the regularly scheduled vesting schedule applicable to existing members of the Board of Directors. All other time-based RSUs granted during three months ended April 2, 2021 vest ratably, subject to the recipient’s continuous service to the Company over a period of 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 market-based conditions. 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.
- 11 -

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 2,
2021
April 3,
2020
Weighted average fair value$85.16 $107.42 
Risk-free interest rate0.19 %1.53 %
Expected volatility41 %30 %
Expected life (in years)3.02.9
Expected dividend yield % %
The valuation of the TSR portion of the PRSUs granted during 2021 and 2020 also reflects a weighted average illiquidity discount of 8.19% and 8.00%, respectively, related to the six-month period that recipients are restricted from selling, transferring, pledging or assigning the underlying shares, in the event of vesting.
The following table summarizes time-vested RSU activity for the three month period ended April 2, 2021:
Time-Vested
Activity
Weighted
Average
Grant Date Fair Value
Nonvested at December 31, 2020207,923 $75.38 
Granted146,247 79.09 
Vested(59,143)63.94 
Forfeited(2,327)80.24 
Nonvested at April 2, 2021292,700 $79.51 
The following table summarizes PRSU activity for the three month period ended April 2, 2021:
Performance-
Vested
Activity
Weighted
Average
Grant Date Fair Value
Nonvested at December 31, 2020219,391 $72.33 
Granted92,345 85.16 
Vested(38,882)37.75 
Forfeited(65,941)49.00 
Nonvested at April 2, 2021206,913 $91.98 
- 12 -

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


(8.)     OTHER OPERATING EXPENSES
Other operating expenses comprise the following (in thousands):
 Three Months Ended
 April 2,
2021
April 3,
2020
Operational excellence initiatives$654 $974 
Strategic reorganization and alignment 548 
Manufacturing alignment to support growth 128 
Acquisition and integration84 356 
Other general expenses177 922 
Total other operating expenses$915 $2,928 
Operational excellence initiatives
The Company’s operational excellence initiatives mainly consist of costs associated with executing on its sales force, manufacturing, business process and performance excellence operational strategic 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.
2021 Initiatives - Costs related to the Company’s 2021 initiatives are primarily recorded within the Medical segment and mainly include termination benefits. The Company estimates that it will incur aggregate pre-tax charges in connection with the 2021 realignment plan of between approximately $1 million to $2 million, the majority of which are expected to be cash expenditures. As of April 2, 2021, total restructuring and related charges incurred since inception was $0.4 million. These actions are expected to be substantially completed by the end of 2021.
2020 Initiatives - Costs related to the Company’s 2020 initiatives are primarily recorded within the Medical segment and mainly include termination benefits. As of April 2, 2021, total restructuring and related charges incurred since inception was $3.0 million. These actions were substantially complete at the end of 2020.
Strategic reorganization and alignment
These initiatives primarily included aligning resources with the Company’s strategic direction, improving profitability to invest in accelerated growth and the expansion of a facility. These actions began in 2017 and were completed during the second quarter of 2020. The Company recorded, primarily within the Medical segment, $23.0 million of restructuring and related charges since inception.
Manufacturing alignment to support growth
These initiatives were designed to reduce costs, increase manufacturing capacity to accommodate growth and improve operating efficiencies by relocating certain manufacturing operations and expanding certain facilities. These actions began in 2017 and were completed during the fourth quarter of 2020. The Company recorded, primarily within the Medical segment, $5.8 million of restructuring and related charges since inception.
The following table summarizes the change in accrued liabilities, presented within Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets, related to the initiatives described above (in thousands):
Operational
excellence
initiatives
December 31, 2020$291 
Charges incurred, net of reversals654 
Cash payments(306)
April 2, 2021$639 
- 13 -

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


(8.)     OTHER OPERATING EXPENSES (Continued)
Acquisition and integration
Acquisition and integration costs primarily consist of professional fees and other costs related to business acquisitions. During the three months ended April 2, 2021 and April 3, 2020, acquisition and integration costs included $0.1 million and $0.9 million, respectively, of expenses related to the acquisition of certain assets and liabilities of InoMec and US BioDesign, LLC (“USB”), which was acquired in October 2019. Acquisition and integration costs for the three months ended April 3, 2020, also includes a $0.5 million adjustment to reduce the fair value of acquisition-related contingent consideration liability associated with the Company’s acquisition of USB. See Note 13 “Financial Instruments and Fair Value Measurements” for additional information related to the fair value measurement of the contingent consideration.
Other general expenses
During the three months ended April 2, 2021 and April 3, 2020, the Company recorded expenses related to other initiatives not described above, which relate primarily to integration and operational initiatives to reduce future costs and improve efficiencies. The 2021 and 2020 amounts primarily include data archiving expenses, information technology systems conversion expenses, and expenses related to the restructuring of certain legal entities of the Company.
(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 the first quarter of 2021 was 13.8% on $25.0 million of income before taxes compared to 15.1% on $36.6 million of income before taxes for the same period in 2020. 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 2021 and 2020 is due principally to the net impact of the Company’s earnings outside the U.S., which are generally taxed at rates that differ from the U.S federal rate, the Global Intangible Low-Taxed Income (“GILTI”) tax, the availability of tax credits, and certain discrete tax benefits. For the first quarter of 2021 and 2020, the Company recorded discrete tax benefits of $0.6 million and $1.0 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 during those quarters.
As of April 2, 2021 and December 31, 2020, the Company had unrecognized tax benefits of approximately $5.5 million. It is reasonably possible that a reduction of up to $3.4 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 2, 2021 and December 31, 2020, approximately $5.5 million 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. The CARES Act provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due January 3, 2022 and the remaining 50% due January 3, 2023. As of April 2, 2021 and December 31, 2020, the Company had deferred a total of $9.7 million of payroll taxes. The deferred payroll taxes are included within Accrued expenses and other current liabilities and Other long-term liabilities on the Condensed Consolidated Balance Sheets.
- 14 -

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


(10.)    COMMITMENTS AND CONTINGENCIES
Contingent Consideration Arrangements
The Company records contingent consideration liabilities related to the earn-out provisions for certain acquisitions. See Note 13 “Financial Instruments and Fair Value Measurements” for additional information.
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.
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 expenses and other current liabilities on the Condensed Consolidated Balance Sheets. The change in product warranty liability comprised the following (in thousands):
December 31, 2020$163 
Additions to warranty reserve, net of reversals15 
Adjustments to pre-existing warranties (63)
April 2, 2021$115 
(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 2,
2021
April 3,
2020
Numerator for basic and diluted EPS:
Net income$21,520 $31,100 
Denominator for basic and diluted EPS:
Weighted average shares outstanding - Basic32,957 32,807 
Dilutive effect of share-based awards231 310 
Weighted average shares outstanding - Diluted33,188 33,117 
Basic EPS$0.65 $0.95 
Diluted EPS$0.65 $0.94 
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 2,
2021
April 3,
2020
Time-vested RSUs10 101 
PRSUs64 24 
- 15 -

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 2, 2021 and April 3, 2020:
IssuedTreasury StockOutstanding
Shares outstanding at December 31, 202032,908,178  32,908,178 
Stock options exercised4,229  4,229 
Vesting of RSUs, net of shares withheld to cover taxes62,295  62,295 
Shares outstanding at April 2, 202132,974,702  32,974,702 
Shares outstanding at December 31, 201932,847,017 (146,546)32,700,471 
Stock options exercised 58,658 58,658 
Vesting of RSUs, net of shares withheld to cover taxes 66,876 66,876 
Shares outstanding at April 3, 202032,847,017 (21,012)32,826,005 
Accumulated Other Comprehensive Income (Loss) (“AOCI”) comprises the following (in thousands):
Defined
Benefit
Plan
Liability
Cash
Flow
Hedges
Foreign
Currency
Translation
Adjustment
Total
Pre-Tax
Amount
TaxNet-of-Tax
Amount
December 31, 2020$(1,095)$(4,956)$57,546 $51,495 $1,197 $52,692 
Unrealized loss on cash flow hedges— (1,269)— (1,269)266 (1,003)
Realized gain on foreign currency hedges— (659)— (659)139 (520)
Realized loss on interest rate swap hedges— 1,034 — 1,034 (217)817 
Foreign currency translation loss— — (16,364)(16,364) (16,364)
April 2, 2021$(1,095)$(5,850)$41,182 $34,237 $1,385 $35,622 
December 31, 2019$(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)
- 16 -

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 Condensed Consolidated Balance Sheets.
The following tables provide information regarding assets and liabilities recorded at fair value on a recurring basis (in thousands):
Fair ValueQuoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
April 2, 2021
Assets: Foreign currency contracts$28 $ $28 $ 
Liabilities: Foreign currency contracts152  152  
Liabilities: Interest rate swap5,726  5,726  
Liabilities: Contingent consideration2,281   2,281 
December 31, 2020
Assets: Foreign currency contracts$2,070 $ $2,070 $ 
Liabilities: Interest rate swap7,026  7,026  
Liabilities: Contingent consideration3,900   3,900 
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 swap designated as cash flow hedges as of April 2, 2021 is as follows (dollars in thousands):
Notional AmountStart DateEnd
Date
Pay Fixed RateReceive Current Floating RateFair ValueBalance Sheet Location
$150,000 Jun 2020Jun 20232.1785 %0.1091 %$(5,726)Other long-term liabilities
Information regarding the Company’s outstanding interest rate swap designated as cash flow hedges as of December 31, 2020 is as follows (dollars in thousands):
Notional AmountStart DateEnd
Date
Pay Fixed RateReceive Current Floating RateFair ValueBalance Sheet Location
$200,000 Jun 2020Jun 20232.1785 %0.1480 %$(7,026)Other long-term liabilities
- 17 -

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


(13.)     FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
Foreign Currency Contracts
The Company periodically enters into foreign currency forward contracts to hedge its exposure to foreign currency exchange rate fluctuations in its international operations. The Company has designated these foreign currency forward contracts as cash flow hedges. Information regarding outstanding foreign currency forward contracts designated as cash flow hedges as of April 2, 2021 is as follows (dollars in thousands):
Notional AmountStart
Date
End
Date
$/Foreign CurrencyFair ValueBalance Sheet Location
$1,553 Apr 2021Aug 20210.0232UYU Peso$30 Prepaid expenses and other current assets
3,270 Apr 2021Nov 20210.0227UYU Peso10 Prepaid expenses and other current assets
2,048 Jul 2021